.jpg)
[This essay was originally published as "Die Legende von Versagen des Kapitalismus" in Der Internationale Kapitalismus und die Krise, Festschrift für Julius Wolf (1932)[1]]
by Ludwig von Mises
The nearly universal opinion expressed these days is
that the economic crisis of recent years marks the end of capitalism.
Capitalism allegedly has failed, has proven itself incapable of solving
economic problems, and so mankind has no alternative, if it is to survive, then
to make the transition to a planned economy, to socialism.
This is hardly a new idea. The socialists have always
maintained that economic crises are the inevitable result of the capitalistic
method of production and that there is no other means of eliminating economic
crises than the transition to socialism. If these assertions are expressed more
forcefully these days and evoke greater public response, it is not because the
present crisis is greater or longer than its predecessors, but rather primarily
because today public opinion is much more strongly influenced by socialist
views than it was in previous decades.
Part I
When there was no economic theory, the belief was that
whoever had power and was determined to use it could accomplish anything. In
the interest of their spiritual welfare and with a view toward their reward in
heaven, rulers were admonished by their priests to exercise moderation in their
use of power. Also, it was not a question of what limits the inherent
conditions of human life and production set for this power, but rather that
they were considered boundless and omnipotent in the sphere of social affairs.
The foundation of social sciences, the work of a large
number of great intellects, of whom David Hume and Adam Smith are most
outstanding, has destroyed this conception. One discovered that social power
was a spiritual one and not (as was supposed) a material and, in the rough
sense of the word, a real one. And there was the recognition of a necessary
coherence within market phenomena which power is unable to destroy. There was
also a realization that something was operative in social affairs that the powerful
could not influence and to which they had to accommodate themselves, just as
they had to adjust to the laws of nature. In the history of human thought and
science there is no greater discovery.
If one proceeds from this recognition of the laws of the
market, economic theory shows just what kind of situation arises from the
interference of force and power in market processes. The isolated intervention
cannot reach the end the authorities strive for in enacting it and must result
in consequences which are undesirable from the standpoint of the authorities.
Even from the point of view of the authorities themselves the intervention is
pointless and harmful. Proceeding from this perception, if one wants to arrange
market activity according to the conclusions of scientific thought — and we
give thought to these matters not only because we are seeking knowledge for its
own sake, but also because we want to arrange our actions such that we can
reach the goals we aspire to — one then comes unavoidably to a rejection of
such interventions as superfluous, unnecessary, and harmful, a notion which
characterizes the liberal teaching. It is not that liberalism wants to carry
standards of value over into science; it wants to take from science a compass
for market actions. Liberalism uses the results of scientific research in order
to construct society in such a way that it will be able to realize as
effectively as possible the purposes it is intended to realize. The
politico-economic parties do not differ on the end result for which they strive
but on the means they should employ to achieve their common goal. The liberals
are of the opinion that private property in the means of production is the only
way to create wealth for everyone, because they consider socialism impractical
and because they believe that the system of interventionism (which according to
the view of its advocates is between capitalism and socialism) cannot achieve
its proponents' goals.
The liberal view has found bitter opposition. But the
opponents of liberalism have not been successful in undermining its basic
theory nor the practical application of this theory. They have not sought to
defend themselves against the crushing criticism which the liberals have
leveled against their plans by logical refutation; instead they have used
evasions. The socialists considered themselves removed from this criticism,
because Marxism has declared inquiry about the establishment and the efficacy
of a socialist commonwealth heretical; they continued to cherish the socialist
state of the future as heaven on earth, but refused to engage in a discussion
of the details of their plan. The interventionists chose another path. They
argued, on insufficient grounds, against the universal validity of economic
theory. Not in a position to dispute economic theory logically, they could
refer to nothing other than some "moral pathos," of which they spoke
in the invitation to the founding meeting of the Vereins für Sozialpolitik [Association for Social Policy] in Eisenach. Against logic
they set moralism, against theory emotional prejudice, against argument the
reference to the will of the state.
Economic theory predicted the effects of
interventionism and state and municipal socialism exactly as they happened. All the warnings were
ignored. For 50 or 60 years the politics of European countries has been
anticapitalist and antiliberal. More than 40 years ago Sidney Webb (Lord
Passfield) wrote,
it can now fairly be claimed that the socialist philosophy of to-day is but the conscious and explicit assertion of principles of social organization which have been already in great part unconsciously adopted. The economic history of the century is an almost continuous record of the progress of Socialism.[2]
That was at the beginning of this development and it
was in England where liberalism was able for the longest time to hold off the
anticapitalistic economic policies. Since then interventionist policies have
made great strides. In general the view today is that we live in an age in
which the "hampered economy" reigns — as the forerunner of the
blessed socialist collective consciousness to come.
Now, because indeed that which economic theory
predicted has happened, because the fruits of the anticapitalistic economic
policies have come to light, a cry is heard from all sides: this is the decline
of capitalism, the capitalistic system has failed!
Liberalism cannot be deemed responsible for any of the
institutions which give today's economic policies their character. It was
against the nationalization and the bringing under municipal control of
projects which now show themselves to be catastrophes for the public sector and
a source of filthy corruption; it was against the denial of protection for
those willing to work and against placing state power at the disposal of the
trade unions, against unemployment compensation, which has made unemployment a
permanent and universal phenomenon, against social insurance, which has made
those insured into grumblers, malingers, and neurasthenics, against tariffs
(and thereby implicitly against cartels), against the limitation of freedom to
live, to travel, or study where one likes, against excessive taxation and
against inflation, against armaments, against colonial acquisitions, against
the oppression of minorities, against imperialism and against war. It put up
stubborn resistance against the politics of capital consumption. And liberalism
did not create the armed party troops who are just waiting for the convenient
opportunity to start a civil war.
Part II
The line of argument that leads to blaming capitalism
for at least some of these things is based on the notion that entrepreneurs and
capitalists are no longer liberal but interventionist and statist. The fact is
correct, but the conclusions people want to draw from it are wrong-headed.
These deductions stem from the entirely untenable Marxist view that
entrepreneurs and capitalists protected their special class interests through
liberalism during the time when capitalism flourished but now, in the late and
declining period of capitalism, protect them through interventionism. This is
supposed to be proof that the "hampered economy" of interventionism
is the historically necessary economics of the phase of capitalism in which we
find ourselves today. But the concept of classical political economy and of
liberalism as the ideology (in the Marxist sense of the word) of the
bourgeoisie is one of the many distorted techniques of Marxism. If
entrepreneurs and capitalists were liberal thinkers around 1800 in England and
interventionist, statist, and socialist thinkers around 1930 in Germany, the
reason is that entrepreneurs and capitalists were also captivated by the
prevailing ideas of the times. In 1800 no less than in 1930 entrepreneurs had
special interests which were protected by interventionism and hurt by
liberalism.
Today the great entrepreneurs are often cited as
"economic leaders." Capitalistic society knows no "economic
leaders." Therein lies the characteristic difference between socialist
economies on the one hand and capitalist economies on the other hand: in the
latter, the entrepreneurs and the owners of the means of production follow no
leadership save that of the market. The custom of citing initiators of great
enterprises as economic leaders already gives some indication that these days
it is not usually the case that one reaches these positions by economic
successes but rather by other means.
In the interventionist state it is no longer of
crucial importance for the success of an enterprise that operations be run in
such a way that the needs of the consumer are satisfied in the best and least
expensive way; it is much more important that one has "good
relations" with the controlling political factions, that the interventions
redound to the advantage and not the disadvantage of the enterprise. A few more
marks' worth of tariff protection for the output of the enterprise, a few marks
less tariff protection for the inputs in the manufacturing process can help the
enterprise more than the greatest prudence in the conduct of operations. An
enterprise may be well run, but it will go under if it does not know how to
protect its interests in the arrangement of tariff rates, in the wage
negotiations before arbitration boards, and in governing bodies of cartels. It
is much more important to have "connections" than to produce well and
cheaply. Consequently the men who reach the top of such enterprises are not
those who know how to organize operations and give production a direction which
the market situation demands, but rather men who are in good standing both
"above" and "below," men who know how to get along with the
press and with all political parties, especially with the radicals, such that
their dealings cause no offense. This is that class of general directors who
deal more with federal dignitaries and party leaders than with those from whom
they buy or to whom they sell.
Because many ventures depend on political favors,
those who undertake such ventures must repay the politicians with favors. There
has been no big venture in recent years which has not had to expend
considerable sums for transactions which from the outset were clearly
unprofitable but which, despite expected losses, had to be concluded for
political reasons. This is not to mention contributions to non-business
concerns — election funds, public welfare institutions, and the like.
Powers working toward the independence of the
directors of the large banks, industrial concerns, and joint-stock companies
from the stockholders are asserting themselves more strongly. This politically
expedited "tendency for big businesses to socialize themselves," that
is, for letting interests other than the regard "for the highest possible
yield for the stockholders" determine the management of the ventures, has
been greeted by statist writers as a sign that we have already vanquished
capitalism.[3] In the course of the reform of German stock
rights, even legal efforts have already been made to put the interest and
well-being of the entrepreneur, namely "his economic, legal, and social
self-worth and lasting value and his independence from the changing majority of
changing stockholders,"[4] above those of the shareholder.
With the influence of the state behind them and
supported by a thoroughly interventionist public opinion, the leaders of big
enterprises today feel so strong in relation to the stockholders that they
believe they need not take their interests into account. In their conduct of
the businesses of society in those countries in which statism has most strongly
come to rule — for example in the successor states of the old Austro-Hungarian
Empire — they are as unconcerned about profitability as the directors of public
utilities. The result is ruin. The theory which has been advanced says that
these ventures are too large to be run simply with a view toward profit. This
concept is extraordinarily opportune whenever the result of conducting business
while fundamentally renouncing profitability is the bankruptcy of the
enterprise. It is opportune, because at this moment the same theory demands the
intervention of the state for support of enterprises which are too big to be
allowed to fail.
Part III
It is true that socialism and interventionism have not
yet succeeded in completely eliminating capitalism. If they had, we Europeans,
after centuries of prosperity, would rediscover the meaning of hunger on a
massive scale. Capitalism is still prominent enough that new industries are
coming into existence, and those already established are improving and
expanding their equipment and operations. All the economic advances which have
been and will be made stem from the persistent remnant of capitalism in our society.
But capitalism is always harassed by the intervention of the government and
must pay as taxes a considerable part of its profits in order to defray the
inferior productivity of public enterprise.
The crisis under which the world is presently suffering
is the crisis of interventionism and of state and municipal socialism, in short
the crisis of anticapitalist policies. Capitalist society is guided by the play
of the market mechanism. On that issue there is no difference of opinion. The
market prices bring supply and demand into congruence and determine the
direction and extent of production. It is from the market that the capitalist
economy receives its sense. If the function of the market as regulator of
production is always thwarted by economic policies in so far as the latter try
to determine prices, wages, and interest rates instead of letting the market
determine them, then a crisis will surely develop.
"Bastiat has not failed, but rather Marx and Schmoller."
Notes
[1] This essay was translated from the German by
Jane E. Sanders, who wishes to gratefully acknowledge the comments and
suggestions of Professor John T. Sanders, Rochester Institute of Technology,
and Professor David R. Henderson, University of Rochester, in the preparation
of the translation.
[2] Cf. Webb, Fabian Essays in Socialism.…
Ed. by G. Bernard Shaw. (American ed., edited by H.G. Wilshire. New York: The
Humboldt Publishing Co., 1891) p. 4.
[3] Cf. Keynes, "The End of
Laisser-Faire," 1926, see, Essays in Persuasion (New
York: W.W. Norton & Co., Inc., 1932) pp. 314–315.
[4] Cf. Passow, Der Strukturwandel der
Aktiengesellcschaft im Lichte der Wirtschaftsenquente, (Jena 1939), S.4.
No comments:
Post a Comment