German Historical School & Socialism

1. German Historical School& Socialism ECON 205W Summer 2006 Prof. Cunningham

2. Major Tenets • Society is dynamic, evolving. • (Aggressive) positive role for government. • Inductive/Historical approach. • Advocates of (socially) conservative reform.

3. Friedrich List (1789-1846) • Background • 1841, National System of Political Economy • Developed the first of the so-called stage theories of economic development. Five stages: • Primitive • Pastorial • Agricultural • Agricultural-Manufacturing • Agricultural-Manufacturing-Commercial • Claimed the scheme came to him from his observations of the U.S.

4. Wilhelm Roscher (1817-1894) • “Older Historical School” • 5-Volume Textbook called Economic Science • Volume 1 ran 13 editions and was translated into English as Principles of Political Economy • His Principles is comparable in scope to Mill. • Focus on Method“The method of science is of greater significance by far than any single discovery, however amazing the latter may be.”

5. Roscher (2) • Focus on history and the laws of economic development that a study of history can reveal.

6. Gustav von Schmoller(1838-1917) • “Younger Historical School” • Background • Founder and leader of the Association for Social Policy. • The AEA was modeled after this. • Quite hostile toward economic theory—rejected theory altogether.

7. Schmoller (2) • Pacify the labor class through social policy—role for government. • Methodenstreit: engaged in a controvery with Menger about methods. • Menger favored theory • Menger was one of the discoverers of the subjective theory of value and the marginal principle. • Menger defended theory and analysis.

8. Max Weber (1864-1920) • Germany’s greatest social scientist of recent times. • Approach: Entzauberung (“breaking of magic spells”) • Interpreted history as a process of rationalization. • Close to the Schmoller group. • Contributed enormously to sociology. • Used “ideal types” (RAs) in analysis. • Leads to American Institutionalism via John Bates Clark et al.

9. Socialism before Marx • Classical School under attack. • Softening view of Classical Writers • German Historical School • Socialists (French) • Socialism—national patterns • England Socialism • Godwinian, Ricardian, Christian • French Socialism • German (State) Socialism

10. Clarification: Socialism vs. Communism • Socialism • Transitory phase between capitalism and communism • Features • Dictatorship of the proletariat • Bourgeoisie under control of the proletariat • Payment according to work performed • Communism • Classless society in which all live by working and not by owning • State is nonexistent • Wage system is abolished

11. Robert Owen (1771-1858) • Man is essentially good and “perfectible” but is corrupted by the evil institutions of society • Society corrupts the individual. • Background and community involvement. • A New View of Society, 1813. • Report to the County of Lanark, 1821. • Especially concerned with the welfare of children in the industrial society.

12. Owen (2) • People are formed by their environment. • Businesspeople are not enough concerned with their employees. • Foresaw that technology would make poverty and scarcity unnecessary. • Distrusted Classical pursuit of self-interest. • Recommendations…

13. Ricardian Socialists • Hold Classical theory of value as central issue • From the labor theory of value, they derived theories of exploitation • Proposed cooperative organizations, trade unions, monetary reform • Like Owen, rejected revolution and government action

14. Ricardian Socialists (2) • Charles Hall (c1740-c1820) • William Thompson (1775-1833) • Thomas Hodgskin (1787-1869) • John Gray (1799-1883) • John Bray (1809-97)

15. Christian Socialists • Most British socialism was based on rationalism. Hostility toward religion. • Christian socialists tried to forge a link between socialism and religion. • Frederick Denison Maurice (1805-72) • Charles Kingsley (1819-75) • John Ludlow (1821-1911)

16. French Socialists • Auguste Blanqui (1805-81) • Sought: • Free Education • Take over (nationalize) large estates • Guaranteed right to work • Social equality • Progressive income tax • Louis Blanc (1811-82) • First stated “From each according to his ability, to each according to his need.”

17. French Socialists (2) • Henri de Saint-Simon (1760-1825) • More interested in social reform than equality or abolition of private property • Sought a theory of history • Collectivization instead of class struggle • Upheld private property • Advocate of industrial development • Thought forces of competition lead society to anarchy • A “rational” centrally planned economy would remove the causes of social conflict and eventually eliminate the need for the state. • Power should move to the productive classes (businesspeople, bankers, engineers, workers) • People should be paid according to their value to society

18. French Socialists (3) • Fourier (1772-1837) • Opposite of Saint-Simon • Decentralization instead of central planning • Movement back to land instead of industrialization • Felt that the entire industrialization movement was a mistake. • The only work that is good work is work that gratifies innate propensities • Propensities or passions: for variety, for adventure, for socializing • Phalanx

19. French Socialists (4) • Pierre-Joseph Proudhon (1809-65) • Anarchist • No use for authority beyond family and local community • Rejected representative democracy in favor of authoritative socialism/communism • Disapproved of revolution by radical schemers or violent upheaval.

20. Karl Marx (1818-1883) • “Scientific Socialism” • His co-author and sponsor was Friedrich Engels (1820-1895) • Background • 1848, Communist Manifesto • 1867, Vol. I of Das Kapital • Posthumously, Engle published vols. II and III.

21. Marx (2) • Influences • Smith and Ricardo • French Socialists • Darwin • Hegel • Feuerbach

22. Socialist Ideology • Equality • Brotherhood • Cooperation

23. Inferiority of Capitalism • Capitalism morally and spiritually deforms people. • Capitalism is based upon exploitation and alienation. • Capitalist economies undergo unavoidable business cycle.

24. Economic Determinism • Result of Marx’s historical materialism as a theory of history. • Capitalism will ultimately be replaced by socialism. • Provides a framework for interpreting history. • Provides a theory of social change or evolution. • Marx’s interpretation of history.

25. End of History • Rejection of religion. • Thorough-going empiricism and pragmatism. • A social and political arrangement that allows all an equal voice and equal claim in society. (Communal democracy?)

26. Marx’s Vision • Economy coordinated by a central planning agency. • All production of goods under social control. • Labor supplied by “new men”, motivated by “spirit of social cooperation”, not self-interest. • Communism elevates humankind.

27. Theories and Work • Communist Manifesto (1848), by Marx and Engels • Appeal for organized political action. • Recognition of the advances made by the bourgeoisie revolution. • Points to forces currently undermining capitalism. • Lists a number of intermediate measure to revolutionize production. • Marx’s message has not been heeded in free, economically advanced countries without foreign intervention.

28. Theories and Work (2) • Das Kapital: A Critique of Political Economy • Vol I published by Marx in 1867 • Vols. II and III edited and published by Engel (1885, 1894) • Fragments exist of a Vol. IV, published later as Theories of Surplus Value. • Closely aligns with Hegel.

29. Theory and Work (3)

30. Theories and Work (4) • Concept of class • The state • Purposes of Das Kapital • Labor theory of value • Concentration of capital leads to a declining rate of profit. • This leads to an increasing misery of the proletariat. • Economic crises.