Marxism and the German Historical School

In Documents 12 and 13, written by Rosa Luxemburg and Rudolf Hilferding, we turn to another aspect of methodological debate, this time involving the historical school of political economy, which developed chiefly in Germany in the last half of the nineteenth century.

The so-called Methodenstreit, or ‘dispute over method’, between the his­torical school and marginalism, which broke out when Carl Menger attacked Schmoller and the German historical school in his Investigations into the Method of the Social Sciences with Special Reference to Economics (1883), was actually a tempest in an academic teapot compared to the common hostil­ity of both groups to Marxism. In 1886 Eugen von Bohm-Bawerk, a leading promoter of marginalist theory, wrote a book-length criticism of Marxist eco­nomics shortly after the appearance of the third volume of Capital f and Lujo Brentano, associated with the historical school, made the struggle against Marxism a leitmotif of his entire academic career^⁸

The ambition of members of the historical school to appear as Sozialpoli- tiker, or progressive advocates of reform, was commonly dismissed by Marxists and economic liberals alike as Kathedersozialismus.

In 1872, Professors Wagner, Schmoller, Brentano, and others held a Con­gress at Eisenach at which they proclaimed noisily and with much pub­licity that their goal was the introduction of social reforms for the pro­tection of the working class. These gentlemen, whom the liberal, Oppen­heimer, calls Kathedersozialisten [‘Socialists of the Chair’ or ‘Academic Socialists’] formed a Verein fur Sozialreform [Association for Social Reform]. Only a few years later, when the fight against Social Demo­cracy grew sharper, as representatives in the Reichstag these pygmies of ‘Kathedersozialismus’ voted for the extension of the Antisocialist Law. Beyond this, all of the activity of the Association consists in its yearly gen­eral assemblies, at which a few professorial reports on different themes are read. Further, the Association has published over one hundred thick volumes on economic questions. Not a thing has been done for social reform by the professors - who, in addition, support protective tariffs, militarism, etc. Finally, the Association has given up social reforms and occupies itself with the problem of crises, cartels, and the like.^[59]

In 1888 Karl Kautsky wrote a review of Lujo Brentano’s brochure Classical Polit­ical Economy, pointing out that the historical school had no alternative to offer in lieu of the classical economic theory it rejected. Brentano claimed that ‘eco­nomists no longer had to be thinkers, but photographers’. Kautsky replied that science does not consist of ‘a mere description of facts and processes. These provide only the foundations from which laws can be inferred. And it is not just a question of a mere description, but of a methodical investigation, which again is only possible on the basis of an adequate and thoroughly thought-out theory". The historical school’s rejection of coherent theory actually threw its members back to the theories they rejected, because, Kautsky said, ‘as long as they are unable to replace classical theory...

In 1900 Rosa Luxemburg reviewed Richard Schuler’s book The Economic Policy of the Historical School, which called for repudiation of the historical- inductive approach of the historical school and a return to the deductive meth-

odology of the classics. She argued that the issue was not one of inductive versus deductive method, but rather of the state of capitalist development and of the class antagonisms to which it gave rise. The historical school was ‘the only real national product of the German bourgeoisie in the field of economic theory', and it was therefore a true reflection of that class's own history. It had arisen as a reaction against the socialist doctrine of political economy. ‘Clas­sical political economy had everywhere, with invincible logic, turned into self­criticism, into criticism of the bourgeois order'; and in Marx the transformation of classical economics into its opposite, into the socialist analysis of capitalism, had been completed. It followed that

The socialist critique, i.e. the consequence, could only be denied if the starting point, classical economics, was overcome. The results of the investigation of bourgeois commodity economy, as offered by classical economics in a coherent system, could not simply be negated or cor­rected. There was no other way but to fight the investigation itself, the method [of classical political economy]. If the purpose of classical eco­nomics was to understand the principles and basic laws of bourgeois economy, the historical school, by contrast, set itself the task of mysti­fying the inner workings of this economy.⁶¹

Just three years after Richard Schuler challenged the historical school to return to the deductive method of classical political economy - or, as Rosa Luxemburg put it, issued the call ‘Back to Adam Smith' - Werner Sombart turned the debate in a novel direction with his monumental two-volume study of the origins and development of Modern Capitalism (1902).

Sombart effectively skirted the debate over induction or deduction, but his attempt to create a unifying theory of social causality foundered, according to Hilferding, at the point where it began. Sombart convincingly documented the relation between economic motives and economic history, but he failed to explain how or why one motive gave way to another. The result was that he provided theories, not ‘a general social theory’. The emergence of motivation, which should have been historically determined, remained unexplained.

Sombart claims that the motivations of living people are the ultimate, primary active causes we can go back to. In order not to fall into an extremely idealistic conception that does violence to the facts, Sombart tries to understand those motives historically. But since he sees them as the primary factors, he is forced to leave them just to follow one another, while the task of a theory of development should be to derive them from one another.⁶²