— A. MARSHALL AND J. SCHUMPETER —
WERE THEY SOCIALISTS?
When Keynes at Harvard was first published it was attacked by a group of economists because Alfred Marshall, the late British economist and Joseph Schumpeter, the Austrian economist, were mentioned as socialists. Soon it became apparent that this was an oblique attack motivated by other considerations. Most of the criticisms came from within the Economists National Committee on Monetary Policy. Since we were in touch with Professor Olin Glen Saxon, a member of the N.C.M.P., we were able to trace the Furies from the front row, so to speak.
In a conference at Yale University Professor Saxon observed that most of the criticism was motivated by envy and jealousy over the fact that this was the first factual exposure of the socialist bias underlying Keynes’ theories. He pointed out that alleged conservative economists smarting under the embarrassment of wrestling with the Keynesian web, “strained at a gnat, and swallowed a camel.”
Strenuous efforts were made by these ‘conservative’ economists to uncover the “professors” who were the architects of Keynes at Harvard. Confidential information passed through the academic underworld that no less than five apostate economists were the compilers of the book. Now the humiliating knowledge that the book was researched and written without imposing academic credentials. Professor Saxon vetted the book after it was set in page proof, only making a few last minute suggestions. He fully agreed that both Marshall and Schumpeter were socialists to the bone. He knew Schumpeter intimately and was convinced that he was a socialist of the Fabian variety.
The main thrust of the attack on Keynes at Harvard was led by an economist who is well known for his support of the negative income tax. He is less well known for his former leftist associations. His campaign was largely undercover with unsigned mimeographed criticisms circulated among economists and sociologists. His tour de force was that Marshall and Schumpeter were really champions of private enterprise and that any allusion to their leftism was a libel.
The leftist record of Alfred Marshall is loud and clear. We have no less an authority than Schumpeter for this. At the age of twenty-three (1906) Schumpeter went to England and became a member of Marshall’s circle. Years later he wrote that,
Marshall professed himself in sympathy with the aims of socialism and spoke without explanation and qualification of the ‘evils of inequality’; also he was the first theorist to prove theoretically that laissez-faire, even with perfect competition and independently of those evils of inequality, did not assure a maximum of welfare to society as a whole; and he favored high taxation more than is compatible with simon-pure liberalism.(1)
Schumpeter pointed out that, “Marshall was largely in sympathy with the aims of the Fabians (as they were at that time); the difference was primarily one of scientific method.”(2) The resentment of certain socialist economists against Marshall is explained by Schumpeter as follows: “Marshall professed to be in sympathy with the ultimate aims of socialism, though he expressed himself in so patronizing a way as to evoke nothing but irritation.”(3) In 1947 Clement Atlee, a leader of the Fabian socialists, set his imprimatur onto a book that declared, “Marshall’s ‘broad proposition’ is the main essential of the socialist case plainly stated.”(4)
The most positive evidence of Marshall’s socialism is contained in a declaration by Sydney Webb at the turn of the century who observed, “. . .we learn that Prof. Marshall (Professor of Political Economy at Cambridge) has at various times declared himself a Socialist; and when we find Prof. Sidgwick (Professor of Moral Philosophy at the same University) contributing an article to the Contemporary Review to prove that the main principles of Socialism are a plain deduction from accepted economic doctrines.”(5) Marshall and Sidgwick have been mentioned earlier as cooperators with Keynes’ father in writing an economic text-book, at the turn of the century. Marshall in his old age, in turn, arranged with the elder Keynes to have his son John Maynard, pick up the scepter of Fabian economic leadership for the coming generation.(6)
In 1906, at the age of twenty-three, Joseph Schumpeter received the degree of Doctor of Law from the University of Vienna. A son of aristocratic parents he was sent to attend lectures at the Fabian socialist London School of Economics in London England. There he attended lectures given by Sidney Webb, head of the Fabian Society. He also attended seminars given by Alfred Marshall. He received a thorough grounding in Fabian socialism to which he remained attached for the rest of his life.(7) He fought for a Fabian policy of disguised socialism among Austrian socialists for many years. In two articles aimed at his socialist comrades he pointed out, “the enormous superiority of the British system, (Fabian socialism) with its dignified, well mannered, evolutionary way of doing things, as compared with the revolutionary, dogmatic methods of continental socialism always marred by bad manners and demagoguery.”(8) In these same articles he heralded the disguised socialism of the United States as a model for Germanic socialism.
The British Fabians taught Schumpeter that he could enormously aid the march towards socialism by pretending not to be a socialist. In fact, the Fabian Society has purged a number of its branches who refused to drop the word “socialism” from their club names. The basic posture was always to pretend before the public that they were not socialist. Schumpeter’s counselor, Sidney Webb, in speaking of the Fabian clubs explained, “A steady stream of persons influenced by socialist doctrines passes into them, but after a time most of these cease to attend meetings, the subjects of which have become familiar” and also that, “These persons are not lost to the movement: they retain their socialist tone of thought and give effect to it. . . .” Webb further observed, “they often cease to belong to any distinct socialist organization. . . .”(9) Schumpeter assumed the role of objective independence to cover his Fabian socialism. He maintained this pose until his death 44 years later. The only places where he could not successfully carry off this disguise was in Austria and Germany where he was closely identified with Marxist elements.
Beginning with 1906 Schumpeter belonged to a group in Austria that spawned the future leaders of the socialist movement in that country. He immersed himself in Marxist dogma along with such socialists as Otto Bauer, later leader of the Austrian socialist movement and foreign minister in 1919; Rudolf Hilferding who twice became the socialist Minister of Finance of the German Republic after World War I; and Emil Lederer who followed Schumpeter to the United States and became the founder of the Fabian socialist Graduate Faculty of the New School for Social Research in New York City in 1934.(10)
In 1918 Schumpeter became a consultant of the Socialization Commission in Berlin at the recommendation of Hilferding, Lederer and Karl Kautsky, (Kautsky knew Karl Marx and Frederich Engels and was the marxists’ heir apparent in the international socialist movement.)(11) In 1919 socialist Otto Bauer was made Secretary for Foreign Affairs in the new Austrian government. Bauer and his socialist comrades immediately installed Schumpeter as Minister of Finance.(12) The new government was composed of a coalition of marxist socialists and the Catholic, Christian-Social Party. Adolf Hitler gave this group of Christian socialists credit for drawing him into National Socialism via the anti-Semitic route.(13) (During World War II Schumpeter was criticized by his Harvard colleagues for being sympathetic to the Nazi cause and for belittling the accounts of Hitierian atrocities.)(14) In fact the Christian Social Party came to Schumpeter’s defence when he was accused of mishandling Austrian finances.(15)
Among Germans there has been little doubt that Schumpeter was a socialist. They remember that in 1918 Schumpeter wrote a pamphlet designed to placate the ‘direct actionists’ in the socialist movement. Schumpeter informed his more impatient comrades that, “The hour of socialist will come.” He explained to them, “I do not want to extoll the free enterprise economy as the last word of wisdom.” However, he pointed that the private enterprise system had to be tolerated for a time being since its dynamism was necessary to rebuild Germany and Austria after the damage done to their economy because of World War I.(16)
Schumpeter came to the United States from England already possessing a carefully constructed, triple-distilled cover, of non-socialist impartiality. This gave him an immense maneuvering advantage among naive American academics. Left-wingers at no time tolerate those who claim they are neutral in the field of economics. In the case of Schumpeter the leftists at Harvard soon found a nesting place. Paul Sweezy, publicly known as a pro-Soviet marxist, became Schumpeter’s collaborator in many money making and propagandistic enterprises. Schumpeter, an old sophisticated leftist could not be categorized as an innocent among marxist colonizers. Sweezy eventually became Schumpeter’s literary executor.
American apologists have been hard put to explain why the German editors of Schumpeter’s major work stated categorically that, “Schumpeter is a socialist.”(17) This occured during Schumpeter’s life time. He did not deny it. Nevertheless, after his death those who wished to maintain the fiction of Schumpeter’s conservatism insisted that his German compatriots were mistaken.
In England Schumpeter’s writings have been repeatedly listed as approved works in Fabian socialist publications.(18) Private letters of Harold Laski, the former head of Fabian socialism show that Schumpeter closeted himself with the Fabian high command before leaving for permanent residence in the United States.(19) Actually, Schumpeter’s socialist background is even more provable than that of J.M. Keynes.
All that we can do is to present the facts. We feel that we have done our duty. The next step is up to an informed and vigilant American people, in general, and in particular to the college communities, beginning with Harvard.
1 Joseph Schumpeter, History of Economic Analysis, p. 765.
2 Ibid., p. 883.
3 Ibid., p. 889.
4 Douglas Jay, The Socialist Case, Faber and Faber, London, 1947, p. 276.
5 W.P.D. Bliss, A Handbook of Socialism, Swan Sonnenschein &. Co., London and Charles Scribner’s, New York, 1895, p. 177.
6 Harrod, Life of Keynes, pp. 107, 117.
7 Schumpeter, History of Economic Analysis, pp. 833, 889.
8 Gottfried Haberler, “Joseph Alois Schumpeter,” Quarterly Journal of Economics, August 1950, p. 353.
Joseph Schumpeter, “Der Sozialismus in England und bie uns,” der osterreichische Volkswirt, December 13, and 20, 1924.
9 Sidney Webb, Socialism In England, 1889, pp. 20-21.
10 Haberler, Quarterly Journal of Economics, Aug. 1950, p. 337.
11 Arthur Smithies, Schumpeter—Social Scientist, p. 13.
12 Haberler, Quarterly Journal, 337.
13 Adolf Hitler, Mein Kampf, pp. 71-72, 124-129, 158, 227, 262. Also see Ernst Noltke, Three Faces of Fascism, Holt, Rinehart and Winston, New York, 1965, p. 298.
14 Haberler, Schumpeter—Social Scientist, p. 38.
15 Ibid., p. 35.
16 Die Krise des Steurstaats, quoted in Haberler, Quarterly Journal of Economics, August 1950, p. 345n, 349. (Schumpeter explained to his fellow socialists that, “The hour that is, belongs to free enterprise. Only at the price of heavy sacrifice even for the working class could the free enterprise system be given up at this time.”)
17 Edgar Salin, in the preface to Kapitalismus, Socialismus and Democratic, by Joseph Schumpeter, Bern, A. Francke, 1946, p. 8.
18 Sister M. Margaret Patricia McCarran, Unpublished manuscript on “Fabian Socialism in the United States,” p. 779.
19 Holmes-Laski Letters, 1916-35, Harvard University Press, Cambridge, 1953, vol. 2, p. 1057.