There Is Really No Essential Difference Between the Unlimited Power of the Democratic State and the Unlimited Power of the Autocrat

And he also stressed that democracy must not be conceived as the unlimited rule of the general will:

There is really no essential difference between the unlimited power of the democratic state and the unlimited power of the autocrat. The idea that carries away our demagogues and their supporters, the idea that the state can do whatever it wishes, and that nothing should resist the will of the sovereign people, has done more evil perhaps than the caesar-mania of degenerate princelings.

Mises concluded that “only within the framework of Liberalism does democracy fulfill a social function. Democracy without Liberalism is a hollow form.” The great danger inherent in democracy is to turn the libertarian postulate of equality before the law into the postulate of economic equality.

Here is a fertile field for the demagogue. Whoever stirs up the resentment of the poor against the rich can count on securing a big audience. Democracy creates the most favourable preliminary conditions for the development of this spirit, which is always and everywhere present, though concealed. So far all democratic states have foundered on this point. The democracy of our own time is hastening towards the same end.

—Jörg Guido Hülsmann, Mises: The Last Knight of Liberalism (Auburn, AL: Ludwig von Mises Institute, 2007), 412-413.

Society Is Purely and Solely a Continual Series of Exchanges; the Two Contracting Parties Always Both Gain; Society Is an Uninterrupted Succession of Advantages

Liberal class conflict theory emerged in a polished form in France, in the period of the Bourbon Restoration, following the defeat and final exile of Napoleon. From 1817 to 1819, two young liberals, Charles Comte and Charles Dunoyer, edited the journal Le Censeur Européen; beginning with the second volume (issue), another young liberal, Augustin Thierry, collaborated closely with them. The Censeur Européen  developed and disseminated a radical version of liberalism, one that continued to influence liberal thought up to the time of Herbert Spencer and beyond. It can be viewed as a core-constituent—and thus one of the historically defining elements—of authentic liberalism (see “Liberalism, True and False,” in the present work). In this sense, a consideration of the world-view of the Censeur group  is of great importance in helping to give shape and content to the protean concept of liberalism. Moreover, through Henri de Saint-Simon and his followers and other channels, it had an impact on socialist thought as well. Comte and Dunoyer called their doctrine Industrialisme, Industrialism.

There were several major sources of Industrialism. One was Antoine Destutt de Tracy, the last and most famous of the Idéologue school of French liberals, whose friend, Thomas Jefferson, arranged for the translation and publication of his Treatise on Political Economy in the United States before it appeared in France. Destutt de Tracy’s definition of society was crucial:

Society is purely and solely a continual series of exchanges. It is never anything else, in any epoch of its duration, from its commencement the most unformed to its greatest perfection. And this is the greatest eulogy we can give to it, for exchange is an admirable transaction, in which the two contracting parties always both gain; consequently, society is an uninterrupted succession of advantages, unceasingly renewed for all its members.

Destutt de Tracy’s position was that “commerce is society itself. . . . It is an attribute of man. . . . It is the source of all human good . . .” Commerce was a “panacea,” in the words of a student of his thought, “the world’s civilizing, rationalizing, and pacifying force.”

—Ralph Raico, “The Conflict of Classes: Liberal vs. Marxist Theories,” in Classical Liberalism and the Austrian School (Auburn, AL: Ludwig von Mises Institute, 2012), 189-190.

The Acid Rain Scare Was the Dress Rehearsal for the Global Warming Scare; Both Scares Originated in Sweden; Bert Bolin, Future First Chair of the IPCC, Wrote the Report

This book tells the story of two countries and three environmental scares. Two originated in Sweden (acid rain and global warming) and one (the nuclear winter) was transmitted from Moscow via Stockholm. . . .

Acid rain (Scare #1) was the dress rehearsal for global warming. The politicized science of acid rain swept all before it, the bar set low in the first government report on acid rain, which happened to be written by Bert Bolin, a friend of Palme [prime minister of Sweden] and future first chair of the IPCC. It spread to Germany, where hysteria about “forest death” destroyed any hope of rationality and objectivity. It was taken up by Canada, which waged a relentless campaign to get the United States to cut its power station emissions. The Reagan Administration held firm against virtually unanimous scientific opinion. Elected as the environmental president, George H. W. Bush gave the Canadians what they wanted. However, the science was not as solid as the consensus asserted, and a ten-year federal study revealed it for what it was. Scandalously, the Environmental Protection Agency (EPA) suppressed its findings until the main provisions of the acid rain legislation had been agreed in Congress.

—Rupert Darwall, Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex (New York: Encounter Books, 2019), Kobo e-book.

No Wonder Goebbels Declared Eighty Years Later that National Socialism Was “anti-Semitic” because It Was Socialistic

But the real Marx came to life in his letters, especially when he vented  his hatred on former friends, collaborators, or sympathizers. Marx actually vied with Engels in heaping anti-Jewish invectives upon the head of  Lassalle, insults of a descriptive physical nature reminiscent of the smutty Nazi weekly Der Stürmer, edited by Julius Streicher. Marx saw in Lassalle a “niggerlike Jew,” and Engels' invectives were no more moderate.  In a way these attitudes are not surprising because socialism and the Jewish  outlook, the Jewish mind, the Jewish character do not easily mix. Belonging to a religious minority within Christendom (with which they  remain mysteriously connected), the Jews are apt to have the critical bent of  small religious bodies everywhere. These minorities question much of the intellectual-spiritual foundations upon which the majority live, and they are often emphatic in their criticisms. Thus they easily become unpopular,  because the Philistine hates the critic. Let such minorities rise financially and opposition to them will increase—envy will be added to discomfort and suspicion. . . .

Yet even in Eastern Europe a break between the socialist and communist  forces and the Jews had to come. (For a while this was obscured by the fact  that the Nazis literally drove these Jews into the arms of organized leftism.)  A latent, sometimes even an open, anti-Jewish sentiment existed in the ranks of Europe's socialist parties—and it was prominent in Red Russia  as well. By the time World War II broke out, Stalin had killed many  more Jews than Hitler. Needless to say, Jewish haute finance was never  really procommunist. If Jewish bankers did business with the Soviet  Union, gentile manufacturers and financiers are even more guilty in this  respect.

Antonio Machado, the great Spanish poet who died in exile, predicted  the inevitable turn to anti Judaism that Marxism would take. Marx  himself started it, of course: “What is the secular basis of Judaism?” he  asked. “Practical needs, egoism. What is the secular cult of the Jew?  Huckstery. What is his secular God? Money.” No wonder Goebbels declared eighty years later that National Socialism was “anti-Semitic” because it was socialistic.

Marxism does not harmonize with the Jewish mind, which is individualistic and commercially oriented; nor has it in any way a “proletarian” character. Marx ended his revolting pamphlet against the Jews, in his Die Frühschriften, with the remark that the true emancipation of the Jews  consisted in “the emancipation of society from Jewry” (his emphasis). This is precisely what the National Socialists attempted with the Endlösung [the Final Solution]. 

--Erik von Kuehnelt-Leddihn, Leftism Revisited: From de Sade and Marx to Hitler and Pol Pot (Washington, DC: Regnery Gateway, 1990), 119-121.

The Cancer Chapter in Rachel Carson's “Silent Spring” Incorporated the Nazi Belief that Industrialization Was Causing a Cancer Epidemic

America invented Earth Day in 1970 and gave birth to postwar environmentalism with Rachel Carson's Silent Spring (1962). Yet even these seemingly all-American products drew on ideas from across the Atlantic and from across the chasm of the Second World War; the cancer chapter in Rachel Carson's Silent Spring, for instance, incorporated the Nazi belief that industrialization was causing a cancer epidemic.

If there was a purely American strand of environmentalism, the demands it made on America were fairly limited. The costs of banning DDT—the principal policy consequence of Silent Spring—were mainly inflicted on Africans exposed to the risk of malaria. Thanks to the availability of cheap substitutes, phasing out CFCs a decade and a half later to preserve the ozone layer hardly required Americans to change their lifestyles. Preserving habitats and wildernesses did not necessitate transforming American society and culture.

—Rupert Darwall, Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex (New York: Encounter Books, 2019), Kobo e-book.

There Can Be No Calculation Problem in the Evenly Rotating Economy (ERE) Because No Calculation There Is Necessary

The proof-by-listing-of-mathematical-equations is no proof at all. It applies, at best, only to the evenly rotating economy. Obviously, our whole discussion of the calculation problem applies to the real world and to it only. There can be no calculation problem in the ERE because no calculation there is necessary. Obviously, there is no need to calculate profits and losses when all future data are known from the beginning and where there are no profits and losses.  In the ERE, the best allocation of resources proceeds automatically. For Barone to demonstrate that the calculation difficulty does not exist in the ERE is not a solution; it is simply a mathematical belaboring of the obvious. The difficulty of calculation applies to the real world only.

—Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. of the Scholar's ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 616.

The New Deal Can Be Seen As a Veteran's Reunion Reconvening the Bureaucrats Who Had Managed the Wartime Economy in 1917-18

The war metaphor influenced nearly all of the New Deal’s reform programs and the institutions put in place to implement them. The NRA was modeled on the War Industries Board of 1917, established by Woodrow Wilson to subordinate industry to the needs of wartime production, and it was directed by a former general who had served on that body. The Civilian Conservation Corps was paramilitary in structure. Even programs that seemed far removed from military purposes—the construction of settlements, the regulation of rivers, and the production of electricity—were thoroughly infused with the aura of wartime mobilization. Indeed, the Tennessee Valley Authority was presented to the public as a continuation of a defense project from World War I.

Extending the military metaphor, the New Deal could be seen as a veteran’s reunion, reconvening the bureaucrats who had managed the wartime economy in 1917 and 1918. For them, the New Deal was an occasion to bring a chapter of history that had ended in disappointment, to a happier conclusion. Tugwell spoke for many when he said that the wartime economy had been a kind of socialism and regretfully added that with the war’s end a great experiment had been broken off in midstream. Such sentiments were echoed in the nostalgic euphoria with which early Fascism and National Socialism pursued their experiments. Journalists who witnessed events on both sides of the Atlantic found the popular mood in the first days of the New Deal reminiscent of the Fascist March on Rome in 1922 and the German elections in March 1933.

—Wolfgang Schivelbusch, Three New Deals: Reflections on Roosevelt's America, Mussolini's Italy, and Hitler's Germany, 1933-1939 (New York: Picador Henry Holt and Company, 2007), Kobo e-book.

The Technocrats Had No Problem Seeing the Similarities between the National Recovery Administration (NRA) Codes and Fascist Corporatism

Roosevelt himself once spoke in the presence of journalists of Mussolini and Stalin as his “blood brothers.” And during the public unveiling of the National Industrial Recovery Act, when Roosevelt referred to the industrial associations that had been reconstituted by the codes as “modern guilds,” those fluent in the jargon may well have recognized the reference to the corporatist system associated with Fascism. . . .

Rexford Tugwell, the man who was known as the most left-wing member of Roosevelt’s brain trust and who was frank about his admiration for the Soviet planned economy, was also open in his respect for Mussolini’s economic policies, though he otherwise rejected Fascism on ideological grounds. . . .

The technocrats who worked below the level of political decision making had no problem seeing the similarities between the NRA codes and Fascist corporatism. As one put it: “The Fascist Principles are very similar to those which we have been evolving here in America and so are of particular interest at this time.”

—Wolfgang Schivelbusch, Three New Deals: Reflections on Roosevelt's America, Mussolini's Italy, and Hitler's Germany, 1933-1939 (New York: Picador Henry Holt and Company, 2007), Kobo e-book.

Mussolini Asks, “Where Is America Headed?” Il Duce Answers, “It Is on the Road to Corporatism”

In his review of the Italian edition of New Frontiers, a book written by Roosevelt’s secretary of agriculture, Henry A. Wallace, Mussolini wrote:

The book as a whole is just as “corporativistic” as the individual solutions put forth in it. It is both a declaration of faith and an indictment of economic liberalism. . . . Wallace’s answer to the question of what America wants is as follows: anything but a return to the free-market, i.e., anarchistic economy. Where is America headed? This book leaves no doubt that it is on the road to corporatism, the economic system of the current century.

—Wolfgang Schivelbusch, Three New Deals: Reflections on Roosevelt's America, Mussolini's Italy, and Hitler's Germany, 1933-1939 (New York: Picador Henry Holt and Company, 2007), Kobo e-book.

People Produce for Profit But To Imply That Production for Profit Does Not Mean Production to Satisfy Needs, Is Entirely False

We refer to the objection that in capitalist societies prices are used as indicators of profitability. People produce for profit, it is said. This statement is correct. If the commodity to be produced, or resold, is not demanded at a price that covers costs, it will not be produced or bought at that price. On the other hand, to imply that production for profit does not mean production to satisfy needs, is entirely false. The contrary is the case. The producers' and traders' every effort is directed towards anticipating and satisfying the needs of the buyers, in the last resort the needs of the public, such as they are expressed in effective demand. The success of producers and traders will depend on their ability to do this. Their ability to anticipate correctly will decide whether the result will be profit or loss, which in the long run will decide whether they can stay in business or not.

Professor Boris Brutzkus goes so far as to say that the producer and trader in a capitalist country, strictly speaking, does not need to keep books or to calculate, as prices will give him all necessary indications. If he does not take heed of prices, he risks losing his fortune and his position. In socialist countries where the state is the only owner of the means of production and the only distributing agency, this automatic purging process does not exist, so that, as Brutzkus says, “economic calculation is of far greater significance in the socialist, than in the capitalist society.” (Economic Planning in Soviet Russia, p. 11.)

—Trygve J. B. Hoff, appendix A of Economic Calculation in the Socialist Society, trans. M. A. Michael (London: William Hodge and Company, 1949), 198, 198n.

Marx Bristled at the Charge, Evidently a Tired Old Cliché by 1871, that Communism Was Impossible

In 1920 an Austrian economist named Ludwig von Mises published a short article in which he claimed that socialism was not a practical possibility (Mises 1920). Two years later this article was incorporated in a book (Mises 1922) which became widely read and much debated on the European continent. At that time socialism still appeared to be in the ascendant. Its recent disappointments in Germany, Austria, and Hungary seemed temporary setbacks, and the construction of a completely new economic order was triumphantly under way in, of all places, Russia. To many observers of socialism, friendly, apprehensive, or hostile, its eventual triumph appeared inescapable. Yet Mises contended that, however powerful the socialist movement might become, and no matter how many people wanted socialism, howsoever ardently, they would always be powerless to bring socialism into being, because socialism was inherently unfeasible.

There was nothing new in the assertion that socialism could not work in practice. Malthus’s 1798 Essay on the Principle of Population was written primarily to show that Godwin’s socialism (a form of agrarian anarchocommunism) was impossible. A passage in Marx’s Civil War in France shows him bristling at the charge, evidently a tired old cliché by 1871, that “communism” was “impossible.” What was new to Mises’s readers was his specific argument for the impossibility of socialism. Most earlier arguments had rested either on an appeal to human nature (especially the alleged need for appropriate material incentives) or on the Malthusian population theory. Arguments from human nature or motivation suffer from weaknesses which render them rather ineffective, and the Malthusian argument, though it was extraordinarily effective for a century, was eventually recognized to be unsound. Mises’s argument against the practical feasibility of what he calls “socialism” does not hinge upon questions of motivation, but rather claims that, with the best will in the world, humans are not able to operate a society on ‘socialist’ lines, because modern industry cannot be successfully guided or administered without the information provided by market prices of factors of production. Mises claims that even where there’s a will, there’s no way. It is part of Mises’s definition of socialism that factors of production are not exchanged on the market, so that under socialism there cannot be market prices of factors of production. Whether this really is integral to socialism is one of the questions I consider later. Mises’s argument, known as the Wirtschaftsrechnung or ‘economic calculation’ argument, had been proposed by several earlier writers, but little notice was taken, and no serious debate ensued until 1920.

—David Ramsay Steele, From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation (La Salle, IL: Open Court Publishing, 1992), e-book.

In The General Theory, Keynes Is Puzzled by the Austrian School's Use of the Term “Capital Consumption”

The matter was relevant to the Keynes–Hayek debate as well. As Horwitz (2011) notes: “In the only real mention of the Austrian view of capital in The General Theory, Keynes (1936) says:”

It seems probable that capital formation and capital consumption, as used by the Austrian school of economists, are not identical either with investment and disinvestment as defined above or with net investment and disinvestment. In particular, capital consumption is said to occur in circumstances where there is quite clearly no net decrease in capital equipment as defined above. I have, however, been unable to discover a reference to any passage where the meaning of these terms is clearly explained. The statement, for example, that capital formation occurs when there is a lengthening of the period of production does not much advance matters.

Horwitz continues:

Keynes’s dismissiveness aside, this passage reveals much about the differences in approaches. Keynes seems puzzled by the Austrian claim that capital can be “consumed” even though there is no net decrease in physical capital. The answer to the puzzle is that capital, for the Austrians, is about value, not about the physical object itself. If we build a machine in anticipation of some specific future demand and then discover our expectations were wrong, the machine will drop in value (which is a form of capital consumption), but it does not crumple into dust. Capital goods are valued in terms of the (discounted) value of the future consumption goods they will produce. If consumer demand changes, the value of the capital good changes (assuming it is insufficiently versatile to produce whatever new product is now in demand) and capital-value is lost, thus capital has been consumed even though the physical stock of capital has not changed. This [is important in any] discussion of the business cycle. (Horwitz, 2011)

—Peter Lewin and Nicolas Cachanosky, Austrian Capital Theory: A Modern Survey of the Essentials, Cambridge Elements in Austrian Economics (Cambridge, UK: Cambridge University Press, 2019), 31.

Governments Are Themselves Always, and Without Any Exception, the Greatest Spendthrifts in the Society, According to Adam Smith

Smith also wrote of the dangers of government spending with the kind of insight that the years since have done nothing to diminish the relevance of. The propensity of governments to profligate waste was recognized by Smith in ways that every generation has had to learn over again for itself:

It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people … They [governments] are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.

—Steven Kates, Free Market Economics: An Introduction for the General Reader, 3rd ed. (Cheltenham, UK: Edward Elgar Publishing, 2017), Kobo e-book.

The Classical Economists Were Right; The Public Debt is a DOUBLE Burden on the Free Market

Lending to government, therefore, may be voluntary, but the process is hardly voluntary when considered as a whole. It is rather a voluntary participation in future confiscation to be committed by the government. In fact, lending to government twice involves diversion of private funds to the government: once when the loan is made, and private savings are diverted to government spending; and again when the government taxes or inflates (or borrows again) to obtain the money to repay the loan. Then, once more, a coerced diversion takes place from private producers to the government, the proceeds of which, after payment of the bureaucracy for handling services, accrues to the government bondholders. The latter have thus become a part of the State apparatus and are engaging in a “relation of State” with the tax-paying producers.

137 Hence, despite Buchanan’s criticism, the classical economists such as Mill were right: the public debt is a double burden on the free market; in the present, because resources are withdrawn from private to unproductive governmental employment; and in the future, when private citizens are taxed to pay the debt. Indeed, for Buchanan to be right, and the public debt to be no burden, two extreme conditions would have to be met: (1) the bondholder would have to tear up his bond, so that the loan would be a genuinely voluntary contribution to the government; and (2) the government would have to be a totally voluntary institution, subsisting on voluntary payments alone, not just for this particular debt, but for all in transactions with the rest of society.

—Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. of the Scholar's ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 1027, 1027n137.

Since the Purchasing Power of Money Can Vary, Some Economists Tried to Improve on the Free Market by Creating a Monetary Unit with Stable and Constant Purchasing Power

The knowledge that the purchasing power of money could vary led some economists to try to improve on the free market by creating, in some way, a monetary unit which would remain stable and constant in its purchasing power. All these stabilization plans, of course, involve in one way or another an attack on the gold or other commodity standard, since the value of gold fluctuates as a result of the continual changes in the supply of and the demand for gold. The stabilizers want the government to keep an arbitrary index of prices constant by pumping money into the economy when the index falls and taking money out when it rises. The outstanding proponent of “stable money,” Irving Fisher, revealed the reason for his urge toward stabilization in the following autobiographical passage: “I became increasingly aware of the imperative need of a stable yardstick of value. I had come into economics from mathematical physics, in which fixed units of measure contribute the essential starting point.” Apparently, Fisher did not realize that there could be fundamental differences in the nature of the sciences of physics and of purposeful human action.

It is difficult, indeed, to understand what the advantages of a stable value of money are supposed to be. One of the most frequently cited advantages, for example, is that debtors will no longer be harmed by unforeseen rises in the value of money, while creditors will no longer be harmed by unforeseen declines in its value. Yet if creditors and debtors want such a hedge against future changes, they have an easy way out on the free market. When they make their contracts, they can agree that repayment be made in a sum of money corrected by some agreed-upon index number of changes in the value of money. Such a voluntary tabular standard for business contracts has long been advocated by stabilizationists, who have been rather puzzled to find that a course which appears to them so beneficial is almost never adopted in business practice. Despite the multitude of index numbers and other schemes that have been proposed to businessmen by these economists, creditors and debtors have somehow failed to take advantage of them. Yet, while stabilization plans have made no headway among the groups that they would supposedly benefit the most, the stabilizationists have remained undaunted in their zeal to force their plans on the whole society by means of State coercion.

—Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. of the Scholar's ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 847-848.

The “National Income” Approach Is an Attempt to Justify the Marxian Idea That Under Capitalism Goods Are “Socially” Produced and Then “Appropriated” by Individuals

The concept of national income entirely obliterates the real conditions of production within a market economy. It implies the idea that it is not activities of individuals that bring about the improvement (or impairment) in the quantity of goods available, but something that is above and outside these activities. This mysterious something produces a quantity called “national income,” and then a second process “distributes” this quantity among the various individuals. The political meaning of this method is obvious. One criticizes the “inequality” prevailing in the “distribution” of national income. One taboos the question what makes the national income rise or drop and implies that there is no inequality in the contributions and achievements of the individuals that are generating the total quantity of national income.

If one raises the question what factors make the national income rise, one has only one answer: the improvement in equipment, the tools and machines employed in production, on the one hand, and the improvement in the utilization of the available equipment for the best possible satisfaction of human wants, on the other hand. The former is the effect of saving and the accumulation of capital, the latter of technological skill and of entrepreneurial activities. If one calls an increase in national income (not produced by inflation) economic progress, one cannot avoid establishing the fact that economic progress is the fruit of the endeavors of the savers, of the inventors, and of the entrepreneurs. What an unbiased analysis of the national income would have to show is first of all the patent inequality in the contribution of various individuals to the emergence of the magnitude called national income. It would furthermore have to show how the increase in the per-head quota of capital employed and the perfection of technological and entrepreneurial activities benefit—by raising the marginal productivity of labor and thereby wage rates and by raising the prices paid for the utilization of natural resources—also those classes of individuals who themselves did not contribute to the improvement of conditions and the rise in “national income.”

The “national income” approach is an abortive attempt to provide a justification for the Marxian idea that under capitalism goods are “socially” (gesellschaftlich) produced and then “appropriated” by individuals. It puts things upside down. In reality, the production processes are activities of individuals cooperating with one another. Each individual collaborator receives what his fellow men—competing with one another as buyers on the market—are prepared to pay for his contribution. For the sake of argument one may admit that, adding up the prices paid for every individual’s contribution, one may call the resulting total national income. But it is a gratuitous pastime to conclude that this total has been produced by the “nation” and to bemoan—neglecting the inequality of the various individuals’ contributions—the inequality in its alleged distribution.

—Ludwig von Mises, The Ultimate Foundation of Economic Science: An Essay on Method, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2006), 77-78.

The “Progressives” Who Today Masquerade as “Liberals” May Rant Against “Fascism”; Yet It Is Their Policy that Paves the Way for Hitlerism

An ideological struggle cannot be fought successfully with constant concessions to the principles of the enemy. Those who refute capitalism because it supposedly is inimical to the interest of the masses, those who proclaim “as a matter of course” that after the victory over Hitler the market economy will have to be replaced by a better system and, therefore, everything should be done now to make the government control of business as complete as possible, are actually fighting for totalitarianism. The “progressives” who today masquerade as “liberals” may rant against “fascism”; yet it is their policy that paves the way for Hitlerism.

Nothing could have been more helpful to the success of the National-Socialist (Nazi) movement than the methods used by the “progressives,” denouncing Nazism as a party serving the interests of “capital.” The German workers knew this tactic too well to be deceived by it again. Was it not true that, since the seventies of the [nineteenth] century, the ostensibly pro-labor Social-Democrats had fought all the pro-labor measures of the German government vigorously, calling them “bourgeois” and injurious to the interests of the working class? The Social-Democrats had consistently voted against the nationalization of the railroads, the municipalization of the public utilities, labor legislation, and compulsory accident, sickness, and old-age insurance, the German social security system which was adopted later throughout the world. Then after the war [World War I] the Communists branded the German Social-Democratic party and the Social-Democratic unions as “traitors to their class.” So the German workers realized that every party wooing them called the competing parties “willing servants of capitalism,” and their allegiance to Nazism would not be shattered by such phrases.

—Ludwig von Mises, Interventionism: An Economic Analysis, ed. Bettina Bien Greaves, trans. Thomas Francis McManus and Heinrich Bund (Indianapolis: Liberty Fund, 2011), 89-90.

The Nazis Have Succeeded in Entirely Eliminating the Profit Motive from the Conduct of Business

No private enterprise will ever fall prey to bureaucratic methods of management if it is operated with the sole aim of making profit. It has already been pointed out that under the profit motive every industrial aggregate, no matter how big it may be, is in a position to organize its whole business and each part of it in such a way that the spirit of capitalist acquisitiveness permeates it from top to bottom.

But ours is an age of a general attack on the profit motive. Public opinion condemns it as highly immoral and extremely detrimental to the commonweal. Political parties and governments are anxious to remove it and to put in its place what they call the “service” point of view and what is in fact bureaucratic management.

We do not need to deal in detail with what the Nazis have achieved in this regard. The Nazis have succeeded in entirely eliminating the profit motive from the conduct of business. In Nazi Germany there is no longer any question of free enterprise. There are no more entrepreneurs. The former entrepreneurs have been reduced to the status of Betriebsführer (shop manager). They are not free in their operation; they are bound to obey unconditionally the orders issued by the Central Board of Production Management, the Reichswirtschaftsministerium, and its subordinate district and branch offices. The government not only determines the prices and interest rates to be paid and to be asked, the height of wages and salaries, the amount to be produced and the methods to be applied in production; it allots a definite income to every shop manager, thus virtually transforming him into a salaried civil servant. This system has, but for the use of some terms, nothing in common with capitalism and a market economy. It is simply socialism of the German pattern, Zwangswirtschaft. It differs from the Russian pattern of socialism, the system of outright nationalization of all plants, only in technical matters. And it is, of course, like the Russian system, a mode of social organization that is purely authoritarian.

—Ludwig von Mises, Bureaucracy, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007), 53-54.

There Is Always Disequilibrium in the Real Economy and the State of “Equilibrium” Never Becomes Actual

A new sophisticated version of the image of the perfect society has arisen lately out of a crass misinterpretation of the procedure of economics. In order to deal with the effects of changes in the market situation, the endeavors to adjust production to these changes, and the phenomena of profit and loss, the economist constructs the image of a hypothetical, although unattainable, state of affairs in which production is always fully adjusted to the realizable wishes of the consumers and no further changes whatever occur. In this imaginary world tomorrow does not differ from today, no maladjustments can arise, and no need for any entrepreneurial action emerges. The conduct of business does not require any initiative; it is a self-acting process unconsciously performed by automatons impelled by mysterious quasi-instincts. There is for economists (and, for that matter, also for laymen discussing economic issues) no other way to conceive what is going on in the real, continually changing world than to contrast it in this way with a fictitious world of stability and absence of change. But the economists are fully aware that the elaboration of this image of an evenly rotating economy is merely a mental tool that has no counterpart in the real world in which man lives and is called to act. They did not even suspect that anybody could fail to grasp the merely hypothetical and ancillary character of their concept.

Yet some people misunderstood the meaning and significance of this mental tool. In a metaphor borrowed from the theory of mechanics, the mathematical economists call the evenly rotating economy the static state, the conditions prevailing in it “equilibrium,” and any deviation from “equilibrium” disequilibrium. This language suggests that there is something vicious in the very fact that there is always disequilibrium in the real economy and that the state of “equilibrium” never becomes actual. The merely imagined hypothetical state of undisturbed “equilibrium” appears as the most desirable state of reality. In this sense some authors call competition as it prevails in the changing economy imperfect competition. The truth is that competition can exist only in a changing economy. Its function is precisely to wipe out disequilibrium and to generate a tendency toward the attainment of “equilibrium.” There cannot be any competition in a state of “static equilibrium” because in such a state there is no point at which a competitor could interfere in order to perform something that satisfies the consumers better than what is already performed anyway. The very definition of “equilibrium” implies that there is no maladjustment anywhere in the economic system, and consequently no need for any action to wipe out maladjustments, no entrepreneurial activity, no entrepreneurial profits and losses. It is precisely the absence of the profits that prompts mathematical economists to consider the state of undisturbed static equilibrium as the ideal state, for they are inspired by the prepossession that entrepreneurs are useless parasites and profits are unfair lucre.

—Ludwig von Mises, Theory and History: An Interpretation of Social and Economic Evolution, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2005), 241-242.

8 of the 10 Points in the Communist Manifesto Have Been Executed by the German Nazis with a Radicalism That Would Have Delighted Marx

Karl Marx turned to socialism at a time when he did not yet know economics and because he did not know it. Later, when the failure of the Revolution of 1848 and 1849 forced him to flee Germany, he went to London. There, in the reading room of the British Museum, he discovered in the ’fifties not, as he boasted, the laws of capitalist evolution, but the writings of British political economy, the reports published by the British Government, and the pamphlets in which earlier British socialists used the theory of value as expounded by classical economics for a moral justification of labor’s claims. These were the materials out of which Marx built his “economic foundations” of socialism.

Before he moved to London Marx had quite naïvely advocated a program of interventionism. In the Communist Manifesto in 1848 he expounded ten measures for imminent action. These points, which are described as “pretty generally applicable in the most advanced countries,” are defined as “despotic inroads on the rights of property and on the conditions of bourgeois methods of production.” Marx and Engels characterize them as “measures, economically unsatisfactory and untenable, but which in the course of events outstrip themselves, necessitate further inroads upon the old social order and are indispensable as a means of entirely revolutionizing the whole mode of production.”  Eight of these ten points have been executed by the German Nazis with a radicalism that would have delighted Marx. The two remaining suggestions (namely, expropriation of private property in land and dedication of all rents of land to public expenditure, and abolition of all right of inheritance) have not yet been fully adopted by the Nazis. However, their methods of taxation, their agricultural planning, and their policies concerning rent restriction are daily approaching the goals determined by Marx. The authors of the Communist Manifesto aimed at a step-by-step realization of socialism by measures of social reform. They were thus recommending procedures which Marx and the Marxians in later years branded as socio-reformist fraud.

—Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2011), 171-172.

German Labor Turned toward Nazism because the Nazis Had a Program Dealing with Their Most Urgent Problem—Foreign Trade Barriers. The Other Parties Lacked Such a Program

A riddle that has puzzled nearly all writers dealing with the problems of Nazism is this: There were in Germany many millions organized in the parties of the Social Democrats, of the communists, and of the Catholic Center; they were members of the trade unions affiliated with these parties. How could the Nazis succeed in overthrowing these masses of resolute adversaries and in establishing their totalitarian system? Did these millions change their minds overnight? Or were they cowards, yielding to the terror of the Storm Troopers and waiting for the day of redemption? Are the German workers still Marxians? Or are they sincere supporters of the Nazi system?

There is a fundamental error in posing the problem in this way. People take it for granted that the members of the various party clubs and trade-unions were convinced Social Democrats, communists, or Catholics, and that they fully endorsed the creeds and programs of their leaders. It is not generally realized that party allegiance and trade-union membership were virtually obligatory. Although the closed shop system was not carried to the extreme in Weimar Germany that it is today in Nazi Germany and in some branches of foreign industry, it had gone far enough. In the greater part of Germany and in most of the branches of German production it was practically impossible for a worker to stay outside of all the big trade-union groups. If he wanted a job or did not want to be dismissed, or if he wanted the unemployment dole, he had to join one of these unions. They exercised an economic and political pressure to which every individual had to yield. To join the union became practically a matter of routine for the worker. He did so because everybody did and because it was risky not to. It was not for him to inquire into the Weltanschauung of his union. Nor did the union bureaucrats trouble themselves about the tenets or feelings of the members. Their first aim was to herd as many workers as possible into the ranks of their unions.

These millions of organized workers were forced to pay lip service to the creeds of their parties, to vote for their candidates at the elections for Parliament and for union offices, to subscribe to the party newspapers, and to avoid open criticism of the party’s policy. But daily experience nonetheless brought them the evidence that something was wrong with their parties. Every day they learned about new trade barriers established by foreign nations against German manufactures—that is, against the products of their own toil and trouble. As the trade unions, with few exceptions, were not prepared to agree to wage cuts, every new trade barrier immediately resulted in increased unemployment. The workers lost confidence in the Marxians and in the Center. They became aware that these men did not know how to deal with their problems and that all they did was to indict capitalism. German labor was radically hostile to capitalism, but it found denunciation of capitalism unsatisfactory in this instance. The workers could not expect production to keep up if export sales dropped. They therefore became interested in the Nazi arguments. Such happenings, said the Nazis, are the drawbacks of our unfortunate dependence on foreign markets and the whims of foreign governments. Germany is doomed if it does not succeed in conquering more space and in attaining self-sufficiency. All endeavors to improve the conditions of labor are vain as long as we are compelled to serve as wage slaves for foreign capitalists. Such words impressed the workers. They did not abandon either the trade unions or the party clubs since this would have had very serious consequences for them. They still voted the Social Democrat, the communist, or the Catholic ticket out of fear and inertia. But they became indifferent both to Marxian and to Catholic socialism and began to sympathize with national socialism. Years before 1933 the ranks of German trade-unions were already full of people secretly sympathizing with Nazism. Thus German labor was not greatly disturbed when the Nazis finally forcibly incorporated all trade-union members into their Labor Front. They turned toward Nazism because the Nazis had a program dealing with their most urgent problem—foreign trade barriers. The other parties lacked such a program.

The removal of the unpopular trade-union bureaucrats pleased the workers no less than the humiliations inflicted by the Nazis on the entrepreneurs and executives. The bosses were reduced to the rank of shop managers. They had to bow to the almighty party chiefs. The workers exulted over the misfortunes of their employers. It was their triumph when their boss, foaming with rage, was forced to march in their ranks on state holiday parades. It was balm for their hearts.

Then came the rearmament boom. There were no more unemployed. Very soon there was a shortage of labor. The Nazis succeeded in solving a problem that the Social Democrats had been unable to master. Labor became enthusiastic.

It is highly probable that the workers are now fully aware of the dark side of the picture. They are disillusioned. The Nazis have not led them into the land of milk and honey. In the desert of the ration cards the seeds of communism are thriving. On the day of the defeat the Labor Front will collapse as the Marxian and the Catholic trade unions did in 1933.

—Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2011), 245-247.

Ludwig von Mises Warns Austrian Bankers in 1919: “We Are Going Down a Road That Leads to the Collapse of Our Currency”

We are going down a road that leads to the collapse of our currency. Our financial policy has been reduced to one remedy: printing more and more paper money. There is almost no prospect that things will change in this respect. It is unreasonable to expect that the Social Democratic party will suddenly admit the inner collapse of its socialist ideas or openly recognize the falsity of all that it has proclaimed for decades. We cannot expect better things from the Christian Socialist party, whose economic ideal is the survival of autarchic farmers and of small craftsmen mainly concerned about their daily bread. . . . And when it comes to the German Nationalists, they have always tried to outdo the other parties by their social-reformist radicalism and are currently the special advocates for the large sector of public employees, whose syndicalism has dealt the final blow to our financial situation. . . . Our entire political life is impregnated with imperialist, mercantilist, and socialist thinking, and with the fantasies of “economic nationalism.” . . .

In terms of economic policy, however, our system, like that of the Bolsheviks, promotes an undisguised onslaught on private property, not only of the means of production but of consumption goods as well. And like Bolshevism, it survives only by using up the capital that has been accumulated over several generations under a freer economy. Movable and fixed equipment in public enterprises is not replaced as it gets worn out, and devious taxation and trade policies combine to hinder private enterprises in renovating their technical equipment. Food supplies are imported from other countries, and their counterpart is generated not by the export of domestically produced goods but by increasing indebtedness, the piecemeal sale of domestic productive capital—sale of shares, decimation of timber supplies—and an equally undesirable reduction of the domestic stock of consumption goods.

—Ludwig von Mises, “On the Actions to Be Taken in the Face of Progressive Currency Depreciation,” in Selected Writings of Ludwig von Mises, vol. 2, Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, ed. Richard M. Ebeling (Indianapolis: Liberty Fund, 2002), 47-49.

Ludwig von Mises on the Monetary System of German-Austria After the Dissolution of the Habsburg Dual Monarchy in October 1918

Austria and Hungary also largely financed the World War by using the printing press. At the very beginning of the war, the legislation was set aside that had imposed limitations on the expansion of bank notes by the Austro-Hungarian Bank, and on the use of credit by both states of the monarchy through their central bank. This cleared the way for inflation. The indebtedness of both states to the bank grew from month to month, the circulation of bank notes increased precipitously, and, in line with the proliferation of paper currency, the prices of goods and services and the rates of foreign bills of exchange increased.

When, in October 1918, the dual monarchy of the Habsburgs disintegrated into a number of separate national territories, some of them constituted as independent states while others incorporated into neighboring states, the Austro-Hungarian Bank finished its role as the joint institution enjoying the sole privilege of issuing currency for the entire monarchy. In the legal sense, its privilege of issuing notes continued until the end of 1919. However, in actual fact this privilege was only respected by German-Austria.

After the dissolution it was obvious that the Austro-Hungarian Bank would no longer be able to extend credit to the various successor states as it had extended to the Austrian and Hungarian states during the war. . . .

At the beginning of 1919, the first step in this direction was taken by the Southern Slav government [Yugoslavia]. Czechoslovakia was to follow. The notes of the Austro-Hungarian Bank circulating within their territories were stamped, and all other notes were no longer legal tender. Henceforth, only stamped notes could be used to fulfill all contracts denominated in crowns. This completed the creation of Southern Slav and Czechoslovak crowns, though the technical implementation of these reforms may have been deficient from a monetary point of view.

Now German-Austria, also, had to act. It could no longer wait until all other states had made the transition from the Austro-Hungarian crown to separate national crowns. It had to give up the Austro-Hungarian crown in order to avoid there being notes that, for whatever reason, had not been stamped in the other states that would now flow back into German-Austria and increase the inflation within German-Austria. It had to prevent the Czechoslovak Ministry of Finance from using the half of its citizens’ holdings of notes that had been retained upon the marking of currency for the purchasing of securities in German-Austria. Bank notes circulating in the Ukraine and in neutral foreign countries that totaled several billion crowns were not to be regarded simply as German-Austrian currency. This is why German-Austria, as well, applied a special mark to bank notes denominated in crowns and circulating within her territory. The decree of March 25, 1919, which had the force of law, withdrew legal-tender status from all obligations not so denominated. This created a separate German-Austrian currency. All further issues are then of a technical nature and pertain to the independent German-Austrian currency. Important though that may be, it takes second place behind the fact of the independence of the currency. Among the issues open for discussion is the question of whether or not to set up an independent German-Austrian central bank, and the further question of whether to keep the stamped notes in circulation or to replace them by newly designed notes because of the easy possibility of falsifying stamp imprints.

—Ludwig von Mises, “The Reentry of German-Austria into the German Reich and the Currency Question,” in Selected Writings of Ludwig von Mises, vol. 2, Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, ed. Richard M. Ebeling (Indianapolis: Liberty Fund, 2002), 69, 71.

A Major Defect in the German Banking System Is That Bankers Stopped Being Bankers in the Classical Sense of the Term

The events of the last few weeks have made obvious to everyone the defects in the German and Austrian banking systems, which previously were recognized by only a few.

At least until very recently, English and American banks have acted, in principle, purely as bankers in the classical sense of the term. That is, they have viewed their primary business to be the lending of money. The development of German banking activity made them not merely banks but also put them in the business of being industrial holding companies and investment trusts. This development did not occur through any logical process. In the beginning, German banks also limited themselves to the granting of credit. They ended up becoming partners in the businesses to which they had granted credit because they lent too much to these enterprises in proportion to their own capital. These banks were plunged into difficulties when there were attempts for immediate conversion of those enterprises’ stocks and debentures into cash.

Gradually, banks were pushed out of the role of creditor into the role of the chief interested party. As a result, these banks no longer faced those enterprises with the critical eye of a banker who carefully judges the businesses’ prospects as debtors, and who constantly evaluates the borrower’s creditworthiness in order to limit or withdraw lines of credit if changing circumstances warrant it. These banks no longer looked at businesses’ activities from the standpoint of a lender but from the viewpoint of the borrower. When the monitoring function that the lending institution normally exercises over businesses fell by the wayside, an essential regulator of the money market disappeared in fact if not in name.

The news media would appropriately offer strong criticisms of any combination of the banking business with production and trading activities, when individual enterprises and business firms made attempts to publicly raise investment money. But it was overlooked that at many respected banks that had readily put money into risky ventures (including three major banks in Vienna and Berlin that have recently failed) conditions were no better. The independence of these banks from industrial enterprises was in many cases purely formal in the legal sense.

The representatives of the banks who had to decide on the granting of credit were, unfortunately, in many instances, identical with the representatives of the debtors who appealed for loans and credit expansion. When writers on the economy spoke out against this combining of banking and industry, those in banking labeled them ivory-tower theoreticians. Modern conditions, it was said, absolutely demand the amalgamation of banking and industry. The failure of this system clearly proves who was right. The more cautious the bank was in the establishment of its associations, the better off it is today.

The most pressing reform that must be pushed for is the elimination of the existing close ties between the banks and industrial combinations. Everyone agrees with this. Of course, this goal can be only slowly achieved. It will be years before it will be possible to transfer the large debts of many enterprises from the banks to the public through the issuing of stocks and bonds. Recent experience has caused severe mistrust of stocks and bonds issued by industry, and this mistrust will not be quickly overcome. But the distrust is even stronger against stocks issued by banks, due to the serious doubts about their connections with industry.

—Ludwig von Mises, “The Economic Crisis and Lessons for Banking Policy,” in Selected Writings of Ludwig von Mises, vol. 1, Monetary and Economic Policy Problems Before, During, and After the Great War, ed. Richard M. Ebeling (Indianapolis: Liberty Fund, 2012), 296-298.

Foreign-Exchange Control Enables European Banks to Use the Government's Restrictions As a Way to Avoid Making Their Repayments Abroad

The primary problem behind the foreign-exchange controls comes from the fact that a number of European banks have invested long-term the equivalent of the short-term credits that have been extended to them from abroad, with no ability to pay on their part being anticipated in the near future. These banks are not in a position to fulfill obligations to their creditors to pay on demand or on short notice. It is the most difficult problem confronting these European banks today. Foreign-exchange control enables these banks to use the government’s restrictions as a way to avoid making their repayments abroad. But this does not resolve the underlying problem, it merely postpones it. This problem, however,must be resolved; otherwise a restoration of international relations in these as well as in credit matters in general cannot be restored.

Foreign-exchange control allows these banks to contact their creditors and temporarily arrange moratorium agreements. But these agreements do not provide a definitive solution. But a definitive solution must be found in order to restore the credit system and its functioning again in a normal manner. This is one of the principal conditions necessary for bringing an end to the world economic crisis.

The restructuring of the insolvent banks must therefore precede the abolition of foreign-exchange control. The banks whose balances are in severe deficit must be liquidated, and the losses that have occurred must be recognized as complete losses. It is useless to postpone the liquidation of these enterprises. The losses will only be made greater by delaying a final settling of accounts. Fortunately, the balances of the majority of the banks in question are not bankrupt but only insolvent. These banks would be in a sound condition if the maturity dates of their own debt obligations coincided with the dates when they received claims owed to them. It is necessary to make every effort to reach an arrangement through agreements between these banks and their foreign creditors, in collaboration with the governments of the various countries involved as well as with international organizations (the League of Nations, the Bank of International Settlements, the International Chamber of Commerce). This is all the more feasible considering that it is not in the interest of creditors that the banks in which they have placed their capital should fail and suffer further losses, only adding to the harm to themselves in the process. These arrangements should be initiated and carried out as soon as possible. Once they are, there will no longer be any obstacles, from this source, to delay the abolition of foreign-exchange control.

It would be superfluous, in this regard, to provide special legislation requiring that banks maintain their own liquidity in the future. The banks will do this in their own interest, particularly if it is clear that any bank that poorly manages it own affairs can have no hope of being kept afloat by government intervention at the expense of the rest of society.

—Ludwig von Mises, “The Return to Freedom of Exchange,” in Selected Writings of Ludwig von Mises, vol. 2, Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, ed. Richard M. Ebeling (Indianapolis: Liberty Fund, 2002), 217-218.