THE CLASH OF GROUP INTERESTS
Copyright 1978 Center for Libertarian Studies All rights reserved by the Center
"The Clash of Group Interests" was originally published in Approaches to National Unity (1945)
"The Myth of the Failure of Capitalism" was originally published as "Die Legende von Versagen des Kapitalismus" in Der Internationale Kapitalismus und die Krise, Festschriftfiir Julius Vyo//(1932)
"The Freedom to Move as an International Problem" was originally published as "Freiziigigkeit als internationales Problem" in Wiener Wirtschaftswoche (Christmas, 1935)
"Karl Menger and the Austrian School of Economics" was originally published as "Carl Menger und die osterreichische Schule der Nationalokonomie" in Neue Freie Presse (January 29 & 30,1929)
Preface
by Murray N. Rothbard
In the twentieth century, the advocates of free market economics almost invariably pin the blame for government intervention solely on erroneous ideas—that is, on incorrect ideas about which policies will advance the public weal. To most of these writers, any such concept as "ruling class" sounds impossibly Marxist. In short, what they are really saying is that there are no irreconcilable conflicts of class or group interest in human history, that everyone's interests are always compatible, and that therefore any political clashes can only stem from misapprehensions of this common interest.
In "The Clash of Group Interests," the most important of the little-known essays reprinted here, Ludwig von Mises, the outstanding champion of the free market in this century, avoids the naive trap embraced by so many of his colleagues. Instead, Mises sets forth a highly sophisticated and libertarian theory of classes and of class conflict, by distinguishing sharply between the free market and government intervention. It is true that on the free market there are no clashes of class or group interest; all participants benefit from the market and therefore all their interests are in harmony. But the matter changes drastically, Mises points but, when we move to the intervention of government. For that very intervention necessarily creates conflict between those classes of people who are benefited or privileged by the State, and those who are burdened by it. These conflicting classes created by State intervention Mises calls castes. As Mises states:
Thus there prevails a solidarity of interests among all caste members and a conflict of interests among the various castes. Each privileged caste aims at the attainment of new privileges and at the preservation of old ones. Each underprivileged caste aims at the abolition of its disqualifications. Within a caste society there is an irreconcilable antagonism between the interests of the various castes.
In this profound analysis Mises harkens back to the original libertarian theory of class analysis, originated by Charles Comte and Charles Dunoyer, leaders of French laissez-faire liberalism in the early 19th century.
But Mises has a grave problem; as a utilitarian, indeed as someone who equates utilitarianism with economics and with the free market, he has to be able to convince everyone, even those whom he concedes are the ruling castes, that they would be better off in a free market and a free society, and that they too should agitate for this end. He attempts to do this by setting up a dichotomy between "short-run" and "long-run" interests, the latter being termed "the rightly understood" interests. Even the short-run beneficiaries from statism, Mises asserts, will lose in the long run. As Mises puts it:
In the short run an individual or a group may profit from violating the interests of other groups or individuals. But in the long run, in indulging in such actions, they damage their own selfish interests no less than those of the people they have injured. The sacrifice that a man or a group makes in renouncing some short-run gains, lest they endanger the peaceful operation of the apparatus of social cooperation, is merely temporary. It amounts to an abandonment of a small immediate profit for the sake of incomparably greater advantages in the long run.
The great problem here is: why should people always consult their long-run, as contrasted to their short-run, interests? Why is the long-run the "right understanding"? Ludwig von Mises, more than any economist of his day, has brought to the discipline the realization of the great and abiding importance of time preference in human action: the preference of achieving a given satisfaction now rather than later. In short, everyone prefers the shorter to the longer run, some to different degrees than others. How can Mises, as a utilitarian, say that a lower time preference for the present is "better" than a higher? In brief, some moral doctrine beyond utilitarianism is necessary to assert that people should consult their long-run over their short-run interests. This consideration becomes even more important when we consider those cases where government intervention confers great, not "small," gains on the privileged, and where retribution does not arrive for a very long time, so that the "temporary" in the above quote is a long time indeed.
This consideration becomes still more poignant in the noble and surprising essay, "The Freedom to Move as an International Problem," newly translated from a 1935 newspaper in Vienna. It is surprising because it presents a remarkably sharp attack on the immigration barriers erected by the United States and the British Dominions. For Mises trenchantly identifies these barriers as creating a ruling class elite, albeit a large one, in which workers in a particular geographical area with a high standard of living, use the State to keep immigrants from lower-wage areas out, thereby freezing the latter into a permanently lower wage. Mises correctly adds that, contrary to the Marxian myth of the
international solidarity of the proletariat, it is the unions in the high living standard countries who have lobbied for the immigration restrictions. Mises is hard-hitting on the privileges conferred by immigration barriers: "The oft-referred-to 'miracle' of the high wages in the United States and Australia may be explained simply by the policy of trying to prevent a new immigration. For decades people have not dared to discuss these things in Europe." Mises concludes his essay with an implicit justification of overcrowded Europe making war upon the restrictive countries: "This is a problem of the right of immigration into the largest and most productive lands.... Without the reestablishment of freedom of migration throughout the world, there can be no lasting peace."
Even here, Mises tries to show that, in the long run, the workers of the privileged countries are worse off from the immigration barriers, but it is clear that the "run" is so long and the intermediary advantages so substantial, that the utilitarian harmony of universal interests here breaks down.
The same breakdown occurs when Mises, in his "The Clash of Group Interests," tries to dismiss war between nations and nationalisms as senseless, at least in the long run. But he does not come to grips with the problem of national boundaries; since the essence of the nation-State is that it has a monopoly of force over a given territorial area, there is ineluctably a conflict of interest between States and their rulers over the size of their territories, the size of the areas over which their dominion is exercised. While in the free market, each man's gain is another man's gain, one State's gain in territory is necessarily another State's loss, and so the conflict of interest over boundaries are irreconcilable^—even though they are less important the fewer the government interventions in society.
Mises' notable theory of classes has been curiously neglected by most of his followers. By bringing it back into prominence, we have to abandon the cozy view that all of us, we and our privileged rulers alike, are in a continuing harmony of interest. By amending Mises' theory to account for time preference and other problems in his "rightly understood" analysis, we conclude with the still less cozy view that the interests of the State privileged and of the rest of Society are at loggerheads. And further, that only moral principles beyond utilitarianism can ultimately settle the dispute between them.
The Clash of Group Interests
i
To apply the term "group tensions" to denote contemporary antagonisms is certainly a euphemism. What we have to face are conflicts considered as irreconcilable and resulting in almost continual wars, civil wars, and revolutions. As far as there is peace, the reason is not, to be sure, love of peace based on philosophical principles, but the fact that the groups concerned have not yet finished their preparations for the fight and, for considerations of expediency, are waiting for a more propitious moment to strike the first blow.
In fighting one another, people are not in disagreement with the consensus of contemporary social doctrines. It is an almost generally accepted dogma that there exist irreconcilable conflicts of group interests. Opinions differ by and large only with regard to the question, which groups have to be considered as genuine groups and, consequently, which conflicts are the genuine ones. The nationalists call the nations (which means in Europe the linguistic groups), the racists call the races, and the Marxians call the "social classes," the genuine groups, but there is unanimity with regard to the doctrine that a genuine group cannot prosper except to the detriment of other genuine groups. The natural state of intergroup relations, according to this view, is conflict.
This social philosophy has made itself safe against any criticism by proclaiming the principle of polylogism. Marx, Dietzgen, and the radicals among the representatives of the "sociology of knowledge" teach that the logical structure of mind is different with different social classes. If a man deviates from the teachings of Marxism, the reason is either that he is a member of a nonproletarian class and therefore constitutionally
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incapable of grasping the proletarian philosophy; or, if he is a proletarian, he is simply a traitor. Objections raised to Marxism are of no avail because their authors are "sycophants of the bourgeoisie." In a similar way the German racists declare that the logic of the various races is essentially different. The principles of "non-Aryan" logic and the scientific theories developed by its application are invalid for the "Aryans."
Now, if this is correct, the case for peaceful human cooperation is hopeless. If the members of the various groups are not even in a position to agree with regard to mathematical and physical theorems and biological problems, they will certainly never find a pattern for a smoothly functioning social organization.
It is true that most of our contemporaries, in their avowal of polylogism do not go so far as the consistent Marxians, racists, etc. But a vicious doctrine is not rendered less objectionable by timidity and moderation in its expression. It is a fact that contemporary social and political science makes ample use of polylogism, although its champions refrain from expounding clearly and openly the philosophical foundations of polylogism's teachings. Thus, for instance, the Ricardian theory of foreign trade is simply disposed of by pointing out that it was the "ideological superstructure" of the class interests of the nineteenth-century British bourgeoisie. Whoever opposes the fashionable doctrines of government interference with business or of labor-unionism is—in Marxian terminology—branded as a defender of the unfair class interests of the "exploiters."
The very way in which social scientists, historians, editors, and politicians apply the terms "capital" and "labor" or deal with the problems of economic nationalism is the proof that they have entirely adopted the doctrine of the irreconcilable conflict of group interests. If it is true that such irreconcilable conflicts exist, neither international war nor civil war can be avoided.
Our wars and civil wars are not contrary to the social doctrines generally accepted today. They are precisely the logical outcome of these doctrines.
II
The first queston we must answer is: What integrates those groups whose conflicts we are discussing?
Under a caste system the answer is obvious. Society is divided into rigid castes. Caste membership assigns to each individual certain privileges (privilegia favorabilia) or certain disqualifications (privilegia odiosa). As a rule a man inherits his caste quality from his parents, remains in his caste for life, and bestows his status on his children. His personal fate is inseparably linked with that of his caste. He cannot expect an improvement of his conditions except through an improve
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ment in the conditions of his caste or estate. Thus there prevails a solidarity of interests among all caste members and a conflict of interests among the various castes. Each privileged caste aims at the attainment of new privileges and at the preservation of the old ones. Each underprivileged caste aims at the abolition of its disqualifications. Within a caste society there is an irreconcilable antagonism between the interests of the various castes.
Capitalism has substituted equality under the law for the caste system of older days. In a free-market society, says the liberal economist, there are neither privileged nor underprivileged. There are no castes and therefore no caste conflicts. There prevails full harmony of the rightly understood (we say today, of the long-run) interests of all individuals and of all groups. The liberal economist does not contest the fact that a privilege granted to a definite group of people can further the short-term interests of this group at the expense of the rest of the nation. An import duty on wheat raises the price of wheat on the domestic market and thus increases the income of domestic farmers. (As this is not an essay on economic problems we do not need to point out the special -market situation required for this effect of the tariff.) But it is unlikely that the consumers, the great majority, will lastingly acquiesce in a state of affairs which harms them for the sole benefit of the wheat growers. They will either abolish the tariff or try to secure similar protection for themselves. If all groups enjoy privileges, only those are really benefited who are privileged to a far greater degree than the rest. With equal privilege for each group, what a man profits in his capacity as producer and seller is, on the other hand, absorbed by the higher prices he must pay in his capacity as consumer and buyer. But beyond this, all are losers because the tariff diverts production from the places offering the most favorable conditions for production to places offering less favorable conditions and thus reduces the total amount of the national income. The short-run interests of a group may be served by a privilege at the expense of other people. The rightly understood, i.e., the long-run interests are certainly better served in the absence of any privilege.
The fact that people occupy the same position within the frame of a free-market society does not result in a solidarity of their short-run interests. On the contrary, precisely this sameness of their place in the system of the division of labor and social co-operation makes them competitors and rivals. The short-run conflict between competitors can be superseded by the solidarity of the rightly understood interests of all members of a capitalist society. But—in the absence of group privileges —it can never result in group solidarity and in an antagonism between the interests of the group and those of the rest of society. Under free trade the manufacturers of shoes are simply competitors. They can be
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welded together into a group with solidarity of interests only when privilege supervenes, e.g., a tariff on shoes (privilegium favorabile) or a law discriminating against them for the benefit of some other people {privilegium odiosum).
It was against this doctrine that Karl Marx expounded his doctrine of the irreconcilable conflict of class interests. There are no castes under capitalism and bourgeois democracy. But there are social classes, the exploiters and the exploited. The proletarians have one common interest, the abolition of the wages system and the establishment of the classless society of socialism. The bourgeois, on the other hand, are united in their endeavors to preserve capitalism.
Marx's doctrine of class war is entirely founded on his analysis of the operation of the capitalist system and his appraisal of the socialist mode of production. His economic analysis of capitalism has long since been exploded as utterly fallacious. The only reason which Marx advanced in order to demonstrate that socialism is a better system than capitalism was his pretension to have discovered the law of historical evolution; namely, that socialism is bound to come with "the inexorability of a law of nature." As he was fully convinced that the course of history is a continuous progress from lower and less desirable modes of social production toward higher and more desirable modes and that therefore each later stage of social organization must necessarily be a better stage than the preceding stages were, he could not have any doubts about the blessings of socialism. Having quite arbitrarily taken for granted that the "wave of the future" is driving mankind toward socialism, he believed that he had done everything that was needed to prove the superiority of socialism. Marx not only refrained from any analysis of a socialist economy. He outlawed such studies as utterly "Utopian" and "unscientific."
Every page of the history of the past hundred years belies the Marxian dogma that the proletarians are necessarily internationally minded and know that there is an unshakable solidarity of the interests of the wage-earners all over the world. Delegates of the "labor" parties of various countries have consorted with one another in the various International Working Men's Associations. But while they indulged in the idle talk about international comradeship and brotherhood, the pressure groups of labor of various countries were busy in fighting one another. The workers of the comparatively underpopulated countries protect, by means of immigration barriers, their higher standard of wages against the tendency toward an equalization of wage rates, inherent in a system of free mobility of labor from country to country. They try to safeguard the short-run success of "pro-labor" policies by barring commodities produced abroad from access to the domestic market of their own countries. Thus they create those tensions which must result in war
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whenever those injured by such policies expect that they can brush away by violence the measures of foreign governments that are prejudicial to their own well-being.
Our age is full of serious conflicts of economic group interests. But these conflicts are not inherent in the operation of an unhampered capitalist economy. They are the necessary outcome of government policies interfering with the operation of the market. They are not conflicts of Marxian classes. They are brought about by the fact that mankind has gone back to group privileges and thereby to a new caste system.
In a capitalist society the proprietary class is formed of people who have well succeeded in serving the needs of the consumers and of the heirs of such people. However, past merit and success give them only a temporary and continually contested advantage over other people. They are not only continually competing with one another, they have daily to defend their eminent position against newcomers aiming at their elimination. The operation of the market steadily removes inc...
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