Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Monday, October 30, 2006

Socialism with German Nationalist Characteristics

I was supposed to contribute to Crooked Timber's seminar http://crookedtimber.org/category/sheri-berman-seminar/ on Sheri Berman (2006), The Primacy of Politics: Social Democracy and the Making of Europe's Twentieth Century(Cambridge: Cambridge University Press: 0521521106). But it never happened: I never produced anything I was happy with.

So let me, instead, point you over to the ongoing debate and post my favorite passage from Berman's book, on the debate at the start of the 1930s in Weimar Germany between Wladimir Woytinsky and Rudolf Hilferding:

Sheri Berman (2006), The Primacy of Politics: Social Democracy and the Making of Europe's Twentieth Century(Cambridge: Cambridge University Press: 0521521106), p. 110 ff: Over time... the... S[ocialit ]P[arty of]D[eutschland]'s position became increasingly problematic.... [T]he SPD's support of [the Hooverite plans of Chancellor] Bruening and its failure to put forward any distinctive plans of its own for dealing with the Great Depression elicited storms of protest. At the party's 1931 congress... the most electrifying speech, Fritz Tarnow... summed up the SPD's dilemma:

Are we standing at the sickbed of capitalism not only as doctors who want to heal the patient, but also as prospective heirs who can't wait for the end and would gladly help the process along with a little poison?... We are damned, I think, to be doctors who seriously want to cure, and yet we have to maintain the feeling that we are heirs who wish to receive the entire legacy of the capitalist system today rather than tomorrow. This double role, doctor and heir, is a damned difficult task....

[M]any speakers embraced Tarnow's frontal assault on the [Socialist] Party [of Germany's] immobilism. Others... rejected the idea.... [T]he congress... decided to stay the course.

The sterility of the SPD's position also soured the party's relationship to organized labor. By 1930, the German unions had... decided that fighting unemployment had become the top priority. In 1931... unions began to consider seriously various job-creation proposals, the most important of which was the WTB plan... the brainchild of Wladimir S. Woytinsky... Russian emigre... headed a major union['s]... statistical bureau.... By 1931 he had come to the conclusion that Germany's only way out of the crisis [of the Great Depression] was through stimulating the domestic economy... with Tarnow and Fritz Baade... a prot-Keynesian strategy based on domestic stimulus... 2 billion marks to be spent on work creation.... Deficit financing would be necessary....

Woytinsky argued that the time had come for Social Democrats to surrender their faith in historical development and the "mystical powers of the market" and recognize that improvement would depend on activie intervention in the market... using the levers of power to help improve the lives of the masses... tame the anarchy of the market... showing the way to a more organized and just economy... provide the SPD (and the unions) with a concrete step toward a new economic and social order. The labor movement, he suggested, should begin a frontal assault on deflation and the radical right under the banner "the struggle against the crisis."

The union movement embraced the WTB plan.... The newspaper of the German metalworkers' union, for example, warned: "... We must come forward with a work creation program, regardless of any scientific differences of opinion, otherwise the quacks [i.e., the Nazis] will find increasing support for their views. We can't wait until our theoreticians are united..."

Despite increasing pressure... Bruening stuck to his [Hooverite] course, forcing the SPD into a very difficult position. Never having developed a strategy for working within the capitalist system... the party was divided.... Some on the right argued for work creation, but many of these same "reformers" scorned the idea of deficit financing. Many on the left, meanwhile, argued that the time was ripe for a full-fledged "socialist" strategy....

[T]he party's most important economic theoretician, Rudolf Hilferding... mounted a full-scale campaign against the plan. He began his attacks by stressing that the WTB plan was "un-Marxist" and threatened "the very foundations of our program." The only solution to economic difficulties, he claimed, was to wait for the business cycle to run its course; an "offensive economic policy" had no place because the ultimate arbiter of developments was the "logic of capitalism."

But even Hilferding recognized that his position doomed the SPD to continued sterility. In a letter to Karl Kautsky, he wrote:

[W]orst of all in this situation is that we cannot say anything concrete to the people about how and by what means we would end the crisis. Capitalism has been shaken far beyond our expectations but... a socialist solution is not at hand and that makes the situation unbelievably difficult and allows the Communists and Nazis to continue to grow."

... At the labor movement's "crisis" congress in April, advocates of the WTB plan emphasized the increasing desperation of the masses and pointed out that both the Nazis and the Communists were trumpeting work-creation programs.... In the run-up to the elections that July, it became clear that... the SPD's program "contained no thoughts capable of stimulating the imagination.... One could not find in it ways out of the [problem of] mass unemployment."... [T]he elections were a disaster.... The SPD agreed to discuss the WTB plan yet again.... Hilferding declared that such proposals called into question

the very foundations of our program... Marx's theory of labor value. Our program rests on the conviction that labor, and labor alone, creates value.... Depressions result from the anarchy of the capitalist system. Either they come to an end or they must lead to the collapse of this system. If [Woytinsky and others] think they can mitigate a depression by public works, they are merely showing that they are not Marxists.

Woytinsky responded to this charge with the following argument:

The flood of unemployment is rising, the people are at the end of their patience. The workers, holding us responsible for their misery, are deserting the party to join the Communists and the Nazis. We are losing ground. There is no time to waste. Something must be done before it is too late. Our plan has nothing to do with any particular value theory. Any party can execute it. And it will be executed. The only question is whether we take the initiative or leave it to our enemies.

...[A]ll but one of the SPD representatives of the meeting sided with Hilferding over Woytinsky...

It is hard to avoid the belief that there was a way out of the disaster--a way to beat the Nazis even at the end of 1931--and that if only Rudolf Hilferding and his ilk had been less blinkered ideologues who sought truth from old books rather than new facts, the SPD could have led a German "New Deal" that would have been as great a success as Roosevelt's New Deal in America.

The connection between this historical episode and the American Enterprise Institute and the Project for a New American Century is left as an exercise to the reader.

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