Liberalism and Orthodox Marxism

The first modern political and economic ideology was liberalism. Among the many factors shaping liberalism's development was opposition to the power exercised by the Church and absolute monarchs during the eighteenth and much of the nineteenth century. Liberals were therefore suspicious of, if not antagonistic towards, collective political and social authority and instead emphasized individual rights and liberty.Footnote ⁴ These positions were reinforced by the rise of capitalism. As the industrial revolution spread across Europe during the nineteenth century, liberalism provided both an explanation of and a justification for the transformations the new system brought. Liberalism became associated with the view that if left alone, markets and freely interacting individuals would deliver the greatest good to the greatest number. Thus in the economic, as in the political and social spheres, liberalism proclaimed the best government to be the one that governed the least.Footnote ⁵ Politics, in other words, was the blind spot of classical liberalism. (Or, as one of the movement's most vehement critics put it, “there is no liberal theory of politics, only a liberal critique of politics.”)Footnote ⁶ Liberals denigrated, or at best were skeptical of, the state and believed it should interfere as little as possible in the forward march of history. So well did such views fit in with the Zeitgeist of the early to mid nineteenth century that the era has often been called “the age of liberalism.”Footnote ⁷

Yet by the end of the century the bloom was already off the rose. The practical consequences of early capitalism—especially the dramatic inequalities, social dislocation, and atomization it engendered—led to a backlash and a search for alternatives. The most important and powerful challenge on the left came from Marxism, and during the last decades of the nineteenth century, a stripped-down, mechanistic version of Marxism established itself as the official ideology of much of the international socialist movement. This interpretation of Marxism was primarily the work of Friedrich Engels, Marx's collaborator, and Karl Kautsky, the “pope” of socialism. In simplifying and popularizing Marx's thought for the socialist movement, Engels and Kautsky accentuated and perhaps exaggerated certain elements, most notably an emphasis on the primacy of economics.

The most distinctive aspect of Marx's thought—and the one that lay at the heart of orthodox Marxism—was historical materialism. Marx argued that history was propelled forward by economic development and the class conflict it generated. He thus characterized the ultimate aim of his life's work as “laying bare the economic law of motion of modern society”Footnote ⁸—showing how economic forces determined the logic and direction of historical evolution. “It is a question of … laws,” he once put it, “tendencies working with iron necessity towards inevitable results.”Footnote ⁹ Since this view implied that the only thing required to achieve socialism was “calm recognition of the historically inevitable,”Footnote ¹⁰ Marx's view was profoundly comforting. But it also led him to devote little time to worrying about the actual transition from capitalism to socialism or how socialist parties might encourage or manage it. In Marx's view of history, revolutionaries “did not have to plan ahead or think about how a just society should be organized … because they knew the solution was contained in the problem, and would appear in due course through the inevitable process of dialectical transformation. Midwives do not have to design the babies they deliver.”Footnote ¹¹ In this vision of socialism, in other words, politics was at best a secondary activity.

Historical materialism was not the only reason Marx neglected politics. He also believed that until the demise of capitalism, politics would be driven by narrow economic interest and the quest for domination. The state would remain at the service of the dominant (bourgeois) class, he believed, so there was little point in devoting much attention to analyzing its functioning or logic.Footnote ¹² And since society was neatly dividing into two separate and opposed camps, cooperation with other social and political groups made little long-term sense for workers. Furthermore, with the transition to socialism, politics itself would disappear—as the elimination of classes and economic scarcity created harmonious and prosperous communities with no need for political institutions to suppress and mediate conflict.

Marx held, in short, a “negative” view of politics—he believed that with the achievement of economic abundance, the need for politics would wither away. This conviction was something he shared with his liberal antagonists. As Michael Walzer has written,

Friedrich Engels, Marx's collaborator and leading apostle, was especially important in promoting a version of Marxism rooted in the primacy of economics and where political activity was secondary or subsidiary.Footnote ¹⁴ As he once famously put it, revolutions were “not intentionally and capriciously made, but rather have universally been the necessary consequence of conditions completely independent of the will and leadership of individual parties and entire classes.”Footnote ¹⁵ And once revolution occurred, all politics would fade away: “As soon as there is no longer any social class to be held in subjection … nothing more remains to be repressed and a special repressive force, a state, is no longer necessary…. [Under socialism] state interference in social relations becomes … superfluous … and the government of persons is replaced by the administration of things…. The state is not ‘abolished.’ It dies out.”Footnote ¹⁶ By the time of his death in 1895, Engels had succeeded in establishing a doctrine firmly grounded in the primacy of economic forces and the concomitant necessity of class struggle as orthodox Marxism.

If Engels was responsible for codifying Marxist orthodoxy, Karl Kautsky was largely responsible for its popularization. After Engels' death, Kautsky became the dominant intellectual of the Second International, and his writings were often the first, and sometimes the only, interpretation of Marx available to an entire generation of socialists in Germany and elsewhere.Footnote ¹⁷ Kautsky's writings depict a capitalist system characterized by increasing class conflict, recurring crises, and careening towards its own demise. “Irresistible economic forces,” he wrote, “lead with the certainty of doom to the shipwreck of capitalist production.”Footnote ¹⁸ The role of socialist parties was thus not to drive the transition to socialism but to help workers understand the nature of capitalist society and prepare them for the inevitable class struggle that would bring it crashing down.Footnote ¹⁹

By the end of the nineteenth century, however, orthodox Marxism began to run into trouble. To begin with, many of Marx's predictions failed to come true. By the fin-de-siècle, European capitalism had developed renewed vigor after a long depression and bourgeois states had begun undertaking important political, social, and economic reforms. Just as Marxism's failings as a guide to history were becoming clear, moreover, criticism arose within the international socialist movement regarding its inadequacy as a guide to constructive political action. Parties acting in Marx's name had become important political players in a number of European countries by the end of the nineteenth century, but orthodox Marxism could not furnish them with a strategy for using their power to achieve any practical goals since it considered economic forces rather than political organizations and activity to be the prime mover of history.

A third problem stemmed from the increasing gulf between orthodox Marxism's passive laissez-faire economism—its insistence that government policies could not and should not fundamentally change the workings of the market—and the psycho-political needs of mass populations under economic and social stress. This failing it shared with its liberal cousin, and as a result both found themselves under attack during the fin-de-siècle. Then, as now, a growing number of voices were heard bemoaning the erosion of traditional values and communities, as well as rising social dislocation, atomization, and fragmentation. As a result, the era witnessed a surge in communitarian and nationalist movements as Europeans groped for ways to reintegrate their societies and restore a sense of purpose to what they saw as a corrupt, amoral, and disenchanted bourgeois world.Footnote ²⁰

Thus during the fin-de-siècle the classic ideologies and movements of the nineteenth century—liberalism and Marxism—found themselves struggling to adapt to changing circumstances. Within both, revisionists arose urging dramatic changes in doctrine and strategy. Out of these revisionisms would grow the great ideologies of the twentieth century.Footnote ²¹

Revisionism

Given its close association with the modern capitalist order, it is not surprising that the widespread discontent and unease of the fin-de-siècle placed liberalism under strain. As one of the great observers of the liberalism of the era, L. T. Hobhouse noted, if “the nineteenth century might be called the age of Liberalism…. its close saw the fortunes of that great ideology brought to its lowest ebb…. It had the air of a creed that [was] becoming fossilized as an extinct form.”Footnote ²² In an attempt to stem liberalism's decline, a number of revisionists (often referred to as progressives or “new” liberals, especially in England and the U.S.) began calling for a re-evaluation of the movement's traditional ideology and programs.Footnote ²³ These revisionists advocated abandoning liberalism's traditional skepticism towards government intervention in the economy and accepting a significant role for the state in protecting citizens and society from the vicissitudes of the market; they essentially wanted to maintain the basic structure of the liberal, capitalist order, but to ameliorate its worst excesses. This movement went furthest and was most successful in England and the U.S. (where well-known figures like L.T. Hobhouse, John Dewey and Walter Lippman championed the cause) but proved unable, on the continent in particular, to rescue liberalism from the problems it faced during the fin-de-siècle. The half-way house positions advocated by revisionist liberals satisfied neither traditional liberals nor the growing chorus of voices on both left and right clamoring for more radical solutions to capitalism's problems. Thus even where revisionist liberals succeeded in effecting important policy changes, liberal parties were rarely able to regain the powerful political positions they had enjoyed during earlier decades.

Just as liberal revisionism arose as an attempt to update liberalism to deal with contemporary problems, so did revisionism within the international socialist movement emerge in response to the inability of orthodox Marxism to respond to many of the challenges facing socialists and their societies during the fin-de-siècle. As noted above, as many socialists came to believe that socialism was not going to come about as the inevitable consequence of economic development (as Marx and even more so Engels and many of their influential followers believed), they began to argue that it would have to be achieved as a result of human action. Some revisionists, such as Lenin, felt it could be imposed, and set about to spur history along through the politico-military efforts of a revolutionary vanguard. Others felt that it could be made desirable, and thus emerge through the collective efforts of human beings motivated by a belief in a higher good. Within this latter revisionist camp, two distinct strands of thinking emerged. The first was democratic and epitomized by the work of Eduard Bernstein.

Bernstein's revisionism originated in his growing conviction that historical materialism could no longer provide a good explanation for the dynamics of contemporary capitalism or the transition to socialism.

Bernstein's observations led him to believe that capitalism was not leading to an increasing concentration of wealth and the immiseration of society.

In short, Bernstein came to believe that capitalism was not producing the class structures or conflict that orthodox Marxism predicted. By the end of the nineteenth century he was arguing that “the intensification of social relations has not in fact occurred as the Manifesto depicts it. It is not only useless but extremely foolish to conceal this fact from ourselves…. Everywhere in the more advanced countries we see the class struggle assuming more moderate forms, and our prospects for the future would hold little hope if this were not the case.”Footnote ²⁶

The flip side of Bernstein's belief in a moderation of the class struggle was his faith in a potential community of interest between workers and other citizens suffering from the injustices of capitalism. At the turn of the century many in the middle classes and peasantry were feeling economically threatened and politically frustrated. Bernstein saw them as potential allies or even recruits, and urged socialists to ground their appeals in “the feeling of common humanity [and a] recognition of social interdependence.”Footnote ²⁷

Convinced that capitalism had become increasingly complex and adaptable and was not likely to collapse any time soon Bernstein thus urged his fellow socialists to recognize the folly of believing that “the victory of socialism [depended] on … ‘imminent economic necessity.’”Footnote ²⁸ His loss of faith in economic development leading to the desired socialist outcome led Bernstein, like Lenin, to an appreciation of the potential of political action. Socialism, in Bernstein's view, would have to emerge from a conscious, collective struggle for a better world. The challenge facing the working class was evolutionary: socialists had to come up with “positive suggestions for reform capable of spurring fundamental change.”Footnote ²⁹

Bernstein's revisionism replaced historical materialism with a belief in the primacy of politics—a conviction that individuals, motivated by belief in a better world, could band together and use the power of the democratic state to gradually reshape the world around them. “This new vision [of the transition to socialism] takes place in the daily life of the working class, struggling anew against exploitation. It shows the proletariat growing in numbers and in social power—not merely pushing forward, but upward as well, elevating its economic, ethical, and political standards and becoming increasingly capable of co-governing state and economy. This vision is alive and well among those … commonly called ‘revisionists’.”Footnote ³⁰

Bernstein's revisionist critique is the most important and well known, but his arguments were echoed by a growing number of dissident socialists across Europe, who shared an emphasis on a political path to socialism and the need for cross-class cooperation. In France, for example, the “moral idealism”Footnote ³¹ of Jean Jaurès rejected a primarily economistic base for socialism and insisted that socialism's realization depended on human action and the inspiration that would derive from a vision of a better, more just world. Jaurès also rejected the idea held by most orthodox Marxists that workers “had no fatherland”—that there was an inherent contradiction between patriotism and socialism—and in fact he often portrayed the latter as the final realization of the (universal) values embodied in the French revolution. Concomitantly, Jaurès pressed socialists to recognize the inherent value of democracy and, especially after the Dreyfus affair, the need to cooperate with other democratic and reform minded forces to defend and expand it.Footnote ³² In addition to Jaurès, other movements on the French left, including the “national socialism” of Alexandre Millerand, independent and possibilist socialists, brought revisionist themes and policies to the heart of the French socialist movement.

In Italy, indigenous critics of Marxism chipped away at the tenets of orthodoxy during the late nineteenth and early twentieth centuries. Italy's most famous intellectual, Benedetto Croce, published several powerful critiques of Marxism and historical materialism,Footnote ³³ and inside the socialist movement itself the temptations of political collaboration with bourgeois elites and the government—especially during the Giolittian era (1890–1914)—emboldened a growing number of revisionists and reformists in their critiques of the economic determinism and political passivity of orthodoxy.Footnote ³⁴ In Austria, meanwhile, many “Austro-Marxists” were developing an “ethical” or “Kantian” revisionism of their own.Footnote ³⁵ And in Scandinavia, and particularly in Sweden, revisionism was actually gaining the upper hand.Footnote ³⁶

During the last years of the nineteenth and the first years of the twentieth century revisionism progressed in fits and starts, within and across several countries, and against continued opposition from both orthodox Marxists and theoretical pragmatists (who wanted to pursue reforms without rocking the boat). Although Bernstein and his fellow revisionists insisted that they were merely “revising” or “updating” Marxism, their fiercest critics—the defenders of orthodoxy—saw clearly what the revisionists themselves were loath to admit: that they were arguing for a replacement of Marxism with something entirely different. By abandoning historical materialism and class struggle, they were in fact rejecting Marxism as thoroughly as Marx had rejected liberalism a half century earlier. Kautsky, for example, commented: “[Bernstein] tells us that the number of property-owners, of capitalists, is growing and that the groundwork on which we have based our views is therefore wrong. If that were so, then the time of our victory would not only be long delayed, we would never reach our goal at all.”Footnote ³⁷ Similarly, Wilhelm Liebknecht, a leader of the German Socialist Party, Sozialdemokratische Partei Deutschland (SPD) noted that: “If Bernstein's arguments [are] correct, we might as well bury our program, our entire history, and the whole of Social Democracy.”Footnote ³⁸ And Rosa Luxemburg, probably Bernstein's most vehement and insightful critic, summed up the heretical implications of his views when she noted that socialism was “scientific” rather than “utopian” because economic developments were leading inevitably to capitalism's collapse. If, however, “one admits with Bernstein that capitalist development does not move in the direction of its own ruin, then socialism ceases to be an objective necessity and instead becomes a ‘mere ideal.’”Footnote ³⁹ She was, of course, absolutely right; by rejecting the primacy of economic forces in history and focusing on cross-class cooperation and social solidarity, Bernstein (and other revisionists) were tapping into the spirit of the age and laying the foundations for a true ideological alternative.Footnote ⁴⁰

In the years leading up to the First World War the democratic revisionist attack continued, rendering orthodox Marxism increasingly beleaguered and the Socialist movement increasingly divided. If this were not enough, orthodox Marxism faced a challenge from yet another corner. During the fin-de-siècle, the same forces that had pushed many toward democratic revisionism led others to another form of revisionism, one greatly influenced by the anti-Enlightenment and nationalist backlashes of the era.

These two revisionisms had much in common; where they differed were in their assessments of democracy and liberalism. Whereas Bernstein and other democratic revisionists believed in the transformative powers of a truly democratic state and viewed socialism's task as completing or fulfilling many of the unrealized promises of liberalism,Footnote ⁴¹ other revisionists had nothing but disdain for democracy and liberalism. They therefore did not believe that a peaceful, democratic path to socialism was possible; instead, in their view, a better world would only emerge from “active combat which would destroy the existing state of things.”Footnote ⁴² This strand of revisionism has thus been called “revolutionary”Footnote ⁴³ and was epitomized by Georges Sorel.

Although largely forgotten today, Sorel was once considered by many to be “the greatest revolutionary in twentieth century political philosophy.”Footnote ⁴⁴ Sorel began his socialist career as “one of the leading theoreticians of Marxism in France”Footnote ⁴⁵ but by the end of the nineteenth century he was growing disillusioned with orthodoxy. As with other revisionists, these doubts were rooted in recognition of the gap between Marxism and the demands of contemporary era. Sorel understood that many of Marx's predictions about capitalism were not coming to pass; as he put it, “experience shows us that the capitalist system is changing rather rapidly before our eyes. Orthodox [Marxists] make extraordinary efforts of imagination in order not to see what is clear to everyone; they have abandoned the terrain of social science to pass into utopia.”Footnote ⁴⁶ Sorel was impressed by capitalism's productive power and began limiting his opposition “to the political, intellectual and moral aspects of the liberal and bourgeois system” rather than questioning the basic principles of the capitalism economy.Footnote ⁴⁷ Also like democratic revisionists, Sorel came to believe that historical materialism was not only wrong, but was also robbing the socialist movement of its vitality. He thus supported Bernstein in the revisionist controversy and agreed with his conclusion that what was needed was an activist alternative to orthodoxy. However, unlike Bernstein, Sorel had no interest in reform, liberalism, or democracy. Instead, he believed real change would only come with the destruction of the existing order.

At first Sorel believed that this could be achieved by a revitalized workers' movement, but by the first decade of the twentieth century he had begun to lose faith in the revolutionary potential of the proletariat. The result was that Sorel, like his democratic revisionist counterparts, abandoned an exclusive focus on the working class. But whereas the abandonment of a workers-only strategy led democratic revisionists to cross-class cooperation, it led Sorel to embrace the revolutionary possibilities of another contemporary movement—mass nationalism.

As noted above, during the last decades of the nineteenth century nationalist movements arose across Europe, playing a particularly important role in places like Italy and Germany, which were dealing with the strains generated by late state formation. Many of these movements came to see socialism as a necessary component of their larger political program, but theirs was a socialism divorced from Marxism—based on a deep suspicion of capitalism and liberalism, but vehemently rejecting historical materialism and class struggle. Many in this camp thus came to embrace the term “national socialism” to refer to their movement, thereby indicating their opposition to the reigning liberal capitalist order as well as their belief that a revitalized national state was the best way to combat it.

In Italy, Sorel's ideas played a key role in midwifing the birth of this “national socialist” movement. Italian nationalists believed that in order to deal with their country's myriad challenges and problems, Italians needed to be united, and many viewed Sorel as offering ideas that could help achieve this. Enrico Corradini, for example, characterized nationalism and socialism as the “two great facts of the modern world” and as part of his effort to bring them together he came up with the idea of Italy as a “proletarian nation,” substituting conflict between capitalists and the proletariat with the struggle between rich and poor nations. He argued that all domestic groups, but especially workers, had a stake in Italy's success. For example, at the founding congress of the Italian Nationalist Association in 1910 he argued in his keynote address that “for years and years the socialists … have been preaching to the workers that it was in their interest to show solidarity with the workers of … China or Paraguay and to dissociate themselves … from their employers and the Italian nation. We must drum it into … their heads that it is in their best interest to maintain solidarity with their employers … and their own country and to hell with solidarity with their comrades in Paraguay or … China.” By so doing, he argued, nationalists would become a force for national unity and rejuvenation—“our national socialism.”Footnote ⁴⁸

In the following years, others within the nationalist movement continued to develop these themes, while at the same time figures within the socialist movement, particularly on its syndicalist wing were beginning to embrace Sorelian revisionism and exhibit sympathy for the growing nationalist movement. Mussolini was the most well-known of these figures but he was hardly alone. In the years leading up to the First World War, figures on both the revolutionary left and the nationalist right began to recognize important similarities between their movements: both viewed liberalism and capitalism with disdain, yearned for activist solutions to their country's contemporary problems, and found much to like in Sorel's revisionism.

In France a merger between nationalism and socialism also occurred during the late nineteenth century, and was helped along by Sorel's ideas. On the left, a group of syndicalist intellectuals including Hubert Lagardelle and Édouard Berth, disgusted with the passivity of orthodoxy and critical primarily of capitalism's ethical and social (rather than material) consequences, became acolytes of Sorel. On the right, meanwhile, growing numbers of nationalists were becoming increasingly alarmed by what they saw as the divisive and degenerative trends caused by capitalism. Many were concerned, for example, that capitalism was dividing the nation into “winners” and “losers,” placing self-interest above communal interest, and giving the market and private interests control over France's destiny. As Maurice Barrès—one of the key figures within the nationalist movement during the late nineteenth century—put it, revitalizing France required reintegrating the “causalities of modern society” back into the national community, solving the “social question,” and supporting some type of socialism.Footnote ⁴⁹ He called this “new” socialism “socialist nationalism” and himself a “national socialist.”Footnote ⁵⁰

The most important nationalist organization of the fin-de-siècle, the Action Français, continued to push many of these themes. It held liberal capitalism to blame for the divisions plaguing contemporary France and took an active interest in social questions. In response, Sorel began to show some sympathy for the movement and by 1910 he was openly collaborating with its members. One result was the founding of the Cercle Proudhon, which merged socialist and nationalist themes and denounced democracy and unfettered capitalism. It was, however, more focused on capitalism's “excesses” and negative social consequences than its inherent nature. For example, Georges Valois, one of the Cercle's most influenced members, argued that “capitalist principles … are pernicious to any human group when applied outside of the [economic] domain.” Because capitalism responds only to material interest and the pursuit of gain, “religious life is diminished, the working life degraded, the family destroyed, the foreign worker brought in, the natural resources are exploited without restraint, the political institutions are transformed into organs of coercion in order to increase the excessive output of capital. In everything the national interest is gravely compromised.”Footnote ⁵¹ Cercle supporters and other nationalists argued that a revitalized national state was necessary to take on capitalism and the other “degenerative” forces threatening France.

In Germany, finally, a synthesis between nationalism and socialism also emerged during the fin-de-siècle (although without much influence from Sorel). On the left this was driven by a group of revisionists centered on Joseph Bloch's Sozialistische Monatshefte. A full panoply of revisionist critiques was aired in the Monatshefte's pages, with the determinism and passivity of orthodox Marxism coming for particular disapproval and calls for the SPD to break out of its “proletarian ghetto” a regular theme. In addition, many contributors called for reconciliation between socialism and Deutschtum (German-ness) and denounced the liberal “canker.”Footnote ⁵² Anti-liberalism was a central feature of Bloch's as well as of the group's most influential spokesman, Karl Leuthner. Leuthner argued that “there [had] possibly never existed an intellectual current that [was] so bereft of healthy political insight as the Manchester liberal world view”Footnote ⁵³ and he believed that Germany could only fight liberalism and other dangerous problems if the SPD set out to attract the great masses of Germans and placed the national interest above class interests. On the other half of the political spectrum, prominent nationalists also attacked liberalism and capitalism while calling for a new form of socialism. Werner Sombart, for example, (from whose 1902 book Der Moderne Kapitalismus the term capitalism came) blamed his country's misfortunes—social conflict, materialism, the degradation of national culture—on capitalism (and the Jews who personified and promoted it). Sombart also helped popularize the idea that there was a particularly “German” or “national” form of socialism that had little in common with Marxism, but was instead based on a belief that the economy had to be subordinated to the needs of the Gemeinschaft. Over time, he and others began to believe this goal could be achieved without destroying capitalism but rather simply by controlling it and purging its extreme and “Jewish” elements. These sorts of ideas had a profound effect on German political and cultural life and were embedded in a wide range of organizations, from the apolitical Wandervogel to the increasingly popular nationalist associations.

Thus by the early twentieth century revisionists on both the left and the right had developed powerful critiques of orthodox Marxism that rejected economic determinism, developed more nuanced views of capitalism, and called for political solutions to contemporary problems. In addition, both groups of revisionists began to move away from the class struggle and workers-only emphasis of orthodoxy. But whereas democratic revisionists believed that cross-class cooperation and a democratic state could bring about critical transformations in the existing order, many revolutionary revisionists began to see in the mass appeal and strong state focus of nationalism the best path to a better future. Both groups of revisionists had thus made clear breaks with orthodox Marxism and had begun laying the foundations for new ideological alternatives before the outbreak of the First World War. It would, however, take the vast changes unleashed by the war for these alternatives to mature into new ideologies and movements of their own.

Social Democracy, Fascism, and National Socialism

The immense changes wrought by the Great War pushed revisionists to make full and open breaks with historical materialism and other central tenets of orthodox Marxism and embrace a new doctrine rooted in the primacy of politics and communitarianism. With the outbreak of war, many socialists abandoned their suspicions of national states while their parties threw their support behind the states they had hitherto pledged to destroy.Footnote ⁵⁴ Also important was the democratic wave that spread across much of Europe at the end of the war. After 1918 socialists were confronted with unprecedented opportunities for participation in bourgeois governments. Given a chance to help form or even lead democratic administrations, many were forced to recognize the uncomfortable truth that workers alone could never deliver an electoral majority and that cooperation with non-proletarians was the price of political power. The war also revealed the immense mobilizing power of nationalism and bred a generation that valued community, solidarity, and struggle. Populist right-wing movements across the continent were riding these trends, and many socialists worried that clinging to orthodox Marxism's emphasis on class conflict would prevent them from responding to the needs of ordinary citizens and thus cause them to lose ground to competitors.

In addition, the pivotal position occupied by socialist parties during the interwar years made it increasingly difficult to avoid the question of how political power could contribute to socialist transformation, and the subsequent onset of the Great Depression made preaching submission to economic forces tantamount to political suicide. Indeed, by the early 1930s the protest against liberalism and capitalism that had been growing since the end of the nineteenth century reached fever pitch with the legions of the disaffected ready to be claimed by any political movement willing to press for change. Orthodoxy's emphasis on letting economic forces be the drivers of history meant that here too it ceded ground to activist groups on the right.

As socialist parties stumbled in country after country, a growing number of proto-social democrats became convinced that a whole new vision was necessary for their movement—one that would supplant rather than tinker with orthodoxy—and to develop one they returned to the themes set out by revisionism's pioneers a generation earlier. In the 1920s and 1930s the first task facing these proto-social democrats was to reform, and perhaps transform, capitalism. This led to sustained conflict with orthodox Marxists, however, for achieving such reforms meant finding a way to use political forces to control economic ones—something that both Marxist and liberal orthodoxy refused to countenance. The conflict played itself out most dramatically in Germany, as the SPD leadership backed conservative economic policies and a conservative government during the early 1930s while their supporters and the rest of German society clamored for a more activist response to the catastrophe befalling them.Footnote ⁵⁵ Many were frustrated with this course and at the party's 1931 congress, union leader Fritz Tarnow summed up the dilemmas emanating from the SPD's policies in the following manner:

Despite the growing recognition that continued inaction was crippling the party as well as the Weimar Republic, the SPD's most important economic theorist, Rudolf Hilferding, as well as most of its top leadership, refused to believe that they could truly make things better. Hilferding claimed that the only solution to the economic crisis was to wait for the business cycle to run its course. In his view, an “offensive economic policy” had no place because the ultimate arbiter of developments was the “logic of capitalism.” Not believing that politicians could resolve the Depression on their own, he fought all attempts at an activist, neo-Keynesian course shift.Footnote ⁵⁷ (Since neo-classical liberalism and orthodox Marxism put their faith in ineluctable economic mechanisms and denigrated political interference in the economy, orthodox Marxists, Hilferding once noted, were the last and best of the classical economists.)Footnote ⁵⁸

True social democrats were unwilling to accept such passivity and fought for programs that would use the power of the state to tame the capitalist system. Neither hoping for capitalism's demise nor worshipping the market uncritically, they argued that the market's anarchic and destructive powers should be fettered at the same time that its ability to produce unprecedented material bounty was exploited. They thus came to champion a real “third way” between classical liberalism and Soviet communism based on a belief that political forces must be able to triumph over economic ones.

A key figure in these developments—and a crucial link between the revisionism of Bernstein and the mature social democracy of the post-1945 era—was the Belgian activist Hendrik de Man.Footnote ⁵⁹ Wartime experiences played a critical role in de Man's ideological and political evolution; by highlighting the tenacity of national feeling, the potential for state control of the economy, and the immense motivating power of idealism, the war, in de Man's own words “shook my Marxist faith to its foundations.”Footnote ⁶⁰ Becoming convinced that saving socialism required a fundamental break with prewar orthodoxy, de Man put forth a new vision of socialism in his writings and Depression-fighting Plan du Travail, which combined short-term policies designed to increase demand and credit flows with a long term scheme for the transformation of the economy. In addition to providing an activist strategy for fighting the Depression, the Plan gave a generation of socialists (often referred to as planistes) a new way of conceptualizing their role in society and the relationship between capitalism and socialism. As with Bernstein, de Man neither believed in nor hoped for capitalism's immediate collapse; instead he argued that a strategy of evolutionary reforms could transform it. In order to begin this transformation de Man urged socialists to recognize that “the essential thing [was] not the taking over of … ownership but of control.”Footnote ⁶¹ By capturing the state, social democrats could direct and tame capitalism and insulate citizens from the destructiveness of the market without having to resort to Soviet-style nationalization.

De Man and his Plan proved an inspiration to socialists across Europe. In France planisme found its champions in Marcel Déat and a group of neo-socialists who broke with the mainstream French socialist party Section Française de l'Internationale Ouvrière (SFIO) over the latter's orthodoxy and immobolism. Like de Man, Déat recognized that “in the present historical phase forms of society appear possible which are not yet socialist but which are no longer capitalist.” The question socialists had to answer, therefore, was “are we going to allow these experiments to be carried out without us?”Footnote ⁶² Déat's answer was “no,” and he urged his colleagues to focus on gaining political power so that they could begin “transforming the world in which they lived.”Footnote ⁶³ In Germany, planistes could be found among the generation of young socialists who came of age during the First World War and saw in state intervention the basis for a long called-for offensive strategy. One of the most prominent members of this group, for example, Carlo Mierendorff, argued that such policies would finally provide the SPD with a “concrete socialist vision,” a way of showing German citizens that it could actively work to improve their lives.Footnote ⁶⁴

Planisme wasn't the only activist economic strategy championed by social democrats during the interwar years. Some found in proto-Keynesian policies the perfect tool for combating the Depression and starting the process of social transformation. For example, in Germany it was not Mierendorff's planisme but actually the proto-Keynesian WTB plan (championed by Wladimir Woytinsky, a Russian émigré who became head of the main labor union's statistical bureau; Frtiz Tarnow; and Fritz Baade, a SPD member of parliament) that emerged as the main alternative to the reigning orthodoxy. Woytinksy argued that the time had come for the SPD to surrender its faith in historical development, “to stop lulling the masses with sozialistische Zukunftsmusik” (socialist future music) and the “mystical powers of the market.”Footnote ⁶⁵ By using the levers of political power to help improve the lives of the masses, by helping to tame the anarchy of the market, and by showing the way to a more organized and just economy, the WTB plan could finally provide the labor movement with a foundation upon which to build a new economic and social order.Footnote ⁶⁶

Regardless of the specific policies they advocated, one thing that joined all of the budding interwar social democrats was a rejection of the passivity and economic determinism of orthodox Marxism and a belief in using states to tame capitalism. In order to do this, however—and finally relegate historical materialism to the dustbin of history—they had to win majority support for their programs. Hence, during the interwar years many returned to the themes of cross-class cooperation that Bernstein and other revisionists had preached a generation earlier. Furthermore, in an era of dislocation and disorientation, these social democrats realized that appeals to the “people,” “the community,” and the common good were much more attractive than the class struggle perspective of orthodox Marxism or the individualism of classical liberalism, and so they often embraced a communitarian, corporatist, or even nationalist approach.

Here again de Man was a key figure. Like Bernstein and others, he believed that the class struggle perspective of Marx and Engels had been invalidated by changing economic and social conditions, and by the '20s he saw that a purely proletarian focus would doom social democrats to minority status. “Even from the narrow viewpoint of the conquest of power … it is becoming more and more urgent to enlarge the sphere of influence of our movement of ideas, by showing that socialism is something other than the collective egoism of a given class.”Footnote ⁶⁷ Furthermore, de Man did not believe in inevitable conflicts of interest. Especially since the war, he argued, there had arisen “a national community of interest between certain groups of workers and employers, or between the working class and the employing class as a whole” as well as between workers and intellectuals.Footnote ⁶⁸ As a result, the time had come to replace existing conflictual relationships and institutions with cooperative and corporatist ones. In order to do this, however, socialists needed to design their policies and appeals with cross-class alliances and solidarity in mind. His Plan du Travail, for example, was explicitly formulated to “appeal … not only to the working class but also to all classes of the population suffering from the present economic distress and to all men of good will.”Footnote ⁶⁹

Comparable visions gained adherents across the continent. In France, Déat drew on the legacy of both Bernstein and Jaurès in developing his cross-class, corporatist and patrie-centered socialisme communautaire. In Germany, the planistes around Mierendorff also supported cross-class and corporatist appeals while many of the supporters of the WTB plan became vigorous advocates of a Volkspartei strategy. It was in Scandinavia, however, and particularly in Sweden, that the new approach was embraced wholeheartedly by a unified party. This is why one must turn to Sweden to observe the full dimensions, and potential, of the new and truly social democratic alternative.

During the interwar years the Swedish social democratic party, the SAP, developed a new view of its role in society as well as of the relationship between politics and economics. Especially after the First World War, an increasing number of party members began arguing that the market's productive powers could be harnessed while its destructive potential was controlled. The key figure in this development, Nils Karleby, insisted that “improvements in the efficiency of economic activity have always been, and should continue to be, the only means … of improving society's welfare.”Footnote ⁷⁰ He argued further that capitalism or bourgeois property relations should be viewed as a bundle of rights. If ownership was only the conglomeration of a number of individual rights then the rights could be separated from one another and gradually made subject to societal influence. Hence “all social reforms … resulting in an increase of societal and a decrease in private control over property [represent a stage] in social transformation…. [Furthermore] social policies are, in fact, an overstepping of the boundaries of capitalism … an actual shift in the position of workers in society and the production process. This is the original (and uniquely) social democratic view.”Footnote ⁷¹

Such views laid the groundwork for the SAP's championing of a proto-Keynesian program during the Depression, and the selling of this program to the electorate by stressing its activism and commitment to the common good. For example, during the 1932 election campaign a leading party paper proclaimed, “humanity carries its destiny in its own hands…. Where the bourgeoisie preach laxity and submission to … fate, we appeal to people's desire for creativity … conscious that we both can and will succeed in shaping a social system in which the fruits of labor will go to the benefit of those who are willing to … participate in the common task.”Footnote ⁷² Similarly, at the party's 1932 congress Rickard Sandler, a leading party activist, urged his colleagues to recognize that socialists had to “abandon the view that we or our children will enjoy some kind of ‘freebie’ socialism that … ‘developments’ will place in our hands.” The only way society would move towards socialism he argued, was if the party used all its power to push it along this path.Footnote ⁷³

While the SAP was trumpeting its willingness to use political power to shape market developments, its leader Per Albin Hansson was popularizing his theme of Sweden as the “Folkhemmet” or “people's home.” He declared that “the basis of the home is community and togetherness” and stressed that social democracy sought to “break down the barriers that … separate citizens.”Footnote ⁷⁴ As a result of these policies and appeals, while in countries such as Germany and Italy it was the populist right that appeared politically dynamic and championed communal solidarity, in Sweden it was the social democrats who became known as the party with exciting plans for taming capitalism and helping the “little people.”

By the mid 1930s, therefore, the democratic strand of revisionism had blossomed into a powerful political movement all its own. In contrast to orthodox Marxism's and classical liberalism's laissez-faire approach, social democracy proclaimed the primacy of politics and a willingness to use the state to control, or at least direct, the market. In addition, in contrast to orthodox Marxism's focus on the proletariat and classical liberalism's focus on the individual, social democracy appealed to the ordinary, or “little” people, the “community,” and the collective good. These principles found expression in the advocacy of Keynesianism and state intervention in the economy, cross-class alliances and communitarian appeals. The former gave social democrats a theoretical rationale for using political power to influence the development of the capitalist system, while the latter embodied the norms of national solidarity and cooperation that lay at the heart of their world view. By the end of the 1930s all of the components of what would come to be known as the postwar social democratic compromise had already been developed, although it was only in Sweden that they were fully implemented.

On the right, meanwhile, the changes unleashed by the First World War gave nationalism a mass base and renewed vitality and this helped convince some revolutionary revisionists to make a final break with their erstwhile socialist colleagues and join up with the rising fascist and National Socialist movements.Footnote ⁷⁵ The most well-known and consequential example of this was in Italy. In 1919 Mussolini joined with several like-minded colleagues to form a new political movement, the Fasci di Combattimento, which brought together nationalist and socialist themes. Its first program was strongly anti-capitalist, calling for an eight-hour day, minimum wages, the participation of workers' representatives in industrial management, progressive taxes on capital, and the confiscation of all uncultivated land. Initially the movement met with little success but the growing chaos that began to engulf Italy (and the existing socialist movement) in 1920 handed the Fascists a golden opportunity. The Fascists asserted that only they could restore order to the country and they used their militias to calm the countryside and provided jobs and other resources to supporters. They also revamped their program to appear to a wider range of Italians, toning down some of the radicalism of the 1919 program and stressing communitarian and nationalist themes. With regard to capitalism, the movement presented a mixed message, promising to protect private poverty and promote growth, but insisting that the state had the right to oversee the economy and that development had to occur in a way that was not socially destabilizing. This combination proved very attractive and by 1922 Mussolini was in power.

Once in control, Mussolini gradually consolidated his power and by the mid-1920s began actively reshaping socioeconomic relations. The state was placed at the center of Fascism's transformative vision, viewed as an entity that stood above the interests of individuals and groups. As Mussolini put it, for Fascists “everything is in the State, and nothing human or spiritual exists, much less has value, outside the State.”Footnote ⁷⁶ Fascists thus claimed that the state had the right and duty to intervene in almost any aspect of socioeconomic life. As another leading Fascist put it, “there cannot be any single economic interests which are above the general economic interests of the State, no individual, economic initiatives which do not fall under the supervision and regulation of the State”Footnote ⁷⁷ None of this meant that Fascists rejected capitalism or private property. Rather it meant that Fascists aimed to create a system that could ensure economic growth at the same time that the state made sure that the nation's “needs” and “goals” were not threatened by unregulated markets and “selfish” capitalists. In order to achieve this new political economy, the fascist state undertook a wide range of measures, including developing corporatist structures; setting up parastatal institutions like the Italian Credit Institute (Instituto Mobilare Italiano) and the Italian Financial Society (Societa Finanziara Italiana), which helped control the credit supply, and the Institute for Industrial Reconstruction (IRI), which ended up controlling a significant chunk of the Italian industrial sector; essentially taking over agricultural production; and setting up a wide range of social service programs including health insurance, old age and disability pensions, paid national holidays, family/maternity benefits, and others. In short, there is no doubt that Fascism reshaped the relationship among state, economy, and society in fundamental and long-lasting ways. The cumulative result of the Fascist regime's efforts led some observers to assert that by the outbreak of the Second World War the Italian state had “a control over the economy that was unequalled outside the Soviet Union.”Footnote ⁷⁸ And although there is little doubt that this new system was inequitable (with workers suffering much greater losses than business) the changes were, on the whole, popular. Indeed many seem to have believed that the Fascism's insistence on the primacy of politics—its willingness to assert the power of the state vis-à-vis the market—represented a real solution to the problems of the modern liberal capitalist order.Footnote ⁷⁹

A similar dynamic unfolded in Germany. In 1920 one of the myriad of nationalist groups that sprung on the heels of the German defeat, the German Workers' Party, changed its name to the National Socialist German Workers' Party (NSDAP) and published a program that mixed nationalist, socialist, and anti-Semitic themes. In addition to calling for “the union of all Germans in a greater Germany” and promising to combat “the Jewish-materialist spirit,” the program included many planks designed to help the party fight Marxism (and the SPD), in part by appropriating some of its main themes, particularly its critique of capitalism. It argued “that the state be obligated first of all to ensure the gainful employment and the livelihood of the citizens” and demanded the confiscation of war profits, the nationalization of trusts, profit sharing, and land reform. It pledged that if the National Socialists came to power, the “ruthless competition” and egoism of capitalism would be replaced with a new system whose basic principle was that “public interest comes before self-interest.”Footnote ⁸⁰ As in Italy, the party did not do very well initially but was revitalized by the Weimar Republic's growing difficulties and the mainstream parties' inability to attract increasingly alienated and disillusioned middle-class and rural groups. The NSDAP shifted to trying to attract the broad range of Germans fed up with the Republic and the existing parties by focusing more on nationalist themes, law and order, and anti-Marxism. It did not, however, eliminate its critiques of liberal capitalism, although they did shift in tone. The Nazis invoked the difference between “rapacious” (raffendes) and “creative” (schaffendes) capital, the former associated with finance, commerce, and Jews, the latter with industry, production, and German values. In addition, when the Depression hit, the party offered an activist Depression-fighting strategy, promising to solve the problem of unemployment, and to use the state to prevent such tragedies in the future. Such promises contributed to the Nazi election victory in 1932.

Once Hitler came to power the Nazis set to work immediately reorganizing the economy and society. The regime made full employment a central goal and undertook a variety of other measures to jump-start the economy, including exerting greater control over the banking system and credit flows and giving subsidies and tax relief to businesses to encourage production and hiring.Footnote ⁸¹ In addition to the specific measures undertaken to fight the Depression and unemployment, the Nazi regime expanded its control over the economy in other ways, always with an eye to the primacy of politics. Although Hitler never took the radical anti-capitalist stances of some others in his movement, he was fully committed to the old national socialist formula Gemeinnutz geht vor Eigennutz—national interest above private interest. Like the budding social democrats, Hitler and the Nazis operated on the belief that to achieve their goals “the essential thing was not the taking over ownership, but that of control.” Destruction of the capitalist system and the elimination of private property would not only hinder production and create a political backlash, but were also unnecessary, since control could be exerted in other ways. Businessmen (with the obvious exception of Jews and other “undesirables”) were thus allowed to retain their enterprises and much of their profits, but almost all their other activities “were fettered (gebunden) or at least directed (gelenkt) by state agencies”Footnote ⁸²—through extensive regulation, wage and price controls, the preferential awarding of contracts, and the management of credit and investment funds. The result was that although business, and especially big business, probably benefited more than any other group from the Nazi regime, these benefits were accompanied by a dramatic loss of autonomy. Thus, by the end of the 1930s, the state's role in the economy had expanded dramatically; controls and regulations touched every sphere of economic life, public spending as a share of GNP had grown spectacularly (from 17 percent of GNP in 1932 to 33 percent in 1938),Footnote ⁸³ and the government essentially controlled the provision of credit. Indeed, as many observers have noted, although the German economy remained at least nominally capitalist and private property was never fundamentally threatened, “the scope and depth of state intervention in Nazi Germany had no peacetime precedent or parallel in any capitalist economy, Fascist Italy included.”Footnote ⁸⁴

In the final analysis, there is little doubt that the Nazi boast that the year “1933 was revolutionary and opened a new epoch in German history” was accurate.Footnote ⁸⁵ In addition to instituting a regime of unprecedented violence and barbarity, the Nazis managed to reshape the relationship between the state, society, and the economy in Germany in fundamental ways. Most obviously, they instituted a “genuine revolution”Footnote ⁸⁶ in economic affairs, rejecting both laissez-faire liberalism and Soviet Communism. Instead, the Nazi system was predicated on a belief in the primacy of politics—an insistence that the state and its leader had the right, indeed the duty, to intervene in all spheres of life, including the economy. And intervene the Nazis did, exerting their dominance over socioeconomic actors and the direction and nature of economic development through a myriad of indirect measures (and the constant, if often implicit, threat of force).

The consequences of these changes were profound. The Nazis' seeming success in overcoming the depression, their insistence that capitalism and capitalists had to serve the “national interest,” and their constant assertion that class cleavages, conflicts, and hierarchies had no role to play in a true Volksgemeinschaft played a critical role in stabilizing and legitimizing the regime during the 1930s. Hitler enjoyed genuine popular support in Germany because for most Germans national socialism was associated first and foremost not with racism, violence, and tyranny but with an improved life, national pride, and a sense of community: “economic leveling and social mobility domestically, collective and palpable prosperity for the Herrenfolk at the cost of the so-called Minderwertiger, this was the simple and popular magic formula of the National Socialist state.”Footnote ⁸⁷ Many believed, in short, that the Third Reich might actually have found solutions to many of modernity's contemporary problems—a claim that by the 1930s most of the mainstream left could not longer make.