Socialisms, Austrian Style

The national conflicts within the empire were compounded by social conflicts resulting directly or indirectly from the liberal reforms of the 1850s and 1860s. The liberalization of trade, transport, banking, and industry had completely transformed the Austrian economy, undermining the social and political position of the old elites. The aristocracy and clergy despised the emerging coterie of capitalist upstarts, and in their political rearguard action against liberalism and capitalism they allied themselves with the economic losers of the transformation process: the great number of people employed in traditional forms of production, including small-scale farming and those handicrafts that had become obsolete in an era of more efficient factory production. They were not necessarily “losers” in the sense that their income had been reduced in absolute terms. It was rather that their relative economic and social positions had deteriorated in comparison to those of their relatives, friends, and neighbors who had found employment in the new capitalist corporations.

Petit-bourgeois residents of fin de siècle Vienna especially resented the success of the new Jewish middle and upper classes, which most visibly represented the changes in Austrian society induced by the liberal reforms. There had been virtually no Jewish residents in Vienna before 1848 because Jews were not allowed to own land in the city or to stay longer than three days within its walls. Only about 200 distinguished Jewish families such as the Rothschilds had obtained an exemption from this policy. All others had to leave the city after three days and re-enter it at another gate to obtain a new visa. As a consequence, Jews were virtually unknown to the general population, and those who had actually met Jews in person remembered them as impoverished Talmud students in Galicia and other rural regions of the empire. Things changed radically in the wake of the revolution of 1848, when the restrictions on Jewish real estate ownership were abolished. By 1857, about 7,000 Jews had settled in Vienna. This was the beginning of a great wave of Jewish middle- and upper-class immigration. Starting in the 1860s, well-to-do Jewish families flocked into the capital. By the turn of the century, there were 145,000 Jews in Vienna. By 1910, it was 175,000. Only Warsaw hosted a larger Jewish population.⁵⁵

In a city as small as Vienna it was now impossible to overlook the Jewish presence. The new wealthy Jewish residents clearly outnumbered the Catholic nouveaux riches. For traditional city dwellers, liberalism, capitalism, and Jews were all alien intruders. These urban masses in Vienna were easy prey to the old elites when they began to organize a political backlash against the capitalist movement. Two parties were particularly effective: the German Nationalists and the Christian Socialists.

As a schoolboy, Ludwig von Mises witnessed firsthand the rise of the Christian Social Party in Vienna. In 1882, the Vienna election law had been modified to extend suffrage to lower-income groups.⁵⁶ These voters eventually secured the sweeping victory of the Christian Socialists under Karl Lueger in the communal elections of 1895. Lueger—commonly called “Handsome Karl” (der schöne Karl)—was the incarnation of the modern politician. He knew how to flatter the “man on the street.” He did not count on winning by argument, but relied entirely on appeals to voters' feelings, fears, and resentments. Although he had risen from lower-class origins in a liberal age and harbored no personal ill will toward Jews, he built his election campaign squarely on anti-capitalism and anti-Semitism.

The emperor despised Lueger's anti-Semitic tactics and refused to appoint him mayor of Vienna. But after three consecutive election victories, Franz Joseph eventually gave in and Handsome Karl became mayor on April 20, 1897. Lueger immediately proceeded to enlarge his power base by incorporating many suburbs into the city of Vienna. After the incorporation had been completed in 1902, Vienna became a secure dominion of the Christian Social Party. It would remain so until the end of World War I, when the red socialists won the majority in the city and started one of the greatest experiments in communal socialism ever, turning the capital of Austria into Red Vienna.

Like the Christian Socialists and the German Nationalists, the socialist movement was ultimately an offshoot of the liberal transformation of Austria-Hungary. But whereas the former groups resisted this transformation, the socialists were carried along with it, and its leaders were quite conscious of the irony—or, as they would say, “dialectics”—that they were “children of the capitalist revolution.” They were spoiled brats bound for patricide, praising the economic achievements of liberalism while silently preparing the violent overthrow of this very system.

Socialism and capitalism were but two faces of the same radical and rapid transformation of the economy, society, and politics. For this very reason, both of them lent themselves to the integration of Jewish elites into leadership positions. Just as capitalism enabled a great number of Jewish entrepreneurs, statesmen, and intellectuals such as David Ricardo, Disraeli, and Ludwig Bamberger to rise to wealth and influence, so the socialist movement was a predominantly Jewish movement at the leadership level. Lassalle and Luxemburg in Germany, as well as Kautsky, Bauer, and the Adlers in Austria were all of Jewish origin. In short, liberalism had paved the way for freely experimenting with new modes of production and thus led to the emergence of the factory system. With the large factories came many Jewish capitalists and a proletariat with a Jewish leadership.⁵⁷

In contrast, the new urban proletariat was a largely non-Jewish group without traditions. It therefore lacked social and political institutions and quite naturally became fair game for politicians and political movements. All parties tried to mobilize the new urban masses for their causes, and until the 1880s the German Nationalists and the Christian Socialists had the upper hand in this endeavor. Things changed only when the socialists triumphed in German elections. Their popularity extended to the Austrian proletariat, winning many over to the socialist cause—but not all of them.⁵⁸ When Handsome Karl made anti-Semitic slurs at election rallies, he knew what he was doing. It was the one sure way to lure voters away from both the liberals and the socialists.

Like all social democratic parties in central Europe, the Austrian organization was entirely under the sway of Karl Marx's doctrines. Marx had reconstructed the theory of socialism in a way that made it especially appealing to the urban proletarian masses. In his account, the proletariat was the social class that embodied the future of socialism. Liberalism and capitalism, Marx argued, were merely an intermediate phase of social evolution. Their main function was to give birth to the proletariat and then to impoverish it, thus inciting the working masses to the final revolution, which would create a classless society and bring about the end of history.

By the time twelve-year old Mises had completed his first year of school in Vienna in 1893, Marxism had already lost much respect and attraction. Twenty-five years had passed since the first publication of Das Kapital, and events had clearly refuted Marx's predictions about capitalism's propensity to create misery among the working classes. The uncomfortable evidence induced a split among socialist intellectual leaders. Eduard Bernstein criticized Marxism and proposed a “revised” theory of socialism. He recognized the ability of capitalism to improve the material lot of the proletariat. Rather than seeking to overhaul capitalism, he argued, socialists should strive to correct its flaws through democratically elected governments.

Bernsteinian revisionism was part of a more general effort to turn the socialist movement away from its Marxist fixation on a violent overthrow of present social conditions. Under the leadership of the Vienna doctor Viktor Adler and of the Marxist theoretician Karl Kautsky, the Austrian social democrats gave a clear endorsement of the principles of non-violence and legality in political struggle.⁵⁹ At the Hainfeld party congress in 1888–1889, which united the violence-prone ideological radicals and the union-dominated moderates, Adler and Kautsky championed piecemeal social reform through universal suffrage and parliamentary legislation. Marxist radicals in other countries heaped ridicule on this affirmation of the legitimacy of the state and its organs, calling the approach of their moderate Austrian comrades “k.k. social democracy”.⁶⁰ But the new strategy was undeniably successful.

During his school years, Mises followed the progress of the social democratic agitation in favor of universal suffrage. He lived first-hand the conflicts he would later spend so much time analyzing. His contemporary, Felix Somary, recalls:

It had been eighty-four years since the Congress of Vienna, and both Europe and America basked in the long peace and looked down on the Austrians as incompetents, immature, patiently enduring a tyrant's yoke. The reality was quite different, for the big issues that we were struggling over in Austria had not been dealt with in other countries; on the contrary, they had not even surfaced in those countries, and were to do so only decades later. Nationalism, political anti-Semitism, even Communism, were already fighting issues with us, while in the rest of the world the curious duality of liberalism and imperialism still held sway.

While all the rest in their smug peace and quiet looked down at the Austrian turmoil as if at some curiosity, we young people felt ourselves at the very centre of political events. For our world was far more real than the other: we didn't discuss, we fought; and not, as outsiders imagined, over the questions of the day before yesterday, but about those of the day after tomorrow. When in later decades the new barbarian-ism came flooding in, it surprised the West; for us it was a familiar phenomenon, we had seen it churning with wild and uninterrupted turbulence at the heart of a highly developed and refined civilization. I say “we,” meaning the entire intellectual youth of Vienna at that time: we stood at a decisive turning-point in history and felt it in our innermost being.⁶¹