The Great Depression

The third development that shaped the 1930s and contemporary ideas of the economy, society and policy was the Great Depression, the deepest of the 47 economic downturns the United States has experienced since 1785. It began with the Wall Street Crash of 1929, which ushered in a 12-year period of mass unemployment and pauperization that affected all western industrial nations.

The stock crash began on October 24, 1929, since then known as “Black Thursday,” when the market lost 11 percent of its value, it intensified on on October 28 (“Black Monday”) when the losses added an extra 13 percent decline and peaked on Black Tuesday, October 29, when the market declined further, another 12 percent and a volume of trading that went unmatched for 40 years, as panic took hold.

Much has been written about the event, perhaps the most dispassionate and succinct presentation for the nonspecialist is The Great Crash, 1929 by John Kenneth Galbraith, published long after the smoke cleared, in 1954.

Among the factors that played into the panic, Galbraith explains, was the unrestricted ability to speculate on stocks by borrowing money (known as trading on margin) and a speculative bubble in which investors failed to notice that consumption was beginning to lag behind production. Joseph Kennedy, father of the president, famously recounted that he got out of the market before the crash, when a shoeshine boy offered him a stock tip, his clue that speculation was running amok.

A group of wealthy investors and banks tried to remedy matters and the market briefly regained its value, but another, much longer, steady decline ran from April 1931 to July 8, 1932, when the market closed at the lowest level of the 20th century, with a net 89 percent loss of value for stocks overall. Events in Wall Street caused a panicked run on banks and internationally on the dollar, which was then backed by gold, and business uncertainty led to layoffs.

Between 1929 and 1932, worldwide gross domestic product fell by an estimated 15 percent (worldwide GDP fell by less than 1 percent from 2008 to 2009 during the Great Recession). U.S. unemployment rose to 25 percent (by comparison, the Great Recession peaked briefly at 10 percent) and in other countries it rose as high as 33 percent.

The Depression was actually two downturns. The first was the slump brought on by the crash, from which the U.S. was beginning to recover toward 1935 thanks to President Franklin D. Roosevelt’s New Deal. Then there was a second slump beginning in 1936, brought on entirely by Washington policy when Republicans attempted to cut spending on the programs that were lifting up the economy.

What ended the Depression definitively was the massive government investment in World War II. By 1943 unemployment was at 3 percent. The explanation is simple. Government-financed capital spending rose from 5 percent of all such investment in 1940 to 67 percent by 1943. The United States had found its investor of last resort.

The Black International

In the 1920s, from the Right, there emerged three movements in Europe that were loosely affiliated with one another in what is often called the Black International, after the color of the shirts of the Italian National Fascist Party (their allies, the German Nazis wore brown shirts and the Spanish Falangists, blue).

The three had in common a top-down view of government as commanding society through a single leader and political party that claimed to espouse a path toward restoring the nation to a mythologized greatness in the past. Benito Mussolini in Italy claimed ancient Rome as its heritage, Adolf Hitler in Germany referred back to the ancient Teutonic warrior tribes that brought Rome down and Francisco Franco in Spain basked in the erstwhile glory of the first empire on which the sun did not set.

They were expressly authoritarian and disdainful of elections even as they claimed to embody the popular will. Their economics were corporativist, meaning that they viewed society as made of social and economic blocs such as state-controlled unions, business associations and various interest and affinity groups (women’s groups among them), all of which formed a corporate, or bodily, whole. Their broader philosophy claimed some elements of a distinctly medieval Christianity and traditionalist values.

The three movements opposed almost everything that dismembered the social order and respect for traditional values of what I elsewhere have called “the Cathedral of Europe” — including humanism, the Protestant Reformation’s individualism, the French and American Revolution’s electoral democracy and capitalism and what they viewed as the heir of all these, Communism. Once the theocratic order was jettisoned in the Renaissance, they proposed, it was all downhill.

All three shared striking symbols symbols. Fascists has the fasces, a Latin word for a bundle of rods tied around an ax, which stood for the tightly bound members of the movement who figuratively chopped down whatever stood in the way of their ideas. The Nazis borrowed a turned and swiveled swastika, an ancient Indian religious icon; in Sanskrit the name has three roots “su” (good), “asti” (exists) and “ka” (make), which combined meant the coming to existence of goodness. The Falangists had a set of five arrows linked with a yoke representing the indissoluble union of the five kingdoms of Castile, Leon, Aragon, Granada and Navarre.

Fascists, Nazis and Falangists shared also European supremacist views. Italian Fascists focused on the claimed superiority of Italians over Africans and used it to justify conquests of Libya and Ethiopia. German Nazis claimed that the Germanic races were superior among all Aryans, or European peoples of Indian origin, like the swastika. The Falange was not particularly interested in ethnic distinctions, largely because Spaniards were multiethnic going back to Phoenician outposts in the peninsula in the pre-Roman period; nonetheless Franco himself was fond of the Visigoths of central Spain and their alleged “national love for law and order.”

All three used the scientifically discredited concept of “race” to describe the people they favored, along with those they despised, namely Jews, the Roma and various other groups.

Mussolini came to power in 1922 after a dramatic “March on Rome,” to radically reform a parliamentary monarchy; by 1925 he abandoned all pretenses and imposed one-man rule, subject only to the king, who overthrew him in 1943 when the Allies were at the gates of Rome. Hitler narrowly won a plurality of votes (43 percent) in 1933 and two weeks later had his party enact dictatorial powers with which he ruled until 1945. Franco came to power in 1939 and the end of the Spanish Civil War; he ruled as military dictator until his death in 1975.

Stalinism

As background, we return to the Soviet Union, where Lenin died in 1924. He was succeeded after a series of complex internal political struggles by Joseph Stalin. The “Man of Steel” ended up as General Secretary of the Communist Party, after expelling Leon Trotsky from the Party; it was a position he held until his death in 1953.

Stalin was unusual in that he had been an Orthodox seminarian and a bank robber, albeit justified as raising funds for revolution. Under the Soviet Union’s power structure, in which government carried out decisions made by the Party in its members-only meetings, he didn’t become formally head of state — premier of the USSR — until 1941.

Stalinism is the kind of rule that became standard in the USSR and its satellites. Overtly it advocated rapid industrialization; the theory of “socialism in one country,” displacing the goal of international revolution with that of expanding the Soviet system; a centralized state control of every imaginable social activity; collectivization of agriculture.

Less overtly Stalinism generated a system of control that was as old as Tsarism and under Leninism had originally been devised during the Civil War, in which Stalin played an important role. This went from neighborhood committees to defend the revolution, to the various incarnations of the Soviet secret police — the Cheka, in 1937 NKVD and after Stalin the KGB — which were small bureaucracies to “purge” the Party of “deviationists,” until peasants refused in the 1929 to play along with collectivized farms, causing food shortages and eventually famine.

Then came a series of “Great Purges,” or broad based attacks first against peasants, then technical and professional workers when the economy failed, ultimately to allegedly Tsarist military officers. To house those who were not dispatched with the classic bullet to the back of the head — estimates of the slaughter go as high as 60 million — Stain established the Chief Administration of Corrective Labor whose acronym in Russian is GULAG.

Marx warned against revolutions in backward countries such as Russia, stating that they would degenerate into what he called “the Asiatic mode of production.” Not even Lenin, who recast a lot of Marx, ever envisioned Stalinism, argued Trotsky, who eventually fled to exile in Mexico, where an assassin killed him with an ice pick.

In opposition outside the USSR, Trotkyists formed the Fourth International — to rival the Communist Third, which had been set up against the socialist Second — and have argued that Stalinist USSR was neither socialist nor Leninist but a bureaucratized state controlled by a ruling caste, the Party’s Nomenklatura (or list of notables). The second was Maoism, in uneasy alliance with Stalinism, yet critical of putting Soviet interests above world revolution; Castro’s Cuba and North Korea are somewhere between Stalinism and Maoism.

Reaction

The Russian Revolution also prompted a reaction in the United States, known as the first Red Scare, roughly between 1917 and 1920, which involved some mass hysteria fanned by newspapers stoking the flames of fear and virulent anti-immigrant sentiment. The latter was related the nationality of leftist activists, who were mostly relatively recent arrivals from Germany, Poland and Italy.

Then, in 1919, the government got its excuse for massive repression. Galleanists, or followers of violent insurrectionist and anarchist Luigi Galleani, sent some 36 letter bombs between April and June 1919 to leading government officials and businessmen, but also law enforcement officials. Although only two people were injured (only 8 actually exploded, 16 were sent back for insufficient postage), the Justice Department launched a series of massive raids under the leadership of Attorney General A. Mitchell Palmer.

The Palmer raids, as the campaign is known, was also an excuse to go after new Mexican immigrants. Ironically, they were mostly the so-called “Cristeros,” who had fled persecution of Christians during the ongoing revolution in Mexico. Palmer deported more than 500 foreign citizens in all; his  popularity and political ambitions to succeed Wilson fizzled when he warned of an attempt to overthrow the U.S. government on May 1, 1920, but nothing happened.

In that period, several states also enacted “criminal syndicalism” laws outlawing advocacy of violence in effecting and securing social change, also otherwise restricting free speech. These laws led to aggressive police action against people accused of being left-wing, with no distinction made between communism, anarchism, socialism or social democracy.

One of the notable cases of that era was against Nicola Sacco and Bartolomeo Vanzetti, Italian-born American anarchists convicted of murdering a guard and a paymaster during a 1920 armed robbery in Braintree, Mass., and later electrocuted. The case remained controversial because of the prejudice openly invoked against the accused; ballistic tests 40 years later proved that Sacco was indeed the shooter, but not Vanzetti.

Leninism

Lenin’s regime was like an earthquake that set off deep fears within the middle and upper classes of the world, so that for the next 72 years, the Soviet Union remained the bogeyman that every union leader, activist and politician outside Russia could use, for good or ill.

Internationally, Lenin broke almost all the rules. He signed a peace treaty with Germany, effectively bowing out of World War I. More importantly, his government repudiated all foreign debt contract by previous governments or by any Russian entity.

Internally, the new government nationalized all private property — this meant all income-producing property, not personal possessions (clothes, furniture, etc.) and not personal real estate of middle-income people or below. In addition, it nationalized all banks, factories and all business and luxurious property and expropriated all Church property. Wages were raised and the eight-hour working day was introduced. Only agriculture remained initially untouched. Lastly, the Tsar and his family, were executed in July 1918.

The effect of all these measures was electrifying. The Russian revolt inspired a surge by the world Communist movement, which was more or less aligned with the Bolsheviks. In 1918-19 a revolution broke out in Germany, where a short-lived Bavarian Soviet Republic popped up. Next door, in Hungary, there were a series of 1918-1920 revolts with heavy Communist involvement. Similarly in Italy, the “biennio rosso” (red biennium) of social conflict between 1919 and 1920 included mass strikes, worker protests and self-management experiments in land and factories seizures by peasants and workers.

For about two years, the western Allies briefly occupied militarily parts of what would soon be called the Soviet Union, until the Reds won the Civil War. In 1922, with the Russian economy near collapse, Lenin reversed course and made a feint to “state capitalism” under his New Economic Policy, which won his government diplomatic recognition in Europe, although the USA would withhold it until 1933.

The Bolshevik Revolt

The Germans, being no fools, set to take advantage of the coup behind the lines of their Eastern Front and dispatched Lenin in a sealed train from exile in Switzerland to the turmoil in Russia, where he arrived in St. Petersburg to stoke the fire of revolt in 1917. In exchange, Lenin vowed to end the war, closing the Russian front; it was a deal similar to that Germans made with Irish rebels a year earlier.

The provisional government had set up a new Duma, which — much like the National Assembly in pre-revolutionary France — had been a puppet advisory council to the monarch, but this time as a real parliament. The Duma became a hornets’ nest of opinions, including socialists.

Parallel to the Duma, government power devolved to a network of grassroots community assemblies (called “soviets”). These were modeled after the workers councils that had been set up in the abortive revolution of 1905; John Reed offers the best description of how they functioned, which was by a fairly chaotic consensus. The net effect was that the Provisional Government and Duma made grand policy and legislation, but at the local level people obeyed the soviets, which also formed militias to defend against armed bands of Tsarists.

In October (November in modern calendars), the Bolsheviks, under a committee led by Lenin led an armed revolt of workers and soldiers, under the slogan “peace, bread and land.” They seized the capital, Petrograd (St. Petersburg), overthrew the government and transferred its authority to the soviets.  The very first people Lenin ordered shot, on the first morning of the new regime, were 2,000 members of what was then called the Social Revolutionary Party, much more moderate than the Bolsheviki, despite the name.

Lenin halted the war, signed a peace treaty with Germany in March 1918, launched a campaign of “red terror” (similar to Robespierre in the French Revolution) operated by the Cheka (a secret police that was almost identical originally to the Tsar's Okhrana) to bring opponents (many of them socialists) to heel. A Civil war broke out, indeed Britain, France and the United States sent troops to help the “White” counter-revolutionaries against the “Red” Bolsheviks, which the latter won. Lenin's group named itself the Communist Party and formed, in 1922, the Union of Soviet Socialist Republics.

The Russian Coup

The Russian Revolution of 1917 was a complex worldwide shattering event, as was the French Revolution launched 1789, and occurred in two stages.

The history of the Russian Revolution is complex and highly controversial. In my opinion, the best outsider account is that by American journalist John Reed (played by Warren Beatty in the film "Reds") who wrote the fairly slim volume Ten Days That Shook the World. The best insider account, Leon Trotsky's History of the Russian Revolution, includes hilarious inside-jokes but is, I regret, three volumes.

In March 1917 there was effectively a palace coup. Russia was losing its front in World War I and the establishment and some reformists thought the Tsar had to go. Thus far it was a bourgeois revolt.

The French word "bourgeois" originally meant the inhabitants of an urbanized and incorporated borough, “bourg.” The bourgeois were the new class of city merchants that developed starting in the Renaissance, when urban life revived in Europe at the birth of capitalism; Marx extended the term to refer to the new class of investors, entrepreneurs, managers and white collar workers that emerged with industrialization, which he called the bourgeoisie, effectively comfortable people of the cities.

The February Revolution (March in modern calendars) was bourgeois in the sense that it was not a popular outburst. It was primarily the establishment exasperated with a backward monarch who thought he could beat back the modern German army with the same cavalry that had defeated Napoleon (although what Joseph Stalin would call “General Winter” had a lot more to do with the 19th-century victory than Cossacks).

There was no social or economic change intended by the provisional government, which decided to continue to abide by its obligations to the western Allies and continue the highly unpopular war. Peasants and workers perceived that they were fighting for the benefit of the wealthy.

Early 20th Century Socialism

Another answer to capitalism, came in several attempts at actual political action by U.S. socialists. In 1876, the Socialist Labor Party was founded by Daniel De Leon and in 1901 the Socialist Party of America started, led by Eugene V. Debs. Then came World War I, which wreaked havoc on the new parties of the Left.

The second Socialist International effectively collapsed over whether to support the war. Reformist-minded socialists argued that participating in government meant accepting majority rule, even when it came to war. The more radical revolutionaries argued that approving of the war meant pitting workers against each other and were opposed to the internationalist idea of socialism, within which class trumped nationality.

Somewhere in the middle of this maelstrom, was Russian socialism, beat back ferociously in an attempted revolution in 1905, after which much of the leadership ―  including one Vladimir Illyich Lenin ― went into exile. Lenin proposed an interpretation of Marx that diverged with all but the most radical socialists. It forever cleaved a divide between Leninists (commonly called Communists, after the name they gave their party) and all other socialists.

Lenin believed that armed revolt was the only path to socialism, led by a vanguard of professional revolutionists who would seize government, then govern in name of the working class ― or to use the 19th-century term favored by Marx, the proletariat. “Proletarian” was how Romans referred to citizens too poor to pay taxes who instead contributed their children ― “prole,” in Latin ― as soldiers who went into the Roman Legions.

To muddy the waters as to the standing of his faction within Russian socialism, Lenin played a word game. Lenin’s faction was a numerical minority (“menshevo,” in Russian), which split off from more gradualist and moderate Russian socialists chastised by the 1905 debacle. Yet, in order to lead and speak for all Russian socialists, Lenin told the story in reverse arguing that the majority (“bolshevo”) had stuck with him. Thus his followers called themselves Bolsheviks.

The collapse of the International and the rise of Lenin's Russian splinter group of socialists would have a momentous effect on the ideas that would shape what Walter Lippmann would call “the American Century.”

Progressivism

In the same way a tamed Labor Day celebration of unions stole the thunder of socialist May Day, a political movement arose in the United States to attempt to prevent revolutionary change by offering mild reforms.

Marx and early socialists were concerned with Europe, not the United States and their ideas were mostly imported through immigration from Central Europe and Italy, at a time when industrialization was demanding an ever greater number of workers for new and expanding factories. Up to the 1890s, when the American Frontier was effectively declared closed, the existence of what to some were vast "vacant" lands (not how Indians or Mexicans viewed them), had been a kind of social and economic safety valve. If you didn’t like being on the bottom of the pecking order, you just went West.

Once the Frontiers closed or became crowded, however, the urgent problems of capitalism began to take on urgency. Because capitalism encouraged speculative investment, the entire economic system was chained to a recurring cycle of booms and busts that left millions of workers out of work. This happened again and again and again, every 5 to 15 years. The Great Depression of the 1930s was the deepest and longest bust, but it was by far not the only one. The cycle has continued happening through the Great Recession of 2007-2009.

One answer, from well-meaning but essentially capitalist quarters, were the reformist "Progressives." In the presidential election of 1912 all three major candidates — Teddy Roosevelt for the "Bull Moose" Progressive Party (a split from the Republicans), Republican William Howard Taft and Democrat Woodrow Wilson — claimed to be "progressive" at one point or another.

U.S. Progressivism of the 1880s to the 1920s was a decidedly centrist, reformist effort to ameliorate the ill effects of capitalism, regulating it rather than getting rid of it; its principal and last policy achievements in the USA were the Federal Reserve, the Food and Drug Administration (which ended the actual "snake oil" salesmen) and the federal income tax. Less effective was anti-trust legislation, which did not stop corporations' unfettered growth in power.

Labor Unions

Elsewhere during this period there emerged labor unions, which the Chartists in England organized on a trade basis along the lines of the collapsed medieval guilds. Other labor organizers argued that workers should organize themselves by broader industries rather than trade.

Originally, all unionizing was illegal in the United States as a form of “conspiracy” of workers to raise their wages by trying to bargain as a group. This changed with the 1842 landmark case of Commonwealth v. Hunt, in which the Massachusetts Supreme Judicial Court ruled that “labor combinations” (or workers offering labor as a group) were legal provided that they has a legal purpose and used legal means to achieve their goals.

The National Labor Union, founded in 1866, was the first U.S. national labor federation, but it dissolved in 1872. Around that time also, the regional Order of the Knights of St. Crispin was founded in the northeast in 1867 and had 50,000 members by 1870. The Knights of Labor, focused on the railways, organized in 1869. The Federation of Organized Trades and Labor Unions, eventually called the American Federation of Labor, began in 1881 under the leadership of Samuel Gompers. The Western Federation of Miners was established in 1893.

Many unions leaders in the 19th century were socialists, some were anarchists, or anarcho-syndicalists (unions were sometimes called syndicates). In the 20th century, there occurred a shift, as we shall see.

Reform or Revolution?

The popular American view of socialism today is of a monolithic Communism led by what was once the Soviet Union ― continued today by rump periphery states such as Cuba, North Korea and Vietnam ― in which the seizure and retention of power by a guiding party was violent and undemocratic. This is a false Cold War myth.

Actually, the bulk of the socialist movement is and has been democratic. However, beginning in the 1880s there began to be a fissure between two kinds of socialists over tactics.

In one corner, were those willing to gain ascendancy gradually, legally, with a practical socioeconomic agenda and very little pretense of presenting a dogmatic philosophy rather than a view subject to scientific criticism. In the other, were those impatient with injustices, willing to jump past the legalities and niceties and seize power by the force of arms and hold onto it through terror.

In admittedly oversimplified terms, this is the crucial socialist debate in the late 19th century, after both the 1848 revolutions and 1870 commune failed. Socialists agreed in broad terms on the ultimate outcome ― socialization of the means of production ― but they came to disagree quite bitterly about how to get there.

The advocates of reform were exemplified by the renown Eduard Bernstein, a German social-democratic political theorist and politician, a member of the Social Democratic Party (the socialist party German workers identified with their interests, inspiring the Nazis to fly the false flag of “socialist” for their party’s name). Bernstein wrote a work called Evolutionary Socialism and became the standard leader of socialists who espoused social democracy, reformism and an electoral path to socialism.

He had known Marx and Engels well, but he regarded Marxist philosophical thinking, in particular the theory of historical materialism, as “immature.” (Contrary to all Cold War propaganda, pro or con, Marx himself made explicit in comments concerning a program of the early German socialists that atheism and related ideas, were his personal opinions, not socialism.) Bernstein helped develop the Second International (1889–1916), the precursor of modern and moderate western European socialism, which brought together socialist parties of 20 countries in a unified effort.

Against the reformist socialists stood firebrands such as Rosa Luxembourg, a German-Polish Marxist theorist, philosopher, economist, anti-war activist and revolutionary socialist of Polish origin. She founded the Spartacus League in 1915 (Spartacus was a Roman slave who led an uprising) and ultimately joined the Communist Party of Germany. A radical, she wrote a scathing response to Bernstein's book, an 1899 pamphlet titled Social Reform or Revolution?

Anarchism

After the 1848 rebellion mentioned earlier, which was a series of political upheavals throughout a year; it involved workers from France and Spain to as far as Hungary, who went on general strikes, set up provisional governments in some cities and generally shook the continent. It remains the most widespread was of revolutions in European history and occurred all more or less at the same time, with no coordination.

At that point workers began to understand themselves as a socioeconomic class: those who possessed nothing (neither land nor factories) and had to sell their time at work. The 19th century word favored by Marx was "the proletariat." Proletarian is a Latin term used in Imperial Rome to refer to people so poor and uneducated that their principal contribution to Rome was to have children (prole, in Latin) who would then go into the Legions. Socialists argued that the land and factories should be controlled by workers, who were the ones who made these things productive, presumably through a government dedicated to serving workers.

Anarchists went a step further: they argued that the institution of government (along with the concept of property and all religion) was in itself evil and that instead workers should form voluntary associations to organize common ownership of the means of production. The French politician and writer Pierre-Joseph Proudhon is deemed the "father" of Anarchism, although he abandoned it, but the classic Anarchists are Peter Kropotkin, Mikhail Bakunin, Leon Tolstoy and others.

The most notable act of Anarchists in the 19th century was a short-lived rebellion known as the Paris Commune, a revolt during the Franco-Prussian War that led to the collapse of the French Second Empire under Napoleon III (aka Louis Napoleon, a nephew of the original) in September 1870. As Prussia besieged Paris, which was a hotbed of working-class radicalism, workers refused to fight to defend the capitalist-industrialist elite and seized the city from within, proclaimed a "Commune of Paris" led by Anarchists. They were ruthlessly suppressed by the French Army in what was later called "The Bloody Week," beginning May 21, 1871.

However, the ideas of the Commune — voluntarism, no property or religion and even free love — had enormous influence on Marx, who described the event as an example of his fateful phrase, "dictatorship of the proletariat" in his famous work, The Eighteenth Brumaire of Louis Napoleon.

Early Socialists

Socialism existed before Marx. American Founding Father Thomas Paine had proposed a plan to tax property owners to pay for the needs of the poor through something very similar to the Universal Basic Income being talked about today — but he was not consciously socialist.

In Europe, the first movements to become conscious of themselves as socialists were the Owenites, Chartists and Saint-Simonians, among others.

Robert Owen was an eccentric Welsh mill owner in Scotland who developed utopian ideas and in 1824, Owen traveled to the United States to invest the bulk of his fortune in an experimental 1,000-member colony on the banks of Indiana's Wabash River, called New Harmony. Owen originated the idea of an eight-hour work day in 1810!!!

Owenites overlapped with a number of other working-class movements, most notably the Chartists (so called for their People's Charter of 1838, which called for universal suffrage for all male adults); in England, as in the USA, voting was limited to property owners. The Chartists, like the Owenites called for a more equitable distribution of income and better living conditions for the working classes — which were, in truth, abominable.

Count Henri de Saint-Simon was the first person to actually use the term "socialism." He was fascinated by science and technology its potential to eliminate hard work; he advocated a socialist society that would eliminate the disorderly aspects of capitalism — such as booms and busts — through administrative efficiency and science as the path to a rationally organized and planned economy.

Socialism

While Americans argued over slavery, Europe had begun to divide over what began to be called “wage slavery.” Just as the liberalism of Locke and Mill and capitalism of Smith had become the pillars of the social and economic order, an English economist named David Ricardo observed that the value of traded things — commodities — is determined by the quantity of labor needed to produce them, which industrialization made variable, rather than the material from which it comes, which remained more or less fixed.

This idea caught fire in the mind of Karl Marx, a German intellectual exiled in England who was then observing the new industrial economy. Marx concluded that capitalists — people with money beyond that needed for well-being, also known as capital invested in productive ventures — make profits from the difference between the costs of production (the labor and raw materials they pay for) and the market price they obtain. A key advantage in the process lies in the difference between what it costs for workers to stay alive and the ultimate price of the goods they make, which Marx called “surplus value”; this is what, Marx argued, capitalists take from workers.

Marx did not blame capitalists, whom he saw as trapped within the rules; instead, he viewed the economic system and capital itself as the cause of the surplus value theft. No real change would occur, he proposed, until control of production and markets was in the hands of all society, especially the workers.

The idea first appeared in a document called the Communist Manifesto, which Marx wrote with fellow exile Friedrich Engels in 1848. It was a fast and furious summary of complex ideas, written just as worker revolts broke out in the most widespread revolutionary wave in European history, from France to as far as Hungary. This was the dawn of what would be called the socialist movement, its ideas later developed in detail in many books, especially the three-volume Capital. Their key and simplest concept would prove maddeningly difficult to bring about.

To understand what was to happen in the United States, we need to review the emergence of socialism in Europe, which occurred in four steps: 1) the proto-socialism that built up to Marx and the First International; 2) Anarchism; 3) labor unions and 4) a broad-based debate within socialism between reform and revolution. All of this took place between from about the 1820s to the 1880s and a little beyond.