Karl Wittgenstein, 1908
Karl Wittgenstein, 1908
Karl Wittgenstein, Business Tycoon and Art Patron
by Jorn K. Bramann, Frostburg State University
and John Moran, Manhattan
College
There is a considerable discrepancy between Karl Wittgenstein’s historical
importance and the scant space devoted to him by historians, especially in
contrast to the huge corpus devoted to his philosopher son, Ludwig Wittgenstein.
None of the leading histories of business and industry in the Austro-Hungarian
monarchy describes Karl Wittgenstein’s preeminent role in its development; few
even mention his name. Nor is he mentioned in any of the leading histories or
biographies of the Viennese Secession, despite his generous financial support of
that artistic movement.[1] Yet Karl Wittgenstein’s rise from a self-educated
engineer to one of the most powerful industrialists in the Habsburg empire was
intimately intertwined with the development of the iron and steel industry in
the monarchy and consequently with the industrialization of Austria-Hungary. His
career and activities exemplified all the contradictions involved in the
industrialization of Austria. Besides being one of Europe’s foremost engineers,
Wittgenstein lavishly supported the Viennese Secession Movement and was the
major financial backer of its famous exhibition hall. Moreover, he consciously
engaged in an ideological struggle against the established economic and cultural
institutions of the monarchy as well as against the growing socialist
movement.
Karl Wittgenstein, the son of a wool merchant, was born on April 8,
1847, in Gohlis, near Leipzig. In 1851 his parents emigrated to Vienna, where he
grew into manhood. (His mother came from the old Viennese family of Figdor, the
family to which Johannes Brahms’ violinist Joachim belonged.) The writers of
several biographical sketches say that he attended the famous Akademische
Gymnasium, whose later pupils included such celebrated figures as Arthur
Schnitzler and Hugo von Hofmannsthal. However, his name does not appear in the
school’s records. All that we can say with certainty is that he was apparently
expelled from some secondary school or another for indulging in pranks. His
father wanted him to study for a diploma through private tutors, but
Wittgenstein fled to the United States, using a passport he had bought from a
student who needed money.
He arrived in New York in April, 1865, with only
his violin. He survived the first few weeks by working as a waiter and an
entertainer. When public entertainment was forbidden after President Abraham
Lincoln’s assassination on April 14, Wittgenstein had to seek other employment.
He joined the crew of a canal boat carrying pressed hay to Washington, D.C. In
Washington he “became a barkeeper in a bar that had a section for whites and one
for blacks.” As he wrote in his memoirs, he worked “first in the white section;
then, because I was useful there, in the niggerbar. There I had my first chance
to make good money.”[2] Late in the fall he returned to New York where he held
several teaching positions. After about a year his sister arranged a shaky
reconciliation between him and his father, whereupon he returned to Vienna early
in 1867.
He enrolled in the Polytechnik as a part-time student and took
part-time employment in the shop of the Austrian State Railways. After a year he
gave up his studies and occupied himself with a number of jobs that took him to
various parts of the monarchy. He worked in a shipyard at Trieste, in a
construction office at Budapest, on a rail construction site in northern
Hungary, and in a turbine factory in Vienna. The decisive step in his early
career was taken when he applied for a job as a draftsman in a company that was
commissioned to build a steel mill in northern Bohemia. His employer and future
friend Paul Kupelwieser wrote that he
hired him as a draftsman in
1872 for the construction of the Teplitz Rolling Mill, but I did not expect much
of a performance from this restless young man, whom I did not know, but who had
become the brother-in-law of my brother Dr. Karl Kupelwieser. How pleasantly
surprised I was when I found in him an extraordinarily able and industrious
draftsman, who could do the work of two such employees and who could overcome
all kinds of difficulties in the best of spirits (and who was in love, and
perhaps already bound to his future, excellent wife).[3]
During the next two years Wittgenstein favorably impressed everyone who
worked with him. After the mill was built he was put in charge of the repair
shop and the foundry. But Kupelwieser also used him extensively in various
commercial capacities. Wittgenstein proved extremely successful in finding
buyers for the mill’s products at a time when most of the iron and steel
industry was suffering from the great economic crises of 1873. At the same time,
he started buying stock in the mill, using the financial resources of his mother
and his wife, whom he had married in 1874. However, after he sided with
Kupelwieser, the director of the mill, in a dispute with the company’s
president, he quit his post at the Teplitz Rolling Mill and found a position as
a draftsman in a technical office in Vienna.
The friction between the
director of the Teplitz Rolling Mill and the president of the company continued
until 1876, when Kupelwieser demanded that the owners choose between him and the
president. The president finally resigned, along with several board members – a
move that necessitated the coopting of new members, who happened to be friendly
to Wittgenstein. The new board appointed him assistant director of the mill and
charged him with the responsibility of representing the company commercially in
Vienna. In 1877, when Kupelwieser accepted the post of director general of the
much more prestigious Witkowitz Mill in Moravia, he was succeeded as director of
the Teplitz Rolling Mill by Wittgenstein. Meanwhile, Wittgenstein had increased
his stockholdings in the mill to two-fifths of the total shares.
Like so many
mills in the monarchy, the Teplitz Rolling Mill had been built in response to
the rapidly increasing demand for rails occasioned by the great surge in
railroad building. The crisis of 1873 put a temporary end to this boom, and many
mills had to close. Although the Teplitz Rolling Mill escaped this fate,
business remained sluggish.
War Profit
The mill finally emerged from the slump when Wittgenstein seized an
opportunity to profit from the war between Russia and Turkey in 1878. As part of
its war effort, the Russian government was planning to build a railroad in the
Balkan Peninsula. When it became known that Russian Counselor of State Poliakoff
planned to purchase rails for the road, many European industrialists hastened to
negotiate with him. Wittgenstein pursued him to Kiev and then to Bucharest
before he succeeded in contacting him. Counselor Poliakoff was already
negotiating with such powerful competitors as Krupp, but Wittgenstein managed to
convince him of the advantages that could be gained by purchasing rails from his
own mill. The Russians were seeking heavy-gauge rails, like those normally used
on the Russian railroads, for delivery at Bucharest by a given date. Since they
planned to use the road for only a few months, Wittgenstein suggested that they
could save money by laying lighter rails. After calculating for Poliakoff the
money that could be saved by doing so, Wittgenstein received the order. He was
able to make an attractive proposal because the Teplitz mill had already stocked
a large inventory of light rails that had been ordered by the Austrian State
Railways for delivery by an agreed date. To meet the Russian deadline,
Wittgenstein’s associate, Isidor Weinberger, who had close government
connections, arranged a postponement of the Austrian delivery with the secretary
of commerce. For several weeks the Teplitz Mill produced rails day and night for
both the Russian and Austrian railroads.
Not only did Wittgenstein profit by
selling light rails to Russia, but he also gained enormously by acquiring the
right to utilize the Thomas-Gilchrist process of steel manufacturing, which made
possible the smelting of phosphoric iron ore. Since most European iron ore is
phosphoric, the new smelting process greatly reduced the cost of producing
high-quality steel; moreover, since phosphoric slag is a rich fertilizer, it
made formerly useless iron ore deposits potentially more valuable than those of
non-phosphoric ore.
The process had been patented in England in 1878; in 1879
the patent rights for Austria were owned by the director general of the Hoerde
Mill near Dortmund, in Germany. Wittgenstein bought the rights for the Teplitz
Mill in 1880; a few months later he sought a license for all Bohemia, intending
to acquire a monopoly for the use of the process in the northern part of the
monarchy. He went to Hoerde, where Director Josef Massenetz informed him that he
was already negotiating with Jan Dusanek, the director of the Bohemian Mining
Company. All Wittgenstein could get from Massenetz was a signed contract to sell
the license to the Teplitz Rolling Mill if Dusanek failed to buy it before a
specified date. Upon learning that Wittgenstein was in Hoerde, Dusanek accused
him of driving up the price for the license by competing with the Bohemian
Mining Company. He elicited Wittgenstein’s promise to refrain from further
negotiations with Massenetz and suggested that the two of them could agree to
share the license in the future. Wittgenstein remained silent about his contract
with Massenetz. The apparently overconfident Dusanek protracted his negotiations
with Massenetz, missed the deadline, and lost the license to Wittgenstein’s
company.
The consequences of this coup were enormous. Without a license for
the Thomas-Gilchrist process, the Bohemian Mining Company was no longer a
serious competitor, and eventually its owners were forced to sell to
Wittgenstein. Negotiations on behalf of the Bohemian Mining Company were
conducted by Dr. Jakob Rappaport. Wittgenstein treated him imperiously. First he
demanded that he sell all the stock of the Bohemian company. Then on another
occasion when he felt slighted because Dr. Rappaport had kept him waiting
fifteen minutes, he arrogantly ordered Rappaport to take him to dinner at the
luxurious Sacher restaurant in Vienna and refused to be satisfied with several
alternatives that Rappaport suggested. To appreciate the impudence of his
demand, one should recall the importance of social position in the semi-feudal
Habsburg monarchy. As Stefan Zweig related in his memoirs, his father, although
wealthy, avoided mixing with the nobility at Sacher, for “it would have seemed
to him improper or embarrassing to sit across from Prince Schwarzenberg or
Lobkowitz.”[4] The incident not only illustrates Wittgenstein’s aggressiveness
but also indicates the power he wielded even before he became the undisputed
leader of the Bohemian iron and steel industry.
The last phase of the
Bohemian Mining Company’s acquisition brought the story to an almost farcical
conclusion. Wittgenstein and Rappaport agreed on a price of 400,000 guilders,
which was far beyond Wittgenstein's means. But that did not faze him. Because he
was acquainted with the Bohemian Mining Company’s practices through his past
dealings with it, he knew that Dusanek was overcautious and always kept a large
financial reserve fund at the company’s office. So, after the negotiations were
completed he immediately went to the main office of the mining company to
arrange some technical changes. While there he casually mentioned to the
bookkeeper that 300,000 guilders were to be transferred to the office of the
Teplitz Rolling Mill. Thus he bought three-fourths of the company with that
company’s own money.
Shortly thereafter, Wittgenstein obtained control of
the Prague Iron Industry Company, a competitor of considerable size and
potential and the only firm that had acquired rights to the Thomas-Gilchrist
process before Wittgenstein secured them for the rest of Bohemia. Because the
Prague Iron Industry Company was faring poorly under inept management, its
owners offered Wittgenstein the post of central director. Wittgenstein agreed to
accept it on condition that the company buy the Teplitz mill, paying
Wittgenstein and his associates in shares of Prague Iron Company stock. Upon
completion of the merger, Wittgenstein became the major shareholder and central
director of one of the country’s largest companies. Mainly through his vigorous
leadership, it became a highly profitable enterprise, enabling him to amass one
of the greatest fortunes in the monarchy.
Vertical Integration
Wittgenstein’s approach to business matters was atypical of the industrially
underdeveloped monarchy. His approach combined the rapid introduction of
technical innovations and the acquisition or establishment of new facilities
with the rigorous closing of unprofitable works. He had purchased the Bohemian
Mining Company to produce pig iron, which he could use in his Teplitz Rolling
Mill. To use the steel produced in Teplitz, he bought and built several hardware
factories. To use the byproducts of his blast furnaces, he built a cement
factory. To secure a sufficient supply of coke for the production of pig iron,
he bought and developed several coal mines. In this way Wittgenstein controlled
a process that extended from the mining of coal to the selling of scythes, thus
achieving a high degree of what is now called “vertical integration.”
Of
course, such an important entrepreneur had close connections with major
financial institutions. Wittgenstein served on the board of the K. k. priv.
Oesterreichische Credit-Anstalt fuer Handel und Gewerbe, one of the most
powerful banks of the monarchy,[5] as well as on those of the Boehmische
Eskomptebank, and the Niederoesterreichische Eskomptegesellschaft. He
consolidated his control over the Bohemian iron and steel industry by organizing
a number of cartels over which he exercised great influence. The first cartel
established in the monarchy was the rail cartel, which Wittgenstein had founded
in 1877. By dividing markets, limiting production, and maintaining artificially
high prices, it contributed greatly to the prosperity of the Wittgenstein
enterprises. A few years later Kupelwieser initiated a much more comprehensive
cartel, which later came to be regarded as Wittgenstein’s creation. As he
described it, “The Teplitz Rolling Mill, the Bohemian Mining Company, and the
Prague Iron Industry Company united under Karl Wittgenstein’s direction. This
was a superpower in the Austrian iron industry, which of course, I could not
oppose, but with which I had to seek some kind of agreement.”[6] What was
established was the powerful iron cartel, dominated by Wittgenstein, which
effectively controlled the basic iron and steel industry of the entire
monarchy.
Merge, Downsize
With the acquisition of the Bohemian Mining Company and the Prague Iron
Industry Company, particularly the latter, which owned the famous iron ore
deposits of Nusice, near Prague, Wittgenstein gained control of one of the two
centers of the iron and steel industry in the monarchy. With the acquisition of
the Alpine Mining Company, which owned the famous Erzberg, a mountain consisting
entirely of high-quality iron, he gained control of the second one. After the
introduction of the Thomas-Gilchrist process in the enterprises controlled by
Wittgenstein, Bohemia surpassed the Alpine region in iron and steel production.
For a while Wittgenstein spent most of his energies developing his Bohemian
holdings. In 1896, however, he secretly began acquiring stock in the Alpine
Mining Company, both for himself and his business associates. Since that company
was doing poorly, its shares could be bought at extremely low prices. After
Wittgenstein and his associates acquired a solid majority of the stock of the
Alpine Mining Company, the names of the new owners were made public, and the
various facilities of the company were rapidly reorganized.
One reason for
the Alpine Mining Company’s poor performance under its previous owners was that
they had not shut down unprofitable works, because closings threatened to rouse
public concern over the hardships that would be suffered by the workers who
would be laid off. Wittgenstein did what he considered necessary to resuscitate
the company. The resulting mood of many people is well reflected in a series of
articles entitled “Pictures from the Styrian Ironworks of the Alpine Mining
Company,” which were published in the Oesterreichische Metallarbeiter
between the time Wittgenstein acquired the Alpine Mining Company and his
retirement. In the October 6, 1898 issue, one reads:
Since the genius of Mr. Wittgenstein has been in charge of the Alpine Mining Co., there have been endless complaints by the workers about overly intensive work, the reduction of piecework wages, arbitrary distribution of work, etc., and it seems almost as if everything is to be turned upside down, with the old way of doing things changed completely. To avoid misunderstandings, however, mention should be made of the fact that there was nothing heavenly about the old condition.…Things have just become so much worse.
The rest of the article outlined the major managerial changes made since
Wittgenstein had taken control of the Alpine. Before then, the writer explained,
wages for piecework had been determined by the director general of the whole
company. After Wittgenstein took over, such wages were determined by the
directors of the individual plants. As a consequence, piecework wage reductions
became widespread because each individual director was pressured by the need to
reduce his labor costs as much as possible.
The October 27 issue mentioned
Wittgenstein’s reputation as someone who knows how to put the right man in the
right place. The secret of his practice, the Metallarbeiter opined, is
to create a hierarchy in which everyone is encouraged to squeeze the most out of
his subordinates. The article stressed the fact that in such a system
productivity is not increased by introducing better machinery but by
intensifying the exploitation of labor power. The November 3 issue reported that
workers who wanted to do piecework were often prevented from doing so by being
assigned to unrelated tasks, that workers had to start paying rent for
company-owned houses, and that they were told to work without protective gloves,
even though the wearing of gloves was prescribed by law.
Under Wittgenstein’s
control, the Alpine flourished beyond all expectations. The market price of the
company's shares rose to more than ten times their former value. But
dissatisfaction over Wittgenstein’s way of doing business steadily increased,
not only among the workers but particularly on the part of the industrialists
who had suffered from Wittgenstein’s monopolistic practices. The industrialists
complained that, because the iron cartel charged such exhorbitant prices for
iron and steel, their own industries could not prosper. They sought to convince
the government to lower protective tariffs, since the iron cartel was charging
artificially inflated prices. The growing opposition influenced Wittgenstein to
resign his post as central director of the Prague Iron Industry Company in the
summer of 1898 and to go on an extended tour.
Controversy
The discontent over Wittgenstein’s operations broke out into the open at the
end of 1898 and the beginning of 1899, when Wilhelm Kestranek, a close friend
and protégé of Wittgenstein, who had been made central director of the Prague
Iron Industry Company in the summer of 1898, proposed at a conference of that
company’s board the following December that an extraordinary meeting of
shareholders should be held on March 1, 1899, to distribute several special
reserve funds to the stockholders, since the company had much more cash than it
needed for present and future operations.[7] While most of the board (who
belonged to the so-called “Wittgenstein clique”) supported Kestranek’s
recommendation, two members representing the Credit-Anstalt disagreed and
proposed that a committee be appointed to study the proposal in detail. When the
bank representatives were overruled, they resigned from the board of the Prague
Iron Industry Company. Wittgenstein, in turn, resigned from the board of the
bank. The alienation between what was then the biggest iron and steel company
and the biggest bank in the monarchy provoked considerable alarm in the business
community and called widespread attention to Kestranek’s suggestion. Various
newspapers hinted that the proposal was really a scheme to drive up the market
value of the Prague Iron Industry Company’s stock – a belief that apparently was
shared by the government. On December 12, a semi-official “communique” appeared
in the Wiener Abendpost in which the government expressed its
satisfaction over the fact that the press had condemned Kestranek’s plan and
hinted that legal action might be taken to prevent Kestranek’s recommendation
from being carried out.
After the government expressed its concern over the
plan to distribute the company’s special reserve funds among the shareholders,
Wittgenstein’s actions became the topic of even more heated debates not only in
the press but also in parliament and in the diet of Lower Austria. Personally
offended by the semi-official “communique” in the Abendpost, he avenged
himself in 1899 when Baron Joseph di Pauli von Treuheim, the secretary of
commerce, invited him to a conference at the ministry of commerce by curtly
informing the messenger bringing the invitation that he had an office where the
secretary could contact him during regular business hours.[8]
The most
important consequence of the whole affair was that it prompted Wittgenstein’s
enemies to demand a reduction of protective tariffs on iron and iron products
and protection of the public against the abuses of the iron cartel. An article
in the first supplement of the Fremden-Blatt of December 18, 1898,
pointed out the connection between Kestranek’s claim that Prague Iron had a
surplus of cash at its disposal and the company’s extensive utilization of the
protection offered by tariffs and cartels. The writer of the article maintained
that the
report of the Prague Iron Industry Company concerning the utilization of its surplus millions displays such embarrassment that one could almost conclude that the company will be forced, like Egyptian Pharaohs, to build pyramids if the government does not give its permission to distribute its special reserve funds….The company has proved more than it wanted to prove, for it has proved that the serious accusations leveled against it on the occasion of the last official inquiries into industry and export were entirely justified. A reduction of the tariff on pig iron is, therefore, an unavoidable conclusion. The helots of the iron industry, and that includes almost all branches of industry that need pig iron or half-finished products for their production, clamor for liberation from oppression by the iron cartel. Their protest has been heard in public as well as in parliament. The cartel and tariff question has become an issue, and this issue will not go away until satisfactory answers have been found.
On January 23 and 24, 1899, the ministry of commerce conducted an official
inquiry into the condition of the iron and steel industry. Representatives of
the iron cartel as well as of iron-consuming industries were present. The
participants agreed to keep the proceedings secret, and minutes were distributed
only among those present. Essentially the same arguments were exchanged between
the basic iron and steel producers and the consuming industries that had
previously been exchanged in the press. One consumer representative maintained
that since the iron cartel (the producers) represented capital of 50 million
guilders, while that of the iron-consuming industry amounted to 2,870 million,
the branch of the economy in which much more capital was invested was being
exploited and oppressed by the industry with much less but more highly
concentrated capital. Pointing to the spurious nature of the cartel’s talk about
the interest of the iron industry, he maintained that whenever such issues as
raising or lowering tariffs came up it “is always the iron producers who raise
their voice in the name of the entire iron industry, whereas in reality they
further their own interest alone and treat that of iron-consuming businesses
like that of outlaws."[9]
Nothing came of either this inquiry or the public
debate preceding it. Wittgenstein’s position of power was unassailable.[10] His
retirement from active business life by no means signified a fall from power, as
some observers maintained. The empire founded by him changed but little when he
nominally ceased to head it. During the last decade of his active career he had
carefully groomed a staff of managers who ran his enterprises entirely in his
spirit and just as efficiently as he did.[11] The fact that Wittgenstein’s
enterprises functioned as well even at the time of his death on January 20,
1913, as they had during his active involvement prompted the
Arbeiter-Zeitung to say in its obituary:
This unprecedented and successful career [of Karl Wittgenstein] is, incidentally, one of the strongest arguments against the bourgeois-capitalist order. If he, who is called the creator of these giant companies, could retire from them without jeopardizing their further development – is this not striking proof that socialized production is possible and that private ownership of the means of production only an obstacle in the way of making a more social use of industry?[12]
Published Works
Wittgenstein wrote a number of articles, speeches, and letters, that were
collected and published in book form shortly after his death.[13] The most
important of these writings was translated into English and published separately
under the title The Causes of the Development of Industry in
America.[14] His articles, speeches, and letters covered a variety of
topics, including a trip to the United States, the problems of the
Austro-Hungarian tariff union, the management of the state-owned Austrian
railways, the doctrine and practice of free trade, emigration, cartels, and the
Viennese press’s treatment of Theodore Roosevelt’s address to Congress in 1901.
These disparate topics are united by a single theme: Wittgenstein’s belief that
the growth of private industry assures the general prosperity and moral health
of society.
Wittgenstein tried to provide reasons to support this belief,
which formed the basis for all his disputes with persons from various political
quarters. In regard to the United States, for instance, he tried to show that
the Americans were right in asserting “that, in truth, the working classes in
the United States are culturally and materially better off than those in
countries where industry has not made such advance.”[15] A higher standard of
living is possible, Wittgenstein argued, if productivity and wages increase. A
“rich country is distinguished from a poor country through its greater
production and higher wages.”[16] In turn, greater production is achieved by an
increase in the investment of capital. “The augmentation of capital invested per
unit of commodity produced,” he insisted, “must precede an increase of
production;”[17] consequently, there must be opportunities for profitable
investment and the movement of capital should be as unrestricted as possible.
Wittgenstein enthusiastically described the “complete freedom of movement of
people and commodities” in the prosperous United States[18] – a freedom that
inevitably leads to the formation of large, financially strong, enterprises that
produce goods at low cost.[19]
Wittgenstein was not blind to the negative
implications of “the sovereign rule” of capital, but he ostensibly considered
hardships for some to be a necessary price for the future prosperity of all. “A
state that wants a large and wealthy industry,” he emphasized, “must accept the
association of capital on the most liberal and modern basis, and it must accept
its dark sides as well;”[20] therefore, he strongly opposed legislation that
would protect consumers from fraudulent businessmen[21] or instigate legal
actions against trusts.[22]
Wittgenstein’s belief in the sovereignty of
capital sometimes developed into a kind of Social Darwinism. Not only did he
repeatedly eulogize the daring and aggressive entrepreneur; he also used
survival-of-the-fittest idiom in discussing the fate of lower-class emigrants.
As he put it, “Only those most favored by nature will overcome all obstacles in
building for themselves a better life in the West, among strangers with whose
language and customs they are unfamiliar. The ailing and the weak are unfit for
this, and they are left behind.”[23] It was Wittgenstein’s admiration for the
reckless vigor and success of such industrialists as Andrew Carnegie that
disposed him favorably toward Bismarck’s heavy-handed treatment of
parliament,[24] the successes of the “Aryan race” in settling the American
continent[25] and defending itself against “the rapacity of the Indians,”[26]
and the “English cannons and soldiers” that maintained “exemplary order” in the
colonies[27] and allowed the rapid accumulation of wealth.[28]
Wittgenstein’s
allusions to the philosophy of Social Darwinism were not entirely coincidental.
For one thing, he was a friend of Andrew Carnegie, whose guest he was in the
United States and whose host he was in Vienna.[29] Carnegie, in turn, was an
ardent admirer and personal friend of Herbert Spencer.[30] It is not surprising,
therefore, that many of Wittgenstein’s views were identical with those expressed
by Carnegie and Spencer; especially since Social Darwinism was a perfect
expression of and apology for the aspirations and practices of industrialists
such as Wittgenstein. Spencer opposed poor laws, the regulation of sanitary
conditions and of housing, the protection of the ignorant from medical
quacks.[31] If people were poor, Spencer maintained that they should be
eliminated, since they were unfit for survival. As he put it, “the whole effort
of nature is to get rid of such, to clear the world of them, and make room for
better.”[32] Such a harsh attitude toward the poor and unfortunate was justified
in the name of progress. In Carnegie’s words, “It [the great law of the survival
of the fittest] is here; and while the law may sometimes be hard for the
individual, it is best for the race, because it insures the survival of the
fittest in every department.”[33] The similarity between such statements and
comparable ones in Wittgenstein’s writings suggest that the
survival-of-the-fittest idiom in Wittgenstein’s thought was not a mere
coincidence but a frame of reference within which he tried to understand and
justify his activities.
It is clear that Wittgenstein’s convictions brought
him into open conflict with many Austrian conservatives. The usual foil for his
criticism of conditions in Austria was his enthusiastic praise of conditions in
the United States. Thus, a good index of Wittgenstein’s scale of values is what
he found praiseworthy in the United States. About the Americans in general he
wrote: “Two hard centuries taught the American nation diligence, perseverance,
and great frugality, imbued it with a healthy, if you like, relentless egoism, a
desire for education, a speculative spirit and a great love of
liberty.”[34]
The “speculative spirit” he attributed to Americans is
particularly noteworthy. A “speculator,” according to him, is a man willing to
risk much in a situation characterized by great uncertainties. “Industry knows
no finality, and cannot reckon with any finality,” he argued. “The manufacturer
must not only be a mechanician and merchant, and as such able to follow the
fluctuations of the market for his products but he must perceive the demand for
new articles in time, must recognize the value of new methods of working, and
also have the courage to adopt them; in a word, he must take into consideration
a whole series of factors that are not definable, not tangible and often
dependent on chance; he must be also a speculator.”[35] Wittgenstein considered
the United States an ideal environment for such men. “But crisis follows
speculation as shadow follows light, and the intenser the one, the darker the
other,” he wrote. “That is the reason why there is no country in which crises
are so frequent and so serious as in America; I should well nigh say that the
crisis is permanent in America.”[36]
Since this situation demands the utmost
from the entrepreneur, rapidly improving technology, introduced to reduce
production costs, demands the utmost from the workers. Nothing “urges on human
activity as much as the precise and rapid working of machines,” Wittgenstein
wrote. “The mental and physical exertion of the driver of an express train is
much more intense than that of the driver of a freight train, or indeed of the
driver of the diligence in olden times.”[37]
Wittgenstein maintained that in
the United States workers exert themselves more than elsewhere; they are more
alert, versatile, and intelligent. Consequently, the productivity of labor there
is considerably higher than in other countries. “In the United States, 7 hours
of labor are necessary for the production of 100 kilograms of rail, in Germany
13 hours, and in Austria 33 hours.”[38] For this reason, wages are also higher
in the United States, and American workers can enjoy a much higher standard of
living, i.e., consume considerable more goods than workers in the Old World.
“The American workman is used to a large quantity of meat, and to a greater
variety in his diet. Meat three times a day is not rare, twice a day is the
general rule.”[39] “Children, especially girls, are better dressed, and…wear
what we should consider finery; the outward differences between the workman and
the petty bourgeoisie are disappearing more and more.”[40]
Free Trade
There is no need to compare Wittgenstein’s image of the United States with
actual conditions in that country. He focused mainly on the bright side of
things, while treating problematic aspects rather superficially. Whatever the
distance between image and reality, there are clearly many apologetic elements
in Wittgenstein’s writings. Especially interesting are certain policy
recommendations that seem to contradict his praise of the daring “speculator”
and the unrestricted movement of capital. Wittgenstein pointed out that if
capitalistic development had been allowed to occur without interference, England
undoubtedly would be the world’s manufacturer, while the rest of the world would
serve only as the supplier of raw materials and markets for manufactures. Such a
development was prevented because other countries, among them the United States,
abolished free trade and built domestic industry behind the walls of high
protective tariffs. Wittgenstein urged Austria to shed the remnants of free
trade because he had come to appreciate the American way of fostering
prosperity. Maintaining that English “free trade was the freedom to force other
people to buy English commodities,”[41] he insisted that “English free trade was
rather like the freedom of someone who permits himself to shoot at the house of
his neighbor, who cannot shoot back because he has no gun.”[42]
Thus, while
Wittgenstein opposed governmental protection of consumers against fraudulent
businessmen and big trusts, he strongly urged the government to protect domestic
entrepreneurs against powerful foreign competitors, for he was aware that it
would be suicidal to be too daring a “speculator” in an open world market. For
this reason, he argued the necessity of “security” for the industrial
entrepreneur. In his words, “Industry as well as agriculture in the United
States and Germany have, under all circumstances, permanently and independently
of the grace or lack of it of particular governments the security to serve a
market for a profit. With such security, the entrepreneurial spirit, said to be
lacking in Austria, will come. Only such security will produce courage and
justify the large investments needed for further specialization, the use of
machines, the exploitation of all technical progress – even by the smallest
factories.”[43]
To ensure security for the entrepreneur, Wittgenstein
defended in theory what he had always applied in practice: the establishment of
cartels. After describing in detail how steel producers had almost ruined each
other by competing for orders in an open market and relating the events in
response to which he founded the first cartel in the Austrian iron and steel
industry, he asked rhetorically: “Should we have done anything else? Should we
have continued any longer the battle that brought us all to the brink of
bankruptcy? It was inconceivable that one of us would have succeeded in
continuing it to the point where the rest would have given up producing
rails.”[44]
Since Wittgenstein was aware of the widespread opposition to his
monopolistic practices and the growing hostility toward him personally, he tried
to label criticism of cartels as socialist.[45] He was wrong, for opposition to
cartels came less from socialists or workers[46] than from leaders or
iron-consuming industries, from entrepreneurs who would like to develop their
potential as “speculators” but found themselves thwarted under conditions
established and maintained by Wittgenstein and his group.
Philanthropy
Wittgenstein was not only a controversial “captain of industry” in the Austro-Hungarian monarchy during the latter part of the nineteenth century; he was also a significant patron of the fine arts.[47] It is well known that musicians such as Johannes Brahms, Pablo Casals, and Josef Labor frequented his palace and that he collected works of such sculptors and painters as Francois Auguste Rodin, Gustav Klimt, and Franz Hohenberger. He lavishly supported the Austrian version of Art Nouveau, the Viennese Secession, when it was still an insurgent movement around the turn of the century, and he was the leading financial backer of the Secession’s famous exhibition hall, which was designed by Joseph Maria Olbrich in 1898.
Olbrich's design for the Exhibition Hall of the Vienna Secession
Wittgenstein’s support of the insurgent
movement in the fine arts was consistent with his general outlook. Since he was
highly anti-traditionalist in the field of industrial development, an art
movement whose major task it was to combat the revival of older styles had a
strong appeal to him. But Wittgenstein’s progressivism had very clear limits,
which were graphically represented by the high degree of exclusivity entailed in
the refined culture of the Viennese Secession.
Wittgenstein commissioned a
prominent Secession artist, Josef Hoffmann, to decorate two rooms of his country
estate, the Hochreith. Hoffmann’s working conditions were ideal. He advocated
stylistic unity to the utmost detail, and Wittgenstein put no limits on the
resources at his disposal. Hoffmann’s technique and style muted the effect of
his sumptuous materials. In an article describing his work in the two rooms,
Franz Windisch-Graetz quoted the following excerpt from a letter written by a
visitor to the Hochreith:
Absolutely unostentatious: the gold of the ridges is hardly noticeable by
itself. I can easily imagine someone attentively looking around the room and
saying, when asked how he liked the gold ridges, that he had not noticed them at
all. The carpet [is] splendidly warm, and the whole thing just as I would
imagine the private rooms of a Fugger in the middle ages.[48]
The
subdued gold ridges testify to the refined taste of the artist and the patron,
but, like the comparison with the Fuggers, they also indicate how much the
ovation of such artistic endeavors depends on the accumulation of wealth by a
minority, and how the majority is excluded not only from refinement of taste but
also often from much more fundamental things. In his famous poem, “Manche
Freilich,” [49] Hugo von Hofmannsthal fastidiously voiced a refined bourgeois regret
over the contrast between high culture and its material base:
Granted, some must die below deck,
Where streak the ship’s heavy
oars.
Others dwell above at the helm,
Knowing flights of birds and realms
of stars.
Some lie forever with heavy limbs
At the roots of confused
life.
For others are seats prepared
With sibyls and queens.
And there
they sit as if at home
With light heads and light hands.
Yet a shadow from
those other lives
Falls into these lives,
And the light are bound to the
heavy
As to the air and earth:
My eyelids cannot shed
Quite forgotten
people’s weariness,
Nor my terrified soul fend against
The silent falling
of distant stars.
Many fates weave beside my own,
Life entangles them all,
And my
part is more than this life’s
Slender flame or slim lyre.
Labor
Apparently unheralded by the Sibyls, Wittgenstein’s weary oarsmen below were beginning to find their own voices and to murmur against the helmsman’s enrichment through their own impoverishment. In the fall of 1891, for instance, the St. Poeltener Zeitung printed the following article, not penned by a professional journalist:
Hohenberg, October 26. Today the strike in the Fuerthofer works ended. More than 300 file makers have been without work since October 1 – i.e., for more than 3 weeks! The factory in spector considered their demands unjustified, and Witkenstein [sic], therefore, did not give in. The file makers regarded the sudden lockout [ordered by management on October 1 in response to the strike threat] as unjust. Their support from Austria and from abroad soon proved [to be] insufficient; many workers, particularly those who are married, started to lose courage, etc. In short, everyone was feeling very gloomy. It is probable that the factory has not gained anything during the strike, but it is certain that the savings of many workers have decreased; and it goes without saying that many local businessmen have suffered as well. On October 22 posters were suddenly nailed to the doors of the workers’ quarters, saying ‘Work will start tomorrow.’ By this measure Witkenstein [sic] wanted to end the strike in a simple and peaceful manner. However, only a few followed the invitation! Then a second poster announced: ‘Either work or leave the quarters!’ I withhold any judgment concerning Witkenstein’s [sic] actions and the demands of the workers. In honor of the latter it should be said, however, that they kept exemplary order among themselves during the entire strike period. One saw no drunks, heard of no brawl but, instead, they [the workers] sat down near the forest in groups of 8-10 – and there was fine weather all the time. Well, God bless work! [50]
Another article describing the same strike in the Arbeiter-Zeitung,
on December 12, related the following details concerning the expulsion of
workers from company-owned living quarters: The director came “with a lot of
policemen, and the latter began the expulsion. The head of a family with four
children was expelled late at night, when the children were already asleep in
their beds. Sergeant Werner, a well-known enemy of the workers, mercilessly
dragged them out of their beds, and they were made homeless.”
The bitterness
aroused by Wittgenstein’s strike-breaking actions was fervently expressed in the
following editorial in the January 26, 1899 issue of the Oesterreichischer
Metallarbeiter, which was sarcastically entitled “Mr. Wittgenstein – a
Friend of the Worker:”
We must confess unreservedly that we have done Mr. Wittgenstein a great injustice in this paper by repeatedly calling him an exploiter, who tries to use the workers employed in his factories in a most reckless way. We plead guilty to the charge of unjustly calling Mr. Wittgenstein – a man who has in a short time sucked several millions from the marrow of his workers – a heartless and reckless man. . . . We rub ashes on our heads and beg forgiveness, for Mr. Wittgenstein is a great philanthropist. The workers at his plants in Fuerthof and St. Egyd have now been freed of all sorrows. Now the proletarians, who are not entirely unrelated to the creation of Mr. Wittgenstein’s tremendous wealth, can look calmly to enjoying the same bleak future as before, for Mr. Wittgenstein has made the unique and unprecedented decision to donate the huge sum of one thousand guilders to the workers in these factories.
According to the writer of the above editorial, the employees of the two plants were told on January 17 “that Mr. Wittgenstein had donated 1,000 guilders for the needy workers of Fuerthof and St. Egyd, because he was bidding them farewell and wanted to show his heartfelt gratitude for their support throughout the past years. A committee had to be elected to identify the needy. It was not difficult to find them,” the Metallarbeiter assured its readers, “for the generous donor had seen to it that the workers of Fuerthof and St. Egyd had to endure many hardships and great misery. It was much more difficult to proceed according to the donor’s specifications, for there were many more needy than those for whom funds were provided. Thus many miserable heads of households had to be turned away. Considering all this, it is not surprising that the workers of Fuerthof and St. Egyd believe that Mr. Wittgenstein intended to cap the end of his career as an exploiter of workers to satiate his greed for profits by earning the derision of the workers of the whole area.”
[Reprinted, with minor stylistic changes, from The Austrian History Yearbook, Vol. XV-XVI (1979-1980).]
Endnotes
[1]Biographical material can be found in Georg Guenther, “Karl Wittgenstein
und seine Bedeutung fuer den Aufbau und die Entwicklung der oesterreichischen
Volkswirtschaft,” Neue Oesterreichische Biographie, edited by Anton
Bettelheim (10 vols., Vienna: Wienerdrucke, 1923-35); Paul Kupelwieser, Aus
den Erinnerungen eines alten Oesterreichers (Vienna: Gerold & Co.,
1918); obituaries in the Neue Freie Presse and other journals; and Karl
Wittgenstein, “Lebenserinnerungen” (unpublished notes covering the period from
1847 to 1884 dictated to one of his daughters shortly before his
death).
[2]Wittgenstein, “Lebenserinnerungen.”
[3]Kupelwieser, Aus den
Erinnerungen eines alten Oesterrcihers, p. 61. In 1874 Wittgenstein married
Leopoldine Kallmus (1850-1916), an “amiable and well-off girl,” according to
Kupelwieser. See ibid., p. 85.
[4]See Stefan Zweig, Die Welt von Gestern.
Erinnerungen eines Europaeers (Frankfurt:Suhrkamp, 1949), p.
36.
[5]Wittgenstein’s involvement with this bank is described in Eduard
Maerz, Oesterreichische Industrie- und Bankpolitik in der Zeit Franz-Josefs
I. Am Beispiel der k. k. priv. Oesterreichischen Credit-Anstalt fuer Handel und
Gewerbe (Vienna: Europa Verlag, 1968).
[6]Kupelwieser, Aus den
Erinnerungen eines alten Oesterreichers, p. 156.
[7]See Prager
Eisen-Industrie-Gesellschaft, Geschaefts- und Betriebs-Bericht fuer das
Geschaeftsjahr 1898-1899 (Vienna: Prager Eisen-Industrie-Gesellschaft,
1899).
[8]Wittgenstein’s relations with the imperial government were never
cordial. The government was conservative, semi-feudal, and Catholic;
Wittgenstein was progressive, bourgeois, and Protestant. Wittgenstein never
sought nor received any of the many decorations awarded by the imperial
government. He was never knighted, although many men of far less importance
attained that distinction. His cool relationship with the government may help to
explain why historians generally have paid little attention to his important
role in the economic affairs of the Habsburg monarchy.
[9]Protokol ueber die
am 23. und 24. Jaenner 1899 in k. k. Handelsministerium abgehaltene
Eisenexpertise, Allgemeines Verwaltungsarchiv (Vienna), File No. PZ
368-99/Handels-Ministerium.
[10]The distribution of the special reserve funds
was postponed until a later date. Prager Eisen-Industrie-Gesellschaft,
Geschaefts- und Betriebs-Bericht fuer das Geschaefstjahr 1898-1899. The motives
for this action are not entirely clear, but Wittgenstein and Kestranek were
clearly employing techniques characteristic of American corporate finance.
Distributing the surplus funds would help them achieve leverage for corporate
control with a minimum of capital investment, while improving their cash
position for investment elsewhere. By claiming that the funds should be
distributed because they were not needed for operational purposes they
contradicted their own argument for the need for a protective tariff--a form of
government subsidy. The “surpluses” in question apparently were derived, in part
at least, from earlier tariff subsidies. To his antagonists it seemed that
Wittgenstein was asking for additional government money while saying that he had
more than he knew what to do with.
[11]That none of his sons succeeded him as
an entrepreneur to continue his work was one of the great disappointments of his
life. Information from Dr. Thomas H. W. Stonborough. The fact that Wittgenstein
desired an heir for his empire, while all of his sons were interested in the
fine arts, as well as his rather dictatorial behavior, seems to explain a good
deal about his sons’ suicidal tendencies. Three of them committed suicide and
Ludwig, the fourth son, repeatedly thought about doing
so.
[12]Arbeiter-Zeitung, January 21, 1913.
[13]Karl
Wittgenstein, Zeitungsartikel und Vortraege (Vienna: Gottlieb Gistel,
1913). Cf Politico-Economic Writings: An Annotated Reprint of 'Zeitungsartikel und Vortraege', edited by J. C. Nyri; Viennise Heritage, Wiener Erbe 1 1984.
[14]The Causes of the
Development of Industry in America. A Lecture delivered before the Association
of Engineers and Architects on November 5th 1898 (Vienna: Spies & Co., n.
d.).
[15]Ibid., p. 4.
[16]Wittgenstein, Zeitungsartikel und
Vortraege, p. 122.
[17]Ibid.
[18]Ibid., p.
98.
[19]Ibid., p. 97.
[20]Ibid., p.
159.
[21]Ibid., pp. 65-66.
[22]Ibid., pp.
174-175.
[23]Ibid., p. 3.
[24]Ibid., p.
92.
[25]Ibid., p. 49.
[26]Ibid., p.
50.
[27]Ibid., p. 17.
[28]Ibid., p.
15.
[29]Information from Dr. Thomas H. W. Stonborough. The relationship
between the two industrialists, of course, had nothing to do with Wittgenstein’s
earlier trip to the United States.
[30]See the chapter on “Herbert Spencer
and His Disciple” in Andrew Carnegie, Autobiography (Boston, Mass.:
Houghton Mifflin, 1920).
[31]Richard Hofstadter, Social Darwinism in
American Thought (Boston, Mass.: Beacon Press, 1944), p.41.
[32]As
quoted in ibid.
[33]Ibid., pp. 45-46. See also “The Bugaboo
of Trusts,” in Andrew Carnegie, The Empire of Business (Reprint of the
1933 ed., New York: Greenwood Press, 1968), p. 135.
[34]Wittgenstein, The
Causes of the Development of Industry in America, p.
21.
[35]Ibid., p. 24.
[36]Ibid., p.
25.
[37]Ibid., p. 17.
[38]Wittgenstein, Zeitungsartikel und
Vortraege, p. 81.
[39]Wittgenstein, The Causes of the Development of
Industry in America, p. 15.
[40]Ibid., p.
16.
[41]Wittgenstein, Zeitungsartikel und Vortraege, p.
131.
[42]Ibid., p. 132.
[43]Ibid., p.
85.
[44]Ibid., p. 180
[45]Ibid., p. 190.
[46]A
lengthy article on “The Cartels and the Workers” in the
Arbeiter-Zeitung of June 22, 1900, indicates that the question of
cartels and their significance for workers had been almost entirely ignored by
the Austrian socialists.
[47]See anonymous, “Karl Wittgenstein als
Kunstfreund,” Neue Freie Presse, January 21, 1913.
[48]Alte und
Moderne Kunst, Vol. XCII (1967), p. 31.
[49]Translated from German by
the authors.
[50]St. Poeltener Zeitung, November 1, 1891.