Nietzsche and the German Historical School of Economics

2. The Kathedersozialist Program

In order to better illuminate our arguments on Nietzsche’s sociopolitical views, it is necessary briefly to outline the Kathederzosialist program. Their economic tradition was a progression of mercantilist doctrines as they were defined by Gustav Schmoller: ‘[Mercantilism] in its innermost kernel… is nothing but state making – not state making in a narrow sense, but state making and national-economy making at the same time, state making in the modern sense, which creates out of the political community an economic community, and so gives it a heightened meaning” (Schmoller 1884/1967:50-51). Spearheaded by economists like Adolph Wagner, Gustav Schmoller and Lujo Brentano (Wittrock 1939) the movement reacted to reigning social conditions created by Ricardian doctrines and policies. Acknowledging Engels’ terrible verdict of working class welfare under laissez-faire liberalism (Engels 1892) but unwilling to accept the Marxist alternative of a dictatorship of the proletariat, these economists sought to find a viable third alternative. State intervention in economic life was, on a general level, to follow the more active model of Friedrich List and what was later to become the American Institutional School, rather than the limited vision of Smith and the Ricardians. The Verein für Socialpolitik was established as a consequence of the growing profession’s need for direction (Schumpeter 1954:756). Involving a definite pledge and a practical agenda stretching beyond the limits of quantification, the Verein functioned on a basis of large-scale coordination of research activities that in the end resulted in the 188 volumes of the Verein’s Schriften published between 1872 and 1932.

The social question of the day, the Soziale Frage, was pressing. While the theory fuelling laissez faire liberalism already existed in praxis as public policy, the Marxist alternative did not. The Herculean task facing what was to become the Social Democrats was therefore to translate Marx’ analysis of the ills of capitalism increasingly into a viable political system compatible with democracy. As Haselbach argues, the task facing liberal revisionism was even more daunting, namely explaining why liberal theory had not functioned in praxis, and why liberalism had failed to deliver on its political promises. “The question for liberal revisionism was thus, why liberalism, as a practical policy, had not succeeded in harmonising and ordering the economic and social world through the invisible hand of the market forces, but had, instead, brought about new social divisions and political turmoil, the Social Question”(Haselbach 2000:65). In other words, why was the gap between rich and poor growing every day, and why was Europe in this period threatened by the lingering possibility of anti-capitalist revolution, rather than lulled into perpetual sociopolitical harmony by the Mandevillian private vices – public benefits doctrine? This was the focal point of Germany’s political debate from the mid-19^th Century, and the uncertain foundation of the Kathedersozialist movement.

The Verein für Socialpolitik – created six years before Nietzsche wrote Human, all too Human – attempted to take the best of both worlds, allowing for individual creativity and Geist within a framework of social welfare. There was no use to, like the Jacobins, demand an overnight revolution to solve all of humanity’s problems, so instead a “fundamental reconstruction of society was to come about in time, as a by-product rather than as the result of efforts directly aimed at it” (Schumpeter 1954:803). While attacked by their opponents due to their lack of scientific objectivity and empirical proofs, these highly normative economists

John Rae, writing in his 1901 book on Contemporary Socialism, judged their method to be as natural and legitimate a descendent from Adam Smith as the laissez faire-intensive German Manchester Party, and perhaps even more so, “for in science the true succession lies with those who carry the principles of the master to a more fruitful development, and not with those who embalm them as sacred but sterile simulacra” (Rae 1901:198-199).

The Verein was, however, not a proper ‘School’ per se, as its individual members disagreed on what course should be taken to achieve the intended reforms. A classic example can be found in the disagreements between Lujo Brentano and Gustav Schmoller on the role of the state in insuring the welfare of workers. Where Schmoller argued for direct state intervention in matters of the market, Brentano had faith in labour unions and the intrinsic mechanics of the commercial system (Kaku 2000:72-86). They all shared the final goal, but not the means of getting there. The diversity of its legacy greatly facilitates our task, as Nietzsche’s idiosyncrasies fail to alienate him from their larger goal. The theoretical nature of the Verein in the end found its perfect match in Bismarck’s pragmatism, and its work created the foundations for the European welfare states.

3. Nietzsche and Renaissance Individualism.

So how do Nietzsche’s principles of statecraft fit into this? Before we attempt to answer, we must first establish the Zeitgeist that bore them. In sharp contrast to the quantitative stasis of Newtonian Mechanics, Nietzsche’s Protagorean world is one of constant, qualitative flux: “Our social order will slowly melt away, just as all earlier orders have done, as soon as the suns of new opinions shone with new heat over humanity” (Nietzsche 1995:239).⁶ Perspectives on reality are relative, and so are morals. To Nietzsche, and indeed to the whole German economic tradition, the true engine of socio-economic growth is Man‘s wit and will, in Nietzsche’s terms “The Will to Power”. While the academic community fails to agree on the exact meaning of this elusive ideal (Magnus 1996 : 41), we argue along the lines of Richardson and others that it reflects a basic need to master reality (Richardson 1996:148-157); an urge to fulfil our personal potential and reach for the divine within us (See also Reinert H & E, in this volume).

This better part of human nature was, long before Nietzsche, defined by Benjamin Constant as: “that noble disquiet which pursues and torments us, that desires to broaden our knowledge and develop our faculties… it is to this self-development that our destiny calls us” (Constant 1816). Industry, innovation, and production are all key-words in this tradition. While the commercialist Smith saw Man as a dog bartering bones (Smith 1976: Book 1 p. 17) (Man the Trader), the German tradition saw Man as a dog learning to can dog food instead of chewing bones (Man the Innovator and Producer).

The close relationship between Nietzsche and his older University of Basel colleague Jacob Burckhardt, the famous Renaissance scholar, is well documented in Edgar Salin’s Jacob Burckhardt und Nietzsche (Salin 1948), and more recently in Lionel Gossman’s Basel in the Age of Burckhardt (Gossman 2000). Burckhardt was the eminent historian of the same time periods that fascinated Nietzsche: Ancient Greece (Burckhardt 1998) and the Renaissance (Burckhardt 1958). Werner Sombart gives Jacob Burckhardt the credit when he refers to the Renaissance as “an embryonic age for the interest in the individual: in portraits, in biographies, and in psychology”⁷ (Sombart 1930:88). This was clearly also Nietzsche’s view. The word Renaissance appears 76 times in Nietzsche’s complete works, of which 14 times in Human, all too Human.

To Nietzsche the Renaissance with its birth of individualism was the main event of the second millennium:

To me the Renaissance will always mark the high point of this millennium; and what happened subsequently is the great reaction of all kinds of herd instincts against the individualism of that period.⁸

Nietzsche’s economics is today not easily recognised as such, because in many ways it belongs to the ‘duty-based economics’ of the Renaissance, what Werner Sombart calls richtende Nationalökonomie. In the new interpretation of the Bible that created the Renaissance, the duty to invent and to create emanated from Man being created in the image of God. As the most typical characteristic of the Lord was his creativity, innovations and creation were Man’s pleasurable duties (Reinert & Daastøl 1997). Nietzsche’s teachings retain the pleasurable and playful duty to create that characterises the Renaissance, but now as a duty towards an inner self: ‘Yes to the game of creation, my brothers, requires a holy saying of yes’ he says in Zarathustra.⁹

In the Renaissance tradition Nietzsche identifies a fundamental role played by the individual in society – an aspect which much later came to be associated with the economics of Joseph Schumpeter – namely the vital role of the individual entrepreneur in renewing society through ‘creative destruction’. As an economist, Nietzsche upholds the Renaissance legacy of humanist creativity from Gottfried Wilhelm Leibniz and Christian Wolff, the founders of German economics. “The industry of men”, as the term appears in the works of Molinaeus (Molinaeus 1546/1930:73), was born when Neo-Platonic influences during the Renaissance made creation itself self-conscious (Reinert & Daastøl 1997). Fuelled by what Nietzsche refers to as Geist- und Willens-Kapital (Nietzsche 1995:258), in this tradition Man’s wit and will became the true engine of socio-economic growth. This is what Nietzsche complains was being lost in the economics of his age: Our age, which speaks so much of economics is wasteful, it wastes the most precious of all, the Geist.¹⁰ This is an echo from the complaints of German economists at the time against die Entgeistung of economic theory: that Man’s Geist, his wit and will, was disappearing from economic theory as the barter-based English tradition of automatic economic harmony increasingly dominated the scene.