Lujo Brentano (December 18, 1844 – September 9, 1931) was an eminent German economist and social reformer. He conducted research into trade unions, linking them to the medieval guilds in Europe. His theoretical work, as a member of the German historical school of economics, opposed the theories of both classical and Marxist economics. He was not afraid of controversy, challenging the theories of Max Weber and Karl Marx. Brentano's own stance echoed the views of the "modern liberals" with whom he was associated, arguing for freedom of the individual and, at the same time, for the state to be responsible to provide public services, such as education and healthcare, that were essential to ensure human rights for all members of the society. Brentano believed that social improvements would be achieved through negotiation and mutual collaboration, not violent revolution.
Lujo Brentano was born on December 18, 1844, in Aschaffenburg, Bavaria, into one of the most important German Catholic intellectual families, originally of Italian descent. His uncle, Clemens Brentano and aunt Bettina von Arnim were significant writers of German Romantic literature, and his brother, Franz Brentano, an influential philosopher and early pioneer in psychology. (Note: The mistake is often made to say that Brentano was called Ludwig Joseph, and that "Lujo" was a kind of nickname or contraction. This is incorrect; while he was given his name after a Ludwig and a Joseph, Lujo was his real and legal name (Brentano 1931, p. 18.).)
Brentano attended schools in Aschaffenburg and Augsburg. After graduation, he went to Ireland where he became a student at the world famous Trinity College in Dublin from 1861 until 1862. Back in Germany, he attended the universities of Muenster, Munich, Heidelberg, Würzburg, Göttingen, and Berlin. In Heidelberg he earned his doctorate in law, and in Göttingen his doctorate in economics. Having finished his studies, he started to work for the Königliches Statistisches Seminar zu Berlin, the royal statistical office, in Berlin.
In 1868, Lujo Brentano accompanied the head of this statistical office, Ernst Engel (statistician and creator of the famous "Engel's Law" and the "Engel Curve"), on one of his trips to England. During this journey, he studied the conditions of the English working classes and, especially, trade unions. The fruit of this work is one of his most popular books, which became an authoritative source on trade unions and associations: Die Arbeitergilden der Gegenwart, (1871-1872).
In 1872, Brentano became professor of political economics at the University of Breslau. During the following years he taught at different universities, including the universities of Strasbourg, Vienna, and Leipzig. Finally, from 1891 till 1914, he taught as full professor at the Ludwig Maximilian University of Munich, where he held the chair of economics.
He died at the age of 87, on September 9, 1931 in Munich.
Brentano was a member of the German Historical school of economics, which exerted a strong influence on the German-speaking world throughout the nineteenth century. This school developed as a reaction to rationalism and Enlightenment thinking, and challenged British classical economics. It also attacked neo-classical economics and Marxian economics, that were emerging descendants of the classical economists. The Historical School was characterized by its emphasis on historical and ethical methods, and for this reason it has been misunderstood by mainstream economics as an unscientific standpoint.
The leading figures of this school, in addition to Brentano, were such economic thinkers and innovators as Adam Muller, Wilhelm Roscher, Karl Knies, Gustav Schmoller, and Werner Sombart. Others closely related to the thought of the Historical School in different ways included Carl Menger, Anton Menger, Friedrich von Wieser, Max Weber, Joseph Schumpeter, Tokuzo Fukuda, Walter Eucken, Wilhelm Ropke, and Alfred Muller-Armack.
A professor at Vienna, Leipzig, and Munich, Lujo Brentano was perhaps the most liberal and theory-friendly of the German Historical School. Brentano and other key liberal thinkers developed the theory of "modern liberalism" (also known as "social liberalism," "new liberalism," and not to be confused with "neoliberalism"). Modern liberalism is a political philosophy that emphasizes mutual collaboration through liberal institutions, rather than the threat and use of force, to solve political controversies.
Rejecting both radical capitalism and the revolutionary elements from the socialist school, modern liberalism emphasized positive liberty, seeking to enhance the freedoms of the poor and disadvantaged in society. Like all liberals, "modern liberals" believe in individual freedom as a central objective. However, they also maintain that lack of economic opportunity, education, healthcare, and so forth can be just as damaging to liberty as can an oppressive state. As a result, modern liberals have generally been the most outspoken defenders of human rights and civil liberties, arguing for a mixed economy, with the state providing public services to ensure that people's social rights as well as their civil liberties are upheld.
Brentano's own research was on European guilds and trade unions. He not only produced an overwhelming amount of exceptional historical work, but also extended it to policy conclusions, arguing that trade unions and other labor organizations could do very well by themselves without state assistance. However, he explored how the essential glue of the economic units—fraternity—came apart over time with the development of capitalism.
In 1868, Brentano made a thorough study of trade unionism in England, resulting in the publication of his Die Arbeitergilden der Gegenwart (1871-72; in English Workers' Guilds of the Present). In it he argued that modern trade unions were the successors of the medieval guilds. The book soon became an authoritative source on industrial-era work associations. His other works, which are of a more theoretical nature, relate chiefly to political economy.
Brentano founded the Vereins für Socialpolitik with Gustav Schmoller and Adolph Wagner. He vigorously disputed Max Weber's thesis concerning the link between Calvinism and capitalism. The key point of Brentano’s dispute with Weber involved the issue of Puritan ethics as the sole ethical base of capitalism.
The question was whether capitalism should be defined as resting on puritanical ethics—based on the two seventeenth-century Puritan merchants whose diaries were studied and found to exemplify the ethical qualities of Weber's "new type" of entrepreneur—claiming that the Puritan religion can have power over the economic behavior of its adherents. The alternative position is that there were sharp differences between the Puritan ethic and the spirit of capitalism, and that the affinity between them was, at best, partial.
Brentano strongly objected to Weber’s “new type” of entrepreneurs and claimed that the modern concept of the "spirit of capitalism" included in its assumptions "only what has been in fact proved." An objection that Weber found, for some reason, “incomprehensible” (Brentano 1901).
Brentano claimed—as many later economists have also noted—that there is the ambiguity in Weber's concept of the "spirit of capitalism":
The idea of modern capitalism is poorly conceptualized because it is ambiguous. The rational firm, rational organization of labor, calculable law, and so on may be characteristics of it, but may simply be preconditions of it. (Cohen 2002)
In 1872, Brentano began a dispute with Karl Marx, initially publishing his accusation in an article entitled "How Karl Marx Quotes" in the Concordia (Brentano 1872). Marx and his supporters responded, and the argument continued over an extended period (Brentano 1890).
This “battle” of Brentano's was rather serious, as he claimed that Marx falsified (or knowingly used falsified) text from the Hansard record of parliamentary debates to further his economic premises in Das Capital. This is what Marx claimed that Lord Gladstone, Chancellor of Exchequer, said in the British Parliament:
Dazzled by the 'Progress of the Nation' statistics dancing before his eyes, the Chancellor of the Exchequer exclaims in wild ecstasy: 'From 1842 to 1852 the taxable income of the country increased by 6 per cent; in the eight years from 1853 to 1861, it has increased from the basis taken in 1853, 20 per cent! The fact is so astonishing as to be almost incredible!... This intoxicating augmentation of wealth and power,' adds Mr. Gladstone, 'is entirely confined to classes of property.(Marx Das Capital, Vo1 1, 1867, p. 639 and in all other Marx’s publications since then).
For comparison, Gladstone's speech reads:
The Income Tax, at 7d. in the pound, in the year 1842-3, attaching to Great Britain only, and in Great Britain only to incomes of £150 and upwards, was assessed upon an aggregate amount of income ... On the contrary, certain concessions and relaxations have from time to time been enacted by the Legislature... would rather tell in the opposite direction... but there is a certain feature of that result which, when carefully examined, is yet more remarkable; and that is the accelerated rate of increase in the latter portion of that period. I again invite the attention of the Committee for a few minutes. I compare two periods—one of them before 1853, and the other since 1853, the year when the basis was altered. In eight years from 1842 to 1852 inclusive, the liable to tax income of the country, as nearly as we can make out, increased by 6 per cent; but in eight years, from 1853 to 1861, the income of the country again increased upon the basis taken by 20 per cent. That is a fact so singular and striking as to seem almost incredible. (Hansard, Parliamentary Debates, 3rd Series, Vol. 170, p.243 ff.)
Brentano accused Marx of misquoting Gladstone to support his own position:
What is the relationship between this speech and the quotation by Marx? Gladstone first makes the point that there has undoubtedly been a colossal increase in the income of the country. This is proved for him by the income tax. But income tax takes notice only of incomes of 150 pounds sterling and over. Persons with lower incomes pay no income tax in England. The fact that Gladstone mentions this so that his yardstick can be properly appreciated is utilized by Marx to have Gladstone say: '….This intoxicating augmentation of wealth and power is entirely confined to classes of property…..' Yet this sentence is nowhere to be found in Gladstone's speech. It says quite the opposite. Marx has added the sentence lying, both in form and in content (Brentano 1872)
Brentano substantiated his position that Marx had misquoted Gladstone, elaborating on the context of Gladstone's actual statements:
I consulted the shorthand report of Gladstone's budget speech and found that this in fact showed that the wage increases in the period 1842-1861 had not limited the increase in the income of the possessing classes in any way which negatively affected their demand for labor; but that, on the contrary Gladstone had stated in direct opposition to Karl Marx's claim: The figures which I have quoted take little or no cognizance of the condition of those who do not pay income tax ... of the property of the laboring population, or of the increase of its income... But if we look to the average condition of the British laborer, whether peasant, or miner, or operative, or artisan, we know from varied and indubitable evidence that during the last twenty years such an addition has been made to his means of subsistence as we may almost pronounce to be without example in the history of any country and of any age (Brentano 1872)
When accused of making anonymous attacks on Marx, Brentano defended himself, indicating that his article was requested by the editors of the publication.
In view of the great importance of Gladstone's quotation for the Social Democratic claim that in the framework of the existing state and social order the rich would necessarily become ever richer and the poor ever poorer, I drew the attention of the editors of the Concordia, Zeitschrift für die Arbeiterfrage, at that time appearing in Berlin, to the forgery which had been committed here. They asked me to write an article on the subject, which was published in the Concordia of March 7, 1872 (Brentano 1890).
While Brentano initially only pointed out that Marx's quotation from Gladstone's speech was inaccurate, the dispute was magnified to the point where Marx and his supporters became adamant to defend his theory at all costs. The final stroke of the “political genius” of Marx appearing in this last quote from Brentano:
Had Marx simply admitted that he had been misled by this book, and from then on reproduced the quotation correctly, one might have been surprised that he had relied upon such a source, but the mistake would at least have been rectified. But for him there was no question of this. … given the wide circulation which had been attained by the Inaugural Address, the loss of this show-piece as the result of this correction, would have been very embarrassing for the agitation. … the main agitation method of Social Democracy is that its representatives proclaim themselves the sole proprietors of real science; and …. they prefer to accuse themselves of having utilized the iron law of wages in deliberate untruthfulness simply as a means of agitation, rather than confess that they have been shown to be in error. Instead of withdrawing, Marx therefore attempted to prove that Gladstone had subsequently tinkered with the shorthand report of his budget speech; the loutishness of this!! (Brentano 1890).
As Marx never directly got involved in any, let alone this (serious), debate, it had to be Friedrich Engels, who, in the preface to the fourth edition of Marx's Capital tried to contain the scandal by "summarizing" the two opposing positions:
ignoring other less important reservations (by which he meant Marx’s falsification), neither the protection legislation nor the resistance of the trade associations removes the main thing which needs abolishing: Capitalist relations, which constantly reproduce the contradiction between the Capitalist class and the class of wage laborers... But since Mr. Brentano would gladly convert wage-slaves into contented wage-slaves, he must hugely exaggerate the advantageous effects of labor protection, the resistance of trade associations, social piecemeal legislation, etc.
Brentano undoubtedly had no intention of supporting slave-like conditions; on the contrary, his study of trade unions led him to believe that progress toward the betterment of working people could be achieved through negotiation and other non-violent methods. Thus, the violent revolutions that Marx and Engels promoted as inevitable, Brentano viewed as, in fact, unnecessary and undesirable.
During his career, Brentano became one of the most distinguished, most influential and socio-politically committed economists and social reformers of his time.
Because of his position as a teacher and social reformer Brentano had a powerful influence (he was even, and not very correctly, considered to be one of the leaders of the world pacifist movement). His influence extended first, to the social market economy and, secondly, to German politicians, such as the former federal president of Germany and economist Theodor Heuss, who used to be one of Brentano’s students.
One of his potentially most significant contributions to the world politics (unfortunately it was kept well hidden in the economics claims and counterclaims) was his publishing of the proof—in the very reputable journal with world-wide readership—that Karl Marx knowingly falsified a Hansard text of Gladstone's speech in the British Parliament, to make from it one of his main points in Das Capital (Brentano 1872, 1890).
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