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German Historical School& Socialism

ECON 205WSummer 2006Prof. Cunningham

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Major Tenets Society is dynamic, evolving. (Aggressive) positive role for

government. Inductive/Historical approach. Advocates of (socially)

conservative reform.

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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.

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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.”

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Roscher (2) Focus on history and the laws of

economic development that a study of history can reveal.

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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.

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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.

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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.

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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

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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

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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.

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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…

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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

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

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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)

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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.”

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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

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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

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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.

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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.

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Marx (2) Influences

Smith and Ricardo French Socialists Darwin Hegel Feuerbach

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Socialist Ideology Equality Brotherhood Cooperation

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Inferiority of Capitalism Capitalism morally and spiritually

deforms people. Capitalism is based upon

exploitation and alienation. Capitalist economies undergo

unavoidable business cycle.

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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.

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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?)

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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.

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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.

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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.

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Theory and Work (3)HEGEL MARX1. History is an unfolding of the spirit, manifesting in the rise of nations and their struggles.

1. Rise of classes, class struggle.

2. Wars between nations were result of historical necessity.

2. War between classes an historical necessity.

3. Prussian monarchy would fulfill mankind’s quest for liberty & justice.

3. Proletariat would fulfill mankind’s quest for liberty & justice.

4. Liberty is a conscious and willing submission to necessity.

4. Same

5. Power = moralityWhat is = what ought to beReality = reason

5. Same

6. These conclusions follow from philosophically based theory, not empirics, therefore defy validation.

6. Same

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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.