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The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

Advancing the scholarship of liberty in the tradition of the Austrian School

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by Ludwig von Mises


The analysis of the technical characteristics of bureaucratic management and of its opposite, profit management, provides a clue for a fair and unbiased valuation of both systems of doing things under the division of labor.

Public administration, the handling of the government apparatus of coercion and compulsion, must necessarily be formalistic and bureaucratic. No reform can remove the bureaucratic features of the government’s bureaus. It is useless to blame them for their slowness and slackness. It is vain to lament over the fact that the assiduity, carefulness, and painstaking work of the average bureau clerk are, as a rule, below those of the average worker in private business. (There are, after all, many civil servants whose enthusiastic fervor amounts to unselfish sacrifice.) In the absence of an unquestionable yardstick of success and failure it is almost impossible for the vast majority of men to find that incentive to utmost exertion that the money calculus of profit-seeking business easily provides. It is of no use to criticize the bureaucrat’s pedantic observance of rigid rules and regulations. Such rules are indispensable if public administration is not to slip out of the hands of the top executives and degenerate into the supremacy of subordinate clerks. These rules are, moreover, the only means of making the law supreme in the conduct of public affairs and of protecting the citizen against despotic arbitrariness.

It is easy for an observer to indict the bureaucratic apparatus for extravagance. But the executive with whom the responsibility for perfect service rests sees the matter from another angle. He does not want to run too high a risk. He prefers to be on the safe side and to be doubly sure.

All such deficiencies are inherent in the performance of services which cannot be checked by money statements of profit and loss. Indeed we would never have recognized that they really are deficiencies if we were not in a position to compare the bureaucratic system with the operation of profit-seeking enterprise. This much-abused system of the “mean” striving for profit made people efficiency conscious and eager for the utmost rationalization. But we cannot help it. We must put up with the fact that one cannot apply to a police department or to the office of a tax collector the well-tried methods of profit-seeking business.

Yet the whole matter takes on a quite different meaning in view of the fanatical endeavors to transform the entire apparatus of production and distribution into a mammoth bureau. Lenin’s ideal of taking the organization of the government’s postal service as the pattern of society’s economic organization and of making every man a cog in a vast bureaucratic machine[1] makes it imperative to unmask the inferiority of bureaucratic methods when compared with those of private business. The aim of such a scrutiny is certainly not to disparage the work of tax collectors, customs officers, and patrolmen or to belittle their achievements. But it is necessary to show in what essential respects a steel plant differs from an embassy and a shoe plant from a marriage license bureau, and why it would be mischievous to reorganize a bakery according to the pattern of the post office.

What is called in a very biased terminology the substitution of the service principle for the profit principle would result in an abandonment of the only method making for rationality and calculation in the production of necessities. The profit earned by the entrepreneur is expressive of the fact that he has well served the consumers, that is, all the people. But with regard to the performance of bureaus no method for establishing success or failure by calculation procedures is available.

In any socialist system the central board of production management alone would have the power to order, and everybody else would have to carry out the orders received. All people except the production czar would have to comply unconditionally with instructions, codes, rules, and regulations drafted by a superior body. Of course every citizen might have the right to suggest some changes in this immense system of regimentation. But the way from such a suggestion to its acceptance by the competent supreme authority would at best be as far and onerous as the way is today from a letter to the editor or an article in a periodical suggesting an amendment of a law to its passage by the legislature.

There have been in the course of history many movements asking with enthusiasm and fanaticism for a reform of social institutions. People fought for their religious convictions, for the preservation of their civilization, for freedom, for self-determination, for the abolition of serfdom and slavery, for fairness and justice in court procedure. Today millions are fascinated by the plan to transform the whole world into a bureau, to make everybody a bureaucrat, and to wipe out any private initiative. The paradise of the future is visualized as an all-embracing bureaucratic apparatus. The most powerful reform movement that history has ever known, the first ideological trend not limited to a section of mankind only but supported by people of all races, nations, religions, and civilizations aims at all-round bureaucratization. The post office is the model for the construction of the New Jerusalem. The post-office clerk is the prototype of future man. Streams of blood have been shed for the realization of this ideal.

In this book we are discussing not persons but systems of social organization. We do not mean that the post-office clerk is inferior to anybody else. What must be realized is only that the strait jacket of bureaucratic organization paralyzes the individual’s initiative, while within the capitalist market society an innovator still has a chance to succeed. The former makes for stagnation and preservation of inveterate methods, the latter makes for progress and improvement. Capitalism is progressive, socialism is not. One does not invalidate this argument by pointing out that the Bolshevists have copied various American innovations. So did all oriental peoples. But it is a non sequitur to deduce from this fact that all civilized nations must copy the Russian methods of social organization.

The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office. Every man but one a subordinate clerk in a bureau. What an alluring utopia! What a noble cause to fight!

Against all this frenzy of agitation there is but one weapon available: reason. Just common sense is needed to prevent man from falling prey to illusory fantasies and empty catchwords.

[1]Lenin, State and Revolution (1917; New York ed., 1935), p. 44.

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