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Birth of a Movement

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Tags Austrian Economics OverviewHistory of the Austrian School of Economics

10/28/2007Jörg Guido Hülsmann
[This article is from chapter 19 of Mises: The Last Knight of Liberalism.]

The war years had brought economic hardship to Mises, and if he ever had any illusions about the state of the American mind before he came to the United States in 1940, he had certainly lost them by the end of the war.

American public opinion was already entirely under the sway of statism. And as a consequence the old American liberties were at an all-time low. As Mises wrote to a German correspondent: "Unfortunately one can become acquainted with the fruits of the planned economy here in the U.S.A. too."[1]

Similarly, to a promising young economist in Austria he wrote that the American literature on economics was, if anything, worse than the European:

There is a great enthusiasm for unbalanced budgets, deficit spending, low interest rates and all sorts of regimentation. Those who dare to disagree are simply brushed aside as "orthodox and reactionary."[2]

And on the same theme:

The intellectual ravages caused by Keynesianism are very bad. For example, everyone here is delighted that national income has "increased" from 77.6 billion dollars in 1940 to 161.0 in 1945.[3]

But the forces of resistance were slowly emerging. There was a seedbed of libertarian opposition, a network of leaders — thinkers and organizers, sometimes in personal union — who were preparing the counterattack. One historian has called these years "the nadir of individualistic, Jeffersonian thought in the United States."[4] Yet the nadir was only in political practice. The thinking was no longer in disarray, but in the initial phase of a long-term resurgence. It is true that these thinkers and organizers were still scattered. They had only to find one another.

There were journalists like Henry Hazlitt, Lawrence Fertig, Frank Chodorov, Suzanne LaFollette, Garet Garrett, John Flynn, and John Chamberlain. There were writers like Albert J. Nock, Isabel Paterson, Rose Wilder Lane, Ayn Rand, and Felix Morley. There were organizers such as Leonard Read, Frederick Nymeyer, and Loren Miller. There were businessmen ready to sponsor educational ventures to promote laissez-faire policies, such as Jasper Crane, Harry Earhart, Alfred Kohlberg, Howard Pew, Claude Robinson, and William Volker. And there were academics such as Benjamin Anderson, H.J. Davenport, Fred Fairchild, Leo Wolman, Frank Knight, Henry Simons, and Ludwig von Mises. These men and women would reverse the course of events in a mere fifteen years. They were not strong enough to rid America of its creeping statism, but they succeeded in slamming on the brakes and reorienting public debate.

At the beginning of the 1960s, classical liberalism had risen from the ashes, and it had done so under the decisive impact and intellectual leadership of Mises.[5] These fifteen years of his life saw a last great blossoming of his creative powers, which paved the way for a new liberty in the western world. During this period, Mises's impact was amplified and deepened through several new organizations that rallied a hitherto disparate and unconscious public around the banner of liberty. And for the first time in his life, Mises worked on a permanent basis with a group of students that had learned economic science through his writings. These first Misesians soon became even more coherent and radical advocates of laissez-faire than the master himself — something unprecedented for Mises: in his Vienna seminars, he had been in the awkward position of being more radical than his students.

Libertarian Seedbeds

Many Americans had grown weary of the New Deal during the second term of President Roosevelt's administration. More and more people realized that their president had brought about a revolution in the American system of government. But the majority gave FDR a third term. The president promised to keep America out of the new European war that would eventually turn into World War II. When Roosevelt went back on his word, the majority started to wane. The population still stood behind the commander in chief in a time of war, but the disenchantment with New Deal policies became ever more manifest. People started listening to critical voices, and these voices could now be heard everywhere.

Isabel Paterson in The God of the Machine (1943) and Rose Wilder Lane in The Discovery of Freedom (1942) had delivered passionate and widely noticed indictments of the omnipotent state undermining individual liberty. John T. Flynn had exposed the socialist agenda and impact of the federal government's interventions in The Roosevelt Myth and As We Go Marching (1945). In early 1944, Felix Morley, John Chamberlain, and Frank Hanighen founded the weekly journal Human Events. Their mission was to educate the American public about the uncomfortable fact that their federal government had been taken hostage by socialist and Communist ideologues. The public also listened for the first time to the voice of two Austrian émigrés. Mises came out with two books in 1944: Omnipotent Government and Bureaucracy, both of which were calibrated to diminish the faith in the necessity and expediency of solving social problems with the brutal force of state power. And in the same year Friedrich August Hayek published The Road to Serfdom, the book that would make Hayek famous.

Intellectuals held no monopoly on critical inquiry about the nature and scope of the Roosevelt government. Regular citizens without any scientific pretensions now rediscovered the old American virtue of distrusting their government. Wherever they looked, they found their worst fears confirmed. And now they not only noticed, but also recorded and spread their discoveries. One example illustrates the situation: An entrepreneur from Houston running a small printing company had started wondering just how many federal agencies had actually been created under the New Deal. There was no ready reference for the information, so he decided to create one himself. He produced an alphabetical listing of all the agencies, the length of which must have been breathtaking — at least in those days. At first he had just printed a small number of folders for his friends, acquaintances, and people on his local mailing list. The response was overwhelming. After a few months, he had sold almost 200,000 copies — all on demand.[6]

The most visible turning point for the fortunes of classical liberalism came on September 18, 1944. On this day, F.A. Hayek's book The Road to Serfdom appeared in the United States and met with huge and immediate success. Reader's Digest condensed the book and had more than one million copies distributed by the Book-of-the-Month Club.[7] Overnight, Hayek became an international celebrity.

Nobody was more surprised by these events than Hayek and his publisher. There were four major factors to his unexpected success. First, Hayek did not come up with any new argument, but just gave a particularly eloquent and sophisticated presentation of a position that, before the war, had already found wide acclaim among the American public. The central argument of The Road to Serfdom was in fact that increased powers for government were tantamount to reduced sovereignty for the individual citizens, and that total government control turned the citizens into slaves — regardless of whether the totalitarian state was fascist or Communist. Second, the war years had dramatically accelerated this increase of powers of the U.S. federal government and thus raised awareness of and misgivings about this fact among a greater number of people. Third, again echoing other neo-liberals, Hayek defended what seemed to be a pragmatic middle-of-the-road solution that appealed to the American mind. He emphasized that he did not advocate laissez-faire but a new brand of liberalism.[8] Fourth, and finally, Hayek weighed in with the full authority of an academic economist who was well-known and respected in the United Kingdom, a fact that to the present day can prey on Americans' intellectual inferiority complex.

For staunch defenders of liberty, Hayek's neo-liberalism was of course far too soft on government. The positive program of The Road to Serfdom left the government in control of economic life. The economy was still to be a planned economy, with the government in charge of all the planning. Hayek merely suggested that this planning be for competition rather than the detailed control of all market participants. This was a naïve approach from any realistic political point of view, and some thought it was indefensible from an intellectual point of view as well. Commenting on Hayek's program, Frank Chodorov exclaimed: "How silly!" and made it clear that he thought the program verged on intellectual cowardice.[9]

Mises was very happy about the success of the book. However, he too thought that Hayek had made his case in misleading terms. Hayek had singled out economic planning as the root cause of the various policies that threatened political and economic freedom. But there is no danger in planning per se. The real question is: who should do the planning, and how should the plans be applied? Should there be only one plan imposed by the power of the state on all citizens? Or should there be many different plans, made by each individual or head of household? Mises emphasized this crucial distinction in a speech delivered on 30 March 1945 to the American Academy of Political Science. He left implicit the fact that his speech was a critical review of Hayek's book.[10]

A few days later, on April 3, Hayek arrived in New York City to start a Road to Serfdom lecture tour. It was the first time he saw his old mentor in America.[11] The book and the lecture tour trumpeted the dawn of a new era. The sale of thousands of copies signaled to everyone that the American population still harbored strong affections for liberal ideas, and that these feelings had huge political potential.

The most momentous initiative to exploit this potential was, we can see in retrospect, the decision of Leonard Read to quit his lucrative position at the Los Angeles chamber of commerce at the end of April 1945, and to move to New York City as an Executive Vice President of the National Industrial Conference Board. Read sensed the potential for a huge interest in laissez-faire liberalism and its scientific underpinnings in economic science à la Mises. And he understood that liberty had to be defended as an integrated whole, not in a piecemeal fashion with many concessions. But looking around in 1945, he was amazed to discover that there was not one institution to satisfy this demand for information, and certainly none ready to support or promote classical-liberal scholars and students. Many years later, he summarized his discoveries in four points:

Number one, [the freedom philosophy] wasn't issuing from any place on the face of the earth. Number two, there wasn't a magazine in the country that would take one of our articles. Three, there wasn't a book publisher that would take one of our books. Number four, just twenty-six years ago [in 1945] there did not exist a consistent literature of this philosophy written in modern American idiom. That's how far down the drain this philosophy was.[12]

The National Industrial Conference Board was an educational institution the purpose of which was to provide information about economic science and the functioning of the American economy to classroom teachers all over the country. Read had been hired along with Garet Garrett and others to establish a new nationwide educational program. The express purpose of the new program was to inform teachers, journalists, and intellectuals (the "secondhand dealers in ideas" as Hayek called them[13] ) about the importance of individual liberty for economic prosperity and society at large. It was Read's mission to raise the necessary funds.

Mises was aware of Read's effort. When, in May 1945, he received a request from Mr. Allman, the vice president of the Fruehauf trailer company, inquiring what could be done in terms of organizational work to give the "individual, private enterprise way of living and doing business" political leverage, Mises replied that friends of his were elaborating a plan for imminent action.[14] He had probably talked again with Read about his pet project: the establishment of a libertarian journal of opinion. Human Events had been launched the year before, but Mises was not happy with its one-sided focus on anti-Communism. The problem was not the increase of government interventionism in the name of Communist ideals; the problem was that the government intervened at all. A libertarian journal of opinion would have to educate the public about basic economic laws.

Visiting New York University

One great limitation to Mises's effectiveness in spreading the gospel of liberty was that he lacked an academic base. Like most other champions of the free market, he frequently lectured to businessmen and other civic leaders. But he had no direct impact on future intellectuals, who studied at the universities. Many other libertarian intellectuals could have held public lectures of the sort Mises gave, but no one could match him as a scholar. It was quite often a frustrating experience for him to lecture to American lay audiences. In a letter to Machlup he wrote:

Again and again various organizations invite me to refute Marxism and the union doctrine (which are held to be identical), and as an aside also Keynes and Hansen, in a short paper that can be read in not more than thirty minutes and which every high-school graduate can easily understand. "Refute Marx, but don't use high-brow terms such as value, dialectical materialism, average rate of profit, etc. Refute Keynes, but do not speak of the multiplier, of liquidity preference, etc."[15]

Unlike many of his former students and associates, Mises had been unable to obtain a suitable position at one of the major universities.[16] He had offers from smaller schools, but would not settle for second-rate institutions. At some point in 1944, then, some of his friends and admirers in New York took the initiative to provide him a visiting professorship at NYU. Led by Lawrence Fertig, an NYU trustee, these men eventually came to an agreement with NYU's Graduate School of Business Administration: the School would invite Mises to give an economics seminar, and Mises's salary would be paid out of private funds.[17] This arrangement would be reiterated on a regular basis. Mises started his classes in February 1945.[18] He eventually "visited" with NYU for more than twenty years.[19]

Despite the humiliating circumstances, the seminar proved to be an enormous success. From the outset, it was not only attended by NYU business students, but also attracted a colorful group of personalities from outside: journalists, businessmen, writers, and students from other universities. In a manner reminiscent of Mises's seminars in Vienna, it became a rallying point for New York-based intellectuals interested in the scientific case for laissez-faire, as well as a point of attraction for visitors from abroad. In Vienna, the Mises Circle would move from Mises's Kammer offices to Ancora Verde for dinner, then to the Café Künstler to continue the conversation late into the night. In New York, the participants in Mises's NYU seminar, could follow the classroom session by joining their professor in Child's Restaurant, followed by the Café Lafayette.

NYU students such as Hans Sennholz, William Peterson, George Reisman, Israel Kirzner, and Ralph Raico eventually formed — together with Murray Rothbard — the solid core of Misesians to hold out against all odds during the 1960s and 1970s, thus preparing the breakthrough of Misesian ideas of the 1980s and 1990s. Mises inspired them to contribute to the great project of hammering out a systematic and encompassing libertarian philosophy — a project that had attracted courageous and innovative thinkers from the time of the sixteenth-century Spanish late scholastics to the time of the Manchester School. In retrospect, the results can only be called amazing. It is one thing indeed for students to follow the example of a passionate and encouraging teacher. It is quite another thing to actually produce anything of value. A surprising number of Mises's NYU students later became important scholars and even pioneers in economics, history, and philosophy.

One example of the international significance of the seminar was the case of the Japanese students drawn to attend. Mises's prewar work had been favorably received in Japan and several professors from this far-eastern country had taken part in his Vienna seminar. After the war, a correspondent from the Yasuda Bank wrote Mises that his Theory of Money and Credit had "made a very strong impression in Japanese financial circles and is regarded most highly."[20] The impact would increase when a Japanese edition appeared in May 1949 — just in time to provide intellectual ammunition against the wave of Keynesianism that swept the country with the American occupation forces.[21] One classical-liberal from Japan later recalled the chain of events in his country:

The names of von Mises and Hayek are well known in Japan. The latter's Road to Serfdom was published, during the War about the time when Japan started experimenting in state socialism; my own experience confirms completely the exactness of the professor's prognostications. When the War was over, we had to throw everything overboard and I expected a return to free enterprise. Then a curious thing happened; the Americans arriving in Japan in the wake of the landing forces started putting into effect policies which were hardly distinguishable from state socialism![22]

Leonard Read and the Foundation for Economic Education

About a year after the establishment of Mises's NYU lectures, another institution would be established that would prove to be a pillar of the classical-liberal renaissance and give further leverage to Mises's ideas. Leonard Read had come to the conclusion that his present engagement with the National Industrial Conference Board was a waste of time and money. One of the main reasons for this ineffectiveness was that the Board was committed to a policy of "hearing both sides." In practice this meant, for example, that at the bimonthly public conferences that the Board sponsored at the Waldorf-Astoria, both the champions of the free market and the advocates of government intervention were granted equal time to present their case. Leonard Read believed this policy was based on a severe misunderstanding of what hearing both sides truly meant in the present context. In the words of his biographer:

The "other side" was everywhere — in government, education, and communication. Even businessmen had come to rely on government for restrictions of competition, for government contracts and orders, easy money and credit, and other favors. [ … ] How do you present "both sides" when "one side" is all around you, pre-empting the public discussion, and the "other side" is barely audible in the deafening noise of the former?[23]

Read thought any money spent on yet another presentation of the statist view was money down the drain, and he felt he could not in good conscience justify this expenditure. At the end of 1945, he resigned his position and started visiting the donors to apologize.[24] One of them, New York City businessman David Goodrich, encouraged Read to think about setting up his own organization. Two months later, Read established the Foundation for Economic Education (FEE), which in July 1946 would move to the charming premises in Irvington-on-Hudson, several miles north of Manhattan, where it is still located.

Read mobilized substantial corporate backing for this venture. He had a full address book and was personally acquainted with many executives and owners of the large corporations, some of whom also joined FEE as trustees.

The main activity of FEE was to send out pamphlets and letters explaining the "freedom thesis" to some 30,000 households.[25] Read himself gave a great number of public lectures and together with his other staff, he would soon start offering weekend seminars and other educational programs. The pamphlets and conferences brought students from throughout the country in touch with the writings of Mises and other champions of classical liberalism. Mises himself was one of the first economists hired for lectures and seminars on FEE's premises, and would remain its intellectual center for more than two decades.[26]

It would be hard to overstate the significance of the appearance of FEE. Though its activities were not noticed by a larger national audience, the very existence of this organization gave the scattered classical-liberal forces focus and orientation. It gave them what they had not had since the heyday of nineteenth-century liberalism: a home. FEE provided the material and infrastructure for an enthusiastic return to the ideals of the nineteenth-century laissez-faire liberals. To the key question about the proper functions of government, FEE's Manchesterian answer was that government should be strictly limited to the prevention of "aggressive force" or physical violence.[27]

Most importantly, it attracted young people interested in the intellectual case for liberty and ultimately brought Mises in touch with a self-selected group of students, who were much more receptive to the political implications of his ideas than were many of the attendees of his NYU seminar. Several students he first met at FEE conferences later joined the weekly seminar at NYU, where Mises could go into much more detail.

Last but not least, FEE provided some intellectual counterweight to the neo-liberal orthodoxy that was about to emerge from the University of Chicago's economics department. In 1947 and 1948 respectively, Frank Knight and Henry Simons (posthumously) had published collections of articles making their case for a libertarianism that was so watered-down as to be indistinguishable from social democracy.[28] Other members of the Chicago School were Aaron Director and Milton Friedman. FEE's impact was of course comparatively minor, but without it, the Chicago School would have monopolized the American free-market scene.

Frederick Nymeyer

At about the same time Read was setting up FEE in New York, Mises made another acquaintance that would eventually turn into a long-term ally. In May 1946, Chicago businessman Frederick Nymeyer had finished reading Mises's Theory of Money and Credit, which prompted him to write to the author and inquire about any further writings of his on the subject.[29] During the following months, Nymeyer read Omnipotent Government and other available English-language writings of the Austrian professor. He was the right reader for Mises. He had received his economics education in the early 1920s, then worked for a while as a field representative of the Harvard Business Cycle Index. He was well acquainted with the monetary thought that prevailed in the United States. The Theory of Money and Credit, he found, "was a radically different approach than the mechanical Quantity theory" and he therefore "had some difficulty to adjust all my thinking to your exposition." Part of the difficulty seemed to be the different use of terms, and Nymeyer then went on to raise questions about one of the crucial concepts of the theory: the demand for money.[30] Mises agreed that the way he had put it — the demand for money being the demand for purchasing power — was ambiguous, and that a better way of putting it was to say that the market participants had a demand for cash holdings. He promised to revise his writings accordingly and to consider this point in his forthcoming treatise of economics.

This exchange was the beginning of a long-lasting alliance (though never a more personal friendship). Nymeyer soon commenced to read other Austrian works available in English, in particular Böhm-Bawerk's Capital and Interest. Slowly, he became a dedicated admirer of the Austrian school. He was also a dedicated Calvinist and claimed, "Böhm-Bawerk has gone as far beyond Adam Smith as Calvin did beyond Luther."[31]

Mises's agnosticism did not diminish Nymeyer's admiration for the Austrian economist. And it did not prevent Mises himself from cooperating openly and productively with Christian libertarians in America. In Austria, such cooperation was almost out of the question, because the Christian Socialists had pushed the Catholic Church into an intellectual dead end. Only outstanding personalities such as Monsignor Seitz could overcome the socialist resentments against the liberal Mises. But in the States, things were different. A great number of the Protestant clergymen in America loved individual liberty and the free market and considered this love to result quite naturally from their Christian religion. Many of these men felt that Mises's theories were complementary to their faith.

In correspondence with a high clergyman of the Church of England in Canada, who had read Human Action, Mises wrote:

I fully agree with your statement that the Gospels do not advocate anticapitalistic policies. I dealt with this problem years ago in my book Socialism [ … ]. I furthermore fully agree with your proposition that one does not find in Human Action "one word which is in opposition to the Christian faith."[32]

Mises enthusiastically welcomed the publication of the monthly periodical Faith and Freedom by Spiritual Mobilization, a Los Angeles based organization in December 1949. Of course he knew very well that the majority of Protestant leaders championed some form of socialism or interventionism, and that while the Catholic Church "valiantly fights communism," it did not fight socialism. But these problems were outside of his field: "I think that only theologians are called to deal with the issue."

This was also the opinion of Frederick Nymeyer. One of his mainsprings of motivation for spreading Mises's writings was precisely the complementary relation he perceived between laissez-faire capitalism and Christianity.

Mises and Nymeyer probably met for the first time in late January 1948. Nymeyer then started thinking about why the Austrian School of economics was not prevalent in the United States and he came to the conclusion that Austrian works were not sufficiently well known. In the fall of that year, he was ready to take action, relying in particular on his voluminous address book ("I know several of the outstanding entrepreneurs in the country. I sit on some important Boards of Directors."[33] ). And at the end of January 1949, after several more encounters with Mises, Nymeyer came up with a plan: The idea was to set up a "Liberal Institute" under Mises's leadership at the University of Chicago — Nymeyer was a friend of the Dean of the Business school — or at some other suitable university in the Chicago area.[34] Nymeyer had already won over his associate Robert W. Baird and his friend John T. Brown, vice-president of the J.I. Case Company. By May 1949 they had talked to several other businessmen in the area.

At the end of April, the university had told Nymeyer that they would favor "unrestricted gifts" to be used with "academic freedom" — which meant that the University would select the staff of the proposed Liberal Institute. Mises commented:

Based on this slogan ["academic freedom"] the universities are boycotting all those economists who dare to raise objections against interventionism from another point of view than that of socialism. The question of academic freedom is today not: should communist teachers be tolerated? It is rather: should only communists, socialists or interventionists be appointed?[35]

But the resistance did not come only from within the universities. A few years later (and that much the wiser), Mises acknowledged the existence of another factor:

One of the worst features of the present state of affairs is the misplaced loyalty of the alumni. As soon as somebody dares to criticize something concerning a university, all alumni come to the rescue of their alma mater. Then we have the spectacle of big business defending the boycott launched by the faculties against all those who do not sympathize with interventionism, planning and socialism.[36]

In any case, the plan for a Chicago-based "Liberal Institute" under Mises's leadership did not materialize. But Nymeyer and his friends had some influence in bringing Hayek to Chicago, and in the early 1950s he played a significant role in raising funds for Mont Pèlerin Society meetings.[37]

Mises Debates American Libertarians

With the NYU seminar, FEE, and individual organizers and publishers such as Nymeyer, Mises enjoyed for the very first time in his life a truly congenial network of students and supporters. He had always been a respected scholar, but few of his readers and associates really appreciated the radical antistatist gist of his theories. This held true in particular in the case of the neo-liberals, who prided themselves on their pragmatic positions and on their good sense for wanting the government in charge of creating competition. These men accused Mises of an exaggerated logical argument in the intellectual battle for liberty. If this is a valid charge, then Mises was surely guilty. As one historian put it, he fought "with a supreme logical rigor that even his friends sometimes considered excessive."[38] An example of such a friend was Chicago professor of economics Henry C. Simons, who praised Mises as "the greatest living teacher of economics" and "the toughest old liberal or Manchesterite of his time." But alas, he added, "he is also perhaps the worst enemy of his own libertarian cause."[39]

Things were completely different in the circle of his new friends. Many of the new people that came to Mises through his NYU seminar and FEE were even more libertarian than he was. Suddenly it was Mises who on several occasions turned out to represent the more statist position in his seminar. American libertarians such as Leonard Read and R.C. Hoiles placed great emphasis on the definition of political liberty in terms of non-initiation of force. After the publication of Human Action, for example, Hoiles criticized Mises in private correspondence for having admitted that public education "can work very well" in monolingual countries if it is limited to reading, writing, and arithmetic. Hoiles saw this as an unnecessary concession. Public education, even if limited to the case under discussion, was unjustifiable:

[ … ] the fact that some people were compelled to pay who did not want to have their children taught or who had no children, was teaching by example that the majority had a right to coerce the minority to pay for anything the majority wanted. If that is not the worst kind of government intervention, I do not know what intervention means. [ … ]

When you make this one concession you are denying that our government is limited in what it has a right to do. It seems to me that intervention by the government is just the same thing as initiating force. Understand, I am not opposed to the use of force to stop someone from initiating force, but the government has no right to initiate force. The only purpose of a government is to stop people from intervening in an unhampered market and to stop people from initiating force to make someone pay for anything he doesn't want to pay for.[40]

This perspective was entirely outside Mises's utilitarian approach to political problems. He believed that the question of who initiated force was politically irrelevant because one could hardly ever reach agreement on it. The only relevant question was whether the initiation of force was suitable to attain the end of the acting person, even if his action was somehow wrong from an ethical point of view. A two-sentence letter he sent some ten years later to an American correspondent, a publisher in Wisconsin, speaks volumes: "I read your stimulating letter with great interest. As I see it, the main argument in favor of the capitalist system is that it has raised the standard of living of the common man in an unprecedented way."[41]

Another, even more substantial point of disagreement between Mises and many American libertarians was the question of democracy. A few months after FEE set up shop, Baldy Harper saw the need to write a four-page confidential memorandum defending Mises's views on democracy against the criticisms of Orval Watts, who had pitted democracy against American-style liberalism.[42] Mises would also come to taste the particular American flavor of hostility to democracy in a 1947 exchange of letters with Rose Wilder Lane. Apparently they had met for lunch with Hoiles and others, and Lane had the impression that Mises believed they shared the same outlook on fundamentals. At the meeting she did not feel it was the right moment to start a discussion on the subject, but later wrote him to set the record straight:

[ … ] as an American I am of course fundamentally opposed to democracy and to anyone advocating or defending democracy, which in theory and practice is the basis of socialism.

It is precisely democracy which is destroying the American political structure, American law, and the American economy, as Madison said it would, and as Macauley prophesied that it would do in fact in the 20th century.[43]

Mises did not even bother to address the issue, but observed that he never addressed people who called his writings "stuff" and "nonsense" — as Lane had done in a book review. And that was that for more than two years, after which the debate resumed on more civilized terms, probably because of Lane's friendship with Howard Pew. Mises's basic objection to Lane was that she had misunderstood him. He had never advocated any concrete regime of parliamentary democracy. He merely stressed the fact that all political systems ultimately hinge on mass opinion.[44]

Mises's American friends disagreed and the discussions and correspondence between them remained without conclusion. But the confrontation between the Austrian scholar and his American readers and disciples would be a driving force in the development of libertarian theory. Mises's student Murray Rothbard would eventually work out the radical implications of Misesian economics with great care, combining the non-initiation-of-force criterion with the typical Misesian focus on private property rights. Rothbard thus created the blend of libertarian economics and natural-law ethics that continues to attract many intellectuals to this day.

The new radical environment contrasted sharply with the mentality of Mises's old associates, who had been libertarians by central European standards, but were moderate interventionists in an American context. A case in point was Fritz Machlup. In a 1946 letter to Mises he asked his old master to bless his evasive way of addressing pro-labor-union audiences. He wrote:

I would like your advice: I must soon give a lecture for the U.S. Chamber of Commerce on "Monopolistic Wage Determination as Part of the General Problem of Monopoly." The lecture is to be published, and will probably receive more attention than suits my liking. If the lecture were to be presented in a scientific forum, I could go into the history of ideas, and in particular Mill and so forth. But for the Chamber I must be practical and political. I will have no choice but to say that monopoly wages are the only purpose of labor unions, and that strong labor unions mean unemployment and inflation and lead to an authoritarian state. Can an honest man avoid such statements? Are there any alternatives? [ … ]

If it is politically unthinkable to outlaw labor unions — and I assume this is the case today — can one consider government limitations on private wage increases? I am not thinking, of course, of a fixing of wages through the state, but of a general interdiction to increase wages [ … ] by more than 10% in three years, or something of this sort. Of course this is entirely fantastic. Would it be smarter not to mention such makeshift solutions at all? They have no prospect of being accepted.[45]

Mises replied that he would tell the Chamber: "First of all, liberate yourself from false ideas. Study economics. Then go on to convince others." And he emphasized: "I reject any outlawing or limitation of the liberty of association. Not liberties shall be abolished, only coercion."[46]

Correspondence between the two men had already become quite infrequent and would cool down even further. Mises considered Machlup an opportunist and a coward. Their friendship thawed before Mises's eightieth birthday, but would sink to an all-time low by the mid-1960s.

Planned Chaos

Montes de Oca had already talked to Mises in 1943 about writing an epilogue to the Spanish edition of Socialism, but Mises probably did not turn to the task before 1945. Until then, the rate of progress on the translation was unclear, and Mises may well have been wary of engaging in another project for Montes de Oca, who so far had not completed any of the projects they had discussed in 1942. Mises had not even received payment for a study on Mexico. The susceptible Mexican publishers of Socialism asked for an epilogue dealing with the Soviet experiment, both because dealing with the question was interesting in its own right and because it would bring the book up to date. Mises replied evasively, suggesting that the best solution would be to write a special introduction for the Spanish edition.[47]

In early January 1946, Mises finally received payment for the study on Mexico he had written in 1943. He also worked speedily on the completion of the epilogue his Mexican partners had asked for. The typewritten manuscript was probably finished at the end of the month.[48]

In July and August 1946, Mises lectured again in Mexico City. In the last days of July, Hayek joined him.[49] In the second half of August, they toured the Central Plateau and spent some days on Lake Chapala.[50] On the tour he also gave a talk in Guadalajara (August 27). Montes de Oca acted as a translator to attract a larger audience.

One purpose of Mises's visit was to discuss the long-standing project of an Institute for the Social Sciences. This prospect must have been buried on that occasion — the subject did not come up again in any subsequent correspondence. But another project now took on ever-more concrete shape. Hayek was trying to rally classical liberal scholars on both sides of the Atlantic to establish an international scholarly society devoted to the promotion of individual liberty. He planned to set up a meeting during the next year and sought to secure Mises's participation.

At the end of the year, Montes de Oca was appointed as the Director General of the Mexican central bank, the Banco de Mexico. His group later invited Hazlitt (early January 1947), as well as Hansen and Haberler for lectures (January 1947). Mises himself was invited again for August 1947, to give a series of lectures critically analyzing Marxism.[51]

Upon his return to New York City, Mises learned that Henry Hazlitt had to leave the New York Times. This was not the first time Hazlitt's politics would force him out of a job. In 1933, he had quit his position as literary editor of The Nation, which did not welcome his hostility to the New Deal. Leaving the New York Times was a serious setback, but Hazlitt immediately found a new position at Newsweek, where he enjoyed the same liberty of opinion he once had at the Times. He would write his Newsweek column for exactly twenty years, until he had to leave, once again, for ideological reasons.

Mises himself fared much better and continued his "visit" at NYU, where he taught a course on currency reform in the spring term of 1947. In the fall of 1946, Mises also met a good number of European economists such as Rueff, Perroux, Hoff, Pinson, Novoa, and others, who had traveled to the United States and were lecturing at FEE and other institutions.[52] One likely subject of discussion was Hayek's plan for an international society of classical-liberal scholars.

A Conference at Mont Pèlerin

Exactly one year after the establishment of the Foundation for Economic Education in New York, another organization was brought into existence to provide a forum for the exchange and development of ideas from a classical-liberal perspective. Unlike FEE, this organization did not have any permanent headquarters; it was conceived as a society of academic scholars, and it mainly consisted in annual meetings, which have taken place at different cities throughout the world. Most importantly however this society was founded in the spirit of neo-liberalism, and ever since, neo-liberal scholars, politicians, and journalists have represented the bulk of its members.

The society was a follow-up on the 1938 Lippmann Colloquium that Louis Rougier had organized in Paris. This time, the initiative fell quite naturally into the hands of Hayek, who was well known on both sides of the Atlantic — due to the success of The Road to Serfdom and also because he was among the first western intellectuals to renew contacts with his continental counterparts after the war.[53] In these meetings the idea of a libertarian association slowly emerged. Hayek certainly discussed the issue when he met Mises at the end of July 1946 in Mexico, but at that point there was not yet any concrete plan. From Mexico City he flew to Oslo, where Trygve Hoff organized a preparatory meeting to discuss rather vague plans for the establishment of a neo-liberal association of European intellectuals. There the plan for an "Acton-Tocqueville Society" must have taken shape.[54] By the end of the year, he had found the necessary funds to sponsor the event from Swiss (through Hunold) and American (Volker Fund) sources, and he wrote a letter of invitation to some fifty persons for a ten-day conference in the Swiss Alps, at the bottom of Mount Pèlerin on Lake Geneva.

Hayek was probably anticipating trouble with Mises: on the invitation letter to Mises, Hayek added a hand-written apology that he had not had the time to discuss his plan with him in any detail. His apprehension turned out to be right. Mises went through the roof, writing to Hayek that he could not leave NYU in April and that he "abhorred the idea of going to Europe. I have seen enough decline already."[55] At Hazlitt's request, he had written a four-page memorandum containing his "Observations on Professor Hayek's Plan." Here he stated that many similar plans to stem the tide of totalitarianism had been pursued in the past several decades — he himself had been involved in some of these projects — and each time the plan failed because these friends of liberty had themselves already been infected by the statist virus: "They did not realize that freedom is inextricably linked with the market economy. They endorsed by and large the critical part of the socialist programs. They were committed to a middle-of-the-road solution, to interventionism." At the end of the memorandum, he stated his main objection:

The weak point in Professor Hayek's plan is that it relies upon the cooperation of many men who are known for their endorsement of interventionism. It is necessary to clarify this point before the meeting starts. As I understand the plan, it is not the task of this meeting to discuss anew whether or not a government decree or a union dictate has the power to raise the standard of living of the masses. If somebody wants to discuss these problems, there is no need for him to make a pilgrimage to the Mount Pèlerin. He can find in his neighborhood ample opportunity to do so.[56]

In his letter to Hayek, he was more specific:

I am primarily concerned about the participation of Röpke, who is an outspoken interventionist. I think the same holds true for Brandt, Gideonse, and Eastman. All three of them are contributors to the purely socialist — even though decidedly anti-Soviet — New Leader.[57]

Still Mises did not rule out his participation, but he did suggest a postponement of the conference until September. This turned out to be impracticable, though, and Hayek undertook another attempt to convince his old mentor in early February. He downplayed the significance of Brandt, Gideonse, and Eastman's connections to the New Leader, mentioning that he himself had written for this magazine. But more importantly, he argued that the program of the conference was still quite open and that the main purpose of the meeting on Lake Geneva — and of subsequent meetings — would be to win over especially those historians and political scientists, who still harbored wrong ideas on a number of issues, but who were willing to learn.[58] This seems to have been enough to convince Mises to attend. At Hayek's suggestion, he got in touch with the main sponsor of the conference, the Kansas-City based William Volker Fund, and within a week, travel arrangements were made through FEE.

* * *

It was probably the first time Mises personally got in touch with Harold W. Luhnow and the wealthy Volker Fund. The contact would prove to be highly beneficial in the course of the next fifteen years, until the Fund was liquidated in the early 1960s.

German-born William Volker (1859-1947) had made a fortune with a home furnishing business he had established in 1882 in Kansas City.[59] In 1911, after finally marrying at the age of 52, he became a philanthropist. He eventually established in 1932 a private fund to protect his capital against the encroachments of the tax code — especially the new income tax of 1916. It may have been Volker himself who approved the support of the Mont Pèlerin Society meeting, which took place some seven months before he died. But it is more likely that this was already the decision of his nephew, Harold Luhnow, who became the director of the Fund in 1944 and turned it into the principal sponsor of libertarian scholarship.[60] Apparently Luhnow's main source of libertarian inspiration had been Loren Miller, who from 1942 to 1944 had been an executive of the Kansas City Civic Research Institute (a Volker Fund outfit), before he departed for the Detroit Bureau of Governmental Research — another source of funding of postwar libertarianism.

The influence of the Volker Fund radiated far beyond the United States. By the end of 1953, it paid the membership fees for virtually all non-U.S. members of the Mont Pèlerin Society.[61] The Fund's cooperation with Mises was very close, especially after Luhnow hired former FEE employees Herbert and Richard Cornuelle.[62]

All other libertarian think tanks and funds have been perverted over time, turning away from their initial principles. The Volker Fund alone escaped this fate. It was liquidated in the early 1960s, when its directorship fell into the hands of those who could not identify with the libertarian orientation of its founder.

* * *

The Mont Pèlerin Conference started on April 1, 1947 and lasted for ten days. Mises left New York City on March 25, curious to see Europe again after almost seven years. The meeting had only a minimum agenda and left large leeway for the participants to determine the subjects they wished to discuss in the course of the next days.

Mises and the six other New Yorkers — Read, Harper, and Watts from FEE, as well as Hazlitt, Gideonse (President of Brooklyn College), and Davenport (Fortune Magazine) — represented the Manchesterite fringe of the meeting. Hayek, Friedman, and Machlup were neo-liberals; people like Eucken, de Jouvenel, Knight, Polanyi, Popper, and Stigler were liberal social democrats; and Allais, Röpke, and Robbins represented the far left of the Conference. Allais could not even bring himself to endorse the vague "statement of aims" that all other participants approved on April 8.

In his opening address Hayek set the agenda for the postwar ideological reconstruction of the classical-liberal movement. It involved, Hayek explained, on the one hand "purging traditional liberal theory of certain accidental accretions which have become attached to it in the course of time" and, on the other hand, "facing up to some real problems which an over-simplified liberalism has shirked or which have become apparent only since it has turned into a somewhat stationary and rigid creed."[63] As later developments would show, the concrete meaning of this program was (1) to exculpate classical liberalism from certain widely held criticism, for example, that the policies it had inspired had led to mass misery; (2) to distinguish the "modern" liberalism from its laissez-faire predecessor.

Some of the other scheduled talks, however, were more "neo" and less "liberal." For example, the German economist Walter Eucken explained that antimonopoly legislation was not sufficient to combat monopolies. Further legislative inference was needed in the field of corporate law, patent law, and trademark law. He championed two maxims of economic policy. First, although there was to be freedom of contract, this freedom was not to be allowed to limit in any way the freedom of contract of others. Second, monopolistic market participants should be forced to behave as if they were in "competition" — produce the same quantities and sell them at the same prices that would prevail under "competition."

In short, Eucken dished up the same interventionist agenda that had already dominated the Lippmann Colloquium in 1938. At that time, Mises had been on his honeymoon in Paris, which might explain why his contributions to the discussions had been unusually tame. Nine years later, the honeymoon was over. He reacted with great determination and defended his laissez-faire position so vigorously that many years later his friend Lawrence Fertig still recalled the debate.

The exchange between Mises and his neo-liberal opponents set the tone in the Mont Pèlerin Society for years to come. Although the libertarians around Mises were a small minority, it was they who had the financial backing of the main American sponsors such as the Volker Fund, without which the Society would quickly have died out in those early years. As long as Mises took active part in the meetings, therefore, it was impossible to move on to discussing the technical details of an approved government interventionism. Laissez-faire had made a comeback. It was not the majority opinion, but it was a debatable and debated political option — too much for some initial members such as Maurice Allais, who soon left the Society for precisely this reason.[64]

Despite fundamental disagreements, the meeting was a success. On April 9, some forty participants established the Mont Pèlerin Society and elected Hayek as their President.[65]

Preparing the Counter-Revolution

By March 1945, Yale University Press had decided to publish an American edition of Nationalökonomie. The idea of a simple translation was never really an option. All sides agreed to publish a revised edition — an edition whose revisions would turn out to be rather thorough.[66] For the next three and a half years, Mises worked busily on this project. The revisions were not to be substantive. Their primary purpose was to adapt the work to the intellectual background of his American readers. In this task, Mises benefited enormously from the experience of Henry Hazlitt and Yale editor Donald Davidson, both of whom suggested many areas of improvement. For example, Mises now dealt with doctrines and policy proposals that had specific importance in the United States, such as the Georgist theory of land tax.[67] But he especially modified his discussion of the fundamental philosophical problems of the science of human action. For example, in his German book, Mises felt he had to refute Othmar Spann's "universalist economics" in great detail; he now dropped this discussion almost entirely and focused instead on the refutation of positivism and the use of quantitative methods in economic theory.

He added an entirely new chapter — the only chapter with no counterpart in Nationalökonomie — to discuss the basic problems of probability theory, which was at the heart of the quantitative approach that dominated economic analysis in the Anglo-Saxon countries. In this chapter, Mises seized the opportunity to build on and elaborate the works of his brother Richard, who had pioneered the so-called relative frequency theory of probability. Mises considerably simplified the axiomatic exposition of the theory and argued, without mentioning his brother by name, that the standard account was redundant.

Beyond the scholarly aspect of this contribution, the rectification of his brother was a sequence in a typical "Austrian" literary squirm. Twelve years earlier, Richard had ventured into the field of his elder sibling, and claimed in one of his books that laissez-faire policies had no scientific merit.[68] Now Ludwig struck back by demonstrating what an elegant exposition of the relative-frequency theory looked like.

Human Action almost became Mises's first posthumous publication. In October 1948, he and Margit had a very serious car accident.[69] But the couple survived and Ludwig put the finishing touches on the book by the spring of 1949. He sent copies of the manuscript to receptive publishers and friends, among them Jasper Crane, who ran the Van Nostrand Publishing Company and whom he knew well through FEE.[70]

A Neo-Liberal Coup in Germany

The 1947 Mont Pèlerin Society meeting was enough to satisfy Mises's curiosity about Europe and European scholars for quite some time. Europe lay in shambles, even Paris was in rags. He did not even wish to think about traveling to Austria. All that was good and memorable about Europe was in the past. No need for him to return to the old continent just to witness the misery induced by those very statist follies he had spent a lifetime fighting. When he was invited to the next Mont Pèlerin Society meeting, scheduled for July 1949 in the Swiss town of Seelisberg, he declined.[71]

But his American friends at the Volker Fund thought it was crucial to have him on board, lest the interventionists have a free hand. The Mont Pèlerin Society provided American libertarians not only with some cosmopolitan flair, but it also put them in touch with a mass of intellectuals close to their cause that could not be found at home.

Moreover, in one of the great ironies of history, liberal principles had just been applied with overwhelming success in Germany, and a thorough acquaintance with Ludwig Erhard and the intellectual leaders of the German reforms promised to be helpful for American libertarians in their struggles at home. Nobody in the States knew the reformers, and curiosity was great. Prompted by the news from Germany, Leonard Read asked Mises about Erhard. The reply:

The only fact I know about Professor Erhard is that he is the chairman of the Economic Advisory Board. This council is moderately interventionist and opposes the radical New Dealism of the German political parties and of the outright socialist British Military Government. It is possible that the Board's firmness in this matter is an achievement of Erhard's uncompromising attitude and the persuasiveness of his exposition of the principles of — true liberalism.[72]

The only way to find out, however, was to go to Europe and meet the man and his supporters. But from Luhnow's point of view, this would only be worthwhile if men like Mises could be brought along to give the meetings the right orientation. Through the intermediation of Herbert Cornuelle and Loren Miller, Luhnow urged Mises to attend the Seelisberg meeting. Mises accepted. It would be his second return to Europe after emigration.[73]

He left New York City at some point in June, and then went to Seelisberg from July 3 to 10. The meeting was supposed to deal in particular with questions relating to the labor market.[74] But as was to be expected, it was entirely overshadowed by the discussion of recent events in West Germany.

In March 1948, Ludwig Erhard had been appointed the director of the economic administration of the British-American occupation zone. A disciple of the social-liberal sociologist Franz Oppenheimer, Erhard was unknown in the world of libertarianism — which was probably why he got the job in the first place.[75] But Mr. Nobody lost no time setting out for a liberal coup. Three months after his appointment, he made two bold decisions. Against the intentions of the British military government, he (1) abolished virtually all price controls and (2) introduced a new currency: the Deutschmark.

The next day the stores and shops were filled with merchandise. Businessmen had cut back production during the postwar years, and retailers held back commodities, reserving them for sales on the black market, where higher prices could be obtained. This lamentable state of affairs had resulted, of course, from the Nazi system of price controls, which had made profitable production impossible and turned the open market into a black market. The allied occupation forces had maintained this senseless system at the behest of a small group of influential left-wing economic advisers, for whom central planning and government controls was the state of the art.[76] Erhard overthrew this system, thus creating the economic foundations of the (western) Federal Republic of Germany, which came to be established in the fall of 1949. More than that, he had put into practice a classical-liberal alternative to the Marshall Plan for postwar reconstruction.

A year before the Erhard reforms, on 5 June 1947, Mr. Marshall had presented his proposal for the economic reconstruction of Europe through the large-scale spending of U.S. taxpayer money.[77] In subsequent years and decades, the story of the Marshall Plan has been told and retold from the point of view of its sponsors, thus becoming part of modern welfare-state mythology. High school students in all western countries learn that Marshall Plan-funded government spending initiated a new phase of economic growth after World War II.

In the cold light of economic reasoning, however, we can see that the Marshall Plan was in essence a scheme for postponing the bankruptcy of socialism and the welfare state. In private correspondence, Mises pointed out that the European countries had already "nationalized railroads, telegraph, electric power, telephone, mines, and many factories," and he went on to add:

They have already expropriated by taxation all higher incomes and cannot expect any additional revenue from pushing further the policy of soaking the rich. Thus they want the American taxpayer to foot the bill for the deficits incurred by their glorified socialization policy. They call this scheme the Marshall plan.[78]

While Erhard's reforms compared very positively with the abortive Marshall Plan, they were still far from being satisfactory from a libertarian point of view. Moreover, Erhard and his advisers were not staunch defenders of laissez-faire, but champions of middle-of-the-road policies.79 This was far more serious than any political inability to put into practice a more sweeping program.

In December 1948, when Leonard Read asked him for his opinion on Erhard, Mises did not know the man. In the following years, however, he familiarized himself with the writings of Erhard and found that they closely reflected the opinions of his advisers: Cologne professor of economics Alfred Müller-Armack, as well as Wilhelm Röpke and Walter Eucken. During the 1950s, Mises realized that the very success of Erhard's free-market reforms was liable to be used against the market economy, because the reforms were "sold" in terms of interventionist rhetoric. He therefore honored the German reformers with a lengthy comment in his most prominent book:

[The] supporters of the most recent variety of interventionism, the German "soziale Marktwirtschaft," stress that they consider the market economy to be the best possible and most desirable system of society's economic organization, and that they are opposed to the government omnipotence of socialism. But, of course, all these advocates of a middle-of-the-road policy emphasize with the same vigor that they reject Manchesterism and laissez-faire liberalism. It is necessary, they say, that the state interfere with the market phenomena whenever and wherever the "free play of the economic forces" results in conditions that appear as "socially" undesirable. In making this assertion they take it for granted that it is the government that is called upon to determine in every single case whether or not a definite economic fact is to be considered as reprehensible from the "social" point of view and, consequently whether or not the state of the market requires a special act of government interference.

All these champions of interventionism fail to realize that their program thus implies the establishment of full government supremacy in all economic matters and ultimately brings about a state of affairs that does not differ from what is called the German or the Hindenburg pattern of socialism. If it is in the jurisdiction of the government to decide whether or not definite conditions of the economy justify its intervention, no sphere of operation is left to the market. Then it is no longer the consumers who ultimately determine what should be produced, in what quantity, of what quality, by whom, where, and how — but it is the government. For as soon as the outcome brought about by the operation of the unhampered market differs from what the authorities consider "socially" desirable, the government interferes. That means the market is free as long as it does precisely what the government wants it to do. It is "free" to do what the authorities consider to be the "right" things, but not to do what they consider the "wrong" things; the decision concerning what is right and what is wrong rests with the government. Thus the doctrine and the practice of interventionism ultimately tend to abandon what originally distinguished them from outright socialism and to adopt entirely the principles of totalitarian all-round planning.80

Mises reservations did not grow weaker through personal contact with representatives of the German "Ordo" school of neo-liberalism. Quite the contrary: in private correspondence from the mid-1950s, he stated, "I have more and more doubts whether it is possible to cooperate with Ordo-interventionism in the Mont Pèlerin Society."81

* * *

The 1949 Mont Pèlerin Society meeting took place, again, in Switzerland — this time at one of the mystical places of European libertarianism: the town of Seelisberg, located at the foot of a mountain of the same name. It was on the Rütliwiese, one of the adjacent meadows that, in early August 1291, Swiss patriots deliberated in secret meetings to prepare the overthrow of the regime of emperor Rudolf, who had imposed a wide variety of new laws and taxes. The Mont Pèlerin Society convened more comfortably in hotel facilities, and not all of its participants were eager to overthrow the burgeoning new welfare state. Wilhelm Röpke for example was more concerned about defining a role for government in fighting against "proletarianization." Karl Popper tried to do the same thing for the field of education and research.82

A New Yorker

After a brief return to Manhattan, Mises went to Mexico City for the month of August to lecture at the Asociacion Mexicana de Cultura. He and Margit arrived on the night of July 29, and he soon started his twelve-session course on economic theory, seasoned with a survey of the past 200 years of European history and excursions into the history of thought. Among other things, he explained "how Keynes was influenced by the German socialists of the chair and how he outdid them in many points."83 The seminar participants enjoyed the privilege of receiving advance copies of Human Action.84

During this trip, Montes de Oca prudently raised the question again of whether Mises would stay permanently in Mexico. Mises apparently replied that he now desired "to stay in New York City because it has become the intellectual center of the present day." Montes de Oca would have left it at that, but a few months later he felt the need to raise the question yet again in writing:

There has been on what might be termed a movement among Mexican business men to invite you to become advisor for various business organizations, more or less in the capacity you performed this function in the Vienna Chamber of Commerce.85

After serious reflection Mises again declined, referring this time to his advanced age, which would prevent him from acquiring a sufficient command of the Spanish language. But he emphasized that if he "were twenty years younger, I would not refuse your kind proposition" and he also said that the invitation was very tempting from another point of view: "My three visits to your country have shown me that the climate of opinion is today in Mexico more favorable to the acceptance of sound economic ideas than in any other country." But this did not alter his decision.

Not only had Mises become an American — he was now a New Yorker.


[1] Mises to Johannes Bahner, letter dated 12 June 1947; Grove City Archive: "B" file. Johannes Bahner was the owner and CEO of the Elbeo textile corporation.

[2] Mises to Reinhard Kamitz, letter dated 18 October 1946; Grove City Archive: Kamitz file. Kamitz eventually became Minister of Finance and then president of the Österreichischen Nationalbank. Mises respected him very much and paid him the following homage when he said about Kamitz's time as a Minister of Finance: "under the most adverse circumstances you have proved yourself to be a worthy successor to the two Pleners and to Böhm-Bawerk." Mises to Kamitz, letter dated 14 November 1961; Grove City Archive: Kamitz file

[3] Mises to Hans Ilau, letter dated 17 May 1947; Grove City Archive: NAM files.

[4] Robert M. Crunden, The Mind and Art of Albert Jay Nock (Chicago, 1964), p. 179.

[5] See Juilan Joseph DelGaudio, Refugee Economist in America: Ludwig von Mises and American Social and Economic Thought, 1940-1986 (Ann Arbor, Mich.: University Microfilms International, 1988).

[6] See E.M. Biggers to Congressman H.P. Fullmer, letter dated 5 June 1943; Grove City Archive: "B" files.

[7] See George H. Nash, The Conservative Intellectual Movement in America (New York: Basic Books, 1976), pp. 6–7.

[8] See Hayek, The Road to Serfdom (Chicago: University of Chicago Press, 1944), pp. 17, 36.

[9] Frank Chodorov, "What This Country Needs Is Guts," analysis 2 (February 1946), p. 3.

[10] Mises's speech was first published as "Planning for Freedom," together with a speech by Rufus S. Tucker, delivered before the same audience, in a 24-page pamphlet: Economic Planning (New York: Dynamic America, 1945), pp. 3-12. Later the essay was reprinted in Mises's book Planning for Freedom. In correspondence with A. Dauphin Meunier, a professor in Paris, Mises mentioned that he disliked the title and subtitles of the printed version of his talk. The French translation was published in 1947 in the Revue de l'Économie Contemporaine under the title "L'interventionnisme et le salaire." See Grove City Archive: Dauphin Meunier file. In a letter to Selma Fuller, Mises praises the virtues of Road to Serfdom, but concedes the appropriateness of Fuller's critical stance on the book. "The positive program developed by Hayek matters little when compared with these virtues of his book. However, it is a very comforting fact that your friends were shrewd enough to see the contradictions in this program." Mises to Fuller, handwritten manuscript of a letter dated 14 November 1944; Grove City Archive: Fuller files.

[11] See Mises to Montes de Oca, handwritten manuscript of a letter dated 3 April 1945; Grove City Archive: Montes de Oca files.

[12] Read in an interview with the G.H. Nash, quoted in Nash, The Conservative Intellectual Movement in America, pp. 22–23.

[13] F.A. Hayek, "The Intellectuals and Socialism," University of Chicago Law Review, 16 (1949), pp. 417-33, reprinted in B. Caldwell, ed., The collected works of F.A. Hayek, X: Socialism and war: essays, documents, reviews (Chicago: University of Chicago Press, 1997), p. 222.

[14] See Allman to Mises, letter dated 10 May 1945; Mises to Allman, letter dated 18 May 1945; Grove City Archive: "A" files.

[15] Mises to Machlup, letter dated 15 December 1946; Grove City Archive: Machlup files.

[16] Herbert von Beckerath, Goetz Briefs, Gottfried von Haberler, Georg Halm, and Josef Schumpeter had obtained positions at Harvard; Machlup was at the new (Rockefeller-funded) University of Buffalo, and Morgenstern at Princeton. Apparently they were all unable to get Mises into their departments.

[17] See Nash, The Conservative Intellectual Movement in America, pp. 13, 351 (footnote 57). Nash mentions that Hazlitt and Read were among those involved. Nash also mentions (ibid., p. 20) that Hayek's position at Chicago University was similarly subsidized out of private funds. It is not clear who, apart from Fertig, contributed to paying Mises's salary. It is however most likely that a major part of the money came from the Volker Fund. Other potential donors were among the men who would later back The Freeman, in particular were Alfred Kohlberg (importer), Jasper Crane, Howard Pew (Sun Oil), Herbert Hoover (former U.S. president), W. Prentis (Armstrong Cork), W.F. Peter (Chicago, Rock Island, and Pacific Railroad). See Charles H. Hamilton, "The Freeman: The Early Years," R. Lora, W.H. Longton, eds., The Conservative Press In Twentieth-Century America, Greenwood, 1999.

[18] Mises to Machlup, letter dated 26 December 1944; Hoover Institution: Machlup-Mises correspondence file.

[19] When he was looking for a job right after his arrival in the United States, Machlup had brought him in touch with NYU's department of economics. In November 1940, the department head (Spahr) invited Mises to give a talk on his contributions to economic theory. Spahr was slow (or unwilling) to follow up with a job offer and Mises then accepted the position at NBER.

[20] See Yoneo Azuma to Mises, letter dated 13 July 1948; Grove City Archive: Azuma file. Azuma was a student of Mitsutaro Araki, to whom Mises had already in 1925 granted permission to translate and publish The Theory of Money and Credit. Araki never completed the translation, but his student finished it in the early years of the war. When he wrote to Mises in 1948, the manuscript of the translation had survived the war years in a vault of the publisher. Azuma also kept Mises informed about intellectual developments in Japanese economics.

[21] Machlup reported a few years later from a meeting with Japanese colleagues in Tokyo: "[ … ] there was a discussion of whether certain parts of your Theory of Money were already in the first edition or only added in the second edition. There were several present who were able to discuss this question." See Machlup to Mises, letter dated 28 March 1955; Hoover Institution: Machlup-Mises correspondence file.

[22] Jujiro Iwai to Nymeyer, letter dated 23 January 1952; Grove City Archive: Nymeyer files.

[23] Mary Sennholz, Leonard E. Read: Philosopher of Freedom (Irvington-on-Hudson: FEE, 1993), p. 69.

[24] Mises continued to be invited to other NICB conferences. For example, on May 16, 1946, he discussed the subject of postwar interest rates with Woodlief Thomas (a Federal Reserve economist), Friedrich Lutz, and Paul Samuelson. And on January 22, 1948, he took part in a symposium that dealt with the question: "Should we return to a gold standard?" Here he met Philip Cortney; among the other contributors were Albert Hahn and Michael Heilperin. See Grove City Archive: NICB files. He was probably also instrumental in providing his friend Walter Sulzbach with a job at NICB in 1946 or 1947; see Grove City Archive: Sulzbach file.

[25] The number of 30,000 was attained by early 1949. See Read's memorandum dated 23 March 1949; Grove City Archive: FEE files.

[26] He was "paid a uniform amount at regular intervals" and therefore became, for technical reasons (tax laws), an employee of FEE in October 1946. See Curtiss to Mises, letter dated 8 October 1946; Grove City Archive: FEE files.

[27] See Nash, op. cit., p. 24.

[28] See Knight, Freedom and Reform, 1947; Simons, Economic Policy for a Free Society, 1948.

[29] See Nymeyer to Mises, letter dated 20 May 1946; Grove City Archive: Nymeyer files.

[30] See Nymeyer to Mises, letter dated 12 June 1947; Grove City Archive: Nymeyer files.

[31] Nymeyer to Mortimer Adler, letter dated 14 February 1948; Grove City Archive: Nymeyer files.

[32] Mises to P.C. Armstrong, letter dated 16 January 1950; Grove City Archive: Armstrong file.

[33] Nymeyer to Mises, letter dated 12 October 1948; Grove City Archive: Nymeyer files.

[34] See Nymeyer to Mises, letter dated 25 January 1949; Grove City Archive: Nymeyer files.

[35] Mises to Nymeyer, handwritten manuscript of a letter in response to Nymeyer's letter dated 26 April 1949; Grove City Archive: Nymeyer files.

[36] Mises to Nymeyer, letter dated 17 May 1952; Grove City Archive: Nymeyer files.

[37] See Nymeyer to Hayek and others, correspondence of spring and summer 1952; Grove City Archive: Nymeyer files.

[38] Nash, The Conservative Intellectual Movement in America, p. 10.

[39] Simons, Annals of the American Academy of Political and Social Science 236 (November 1944): 192.

[40] Hoiles to Mises, letter dated 7 September 1949; Grove City College Archive: Hoiles file.

[41] Mises to M.H. Johnson, letter dated 25 October 1956; Grove City Archive: "J" files.

[42] See the memorandum dated 13 January 1947 in Grove City College Archive: FEE files.

[43] Lane to Mises, letter dated 5 July 1947; Grove City Archive: Lane files.

[44] See the fall 1949 and fall 1950 correspondence in Grove City Archive: Lane files.

[45] Machlup to Mises, letter dated 13 December 1946; Grove City College Archive: Machlup files.

[46] Mises to Machlup, letter dated 15 December 1946; Grove City College Archive: Machlup files.

[47] See their correspondence of June and July 1945; Grove City Archive: Montes de Oca files.

[48] See Mises to Montes de Oca, letter dated 12 January 1946; Grove City Archive: Montes de Oca files. Mises received $590 for the study. He finished the epilogue at the end of December 1945. See Mises to Schmidt, letter dated 31 December 1945; Grove City Archive: Schmidt file.

[49] See Mises to Karl Brandt, letter dated 7 September 1946; Grove City Archive: Brandt file.

[50] Mises to Hayek, letter dated 31 December 1946; Grove City Archive: MPS files.

[51] Mises to Hayek, letter dated 31 December 1946; Grove City Archive: MPS files.

[52] Mises to Hayek, letter dated 31 December 1946; Grove City Archive: MPS files.

[53] For example, by January 1949, Hayek had already paid several visits to Austria. See Charmatz to Mises, letter dated 27 January 1949; Grove City Archive: Charmatz file.

[54] See Hayek to Mises, letter dated 28 December 1946; Grove City Archive: MPS files. Mises to Karl Brandt, letter dated 7 September 1946; Grove City Archive: Brandt file. Mises had been in touch with Hoff prior to June 28, 1946. Hoff had written a libertarian manifesto during the war. He sent the manuscript to Sweden, from where an American diplomat was supposed to send it to Alfred A. Knopf in New York. But the diplomat never did so. Hoff learned after the war that this was because the diplomat found the manuscript "undemocratic" — which probably meant that it was too critical of the fundamental dogmas of America's war ally. Hoff had also come to an independent discovery of the impossibility of economic calculation in socialism. Mises had the highest opinion of the Norwegian economist. Hoff was "one of the few contemporaries whose judgment on the problems dealt with in Human Action is of consequence." Mises to Hoff, letter dated 11 January 1950; Grove City Archive: Hoff files.

[55] Mises to Hayek, letter dated 31 December 1946; Grove City Archive: MPS files.

[56] Mises, "Observations on Professor Hayek's Plan," typewritten memorandum dated 31 December 1946; Grove City Archive: MPS files.

[57] Mises to Hayek, letter dated 31 December 1946; Grove City Archive: MPS files. Mises suggested that Hayek invite Montes de Oca and Velasco from Mexico, Maestri from Cuba, and Hytten from Australia.

[58] See Hayek to Mises, letter dated 3 February 1947; Grove City Archive: MPS files.

[59] On Luhnow, see the special collections of the Kansas City Public Library, which also contain photography.

[60] Shortly after Volker's death, the Fund moved from Kansas City to Burlingame, California. This must have been between April 1949 and June 1951. See correspondence in Grove City Archive: Herbert Cornuelle file.

[61] See Hazlitt to Mises, letter dated 21 December 1953; Grove City College Archive: Mont Pèlerin Society files.

[62] Liaison Officers were Richard Cornuelle and Templeton. Herbert Cornuelle left the Fund in November 1953 for a business job in Honolulu.

[63] Hayek, "Opening Address to a Conference at Mont Pèlerin," Studies in Philosophy, Politics, and Economics, Chicago: UCP, 1967, p. 148. See also the very moderately worded "Statement of Aims." A copy is in Grove City Archive: Intercollegiate Society of Individualists file (filed around 1964).

[64] Possibly Allais's visit to FEE in October 1947 reinforced his concerns that the American libertarians were far too radical for his taste. The visit is mentioned in Herbert Cornuelle to Mises, letter dated 14 October 1947; Grove City College Archive: FEE files.

[65] Eventually Hunold from Zurich and Aaron Director became secretaries; Eucken, Jewkes, Knight, Rappard, and Rueff were elected vice-presidents; and Hardy became the Treasurer. Mises, Antoni, Gideonse, Iversen, Robbins, and Röpke became members of the Council. See "President's Circular No. 1," dated 17 November 1947; Grove City College Archive: MPS files. On December 10, Albert Hunold announced that Mises would soon receive a photo album with some seventy pictures of the conference as a Christmas present.

[66] In June 1945, Mises still said the book was "to be published in an American edition next year." Handwritten manuscript of letter to Tietz; Grove City Archive: Tietz file.

[67] He addressed the issue on pp. 632-33 of Human Action, and in a later letter to his French friend Lhoste Lachaume. See Ballvé to Mises, letter dated 18 March 1955; Grove City Archive: Ballvé files. See also Mises to Lidia Alkalay, letter dated 19 February 1952; Grove City Archive: "A" files.

[68] See Richard von Mises, Kleines Lehrbuch des Positivismus: Einführung in die empiristische Wissenschaftsauffassung (The Hague: Van Stockum & Zoon, 1939).

[69] See Hayek to Mises, letter dated 15 November 1948; Grove City Archive: Hayek files. Mises to François Perroux, letter dated 13 November 1948; Grove City Archive: Perroux file. Perroux had learned about the accident from Helene Berger Lieser.

[70] See Crane to Mises, letter dated 28 June 1949; Grove City Archive: Crane file.

[71] Apparently he also declined an invitation to lecture at the University of Vienna in a U.S.-sponsored program in 1948. Fritz Machlup took part. See Thieberger to Mises, 18 April 1948; Grove City Archive: Thieberger files.

[72] Mises to Read, letter dated 4 December 1948; Grove City Archive: FEE files.

[73] In March 1950 he said that he had been to Europe twice, but not to Austria. See Mises to Ernest Neurath, letter dated 13 March 1950, Grove City Archive: Neurath file.

[74] See Miller to Mises, letter dated 26 March 1949; Grove City College Archive: MPS files. See the front-page report in Neue Zürcher Zeitung (25 July 1949). In June 1949, Mises was in Europe. See Margit von Mises to R. Ziegler; Grove City Archive: Cluett, Peabody & Co. file.

[75] On Franz Oppenheimer's influence on his student Erhard, see for example the interview with Erhard in Deutsche Zeitung (30/31 December 1961), p. 20. During the Nazi era, Erhard had worked for two economic research institutes. After the war, he became the Bavarian minister of the economy and also attended the private seminar of Mises's friend, Adolf Weber, who in those days was probably the most "Austrian" professor of economics (see Der Spiegel, 16 October 1963, mentioned by Gibson to Mises, letter dated 3 March 1964; Grove City Archive: "G" file). Weber championed a theory of the market process and of consumer sovereignty that was virtually indistinguishable from Mises's views; see for example, Weber, Weltwirtschaft, pp. 86, 102, 106, 108. It was probably under the impact of the discussions in the Weber circle that Erhard received the vision and inspiration for his reforms of June 1948.

[76] In those days, Walter Eucken, one of the intellectual leaders behind the Erhard reforms, wrote to Mises about the need for further deregulation: "The German authorities, with whom I am in constant touch, try everything to this effect. But American economic policies in Germany are still essentially based on central planning." Eucken to Mises, letter dated 25 June 1948; Grove City Archive: Read files.

[77] See Adolf Wittkowski, Schrifttum zum Marshallplan und zur volkswirtschaftlichen Integration Europas (Bad Godesberg: Bundesministerium für den Marshallplan, 1953).

[78] Mises to Mark Jones, letter dated 31 March 1948; Grove City Archive: Jones file.

  • 79. A few years later, the banking theorist Heinrich von Rittershausen speculated in private correspondence with Mises that Gemeinwirtschaft had laid the foundation for Erhard's success, "because all the significant young people have read it carefully in the 12 years without readings." Rittershausen to Mises, letter dated 22 August 1957; Grove City Archive: Rittershausen file. Of all postwar monetary theorists in Germany, Rittershausen was probably most sympathetic to Mises's views.
  • 80. Mises, Human Action (3rd ed., Chicago: Regnery, 1966), p. 723–24. Until the mid-1950s, Mises was apparently reluctant to even meet with Erhard. Röpke thought this was because Mises was under the influence of his closest German intellectual ally, Volkmar Muthesius, a sharp and relentless critic of Erhard's economic policies. See Muthesius to Mises, letter dated 2 January 1954; Grove City Archive: Muthesius file.
  • 81. Mises to Muthesius, letter dated 1 June 1955; Grove City Archive: Muthesius file.
  • 82. [82] There is a summary of the programs of the first four Mont Pèlerin Society meetings in Grove City College Archive: MPS files. Folder #9. Summary of all meetings until 1970 in folder #33.
  • 83. Mises to Montes de Oca, letter dated 26 February 1949; Grove City Archive: Montes de Oca files. A handwritten note with keywords for a (later) talk on Keynes is in Grove City Archive: May file.
  • 84. Mises to Montes de Oca, letter dated 22 July 1949; Grove City Archive: Montes de Oca files. They stayed at the Ritz, and he received $1,500 for the seminar (stated in earlier correspondence).
  • 85. Montes de Oca to Mises, letter dated 24 February 1950; Grove City Archive: Montes de Oca files.

Contact Jörg Guido Hülsmann

Jörg Guido Hülsmann is senior fellow of the Mises Institute where he holds the 2018 Peterson-Luddy Chair and was director of research for Mises Fellows in residence 1999-2004.  He is author of Mises: The Last Knight of Liberalism and The Ethics of Money Production. He teaches in France, at Université d'Angers. His full CV is here.

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