# Workers' Councils

## GA 331a — 27 May 1919, Stuttgart

### How Should Socialization Arise? III

*Third meeting with representatives of the Greater Stuttgart Workers' Council*

SOURCE INFORMATION: There are no minutes of this meeting, only a few keywords recorded by Rudolf Steiner in his notebook regarding his planned remarks. The fact that a meeting of the Workers' Council actually took place on this date is based on an analogy and therefore cannot be considered definitively certain. However, since these are central ideas of Rudolf Steiner on questions of national economy, they should be reproduced on this assumption. The present text is an attempt at reconstruction based on Rudolf Steiner's keywords and can therefore only be regarded as authentic with reservations. The documents used are printed in Appendix I. The text passages taken from them are set in italics in the present text.

Rudolf Steiner: If the path of socialization is to be pursued in an appropriate manner, it is necessary to consider some fundamental facts that characterize our economic life today. Let us start with the commodity character of labor. This is given insofar as, through the wage relationship, labor is exchanged for commodities, i.e., material goods. What is involved in the exchange of goods for a certain amount of labor? Such an exchange deprives labor of its freedom, especially when one of the parties involved in the exchange has social coercive means at its disposal. And it has such coercive means at its disposal when it can position itself on the political or economic ground of power.

Power can have an economic or political background. Such a political background exists when rights are at stake, i.e., when something is exchanged for a right. Thus, the basic rent has a political background and not an economic one; in reality, the basic rent represents payment for a legal guarantee: the legal certainty of owning a piece of land undisturbed and enjoying its fruits. So, those who receive the ground rent have obtained it because the right to dispose of a certain piece of land has an effect as power over certain people who live on their land. This was the case in the days of feudalism, when the landlord was responsible for his people. But what is the situation today? Well, the responsibility for life and property, for national security, for the administration of justice, for supporting the poor and the sick has been transferred to the general public, but the landowners continue to receive the ground rent.

In today's factory age, a new dependency has emerged, and that is dependency on capital. Real capital, i.e., the means of production, represents a new stage in economic development: beyond the production of agricultural goods, it is now possible to expand production and produce industrially. The means of production brought into being by production place non-owners at the mercy of their owners, and no change is conceivable as long as private ownership remains intact. If the means of production were publicly owned, something else detrimental would arise: the arbitrariness of central authority would prevail. Otherwise, if the means of production are not nationalized, the opposite occurs: the arbitrariness of individual owners prevails.

What can be said in general about the effect of capital rent and ground rent? Both types of rent have a destructive effect on society, i.e., they make the economy antisocial and lead to it having to pay for itself over time, for example through wars. Now, how does a capital rent arise? It arises because capital is able to increase the yield of human activity beyond its own depreciation, as determined by the wear and tear of machinery, buildings, and the aging of farm animals. Capital rent is not the same as capital interest; the latter is part of capital rent and is paid from the rent.

The supply of capital is determined firstly by the prosperity of the people, secondly by the number of people who own capital, and thirdly by the proportion of those capital owners who do not use it themselves as entrepreneurs and are therefore willing to lend it. However, the supply of capital can be affected by capital outflows abroad, but also by hoarding. The demand for capital is determined firstly by the size of an economic area, secondly by the available labor force, thirdly by the strength of the entrepreneurial and inventive spirit, and fourthly by the nature of the natural resources—the forces of nature in general, the fertility of the arable land, the available underground metal deposits, and so on.

Capital also includes the question of interest and the level of the interest rate. In principle, the following law can be established: a low interest rate is favorable for the economy. And this includes the realization that the lower the level of culture, the higher the interest rate. In England, for example, the interest rate was around 20% in the 13th/14th century, around 10% in the 16th century, and 5% at the beginning of the 18th century. In the middle of the 18th century, the interest rate had even fallen to 3%, risen again at the beginning of the 19th century, and fallen again at the end of the century. The outbreak of the World War led to an increase in interest rates, which is hardly surprising given the barbaric cultural conditions. In addition to the aforementioned law, another law applies: the more capital is available for a given, unchanged demand, the lower the interest rate. The less capital is available for a given demand, the higher the interest rate. Of course, there are limits to both the upper and lower bounds: if all capital were accumulated in one place, for example, the central authority of society, there would be no more interest. And according to the law of cultural stages mentioned above, this would mean that the highest cultural stage would have been reached, but there would be only one culture left. If there were no capital at all, the highest interest rate would be given, but the lowest cultural level would be reached, with a primitive culture prevailing.

In the case of total capital accumulation, everything that is produced flows away, except for what is required by individuals as the minimum necessary for survival. If there is no capital accumulation at all, everything produced remains with the individual producers, and the whole ceases to exist. Individuals would then have to work only for themselves, would have to spend more time on their livelihood, would have to work more, unless others came to help them. Division of labor means prosperity. Thus, for a successful economy, it is advisable to divide the work necessary for the production of a good among several people. Without division of labor, the vast majority would be among the many who lose out. But if we have specialization, then one condition must be met in order to compensate for this one-sidedness in work: It must be possible for the worker to counteract the consumption of labor power; a balance must be created. Today, when people talk about socialization, they tend to focus on denigrating the division of labor; they fail to see how sophisticated today's economic processes are.

In the modern economy, we are dealing with a polarity in value creation: on the one hand, we have surplus value, and on the other, we have undervalue. Real production, i.e., production geared toward the manufacture of consumer goods, adds surplus value to the overall balance sheet insofar as the immediate consumer goods are worth more than their production costs. Industrial production, on the other hand, which is geared towards the manufacture of means of production, brings undervalue to the overall balance sheet, i.e., industrial products are worth less than their production costs because, in a sense, they have to feed off direct consumer goods.

This means, and this is an important insight in connection with the means of production that are produced, that they devalue their economic basis—every economic area that is overly industrialized in relation to its immediate consumer goods is exposed to impoverishment.

This polarity must be taken into account when we deal with questions of the world market and wages. These are at the center of current revolutionary efforts. What are we dealing with in these revolutionary aspirations? Political revolution deals with realities, with rights, economic revolution deals only with illusions, and spiritual revolution deals with the foundations of realities, for it is in the spiritual realm that the potential of ideas that has not yet been used lies, and which can become effective in the social organism in the form of new legal structures.

Illusions have no place in the economic sphere, because very specific laws apply there, which have a state of equilibrium as their content. Take, for example, the purchasing value of money. If the banknote, i.e., the money, gains the upper hand by decreasing in value through accumulation, then it deprives life of its real basis. Its value must be at a moderate level, which means that the commodity value of goods that are not immediately consumable, i.e., the means of production, must be balanced with the commodity value of those that are immediately consumable. The commodity value of a means of production is determined by its raw material value. A very specific basic law applies to all products that require labor for their manufacture. If, for example, a locomotive is to be manufactured, it is necessary to obtain as many raw materials as the people manufacturing the locomotive need until its completion.

At the moment of completion, the capital used for its manufacture is exhausted, and thus the value of the locomotive should be zero. If it is then actually devalued in this sense for the economic cycle, this is a sign that the social organism is healthy. This means that when the locomotive is ready, it will already have to be purchased by the general public: from an economic point of view, it has been paid for, so to speak, and the investor has been released, so that he can no longer claim any capital from it. Anyone who has provided capital for the production of a locomotive can only claim the legally justified return; their capital has been processed and thus consumed. It can be observed, and it is a fundamental law of value formation: capital consumes, nature preserves — on the one hand, we have a process of depletion, on the other, a process of construction.

If we look at today's conditions, capital means power; capital can be used to exert economic coercion. And the wage a worker receives? It is an expression of his economic powerlessness. And what about the commodity value of a product? Here we have to distinguish between an industrial product and a land product. Industrial products become more expensive as agricultural production increases, while agricultural products become cheaper as industrial production increases, and this has far-reaching consequences, because it reduces the ability of agricultural production to feed industry. And this can lead to famine.