Nietzsche and the German Historical School of Economics

7. Nietzsche in the Middle: Kathedersozialismus and the True Third Way.

…the cleverness and self-interest of human beings are the best developed of all their characteristics; if the state no longer corresponds to the demands of these forces, chaos is the least likely thing to emerge; instead, an invention even more to the purpose than was the state will triumph over the state. How many organizing forces has humanity already seen die out… We ourselves are seeing the idea that attributes significant legal and political power to the family, which once held sway as far as the Roman way of life reached, becoming ever fainter and feebler. Thus, a later generation will likewise see the state become insignificant in certain areas of the world – an idea that many people today can scarcely conceive without fear and abhorrence. To work towards the diffusion and realization of this idea is admittedly something else: we would have to be quite arrogant about our rational capacity and hardly understand history halfway to put our hand to the plow right away – at a point when nobody can yet exhibit the seeds that later are to be strewn upon the rended earth. Let us therefore trust to “the cleverness and self-interest of human beings” that the state will still persist for a good while yet and that the destructive experiments of over-zealous and premature half-knowers will be repelled! (Nietzsche 1995:255)³³

Hidden in the bowels of this voluminous passage, we see the embryonic form of a Kathedersozialist ideology. While “the cleverness and self-interest of human beings” appear to be the next in kin to a certain invisible hand, Nietzsche’s phrase seems to be of a different temperament. Where Classical economics saw the aggregate self-interest of Man usurping the idea of a state, as in an extreme laissez-faire system, Nietzsche’s self-interest was of a more political nature. Social experimentation is to be avoided, as one should instead rely on nature’s perpetual propensity to change, evolve, and mature. The role of the state in society is to be evaluated from a historical perspective, and not defined on the basis of a monolithic model.

One can thus see how Nietzsche is unwilling to sacrifice the creative genius of the individual to the avatar of communist collectivism. He demands social justice and improved conditions for the working classes, but also acknowledges that progress originates in individual innovations and individual initiative; “A higher culture can arise only where there are two different castes in society… the caste of those who are forced to work and the caste of those who are free to work” (Nietzsche 1995:237)³⁴ Mirroring the ideas Benjamin Constant proposed in his The Liberty of Ancients Compared with that of Moderns (Constant 1816), he simultaneously requests the freedom from need, and the freedom to be creative. While liberalism tends to emphasize the freedoms to (freedom as ‘civil liberties’), communism tended to emphasize the freedoms from (hunger, illiteracy etc). The characteristics of the Third Way of the Verein für Socialpolitik and the successors have been a simultaneous attention to both of these freedoms.

Furthermore, it was important to Nietzsche that there was circulation between the two castes: “…it is even possible for some movement between the two castes to take place, so that the duller, less intelligent families and individuals from the upper caste can be demoted to the lower one and the freer people from the lower caste can in turn gain admission to the higher one…” (Nietzsche 1995:237-238).³⁵ Nietzsche’s idea of social mobility was followed up by Vilfredo Pareto’s ‘Circulation of Elites’ (Pareto 1916). Schumpeter’s later metaphor that the economy is like a hotel where the persons inhabiting the luxury rooms always change also shows clear kinship to the same idea; “In fact, the upper strata of society are like hotels which are indeed always full of people, but people who are forever changing” (Schumpeter 1959:156).

Writers like Kashyap have already pointed out that Nietzsche was “as opposed to the socialist State as to the democratic one” (Kashyap 1970:91), but fail to elaborate on the argument. Nietzsche was thus left hanging in mid-air as a utopian renegade whose social criticisms were as disturbing as they were impractical. The general impression left us by the considerable body of secondary literature on Nietzsche’s political philosophy is that of a diagnostic prophet, a social critic with a visionary analysis of his contemporary power structures. His writings are, however, seldom policy-centred, and hard to relate to the dichotomous political situation created by the Cold War. It can thus, in this day and age of bipolar socioeconomic systems, seem as if Nietzsche’s goal indeed was utopian, that he simultaneously demanded socialism and liberalism; that he wanted to ‘have his cake and still eat it’. This conclusion, however, is anachronistic in that it imposes modern Cold War values on history. Anthony Giddens writes “The ruling groups who set up the social insurance system in imperial Germany in the late nineteenth Century despised laissez-faire economics as they did socialism” (Giddens 1998) and it is indeed in this tradition, independent as it was from the right-left axis of the Cold War, that we find Nietzsche and the Kathedersozialisten.

Also, ‘As a political metaphor, the third path claims a larger field than just economics. Their path took the meaning to bridge the gap, or find an alternative approach beyond the dualism of modernity and tradition, of liberal democracy and authoritarian rule, of rationalism and Heimat’ (Haselbach 2000:67).

Nietzsche’s Zeitgeist was very different from the present one, resting on the intellectual ruins of the Cold War. As a consequence of the NATO-Soviet axis of hostilities, economics became divided in a system of binary opposites, but binary in the sense of a circle cut in two. Only recently did it dawn upon us that the Cold War was fought between two brands of Ricardian economics, while the Other Canon type theory of economics – represented by the Kathedersozialisten and the US institutionalist and pre-institutionalist counterparts – died out. The common Ricardian roots of both neo-classical economics and the planned economy of the communist counterparts have been emphasized by Geoffrey Hodgson (Hodgson 1999), Nicholas Kaldor (Kaldor 1955-1956), and Joseph Stiglitz (Stiglitz 1994). While confusing, shocking, and at times contradictory, Nietzsche’s Glance at the State is more than the quixotic bile of a confused mind, and can indeed be read as a concrete statement of public policy.