Socialism and the Emergence of the Welfare State

Trafford Publishing

Contents

Preface.....................................viiChapter 1 Marx..............................1Chapter 2 Germany...........................7Chapter 3 France............................24Chapter 4 Britain...........................41Chapter 5 Sweden............................49Chapter 6 United States.....................56Conclusion..................................67Index.......................................75

Chapter One

In the beginning was Karl Marx. No other writer of nineteenth-century Europe had remotely as much influence as he. The time and place of his birth were crucial to that importance. Marx was born in the town of Trier (Trèves in French) on the Moselle River only a few miles from the intersection of Germany and France with Luxemburg. It also happens that Trier stood on the border between the Germanic and Roman worlds that had collided there centuries ago. Hence Trier is a historic crossing in the heart of Europe. As for the timing, Marx was born in 1818 near the climax of the first industrial revolution in Britain and at the post-Napoleonic beginning of a second industrial wave of growth that swept over western continental Europe as the nineteenth century unfolded. As a boy, therefore, Marx grew up in a largely rural setting that was soon to be transformed by the innovative force of new commerce and industry. For the first time, everything that we think of as "modern"—meaning a growing population, advancing technological innovation, a burgeoning factory system, mass transportation, an increasingly numerous working class, and much more—was putting in an appearance amid great confusion and conflict. It was Marx's self-appointed task to bring all this remarkable unprecedented activity into focus.

His earliest writings, starting about 1840, tended to get lost in the shuffle. More than a century later they were scooped up by scholars eager to show that Marx was really a humanist, an existentialist, or whatever. But what those first essays actually revealed was that Marx began as a thoroughly convinced Hegelian. It was, after all, Hegel's theoretical Weltanschauung that preoccupied Marx during his initial philosophical studies at the university in Berlin. In 1846 he attempted to pull his own thoughts together in a treatise entitled The German Ideology. The lingering traces of Hegelianism were evident enough, but one crucial sentence set Marx apart from his master: "Here we do not descend from heaven to earth, but we ascend from earth to heaven." If taken to its ultimate conclusion, this newly found conviction meant that Marx would no longer begin with some abstract notion seeking to realize itself in history, but he would take a more positivistic approach by deducing abstractions from historical facts. Of course, he never quite succeeded in making a total transition to that objective, and his writings remained marked by the titanic clash of great concepts.

Let it be briefly added here that Marx well understood Hegel. A single illustration will serve to underscore that assertion: the most fundamental Hegelian proposition of the dialectic. This conception has often been presented as a kind of ethereal tennis match. First an idea (the thesis) is advanced, which is then met by an opposing idea (the antithesis). The resolution of their clash is another idea (the synthesis) that becomes a new thesis, and so on. But the fallacy of this analogy is exposed by asking a simple question: in a tennis tournament, where does the opponent come from? Of course the answer is: from another bracket. Not, however, in Hegel's dialectic. For him the antithesis must be sought within the original thesis. Thus the dialectical method is a repeated process of self-contradiction and intellectual refinement. Marx well comprehended this distinction, and to suit his purposes he transposed it into historical terms with his signature assertion that the capitalist bourgeoisie plants the seeds of its own destruction by creating within the industrial system a revolutionary proletariat.

Such was the setting for the most notorious of Marxian texts, The Communist Manifesto, written with his friend Friedrich Engels in 1848. The chaotic insurrectionary events of that year begged for a coherent interpretation, which Marx and Engels intended to supply. More than that, they hoped to move the historical process along with a provocative theory that the proletariat—Europe's emerging industrial working class—was now rising to overthrow the currently prevailing dominance of the bourgeoisie, that despicable exploitative class of entrepreneurs. The state, invariably an instrument of the ruling class, would doubtless attempt to provide soldiers and arms to suppress this immense uprising of workers, but ultimately the revolution was bound to succeed in overthrowing the existing social order and establishing a classless society.

There, as succinctly as possible, was the gist of Marx's conception. When things did not turn out just as he had wished and predicted, after being exiled from Germany and taking up residence in London, Marx devoted his mature years to composing a massive tome of macroeconomic theory, Kapital, which sought to explain how the inexorable march of history would nonetheless cause the inevitable collapse of the capitalist system and bring proletariat the to power. His hopes for that outcome in his own lifetime were briefly sparked by the Paris Commune in 1871, but its demise left Marx to claim that this one more failure was actually the harbinger of a new society that would be created by a successful world revolution. Famously, that cry was echoed near the end of the First World War by Lenin, who proclaimed the Bolshevik Revolution to be the dawning fulfillment of Marx's dream.

Compressed here to its essentials, that is the story of Karl Marx. How is it to be judged? The timing of revolutionary success aside, he was demonstrably mistaken about any number of matters. Three stand out. First, Marx was convinced that the great revolution would necessarily occur in the industrially most advanced countries, that is, in those where capitalism was most fully developed. Surely he was dead wrong about that. No more inhospitable soil for the spores of revolution could be imagined than that of the Great Britain where Marx took up residence after 1848. While living there for more than three decades in the London working-class district of Soho, he existed in a Germanic bubble with rosy memories of the past, great expectations for the future, but little appreciation of the immediate present at his door. English workers of the late nineteenth century were scarcely given to Marx's brand of insurrectionary theory, and it required a large dose of self-deception on his part to think otherwise.

Second, Marx falsely assumed that the state was destined to play but a single role: by definition, it must always and only be the instrument of the ruling class. Government power would therefore be wielded everywhere to favor the wealthy few at the expense of the less fortunate many. The form of government might vary, but its function would nevertheless be immutable: to buttress the haves against the have-nots. Hence the sole recourse was a revolution to overthrow the state. Marx expressed this conviction in the starkest terms, verging on caricature. The English translation of Kapital repeatedly refers to the capitalist as "Mr. Moneybags," whereas workers are reduced to the status of "wage slaves." In these drastic terms we detect more of the Hegelian dialectic than of factual analysis. Too often, in his later writings, Marx continued to descend from heaven to earth.

Third, Marx assumed that the proletariat had no fatherland. The Marxist cause predicated the international solidarity of workers everywhere, who would come to realize the communality of class rather than of country. Yet if there was one obvious and invariable emotion that seized nineteenth-century Europe, it was nationalism. At the outset of the First World War patriotic enthusiasm spilled spontaneously into the streets of every capital on the Continent. Workers willingly became soldiers. They fought and died for their patrie, regardless of class or social condition.

All of that said, Karl Marx was nonetheless profoundly correct in his most fundamental insight, the implications of which were amply spelled out in Kapital. Namely, it lies in the essence of capitalism that a relatively few individuals must be rich and that most persons must lead a more modest existence, many of them not far removed from the edge of poverty. In short, by its nature the capitalist system dictates that its common folk should perpetually serve their more fortuned overlords. Otherwise capitalism, the embodiment of social inequality, could not exist and would not function.

This concise balance sheet enables us to explore, define, and evaluate what socialism means. In substance, social democracy was at once a positive response to Marx's sprawling scenario and an attempt to mitigate its more negative consequences. The socialist vision was that the state might properly intervene to ameliorate the condition of the working class by fostering a redistribution of wealth through social benefits. Workers could organize and assert their claim to a fair share of capitalism's proceeds. Socialism was therefore reformist rather than revolutionary. But it also proved to be an extraordinarily diverse and complex movement that assumed different forms and met various fates in the individual European nations as well as in the United States. It is only by unraveling the multiple strands of this history that the origin and evolution of socialism can be brought clearly into view.

Chapter Two

To analyze the various forms that socialism assumed in the nineteenth century, it is appropriate to begin with Germany—and not merely because it was the homeland of Karl Marx. The early emergence of socialism there as a conspicuous actor on the world stage coincided with the second industrial revolution, when Germany took the lead in key industries such as dyestuffs, chemicals, electricity, and automobiles. This circumstance gave German socialism a special urgency, and it was there that the different versions of socialist doctrine were most clearly articulated.

But that is to get far ahead of the story, which properly begins deep in the background of Prussia's development after the Napoleonic wars. Under terms of the Vienna peace settlement of 1815, Prussia stretched across all of northern Germany from Silesia to the Rhineland, from Breslau to Cologne. As the first half of the nineteenth century unfolded, five major factors (not confined to Prussia alone) became observable:

1) Rapid population growth. Between the battle of Waterloo and the beginning of the Franco-Prussian War in 1870 the population of Prussia increased by more than 70 percent.

2) Urbanization. At least 80 percent of Prussians could be classified as rural as this period began, whereas inner migration from countryside to city decisively tipped the balance to urban areas by inception of the German Kaiserreich in 1871.

3) Improved transportation. Above all, the introduction of railways, starting in the 1830s, facilitated the movement of goods and people on an unprecedented and ever expanding scale.

4) Thriving economy. On the European continent, this proved to be the first age of large factories where uncounted thousands of workers became employed in the manufacturing process and when fabled names like Krupp, Borsig, and Siemens rose to prominence.

5) State participation. Ever since the days of Frederick the Great in the eighteenth century the Prussian monarchy had enjoyed a largely positive image among its underlings, although the state's direct contribution to the evolution of social policy remained meager.

Taken together, these five basic factors explain the dynamics of transition and innovation that were to make Germany into the industrial giant it became by the late nineteenth century. That was the good news. The bad news was that this remarkable transformation was accompanied by social dislocation, rampant unemployment, and widespread poverty. Inevitably, also, the concentration of labor and machines in the process of industrialization meant an alarming increase in the number of industrial accidents. These problems came to stay, and by mid-century they had to be faced.

But how? The abortive revolution of 1848 obviously indicated that trouble was at hand and that the measures of relief heretofore undertaken by government agencies and charitable institutions were inadequate. The first instance of Prussian social legislation in 1839 was primitive at best, amounting to a kind of poor law that brought little aid to the indigent and injured. If it can be said that there was a dominant social philosophy at stake, it was a notion of liberalism that promoted self-help, individual liberty, limited state intervention, and free commerce. In the late 1840s Prussia adopted a so-called Gewerbeordnung that specified some regulations for factory workers. These initial measures may be seen as a mincing effort to establish a state social policy. Yet their institutional expression was known as the Hilfskasse, that is, a voluntary form of social insurance that conformed tightly with the liberal principle of self-help. A prime example was the Elberfeld system of social assistance, named after a German textile center where it originated (and where, incidentally, Friedrich Engels owned a factory).

Such was the setting for the General German Workers' Association, founded by Ferdinand Lassalle in 1863, the first socialist labor organization of note on Prussian soil, which was the godfather of a growing trade union movement as the century progressed. Lassalle was persuaded that state-help needed to be substituted for self-help, and to that end he "negotiated" with the Prussian prime minister Otto von Bismarck in the following year. A decidedly one-sided conversation it was, as Bismarck remarked, since Lassalle had really nothing to offer him in return. Nonetheless, in the 1860s the first signs of an economic boom were becoming apparent, and the workers' cause was stirring. In 1866 Wilhelm Liebknecht and August Bebel formed a People's Party in Saxony, and three years later, in the midst of a strike wave, they declared the creation of a German Social Democratic Party (SPD) in the city of Eisenach. In that same year, 1869, a new set of labor regulations was promulgated by the North German Confederation (an expanded version of Prussia), which sought to assuage the nascent labor movement but which still depended on the voluntary Hilfskasse, although it asserted the right of the state to intervene when necessary in economic and social affairs—just as Bismarck wished. There matters stood as Germany entered the victorious war with France in 1870.

The birth of the German Kaiserreich, famously proclaimed in the Hall of Mirrors at Versailles in January 1871, was immediately followed by the riotous aftermath of the Paris Commune. By releasing French prisoners of war with their weapons, Bismarck saw to it that the Commune was repressed, but the bogeyman of rebellious workers in revolt was to live on. The "red menace" had arrived, personified in imperial Germany by the merger of Lassalle's Workers' Association with the SPD in 1875. From its inception as a unified political organization, German socialism displayed three marked characteristics. First, there was a close alliance between the party and the trade unions; and, if anything, the unions tended to pull the party toward moderation. Second, within the entire socialist movement there was a notable contrast between a sometimes radical rhetoric and steady centrist reform actions. Third, socialist expectations were generally high that political agitation could ultimately succeed in attaining a significant redistribution of national wealth in favor of the lower classes. German social democracy, in short, was ambitious in the pursuit of a more egalitarian society.

Political allies in the 1870s, Bismarck and the German liberals had other notions. Their strategy was to firm up state control against any potential insurgency, to avoid alienating the proletariat by making it beholden to the existing order, and thereby to build the new Reich on a solid foundation of state-sponsored socialism. Two tactics would serve this end: to denounce the agitation stirred by the Paris Commune, and to pursue a policy of carrot-and-stick by combining liberal reforms (that did little to alter social inequality) with repressive measures. As for the latter, after two failed attempt on the Kaiser's life—falsely blamed by Bismarck on the socialists—the infamous anti-socialist laws were passed by the Reichstag in 1878 and remained in effect until 1890, the end of the Bismarck era. But despite the ban on party organizations, unions, demonstrations, and publications, the socialist movement continued to grow. Whereas August Bebel was the lone SPD deputy in the 1871 national parliament, the party boasted twelve delegates by 1877. Trade unions grew apace, and the popular vote for the SPD more than trebled, reaching 38 percent in Saxony, 39.2 percent in Berlin, and 40 percent in Hamburg. These trends persisted: by 1890 the SPD would garner nearly a million and a half votes and thirty-five seats in the Reichstag. And the German trade union membership subsequently ballooned to two and a half million, Europe's largest, by 1914.

The atmosphere of the 1880s was quite different from the preceding decade in more than one respect. For one thing, the economic slump that had struck in 1873 was dissipating. For another, Bismarck ended his alliance with the National Liberal Party and took a turn to state protectionism, away from liberal free trade policy. The constant, however, was carrot-and-stick, ever more emphatically stressed by the Chancellor. It would be a mistake to exaggerate this circumstance by crediting Bismarck alone with the creation of a state socialism. Still, the legislation of the 1880s would surely not have taken shape without his intervention, and it did lay the groundwork for a structure of social welfare legislation that became a model for the rest of Europe. Few historical subjects have been so extensively studied, so there is no need to belabor the details here. The major enactments may be swiftly listed: national sickness insurance in 1883, accident insurance in 1884, plus old-age pensions and disability insurance in 1889. Several qualifications should be registered. The actual benefits of these programs were initially very modest. They were restricted principally to industrial employees and factory workers with little effect on the rural population. They were usually administered by and largely confined to municipalities. And, contrary to Bismarck's wishes for a more unified system, they remained separate operations with varying degrees of success. Willy-nilly, before 1914, probably a quarter of German citizens received some direct insurance compensation, and, by including their families, perhaps half were thus to some extent covered.

(Continues...)

Excerpted from Socialism and the Emergence of the Welfare Stateby Allan Mitchell Copyright © 2012 by Allan Mitchell. Excerpted by permission of Trafford Publishing. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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