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The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

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Economic Freedom and Interventionism
Ludwig von Mises

I. Economic Freedom

At one of his seminars, a student asked Professor Mises, "Why aren't all businessmen in favor of capitalism?" "That very question," Mises answered, "is Marxist." Mises' response shocked me at the time. It took me some time to realize what he meant. The questioner assumed, as had Karl Marx, that businessmen had a special group or "class" interest in capitalism that other people didn't.

"Capitalism," Mises went on, "benefits everyone?consumers, the masses. It doesn't benefit only businessmen. As a matter of fact, under capitalism some businessmen suffer losses. A businessman's position on the market is never secure; the door is always open to competitors who may challenge his position and deprive him of profits. Yet it is this very competition under capitalism that assures consumers that businessmen will do their best to furnish them, the consumers, with the goods and services they want."

In the articles and papers in this first section, Mises reveals again and again that he is no apologist for business or businessmen. He is interested in determining the economic system which best improves the welfare of individuals and the living conditions of the masses. And that economic system is economic freedom under capitalism. Only with economic freedom, Mises says, are more goods and services produced. Only under capitalism do wages rise and the living standards of the masses improve. The reason? Consumers are sovereign in capitalist free markets. They are in a position to let entrepreneurs know what they want most urgently, by rewarding with profits those who satisfy their wants and by imposing losses and thus withdrawing wealth from those who fail. This system of rewards and penalties guides production and makes sure that more of the goods and services consumers want will be produced, thus raising the wages of workers and the living standards of everyone.

The market is the outcome of peaceful social cooperation and economic freedom. And it is the market that makes individual freedom, justice, morality, innovation, and social harmony possible. As Mises writes in this section:

"A man has freedom as far as he shapes his life according to his own plans," and
"[M]orality makes sense only when addressing individuals who are free agents."

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