When German workers and soldiers rose against the Kaiser in November 1918, it was by no means utopian to expect that the German Revolution would not only produce a republic but also a fundamental transformation of the economic order. The way in which German industrial capitalism had evolved towards the end of the nineteenth century and, even more drastically, during the First World War, had removed it so far from eighteenth century ideas of competition and plurality in the economic realm. It had integrated the few decisive economic players so tightly with the nation state that nationalisation of the entire complex seemed tangible, even necessary.

Disagreement arose over the question how this integration would be achieved. Famously, German social democracy split over this question. Rosa Luxemburg, Karl Liebknecht and others expected this transformation to have to occur as part of a genuine revolution led by the working class. The majority of the social-democratic party, however, believed that the path to a democratically controlled economy could be found through parliamentary legislation and the evolution of legal instruments to integrate unions, bargaining tactics and workers’ rights into the fabric of the state. The Weimar Constitution solidified these aspirations into a concrete political programme. The ‘organization of economic life’, it stated, was to ’conform to the principles of justice’ and ‘enable a life of dignity for all’.^[1]

But the looming prospect of a new integrated economic order also mobilised its opponents. Already in 1920 Ludwig von Mises warned that the emerging planned economies would produce social, political and economic chaos. States would not be capable of replacing markets as the essential mechanism for valuing and distributing goods.^[2] His arguments were countered by Oskar Lange, who showed that market mechanism could indeed be integrated into sophisticated forms of planning.^[3]

Given the fundamentally legalistic, reformist pathway chosen by the erstwhile social-democratic revolutionaries, however, the objections from the German legal profession weighed more heavily. Lawyers and judges, many with liberal or conservative politics, claimed that the rule of law necessitated a fundamental distinction between the public and the private. Large-scale socialisation was not reconcilable with the character of the German Rechtsstaat (‘rule-of-law state’).

A young generation of labour lawyers and constitutional theorists, among them Ernst Fraenkel, Otto Kirchheimer and Franz Neumann, formulated first attempts at a different political theory able to overcome this deadlock. Ernst Fraenkel’s 1927 essay Zur Soziologie der Klassenjustiz (‘On the sociology of class justice’) had disparaged social-democratic trust in German law as a site for political reform. The law, he contended there, could not be understood in abstraction from its actual practitioners who were, after all, endowed with a specific class position.^[4] In his re-interpretation of basic rights Franz Neumann, too, sought to point to the necessity of rethinking the law from its liberal foundations.^[5] In his Behemoth (1942), Neumann would chastise Social-Democracy for its ‘complete reliance on formalistic legality’ and its inability — or outright reluctance — to ‘root out the reactionary elements in the judiciary’.^[6] But more than this: According to Neumann, the parties supporting the republic had relied too much on an easy pluralism which sought to dissolve sovereignty and the unity of the state into a system of plural stakeholders in constant negotiations. This strategy had kept Social-Democrats outside of the real centers of power: the army, bureaucracy, the judiciary and, crucially, industry itself. It had given their political successes in labour law and social legislation a fragile character without robust political backing. The idea that an evermore monopolised economy would ultimately be easier to ‘translate’ into a state directed economy, as had been espoused by Rudolf Hilferding, overlooked that one needed to be in actual possession of the state to bring such a transformation about. More than that: Monopolisation had weakened the working class and thereby the social base on which Social Democracy relied for its political power.^[7]

Neumann’s rejection of the state capitalism thesis should be understood in view of this political and strategic analysis. Neumann viewed Pollock and Horkheimer’s state capitalism theorem as a continuation of political and economic misconceptions of the Weimar era. In the context of National Socialism it was at once too optimistic and too pessimistic. It envisioned a possible future where a totalitarian state capitalist system like National Socialism would be capable — just like its democratic state capitalist counterpart in the USA — of ‘realizing the dream of humanity’, providing everyone with a ‘house, an automobile, six suits and ten pairs of shoes a year.’^[8]  Given that all states were moving towards this form of organisation irrespective of their specific political leadership, the elimination of market competition might even bring about ‘the exclusion of war for decades to come.’^[9] This would, however, also mean that National Socialism as state capitalism would become ‘potentially invulnerable from within.’^[10] Neumann’s own insistence on National Socialism as a politically disorganised non-state with a monopoly capitalist economy was not only a warning against the enormous potential for violence inherent in the regime, it also harboured some theoretically grounded hope for its ultimate demise from its own discordance.

If we see in our own age the re-emergence of hopes for a highly politically integrated model of capitalism, we might remember these debates. Today again we see highly divergent interpretations of the recent large scale state investment programmes particularly in the US. These can be understood as a step in the direction of a publicly organised economic system — a democratic state capitalism.^[11] Conversely — with Neumann — one might wonder whether these same recent political developments could not also be viewed as a contraction of the state and a further encroachment of monopoly capitalism. A politics seeking to incentivise capitalism to better itself may be left constrained by the very forces it seeks to bind.

Crucially, Neumann challenges us not to get lost in administrative utopias without looking clearly for the bases of political power and socio-economic change. A naive trust in ‘social reforms, education and the rule of law may itself endanger democracy’, he cautioned in 1955. Whoever wants to effect lasting political and economic change will have to fight over the decisive ‘coercive institutions’ of the state, that is its police force, judiciary, military and bureaucracy.

To watch the seminar and read the other posts for Coöperism 8/13 on “The Frankfurt School Critique of National Socialism and State Capitalism,” please go to https://cooperism.law.columbia.edu/8-13/

Notes

Clara Maier is a political theorist and historian of political thought at Columbia University.