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Economics

Mises can save the world

If they had listened to Mises in 1927, the world might have been saved. There would have been no Holocaust, Gulag, bombing of civilians, prolonged Depression and vast human suffering.

That was then. What can we do now? We can revisit his great work Liberalism, drink deeply from its wisdom and apply it in our time. Liberalism is this week’s release in the Laissez Faire Club, with a new introduction by Toby Baxendale. If you are not a member, you can join now.

Using the word “liberalism” to mean genuine freedom takes some getting used to. Today’s self-described liberals push government power as the solution to all our economic and social woes.

But government is not liberal! Government is confiscation, coercion, the Taser, the jail cell!

Another use of the term occurs when self-described conservatives condemn liberalism as the cancer that is killing society. What? Thomas Jefferson was a liberal. So was John Locke. So was Alexis de Tocqueville. Their ideas built the world we love.

Most of all, there was Ludwig von Mises, who proudly called himself a liberal. He was the 20th century’s great defender of capitalism and the free society. He decided to settle the issue about what liberalism is once and for all.

This book is Mises’ classic statement in defense of a free society, one of the last statements of the old liberal school and a text from which we can continue to learn. It has been the conscience of a global movement for liberty for 80 years.

Liberalism first appeared in 1927 as a follow-up to both Mises’ devastating 1922 book showing that socialism would fail and his 1926 book criticizing interventionism. It was written to address the burning question: If not socialism, and if not fascism or interventionism, what form of social arrangement is most conducive to human flourishing? Mises’ answer, summed up in the title, is liberalism.

Even in these times, Mises was aware that the meaning of liberalism had changed from its common use in the 19th century. He had to clarify that his understanding not only included commercial freedom, but was rooted in it. Without economic freedom, no other form of freedom can have material meaning.

But Mises did not accept the idea that the term had been merely stolen from the proponents of free markets. He thought it had never been worked out scientifically, and therefore, the theory of liberalism became vulnerable to political manipulation.

Thus did Mises do more than restate classical liberal doctrine. He gave a thoroughly modern defense of freedom, one that corrected the errors of the old liberal school by rooting the idea of liberty in the institution of private property (the subject on which the classical school was sometimes unclear). That is the grand contribution of this volume:

The program of liberalism, therefore, if condensed into a single word, would have to read: property, that is, private ownership of the means of production… All the other demands of liberalism result from this fundamental demand.

But there are other insights. He demonstrates that the order inherent in a laissez-faire society stems not from a mystical source, but from the capacity of the price system to provide a means of rational coordination between independent actors. This rational pursuit of individual interest leads to the division of labor, the development of the money economy, the extended order of production and the coordinative signals of interest and profit. He argues that it is within man’s rational capacity to understand the reasons for the prosperity and orderliness of freedom.

He further shows that political decentralization and secession are the best means to peace and political liberty. As for religion, he recommends the complete separation of church and state, and a cultural conviction that favors tolerance. On immigration, he favors the freedom of movement. On education, state involvement must end — completely.

In some ways, this is the most political of Mises’ treatises, and also one of the most-inspiring books ever written on the idea of liberty. It remains a book that can set the world on fire for freedom, which is probably why it has been translated into more than a dozen languages.

Yet the concluding message here is something that every freedom lover needs to seriously contemplate and return to again and again. Consider his words:

Liberalism is no religion, no worldview, no party of special interests. It is no religion, because it demands neither faith nor devotion, because there is nothing mystical about it and because it has no dogmas. It is no worldview because it does not try to explain the cosmos, and because it says nothing and does not seek to say anything about the meaning and purpose of human existence. It is no party of special interests, because it does not provide or seek to provide any special advantage whatsoever to any individual or any group. It is something entirely different. It is an ideology, a doctrine of the mutual relationship among the members of society and, at the same time, the application of this doctrine to the conduct of men in actual society. It promises nothing that exceeds what can be accomplished in society and through society. It seeks to give men only one thing: the peaceful, undisturbed development of material well-being for all, in order thereby to shield them from the external causes of pain and suffering as far as it lies within the power of social institutions to do so at all. To diminish suffering, to increase happiness: That is its aim.

No sect and no political party has believed that it could afford to forgo advancing its cause by appealing to men’s senses. Rhetorical bombast, music and song resound, banners wave, flowers and colors serve as symbols and the leaders seek to attach their followers to their own person. Liberalism has nothing to do with all this. It has no party flower and no party color, no party song and no party idols, no symbols and no slogans. It has the substance and the arguments. These must lead it to victory.

This is more than a theory; it is a proposed strategy for achieving a dream. It is one that should attract anyone who is truly serious about making a contribution to the cause of freedom.

2 comments to Mises can save the world

  • Paul Marks

    Most importantly if the world (specifically the United States) listened to the Ludwig Von Mises there would have been no Great Depression.

    When people say “the Federal Reserve caused the depression” they are correct – but one must be careful to ask them the question “what, exactly, do you mean by that?”

    If they reply “the Federal Reserve should not have allowed the money supply to collapse after 1929″ then do (to be blunt) do not know what they are talking about.

    Notes and coins did not vanish after 1929 – what “collapsed” was “broad money”, “bank credit” – the CREDIT BUBBLE.

    A bubble encouraged (every step of the way) by Benjamin Strong of the New York Federal Reserve and his friend M. Norman of the Bank of England.

    It was the CREATION of the credit bubble not failing to keep this fool’s paradise going for ever, that was the error.

    And it was against the creation of the credit bubble that Ludwig Von Mises faught in the late 1920s – and so did those who followed him.

    And they faught against the followers of Irving Fisher (Keynes was not yet that important).

    Fisher was utterly ignorant of basic monetary economics (which is why both the crash of 1921 and the crash of 1929 came as a total surpise to him – he thought of inflation as an increase in the “price level” not an increase in the money supply, a mistake so basic that is unforgiveable in an economist who supposedly specialised in money and banking).

    Sadly the late Milton Friedman called Irving Fisher the greatest American economist of the 20th century.

    Whilst such attitudes remain common, there is little hope.

    Of course the absurd response of Herbert “The Forgotten Progressive” Hoover to the crash also needs to be condemned.

    His response was new government spending programs, higher taxes (both on the rich and on imports), and (above all) a fanatical effort to prevent a fall in real wage rates – i.e. the “demand” fallacy.

    This policy meant that long term mass unemployment (unlike in 1921 where it had gone into decline after a few months) would “stick”.

    Wages were “sticky downwards” not because of some natural feature – but because of GOVERNMENT POLICY, the policy of Herbert The Forgotten Progressive Hoover.

  • Jeffery Tucker,

    I have enjoyed your talks, interviews and essays at mises.org. I have read several of mises’ books and many of his essays. I will read Liberalism, now.

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