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Advancing Austrian Economics, Liberty, and Peace

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by Ludwig von Mises




High Brows turn up their noses at Horatio Alger’s philosophy. Yet Alger succeeded better than anybody else in stressing the most characteristic point of capitalist society. Capitalism is a system under which everybody has the chance of acquiring wealth; it gives everybody unlimited opportunity. Not everybody, of course, is favored by good luck. Very few become millionaires. But everybody knows that strenuous effort and nothing less than strenuous effort pays. All roads are open to the smart youngster. He is optimistic in the awareness of his own strength. He has self-confidence and is full of hope. And as he grows older and realizes that many of his plans have been frustrated, he has no cause for despair. His children will start the race again and he does not see any reason why they should not succeed where he himself failed. Life is worth living because it is full of promise.

All this was literally true of America. In old Europe there still survived many checks inherited from the ancien regime. Even in the prime of liberalism, aristocracy and officialdom were struggling for the maintenance of their privileges. But in America there were no such remnants of the Dark Ages. It was in this sense a young country, and it was a free country. Here were neither industrial codes nor guilds. Thomas Alva Edison and Henry Ford did not have to overcome any obstacles erected by shortsighted governments and a narrow-minded public opinion.

Under such conditions the rising generation are driven by the spirit of the pioneer. They are born into a progressing society, and they realize that it is their task to contribute something to the improvement of human affairs. They will change the world, shape it according to their own ideas. They have no time to waste; tomorrow is theirs and they must prepare for the great things that are waiting for them. They do not talk about their being young and about the rights of youth; they act as young people must act. They do not boast about their own “dynamism”; they are dynamic and there is no need for them to emphasize this quality. They do not challenge the older generation with arrogant talk. They want to beat it by their deeds.

But it is quite a different thing under the rising tide of bureaucratization. Government jobs offer no opportunity for the display of personal talents and gifts. Regimentation spells the doom of initiative. The young man has no illusions about his future. He knows what is in store for him. He will get a job with one of the innumerable bureaus, he will be but a cog in a huge machine the working of which is more or less mechanical. The routine of a bureaucratic technique will cripple his mind and tie his hands. He will enjoy security. But this security will be rather of the kind that the convict enjoys within the prison walls. He will never be free to make decisions and to shape his own fate. He will forever be a man taken care of by other people. He will never be a real man relying on his own strength. He shudders at the sight of the huge office buildings in which he will bury himself.

In the decade preceding the First World War Germany, the country most advanced on the path toward bureaucratic regimentation, witnessed the appearance of a phenomenon hitherto unheard of: the youth movement. Turbulent gangs of untidy boys and girls roamed the country, making much noise and shirking their school lessons. In bombastic words they announced the gospel of a golden age. All preceding generations, they emphasized, were simply idiotic; their incapacity has converted the earth into a hell. But the rising generation is no longer willing to endure gerontocracy, the supremacy of impotent and imbecile senility. Henceforth the brilliant youths will rule. They will destroy everything that is old and useless, they will reject all that was dear to their parents, they will substitute new real and substantial values and ideologies for the antiquated and false ones of capitalist and bourgeois civilization, and they will build a new society of giants and supermen.

The inflated verbiage of these adolescents was only a poor disguise for their lack of any ideas and of any definite program. They had nothing to say but this: We are young and therefore chosen; we are ingenious because we are young; we are the carriers of the future; we are the deadly foes of the rotten bourgeois and Philistines. And if somebody was not afraid to ask them what their plans were, they knew only one answer: Our leaders will solve all problems.

It has always been the task of the new generation to provoke changes. But the characteristic feature of the youth movement was that they had neither new ideas nor plans. They called their action the youth movement precisely because they lacked any program which they could use to give a name to their endeavors. In fact they espoused entirely the program of their parents. They did not oppose the trend toward government omnipotence and bureaucratization. Their revolutionary radicalism was nothing but the impudence of the years between boyhood and manhood; it was a phenomenon of a protracted puberty. It was void of any ideological content.

The chiefs of the youth movement were mentally unbalanced neurotics. Many of them were affected by a morbid sexuality; they were either profligate or homosexual. None of them excelled in any field of activity or contributed anything to human progress. Their names are long since forgotten; the only trace they left were some books and poems preaching sexual perversity. But the bulk of their followers were quite different. They had one aim only: to get a job as soon as possible with the government. Those who were not killed in the wars and revolutions are today pedantic and timid bureaucrats in the innumerable offices of the German Zwangswirtschaft. They are obedient and faithful slaves of Hitler. But they will be no less obedient and faithful handy men of Hitler’s successor, whether he is a German nationalist or a puppet of Stalin.

From Germany the youth movement spread to other countries. Italian Fascism masked itself as a youth movement. Its party song, “Giovinezza,” is a hymn of youth. Its buffoon Duce boasted still in his late fifties of his youthful vigor and was anxious to conceal his age like a coquettish lady. But the only concern of the rank-and-file Fascist was to get a government job. In the time of the Ethiopian war the present writer asked some graduate students of one of the great Italian universities for an explanation of their hostility to France and Great Britain. The answer was amazing: “Italy,” they said, “does not offer enough opportunity for its intelligentsia. We want to conquer British and French colonies in order to get in the administration of these territories the jobs which are now in the hands of British and French bureaucrats.”

The youth movement was an expression of the uneasiness that young people felt in face of the gloomy prospects that the general trend toward regimentation offered them. But it was a counterfeit rebellion doomed to failure because it did not dare to fight seriously against the growing menace of government all-round control and totalitarianism. The tumultuous would-be rioters were impotent because they were under the spell of the totalitarian superstitions. They indulged in seditious babble and chanted inflammatory songs, but they wanted first of all government jobs.

Today the youth movement is dead in the countries most advanced on the way toward totalitarianism. In Russia, in Germany, and in Italy the children and the adolescents are firmly integrated into the all-embracing apparatus of state control. Children from the tenderest age are members of the political organizations. From the cradle to the grave all citizens are subject to the machine of the one-party system, bound to obey without asking questions. No “private” associations or gatherings are permitted. The official apparatus does not tolerate any competition. The official ideology does not tolerate any dissenters. Such is the reality of the bureaucratic utopia.


The youth movement was an impotent and abortive revolt of youth against the menace of bureaucratization. It was doomed because it did not attack the seed of the evil, the trend toward socialization. It was in fact nothing but a confused expression of uneasiness, without any clear ideas and definite plans. The revolting adolescents were so completely under the spell of socialist ideas that they simply did not know what they wanted.

It is evident that youth is the first victim of the trend toward bureaucratization. The young men are deprived of any opportunity to shape their own fate. For them there is no chance left. They are in fact “lost generations” for they lack the most precious right of every rising generation, the right to contribute something new to the old inventory of civilization. The slogan, Mankind has reached the stage of maturity, is their undoing. What are young people to whom nothing is left to change and to improve? Whose only prospect is to start at the lowest rung of the bureaucratic ladder and to climb slowly in strict observance of the rules formulated by older superiors? Seen from their viewpoint bureaucratization means subjection of the young to the domination of the old. This amounts to a return to a sort of caste system.

Among all nations and civilizations—in the ages preceding the rise of modern liberalism and its offspring, capitalism—society was based on status. The nation was divided into castes. There were privileged castes such as kings and noblemen, and underprivileged castes such as serfs and slaves. A man was born into a definite caste, remained in it throughout his whole life and bequeathed his caste status to his children. He who was born into one of the lower castes was forever deprived of the right to attain one of the stations of life reserved to the privileged. Liberalism and capitalism abolished all such discrimination and made all people equal under the law. Now virtually everybody was free to compete for every place in the community.

Marxism provides a different interpretation of liberalism’s achievements. The main dogma of Karl Marx is the doctrine of the irreconcilable conflict of economic classes. Capitalist society is divided into classes the interests of which are antagonistic. Thus the class struggle is inevitable. It will disappear only in the future classless society of socialism.

The most remarkable fact about this doctrine is that it has never been explicitly expounded. In the Communist Manifesto the instances used for the exemplification of class struggles are taken from the conflict between castes. Then Marx adds that the modern bourgeois society has established new classes. But he never said what a class is and what he had in mind in speaking of classes and class antagonisms and in coordinating classes to castes. All his writings center around these never-defined terms. Although indefatigable in publishing books and articles full of sophisticated definitions and scholastic hairsplitting, Marx never attempted to explain in unambiguous language what the characteristic mark of an economic class is. When he died, thirty-five years after the publication of the Communist Manifesto, he left the manuscript of the third volume of his main treatise, Capital, unfinished. And, very significantly, the manuscript breaks off just at the point at which the explanation of this fundamental notion of his entire philosophy was to be given. Neither Marx nor any one of the host of Marxian writers could tell us what a social class is, much less whether such social classes really play in the social structure the role assigned to them in the doctrine. Of course, from the logical viewpoint it is permissible to classify things according to any trait chosen. The question is only whether a classification on the ground of the traits selected is useful for further investigation and for the clarification and amplification of our knowledge. The question is therefore not whether the Marxian classes really exist, but whether they really have the importance attached to them by Marx. Marx failed to provide a precise definition of the concept social class that he had used in all his writings in a loose and uncertain way, because a clear definition would have unmasked its futility and its valuelessness for dealing with economic and social problems and the absurdity of coordinating it to social castes.

The characteristic feature of a caste is its rigidity. The social classes, as Marx exemplified them in calling the capitalists, the entrepreneurs, and the wage earners distinct classes, are characterized by their flexibility. There is a perpetual change in the composition of the various classes. Where today are the scions of those who in the days of Marx were entrepreneurs? And where were the ancestors of the contemporary entrepreneurs in the days of Marx? Access to the various stations of modern capitalist society is open to everyone. We may call the United States senators a class without violating logical principles. But it would be a mistake to coordinate them to a hereditary aristocratic caste, notwithstanding the fact that some senators may be descendants of senators of earlier days.

The point has already been stressed that the anonymous forces operating on the market are continuously determining anew who should be entrepreneur and who should be capitalist. The consumers vote, as it were, for those who are to occupy the exalted positions in the setting of the nation’s economic structure.

Now under socialism there are neither entrepreneurs nor capitalists. In this sense, namely, that what Marx called a class will no longer exist, he was right to call socialism a classless society. But this is of no avail. There will be other differences in social functions which we can call classes with surely no less justification than that of Marx. There will be those who issue orders and those who are bound to obey these orders unconditionally; there will be those who make plans and those whose job it is to execute these plans.

The only thing that counts is the fact that under capitalism everybody is the architect of his own fortune. A boy eager to improve his own lot must rely on his own strength and effort. The vote of the consumers passes judgment without respect to persons. The achievements of the candidate, not his person, are valued. Work well done and services well rendered are the only means to succeed.

Under socialism, on the contrary, the beginner must please those already settled. They do not like too efficient-newcomers. (Neither do old, established entrepreneurs like such men; but, under the supremacy of the consumers, they cannot prevent their competition.) In the bureaucratic machine of socialism the way toward promotion is not achievement but the favor of the superiors. The youth depends entirely on the kind disposition of the old men. The rising generation is at the mercy of the aged.

It is useless to deny this fact. There are no Marxian classes within a socialist society. But there is an irreconcilable conflict between those who are in favor with Stalin and Hitler and those who are not. And it is simply human for a dictator to prefer those who share his opinions and praise his work to those who do not.

It was in vain that the Italian Fascists made a hymn to youth their party song and that the Austrian socialists taught the children to sing: “We are young and this is fine.” It is not fine to be a young man under bureaucratic management. The only right that young people enjoy under this system is to be docile, submissive, and obedient. There is no room for unruly innovators who have their own ideas.

This is more than a crisis of the youth. It is a crisis of progress and civilization. Mankind is doomed when the youths are deprived of the opportunity to remodel society according to their own fashion.


Paternal government by an order of lofty and wise men, by any elite of noble bureaucrats, can claim a very eminent champion, Plato.

Plato’s ideal and perfect state is to be ruled by unselfish philosophers. They are unbribable judges and impartial administrators, strictly abiding by the eternal immutable laws of justice. For this is the characteristic mark of Plato’s philosophy: it does not pay any attention to the evolution of social and economic conditions and to changes in human ideas concerning ends and means. There exists the perennial pattern of the good state, and every deviation of actual conditions from this model cannot be anything else than corruption and degradation. The problem is simply to establish the perfect society and then to keep it from any alteration, as change must be tantamount to deterioration. Social and economic institutions are rigid. The notion of progress in knowledge, in technological procedures, in business methods, and in social organization is foreign to Plato’s mind. And all later utopians who shaped the blueprints of their earthly paradises according to Plato’s example in the same way believed in the immutability of human affairs.

Plato’s ideal of elite rule has been converted into fact by the Catholic Church. The Roman Church, under the Tridentine organization as it emerged from the Counter Reformation, is a perfect bureaucracy. It has successfully solved the most delicate problem of every nondemocratic government, the selection of the top executives. To every boy access to the highest dignities of the Church is virtually open. The local priest is anxious to smooth the way to education for the most intelligent youths of his parish; they are trained in the Bishop’s seminary; once ordained, their further career depends entirely upon their character, their zeal, and their intellect. There are among the prelates many scions of noble and wealthy families. But they do not owe their office to their ancestry. They have to compete, on almost equal terms, with the sons of poor peasants, workers, and serfs. The princes of the Catholic Church, the abbots and the teachers of the theological universities, are a body of eminent men. Even in the most advanced countries they are worthy rivals of the most brilliant scholars, philosophers, scientists, and statesmen.

It is to this marvelous instance that the authors of all modern socialist utopias refer as an example. The case is manifest with two forerunners of present-day socialism: Count Henri de Saint-Simon and Auguste Comte. But it was essentially the same with most other socialist authors, although for obvious reasons they did not point to the Church as a model. No precedent of a perfect hierarchy could be found other than that presented by Catholicism.

However, the reference to the Roman Church is fallacious. The realm of Christianity which the Pope and the other Bishops administer is not subject to any change. It is built upon a perennial and immutable doctrine. The creed is fixed forever. There is no progress and no evolution. There is only obedience to the law and the dogma. The methods of selection adopted by the Church are very efficient in the government of a body clinging to an undisputed, unchangeable set of rules and regulations. They are perfect in the choice of the guardians of an eternal treasure of doctrine.

But the case of human society and civil government is different. It is the most precious privilege of man to strive ceaselessly for improvement and to fight by improved methods against the obstacles that nature opposes to his life and welfare. This innate impulse has transformed the descendants of crude cave dwellers into the somewhat civilized men of our age. But mankind has not yet reached a state of perfection beyond which no further progress is possible. The forces that brought about our present civilization are not dead. If not tied by a rigid system of social organization, they will go on and bring further improvement. The selective principle according to which the Catholic Church chooses its future chiefs is unswerving devotion to the creed and its dogmas. It does not look for innovators and reformers, for pioneers of new ideas radically opposed to the old ones. This is what the appointment of the future top executives by the old and well-tried present rulers can safeguard. No bureaucratic system can achieve anything else. But it is precisely this adamant conservatism that makes bureaucratic methods utterly inadequate for the conduct of social and economic affairs.

Bureaucratization is necessarily rigid because it involves the observation of established rules and practices. But in social life rigidity amounts to petrification and death. It is a very significant fact that stability and security are the most cherished slogans of present-day “reformers.” If primitive men had adopted the principle of stability, they would never have gained security; they would long since have been wiped out by beasts of prey and microbes.

German Marxians coined the dictum: If socialism is against human nature, then human nature must be changed. They did not realize that if man’s nature is changed, he ceases to be a man. In an all-round bureaucratic system neither the bureaucrats nor their subjects would any longer be real human beings.


All champions of salvation through the rule of noble despots blithely assume that there cannot be any doubt about the question of who this lofty ruler or class of rulers should be and that all men will voluntarily yield to the supremacy of this superhuman dictator or aristocracy. They do not realize that many men and groups of men could claim primacy for themselves. If the decision between various candidates is not left to majority vote, no principle of selection remains other than civil war. The alternative to the democratic principle of selection through popular election is the seizure of power by ruthless adventurers.

In the second century after Christ the Roman Empire was ruled according to a sublime elaboration of the Führer principle. The Emperor was the most able and eminent man. He did not bequeath his dignity to a member of his family, but he chose as successor the man whom he considered best fitted for the office. This system gave the Empire a succession of four great monarchs: Trajan, Hadrian, Antoninus Pius, and Marcus Aurelius. But then followed the era of the Praetorians, continuous civil war, anarchy, and rapid decay. The rule of the worst was substituted for the rule of the best. Ambitious generals, supported by mercenaries, seized power and ruled until another adventurer defeated them. Treachery, rebellion, and murder became the selective principle. Historians blame Marcus Aurelius, the last of the good emperors. He was guilty, they say, because he abandoned the practice of his predecessors and, instead of choosing the most suitable man, installed his incompetent son Commodus. However, a system that can be wrecked by the fault of only one man is a bad system, even if the fault were less pardonable and understandable than that of a father overrating the character and capacity of his offspring. The truth is that such a Führer system must necessarily result in permanent civil war as soon as there are several candidates for the supreme office.

All present-day dictators came into office through violence. They later had to defend their supremacy against the aspirations of rivals. Political language has coined a special term to refer to such actions: they are called purges. The successors of these dictators will rise to power through the same methods and will apply the same cruelty and ruthlessness in maintaining it. The ultimate basis of an all-round bureaucratic system is violence. The security that it allegedly gives is the turmoil of endless civil war.


The socialists assert that capitalism is degrading, that it is incompatible with man’s dignity, that it weakens man’s intellectual abilities and spoils his moral integrity. Under capitalism, they say, everybody must regard his fellow men as competitors. Man’s innate instincts of benevolence and companionship are thus converted into hatred and a ruthless striving for personal success at the expense of all other people. But socialism will restore the virtues of human nature. Amicableness, fraternity, and comradeship will be the characteristic features of future man. What is needed first is to eliminate this worst of all evils, competition.

However, competition can never be eliminated. As there will always be positions which men value more highly than other positions, people will strive for them and try to outstrip their rivals. It is immaterial whether we call this emulation rivalry or competition. At any rate, in some way or other it must be decided whether or not a man ought to get the job he is applying for. The question is only what kind of competition should exist.

The capitalist variety of competition is to outdo other people on the market through offering better and cheaper goods. The bureaucratic variety consists in intrigues at the “courts” of those in power.

There was a good deal of flattery, adulation, servility, and cringing at the courts of all despotic rulers. But there had always been some men at least who were not afraid to tell a tyrant the truth. It is different in our day. Politicians and writers outdo one another in the adulation of the sovereign, the “common man.” They do not venture to impair their popularity by the expression of unpopular ideas. The courtiers of Louis XIV never went as far as some people go today in praising the Führers and their supporters, the masses. It seems that our contemporaries have lost all common sense and self-criticism.

At a Communist Party Congress a writer named Avdyenko addressed Stalin in these terms: “Centuries shall elapse and the communist generations of the future will deem us the happiest of all mortals that have inhabited this planet throughout the ages, because we have seen Stalin the leader genius, Stalin the Sage, the smiling, the kindly, the supremely simple. When I met Stalin, even at a distance, I throbbed with his forcefulness, his magnetism, and his greatness. I wanted to sing, to shriek, to howl from happiness and exaltation.”[1] A bureaucrat addressing his superior on whom his promotion depends is less poetic but no less crawling.

When at the Diamond Jubilee of Emperor Francis Joseph a statistician attributed to the Emperor’s credit that after sixty years of his reign the country had many thousands of miles of railroads, while at its beginning there were much fewer, the public (and probably the Emperor himself) simply laughed at this piece of toadyism. But nobody laughed when the Soviet Government in the World’s Fairs of Paris and New York flamboyantly boasted of the fact that while the Russia of the Czars used no tractors at all, a quarter of a century later it had already imitated this new American invention.

Nobody ever believed that the paternal absolutism of Marie Thérèse and her grandson Francis was justified by the fact that Mozart, Haydn, Beethoven, and Schubert composed immortal music. But the symphony of a contemporary Russian composer who probably will be forgotten after a few years is claimed as a proof of the eminence of Soviet totalitarianism.

The question is whether the system of bureaucratic control or the system of economic freedom is more efficient. This question can be answered only by economic reasoning. The mere assertion of the fact that the cigarettes manufactured by the French Government’s tobacco monopoly were not so bad as to induce the French to give up smoking is not an argument in favor of government operation of industry. Neither is the fact that the cigarettes manufactured by the Greek Government’s monopoly were the delight of smokers. It is not a merit of the Greek bureaucrats that the climatic and physical conditions of their country make the tobacco grown by the peasants delicate and fragrant.

Every German took it for granted that the very essence and nature of things make it imperative that universities, railroads, telegraphs, and telephones be operated by the government. For a Russian the idea that a man could live without a passport, duly issued and authenticated by the police, always seemed paradoxical. Under the conditions that developed in the last thirty years the citizens of continental Europe became mere appurtenances of their identification papers. In many countries it was risky to go out for a walk without these documents. In most European countries a man has not been free to stay overnight in any place without immediately reporting to the local police department his sleeping place and every change of address.[2]

It is possible that some good may be derived from such regimentation. Of course, it is not of much use in fighting crime and prosecuting criminals. A murderer in hiding will not shrink from violating the law requiring a report of any change of address.[3] In defending their system the bureaucrats become melodramatic. They ask the public how poor abandoned children could find their unscrupulous parents again. They do not mention that a smart detective might be able to find them. Moreover, the fact that there are some scoundrels cannot be considered a sufficient reason for restricting the freedom of the immense majority of decent people.

A profit-seeking enterprise is supported by the voluntary patronage of the public. It cannot subsist if customers do not pour in. But the bureaus forcibly acquire their “patrons.” That an office is approached by many people is not proof of its satisfying an urgent need of the people. It only shows that it interferes with matters that are important to the life of everyone.

The fading of the critical sense is a serious menace to the preservation of our civilization. It makes it easy for quacks to fool the people. It is remarkable that the educated strata are more gullible than the less educated. The most enthusiastic supporters of Marxism, Nazism, and Fascism were the intellectuals, not the boors. The intellectuals were never keen enough to see the manifest contradictions of their creeds. It did not in the least impair the popularity of Fascism that Mussolini in the same speech praised the Italians as the representatives of the oldest Western civilization and as the youngest among the civilized nations. No German nationalist minded it when dark-haired Hitler, corpulent Goering, and lame Goebbels were praised as the shining representatives of the tall, slim, fair-haired, heroic Aryan master race. Is it not amazing that many millions of non-Russians are firmly convinced that the Soviet regime is democratic, even more democratic than America?

This absence of criticism makes it possible to tell people that they will be free men in a system of all-round regimentation. People imagine a regime in which all means are owned by the state and the government is the sole employer as a realm of freedom. They never take into account the possibility that the almighty government of their utopia could aim at ends of which they themselves entirely disapprove. They always tacitly assume that the dictator will do exactly what they themselves want him to do.

[1]As quoted by W. H. Chamberlin, Collectivism, a False Utopia (New York, 1937), p. 43.

[2] Thus the files of the police departments of many European cities provide full information for the last hundred or even hundred and fifty years concerning every resident’s or visitor’s sojourn and all his changes of address. A priceless and well-exploited source of knowledge indeed for biographers.

[3]It seems curious to Americans that in many European trials the jury was asked to answer two questions like this: First, is the defendant guilty of having murdered the victim? Secondly, is the defendant guilty of not having duly reported his change of address?

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