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Innovation Requires Economic Freedom

March 25, 2011

Tags Free MarketsEntrepreneurship

[Excerpted from chapter 16 of Theory and History (1957).]

A civilization is the product of a definite worldview, and its philosophy manifests itself in each of its accomplishments. The artifacts produced by men may be called material. But the methods resorted to in the arrangement of production activities are mental, the outcome of ideas that determine what should be done and how. All the branches of a civilization are animated by the spirit that permeates its ideology.

The philosophy that is the characteristic mark of the West and whose consistent elaboration has in the last centuries transformed all social institutions has been called individualism. It maintains that ideas, the good ones as well as the bad, originate in the mind of an individual man. Only a few men are endowed with the capacity to conceive new ideas.

But as political ideas can work only if they are accepted by society, it rests with the crowd of those who themselves are unable to develop new ways of thinking to approve or disapprove the innovations of the pioneers. There is no guarantee that these masses of followers and routinists will make wise use of the power vested in them. They may reject the good ideas, those whose adoption would benefit them, and espouse bad ideas that will seriously hurt them.

But if they choose what is worse, the fault is not theirs alone. It is no less the fault of the pioneers of the good causes in not having succeeded in bringing forward their thoughts in a more convincing form. The favorable evolution of human affairs depends ultimately on the ability of the human race to beget not only authors but also heralds and disseminators of beneficial ideas.

One may lament the fact that the fate of mankind is determined by the — certainly not infallible — minds of men. But such regret cannot change reality. In fact, the eminence of man is to be seen in his power to choose between good and evil. It is precisely this that the theologians had in view when they praised God for having bestowed upon man the discretion to make his choice between virtue and vice.

The dangers inherent in the masses' incompetence are not eliminated by transferring the authority to make ultimate decisions to the dictatorship of one or a few men, however excellent. It is an illusion to expect that despotism will always side with the good causes. It is characteristic of despotism that it tries to curb the endeavors of pioneers to improve the lot of their fellow men.

The foremost aim of despotic government is to prevent any innovations that could endanger its own supremacy. Its very nature pushes it toward extreme conservatism, the tendency to retain what is, no matter how desirable for the welfare of the people a change might be. It is opposed to new ideas and to any spontaneity on the part of the subjects.

In the long run even the most despotic governments with all their brutality and cruelty are no match for ideas. Eventually the ideology that has won the support of the majority will prevail and cut the ground from under the tyrant's feet. Then the oppressed many will rise in rebellion and overthrow their masters.

However, this may be slow to come about, and in the meantime irreparable damage may have been inflicted upon the common weal. In addition, a revolution necessarily means a violent disturbance of social cooperation, produces irreconcilable rifts and hatreds among the citizens, and may engender bitterness that even centuries cannot entirely wipe out. The main excellence and worth of what is called constitutional institutions, democracy, and government by the people is to be seen in the fact that they make possible peaceful change in the methods and personnel of government.

Where there is representative government, no revolutions and civil wars are required to remove an unpopular ruler and his system. If the men in office and their methods of conducting public affairs no longer please the majority of the nation, they are replaced in the next election by other men and another system.

In this way the philosophy of individualism demolished the doctrine of absolutism, which ascribed heavenly dispensation to princes and tyrants. To the alleged divine right of the anointed kings it opposed the inalienable rights bestowed upon man by his creator. As against the claim of the state to enforce orthodoxy and to exterminate what it considered heresy, it proclaimed freedom of conscience. Against the unyielding preservation of old institutions become obnoxious with the passing of time, it appealed to reason. Thus it inaugurated an age of freedom and progress toward prosperity.

It did not occur to the liberal philosophers of the 18th and early 19th centuries that a new ideology would arise which would resolutely reject all the principles of liberty and individualism and would proclaim the total subjection of the individual to the tutelage of a paternal authority as the most desirable goal of political action, the most noble end of history, and the consummation of all the plans God had in view in creating man.

Not only Hume, Condorcet, and Bentham but even Hegel and John Stuart Mill would have refused to believe it if some of their contemporaries had prophesied that in the 20th century most of the writers and scientists of France and the Anglo-Saxon nations would wax enthusiastic about a system of government that eclipses all tyrannies of the past in pitiless persecution of dissenters and in endeavors to deprive the individual of all opportunity for spontaneous activity. They would have considered that man a lunatic who told them that the abolition of freedom, of all civil rights, and of government based on the consent of the governed would be called liberation. Yet all this has happened.

The historian may understand and give thymological explanations for this radical and sudden change in ideology. But such an interpretation in no way disproves the philosophers' and the economists' analysis and critique of the counterfeit doctrines that engendered this movement.

The keystone of Western civilization is the sphere of spontaneous action it secures to the individual. There have always been attempts to curb the individual's initiative, but the power of the persecutors and inquisitors has not been absolute. It could not prevent the rise of Greek philosophy and its Roman offshoot or the development of modern science and philosophy.

Driven by their inborn genius, pioneers have accomplished their work in spite of all hostility and opposition. The innovator did not have to wait for invitation or order from anybody. He could step forward of his own accord and defy traditional teachings. In the orbit of ideas, the West has by and large always enjoyed the blessings of freedom.

Then came the emancipation of the individual in the field of business, an achievement of that new branch of philosophy, economics. A free hand was given to the enterprising man who knew how to enrich his fellows by improving the methods of production. A horn of plenty was poured upon the common men by the capitalistic business principle of mass production for the satisfaction of the needs of the masses.

In order to appraise justly the effects of the Western idea of freedom we must contrast the West with conditions prevailing in those parts of the world that have never grasped the meaning of freedom.

Some Oriental peoples developed philosophy and science long before the ancestors of the representatives of modern Western civilization emerged from primitive barbarism. There are good reasons to assume that Greek astronomy and mathematics got their first impulse from acquaintance with what had been accomplished in the East.

When later the Arabs acquired a knowledge of Greek literature from the nations they had conquered, a remarkable Muslim culture began to flourish in Persia, Mesopotamia, and Spain. Up to the 13th century Arabian learning was not inferior to the contemporary achievements of the West. But then religious orthodoxy enforced unswerving conformity and put an end to all intellectual activity and independent thinking in the Muslim countries, as had happened before in China, in India, and in the orbit of Eastern Christianity.

The forces of orthodoxy and persecution of dissenters, on the other hand, could not silence the voices of Western science and philosophy, for the spirit of freedom and individualism was already strong enough in the West to survive all persecutions. From the 13th century on, all intellectual, political, and economic innovations originated in the West. Until the East, a few decades ago, was fructified by contact with the West, history in recording the great names in philosophy, science, literature, technology, government, and business could hardly mention any Orientals.

There was stagnation and rigid conservatism in the East until Western ideas began to filter in. To the Orientals themselves slavery, serfdom, untouchability, customs like sutteeism or the crippling of the feet of girls, barbaric punishments, mass misery, ignorance, superstition, and disregard of hygiene did not give any offense. Unable to grasp the meaning of freedom and individualism, today they are enraptured with the program of collectivism.

Although these facts are well-known, millions today enthusiastically support policies that aim at the substitution of planning by an authority for autonomous planning by each individual. They are longing for slavery.

Of course, the champions of totalitarianism protest that what they want to abolish is "only economic freedom" and that all "other freedoms" will remain untouched. But freedom is indivisible. The distinction between an economic sphere of human life and activity and a noneconomic sphere is the worst of their fallacies. If an omnipotent authority has the power to assign to every individual the tasks he has to perform, nothing that can be called freedom and autonomy is left to him. He has only the choice between strict obedience and death by starvation.

Committees of experts may be called to advise the planning authority whether or not a young man should be given the opportunity to prepare himself for and to work in an intellectual or artistic field. But such an arrangement can merely rear disciples committed to the parrot-like repetition of the ideas of the preceding generation.

It would bar innovators who disagree with the accepted ways of thought. No innovation would ever have been accomplished if its originator had been in need of an authorization by those from whose doctrines and methods he wanted to deviate. Hegel would not have ordained Schopenhauer or Feuerbach, nor would Professor Rau have ordained Marx or Carl Menger.

If the supreme planning board is ultimately to determine which books are to be printed, who is to experiment in the laboratories and who is to paint or to sculpture, and which alterations in technological methods should be undertaken, there will be neither improvement nor progress. Individual man will become a pawn in the hands of the rulers, who in their "social engineering" will handle him as engineers handle the stuff of which they construct buildings, bridges, and machines.

In every sphere of human activity an innovation is a challenge not only to all routinists and to the experts and practitioners of traditional methods but even more to those who have in the past themselves been innovators. It meets at the beginning chiefly stubborn opposition. Such obstacles can be overcome in a society where there is economic freedom. They are insurmountable in a socialist system.

The essence of an individual's freedom is the opportunity to deviate from traditional ways of thinking and of doing things. Planning by an established authority precludes planning on the part of individuals.


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