Free Competition Pitilessly Culls Out All Less-Productive Enterprises; the Private Entrepreneur Ruthlessly Abandons Enterprises That No Longer Pay

Most Social Democratic writers are quite silent on this point; others touch on it only incidentally. Thus, Kautsky names two methods that the future state will use for raising production. The first is the concentration of all production in the most efficient firms and the shutting down of all other, less high-ranking, firms. That this is a means of raising production cannot be disputed. But this method is in best operation precisely under the rule of free competition. Free competition pitilessly culls out all less-productive enterprises and firms. Precisely that it does so is again and again used as a reproach against it by the affected parties; precisely for that reason do the weaker enterprises demand state subsidies and special consideration in sales to public agencies, in short, limitation of free competition in every possible way. That the trusts organized on a private-enterprise basis work in the highest degree with these methods for achieving higher productivity must be admitted even by Kautsky, since he actually cites them as models for the social revolution. It is more than doubtful whether the socialist state will also feel the same urgency to carry out such improvements in production. Will it not continue a firm that is less profitable in order to avoid local disadvantages from its abandonment? The private entrepreneur ruthlessly abandons enterprises that no longer pay; he thereby makes it necessary for the workers to move, perhaps also to change their occupations. That is doubtless
harmful above all for the persons affected, but an advantage for the whole, since it makes possible cheaper and better supply of the markets. Will the socialist state also do that? Will it not, precisely on the contrary, out of political considerations, try to avoid local discontent? In the Austrian state railroads, all reforms of this kind were wrecked because people sought to avoid the damage to particular localities that would have resulted from abandonment of superfluous administrative offices, workshops, and heating plants. Even the Army administration ran into parliamentary difficulties when, for military reasons, it wanted to withdraw the garrison from a locality.

--Ludwig von Mises, Nation, State, and Economy: Contributions to the Politics and History of Our Time, trans. Leland B. Yeager, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2006), 155-156.