“In the last century it became evident that a society based on slave labor could not exist side by side with one organized on the principle of free labor. The same holds true in our day for democratic and totalitarian societies.”
Just as the slave-holding South could not survive alongside free labor in the Northern states, the totalitarianism of German National Socialism, Friedrich Pollock believed—or sincerely hoped—could not survive in a world with democratic states. So long as it had “not conquered the whole earth,” the new totalitarian form of National Socialism was doomed to fail.
According to key members of the Frankfurt School, the only way to defeat German National Socialism, which had proved itself to be economically effective by the late 1930s, was to demonstrate the greater economic efficiency of democracies. The only way to defeat authoritarian oppression is to model economic success based on freedom.
W.E.B. Du Bois shared that belief. As he argued in his essay “A Negro Nation Within the Nation” in 1935, the only way to combat racial oppression was to model effective economic independence. Du Bois militated there for a separatist coöperative society for African-Americans that would achieve “a new economic solidarity,” economic success, and economic independence through a Black coöperative state. Du Bois concluded:
When all these things are taken into consideration it becomes clearer to more and more American Negroes that, through voluntary and increased segregation, by careful autonomy and planned economic organization, they may build so strong and efficient a unit that 12,000,000 men can no longer be refused fellowship and equality in the United States.
Du Bois was writing in 1935. Friedrich Pollock and his colleagues at the Frankfurt School in exile at Columbia University were writing in 1941-42, only six years later. And still today, we face similar forms of racial injustice, gross inequality, and a resurgence of white nationalism and white supremacy. What will it take us, today, to achieve fellowship, social justice, and equality? Let us return together to the rise of fascism in the 1930s and the Frankfurt School debates to try to learn from history.
The Puzzle of National Socialism
The rise of National Socialism in Germany during the 1920s and 30s shook the conventional understandings of capitalism and challenged most traditional and critical theories of economic history. Once Hitler took power, the National Socialist government did not nationalize German industry, but instead privatized industries en masse; the Nazi government engaged in planning and put in place a centralized war economy, but allowed capitalist enterprises to do its bidding. The combination of capitalism and centralized planning defied most people’s comprehension of economics.
On a conventional understanding, capitalism depended on free markets, as opposed to planned economies controlled by centralized governments. Those formed the two poles and competing visions of political economy: centralized planning by a communist party in the Soviet Union at one end, and liberal market economies in Western Europe and the United States at the other. To be sure, the enhanced economic role of the U.S. government during the New Deal, as well as the wartime economies of Great Britain and the U.S., put a strain on this conventional understanding, and greatly worried free market proponents like Friedrich Hayek; but still, the conventional contrast between capitalist and controlled economies defined the space of mid-20th century economics. How then could Germany adopt an economic arrangement that included the opposite ends of the spectrum—capitalist enterprise and centralized planning?
As a historical matter, most economic historians agreed that capitalism had undergone structural change over time. Earlier forms of capitalism had evolved throughout the 17th and 18th centuries, and especially during the Industrial Revolution in the 19th century, to give rise to more mature forms of capitalism. Historians and economists disagreed about the exact periodization, labels, and telos; but most agreed that Western industrial societies were in an advanced stage of capitalism. Some referred to “late capitalism” (Spätkapitalismus) or “late-stage capitalism,” a term originally used at the turn of the twentieth century by the German economist Werner Sombart to describe the period of capitalism after World War I (in Der Moderne Kapitalismus, 1902-1927), but then adopted by both orthodox Marxist theorists (e.g., Ernest Mandel, Der Spätkapitalismus, 1972, published in English as Late Capitalism in 1975) and by Frankfurt School thinkers (e.g., Adorno in “Late Capitalism or Industrial Society,” 1968; Jürgen Habermas in Legitimation Crisis, published under the original title of Legitimationsprobleme im Spätkapitalismus in 1973) mostly to describe the period after World War II and the end stages of capitalism. Others used the term “monopoly capitalism,” generally understood to have coincided with the rise of imperialism and colonization from the late nineteenth century to the mid-twentieth; this term was closely associated with Lenin, and his 1916 book, Imperialism, the Highest Stage of Capitalism, in which he understood the term to describe the imperialist condition of capitalism in which the state intervenes to protect large, monopolistic enterprises. Still others referred to “advanced capitalism,” which had a slightly less end-game connotation to it and was less closely tied or associated with Marxist thought. But regardless of the nomenclature, most thinkers agreed that capitalism had advanced to an industrial stage. The advent of German National Socialism posed a direct challenge to all these periodizations and understandings: How did the National Socialist economy relate to late forms of capitalism? Was it inaugurating a new form of capitalism that would be more resilient to economic depression?
At the theoretical level, the National Socialist paradigm confounded all the existing categories, which were themselves already polyvalent. A coterie of terms emerged to grapple with this apparently new form of Nazi capitalism: “State organized private-property monopoly capitalism,” “managerial society,” “administrative capitalism,” “bureaucratic collectivism,” “totalitarian state economy,” “status capitalism,” “neo-mercantilism,” “economy of force,” “state socialism,” “advanced oligopolistic capitalism,” “post-competitive capitalism,” “post-market society.” How then could the National Socialist economy be understood and where would it lead?
This raised a number of challenging questions:
- As a historical matter, was German National Socialism a “new” form of capitalism that could be called, for instance, “state capitalism” as Friedrich Pollock suggested, or was it instead merely a deviant necessary mutation of late capitalism that could be called “totalitarian monopoly capitalism” as Franz Neumann proposed?
- How did German National Socialism fit in the history and periodization of capitalism?
- As a theoretical matter, could capitalism be reconciled with or exist within a centralized governmental planning of the economy?
Those are predominantly historical matters now, but the debates within the Frankfurt School also raise questions about the future and how to achieve a just society. As noted earlier, one shared belief within the Frankfurt School was that the only way to defeat National Socialism was to demonstrate the greater economic efficiency of the democratic form. Germans had experienced too much pain during the long depression to be convinced by anything other than economic stability and power.
Friedrich Pollock, a founder of the Institute for Social Research, director at times, and one of the principal economic thinkers, declared in no uncertain terms that “The totalitarian form of state capitalism is a deadly menace to all values of western civilization.” The only way to defeat it was to show the potential of a new democratic form of what he called “state capitalism”: “Those who want to maintain these values … must be able to show in what way the democratic values can be maintained under the changing conditions.”
Franz Neumann, another core member and economic thinker, author of the weighty book Behemoth: The Structure and Practice of National Socialism (1942), also emphasized that Germany would only be defeated through the example of a democratic model of economic power. Germans would not tolerate a return to “the anarchic conditions of the great depression,” Neumann wrote. However much they might yearn for peace and even abhor concentration camps, he noted, “he [the German] will never be satisfied with a status quo which again delivers him to the anarchic conditions of the great depression.” So the only way to beat National Socialism, Neumann declared, was to offer the vision of an efficient democracy:
The National Socialist leadership knows that once England and the American democracies will show themselves as efficient as, and perhaps more efficient than, National Socialism, while retaining or even deepening democracy, the belief in National Socialism, which is founded on fear and despair, will ultimately collapse. […] To uproot National Socialism in the minds of the German people, the model of an efficiently operated democracy will be worth as much as a powerful army.
In other words, to free the people from the chains of National Socialism, Western democracies needed to show the example of free, democratic, and mostly, efficient economic production.
For Frankfurt School thinkers, though, the Western industrialized economy was in a stage of late capitalism marked by monopolistic and imperialistic tendencies that spelled its demise. It was impossible for them to imagine that more of the same—more late- or monopoly-capitalism marked by inequality and the exploitation of labor—could serve as the exemplar that would defeat National Socialism.
And so, another set of problematics imposed themselves: How could late Western industrialized capitalism be transformed into a force that could defeat German National Socialism? The stakes could not be higher for this group of Jewish, Marxist-sympathizing, refugees exiled at Columbia University.
Within the Frankfurt School, a debate emerged regarding both the proper diagnosis of the form of economic organization represented by National Socialism and the corresponding way to transform Western capitalism in order to defeat it. In broad strokes, which I will detail in a moment, the debate pitted Pollock against Neumann.
Pollock proposed a schema to understand National Socialism: “state capitalism.” The German political economy, Pollock argued, represented a new form of capitalism, a new stage of capitalism, that could be generalized into an ideal-type of “state capitalism” in which the state controls the planning of the economy. National Socialism represented one of two possible variants of this new form of state capitalism: totalitarian state capitalism. But a second form was also possible: democratic state capitalism. And Pollock essentially argued that the creation of democratic state capitalism—a form of state capitalism controlled by the people, rather than a totalitarian elite—could be precisely the kind of efficient democratic economic form that could defeat totalitarian state capitalism.
Now, as I will show, Pollock was actually proposing a social-democratic planned economy that effectively abolished capital and capitalism. Pollock was outlining a radical transformation of American capitalism that got rid of the “capitalist”—his scare quotes, not mine—and turned the capitalist into a “rentier.” In effect, Pollock was advocating a Soviet-style planned economy controlled instead by a social-democratic people. I offer this interpretation in part as a Straussian reading: Pollock was trying to integrate and he was writing to an anti-communist American academy in a somewhat precarious position in exile at Columbia University. He was careful to speak about “democratization” of state capitalism, but the political economy that he sketched in his paper was a planned economy controlled by a social-democratic people. More on that shortly.
Neumann, for his part, interpreted National Socialism very differently: far from a new stage of capitalism that bore any promise whatsoever, National Socialism was the necessary consequence of monopoly capitalism: given the internal contradictions of late-stage monopoly capitalism, totalitarian administration was inevitable as the only effective way to manage those contradictions and prevent the utter collapse of capitalism. National Socialism was, in effect, the Frankenstein of late monopoly capitalism—an irrational, chaotic, lawless anarchic condition of domination, without a coherent political theory, a non-state that forcibly kept the economy going for the power accumulation of a leader and the profit of the large industrial capitalists.
Importantly, Neumann emphasized that totalitarianism was necessary given the late stage of capitalism: capitalism called for totalitarianism. Neumann wore his orthodox Marxism on his sleeve, writing:
In a monopolistic system profits cannot be made and retained without totalitarian political power, and that is the distinctive feature of National Socialism. If totalitarian political power had not abolished freedom of contract, the cartel system would have broken down. If the labor market were not controlled by authoritarian means, the monopolistic system would be endangered; if raw material, supply, price control, and rationalization agencies, if credit and exchange-control offices were in the hands of forces hostile to monopolies, the profit system would break down. The system has become so fully monopolized that it must by nature be hypersensitive to cyclical changes, and such disturbances must be avoided. To achieve that, the monopoly of political power over money, credit, labor, and prices is necessary.
Notice, the contrast with Pollock could not have been greater. Pollock viewed National Socialism as a new stage of capitalism, a new stage of economic organization, that solved the problems of monopoly capitalism, and provided a potential way forward: democratic state capitalism. Pollock wasn’t simply describing a wartime economy; he was describing an economic system that could maintain itself, by contrast to forms of late- or advanced- monopoly-capitalism. By contrast, Neumann was describing a Frankenstein late-stage capitalism that was irredeemable, with no silver lining. In this regard, the two interpretations were completely at odds.
Despite that, Neumann too argued for a “democratization” of Western capitalism. Here too, we need a Straussian sensibility, given that Neumann as well was addressing an anti-communist American audience in a precarious position at the Institute at Columbia University. He had to be careful with his words. For Neumann, as a Marxist, the way forward lay in the oppressed masses. But Neumann presented to his American audience that as “democratization,” a much more palatable concept for Americans. Neumann explained: “The primary condition for psychological warfare against Germany is, therefore, that the process of democratization in England and the United States be not sacrificed but that it be encouraged to progress.” A process of democratization was called for, Neumann wrote. Not easy, given, as Neumann acknowledged, that “It is much more strenuous to develop the potentialities of a nation on a democratic than on an authoritarian basis.” Nevertheless, however hard, that was what was necessary, for, as noted above, “to uproot National Socialism in the minds of the German people, the model of an efficiently operated democracy will be worth as much as a powerful army.”
In the final paragraph of the book, though, Neumann let slip his Marxism:
The flaws and breaks in the system and even the military defeat of Germany will not lead to an automatic collapse of the regime. It can only be overthrown by conscious political action of the oppressed masses, which will utilize the breaks in the system.
“The oppressed masses,” alone, could tear down and defeat totalitarian monopoly capitalism.
Neumann’s Marxism was nevertheless sufficiently masked behind his righteous indignation at Nazism that he would be well received at Columbia, where he was appointed to teach political science, and at the OSS where he participated in the psychological warfare programs that he had outlined in Behemoth.
For our purposes—for purposes of a discussion of the abolition of capital—it is important to see that both Pollock and Neumann offered prescriptions that effectively abolished capital: Pollock, by turning capitalists into “rentiers” and abolishing the social function of the capitalist in a planned economy governed by the people; Neumann, by advocating for rise of the “oppressed masses” and the effective dictatorship of labor under the more docile name of “democratization.” Both of those interventions abolished capital and capitalism; however, neither was fully expressed or transparent, hidden behind the language of democratic theory.
A robust debate erupted within the Frankfurt School over these dueling interpretations of National Socialism and alternative paths forward. In their private correspondence, Horkheimer and Adorno seemed uncomfortable with Neumann’s too orthodox Marxism, and they did not find Pollock sufficiently dialectical. Excellent, detailed histories of the Frankfurt School document this, including the work of Martin Jay, The Dialectical Imagination: A History of the Frankfurt School and the Institute of Social Research, 1923-1950; David Held, Introduction to Critical Theory: Horkheimer to Habermas; Rolf Wiggershaus, The Frankfurt School: Its History, Theories, and Political Significance; William E. Scheuerman, Between the Norm and the Exception: The Frankfurt School and the Rule of Law; and Christian Fuchs, “The Relevance of Franz L. Neumann’s Critical Theory in 2017: ‘Anxiety and Politics’ in the New Age of Authoritarian Capitalism.” As Wiggerhaus documents from the correspondence, Adorno wrote to Horkheimer that Pollock’s article displayed “the undialectical assumption that a non-antagonistic economy might be possible in an antagonistic society.” Horkheimer, for his part, criticized Neumann for failing to properly address the cultural-anthropological dimensions and therefore remaining too orthodox. More on this later.
Several decades later, in 1968, Adorno would return to the debate in an address to German sociologists, revealing how much had changed in the ensuing years. The question was no longer about state capitalism or monopoly capitalism, but rather whether a Marxist lens had any contemporary relevance at all and whether, instead of late-stage capitalism, we had entered into a phase of post-political “industrial society” where class conflict no longer existed and all that was required was good economic management.
“Late Capitalism or Industrial Society?” Adorno asked. The binary choice, Adorno responded, is deceptive. Dialectics were called for. Both labels were correct in some respects, but their contradiction even more enlightening. “Late capitalism” characterizes our relations of production; “industrial society,” our forces of production. And the relations of production remain “damaged, afflicted, and out of kilter,” as they are in late-stage capitalism, because of the industrial forces of production. In order to fully understand our present economic condition, Adorno wrote, it was essential to see that those damaged relations of production were being hidden beneath the idea that we had supposedly entered into a new phase of industrial society.
Adorno used the opportunity of the clash of nomenclature, then, to unmask the illusion that we had entered a classless society. It was precisely the illusion that we live in an industrial society, where relations of production are seamless, that critical sociologists and theorists had to unveil. That was the task of sociology. That was the challenge for sociologists.
In the 1986 address, Adorno made two other important interventions.
First, he revived, in effect, Neumann’s critique of monopoly capitalism: state intervention, Adorno emphasized, is essential to the working of the late capitalist economy:
State intervention in the economy is not – as the old school of liberal thinking believed – an extraneous and superfluous imposition, but is essential to the working of the system as a whole. It is the very epitome of self-defense.
In this, Adorno underscored the illusion of free markets. The state had always played that role, even in laissez-faire times. The myth of liberal economic thought was just that, a myth:
It has sometimes been argued that it is precisely this state intervention in the economy and, even more so, the fact that large-scale and long-term planning have long since become a fact of life, which proves that late capitalism, having overcome the anarchy of commodity production, can no longer be termed “capitalism.” But this view ignores that the social fate of the individual is no less precarious now than it was in the past. At no time has the capitalist economic model functioned in the way its liberal apologists have claimed. Already in Marx’s work it was seen as an ideology and criticized accordingly. Marx demonstrated how little the self-conception of bourgeois society corresponded to the actual reality. It is not without a certain irony that it should be precisely this critical point – that even in its heyday liberalism was not really liberal – which has now been revived in the thesis that capitalism is not really capitalistic.
We live in “managed society” where the state enforces domination and hides the damaged relations of production, Adorno emphasized. Siding with Neumann, Adorno declares: “State intervention in the economy confirms the survival ability of the system, but indirectly also the theory of the breakdown of capitalism; the telos of state intervention is direct political domination independent of market mechanisms.”
But this is hidden by the illusion of industrial society—as Adorno writes, “It is a socially necessary illusion that the forces and the relations of production are now one, and that society can therefore be analyzed in an unproblematic and straightforward way from the point of view of the forces of production”—and it is this illusion that must be confronted by sociologists:
If sociology, rather than being a willing purveyor of welcome information for agencies and interest groups, is to achieve something of that purpose for which it was originally conceived, then it must contribute, however modestly, by means which are not themselves subject to universal fetishization, toward breaking the spell.
The perpetuity, the persistence, the ongoing inevitability of illusions and spells. You could think of Adorno’s intervention here as a radical theory of illusions!
Second, in this context, Adorno identified one group of resistors who offered perhaps a way out or a path forward. As I read it, these were the students of 1968—with whom Adorno would have a tense relationship. Here, though, they seem to offer, in Adorno’s eyes, at least on my reading, a source of inspiration. Adorno writes:
In recent years, on the other hand, traces of a counter movement have also become visible, primarily among the most diverse sections of the youth, namely resistance to blind conformism, freedom to opt for rationally chosen goals, disgust with the condition of the world as the hoax and illusion it is, and an awareness of the possibility of change.
Notice how the anti-conformist youth counter-movements here represent, for Adorno, perhaps the only hope for political change. This is particularly interesting given the Adorno that we tend to depict during the student uprisings of 1968.
All of this raises additional questions for our present. Today, many contemporary critical thinkers—including myself—describe advanced capitalism through the lens of neoliberalism. And so similar challenges arise: with unprecedented unemployment due to the COVID-19 pandemic, brutally discriminatory health impacts, global neoliberalism and government bailouts, and a soaring stock market—how do we diagnose and what methods to move forward? Another set of questions, then:
- What do we call this phase of capitalism? Financialized capitalism with Nancy Fraser? Neoliberalism with David Harvey, Wendy Brown, and others?
- How do we understand the role of capital and capitalism in this new phase?
- And what way forward? Pollock suggested democratic state capitalism—a bit of an oxymoron—to cover perhaps what would have been a social-democratic controlled economy; Neumann proposed “conscious political action by the oppressed masses.” But what is the path forward for us?
The Pollock-Neumann debates become relevant again today in this light. Let me flesh out, then, three idiosyncratic readings—the first two, Straussian—of Pollock, Neumann, and Adorno.
Friedrich Pollock on State Capitalism
Pollock presents, rather innocently or scientifically, as merely beginning a conversation, in his own words, about “the workability of state capitalism.” “Nothing essentially new is intended in this article. Every thought formulated here has found its expression elsewhere.” Under the guise of this modesty, and of developing merely a possible model of “democratic state capitalism,” Pollock is actually eliminating capital and getting rid of the capitalist.
One needs to read this text closely. Because, what state capitalism does, in eliminating the market and replacing it with centralized control and planning (whether under the control of a totalitarian elite or of the people) is to effectively transform the political economy in such a radical way that capital no longer exists or functions in the way it did under market capitalism.
The reason is that, in “state capitalism,” the state controls the credit system, the banks, the money, and in the process, “capital.” Pollock explains this: “the state acquires the additional controlling power implied in complete command over money and credit,” he writes. “Every investment, whether it serves replacement or expansion, is subject to plan, and neither oversaving nor overexpansion, neither an ‘investment strike’ nor ‘Fehlinvestitionen’ can create large-scale disturbances.”
When you dig deeper, then, the state control of the entire financial system entails an end to capital. In fact, Pollock even puts quotation marks over the term “the ‘capitalist.’” The capitalist, in state capitalism, becomes nothing more than a “rentier”—someone who is getting a rent from his property, and that rent is stabilized!
Pollock writes about the transformation of “the ‘capitalist’” in the following way:
The rigid control of capital, whether in its monetary form or as plant, machinery, commodities, fundamentally transforms the quality of private property in the means of production and its owner, the “capitalist.”
The “capitalist” becomes a rentier:
Regulation of prices, limitation of distributed profits, compulsory investment of surplus profits in government bonds or in ventures which the capitalist would not have chosen voluntarily, and finally drastic taxation—all these measures converge to the same end, namely, to transform the capitalist into a mere rentier whose income is fixed by government decree as long as his investments are successful but who has no claim to withdraw his capital if no “interests” are paid.
In totalitarian state capitalism, then, “those owners of capital who are ‘capitalists,’” as he writes, will eventually disappear. They will essentially receive “interest” on their investments, have no social function, and will become surplus population.
The same would have to be true under “democratic” state capitalism—in a planned economy governed by the people.
As is clear, Pollock firmly believes in the effectiveness of planned economies. He places himself alongside Oskar Lange and against Hayek—explicitly, in the margin. He says this expressly on a few occasions, the first citing to literature on socialist planning, the second in response to Hayek:
We think that anyone who seriously studies the modern literature on planning must come to the conclusion that, whatever his objections to the social consequences of planning, these arguments against its economic efficiency no longer hold. All technical means for efficient planning, including the expansion of production in accordance with consumer wants and the most advanced technical possibilities, and taking into account the cost in public health, personal risks, unemployment (never adequately calculated in the cost sheet of private enterprise)—all these technical means are available today.
And what is remarkable is that, whenever Pollock talks about the empirical evidence regarding centralized planning, he refers to evidence from socialist planning. Take a look at note 1 on 204; or see note 1 on 212 where he is using “the literature on socialist planning” to discuss the question of “distribution under state capitalism.” (Despite this, Pollock maintains that his analysis of state capitalism does not apply to the Soviet Union: “it is somewhat doubtful whether our model of state capitalism fits the Soviet Union in its present phase.” I’ll come back to this!)
Pollock reviews the arguments against the effectiveness of state capitalism, and rejects them all. Not convincing, he writes: “Forewarned as we are, we are unable to discover any inherent economic forces, ‘economic laws’ of the old or a new type, which could prevent the functioning of state capitalism,” he writes. He adds in the margin that he does not even think that the Marxian theory of declining profit will prove an impediment to state capitalism. 
In fact, state capitalism does away with economics! Pollock writes:
We may even say that under state capitalism economics as a social science has lost its object. Economic problems in the old sense no longer exist when the coordination of all economic activities is effected by conscious plan instead of by the natural laws of the market. Where the economist formerly racked his brain to solve the puzzle of the exchange process, he meets, under state capitalism, with mere problems of administration.
State capitalism becomes mere administration. Economics is replaced by mere administration.
Now, the most important question, then, is how a democratic form of state capitalism can be achieved. That is the biggest question for Pollock: “It is of vital importance for everybody who believes in the values of democracy that an investigation be made as to whether state capitalism can be brought under democratic control.”
Pollock remains somewhat agnostic, unsure. But the direction of his thought is clear: he is orienting us toward a future of a democratically-controlled planned economy. And in such a “state capitalist” system, as we have seen, the “capitalist” becomes essentially a “rentier.” So he concludes on a note of guarded optimism:
If our thesis proves to be correct, society on its present level can overcome the handicaps of the market system by economic planning. Some of the best brains of this country are studying the problem how such planning can be done in a democratic way, but a great amount of theoretical work will have to be performed before answers to every question will be forthcoming.
The most important point here is that this would entail the abolition of capital by means of a planned economy under social-democratic control.
I note that this interpretation is partly Straussian, in that it reads between the lines given the guarded political situation in which Pollock found himself. But of this, there is little doubt. Just a few basics. Friedrich Pollock (1894-1970), who studied economics, sociology and philosophy at Frankfurt, wrote his dissertation on Marx’s labor theory of value (1923). He founds the Institute with Felix Weil (who provides funding) in 1923, and serves as director of the Institute from 1928 to 1930. He is a student of Soviet planning. He researches and travels to USSR and publishes in about 1927 a book on Soviet planning, Attempts at Planned Economy in the Soviet Union 1917-1927. He leaves Germany with the Institute in exile, first to Geneva and later to New York City. When he writes and publishes this article in 1941, he is in New York City at Columbia University in a very precarious political situation. The Institute is on shaky ground at Columbia. They were invited because they were believed to be interdisciplinary social scientists on the German university model of the social science—the model that gave birth to the University of Chicago (at Chicago, they had to chisel off the “s” from the stone on the building that housed the social science division!). They had to play down their Marxism—unsuccessfully, ultimately, resulting in their eventual replacement by Paul Lazarsfeld’s Bureau of Applied Social Science. Thomas Wheatland has a brilliant account of all this in several articles and a book—a must read.Pollock had been instrumental in getting the Institute to Geneva, through his connections at the International Labor Organization, and also played a key role in getting it to New York City; he met with Lewis Lorwin (who received his PhD at Columbia and taught there for a while) in around 1933 to make contacts, and was at the center of the negotiations.
His work must be read in this context: the people who brought him and the Institute to Columbia were anti-communist. Robert Lynd, professor at Columbia, who led the invitations and welcome was “outspokenly anti-communist” (Wheatland, 21) and thought what he was getting was German social science. Pollock writes this article at the height of the sensitive period at Columbia. There is no question, he had to be extremely careful.
The result is an argument that seems relatively innocuous: Pollock argues on the page that (1) there was an earlier phase of “private capitalism” that involved “19th century free trade and free enterprise;” but (2) that earlier phase of capitalism is irretrievably past, as the result of the advent of totalitarian state capitalism under National Socialist Germany. There is no hope of returning to that earlier phase of capitalism, no more than there was any hope in post-Napoleonic France to return to feudalism. The passage from private capitalism to state capitalism is as determinate, historically, as the passage from feudalism to capitalism. Trying to fight to restore private capitalism in the face of totalitarian state capitalism is a futile exercise that will lead only to the triumph of National Socialism—in Pollock’s words, “it can only lead to a waste of energy and eventually serve as a trail-blazer for totalitarianism.” And although he is unsure whether there is a model of state capitalism (he uses Weberian ideal-type theory) that can be generalized from the National Socialist experience and that would allow for a democratic variant—he writes that there is “serious doubt” about whether such a model of state capitalism exists—he nevertheless proposes to start a conversation precisely to figure out that question: whether it is possible to conceive of a model of state capitalism that would then allow for a democratic variant. So the exercise here is simply to explore whether the new form of state capitalism—i.e. state-directed, centrally planned—could be controlled by democratic processes. To rein in capitalism through democratic state control. And the difference between totalitarian and democratic state capitalism is that, in the first, the control is vested in the hands of a ruling elite made up of political, bureaucratic, or party leaders and the heads of industry and business. “Everybody who does not belong to this group is a mere object of domination.” By contrast, in democratic state capitalism, the people control the state functions and can prevent the slide to totalitarianism.
But beneath this innocuous project, I would argue, is a theory about the abolition of capital. Pollock is being extremely strategic in this work. He is prefiguring a form of socialism, but calling it democratic state capitalism.
One can identify several weaknesses to Pollock’s argument. For one, the idea that private capitalism was a laissez-faire model that was independent of state control and relied on market mechanisms buys into the myth of the free market. It fails to recognize how much that earlier form depended on state regulation. You can hear Pollock buy into that myth in his discussion: “Creation of an economic sphere into which the state should not intrude, essential for the era of private capitalism, is radically repudiated” by state capitalism, he writes. But that is an illusion—as Adorno underscores in his article “Late Capitalism of Industrial Society?”and as others have argued. So, the transition cannot be from private to state capitalism. It cannot be, in Pollock’s words, “the transition from a predominantly economic to an essentially political era.” That is too simplistic. But we can put that aside for now. The point is that Pollock sketches, in a disguised effort, a social-democratic planned economy.
Franz Neumann: National Socialism as a form of “totalitarian monopoly capitalism”
For Neumann, National Socialism did not displace “monopoly capitalism,” but rather placed it under totalitarian rule. National Socialism is not a new form of “state capitalism.” It remains monopoly capitalism; but monopoly capitalism maintained by and directed at the maintenance of a totalitarian elite. And there is no silver lining to this form of capitalism. Neumann is emphatic that National Socialism “could not possibly carry out its economic policy on a democratic basis.” (260-61). In other words, there could not be a democratic version of this economic form. To summarize, Neumann writes:
The German economy of today has two broad and striking characteristics. It is a monopolistic economy—and a command economy. It is a private capitalistic economy, regimented by the totalitarian state. We suggest as a name best to describe it, “Totalitarian Monopoly Capitalism.” (261)
As David Held shows, Neumann retains the term “monopolistic,” and conjoins it with “totalitarian,” because on his view monopoly capitalism, as a late stage of capitalism, is fundamentally unstable and requires the intervention of a totalitarian state. The monopolistic stage of capitalism, on Neumann’s view, has to be upheld by authoritarian means. The cartel system would break down otherwise. This reflected Neumann’s more orthodox Marxist views.
As the historians of the Frankfurt School have emphasized, Neumann was more rigidly Marxist than Horkheimer or Adorno (at least on their view), which was one of the reasons that they distanced themselves slightly from his positions. The irony here, of course, as many note, is that Neumann’s book was more favorably received by American scholars than any of the other works of the Institute, landing Neumann, and Neumann alone, a teaching position at Columbia, and a key position in the OSS. The Marxist dimensions of his work—the argument that late- or monopoly-capitalism necessarily required a totalitarian state to uphold it—did not register, as much as his righteous indignation against the “irrational” “non-state” in Germany and his arguments about propaganda and psychological warfare.
The contrast to Pollock could not be greater:
- Totalitarian monopoly capitalism remains a form of private, not state, capitalism
- Totalitarian monopoly capitalism is not efficient
- And democratic state capitalism is doomed to failure
First, then, the inefficiency. In terms of the effectiveness of the National Socialist economy, by contrast to Pollock who argued for its efficiency, Neumann says that it is nil. Everything was already put in place under the Weimar Republic, and the Nazis added no value: “The contribution of the National Socialist party to the success of the war economy is nil. It has not furnished any man of outstanding merit, nor has it contributed any single ideology or organizational idea that was not fully developed under the Weimar Republic.”
Second, National Socialism operates through selfish profit motives of the captains of industry. What motivates economic production is profit—not power, as Pollock argued. The profit motive remains determinative: “Mandeville’s contention that private vices are public benefits had now been raised to the rank of supreme principle-not for the masses, not for the retailers, wholesalers, and handicraft men, not for the small and middle businessmen, but for the great industrial combines.” According to Neumann, the Nazi party does not get involved in the economics. It leaves it to designated captains of industry. “With all this the party does not interfere. The period of party interference in economics has ended long ago.” Nevertheless, there is government everywhere—regulating credit and money markets, and monopolies, and foreign trade.
Third, democratic-controlled planning is a non-starter. In discussing National Socialism, Neumann makes clear that democratic planning is a failed project. There are too many internal contradictions to make democratic planning possible, at least in Germany at the time, even if it would be a worthy goal, Neumann argues. The major problem is that “Democratic planning, also, enlarges the power of the state; it adds the monopoly of economic coercion to the monopoly of political coercion.” And this then triggers resistance from the monopolist capitalists, etc.
On Neumann’s view, capitalism under the Weimar Republic had gravitated toward a form of “democratic monopoly capitalism.” Under National Socialism, everything was oriented toward imperialist war: this brought about even further restrictions on capitalism, but it remains “capitalist”—governed by the capital interests of the business elite. As Neumann writes:
Preparation for totalitarian war requires a huge expansion of the production-goods industry, especially of the investment-goods industry, and makes it necessary to sacrifice every particular economic interest that contradicts this aim. That involves the organization of the economic system, the incorporation of the total economy into the monopolistic structure, and, though we use the word with reluctance, planning. This means that the automatism of free capitalism, precarious even under a democratic monopoly capitalism, has been severely restricted. But capitalism remains.
National Socialism did not nationalize industry or become socialist because big business had all the same interests—getting rid of unions, eviscerating civil rights, gutting democracy. So, it was a perfect union of power and profit.
In conclusion, Neumann argues that National Socialism “has no political theory of its own, and that the ideologies it uses or discards are mere arcana dominationis, techniques of domination” He maintains that it has no rule of law, in fact has no law, and is therefore not a state. He writes:
“we are confronted with a form of society in which the ruling groups control the rest of the population directly, without the mediation of that rational though coercive apparatus hitherto known as the state. This new social form is not yet fully realized, but the trend exists which defines the very essence of the regime.”
Perhaps the only idea he shares with Pollock is that the only way to defeat Nazi Germany is to show the example of an efficient democracy—an efficient democratic state capitalist system for Pollock, an efficient democracy ruled by the “oppressed masses” for Neumann.
The Ensuing Debate
Christian Fuchs does an excellent job of tracing the various positions of the other members of the Frankfurt School—including Horkheimer, who sided with Pollock in “The End of Reason” (1940) and “The Authoritarian State” (1941); Marcuse, who sided with Neumann in State and Individual Under National Socialism (1942); and Adorno, who “thought that Pollock politically assessed state capitalism too positively” (according to Wiggershaus)—in a fascinating article titled “The Relevance of Franz L. Neumann’s Critical Theory in 2017: Anxiety and Politics in the New Age of Authoritarian Capitalism.”
I would refer you directly to Fuchs’s article, an excerpt of which is here:
Some authors stress that there were major differences between the approaches of Neumann, Kirchheimer, Gurland, and Marcuse on the one side and Pollock, Horkheimer, and Adorno on the other side (Held 1990, 52-53). So for example Martin Jay in his book The Dialectical Imagination: A History of the Frankfurt School and the Institute of Social Research argues: “Franz Neumann’s general indifference towards psychology was one of the factors preventing his being fully accepted by the Institute’s inner circle” (Jay 1996, 87). […]
Rolf Wiggershaus in contrast in his book The Frankfurt School: Its History, Theories, and Political Significance argues that not only Neumann, but also Adorno voiced criticism of Pollock’s approach on Nazism (Wiggershaus 1995, 282), whereas Horkheimer defended Pollock. Adorno thought that Pollock politically assessed state capitalism too positively. Wiggershaus stresses the parallels between Neumann and Pollock and that their differences were rather at the level of words than of a fundamental theoretical nature […] (Wiggershaus 1995, 288-289). The basic difference between Neumann on the one side and Pollock and Horkheimer on the other was that “Neumann insisted on the basically capitalist character of the Nazi system, and therefore thought the notion had been disproved that an unexpected new social formation and a fundamental anthropological transformation had forced their way ahead of socialism, overtaking all the hopes which had been raised in the previous decades” (289-290). Horkheimer thought that Behemoth left out the cultural-anthropological dimension of analysis.
Adorno, circa 1968
Adorno effectively returned to these debates in 1968 in an address to German sociologists, asking whether then-contemporary capitalism should be described as “late capitalism” (retaining the Marxist connotations) or “industrial capitalism” (as a post-Marxist condition beyond class conflict). As noted earlier, he rejected an either-or approach, finding value in the dialectical tension between the late-capitalism of relations of production and the industrial society of forces of production.
Adorno argued that classes still exist, even if class consciousness does not any longer (235); that the world no longer lends itself to a coherent “internally consistent theory” (236; note that he had maintained the same position in 1931 in “The Actuality of Philosophy”); and that nevertheless, “there are compelling facts which cannot, in their turn, be adequately interpreted without invoking the key concept of capitalism.” (237)
Adorno takes Marx to task for not being sufficiently attentive to the way in which our culture society crushes class consciousness:
Marx’s formulation, according to which theory becomes a material force in the world as soon as it takes hold of the masses, has been flagrantly inverted by the actual course of historical events. If society is so organized that it automatically or deliberately blocks, by means of the culture and consciousness industry and by monopolies of public opinion, even the simplest knowledge and awareness of ominous political events or of important critical ideas and theories; if, to compound it all, the organization of society paralyzes even the very ability to imagine the world differently from the way it in fact overwhelmingly appears to its inhabitants, then this rigid and manipulated mental condition becomes every bit as much a material force – a force of repression – as its counterpart, i.e., free and independent thought, which once sought its elimination. (241)
In the end, Adorno argues, the term “industrial society” properly captures forces of production, while “capitalism” correctly describes relations of production, which remain damaged and problematic. Our relations of production, he writes, “are objectively anachronistic, they are damaged, afflicted, and out of kilter.” (243) The state maintains the disorder by sustaining domination—as it has in the past. The great illusion is that we have overcome problem of relations of production and that we are now living in industrial society tout court. It is the role of sociologists to lift that illusion.
In terms of the earlier Pollock-Neumann debate, one could say that Adorno in 1968 rejects the idea that there could be a new phase of “state capitalism” because the state has always regulated and had a key role in the maintenance of capitalism. As he writes, “State intervention in the economy is not – as the old school of liberal thinking believed – an extraneous and superfluous imposition, but is essential to the working of the system as a whole.” (244) In this sense, he effectively resists Pollock’s position, two decades later. But Neumann’s position may have derived too tautologically from his definition of a “state”: if indeed National Socialism did not involve a state because it was non-rational, chaotic, lawless, etc., then of course there could be no “state capitalism” under Nazi Germany—by definition. But if, as Adorno suggests, “bourgeois society had always been irrational, unfree, and unjust,” (244) then the statelessness of Nazi Germany may not be unique. Regardless of how he would have positioned himself in 1940, in 1968 he draws out attention acutely to the illusions that maintain capitalism. And perhaps that would be another beginning of a path toward the abolition of capital: lifting the veil of illusions and spells.
Adorno, Theodor W. “Late Capitalism or Industrial Society?” In V. Meja, D. Misgeld and N. Stehr, eds, Modern German Sociology, Columbia University Press, New York, 1987
Fuchs, Christian. 2017. “The Relevance of Franz L. Neumann’s Critical Theory in 2017: “Anxiety and Politics” in the New Age of Authoritarian Capitalism.” tripleC: Communication, Capitalism & Critique 15 (2): 637-650. https://doi.org/10.31269/triplec.v15i2.903
Held, David. 1980. Introduction to Critical Theory: Horkheimer to Habermas. Berkeley, CA: University of California Press.
Jay, Martin. 1973. The Dialectical Imagination: A History of the Frankfurt School and the Institute of Social Research, 1923-1950. Berkeley, CA: University of California Press.
Marcuse, Herbert. 1960 . Reason and Revolution: Hegel and the Rise of Social Theory. Boston, MA: Beacon Press.
Marcuse, Herbert. 1964. One-Dimensional Man: Studies in the Ideology of Advanced Industrial Society. Boston, MA: Beacon Press.
Neumann, Franz. 1942. Behemoth: The Structure and Practice of National Socialism. New York: Oxford University Press.
Pollock, Friedrich. 1941. State Capitalism. Studies in Philosophy and Social Science 9 (2): 200-225.
Scheuerman, William E. 1994. Between the Norm and the Exception: The Frankfurt School and the Rule of Law. Cambridge, MA: MIT Press.
Thomas Wheatland, The Frankfurt School in Exile (University of Minnesota, 2009)
Thomas Wheatland, “The Frankfurt School’s Invitation from Columbia University: How the Horkheimer Circle Settled on Morningside Heights,” German Politics & Society, Vol. 22, No. 3 (72) (Fall 2004), pp. 1-32
Thomas Wheatland, “Critical Theory on Morningside Heights: From Frankfurt Mandarins to Columbia Sociologists,” German Politics & Society, Vol. 22, No. 4 (73) (Winter 2004), pp. 57-87.
Wiggershaus, Rolf. 1995. The Frankfurt School: Its History, Theories, and Political Significance. Cambridge, MA: MIT Press.
 Note that, with the exception of the first usage of the term on the first line of the first page of the book, where “late capitalism” appears, Thomas McCarthy uses the term “advanced capitalism” in the rest of Legitimation Crisis (1975). [Double check German version].
 Martin Jay, The Dialectical Imagination: A History of the Frankfurt School and the Institute of Social Research, 1923-1950 (Berkeley, CA: University of California Press, 1973), 143-172; David Held, Introduction to Critical Theory: Horkheimer to Habermas (Berkeley, CA: University of California Press, 1980), 52-65; Rolf Wiggershaus, The Frankfurt School: Its History, Theories, and Political Significance (Cambridge, MA: MIT Press, 1995 ), 282-296; William E. Scheuerman, Between the Norm and the Exception: The Frankfurt School and the Rule of Law(Cambridge, MA: MIT Press, 1994), 123-155; Christian Fuchs, “The Relevance of Franz L. Neumann’s Critical Theory in 2017: “Anxiety and Politics” in the New Age of Authoritarian Capitalism,” tripleC: Communication, Capitalism & Critique 15 (2): 637-650 (2017) online at https://doi.org/10.31269/triplec.v15i2.903
 Thomas Wheatland, The Frankfurt School in Exile (University of Minnesota, 2009); Thomas Wheatland, “The Frankfurt School’s Invitation from Columbia University: How the Horkheimer Circle Settled on Morningside Heights,” German Politics & Society, Vol. 22, No. 3 (72) (Fall 2004), pp. 1-32; Thomas Wheatland, “Critical Theory on Morningside Heights: From Frankfurt Mandarins to Columbia Sociologists,” German Politics & Society, Vol. 22, No. 4 (73) (Winter 2004), pp. 57-87.