Rudolf Hilferding

• 1. Introduction

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  Rudolf Hilferding died in a Paris prison in February 1941, in the Gestapo dungeon of La Santé, after being tortured. He had, a few days earlier, been handed over by the police of Vichy France to the very regime he had spent years analyzing, warning against, and fleeing. He held an emergency visa to enter the United States. He had the option of escape. He refused to go, because he had no identification papers, and he would not leave illegally.

  The man who died in that cell had been the Finance Minister of Germany twice. He was, according to those who knew his work, almost universally recognized as the foremost Marxist theoretician the Social Democratic Party of Germany ever produced. His 1910 book, Das Finanzkapital, shaped the thinking of Vladimir Lenin and Nikolai Bukharin. He had spent decades editing some of the most important newspapers and journals of the German left, defending Karl Marx against critics, and arguing before workers' councils that industry should be socialized.

  What drew this Viennese pediatrician from a prosperous Jewish family into the heart of German socialism? How did a man who trained to heal children end up shaping the economic arguments of a global revolutionary movement? And what, exactly, did he see in the workings of capital that everyone else had missed?

• 2. Vienna and the Making of a Theorist

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  On the 10th of August 1877, Rudolf Hilferding was born in Vienna, the son of Emil Hilferding, a merchant, and Anna Hilferding. His younger sister, Maria, completed the household. The family was prosperous and Jewish, and Rudolf attended a public gymnasium, graduating as what his biographers describe as an average student.

  Before he even sat his school leaving examinations, in 1893, Hilferding joined a group of Viennese students who met weekly to discuss socialist literature. That group eventually formed the Freie Vereinigung Sozialistischer Studenten, a student organization whose chairman was Max Adler. It was through this circle that Hilferding first came into intense contact with socialist thought and first became active in the labour movement. The organization's activities sometimes brought its members into conflict with the police, attracting the attention of the Social Democratic Party of Austria.

  At the University of Vienna, where he enrolled to study medicine, Hilferding moved among a remarkable generation of socialist intellectuals. He and his friends Karl Renner, Otto Bauer, and Max Adler studied political economy under the Marxist Carl Grünberg. They also attended the lectures of the philosopher Ernst Mach. Both Grünberg and Mach left lasting marks on Hilferding's thinking. He became one of the staunchest supporters of Victor Adler, the founder of the Social Democratic Party of Austria.

  He graduated with a doctorate in 1901 and began working as a paediatrician in Vienna, though not with much enthusiasm. His real interest was political economy, and he spent his leisure time pursuing it. He would not give up medicine until his first publications brought him success. In 1902, Karl Kautsky, then the most important Marxist theoretician in the world, invited Hilferding to contribute to the theoretical journal Die Neue Zeit on economic subjects. A long-lasting personal and political friendship followed. Together with Max Adler, Hilferding founded and edited the Marx-Studien, a series of theoretical and political studies that spread Austro-Marxian ideas until 1923. In 1903, Renner, Adler, and Hilferding established Vienna's first school for workers.

• 3. Finance Capital

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  In April 1902, Hilferding published a review of Eugen von Böhm-Bawerk's Karl Marx and the Close of His System, a book first issued in 1896, defending Marx's economic theory against one of the sharpest critics the Austrian School had produced. Böhm-Bawerk was a fellow Viennese, and his challenge to Marx was taken seriously in socialist circles. Hilferding's response established him as Marx's principal defender in that debate.

  His most famous work arrived eight years later. Das Finanzkapital, published in Vienna in 1910, has been described as the seminal Marxist analysis of the transformation of competitive, pluralistic liberal capitalism into monopolistic finance capital. Hilferding was writing in the context of the highly cartelized economy of late Austria-Hungary, where he could observe directly how industrial, mercantile, and banking interests were fusing into a single power. The earlier liberal capitalism, in his telling, had been competitive and even buccaneering. Finance capital was something different: concentrated, monopolistic, and actively seeking a centralized state that would dispense privilege rather than stand back from the market.

  Hilferding traced a shift in what capital demanded from politics. Until the 1860s, in his view, the bourgeoisie had pressed for constitutional arrangements that affected all citizens alike. Finance capital increasingly sought state intervention specifically on behalf of wealth-owners. Capitalists, rather than the nobility, now dominated the state.

  From this he drew an unexpected strategic conclusion. Because finance capital had already gathered the most important branches of production under its control, a working class that seized the state could, by seizing finance capital itself, gain immediate control of those branches of production. Peasant farms and small businesses would not need to be expropriated directly; they were already dependent on the institutions that finance capital controlled, and socializing those institutions would socialize them indirectly. Societies that had not yet reached the level of economic maturity Marx had imagined as a prerequisite for socialism could, through this path, still be opened to socialist possibilities.

  Das Finanzkapital also contained a warning. The policy of finance capital, Hilferding wrote, was bound to lead toward war, and war toward revolutionary storms. Lenin and Bukharin drew heavily on this argument in their own writings on imperialism, though Hilferding's book was later described as having anticipated their work.

• 4. Berlin, War, and the SPD

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  In July 1906, August Bebel recommended Hilferding to the SPD's party executive for a teaching post at the party's training center in Berlin. Bebel had used his connections to Karl Kautsky specifically to bring Hilferding to Germany. Hilferding arrived in Berlin in November 1906, having given up his medical practice, and taught there for one term. A law then barred teachers without German citizenship from the post, and he had to give it up. Rosa Luxemburg replaced him, while the Prussian police threatened him with eviction.

  He found a different foothold. Until 1915, Hilferding served as foreign editor of Vorwärts, the leading SPD newspaper, in close proximity to the party's most senior figures. He was soon appointed editor-in-chief. Bebel had originally recommended him for this role after a conflict between Vorwärts's editors and the party executive; his appointment was also intended to strengthen the Marxist presence in the paper's editorial direction. His work for Vorwärts, alongside contributions to Die Neue Zeit and Der Kampf, gave him an adequate income and a platform at the national level of the SPD.

  When World War I broke out in 1914, Hilferding was among the few social democrats who opposed the SPD's Burgfriedenspolitik from the very beginning. The party's decision to vote for war loans was accepted by the majority; Hilferding was in a small minority led by Hugo Haase, a close friend. He and the majority of the Vorwärts editors signed a declaration opposing these policies. In October 1915, the SPD leadership fired all the opposing editors. By that point, Hilferding had already been drafted into the Austro-Hungarian Army as a medic.

  He was first stationed in Vienna, where he led the field hospital for epidemics and lived with his wife and their two sons, Karl and Peter, who was born in 1908. In 1916, he was sent to Steinach am Brenner, near the Italian border. Through correspondence with Kautsky, he stayed informed about party affairs. He kept writing throughout the war. In October 1915, one of his articles in Die Neue Zeit summarized the SPD's situation and revised his theories of finance capital, containing his first formal statement of the concept of organized capitalism.

• 5. The Weimar Years

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  Hilferding joined the anti-war Independent Social Democratic Party of Germany, the USPD, in 1918. When the November Revolution came, he returned to Berlin shortly after the Republic was proclaimed and the emperor had fled. For the next three years he edited Die Freiheit, the USPD's daily newspaper, which grew into one of Berlin's most widely read papers with a circulation of 200,000.

  The Council of the People's Deputies, the provisional revolutionary government, delegated him to the Sozialisierungskommission, the Socialization Committee, whose official task was to socialize suitable industries. Hilferding spent months on this project. It had support among workers, but the SPD leadership considered demobilization and feeding the population more pressing priorities. When Hilferding presented a plan to socialize industry before the Reichsrätekongress, the workers' councils' congress passed a resolution in favor; the government largely ignored it. The committee was disbanded in April 1919. A new one was formed after the Kapp-Lüttwitz-Putsch, under government pressure, but the result was the same.

  The USPD's own internal tensions grew. When Friedrich Ebert sent troops to suppress a sailors' uprising in Berlin on the 24th of December 1918 without consulting the USPD, the party's three representatives withdrew from the government in protest. Hilferding had accused the SPD of trying to push the USPD out, and supported the withdrawal. A poor election performance pushed USPD leaders, including Hilferding, toward support for workers' councils. His articles in the Freiheit suggesting how they should work were sharply criticized by Lenin.

  Hilferding acquired German citizenship in 1919. In 1920, he was appointed to the Reich Economic Council. He opposed a merger of the USPD with the Communist Party and instead backed its reunion with the SPD, in which he became the most prominent and visible spokesperson. At the peak of the Weimar inflation, he served as Finance Minister from August to October 1923. He contributed to stabilizing the mark but could not stop the inflation. The introduction of the Rentenmark was decided during his tenure, though he resigned from office before the monetary reform was carried out.

  From the 4th of May 1924, he sat in the Reichstag for the SPD and served as the party's chief spokesman on financial matters until 1933. In 1925, together with Kautsky, he formulated the Heidelberg Program. Between 1928 and 1929, he again served as finance minister, on the eve of the Great Depression. Hjalmar Schacht, President of the Reichsbank, pressed for a comprehensive tax reform, and Schacht, working with Wilhelm Groener, Kurt von Schleicher, and Otto Meissner, planned for a government that excluded the SPD entirely. Hilferding was forced out.

• 6. Exile and Death

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  After Hitler came to power in 1933, Hilferding and his close associate Rudolf Breitscheid fled together. Their route ran through Denmark, then Saarbrücken, then Paris, before Hilferding settled in Zurich, where he lived until 1938. From 1939 on he was in Paris.

  In exile he remained active. Between 1933 and 1936 he edited Die Zeitschrift für Sozialismus and contributed to Neuer Vorwärts. Until 1939 he was the SPD's representative to the Socialist International, and the party leadership in exile continued to seek his counsel. He held important posts in the SPD's Sopade organization.

  When Germany attacked France, Hilferding and Breitscheid fled to Marseille, in the unoccupied zone. Varian Fry's Refugee Committee worked to get them out of Vichy France. Both men refused to leave illegally, because they lacked identity papers. They were arrested by Vichy police and, despite holding emergency visas to enter the United States, were handed over to the Gestapo on the 9th of February 1941.

  Hilferding was brought to Paris. He was severely maltreated on the journey. After being tortured, he died of unknown causes in La Santé prison. His death was not officially announced until the fall of 1941. Varian Fry and others believed he had been murdered by the Gestapo on the orders of Adolf Hitler or another senior Nazi official. His wife at the time of his death, Rose, escaped to the United States. His earlier wife, Margarete Hönigsberg, the physician he had met in the socialist movement, died in the Theresienstadt Ghetto in 1942.