I recently reviewed Janek Wasserman’s book Marginal revolutionaries: how Austrian economists fought the war of ideas For EH.net, the website of the Economic History Association. I enjoyed the book, which provides a very fascinating history of the Austrian School of Economics.
One thing I admire about Wasserman’s book is the description of the controversial debates of Austrian economists in Vienna, especially their debates with the Marxists. I was particularly interested in Wasserman’s discussion of the debate between Austrians and Marxists over the causes of imperialism.
When we think of the Marxist analysis of imperialism, we often think of Vladimir Lenin. Imperialism, the highest stage of capitalism. But Lenin’s analysis was greatly influenced by Rudolf Hilfering, a Marxist of Austrian descent. And as Wasserman explains, Hilfording’s influential book Finance Capital His debates with Austrian school economists were shaped by:
“On the outskirts of the Bohm Seminar, Hilfording expressed the main arguments of his Magnum Opus. Finance Capital Money and capital as an investigation. Only by examining the “process of intimacy” that eliminates free competition in industry and the ever-closer relationship between banks and industrial capital – which he calls “money capital” – can one understand the outline of the “current stage of capitalism”. Boom and bust its cycle. He also gave a keen eye on the connection between financial capital and imperialism. Because of the need for capitalism to expand continuously, and the desperate search for profits in the industrial and financial sectors, capitalists constantly sought new sources of raw materials, new markets for products, and new sites for capital investment. This tendency leads to larger and larger empires, based on economic necessity but sustained by political and military power. In contrast to liberal apocalypse, Hilfarding rejected the notion that capitalism is inherently pacifist; Capitalist expansion came at the tip of the bayonet. “
That’s right, one of the most influential Marxist analyzes of imperialism was honored through arguments at the seminar of Austrian school icon Eugene von Bohm-Bauerk.
Was Hilfording right that capitalism leads to imperialism? Leading Austrian school economists have opposed his claim. For example, Joseph Schumpeter challenged Hilfording’s analysis of imperialism:
“Like Hilfording, Schumpeter paid close attention to the relationship between capitalism and imperialism, and he acknowledged the intrusion of Hilfording’s insights. He agrees that capitalism has a tendency towards cartelization, monopoly prices, aggressive economic and foreign policies and war. That said, it was political action and not the logic of competition and capitalism that created these events. He therefore rejected Hilfreding’s historical argument about the relationship between financial capital and imperialism: “It is a fundamental lie that imperialism is a necessary stage of capitalism. . . . We have seen that the imperialist nature is indeed hostile to the way of life in the capitalist world. ” Schumpeter maintained that capitalism was moving towards peace. “
Although Schumpeter observed many of the same tendencies as Hilfarding, he argued that the problem was not capitalism, but political action.
Ludwig von went even further in his challenge to Mrs. Hilfording. Wasserman explains that Mises’ book Race, state and economy “Hilfording’s argument turned upside down.” Mrs. argued that capitalism promotes peace while socialism gives birth to imperialism and war. As Wasserman puts it:
“Only a liberal capitalist society, he said, can save civilization from socialism and its authoritarian, imperialist tendencies. As socialism required heavy state intervention in the economy, it also encouraged inter-state rivalry and violence. Liberalism, on the other hand, gives rise to strange relationships between individuals based on non-coercive economic exchanges. “
Mrs. sees capitalism as a source of social cooperation and socialism as a system that leads society to a violent path.
Hilford, Lenin, Schumpeter and Mrs. were all jumping on an important question: what is the cause of war and imperialism? Political economists of all stripes should continue to investigate these issues rigorously in the face of the devastation caused by the war.
Nathan P. Goodman is a postdoctoral fellow in economics at New York University. His research interests include defense and peace economics, self-governance, public choice, institutional analysis, and the Austrian economy.