Marx Back in Germany

Communism seems on the verge of conquering Germany. Individual former Marxist-Leninists already occupy high positions in the Federal Republic of Germany. Now it looks increasingly likely that the Left Party, the successor of the East German Communist Party, might be in government in the foreseeable future.

Dieter Althaus, 50, is the Christian-Democrat prime minister of the German state of Thuringia. Before 1990, when Thuringia was part of Communist East Germany, Herr Althaus was a teacher at a Thuringian high school. Last October the German media published a letter which Herr Althaus sent to the Communist leadership on 9 November 1989, ironically the very day when the Berlin Wall fell, in the evenings. In the letter he advocated that in preparation of their “youth consecration”, a secular coming of age ceremony for 14-year olds in Communist East Germany, the children should be indoctrinated more strictly with Marxist-Leninist ideology. His ardent Marxist-Leninist fervor did not prevent Herr Althaus from becoming the Christian-Democrat leader of his state.

Meanwhile, the German state of Hesse – adjacent to Thuringia, though it was part of “capitalist” West Germany – may soon get a left-wing minority government of Socialists and Greens with the support of the far-left Left Party, which polled 5% of the vote in the state elections earlier this year.

Before the elections Andrea Ypsilanti, the leader of the Hesse Socialist SPD, had promised that under no circumstance would she cooperate with the Left Party, which the German security services consider to be extremist and a threat to democracy. After the elections, however, Frau Ypsilanti changed her mind. In early November she got the approval of the national SPD leadership in Berlin to put together a minority government with the support of the Left Party. Fortunately, the refusal of four Hesse SPD state representatives to support the move thwarted these plans. As a result, the Hessians will be called to the voting booth again next January.

Nevertheless, the willingness of the SPD, which is a member of the government coalition on the federal level, to work with the Left Party bodes ill for the future. It indicates that, less than two decades after the collapse of the East German dictatorship, the political successors to the former dictators have become respected and accepted politicians.

Unlike the so-called “denazification” which took place in Germany after 1945, with prosecutions of Nazi criminals and collaborators and moral condemnations of civil servants who had remained silent, there was no “decommification” after 1989. On the contrary, many of the old regime’s fellow travelers simply turned their coats, rising to high positions in post-communist society.

German Christian-Democrats

German Christian-Democrats did already so much to be considered enemies of Christianity and conservative values. Their policy mislead many good German Christians who naively believed in democratic party system. Recently we witnessed once again on which side CDU stands, behaviour of Potterring in Prague was unacceptable. He was clearly on the side of radical left. 


This is not any new left, a real threath to our countries. This is democracy which always produce such 'rightists' like CDU.

German Christian-Democrats

The CDU was never a "conservative" party in the sense Americans understand it. To assume they were means to misunderstand the entire German history of the last 150 or so years and -- worse -- the current political climate. The CDU is the successor party of the Catholic "Zentrum" party of the German Empire and the Weimar Republic. The name was the platform. The successors drifted even further to the left. A large wing of the CDU was shaped by the Catholic social doctrine right from the beginning. Nowadays, the differences between the CDU and the Social democrats are purely cosmetic.

'Culture' is to make a nice drinking bowl from one's
enemy's skull.
'Civilisation' is to go to prison for that.

Free Market Troubles

How is the free market "facing a few bumps in the road these days?" All the current troubles in the US stem from government interventions which actively encouraged fiscally unsound behavior. Had American social democrats not flushed the Whig (liberal) constitutional restraints created by the Founders down the toilet in the 1930's, we would not be in this mess today. Those that point to the free market as the culprit are lying through their teeth for ulterior motives, none of which are altruistic.

Phoenix Marxism

Marxism will revive Phoenix-like as long as capitalism is subject to periodic economic crises -- which Marxism will plausibly if speciously argue are intrinsic to capitalism.

In point of fact, periodic crises are not intrinsic to capitalism but rather to that specific form of capitalism based on central banking in combination with fractional-reserve banking and government monopoly of fiat currency issuance.

The details are in von Mises, Hayek, and Rothbard.

Inherent crises

RS: Agreed, the snake oil of Marxism will continue to draw customers as long as people are ignorant of its fundamental lies about human nature, history, and wealth. But could you explain your remarks below? I thought the foundation of the Austrian school was Bohm-Bawerk's subjective theory of value. The cycle of confidence-expansion/doubt-contraction would appear to be inherent to the free market system because it is based on the subjective perceptions of value of human actors. Booms and busts predate domination of banking by central banks, don't they? Central banks can manipulate the credit market and the value of money to alter the situation and subjective perceptions thereof, with beneficial or horrendous consequences.

Also, isn't fractional reserve banking inherent to the free market? Bankers calculate risk-reward and succeed or fail based on their calculations. A skilled banker could be more successful with smaller reserves than an unskilled banker.

business cycle

The free market to not to blame for the present crisis.

The financial cause of the business cycle is the expansion of money and credit encouraged by Central Banks. This monetary expansion lowers interest rates and low interest rates induce a greater investment in "higher orders" of capital goods (machine tools, construction, etc.) and to underinvest in consumer goods. The government gives banks permission to inflate, and thus, it is the government — not the free market — that is to blame for booms and busts. Government policy should maintain the equivalent of a 100 percent gold standard.

At the height of the inflationary boom interest rates are rising, choking off further construction, and the rate of growth of the economy falls. As investment falls, the demand for goods also falls, and the whole economy then falls into a recession: a process by which the market liquidates unsound investments and reestablishes the investment and production structure putting the prices of goods and services back at their true levels of demand.

A recession is a problem of under-saving, and over-consumption, and it is therefore important to encourage savings and thrift rather than the opposite, to cut government spending rather than increase it.

business cycle 2

Mr. De Bruycker: I agree the current crisis is largely caused by government expansion of credit (primarily by the U.S. Federal Reserve to mitigate the post-9/11 recession and promote homeownership). However, I don't agree with the implication there would be no boom and bust cycle in the absence of central banks. Your statement that banks inflate the money supply with government permission seems to give away the argument. You seem to be advocating stricter regulation, rather than less government intervention, when you say that. All I am saying is that even without any government involvement there is going to be a boom and bust cycle because that is how humans behave, in crowds. The money supply effectively, if not numerically, expands and contracts with people's optimism and pessimism, and these are mass psychological phenomena. Government banking has successfully smoothed the cycle in the past, but has also been perverted to achieve political ends and to prevent necessary corrections. That is just a roundabout way to the socialist economy in which prices are set politically instead of by people allocating their resources as efficiently as possible.

I agree with your diagnosis and prescription. I am only expressing a reservation with respect to the view that government banking is solely responsible for the business cycle.

Broadly speaking, it is responsible for the present crisis in another way: we develop, under its influence, irresponsible attitudes towards risk and investment. For example, in the U.S.A., no one thinks twice about depositing money in any bank because deposits are federally guaranteed to $100,000. How different from the past, and what a huge subsidy to the banking industry! Few would question this policy, but it contributes to a false sense of security regarding financial risk among all people. That sense of security aggravates the boom and bust cycle and leads to the present disgusting display of industrial begging in Washington.

KO wrote: "I don't agree

KO wrote: "I don't agree with the implication there would be no boom and bust cycle in the absence of central banks."

Business cycles are primarily caused by fractional reserve banking. Thus business cycles will still exist (and did so in the past) without a central bank unless the practice of fractional reserve banking is abolished. But it takes an institution like a central bank to spawn full-blown business cycles.

Central banks allow banks to engage in reckless lending practices without allowing them to fail, and greatly increase the opportunity for expanding the money supply, thereby exacerbating the problem.

The free economy will always include a measure of instability and, one of the major claims made by Georgists economists is that land speculation could also cause a boom and bust, even without interest rates being manipulated.

The Austrian school, in focusing on interest rates, explains the financial side of the cycle and the role of capital goods. But Geo-capitalist Fred Foldvary argues that the business cycle is not entirely a banking phenomenon. Land and rent costs also plays a primary role.

"What makes land speculation dysfunctional - a cause of economic trouble - is not really the speculation itself, but the tax system in which it takes place. The tax systems in the world today mainly tax labor and profits. Some of the tax money goes to build public works, such as subways, freeways, streets, roads, public utilities, parks, security, fire protection, and schooling. These push up land values. So landowners get a government subsidy in the form of increased rent due to infrastructure that workers and businesses, not the landowners, are paying for. So land speculators profit from this forced transfer of wealth from workers to landowners, if they guess right on where new development will go."

"Two things are needed. First, squeeze the profit out of land speculation by having the community or the government collect the land rent. Land values won't go up if the owners don't get the future higher rents. Secondly, stop gushing money into the banking system. But this is hard to do with central banking, since there is no way to know exactly how much to increase the money supply. So let the market do it with free- market banking, where the banks issue private bank notes according to the market demand for them."

business cycle 3

Mr. de Bruycker: Thank you for your informative reply. I feel it vindicates my suggestion that the boom-bust cycle is inherent to free markets, though potentially ruinously aggravated by central banks.

I don't understand the antipathy towards fractional reserve banking on the part of people who otherwise believe in economic freedom. Fractional reserve banking is capitalism per se: depositors entrust their funds to a banks in the expectation that the bank will pay them interest out of the bank's revenue on loans and other investments. The bank invests the depositors' funds to make a profit out of which to pay interest to depositors and to provide a return on their investments to the bank's shareholders. The percentage of funds kept on reserves is a function of the risk the bank's management is willing to bear in view of its liabilities to depositors, on the one hand, and its opportunity to make profitable loans and investments, on the other. To require a bank to maintain 100% reserves is the negation of capitalist banking, i.e., the negation of the freedom to dispose of one's property as one sees fit. Likewise the removal of the ability to profit from increases in land value is the negation of the freedom to dispose of one's property.

Now, a classical liberal understands that individual freedom and the principles of the free market cannot be allowed to trump the health and security of the nation. But eliminating two of the primary methods by which such freedom is exercised, banking and land ownership, seems to cut far more deeply into freedom (and prosperity) than the health and security of the nation require.

I can't tell if you are arguing for the elimination of fractional reserve banking and land speculation, or simply presenting certain theories to illuminate your points about central banks (with which I agree), but if you are advocating them, you would be making more of a socialist critique of the current situation than a conservative or libertarian critique.

Fractional reserve banking .

Maybe you are right after all. This excerpt (from an article by Fred Foldvary, a geolibertarian) below is a reflection on the problem - I found it interesting. Hope this explanation can be helpful to you.

"Some monetary gurus have proposed 100% reserve banking, where banks do not expand the money supply by lending out more money than they have in deposit. But in a true free market, it is up to private owners and customers to made such decisions. So long as the policy is disclosed to the depositors, they should be able to choose between the greater safety of a warehouse bank that holds all money deposited, and the higher interest paid by a bank that can lend out some of the money deposited, possibly insured privately for more safety. Fractional reserve banking worked very well in Scotland during the free-banking era."

Fred E. Foldvary coined the word "geo-libertarianism" in an article so titled in Land and Liberty, May/June 1981, pp. 53-55. Geolibertarians hold that private property is the product of labor, and since land itself was not created by human labor, it cannot rightfully be considered the property of any individual. They generally advocate distributing the land rent to the community via a land value tax.

Fractional reserve banking 2

Mr. De B.: Very interesting, thank you. Appropriating and defending land from other human beings and developing it requires human labor. Geolibertarians could as accurately call themselves geosocialists.

Human labor

Some critics of the community collection of rent claim that site rentals compensate landlords for their services in providing land to tenants. The French economist Frédéric Bastiat in his book Economic Harmonies (1851) expressed this viewpoint. In Chapter 5, "On Value," under the heading "Utility," Bastiat asks whether a payment to the landowner is in exchange for a service for which he is rightfully compensated.
Bastiat argued that the landowner or his ancestor "cleared the land and fenced it off." The landowner drains excess water, fertilizes soil, and builds improvements. Should he not be reimbursed for such land services?

Clearly, the owner is entitled to compensation for such value added. But that value is not land. Land, in the classical economic meaning, means natural resources. What is natural is what exists apart from and prior to human action. Strictly speaking, or economically speaking, land cannot be improved. Any improvement is an alteration of the natural materials. Improvements are the product of human action, and therefore are not land, but capital goods. We popularly speak of improving land, but the value added is not land value, but the value of capital goods.

The services of the site manager are fully compensated for by the portion of the rental that pays for normal wages and returns to capital goods. The remainder is a surplus that is due purely to the advantages of that site relative to the least productive sites. This land rent is therefore not due to any services, but simply due to the legal rights to land revenue imposed by government.

Marx described the land value tax as a step backwards from the transition to communism. He argued that, "The whole thing is...simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one."[Karl Marx - Letter to Friedrich Adolph Sorge in Hoboken]

Well, I think you start from

Well, I think you start from a misdefinition of the word "land." To say that land = natural resources would not be correct, as natural resources are surely separate "things" that may or may not be found on any particular parcel of land. Gold is a natural resource, but you could not define gold as "land." Land may be a bundle of different natural resources, but you could not define land as "natural resources."

I think a more proper definition of land is any soil or earth whatsoever (including vegetative growth, etc.) with an indefinite extent upwards as well as downwards. It would therefore include any natural resources found therein, but would be separate from those natural resources.

I also think your conclusions about land are a bit off. For example, you said "We popularly speak of improving land, but the value added is not land value, but the value of capital goods." If the improvements to the land are "material" (for lack of a better word), like a house or fence, they could rightfully be considered capital goods. But if the improvements to the land are permanent actual land improvements or changes in the physical structure of the land (diverted rivers, added ponds, holes dug, berms built, trees planted), then they are not capital goods but are part of the land.

In any event, one would be entitled to be compensated for said improvements (whether capital or to the actual land) if someone else were to benefit from them, or enjoy them. Why not?

You said: "What is natural is what exists apart from and prior to human action." I'm not sure where this statement comes from. Are humans not as "natural" as any other creature on earth? Thus, if this statement is true, then the corollary also is true, that what is "natural" is what exists apart from and prior to [insert any animal] action. Is land no longer "natural" when a gopher digs a hole, a beaver builds a dam, or a bird builds a nest, "altering" the land, many times as much, if not more than, any human would? I'm sure the answer is no, so why is land no longer "natural" if I reside on it?

It should also be noted that property rights are a bedrock principle of any truly free and democratic society. My land (my home) is my castle and the only place that I can truly act as freely and as openly as I wish. When I no longer have rights to land, or when land is shared, there are restrictions to what I can freely do while upon said land.

The land value tax

Taxes on production and income drive down real wages and the returns to capital equipment, increasing unemployment and discouraging productive investment. Those taxes are confiscatory and an infringement of individual property rights. This can be counteracted by shifting taxes from labor and capital onto the value of land and natural resources.

The land value tax (or single tax, covering all the expenses of government) is one tax placed upon land values only. Whether improved or not, land bearing the same rental would be taxed equally. Improvements do not cause the rise of rent; the true cause is the growth of the community, which results both in improvements and the rise of rent.

As far as the single tax proposal is concerned, an individual has a natural property right to the fruits of his labor, but not to the gifts of nature. The conclusion follows that property rights may be had in the improvements on land, but not in the land itself.

Land should be considered originally owned by the community, not always commonly owned. A tax is paid to own the land, not to rent it. The single tax would go to the enforcement of your title to the land as well as funding the government's job to protect the rights of the people.

Dreaming again

Yes indeed, with free-market capitalism facing a few bumps in the road these days, Marx is in fashion again and "Das Kapital" is flying off the shelves in Germany at the moment.

Earlier this year Oskar Lafontaine, co-leader of the Left party (third-largest in the country), told Die Welt that parts of the Communist Manifesto should be adopted as party policy.-,2144,3264553,00.html

This whole ‘global financial crisis’ has got people dreaming again of a simpler future.

Even Germany's finance minister, Peer Steinbrück - who must have had some sleepless nights over the past few weeks - in trying to find a way out of the financial crisis, has declared himself a fan: "generally one has to admit that certain parts of Marx's theory are really not so bad," he cautiously told Der Spiegel.

"[M]any of the old

"[M]any of the old regime’s fellow travelers simply turned their coats, rising to high positions in post-communist society."

All those Germans who flocked to see "Das Leben der Anderen" (The Lives of Others) may yet prove that in Germany, as was the case 75 years ago, to see and understand is not necessarily to act.


Markus Wolf

The Man Without a Face is Smiling.

(Shameless self-promotion: title of a chapter in a book I'm writing. The chapter itself developed out of an article I wrote several years ago that predicted what PB is now reporting on. In many respects Germany is no different than any other modern Western society(that includes Russia),illiterate as to their own history, they are helpless rubes willing to buy any magic potion bottled in the same slogans and promises that have been killing off their relatives and neighboring villages for generations.)