Marx and Engels and the Theory of Dialectic Materialism

„A socialist advocates socialism because he is fully convinced that the supreme dictator of the socialist commonwealth will be reasonable from his–the individual socialist's–point of view, that he will aim at those ends of which he–the individual socialist–fully approves, and that he will try to attain these ends by choosing means which he–the individual socialist–would also choose. Every socialist calls only that system a genuinely socialist system in which these conditions are completely fulfilled; all other brands claiming the name of socialism are counterfeit systems entirely different from true socialism. Every socialist is a disguised dictator. Woe to all dissenters! They have forfeited their right to live and must be "liquidated."

The market economy makes peaceful cooperation among people possible in spite of the fact that they disagree with regard to their value judgments. In the plans of the socialists there is no room left for dissenting views. Their principle is Gleichschaltung, perfect uniformity enforced by the police.“

Ludwig von Mises, Human Action, Ch. XXV., The Imaginary Construction Of A Socialist Society

When Karl Marx wrote his major treatise 'Das Kapital' (it was published in 1867), he based his economic research on the work of classical economists, who had failed to produce a satisfactory theory of value. He thus adopted and further developed Smith's and Ricardo's 'labor theory of value' (a theory that can be traced back even further, as e.g. the Scholastic philosopher St. Thomas  Aquinas in the 13th century and the Muslim scholar Ibn Khaldoun in the 14th century had already developed earlier labor theories of value). Shortly after the publication of Marx' treatise, William Stanley Jevons published 'The Theory of Political Economy' (1871), and Carl Menger published 'Principles of Economics' (1873) – both authors had independently developed the concept of marginal utility, i.e., the subjectivistic theory of value. This new theory finally solved the 'value paradox' that classical economists had been unable to explain (the classical example of the value paradox is given by the fact that e.g. a diamond generally costs a lot more than water –  even though water seems the more valuable resource, since it is indispensable for survival).

Marx never revised his views on the labor theory of value though, in spite of the fact that they had been thoroughly refuted and superseded shortly after the publication of 'Das Kapital'. As it were, if the labor theory of value is to be rejected, then much of the Marxian theory falls flat. The roots of the socialist calculation problem can be traced back to the labor theory of value as well.

Indeed, as Mises notes in 'Human Action', it wasn't even the intention of Marx to supplant the then existing economic theory by a valid theory of his own. Economic theory appeared to him unassailable, so he merely thought to disparage it. He did so  by asserting that it was 'ideological', this is to say, that it merely served the ends of a certain class of people to the detriment of other classes. Specifically, Marx held that it served as a 'rationalization' of the goals of 'bourgeois capitalist exploiters' to the detriment of 'proletarian workers'. Mises points out that Marx and Engels resorted to polylogism in order to sidestep the need to refute economic arguments by logical ratiocination.  They averred that there is not a single system of logical reasoning, but that there is a 'proletarian logic' arraigned against a 'bourgeois logic'. In short, the minds of members of the proletarian class are supposedly working with a logic of their own. This 'proletarian logic' is according to Marx the only 'correct one', whereas the tainted mind of the bourgeois is incapable of producing anything but ideologically motivated apologias for capitalist exploitation. However, logic is universal – the correctness or incorrectness of a theory is independent of ideological considerations. Logic and deductive reasoning as such are 'wertfrei', not ideological. In terms of establishing whether a theory is correct or not, the personal motives of those creating the theory are irrelevant. Mises provides an illuminating example:

“For the sake of argument we may admit that every effort to attain truth is motivated by considerations of its practical utilization for the attainment of some end. But this does not answer the question why an "ideological" – i.e., a false – theory should render better service than a correct one. The fact that the practical application of a theory results in the outcome predicted on the basis of this theory is universally considered a confirmation of its correctness. It is paradoxical to assert that a vicious theory is from any point of view more useful than a correct one.

Men use firearms. In order to improve these weapons they developed the science of ballistics. But, of course, precisely because they were eager to hunt game and to kill one another, a correct ballistics. A merely "ideological" ballistics would not have been of any use.”


(Human Action, ch. III, Economics And The Revolt Against Reason)

Marx then introduced a mystical quality into his work based on his own 'refined' version of Hegelian dialectic, namely the assertion that history follows a predetermined plan – a plan that in Hegel's philosophy was designed by the mythical 'Geist' ('spirit'), whose interlocutor on earth was none other than Hegel himself. In Marxian theory, this predetermined plan finds its end point in the abolition of private property and the state arrogating sole ownership of the means of production to itself –  communism is held by Marx to be the end point of an inevitable historical evolution. As Mises points out, Marx does not provide us with the source of this intuition – there is no logical explanation offered for this alleged historical determinism. Marx simply listened to an 'inner voice'.

Mises reveals a dry sense of humor when commenting on this aspect of Marxian theory:

“Only one way could lead the socialists out of this impasse [created by their inability to raise objections against the criticisms economists leveled against their schemes]. They could attack logic and reason and substitute mystical intuition for ratiocination. It was the historical role of Karl Marx to propose this solution. Based on Hegel's dialectic mysticism he blithely arrogated to himself the ability to predict the future. Hegel pretended to know that Geist, in creating the universe, wanted to bring about the Prussian monarchy of Frederick William III. But Marx was better informed about Geist's plans. He knew that the final cause of historical evolution was the establishment of the socialist millennium. Socialism is bound to come "with the  inexorability of a law of nature." And as, according to Hegel, every later stage of history is a higher and better stage, there cannot be any doubt that socialism, the final and ultimate stage of mankind's evolution, will be perfect from any point of view. It is consequently useless to discuss the details of the operation of a socialist commonwealth. History, in due time, will arrange everything for the best. It does not need the advice of mortal men.”


(Human Action, ch. III, Economics And The Revolt Against Reason)

In 'Theory and History', Mises mentions that Marx and Engels only used Hegelian dialectics in an 'ornamental sense', as they did not endorse Hegel's fundamental principle of the identity of ontology and logic. They saw themselves as reformers of Hegelian thought, but overlooked that it makes little sense to combine idealistic dialectics with a system of materialism and empiricism. As he notes in chapter 7 of 'Theory and History' –  Dialectic Materialism (all following quotes are from there):

“Hegel was consistent in assuming that the logical process is faithfully reflected in the processes going on in what is commonly called reality. He did not contradict himself in applying the logical apriori to the interpretation of the universe. But it is different with a doctrine that indulges in a naïve realism, materialism, and empiricism. Such a doctrine ought to have no use for a scheme of interpretation that is derived not from experience but from apriori reasoning.”


Given that Marx and Engels professed the 'historical inevitability' of socialism, one wonders why their followers thought a somewhat premature revolution was necessary to achieve it. In fact, the Russian Bolsheviks under Lenin seemingly ignored the Marxian tenet of capitalism as a 'necessary stage' of this historical process. At the time of the Russian revolution, Russia was still an industrial backwater – well over 70% of its population consisted of peasants, who had only escaped from serfdom 56 years earlier, in 1861. Modern large-scale industry was only present in Moscow and Petrograd (the renamed St. Petersburg, the name of which was deemed 'too German-sounding' during World War I). Going by Marx' own theory, the Bolsheviks were too hasty by attempting to jump over the capitalistic stage of history directly into the stage of communistic bliss. As Mises explains in 'Theory and History' to this point:

“For, according to Marx, the duration of a definite system of production relations does not depend on any spiritual factors. It is exclusively determined by the state of the material productive forces. If the material productive forces change, the production relations (i.e., the property relations) and the whole ideological superstructure must change too. This transformation cannot be accelerated by any human effort.
For as Marx said, "no social formation ever disappears before all the productive forces are developed for which it is broad enough, and new higher production relations never appear before the material conditions of their existence have been hatched out in the womb of the old society”.
This is by no means merely an incidental observation of Marx. It is one of the essential points of his doctrine. It is the theorem on which he based his claim to call his own doctrine scientific socialism as distinguished from the merely Utopian socialism of his predecessors. The characteristic mark of the Utopian socialists, as he saw it, was that they believed that the realization of socialism depends on spiritual and intellectual factors. You have to convince people that socialism is better than capitalism and then they will substitute socialism for capitalism. In Marx's eyes this Utopian creed was absurd. The coming of socialism in no way depends on the thoughts and wills of men; it is an outgrowth of the development of the material productive forces. When the time is fulfilled and capitalism has reached its maturity, socialism will come. It can appear neither earlier nor later.”

Marx never provided a good explanation of how the 'material productive forces' and the new technologies that in his opinion undergirded every new phase of history and as it were 'created' its sociological and political relations, came into being; he ewvidently assumed they would just appear on their own (we could call it the 'magical provision of technological progress by Geist'). He never showed what kind of social interaction is required that makes capital accumulation and the implementation of new technological ideas possible.

We would note here that obviously a major factor in capital accumulation are lower consumer time preferences; these in turn are furthered by growing wealth and growing certainty about property rights. It is precisely in those nations where private property rights have been institutionally and constitutionally enshrined that the  greatest growth in wealth has occurred. It is also worth noting in this context that improvements in technology, this is to say, the implementation of new technological ideas, depends largely on the availability of a sufficiently large capital stock and pool of real funding. Thus we can state that the 'growth in the material productive forces' is definitely not happening by accident – what ultimately makes it possible are free market capitalism and strong property rights. It evidently never occurred to Marx that absent such conditions, the accumulation of capital and wealth would cease and reverse. The land of socialist bliss would end up consuming all the previously accumulated capital.

As a result of his belief in the historical inevitability of socialism as the 'end point of history' ,  Marx had no time for attempts by workers to improve their lot via unionism and wage bargaining. He deemed this a waste of time, urging proletarians to abandon such futile struggles and instead keep their focus firmly on the impending revolution. Indeed, according to his own theory, the capitalist exploitation phase was a historical necessity on the road to socialism. It made no sense therefore to attempt to interfere with this deterministic path by trying to improve the material well-being of workers in the here and now.  Incidentally, Marxian theory held that in capitalism, the lot of workers tended to get worse and worse over time – an assertion plainly contradicted by the facts. It follows that any tangible improvements of the lot of workers in capitalist societies would be regarded with suspicion by Marx, since it would provide yet more evidence of the untenability of his theory. Most importantly, the class struggle might then cease, and no revolution would occur. On this point Mises writes in 'Theory and History':

“As he [Marx, ed.] was engrossed in the Hegelian brand of optimism, there was to his mind no further need to demonstrate the merits of socialism. It was obvious to him that socialism, being a later stage of history than capitalism, was also a better stage. It was sheer blasphemy to doubt its merits. What was still left to show was the mechanism by means of which nature brings about the transition from capitalism to socialism. Nature's instrument is the class struggle. As the workers sink deeper and deeper with the progress of capitalism, as their misery, oppression, slavery, and degradation increase, they are driven to revolt, and their rebellion establishes socialism.

The whole chain of this reasoning is exploded by the establishment of the fact that the progress of capitalism does not pauperize the wage earners increasingly, but on the contrary improves their standard of living. Why should the masses be inevitably driven to revolt when they get more and better food, housing and clothing, cars and refrigerators, radio and television sets, nylon and other synthetic products? Even if, for the sake of argument, we were to admit that the workers are driven to rebellion, why should their revolutionary upheaval aim just at the establishment of socialism? The only motive which could induce them to ask for socialism would be the conviction that they themselves would fare better under socialism than under capitalism. But Marxists, anxious to avoid dealing with the economic problems of a socialist commonwealth, did nothing to demonstrate the superiority of socialism over capitalism apart from the circular reasoning that runs: Socialism is bound to come as the next stage of historical evolution. Being a later stage of history than capitalism, it is necessarily higher and better than capitalism. Why is it bound to come? Because the laborers, doomed to progressive impoverishment under capitalism, will rebel and establish socialism. But what other motive could impel them to aim at the establishment of socialism than the conviction that socialism is better than capitalism? And this preeminence of socialism is deduced by Marx from the fact that the coming of socialism is inevitable.

The circle is closed.”

As to the 'proletarian mind' , its 'proletarian thought processes' and private logic, it remains quite noteworthy that none of the preeminent socialist theoreticians were proletarians. On the contrary, they hailed from the bourgeois intelligentsia, beginning with Marx and Engels themselves. Marx was the son of a well-to-do lawyer and married to the sister of the Prussian minister of the interior. Engels was heir to a fortune and a wealthy manufacturer. Referring to their London exile following the suppression of 1848 revolution , Mises notes that “Dining and wining together in the luxurious London homes and country seats of late Victorian "society," ladies and gentlemen in fashionable evening clothes concocted schemes for converting the British proletarians to the socialist creed.”


Wealthy industrialist Friedrich Engels, a reader of proletarian minds who enjoyed fox-hunts in the English country-side, while planning the socialist revolution.

(Photo credit: Wikimedia Commons)


Karl Marx, Engels' intellectual comrade-in-arms, who glimpsed the inevitable socialist  future with the help of his inner voice, guided by Hegel's 'Geist'.

(Photo credit: Wikimedia Commons)


The genesis of the theory of Dialectic Materialism must of course be seen in the context of the times. Europe's established power structures faced a serious revolt by the disenfranchised citizenry in 1848. Although the 1848 revolution was successfully subdued by the ruling classes, the writing was clearly on the wall: a large  change in social relations was in the offing. Progress and science were generally held in high esteem and Marx found it surprisingly easy to cloak his mysticism in the mantle of 'science'. He hated the Prussian political system and it is quite ironic that he used the philosophy of Hegel – which the Prussians in turn used to justify the existence of the Prussian monarchy –  as the basis for his revolutionary screed. From Engels it is known that he was genuinely moved by the plight of factory workers in England when his father sent him to Manchester as a young man to manage the Ermen & Engels textile factory. Engels' motives were likely idealistic and later in life he spent a great deal of time attempting to prove the 'scientific basis' of Marxian theory. Alas, he too failed to refute the objections raised by economists regarding the workability of a socialist system. 

In the end, Marxism did not turn out to be the 'inevitable end point of history'. A revolution planned and implemented by a tiny, but highly energetic minority finally managed to establish it as a political system in Russia in 1917. Its practical implementation required the erection of one of the most brutal and murderous tyrannies ever witnessed in the history of man.

As Mises predicted already in 1920, when he first published his thoughts on the socialist calculation problem, communism failed utterly economically.  Later, upon revisiting the socialist calculation debate,  Rothbard pointed out that a major reason why the communist system was able to survive for such a long time was that its planners were able to observe prices in the capitalist economies. Without the input of this information, the economic collapse of the Marxist command economies would  have occurred much sooner than it did. As German historian Gerd Koenen has put it, it seemed as though the communist system suffered a fatal stroke upon entering the information era.

From our personal observations of European Eastern Bloc nations during the final decade preceding the fall of the Iron Curtain, it seemed as though someone had simply stopped time in the 1950's. Everything was in an advanced state of decay – to a visitor from the West, the entire Eastern Bloc gave the impression of a putrefying corpse. When West German experts began a detailed survey and evaluation of Eastern German industry following  German reunification, they were shocked by what the found. Eastern Germany had long been touted as the economically strongest and soundest member of the COMECON, presumably on faith that German efficiency and diligence would not be totally lost even under communism. In reality, the GDR's economy was nothing but a Potemkin village – and even its facade was crumbling. Every nook and cranny of the nation was bankrupt.  The only thing that could truly be considered an example of German efficiency was the feared 'Stasi' ('Staatssicherheit') – the vast secret police apparatus that helped keep the communist dictators in power. Alas, even the secret police disintegrated in the end.

Attempts to reform communism, such as the efforts by the last general secretary of the Soviet communist party, Michail Gorbachev, failed as well. Gorbachev attempted to 'humanize' the terror regime by opening up political debate within the Soviet Union and increasing press freedom, while at the same time refusing to reform the system's economic  foundations. In the end, the regime that had come to power on the tides of the nationalism in the early 20th century was swept away again by a combination of rising nationalism and utter economic failure. Just as fast as Gorbachev's popularity rose in the West, it declined within the Soviet Union. In the final years of his rule, the provision of consumer goods became ever more erratic and poor. People had to queue daily for many hours to obtain the most basic foodstuffs. The bankruptcy of the communist system had become painfully evident. It was simply not possible to 'reform' the Marxist system without abandoning it completely.

China's communist rulers by contrast to the Soviets were able to stay in power precisely because they introduced elements of free market capitalism beginning with the reforms of Deng Xiaoping, which ended the economic regression of China. Today, China is 'communist' in name only. While it retains many features of a command economy with an unelected elite able to dictate bank lending policies, price controls, large scale investment projects and issuing decrees in the form of production quotas especially in heavy industries, large parts of China's economy have become capitalistic. The only 'pure' communist economy left on earth is the Stalinist concentration camp known as North Korea – plagued by famine and ruled by the iron fist of a terror regime. Even hitherto intransigent Cuba has recently embarked on an economic reform path. The failure of the economic model proposed by Marx and Engels has been demonstrated conclusively both in theory and practice. Regrettably, the practical demonstration has cost the lives of millions, while keeping even greater multitudes living in the equivalent of a drab prison for decades.


Next: The Bolshevik Revolution


Michail Gorbachev , the last secretary general of the Communist Party of the SU – his attempt to reform communism failed.

 (Photo credit: Wikimedia Commons)


Successful reformer Deng Xiaoping – he abandoned the communist economic system. He famously said in 1961: "I don't care if it's a white cat or a black cat. It's a good cat as long as it catches mice."


(Photo credit: Wikimedia Commons)





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3 Responses to “Communism – The Failed Experiment, Part I”

  • TriggerPoint:

    That really helps. Cheers. I need to go back and read the Marxist Manifesto, I read it when I was at school, but read it as someone with more socialist leanings at that age,a kind of romantic idealism, Che Guevara posters, t-shirts and that. In the last several years, with the discovery of Rothbard and the proponents of the Austrian school,my thinking has moved right across the economic, political and social spectrum…I m now more interested in the actual practical and empirical implications of economics, rather than the romantic ideals held as a teenager. Thanks Again.

  • TriggerPoint:

    Hi, Really like your blog, just registered today, but have been reading for quite a few months. The Euro Watch updates are very informative, and the background to world war one was very enlightening. Fantastic knowledge. Have not made it through this current post. Well, I read it lastnight late on, but it wasn’t going in. Its a tough one, but I ll need to sit down and have another attempt…This text below confused me…I thought that development of material forces was what helped capitalism thrive, as socialism was not able to delegate efficient use of resources, hence we had the supply and demand imbalances? Maybe you could explain this. Thanks again.

    “In Marx’s eyes this Utopian creed was absurd. The coming of socialism in no way depends on the thoughts and wills of men; it is an outgrowth of the development of the material productive forces. When the time is fulfilled and capitalism has reached its maturity, socialism will come. It can appear neither earlier nor later.”

    • In this particular quote Mises merely wanted to stress how the socialist creed of Marx differed from that of his predecessors. The so-called Utopian socialists were of the opinion that socialism would be freely chosen by men once they realized its (alleged) superiority as a form of social organization – so they had to work to convince men of its superiority. Marx on the other hand essentially disputed that making such a choice was even necessary. He asserted that socialism, or better communism (in order to not confuse the Marxian system with ‘third way’ democratic socialism) was a historical inevitability and that the development of material productive forces and technology would lead to it regardless of the choices of men. Remember here that Marx regarded capitalism as just a ‘phase’ of history compatible with the world’s level of technology in his life time. Marx once said verbatim that “the hand mill gives you feudalism, the steam mill gives you industrial capitalism” (in ‘The Poverty of Philosophy’, 1847). In short, Marx believed that the state of technology employed in industry was the most important feature of the material productive forces and the decisive factor in the structure of society.
      He refused to accept that it is the thoughts and actions of men that are at the root of creating these material productive forces as well as the form of social relations. He furthermore failed to realize that without free market capitalism and a system of prices, economic calculation would become impossible and hence capital accumulation would cease and reverse. Anyway, the quote that you cite is merely meant to underscore the Hegelian determinism underlying Marx’ theory – it was based on this alleged determinism that Marx declared his version of socialism to be ‘scientific’ as opposed to the Utopianism of his predecessors. Whether he was serious about this or only used it as a sales gimmick, it is incorrect. In the end this is a form of mysticism – since Marx never explains why or how such a determinism supposedly exists. He observed that there was technological progress as well as progress in social relations and concluded that some mysterious force would lead all of this to an end point – and that communism was going to be the system of social organization that would be adopted at this end point.

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