All Commentary
Tuesday, August 1, 1972

Are We Marxians Now?


Dr. Sennholz heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic principles and practices.

Ideas are the forces that lift or destroy civilization. They bring peace and prosperity, or breed wars and revolutions. Ideas shape our laws and institutions, and govern individual action and social relations. No wall or boundary can forcibly retain an idea. It sweeps around the earth like a storm that spares nobody. Ideas are stronger than bombs and missiles, they are mightier than an armada with megatons of explosives.

The philosophical, social and economic ideas of Karl Marx have been more influential than those of all other socialists. They have had, and continue to have, a profound impact not only on the lives of billions of people living in communist and socialist societies who worship him as their apostle and master, but also on the thoughts and policies of all others. Surely, no one would label the American society as “Marxian,” or describe our social and economic policies as “Marx inspired.” There are very few Americans who would courageously confess allegiance to the doctrines of Marx. And yet, serious contemplation cannot escape the conclusion that contemporary American thought on some three major issues — the conflict of interests in society, the concentration of business, and our outlook on the world — bears a startling resemblance to the doctrines of Karl Marx.

At this place we need not investigate why and how this similarity came about, nor ascertain the channels of education and communication that facilitated the sway of Marxian ideas. In fact, in order to demonstrate the resemblance of contemporary thought to Marxian doctrines we need not even prove that Karl Marx was the original author of prevailing American thought. After all, there were many other originators of socialism whose intellectual interdependence is difficult to record.

Economic Conflict

Most Americans seem to agree with the Marxian doctrine of political, social and economic conflict. Their traditional belief in a harmony of interest has gradually given way to trust in conflict and force. Americans now agree with Marx that social groups pursue conflicting interests that are reflected in antagonistic political and economic programs. Where in the past they had relied on individual initiative and action, they now depend on collective measures through legislation or regulation, or collective programs for political and economic pressure groups or business and labor organizations. He who stands alone today without the shelter and security afforded by his interest lobby or union is a rare exception.

In every session of Congress hundreds of new laws are passed that aim to confer rights and privileges on some groups while restricting those of others, or grant property and income to some at the expense of others. The political process has become a wrestling match between ever-changing alliances of pressure groups fighting over economic privileges and benefits. Just listen to the daily newscasts. Most of the reports, whether national or local, deal with the most noisy manifestations of this collective conflict.

Karl Marx was a forceful spokesman of the conflict and exploitation doctrine. Even in the United States, this bulwark of the free world, the doctrine has swayed public opinion. It makes its appearance in the popular notion that the unhampered capitalistic economy delivers the wage earners to the discretion and power of wealthy industrialists. The individual worker is said to be helpless and in need of legal protection in his bargaining with management whose primary concerns are power and profit. The unbridled market system with its profit motive and unhampered competition as it prevailed in this country before World War I is condemned for having inflicted hardship and deprivation on many generations of workers. Such notions, which are popular versions of the exploitation theory, have invaded our colleges and universities, indeed all channels of education and communication. They have radically changed our political parties and our churches. They have given rise to a gigantic labor union movement and to the “New Deal” in social and economic matters. In fact, the exploitation theory determines our basic “economic” policies at all levels of government.

Labor Policy

The ever-growing mass of labor legislation is one of the fruits of the exploitation theory. Its advocates credit modern social policy for having reduced the work week to 48, 44, and 40 hours, or even less. They applaud labor legislation for having eliminated women’s and children’s labor. And they ascribe the present rate of wages to the minimum wage rates set by authoritative intervention. Indeed, practically all labor improvements are credited to social legislation and labor union intervention.

Compulsory social insurance, including unemployment assistance, Medicare and Medicaid, stem from the same intellectual roots. Capitalism is said to be incapable of giving sustenance to the unemployed, sick, or aged laborers. Therefore, social policy must assure decent living conditions to an ever-larger part of the population.

Also, modern taxation reflects our adoption of the exploitation theory. Most taxes aim not only at raising revenue but also at correcting or alleviating the alleged evils of our economic system. Some taxes aim at a “redistribution” of wealth and income. Confiscatory rates are imposed on entrepreneurs and capitalists whose income and capital are thus transformed into goods for consumption by the “underprivileged.” Other taxes aim at changing business customs and conduct or at regulating production and trade. All presidential candidates promise more of the same.

Our labor unions derive their very justification for existence from the exploitation doctrine. Few Americans would disclaim the boast of union leaders that their unions have raised, and still are raising, wages for all workers through association and collective bargaining. American public opinion believes that recent history has proved the beneficial nature of trade unionism without which workers would be subjugated to the greed and arbitrariness of their employers. Because of the common fear of labor exploitation, the people suffer strikes or threats of strikes, union coercion and violence, and endless agitation of hate and envy by labor leaders against the wicked selfishness of exploiters. To many millions of Americans, membership in a labor union is an important social duty and strike a holy task.

Clash of the Generations

In recent years the conflict doctrine has been broadened to cover yet another area: the relations between different generations. It thereby succeeded in pitting millions of American youth against their elders in a so-called “generation gap.” Numerous student organizations of the “New Left” are attacking the “establishment” that represents the older generation with arguments that are taken without much change from the armory of Marx. The era of campus violence was ushered in by the Students for a Democratic Society (SDS), a quasi-Marxian class organization. It was followed by such groups as the Progressive Labor Party, the Weathermen, the Young Workers Liberation League, the Young Socialist Alliance, the National Peace Action Coalition, the New American Movement, and many others. Although the members of such militant groups comprise only small minorities of students, it appears that many millions of young people agree with the radicals on the existence of conflict. If there is collective conflict in our social and economic spheres, why should there be peace and harmony between the establishment and its opposition, between the older generation and youth?

Racial Conflict

One of the ugliest manifestations of the conflict doctrine is found in our race relations. We are told again and again that it is our capitalistic system that imposes conditions of hardship upon a minority of its citizens, and that finally the angriest of them have been driven to assault the exploitation order. We are accused of wicked standards of white morality and capitalist middle-class behavior that condemns the rioting and looting but lacks human concern for millions of deprived Negroes in our midst.

A solution to the growing problems of racial strife is sought in ever-costlier government programs, in more public welfare and public care. While Newark was burning, and as twenty-seven Americans were losing their lives there, the Federal Government tried to rush through Congress a bill to provide $20 million a year for two years to exterminate the rats that infest the city slums. It was suggested that eradicating rats would ultimately help to prevent the racial riots, as it would indicate to the rioters that somebody really cares.

One may agree with the militant “Civil Rights” leaders that, for the first time in American history, political and social conditions are ripe for open rebellion and revolution. But our explanation differs fundamentally from theirs. The teachings of conflict and socialism, which for a long time were limited to white pressure groups, have finally reached millions of Negroes. In their incredible blindness our political leaders eagerly sow dissatisfaction and make reckless promises of redistribution while condemning the private property order — openly encouraging Negro protests against that order. It is collectivism, not capitalism, which breeds insurrection and revolution.

Sexual Conflict

In the United States the conflict doctrine finally was extended to cover sexual relations. There can be little doubt that women’s liberation has become a major and militant movement.

In some of its aspects the movement is hardly new. More than 50 years ago it led to the 19th Constitutional Amendment that gave American women the right to vote. But in recent years, especially since the appearance of Simone de Beauvoir’s The Second Sex and Betty Friedan’s The Feminine Mystique, it acquired the familiar symptoms of conflict and confrontation. Some of its radical spokesmen sound like the other conflict champions although they substitute sex for race, class, or generation. Their charges are almost identical: the capitalistic system breeds exploitation and slavery and therefore should be abolished. Economic freedom means freedom for men only, but exploitation and dependence for women. Therefore, it must give way to the political process, to legislation and regulation, in short, to a new order.

Concentrations and Monopolies

Although most Americans would disclaim any sympathy for Karl Marx and his teachings, they seem to be in full agreement with him not only on his doctrine of conflict of interest and class struggle but also on his theory of industrial concentration and monopoly.

In Das Kapital Karl Marx proclaimed the inevitable coming of socialism on grounds that capitalism causes a gradual pauperization of the working classes. The exploitation profits, which businessmen pocket by means of the employment contract, are invested in an ever-growing apparatus of production, today called automation, which in turn creates a growing army of unemployed and underemployed paupers.

In the decades that followed the publication of Das Kapital, it proved to be most difficult to inculcate this doctrine in the minds of American workers. Every year, wages rose and conditions improved on account of expanding capital investments and rising labor productivity. In fact, the standards of living of American working people rose to levels that are unprecedented in human history. And with the rise in labor productivity and wage rates, the conditions of health, life expectancy, education, recreation, and leisure improved immeasurably.

A more plausible theory on which the doctrine of inevitability of socialism could be based had to be found. Today, communist propaganda, whether in the form of arrogant prognostications that our grandchildren will live under communism or as blaring newscasts by Radio Moscow, proclaims the coming of socialism on grounds that capitalism is degenerating to dire monopolism. Whatever capitalism may have achieved in the past, its dreadful degeneration gives rise to vast concentrations of wealth matched by dismal poverty, automation and unemployment, and other discrepancies and imbalances. Prosperity under capitalism, we are told, is only short-lived and must soon give way to monopolistic exploitation, depression, and unemployment.

Many Americans are increasingly receptive to this doctrine. Certainly the Founding Fathers were aware of the inherent dangers of monopoly. Thomas Jefferson had even advocated a Constitutional amendment outlawing monopolies. But the Founding Fathers were also fully aware that governments were spawning the monopolies. Some three hundred years of European mercantilistic monopolistic policy had taught them that the government issue of licenses, franchises, regulations, and controls gives rise to monopolistic restrictions and economic maladjustments.

The Forces of Competition

Under the influence of European socialistic thought and Marxian indoctrination, this causal connection between government and monopoly has been gradually forgotten. Instead, many Americans are now led to believe that the capitalistic market economy breeds monopolies, and that “big business” tends to degenerate to monopoly. In reality, the unhampered market economy, through the operation of free competition, prevents any one businessman from charging monopolistic prices. Even if one should be the only producer in the field, potential competition, the competition of substitutes, and the elasticity of demand, prevent him from exploiting the situation. Potential competition exists in all fields of production and commerce which everyone is legally free to enter. Most corporations are searching continuously for new lines and items of production. They are eager to invade any field in which business earnings are unusually high. The invasion of another field by a corporation may involve no more than a single retooling or reorganization that is achieved in a few weeks or months. Or, brand new facilities may be employed for an invasion. Thus, one producer, whether he is a monopolist, duopolist, or a competitor among many, always faces the potential competition of all other producers.

But even if American enterprises failed to compete with each other and potential competition failed to exert a restraining influence on monopolists — which is a most unrealistic assumption —the people would escape monopolistic prices through recourse to substitutes. In many fields the competition of substitutes is more important than that of competing enterprises. In the manufacture of clothing, for instance, a dozen different materials vie with each other for the consumer’s dollar. The monopolist of any one material is powerless because monopolistic pricing would induce consumers to switch immediately to other materials. The manufacturers of suspenders compete not only with each other and with potential competitors, but also with the producers of belts. In the transportation industry the railroads compete with trucks, cars, airplanes, pipelines, and ships.

Elasticity of Demand

The existence of substitutes makes for demand elasticity which, in turn, makes monopolistic pricing unprofitable; for higher product prices would greatly curtail product demand, and thus sales and income of the monopolist. Therefore, he again must act as if he were a competitor among many.

All producers, in fact, compete with all other producers for the consumer’s dollars. The manufacturer of television sets competes with the manufacturer of freezers and refrigerators. If the monopolist of one commodity — say, television sets — should raise his price, the consumer may forego the purchase of a new set and buy instead a second-hand set or a refrigerator. We consumers do not allocate our income to the satisfaction of categories of wants but to that of specific wants yielding the greatest net addition to our well-being. This addition, in turn, is determined by the urgency of our wants and by the cost of satisfaction.

This consideration of some fundamental principles of market economics runs counter to the interpretations offered by Marxian propaganda and, unfortunately, also by many fellow Americans. Our statist politicians and antitrust bureaucrats partially embrace the Marxian explanations. They subscribe to the theory that our capitalist system breeds monopolies. But then they part with Radio Moscow by proclaiming their desire to save this monopoly-breeding system from its own destruction. They propose to control the monopolies through government action. Almost every day now, the Antitrust Division of the Department of Justice charges some businessmen with monopolistic conspiracy. These charges, being made in the limelight of worldwide publicity, poison the political atmosphere and create a badly distorted picture of our enterprise economy. In fact, the Antitrust Division is one of the most efficient arms of socialist propaganda.

Anticolonialism

Many Americans also agree with the Marx-Lenin doctrines of colonialism and imperialism. In the name of national sovereignty and anticolonialism the United States

Government has promoted nationalism and socialism in all corners of the world. It has exerted its great influence toward the reduction of European influence and possessions in Asia, Africa, and Latin America. We urged the Dutch to leave Indonesia, we applauded the French retreat from Indochina, we blatantly demanded British and French withdrawal from the Suez Canal, we urged the Belgians to leave the Congo, and the French to surrender North Africa, we censured Portugal for her African possessions and imposed sanctions on Rhodesia.

The Western retreat from Suez to Panama, from Indonesia to Algeria, from the Congo to Morocco evidences an ominous weakness of Western civilization. Blinded by socialistic doctrines and prejudices, our statesmen hail retreat as progress and defeat as victory. Their world view is perverted by conceptions of “capitalist colonialism,” which are derived from the teachings of Marx and Lenin. Echoing the communist leaders in their attacks on the West, they level the charge that European colonialism has kept the economically backward nations subjugated for centuries.

This misconception of history flows from a bad distortion of facts. The European colonies were acquired during the age of mercantilism and nationalism. The spirit of capitalism with its concern for individual freedom and private property, which shaped British foreign policies during the nineteenth century, completely transformed colonial possessions. The British overseas settlers became virtually independent — enjoying a dominion status. All other territories dependent on British rule were governed according to “open-door” principles. The British Empire was a vast free-trade area in which the government undertook only to maintain law and order.

Laissez Faire

Capitalism is the system of individual freedom and private property in production as well as consumption. In both domestic and foreign affairs it implies laissez faire, which means free trade and an open-door policy that welcomes everyone and discriminates against no one. The exploitation of colonial possessions is inconsistent with the concepts of competitive private enterprise and voluntary exchange. An American or European business that invests its capital in an underdeveloped country does not exploit the natives. Capital investments anywhere raise labor productivity and consequently wages. The United Fruit Company, for instance, did not enslave the people of Latin America by creating plantations in wilderness. On the contrary, it raised native productivity and improved working conditions.

And yet, most Americans are convinced that European colonialism is responsible for world poverty and upheaval. Why else would the U.S. Government have helped to liquidate European influence in all corners of the world and sanction and support revolutionary movements? Even today it strongly opposes the white administrations of Portuguese Africa, Rhodesia and South Africa. Many Americans even approve of the confiscation or nationalization of private enterprises by the governments of newly independent countries. They agree with the Marxians the world over that. a sovereign state can legally seize and confiscate any foreign enterprise in disregard of valid contracts and agreements. This is why the new states in Africa and Asia can seize and destroy huge European investments with impunity. And Fidel Castro could seize more than one billion dollars of American investments.

During the eighteenth and nineteenth centuries most Americans were conscious of the natural rights of individuals, and therefore believed in an idea of state sovereignty that was severely limited by inalienable personal rights. State sovereignty was encompassed by the individual rights to life, liberty, and property. This concept of limited state sovereignty, which true friends of freedom continue to embrace, denies the right of any government to seize or nationalize any enterprise without the owner’s consent.

Are we Marxians now? Most Americans will indignantly answer this question in the negative. After all, they neither condone dictatorship with its one-party system nor the ruthless suppression of dissent and brutal treatment of dissenters, which characterize all communist countries. They are “civilized” and therefore abhor all manifestations of inhumanity. But unfortunately, many Americans unwittingly share important philosophical, sociological, and economic beliefs with Marxians the world over. These beliefs give rise to policies that please the Marxians. Ultimately, they will breed the very political and economic tyranny which Americans so abhor.

 

***

A Useful Product

The business genius who makes and markets a useful product and furnishes employment at good wages to hundreds of fathers, serves his community more usefully than a councilman who votes the appropriation of public funds to build playgrounds.

Without the steady production of wealth, the makers of public budgets would be helpless. For this reason the man richly endowed with business sense serves his fellow men best if he continues at his desk to the end of his days.

This line of thought does not win easy acceptance because it is only within recent generations that the social significance of business prosperity has been properly valued. It is now becoming more generally recognized that a nation cannot have too many competent businessmen. Prosperity is more a matter of men than natural resources. Poverty and ignorance have cursed and humbled mankind from the beginning. Intelligent direction of business will eliminate both.

From The William Feather Magazine, April, ¹972


  • Hans F. Sennholz (1922-2007) was Ludwig von Mises' first PhD student in the United States. He taught economics at Grove City College, 1956–1992, having been hired as department chair upon arrival. After he retired, he became president of the Foundation for Economic Education, 1992–1997.