Karl Kautsky

The Labour Revolution

III. The Economic Revolution


THE creation of a socialistic organization is therefore not so simple a process as we used to think, when the problem had not approached so near to us. What kind of organization this will be and how it will be introduced is the question which is now engaging the attention of the theorists, and also the far-seeing politicians of Socialism. In recent years a whole literature on the subject has grown up, mostly in Germany and neighbouring Austria, but also in England, that is, in those countries where economic conditions are favourable to Socialism. Many Utopian features can be detected in this literature, but it is otherwise valuable. Although it shares with Utopianism the common task of presenting a picture of socialistic production, it stands upon far firmer ground than did the old Utopists, whose labours were purely speculative. Moreover, thanks to Marx, we are now familiar with the idea of social evolution. We no longer seek for a perfect society, which would render any further development impossible, but only for a solution of the specific problems which capitalism presents to us. The utopian features in the socialization literature have usually been introduced by non-Marxists, who did not discover their Labour sympathies until after the Revolution.

The reproach has been levelled at us that our investigations ought to have been made sooner, in which case the outcome of the Revolution would have been different. But without the experience furnished by the Revolution, these questions could not have been discussed with the necessary preciseness. We could not have foreseen when and under what circumstances we were coming to power.

It is true that in the winter of 1918-19 we had a purely Socialist Government in Germany for several months. But the German working class revealed its unreadiness at that time by indulging in internecine strife. We had three Socialist parties, the Majoritarians, the Independents, and the Communists, which fought each other with great fury. As their name indicates, the first comprised the great majority of the German workers. But the capital of a modern State plays a decisive part in revolutionary times, and Independents and Communists were preponderant in Berlin. As if this dissension were not sufficient, both Communists and Independents were divided among themselves – in the one case Rosa Luxemburg, and in the other Hugo Haase found a strong opposition. At any rate, the Communists were so far united that they remained outside the Socialist Government, which they fought. But the Independents presented the tragi-comical spectacle of a party whose Right Wing sat in the Government, which its Left Wing strove to overturn.

It will be conceded by every unbiased person that such a working class would lack both the strength and the capability to inaugurate a successful policy of socialization.

In addition to this political difficulty, there were the economic difficulties which sprang from the defeat, the collapse, and the senseless Peace of Versailles. Socialism cannot arise from a crippled and stagnate capitalism, but only from a capitalism carried to its highest point of productivity.

Not until the Socialist parties, purged by the Revolution, have imposed a higher training and discipline upon the politically still illiterate masses; not until the illusions and cult of force of Communism have been replaced by economic insight; not until the worst consequences of the war and of the Peace Treaty have been overcome and the process of production is again working smoothly, will the time come for a successful policy of socialization. I believe it will arrive sooner for England than for Germany.

All the investigations and isolated attempts which are now being made in the province of socialization are chiefly directed to the end of preparing public opinion for the time when the workers capture political power, and therefore acquire the strength to embark upon a resolute policy of socialization. The greater the sum of theoretical, knowledge and practical experience we shall have gathered by that time, the more rapidly and the more securely we shall be able to advance.

Instead of being too late, now is the most propitious time for the leading minds of Socialism to apply themselves to this subject with all their strength. The most important work will devolve upon those who possess eminent gifts of organization, or rather those who combine with such gifts great theoretical powers and knowledge. This combination is seldom to be found amongst us old men – in my own case I must confess that organizing ability is wholly lacking. I must therefore confine myself in what follows to a few indications, although they touch the very kernel of our historical task during the next decades.

Recent as the socialization literature is, we are already able to detect various tendencies in it.

Above all, there are two conceptions regarding the question which is vital for us so long as we are standing on the threshold of our task, viz. how shall we begin?

Socialization cannot be achieved at one stroke, but must be accomplished gradually. Upon this we are agreed, but different answers are given to the question, in which sphere shall we commence?

Capitalist economy is divided into two different processes the production of commodities and their circulation, their purchase and sale. Of course, both processes are closely bound up with each other, and may not be separated.

One of the tendencies indicates that we should begin with the process of production, the other with the process of circulation.

The second would at the outset leave untouched capitalist property in the means of production. The individual capitalist could – many even say should – remain the owner and manager of his business. But he would not be permitted to decide what he should bring to the market, that is, what he should produce.

Statistics are to be prepared of the total productive forces in the State, and likewise of the total needs of consumers, and upon the basis of the data given an economic scheme is to be formulated, into which each undertaking will fit. Production shall or may continue to be private production, but it will no longer be the factor of profit but the needs of society which shall decide what and how much the individual producer will produce and take to the market, or assign to the State. Social needs instead of profit will be the regulative factor.

Prices are not to be fixed in the market by supply and demand, but by the calculation of the costs of production. The separate undertakings of a branch of industry are to be organized into syndicates, which will be controlled by workers and consumers, as well as by employers.

Such in summary outline are the proposals for an economic scheme of the type that has been advocated by Wissell and Neurath. [2]

These proposals are very seductive. Within the limits of a single large undertaking industrial capitalism has already developed the productivity of labour to the highest point. There is no prospect of effecting any rapid improvement through socialization. On the other hand, within the sphere of circulation we still find the greatest waste and the most painful and paralysing crises. If we substitute an economic scheme for this planlessness, we can at once effect a considerable increase in the social output, and thus in general prosperity, even without any diminution in the income of capital.

Capital will not merely retain its income, but its property in the means of production need not be affected.

The latter consideration has influenced many advocates of the economic scheme. Yet this economic scheme by no means excludes the expropriation of the capitalists. Most of the supporters of the economic scheme desire both things; only they consider it necessary to make a start with their scheme, because it can be more easily put into operation. But there are also advocates of the economic scheme who believe its advantages will be sufficiently great to satisfy the workers, so that the other kind of socialization would become superfluous.

In reality, the last-named contingency is out of the question.

The constant improvement in the worker’s position would not diminish the antagonism between Capital and Labour within the undertaking; it would merely alter its character. As the struggle of the workers ceases to be a fight for bread, it becomes a struggle for freedom and power.

On the other hand, is it reasonable to expect that the capitalists would more easily accommodate themselves to an economic scheme; that they would offer less resistance to it than to the more or less compulsory sale of their businesses.

Neither in the one nor in the other case would their incomes be curtailed. But a capitalist could do what he liked with the compensation money he received. He could purchase one of the businesses that were not yet socialized. The demand for such undertakings would then grow; their price would rise; their rate of profit would correspondingly fall; but the energetic business man would be able, as heretofore, to carry on his activities without hindrance.

The economic scheme, however, would entirely close to the capitalist an important sphere of influence, that which is peculiarly capitalistic, the mercantile province, and this for all undertakings. The superintendence of the workers in the undertaking would remain as his sole field of activity. He would no longer be able to derive a profit from buying cheap and selling dear, and getting as much work as possible out of his workers.

This would certainly accentuate the antagonism between Capital and Labour, but it would also make the situation of the capitalists extremely uncomfortable.

The economic scheme would inflict degradation upon the whole class of capitalists at once, whereas the socialization of a few undertakings and branches of business at the outset would only affect a small section of the capitalist class, and would begin with those branches of production that had become private monopolies, and as such would stand in a competitive relation to those branches where free competition still prevailed.

We have therefore no grounds for supposing that the economic scheme would encounter less resistance than the progressive socialization of businesses.

Nor would it permit a more rapid accomplishment of socialization. It is based on comprehensive statistics relating both to the productive forces and to consumption, and these statistics would be drawn from other countries as well. Otto Neurath considers:

“An adequate economic scheme is essential if we are to raise the standard of existence. It is not enough to be acquainted with the whole of the possibilities of production and of the needs of consumers. We must be able to follow the movement and the destination of raw materials and energies, of men and machines throughout the economic organism. We must be in a position to ascertain what quantities of coal, iron, lime, etc., what numbers of machines and men are required for the foundries what proportions of these ingredients are transferred to industry and to agriculture.

“For such purposes we shall need international statistics.

“The economic scheme would have to be elaborated in a single office, which would regard the whole field of economic and social activity as one gigantic undertaking.”

Until we have these international statistics and the economic scheme to be based upon them, it will scarcely be possible to put these ideas into practice. Such comprehensive statistics cannot be compiled overnight. They presuppose a colossal machinery of expert and conscientious collaborators. It would be many years before we could compile statistics of this kind that were in any way reliable, even if it could be done at all on the basis of private property in the means of production.

Neurath seems to conceive of the organism of social economy in too simple terms. In referring to the products in question, he is always mentioning the basic products of industry, such as coal, iron, copper, lime, cement, etc. The quantities of these products may be calculated at the present time. But the statistical difficulties increase with the progress of the raw products through the various stages of preparation until they reach the finished state of products for personal consumption. It seems to me quite impossible to compile exact statistics of the infinite variety of all these products under private enterprise.

That Neurath presents his economic scheme in such simple terms may be explained by the fact that he bases his panacea upon natural economy. We shall, however, see that only a crude economy, whose members have the most primitive needs, is possible upon this basis, or such a sublime social order as may to-day be relegated to cloud cuckoo-land. It is quite incompatible with the economic conditions and needs that exist, and those which are developing out of them

The economic scheme, upon whose advent the fate of socialization is to depend and of which it is to form the starting-point, is assuredly at present and as long as private property exists to any extent nothing but a fata Morgana.

Even more important than these objections to the pretensions of the economic scheme to form the starting-point of socialization is the following: it reserves (at least at first) private property in the means of production and the management of the business to the capitalists or their representatives, but at the same time designs to replace the motive of profit by the satisfaction of needs. To-day profit operates as the driving force and regulator of the production of private capitalists. It is an extremely imperfect regulator, and only functions with the accompaniment of crises and constant friction and great less of energy, but hitherto it has shown itself to be the only possible agency to maintain production in full swing on the basis of private property in the means of production.

Now this property is to continue to exist, but the economic scheme imposed by the State is to take the place of profit as the driving force and regulator. Whence will the scheme derive its compelling power? Manifestly from the State, which will constrain the individual producers to organize their production upon the basis of this scheme, irrespective of what their business prospects would be without it.

As we have repeatedly observed, a high and intricate form of production cannot be based on compulsion. The element of coercion in production always leads to lower and cruder forms of production. But Socialism ought to represent an advance upon, not a retrogression from, capitalism. It is our aim to replace the element of coercion which still inheres in wage-labour by the interest of the worker in his work and its result, and not to introduce a new element of compulsion as the driving force in the process of production, while retaining the existing forms of production.

As the driving force, be it observed. Social compulsion may accomplish much where it is a question of resisting or neutralizing a superior force. Coercion was necessary to induce the feudal lords to renounce their property and their rights. It is necessary to prevent industrialists from working their workers to death, or from condemning children of tender age to slavery in factory hells. Compulsion will be necessary to deprive the capitalists of their property in the means of production.

Exercised in this way, compulsion may be productive of much good, and even indispensable. But of quite a different kind is the compulsion which operates positively, instead of negatively, and which would compel a person to perform reluctantly what could only be adequately performed if his whole heart were in the business.

The supports of the economic scheme point to the trusts, the cartels, etc., where, in spite of the continuance of private property in the means of production, the individual capitalist produces and sells according to the directions of the collective organization, and not according to his own caprices. In fact, the idea of the economic scheme signifies nothing but an extension of the idea of the syndicate. On the one hand, such associations are to be obligatory upon everybody concerned, and on the other hand they are to be brought into close and harmonious connection with each other.

This overlooks a small point: in the associations which are created by capitalists and not by the State, the motive of profit is not excluded. On the contrary, upon this factor depends their strength and vitality. Trusts and cartels are created in order to increase the profits of their members, to provide them with extra profits which could not be obtained under free competition. This profit, this interest, and not external compulsion, induces the individual capitalist to submit to the regulation of production by the association. Moreover, the object of this regulation is not to adapt production to requirements, but to restrict it (at least so far as the home market is concerned) until it falls short of requirements.

Where the association is not able to increase its profits in this way at the expense of the consumer, it exerts its whole strength merely against the worker.

The economic scheme designs to organize industrial associations, which will direct their force either against the worker or the consumer, and yet be deprived of every opportunity of extracting extra profits. If the attempt to invest the associations with supreme power in this way should be successful, they would be entirely useless for the regulation of production, inasmuch as the guiding motive of profit will be lacking. For the execution of its economic scheme, the State would have no alternative but to establish an enormous bureaucratic machine by the side of the machinery of production, in order to supervise the latter. This organization would be protracted and laborious, and its functioning would soon produce intolerable friction and hindrances. The result would eventually he as lamentable as the present Russian example.

It is beside the point to argue that compulsory regulation was useful and even necessary during the war. The conditions which a war creates are not normal. And even conditions which a war creates are not normal. And even the war regulations did not exclude profit, but in fact yielded most substantial profits.

A system which aims at supplying needs, without the intolerable futile and even harmful element of compulsion as its driving force, could only be organized if those whose needs were to be supplied themselves controlled the means of production. The more the organized power of society, the State, owns and operates important implements of production, the clearer will become its insight into the possibilities of production and social needs, the closer will its statistics of production and consumption approach the ideal of universal statistics. The more will the character of its undertakings approach the ideal of an economic scheme for the whole of society.

However necessary and fruitful this economic scheme may be, it cannot be the starting-point of progressive socialization, but must constitute its final phase. To seek to impose it at the commencement of socialization is equivalent to beginning the construction of the socialist edifice with the roof.

For this reason it is absurd to recommend socialization as a remedy for the current crisis. Socialism will make a definite end of crises and unemployment once it is put into extensive operation. Crises and unemployment will diminish in intensity in the degree that socialization progresses. But socialization could never be introduced so quickly and so thoroughly that it would put a stop to a crisis that had already broken out.

Socialization will operate successfully, not as a remedy for nascent crises, but as a prophylactic against coming crises.



1. Planwirtschaft.

2. Rudolf Wissell and Alfred Striemer, Ohne Planwirtschaft kein Aufbau, Stuttgart 1921; R. Wissell, Kritik und Aufbau, Berlin, 1921; Dr. Otto Neurath, Wesen and Weg zur Sozialisierung, Munich, 1919. Consult upon this and upon the questions of socialization generally Heinrich Ströbel’s instructive exposition: Die Sozialisierung, ihre Wege and Voraussetungen, Berlin, 1921. English translation by H.J. Stenning, Socialization in Theory and Practice, P.S. King & Son.


Last updated on 27.1.2004