The Historical School: From Friedrich List to the Social Market Economy

Philosophy of Romanticism – Georg Wilhelm Friedrich Hegel

The spiritual environment that developed in most European countries in the second half of the 18th century, labeled by historians as the Age of Enlightenment, in fragmented Germany also had a specificity, which consisted in the fact that among many representatives of the German Enlightenment the idea of national unity was very popular. In the 70s of the XVIII century, the literary movement «Storm and onslaught» emerged, which contributed to the awakening of national feelings. The Stürmer movement had a noticeable influence on the early work of Goethe, Schiller, Hölderlin and other German poets and writers who created in their works a gallery of images of rebels.

The end of XVIII – beginning of XIX century – is the time of the Great French Revolution, the Napoleonic Wars, the time of industrial revolution in England and the development of capitalism, it is a time of political humiliation of many peoples of Europe (Germans, Hungarians, Poles, Italians, Czechs) and the rise of their national consciousness. Europe was on the threshold of the greatest upheavals and changes. The French Revolution shook the foundations of the old order and for a quarter of a century plunged the countries of the Old World into the abyss of social and political instability. It should be recognized that Napoleon, who tried to redraw the map of Europe, which was languishing under the burden of feudalism and outdated territorial division, first drew under French influence almost all the leading personalities of the time, who, however, soon became disillusioned with him (the great Beethoven changed the dedication in his «Heroic» symphony).

Hegel, a prominent representative of the German classical school, did not stand aloof from these changes. Like many young people of the time, as a student, he marveled at the French Revolution, and then abruptly changed his beliefs and began to praise the extremely conservative Prussian state. His philosophy absorbed the contradictions of the epoch, becoming the creator of a system that tried on the absolute idea with the Prussian class monarchy, he surprisingly combined revolutionary ideas and conservative elements in his doctrine

Georg Wilhelm Friedrich Hegel (1770—1831) was born in Stuttgart, the capital of the principality of Württemberg. The philosopher’s father was a secretary of the treasury and was a member of the highest bureaucracy. His parents prepared him for a career as a pastor; 1788—1793 he studied at the Theological University of Tübingen and earned a Ph. D. in theology. Together with fellow student Schelling and mutual friend Hölderlin, who soon became a famous German Romantic poet, Hegel read the works of Plato and Kant; disillusioned with his career as a pastor, he concentrated on philosophy. From 1793 to 1800, Hegel labored as a home teacher and educator. After the death of his father, he receives his share of the inheritance, which gives him the opportunity to engage in philosophical activities. In early 1801 he comes to Jena, where after defending two dissertations, he receives the right to teach at the local university as a private associate professor of philosophy. In 1802—1803, together with Schelling, he published the «Critical Philosophical Journal», in which he printed a number of his works. After leaving Jena, Hegel moved first to Bamberg and then to Nuremberg, where he worked as director of the gymnasium (1808—1816); it was during this period that he wrote The Science of Logic. From 1816—1818 he held a professorship at the University of Heidelberg, and from 1818 until his death at the University of Berlin, where he was rector of the university for several years. It was in these years, in the Berlin period, that Hegel’s works were especially widely recognized and his authority grew considerably.

According to the famous German historian, social democrat Franz Mehring, Hegel «saw in the history of mankind a process of constant movement, change and transformation, rising from the lowest to the highest forms, and a powerful strain of mind tried to trace in the most diverse departments of historical science, the internal connection, the constant development of this process among all the seeming deviations and accidents.19 His philosophy belonged to the dominant position in German intellectual life. The ideal of the rule of law constructed by Hegel in his «Philosophy of Right» (1822) was just as much a reflection of the Prussian state of 1821 as Fichte’s «Closed Commercial State» was a reflection of the Prussian state of 1801, but Hegel goes further in his «Philosophy of Right» he demands a public trial and jury trials. It is on this work we would like to stop the reader’s attention to understand the philosophy of economic thought and the development of economic doctrines of Germany.

It should be noted that in the second half of the 18th century in the Enlightenment era begins to form a «union» of philosophy and political economy: Hume, Rousseau, Kenet, Thurgot, Smith and others were both philosophers and economists. For the «Encyclopedia» Diderot and D.Alambera wrote their articles on philosophy and political economy Rousseau, Kenet and Thurgot. In 1759 came out «Theory of Moral Sentiments», and in 1776 «Study on the nature and causes of the wealth of nations» A.Smith. They came by their theoretical judgments through natural law philosophy to free trade and the «invisible hand». However, Hegel, also drawing from the laws of natural law, comes to the realization that «man must find his reason» – Spirit – in law.

Hegel notes that «there are two kinds of laws: natural and legal. Natural laws are absolute and have the force of what they are: they do not allow any limitation, although it is possible in some cases to sin against them. To know what the law of nature is, we must know it, for these laws are true; only our conceptions of them may be false. The measure of these laws is outside of us, and our knowledge of them adds nothing to them… when considering legal laws, a spirit of reflection rises, and already the mere difference of the laws makes us pay attention to the fact that they are not absolute…In legal laws, a precept is valid not because it exists, but each person demands that it conform to his own criterion. Here, therefore, there is a possible conflict between what is and what ought to be, between law in and for itself existing, remaining unchanged, and the arbitrary definition of what is right. We find such a division and such a struggle only on the ground of the spirit, and since this advantage of the spirit seems to lead to discord and disaster, one often hears the invitation to return from the arbitrariness of life to the study and contemplation of nature and to make the latter its model. But it is precisely these opposites between the right in and for itself and that to which arbitrariness gives the power of right, that cause the need to know thoroughly what should be recognized as right»20.

Hegel was one of the few scholars of the time who understood the real meaning of the subject of political economy. In his Philosophy of Right, he notes that political economy is a science that «must depict the relation and movement of masses of products in their qualitative and quantitative definiteness and entanglement. It is one of those sciences that have emerged in modern times, because they have the latter as their soil. Its development is an interesting example of how thought in the infinite variety of private facts, which it has in front of it, finds the simple principles of the subject, the reasoning operating in it and controlling it… There are certain universal needs, such as the need for food, drink, clothing, etc., and the way in which these needs are satisfied depends entirely on the circumstances. The soil is more or less fertile here or there; the years differ from one another in their yield; one man is industrious, another lazy. But this teeming arbitrariness gives rise to universal determinations, and the facts, which seem scattered and devoid of any thought, are governed by a necessity which itself appears. Finding this necessity here is the task of political economy, a science that does honor to thought, because it, having before it a mass of accidents, finds their laws»21.

In those years German universities, as noted in the first paragraph, were dominated by cameralistics, which studied the social sciences with a focus on the theory and practice of state administration and German economic thought, maintained a stubborn adherence to the collection of factual data and was alien to broad theoretical generalizations. But Hegel went further and saw political economy as a science that does honor to thought, which allows you to penetrate into the inner connection of things. Hegel came to the understanding that the real subject of political economy are not dependent on the will and consciousness, contradicting externally observed phenomena, deep economic processes through which the realization of necessity. Hegel notes, – «It is interesting to see how all dependencies have an opposite effect here, how special spheres are grouped, affect other spheres and experience from them to help or hinder. This mutual connection, in the existence of which at first is not believed, because it seems as if everything here is left to the arbitrariness of a single individual, is remarkable mainly because – and similar in this with the planetary system – that it always shows the eye only wrong movements, and yet it is possible to know its laws.22

On the political map of Germany at the time of Hegel there were fragmented states, for the centralization of which there were no economic and legal conditions, and that is why he perceived the Greek polis as a democratic alternative to the development of fragmented Germany.

In characterizing the understanding of the essence of the state, Hegel notes: – «The state is the reality of the moral idea, – the moral spirit as a manifest, self-clear substantive will, which thinks and knows itself and performs what it knows and insofar as it knows it. In morals it has its immediate existence, and in the self-consciousness of the individual man, just as the self-consciousness of the individual man through the mindset has in it, as in its essence, purpose and product of its activity, its substantive freedom»23.

History, according to Hegel, is a «judgment of the world,» and since human history is understood by him as «the self-disclosure of Spirit in time,» world history is interpreted as having its own «reasonable plan,» as the realization of the plan possessed by the World Mind. Therefore, everything that seems evil to us (crimes, wars, revolutions, etc.) in fact turns out to be only a transient, though necessary at some stage of development. Here we should recall Hegel’s famous thesis formulated in his Philosophy of Right: «All that is real is reasonable, all that is reasonable is real».

The movement of world human history is interpreted by him as a process of increasing freedom and growth of reasonableness. According to Hegel, history passes through three stages of development:

– Eastern society (everyone is a slave);

– the Greco-Roman world (individuals gain freedom);

– the Germanic-Christian world (all are free)24.

Having been realized in history as freedom, the Absolute Idea at the stage of Absolute Spirit now returns to itself in the process of self-discovery, revealing itself in another triad: art, religion, and philosophy.

«The Germanic spirit is the spirit of the new world,» Hegel notes in the fourth part of the Philosophy of History, «whose aim is the realization of absolute truth as the infinite self-determination of freedom, that freedom whose content is its very absolute form. The purpose of the Germanic peoples is to be the bearers of the Christian principle… the Germanics began by spilling over like a stream, flooding the world and subduing the decrepit and internally rotted states of civilized peoples. It was only then that their development began, brought about by contact with alien culture, alien religion, polity and legislation. They were formed by assimilating and overcoming the alien, and their history is rather a process of deepening into themselves and relating to themselves»25.

«The Germanic nation was characterized by a sense of natural wholeness in itself, and we may,» Hegel notes, «call this feeling Gemuth (soul)…Germanic peoples have the capacity to be bearers of a higher principle of spirit. «In Germany, freedom has been the banner until modern times, and even the alliance of sovereigns, with Frederick II at its head, arose out of love of freedom,» Hegel believed.26

Let us return to the Philosophy of Law, in which Hegel outlines his understanding of the ideal state. His economic ideal is neither detailed regulation of economic life nor strictly centralized closed natural production. In the Philosophy of Right, strict state control is associated with the primitive state of society. However, he does not exclude that «the different interests of producers and consumers may clash with each other, and although in general the correct relation between them is established by itself, their reconciliation also requires regulation consciously undertaken by an authority above them both»27. And these functions he assigns to police supervision. He notes that «the police should take care of street lighting, the construction and maintenance of bridges, the establishment of firm prices for everyday necessities, as well as the health of individuals. And there are two main prevailing opinions here. Some argue that the police should supervise everything, while others argue that the police should not determine anything here, since everyone will be guided in his activities by the needs of others. The individual, of course, should enjoy the right to earn his bread in one way or another, but, on the other hand, the public also has the right to want what they need to be properly supplied. Both parties must be satisfied, and freedom of trade must not be of such a kind as to jeopardize the common good»28. Hegel believed that without state intervention, a tendency toward self-destruction could prevail. In his Philosophy of Right, Hegel declares constitutional monarchy to be the highest and most perfect form of government. It is quite characteristic that Hegel considered members of the government and public officials as that part of society in which «the developed mind and legal consciousness of the whole mass of the people» were concentrated. He notes «the middle class, to which belong government officials, is the center of state consciousness and the most outstanding education. It is therefore its main pillar of legitimacy and intelligence»29. Hegel thus entrusts bureaucrats with the task of renewing society.

November 14, 1831, an epidemic of cholera cut short Hegel’s life. He left his life at the height of the authority of the philosophy he had created, on the basis of which a whole school of Hegelians emerged.

Many academic sources note that Hegel’s doctrine is the highest achievement of dialectics of German classical idealism of his time, is characterized by the breadth and depth of content, the importance and diversity of the problems put forward – it is a widely developed system of categories, the laws of which he deduces from their interactions. However, the focus of Hegel’s philosophy is the dialectic of human history. This great idealist, who believed that development is a characteristic of the activity of the spirit, contributed to the formation of the historical school of law and the historical school of political economy in Germany. It was his philosophical concept that formed the basis for the formation of the methodology of these schools.

The merit of Hegel is that he was the first to see the connection between philosophy and political economy. The entire subsequent history of economic science confirms that the methodological basis of economic disciplines is the philosophy of economics (the culture of thinking of the economist). It should be noted that in recent years in our country the taste for studying the history of economic doctrines, the works of outstanding economists is lost…

Paradoxically, but for two hundred years Hegel’s philosophy has been the subject of controversy and struggle of the most diverse opposing sides. Hegel’s inheritance was divided especially zealously in Russia, where it was considered «theirs» by both Slavophiles and Westerners, both Reds and Whites. Karl Marx, having absorbed Hegel’s ideas, developed his own doctrine, which is still a subject of discussion among politicians and scientists. However, neither politicians nor postmodernists have managed to appropriate his legacy in its entirety.

Adam Muller and political economy romanticism

On the wave of disillusionment with the consequences of the French Revolution – the Jacobin dictatorship and Bonapartism – Romanticism was formed, preaching the growth of national civic consciousness. Identification of romanticism national identity, in contrast to the Enlightenment cosmopolitanism, contributes to the emergence of the ideology of bourgeois nationalism, with particular force manifested in European countries deprived of statehood – Germany, Italy, Poland, Hungary. Among the great romantics of these countries, suffice it to name: German writer, composer and artist Ernst Theodor Amadeus Hoffmann (1776—1822), composer and conductor Carl Maria von Weber (1786—1826), composer and conductor Richard Wagner (1813—1883), Austrian composer Franz Peter Schubert (1797—1828), Italian composers Vincenzo Bellini (1801—1835) and Giuseppe Verdi (1813—1901), virtuoso violinist and composer Nicolo Paganini, French composer Louis Hector Berlioz (1803—1869), Polish poet Adam Mickiewicz (1798—1855), Hungarian poet and revolutionary Sándor Petőfi (1823—1849), and Hungarian-German composer and virtuoso pianist Franz Liszt (1811—1886). They no longer felt obliged to write only on commission; it was a bold gesture, reflecting the spirit of a new time – the time of «Romanticism’.

In art, Romanticism replaced classicism in the 20-30-ies of the XIX century and, as noted by researchers, had two sources: the first, the liberation movement of the people against feudalism and national oppression and the second, the disappointment of the broad social circles of the results of the revolutions of the XVIII century, which in turn, determined the formation of two currents. In one direction, criticism of capitalism was, as a rule, one-sided in nature, noticed only its shadow sides, ignored the progressive that brought the victory of the new system, created illusory ideals that represent an apologia of the medieval past (Novalis, Zhukovsky). Another direction had a progressive, revolutionary orientation, expressing the protest of broad circles of society, both against the bourgeois and feudal system of social organization, against political reaction (Byron, Shelley, Hugo, Sand, Mickiewicz, Petefi, Ryleev, Delacroix, Brullov, Chopin, Berlioz, Liszt). Aesthetic ideals of this direction of romanticism also often had a utopian character, and the images were characterized by ambivalence, internal tragedy, they still expressed a certain understanding of the contradictions of bourgeois society, interest in the life of the broad masses of people and were directed into the future.

In the same period in political economy also formed a direction called by Lenin «economic romanticism», the founder of which he considered the Swiss petty-bourgeois economist Sismond de Sismondi (1773—1842). However, we would like to dwell on another most prominent representative of romanticism in German economic science, an interesting economist, whose views contributed to the formation of «national protectionism» and the emergence of the historical school in Germany – Adam Muller. However, as F. Engels believed, although «Germans have long since proved that in all fields of science they are equal to the rest of the civilized nations, and in most of these areas even surpass them. Only among the coryphees of one science – political economy – there was not a single German name. The reason for this is clear. Political economy is the theoretical analysis of modern bourgeois society and presupposes, therefore, developed bourgeois relations, relations which in Germany for centuries… could not arise»30.

The American historian of economic science, institutionalist B. Seligman (1912—1970) in his fundamental work «The main currents of modern economic thought» notes that «Muller’s romanticism and List’s nationalism served as models that had a decisive influence on the nature of the subsequent criticism of the classical doctrine by representatives of the historical school, who persistently sought to overthrow the abstract categories of the classical school with the help of countless empirical data»31.

Adam Heinrich Müller (1779—1829) was a German publicist and economist. A graduate of the University of Göttingen, he entered the service of the Austrian government in 1813. In 1818 – 1827 he was Consul General of Austria in Leipzig. The most important work of Adam Muller, which in one letter he himself calls the most successful of his works, is the lectures on the elements of state art, which he read in 1808 in Dresden to the Prince of Weimar and a large gathering of statesmen and diplomats, and which in 1809 were printed in Berlin in three volumes under the title «Fundamentals of the Art of State Administration». In this work he was the first to evaluate the Smithian theory as cosmopolitan, not taking into account the national peculiarities of individual countries and peoples. All that he subsequently wrote was a repetition or more detailed exposition of the views contained in this work. In his works he expressed the interests of the feudal aristocracy, praised serfdom, and advocated the defense of large feudal farms and medieval shop associations. Idealizing the medieval way of life, he called for the restructuring of society on «corporate principles». Below the author outlines some of Müller’s conceptual views as presented by Bruno Gildebrand, a representative of the old historical school, and he, in turn, refers only to the above-mentioned lectures. As Bruno Gildebrand notes, in the literature only one Adam Müller «conceived the idea of restoring the science of national economy to its medieval beginnings. This experience deserves special attention, because it was not only the first peculiar manifestation of German nationality in the history of political economy, but also the fair side of its doctrine served as a source for later reactions against the Smithian system»32.

In political economy, Muller was an opponent of A. Smith.

In opposition to Smith’s labor theory of value, Müller put forward the «idea of value,» according to which national wealth should include not only the material but also the spiritual values of the people. Along with material capital there is another, as Bruno Gildebrand notes, «at least as important, or even more important, spiritual capital. The former is expressed and developed in money, and the latter in language. The capital of popular wisdom, experience and thought grows in language; it passes from generation to generation and constitutes at all times the strongest lever of the national economy, which for some reason has been neglected in the last century»33.

At the foundation of Müller’s economic theory lies, according to Hildebrand, the notion of the state, of national union. «Man loses everything, says Müller, as long as he does not feel the social bond, or the state. The state is the need of all needs, the need of the heart, spirit and body; without the state man cannot hear, see, think, feel, love; in a word, man is not conceivable except in the state»34. To the state Müller ascribes a Germanic origin, derives it from German freedom, and considers it an organic national product, as Hildebrand observes. «Hence every state can only be cognized in its movement and development; it is not a concept, but only a living idea, which itself is mobile and which must not be studied, but experienced. Hence in the state practical life should be guided not by the private benefit of one person and not by the immediate benefit of the whole, but only by the permanent benefit of the whole in its continuance. Every living generation, every statesman must always harmonize the present with the past and always have both before his eyes in the same way»35.