Socialism - from absurd ideas to terrifying consequences

The 24th anniversary of the fall of the Berlin Wall (November 2013) gives us a good reason to look back at the economic and philosophical foundations of Marxism; of the “scientific” communism that was supposed to lead humanity to the inevitable final stage of history and the end of the dialectical clash between classes. We all know what this experiment led to – massive economic backwardness and misery in the eastern part of the Iron Curtain. Moreover, it was accompanied by the deliberate slaughter of millions of people.

And although Marx's economic criticisms of capitalism were refuted in his own time - Karl Menger dismantled the labor theory of value, and Böhm-Bawerk his capital theory - much of his philosophy and the vocabulary associated with it remain in use to this day. In the German-language press, for example, you can often find a relatively economically liberal party described as "bourgeois" (bürgerlich), and in American political discourse any state intervention that restricts the free market is considered "progressive". Both terms occupy an important place in Marx's philosophy, and are also used as a tactical device in defending Marxism from criticism.

Of course, socialist thought neither begins nor ends with Marx, but his contribution to the serious acceptance of these ideas, as well as his influence on the history of mankind, cannot be ignored. In a series of articles, we will trace the criticism of Marx and his teachings by the representatives of the Austrian School of Economics, that bête noire (black beast) of all socialist sects.

Socialist thought before Marx

Marx's main contribution to the history of socialist thought was his rejection of previous socialist teachings as unscientific. The word socialist was first used in print in 1827 by Robert Owen, but centuries before that, various religious sects had described the final stage of human history as one of absolute harmony, egalitarianism, common property, and the absence of the need for work or division of labor. By positioning this extra-material stage of human development in the spiritual world, the preacher Joachim Florsky (c. 1135–1202) "solved" the economic problem of resource scarcity and the need for production. Later Christian sects (e.g. Diggers, the Ranters, Fifth Monarchy Men) indulged in mystical messianism and predicted the arrival of the second coming in the material world, which after a bloody apocalypse would reject individualism and private property and build the kingdom of God on earth. In the first half of the 19th century. utopian socialists gained popularity with their rather detailed descriptions of the future world, and the frank idiocy in their predictions brought them deserved ridicule not only from economists, but also from eminent contemporaries such as Honoré de Balzac [1]. The most prominent representatives of this trend were the already mentioned Robert Owen, Saint-Simon and Charles Fourier.

The latter is a very curious author, who predicts a world in which the abolition of private property will cause roasted chickens to fly into people's mouths by themselves; lions will turn into anti-lions that pull carriages; hippos into anti-hippos that help boats move on rivers; anti-beavers will take care of fishing [2]. Fourier also presents a model of the ideal Phalanstère settlement (derived from the Greek word phalanx), complete with a uniform appearance and a detailed plan for the daily activities of all inhabitants. The author also expects the end of monogamy and the pursuit of sexual satisfaction in 5/6 of the time. According to Fourier, the duration of human life will reach 144 years and this paradise order will last 8000 years. These rather specific "insights", reached in a way incomprehensible to others, are an expression of the belief in the historical predetermination of events, whose prophet is the specific author. We will encounter a similar determinism later in Marx, although in a not (even) so absurd version.

Against the background of these predecessors, Marx's texts are truly scientific because (at least within the framework of "Capital") they try to criticize capitalism with the tools of Ricardo and Smith, who at that time were considered part of the scientific mainstream, instead of falling into ridiculous fantasies of paradise on earth. Articles in the Neue Rheinische Zeitung, personal correspondence and unpublished texts during his lifetime nevertheless reveal some common features with his predecessors in the ideas about the socialist stage of human history and the path towards it.

As we see, the common feature between the religious and secular currents of millennial socialism, as well as the later “scientific” one, is the hatred of individualism and private property. The sexual frustrations of the utopian socialists, manifesting themselves in unbridled fantasies, may well put modern left-wing feminist movements in a confusing situation, but Fourier and his fellow writers simply demonstrate consistency in the imposition of a violent egalitarianism, a consequence of the ideology of envy and the denial of the natural inequality of people and their surrounding conditions. [3] In modern Newspeak, these ideas swirl under the euphemism of protection from discrimination and are among the highest ideals of the New Left.

It is difficult to find a better example of discrimination than the choice of a sexual partner - it discriminates on the basis of gender, sexual orientation, age, social status, appearance, often religion, race or ethnic origin, and in general all the signs on which it is wrong to divide people, if we listen to the "progressive" trends. For the rejected, this process undoubtedly brings disappointment, jealousy, envy, depression, and in extreme cases, psychological trauma. Thus, the question logically arises: does the nanny state not need to redistribute sexual goods as well, after it has set out to create material equality? Therefore, it is not surprising that common ownership not only of the means of production, but also of women, is a frequent motif in socialist writings. Marx himself says in his unpublished essay "Private Property and Communism":

Just as a woman passes from marriage to communal prostitution, so the entire world of wealth, i.e. the material essence of man, passes from the relationship of exclusive marriage with the private owner to universal prostitution with the community. [4]

But first, let's examine the scientific basis of Marxism, while also sketching the criticisms of the most prominent authors in the Austrian tradition.

Marx, Menger and the Theory of Value

Although Menger is the generally acknowledged founder of the Austrian School of Economics and an infinitely original thinker, his Grundsätze der Volkswirtschaftslehre (Principles of Economics, 1871) have their roots in a now-discontinued tradition of economic theory that viewed value not as something inherent in a commodity but as a subjective phenomenon. About two centuries before Smith and Ricardo, the representatives of the Salamanca School [5] developed a rather sophisticated theory for their time that refuted the naive views on the formation of prices based on costs, labor, and/or risk. In the texts of Martin de Azpilcueta we can also find reflections on the fact that the increase in money in circulation does not bring any social benefit, but simply an increase in prices - a rather progressive view in the era of unenlightened mercantilism.

In addition, Menger brought back to the agenda and further developed the method of praxeology, of concentration on the actions of the individual, on entrepreneurship. By introducing the terms goods of high and low rank, Menger also laid the foundations of typically "Austrian" achievements such as the heterogeneous capital theory, the importance of time preferences and the formation of prices of original resources and capital goods, according to the preferences of consumers for the final product. This sharp turn in methodology brought Menger a decade-long dispute (Methodenstreit) with the German historical school around Schmoller, which denied the existence of any generally valid economic laws.

Without explicitly mentioning Marx, Menger practically refuted one of the foundations of his system by deriving the theory of marginal utility and the subjective nature of value. His followers would later call this approach causal-realist, because it reveals the cause-and-effect relationships in the emergence of objective exchange values and thus explains the actually existing prices. Marx is not mentioned in Menger's book, not because the latter was not familiar with "Capital", but because Marx's entire economics is actually built on the classical economists Smith and Ricardo. With his Principles, Menger actually corrects some serious defects in classical economic theory, most notably the so-called paradox of value - the inability to explain why bread, which satisfies a vital human need, is incomparably cheaper than a diamond, which serves only as decoration. This apparent paradox arises from the inadequate theory of value, which considers goods in broad categories such as water, bread, gold, diamonds, and the like, rather than in terms of the marginal utility of a given quantity, which is necessarily subjective. As a way out of this situation, classical economists resorted to dividing value into two types - use and exchange, the latter being determined in the long run by the costs required to reproduce it.

Expect a detailed exposition of Menger's critique of the labor theory of value in the next part.

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