V. On Democracy

V On Democracy

by HANS F. SENNHOLZ

THE major conflict of our time is the struggle between the “People’s Democracies” and the “Western Democracies.” Both sides claim to represent the “true” democracy and the truly democratic way of life. Each side claims to represent a system of society that is diametrically opposed to that of the other, based on contradicting beliefs and values and on distinct systems of economic organization.

The subject of this study is the nature of both “democracies,” and the nature and limit of the power which both kinds of society exercise over the individual. For it is the organization of society and the individual’s position in his society that constitute the nucleus of the controversies. Stated in its broadest terms, the problem of the forms of social organization has occupied thinkers since the beginning of civilization. The problem of true or false democracy, however, is the specific problem of our age. “Democracy” is the ambiguous catchword with a multiplicity of connotations harboring conflicting political and economic ideas and practices.

On the Nature of People’s Democracies

A thorough analysis of the nature of the communist social order and political constitution would have to include a discussion of the nature of society, the division of labor, private and collective property, the doctrines of class interests, the economics of a communist community, and many other important problems. Indeed voluminous volumes are and still could be written on the nature of the communist social order. In this essay we merely would like to examine the communist form of government in relation to democracy, i.e., the system of political organization in which the supreme power is retained by the people and exercised directly or indirectly through a system of representation.

The most eminent architects of present-day communism, Marx, Engels, Lenin, and Stalin, have repeatedly and distinctly stated their views on the nature of “capitalist” and “communist” democracies. Karl Marx dealt with this subject on the occasion of the Paris uprising by the communist proletariat which took possession of the city from March 18 to May 28, 1871. According to Marx, the insurrectionary government called Commune was the “positive form” of a republic. Not only legislation and administration were laid into the hands of the Commune but also the judicatory. Thus the three branches of government power were united by the Commune Delegation whose members were to be at any time “revocable and bound by the mandat impératif” of their constituents.1

To Marx the capitalist state is the organ of class domination, the organ of subjugation of one class by another. The function of Western democracy is “to perpetuate the rule of capital, the slavery of labor.”2 Its objective is the creation of a political and economic order that “legalizes and perpetuates the oppression of the workers.” In connection with a discussion of his doctrine of the inevitable collapse of the capitalist democracies and the inevitability of socialism and communism, Marx foresaw a stage of political transition in which the suppressed and impoverished proletariat would seize dictatorial power through revolution. In his own words, “Between capitalist and communist society, there lies a period of revolutionary transition from the former to the latter. A stage of political transition corresponds to this period, and the State during the period can be no other than the revolutionary dictatorship of the proletariat.” 3

Similar ideas on state and society were expressed by Marx’s friend and collaborator, Friedrich Engels. In a letter to the German socialist party leader, Bebel, F. Engels vividly described the communist state as a “transitional institution which we are obliged to use in the revolutionary struggle in order forcibly to crush our opponents. . . . During the period when the proletariat still needs the State, it does not require it in the interests of freedom, but in the interest of crushing its antagonists.”4 Once it has taken control of the state and has crushed its opponents, the proletariat, according to Engels, “converts the means of production into State property. But by this very act it destroys itself, as a proletariat, destroying at the same time all class differences and class antagonisms, and with this, also, the State. Past and present Society, which moved amidst class antagonisms, had to have the State, this is, an organization of the exploiting class for the support of its external conditions of production. . . . When, ultimately, the State really becomes the representative of the whole of Society, it will make itself superfluous. . From the time when, together with class domination and the struggle for individual existence, resulting from the personal anarchy in production, those conflicts and excesses which arise from this struggle will all disappear—from that time there will be nobody to be oppressed; there will, therefore, be no need for any special force of oppression—no need for the State. The first act of the State, in which it really acts as the representative of the whole of Society, namely, the assumption of control over the means of production on behalf of Society, is also its last independent act as a State.” 5 Under those conditions, Engels continues, “the State will not be ‘abolished’; it will wither away.” Of course, this does not mean that the capitalist state will wither away; it must be destroyed by the proletariat through revolution and war. Only the proletarian state withers away after the revolution.6

During his exile from czarist Russia, W. I. Lenin made similar remarks on the nature of capitalist and proletarian democracies. In his The State and Revolution,7 which he wrote in 1917 while in Zurich, Switzerland, he reiterated the teachings of Marx and Engels and expounded his theory of proletarian revolution. To him the Western democracies were organizations with the express purpose of proletarian exploitation. “In capitalist society,” said Lenin, “under the conditions most favourable to its development, we have a more or less complete democracy in the form of a democratic republic. But this democracy is always bound by the narrow framework of capitalistic exploitation, and, consequently, always remains, in reality, a democracy only for the minority, only for the possessing classes, only for the rich.”8 Or at another place, “To decide once every few years which member of the ruling class is to repress and oppress the people through parliament—this is the real essence of middle class parliamentarianism, not only in parliamentary and constitutional Monarchies, but also in the most democratic Republics.” 9 Regarding the American, Swiss, French, and English democracies he remarked that “Parliament itself is giving up to talk for the special purpose of fooling the ‘common people.’”10 To sum up, “we have a democracy that is curtailed, wretched, false; a democracy only for the rich, for the minority.” 11

In his discussion of the alleged evolution of capitalism to imperialism Lenin applied his theory of proletarian revolution and temporary dictatorship also in the field of international relations. “It must be added,” says Lenin, “that imperialism leads to an increase of national oppression and subsequently to the growing of resistance not only in new territories just opened up, but also to territorial annexions among the old countries.”12 Modern capitalism means “striving for power instead of freedom, exploitation of an increasing number of small and weak nations by very few and wealthy nations.” To avoid subjugation by capitalist nations and to repulse any capitalist attempt at exploitation of the proletariat, that is, truly democratic societies, the proletarian state is still needed. Only when the resistance of the capitalists in all countries has finally been broken, when all capitalists have disappeared, only then will all states wither away.

In a speech before the Supreme Soviet in a special session in November 1936, Joseph Stalin compared capitalist constitutions with the new Russian constitution about to be adopted by the Supreme Soviet. “The characteristics of the new Constitution,” according to Stalin, “is its consequent and fully realized democratization. From the point of view of democracy two groups of bourgeois constitutions can be distinguished: one group directly denies the equality of citizens and democratic freedoms or renders their realization unfeasible. The other group indeed accepts the democratic principles and even emphasizes them, but then embarks upon conditions and limitations that completely mutilate the democratic rights and freedoms. They speak of equal rights to vote for all citizens, but then make them contingent on domiciliation, on education and even wealth. They speak of equal rights, but immediately provide for limitations completely or partially voiding the rights of women, etc., etc.”13

According to J. Stalin, the Soviet Constitution “does not merely announce the democratic freedoms, but also assures them through certain material means. It is evident that the democratization of the new Constitution is no ‘ordinary,’ but a socialist democratization.”14 Comparing the Capitalist Democracies with the People’s Democracies Stalin arrived at the following conclusions: “Democracy in the capitalist countries divided into antagonistic classes, in final analysis, is a democracy for the strong, a democracy for the possessing minorities. The democracy in the Soviet Union, on the contrary, is a democracy of workers, of everybody. . . . I therefore believe that the Constitution of the U.S.S.R. is the only one in the world that is democratic throughout.”15 All power in the U.S.S.R. lies with the workers acting through the Soviets of deputies who are the political foundation of the U.S.S.R. and of the dictatorship of the proletariat.16 Capitalism is abolished; unearned riches and exploitation profits are socialized and labor has become “the duty and honour of every able-bodied citizen according to the principle: Who does not labor, shall not eat.”17

These, in short, are the opinions of the most eminent founders of the “People’s Democracies.” Their understanding and conception of the nature of capitalist democracies is based on the belief in the existence of antagonistic class interests under capitalism and in exploitation of the workers by the owners of the means of production. Their contentions obviously would lack any foundation if they failed to prove the existence of class conflicts and capitalist exploitation. We shall endeavor to show in the following that Marx, Engels, Lenin, and Stalin never succeeded in offering cogent proof of class conflict and exploitation under capitalism, nor could they ever succeed because both phenomena are incompatible with the nature of capitalism. Where there is capitalism there can be no class conflict, no exploitation. And where there are class conflicts and exploitation, there can be no capitalism.

In an unhampered market economy the determination of wages is the outcome of the valuations and decisions of consumers. Through buying or abstaining from buying they determine what is produced, at what price, in what quantity, quality, etc. With the valuation of the ultimate consumption goods the consumers also determine the value of labor services and achievements necessary for the production of the final product. Labor services are valued like the services of any other factor of production. Their prices, i.e., wage rates, tend to coincide with the marginal productivity of labor. That is to say, the supply of labor and of other factors of production and the anticipated future prices of the ultimate product determine the height of wage rates. It is obvious that businessmen cannot pay more for services than they obtain for the ultimate product in the market. To pay more would mean to suffer losses and to risk bankruptcy. On the other hand, a businessman cannot pay less than the market value of each service because he would lose his workers to competing entrepreneurs. Under free enterprise I cannot hold a worker by paying him less than he can obtain from my competitors. To assume that employers could keep wages down is absurd, for new entrepreneurs would immediately enter the labor market and bid up the labor price. Already operating entrepreneurs would expand their employment and thus bid up wages until the market height had been reached. As long as an opportunity to earn a profit from low wages existed, employers would continue to bid for additional labor and thus cause wage rates to rise until this source of profit were eliminated.

Of course, in an interventionist society actual wage rates may differ from the potential rate which would exist in an unhampered market. If we erect institutional barriers that impede competition and hinder entrance into certain industries and occupations, we falsify the actual demand and supply situation and bring about disparities of labor prices. But in every instance our interference with competition has inevitable effects. That is to say, we create unemployment, or shortages, depending on the nature of the discrepancy between the interventionist price from that of the unhampered market. Thus it is conceivable that under absence of capitalism wage rates may be lower than the height determined by labor’s marginal productivity. Exploitation is a common phenomenon in all non-capitalist countries, i.e., in interventionist, socialist, and above all, in communist societies where wage rates are determined by central decrees.

Equally indefensible is the contention of the antagonistic class interests under capitalism. The notion of the irreconcilable conflict between the interests of “capital” and “labor” is Marxian, though it enjoys popularity also among non-Marxian socialists and interventionists. In a free market society it is in the vital interests of all its members that the social division of labor be fully developed and each member be most productive. The higher productivity of the division of labor removes all conceivable sources of conflict. It is true, in a society without division of labor additional wealth cannot be produced and each man’s share curtails the shares of all others. But in a market economy the preservation and further development of the division of labor and its greater productivity become the uniting common interest. The greater the productivity of my fellow men, the more will I obtain in exchange for my labor. Thus everybody benefits from the smooth operation of the market economy.

Consumers also determine everybody’s share in the process of production. Their choices and preferences determine who shall be in possession of capital. Whoever serves them best in the satisfaction of their wants is allotted control. Whoever fails to satisfy their most urgent wants suffers losses of capital through the operation of the market. Under capitalism ownership in the means of production has a social function: it serves the satisfaction of the consumer’s wants.

Under communism labor and the material means of production are directed by government. Central planners and officials determine what shall be produced and who shall produce it. It is no longer the consumer whose choices and preferences direct the economy, but government officials who determine the production process and allocate the material factors. Property is divested of its social function and becomes a privilege for officials whose power of management is absolute. To encroach upon their rights and decisions becomes a crime subject to severe punishment. According to Article 131 of the Soviet Constitution, “Persons who transgress against public socialist property are enemies of the people.” That is to say, whoever transgresses against the means of production in the hands of the planners is an enemy of the state.

To maintain that capitalist democracies are democracies “only for the minority, only for the possessing classes, only for the rich,” or that the capitalist state is a state of “class domination” in which “elections decide once every few years which member of the ruling class is to repress and oppress the people through parliament,” either reflects an extraordinary insensibility toward reality or is out-rightly malicious. In the United States more than seven million people own the stock of American corporations and more than five million own farms; that is to say, more than twelve million Americans are capitalists in the Marxian sense. But about a hundred million Americans are eligible to vote in all elections. If the Marxian contention were correct, only the twelve million capitalists could vote, make laws, and determine who should “repress and oppress the people through parliament.” The emptiness of the Marxian contention is apparent.

Let us look at this case from another viewpoint. If it were the American capitalists who make and execute the laws, the taxes paid by the capitalists indeed would be insignificant. Also state controls would not be laid on the business transactions of the capitalists, but rather on all matters concerning the workers. American reality looks different. It is a matter of fact that the highest taxes are paid by the capitalists and especially by the bankers and brokers in Wall Street. As owners of corporations they often pay up to 82% of corporate income and up to 88% of the remaining income in the form of federal income taxes. In addition, state and city governments help themselves to revenues by taxing Wall Street transactions. Numerous government controls are imposed upon the credit and money market. Can anybody honestly maintain that these taxes and controls are imposed upon the capitalists by themselves? Or is it the vast majority of American voters who, ignorant of the fact that their very livelihood and existence depends on capital accumulation and investments, elect representatives who are bent on dissipating and enjoying past capital accumulations for the benefit of the moment? The answer is obvious.

According to Marx, Engels, Lenin, and Stalin, the capitalist democracies must be destroyed by the workers in violent revolutions and be replaced by the “dictatorship of the proletariat.” For “communism alone is capable of giving a really complete democracy, and the fuller it is the more quickly will it become unnecessary and wither away.”

Capitalism and exploitation are two incompatible concepts excluding each other. But let us disregard this conclusion for a moment in order to discuss the alleged necessity of proletarian revolutions in the Western democracies. If it were correct that the workers under capitalism are subjugated and exploited, why do they not vote the few ruling capitalists out of office? As we have seen, the workers are in the vast majority in all elections. Why should they favor violent revolutions if they can most easily form a proletarian dictatorship through their votes at the polls? In 1933, for example, the majority of Germans did not rise in revolution in order to make Hitler the dictator of Germany. They simply voted him into office, observing all provisions of the law. In a democracy where the workers comprise the majority of the constituency, there is no logical justification for the majority to overthrow the government. The majority of a nation only rises in revolution if and when it cannot remove an undesired government through free elections. A dictatorship that is not backed by the majority of the people faces the constant danger of revolution and overthrow.

The predilection of Marx and his followers for violent revolutions merely reveals their palliate intent to seize governmental power with the fanatical support of small minorities. Such an uprising may be successful provided the majority sympathizes with the minority and sooner or later approves the fait accompli. In Russia the majority of the people finally acquiesced in the communist seizure of power after a long and bloody civil war. But as soon as Russian public opinion should begin to disapprove of the dictatorship of the few in power, their overthrow through revolution is imminent. This is the most serious danger to the communist regime in Moscow.

The phrase of the “withering dictatorship of the proletariat” is a catchword coined to lure the bewildered masses. Devoid of any intelligent meaning it even presupposes realization of a series of conditions. First, all means of production must be in the possession of the state and the resistance of the capital owners must be broken. Second, the formula “from each according to his ability, to each according to his needs” must be fully realized. Third, and this is Lenin’s contribution, capitalism must be destroyed in all countries and communism must prevail all over the world. Provided all these conditions are given, the communist states are said to wither away.

The first condition raises the problem of whether a society, in which all means of production are in the hands of an economic planner, can afford to be without a social apparatus of compulsion and coercion. Is central planning and directing of millions of production processes conceivable without coercion? Is the directing of a labor force of many millions of individuals possible without a disciplinary power? We deny this vehemently. Even if we assume that all material means of production are in the hands of a single planner whose position and decisions are uncontested by all his fellow men, we deny that they, without coercion, would work where he wants them to work and in accordance with his instructions. Of course, he may attempt to direct the labor force through education and persuasion. But if his attempt should fail only in exceptional cases, the central director would have to impose control over the engagement of labor. That is to say, he would resort to coercion through the apparatus of coercion: the state. All socialist governments, in order to control and direct the production process, sooner or later applied to a certain extent the use of powers of labor direction. Central planning always means central management of the factors of production, including labor. This holds true in all human societies.

The second condition, that the formula “from each according to his ability, to each according to his needs” must first be realized before the withering process can commence, is an empty political slogan which is to hypnotize the people. Every student of economics knows that the concept of “need,” for example, permits a number of interpretations. And Marx and his followers are said to have been economists. They must have known that human need may pertain to anything requisite, desired, or useful for individual well-being, that it may be physical, intellectual, spiritual, that it refers to individual ends or to imperative demands for the realization of ultimate ends, that it implies indeterminable degrees of urgency. What do they mean? To fail to discuss these concepts of a future society they are striving to attain either reflects an astonishing shallowness of political and economic thought or bad faith. Could they have referred to the need of subsistence, to the provisions for the maintenance of human life? This, indeed, would be surprisingly modest as it implies a considerable reduction in the standards of riving of the American and European nations. Or could they have promised the satisfaction of every conceivable want of every individual on this earth? Could they have meant a paradise on earth? This is most likely and equally fantastic. It seems quite unnecessary to expound on the limitations of our material resources and human energies. There are limits to what man can produce, limits of time and strength, of nature’s cooperation, and above all, of the instruments of production. It is true the latter can be increased and improved through irksome saving and investing, but always in time-consuming narrow limits.

Or let us take the Marxian concept “from each according to his ability.” It immediately reveals a similar ambiguity. Let us assume that ability refers to the physical, intellectual, and moral capacity to perform valuable labor services. But who is to determine a man’s ability to add value to the social product? Is each individual himself to determine his position in the division of labor? Millions of people undoubtedly are convinced of their skill and competence to conduct central planning, to direct the production process, to supervise the labor of others. And who would openly admit that his faculties and talents merely suffice for the performance of primitive labor services? In such a society each individual indeed would endeavor to shift the disutility of hard and base labor to others, and the division of labor would disintegrate. Or should each man’s ability be judged by his fellow men through the operation of the market? In a market society it is the consumers who determine the value of a man’s contribution and, above all, his position in the production process. No, this is not what the communist fathers could have meant, for this is capitalism. Or is a central director to determine a man’s ability and position in the production process? Is the economic dictator to determine everybody’s ability and contribution to the total product? This indeed is conceivable; but this is enslavement and no proletarian paradise.

Finally, the third condition for the promised realization of the withering process is the destruction of capitalism all over the world. The communist state is said to wither away, provided the means of production are nationalized, the formula “from each according to his ability, to each according to his needs” is fully realized, and communism reigns all over the world. These are the communist conditions. In reality communism cannot be realized on a national basis, not to mention on a world-wide basis. It is a system of thought without a trace of logical coherence. Its realization is inaccessible to the human mind. But the unrealizability of the conditions serves the rulers in Russia as a welcome justification for their dictatorial position.

But let us assume for a moment that this nebulous system of social organization is actually realized. Let us assume that all the world is communistic. A glance at the hazy contour of such a world immediately reveals numerous sources of antagonistic conflict which would turn the world into an arena of war and chaos. At first, the problem of economic leadership could not be solved. We would continue to have as many planning agencies and economic directors as we now have states. Diverging policies of national economic planning would be conducted causing confusion, conflict, and chaos. If a world planning board is to direct the production of the whole world’s population, who is to be the supreme economic leader? Even if he should be found, his central planning in the “interest of the world” would create more problems because the absence of the market economy would render the calculation of capital and costs of production impossible. A communist world planner would be deprived of a method of ascertaining whether or not a certain production or method of production were economically worth while. Furthermore, certain parts of the world would be favored to the detriment of others. The richer nations would probably take the view that the capital invested in their areas is their property which they would be reluctant to share with the poorer nations. It is true the American worker is eager to share in the profits of American capitalists and businessmen. But he would be very reluctant to share his wealth and income with the Chinese coolie. He undoubtedly would oppose a reduction of his annual income from, let us say $3,000 to the world average of $200-$300. On the other hand, the poorer nations would insist upon sharing the benefits from the capital and favorable production conditions enjoyed by the richer nations. They would undoubtedly insist upon the right to migrate in vast numbers to the areas with more favorable production conditions. How would a world board for economic planning solve all these problems? They are insoluble under communism.

The communist democracy before its actual realization through the withering process is said to be a “dictatorship of the proletariat.” This phrase is as ambiguous and misleading as all other Marxian concepts. Taken literally it means that all workers are to be dictators. Such a state of society obviously would be identical with anarchism in which millions of workers would wield terroristic power over all others. Or could Marx have meant that the proletariat is to invest their leader with dictatorial power through a system of representation? Let us deliberate on this idea of leadership for a moment.

By far the larger part of the world’s population clings to the pernicious belief that political and economic power concentrated in the hands of virtuous and capable leaders ensures a just and beneficial administration of political and economic matters. They believe that good laws are enacted and bad ones are repealed, that justice is fairly administered and that all branches of administration industriously and intelligently conduct their affairs in the best interest of the public. The virtuous, capable, and trustworthy leaders are said to operate the nation’s facilities of economic production unselfishly and more efficiently than millions of businessmen under capitalist competition. Justice, order, and prosperity are said to prevail where nations have found great leaders in whom they have laid their trust.

This notion fully adopted by the communist world and embraced in large parts of the rest of the world permeates contemporary political thinking. The assumption of the virtuous and capable leader who establishes and enforces the law and plans economic life is without reason or force, for it contradicts the very nature of collectivism. In a collectivist society in which the individual serves the ends established by its illustrious leaders and where the “selfish” interests of the individual are forcibly superseded by collective duties imposed, only the unscrupulous and uninhibited get to the top. It cannot be otherwise. If there is only one end, that of society, and one leader under whose direction the individuals serve toward that end, the problem of dissent arises. How is the leader to deal with the dissenter who disputes the established end or merely the method by which it is to be attained? Is the citizen to be free to pursue diverging ends and unauthorized methods? Is the leader to exert tolerance and indulgence? If he does, the collective ends may not be realized or their realization may be impeded. The question inevitably arises whether the collectivist society should forego the desired ends or whether dissent should be suppressed. There is no other alternative. If superiority and priority are ascribed to the collective end, dissent must be eliminated lest its realization be a failure. Once we have arrived at this conclusion, we clearly perceive the problem of suppressing dissent. The leader who exerts the greatest degree of tolerance towards dissenters is least efficient in their suppression. A leader who is most ruthless and unscrupulous is most successful. As society tends to entrust the realization of its collective ends to those who are most likely to be successful, the most ruthless become its rulers. The notion that the leader of a collectivist society can be virtuous is not borne out by logic or reason. It is senseless and dangerous.

If the leader should abstain from exercising his power and be tolerant and indulgent in the pursuit of the collective end, he must be prepared to face a public opinion that no longer echoes his own. If he should grant his subjects freedom of discussion and the press, a public opinion will form and dissenters will express their doubts and objections. The dissenters now having regular organs will express opinions adverse to the policies of the leader. It is true that the leader may endeavor to “educate” the people in order to counteract adverse opinion and unmask it as a manifestation of selfish private interests. But what is he to do when the unfavorable opinions are embraced by the majority of his subjects? Is he to abdicate or to counteract with power and suppression? This would be the ultimate alternative of the indulgent dictator.18

But even if we were to concede that the dictator can be virtuous, capable, and indulgent, we must deny that it is humanly possible for him to give attention and superintendence to all parts of his legislature, administration, and judiciary. He must select a great number of collaborators of integrity and talent whom he can entrust with the power of supervision and control. And finally, he must depend on millions of honest and able men to inform him correctly at all times, so that he may guide them towards the execution of the collective program. He must direct them, for their passivity is implied in the very idea of his leadership.

It is inevitable that a nation that has transferred its political and economic matters to its illustrious leaders will suffer severely in intellectual and moral capacities. The development of human faculties depends among other things upon their practical application or the prospect of such application. Passivity does not call forth the development of intellectual or active faculties. Who puts himself to the trouble of thought and training if he lacks the prospect of some practical use of his efforts? Moral capacities must suffer where the ultimate decision of human welfare is released from the responsibility of the individual and transferred to government. Morality depends on voluntary good deeds and offices. If the field of personal morality is reduced and that of government responsibility enlarged, it follows that the domain of personal virtue is narrowed by the increasing area of collective coercion.

The very principle that the collective end is the sole end includes the principle that the collective end justifies all means. For the “good of the whole” the individual must be prepared to sacrifice his own ends and apply every means necessary for the attainment of the common end. There is literally nothing that he must not be prepared to do. The collective end as understood by the leader is the sole criterion of what ought to be done. It is obvious that this system of collectivist morals violently contrasts with the morals of our civilization. According to Judeo-Christian moral doctrines the influence of every single action on human good will and gratification is the predominant consideration. The tendencies and effects of all our actions upon every individual and, indeed, upon the whole sentient creation form the yardstick of our morality. To exclude the consequences of our actions and means applied from our moral consideration and to limit our conscience to the consequences of the collective end is in fact to deny all morals.

We readily admit that an authoritarian society will not be wholly destitute of intellectual power. A select class of scholars may embark upon speculations that do not approach politics, the collective ends, and their realization. There may be skill in the common business of life or training in the proper execution of central orders and directives. Finally there may be an attempt on the part of the leader to direct the best mental power in the country in a direction where it will enhance his position and grandeur. This may be the political party, police, or armed forces. The vast majority of the people, however, will tend to lack knowledge of and interest in the more important matters of political and economic life.

It is true there is a bureaucratic variety of competition. The collectivist state in which the market and its competition is eliminated is necessarily organized according to bureaucratic principles. As the sphere of government is expanded to almost all spheres of human activity, the system of bureaucratic management is all-embracing. It cannot be otherwise. If the central leader would abstain from issuing directives and instructions to his subordinates, it would be tantamount to renouncing his own power. Therefore he issues codes, decrees, and statutes that limit and restrict the power of his subordinates. Only through numerous rules and regulations does the leader inform his subjects of the collective will and the methods of its realization. And only through scrupulously abiding by these detailed directives can it be realized. The individual in a collectivist society merely carries out orders; he is not free to act according to his own judgment and conviction.

Competition in an all-embracing bureaucracy pertains to the zeal with which the central directives are executed. To be docile, submissive, and obedient to the superior is to be most virtuous and most likely to gain his favor. There is no room for initiative, for there are regulations which a subordinate cannot change. He is not free to make decisions or to manage his own life and rely on his own strength. There is no hope but in obeying. To follow regulations and directives even if they are harmful or conflict with his conscience is the only way toward promotion. Under these conditions intelligence, initiative, and other personal talents are of little avail. A young man who enters one of the innumerable bureaus has his life predetermined by established rules and practices. He is buried for life. It is true he enjoys security, similar to that enjoyed by the inmates of penitentiaries. But he will never be free to run his own life and be master of his own fate. He belongs to what Ludwig von Mises calls a “lost generation.” 19

The bureaucratic regimentation in a collectivist society breeds a passive type of character, which learns to endure and bend to all circumstances. No longer does the individual struggle against evil or strive for achievement through his own exertion, but he becomes acquiescent and submissive to his superiors and the conditions of his surroundings. Active and energetic characters are eyed with suspicion. Passivity and contentment are held in high esteem. But the advancement of society is solely the work of the uncontented and struggling. Without them civilization must fall into stagnation or even decline.

The moral consequences of all-round bureaucratic regimentation are far-reaching. Where people have desires which they cannot hope to realize through application of their own efforts and energies, they are apt to look with envy and hatred on those enjoying the opportunity of their realization. Only those who believe in the opportunity of success through exertion of individual efforts and energies tend to be free of malice towards those who in the past have succeeded. People who desire what others possess but are too inert to expend the necessary effort, and people whose system of social organization hinders them from ever realizing their hopes, are apt to be grumbling characters with envy and ill will towards all others. It is no coincidence that the nations of the Orient and of the Communist hemisphere embrace a great degree of envy and malice towards the Western nations because they would like to enjoy the advantages of the citizens of the West. They are envious of the standard of living which they cannot attain and are hindered from attaining through application of their own energies. It is a matter of fact that the hostility of numerous nations in the underdeveloped parts of the world flows from this very envy and malice which is the moral consequence of their own system of individual limitation. Russian soldiers in the occupation forces in Europe have learned to envy Europeans for their better living conditions and are thereby stirred to the desire for further conquest and occupation. These moral faults are the inevitable consequence of a system of social organization that rejects individual freedom and initiative. It is no coincidence that Americans in the past felt little ill will towards wealthier fellow men because it was the country of opportunity and reward for individual efforts and exertion. Of course, this too has begun to change with the growth of government regimentation and its attendant decline of individual opportunity, accompanied by the ideology of class struggle, collective bargaining, and strikes as the only remedy for individual enhancement.

Summing up, we may state that the “People’s Democracies” are tyrannies of the states over the individual. They are organizations of destruction of human society, the division of labor, and the values that created human civilization. “People’s Democracy” merely is a catchword with a multiplicity of connotations harboring conflicting political and economic ideas and brutal practices. The Marxian illusion of the stateless society cannot be realized. But any attempt of its realization necessarily must lead to suppression, conflict, and chaos.

On the Nature of Western Democracies

If we compare the political systems of the “People’s Democracies” with those of the West we cannot fail to recognize instantly that the political power in the Western democracies ultimately lies with the people and is exercised indirectly through a system of representation. Government power flows from the consent of the people and is divided among many. Government is an organization set up by individuals for their protection from violent actions of domestic and foreign peace-breakers and has the monopoly of the use of coercion in order effectively to meet transgressions and preserve peaceful interhuman relations. By means of elections the majority of the constituency is free to replace an unpopular government with other representatives who promise to conduct more agreeable policies. It is a social organization that aims to prevent conflict, revolutions, and civil wars.

An historical sketch of Western democracies in theory and practice would have to include the political teachings of Aristotle and his followers, of Jean Jacques Rousseau, John Stuart Mill, and other modern theorists of democracy. It would have to include comparative studies of the legislatures, executives, and judiciaries in the most important Western countries, and finally a discussion of the historical significance of political events in Great Britain, France, the United States, and Germany. In this study, however, we may refrain from entering into a detailed discussion of all these problems and restrict our deliberation to the differences and similarities between the “People’s Democracies” and those of the West.

Our political institutions are the work of men. They are the out-come of past and present political thought and application of human will. In every stage of development the political apparatus was devised and operated by men. Like all things made by man it is either well or ill made and is either capable of attaining desired objectives or not. Our criticism of present-day Western democracies will hinge upon this criterion.

One of the fundamental differences between the “People’s Democracies” and those of the West lies in the political apparatus that guarantees accord between the will of the government and the will of the majority of the people. It is fundamental to the Western democracies and foreign to the “communist democracies.” The significance of the democratic form of government lies in this dependence of legislation and administration on the will of the popular majority. They are dependent on the people’s will through the institution of free elections which can peaceably change the government according to the people’s liking. Under such a legal system conflicts between the rulers and the people are avoided and the smooth operation of the division of labor is safeguarded. Democracy thus performs a function that is of grave social importance and that civilized nations cannot do without.

It is obvious that the Marxian concept of democracy, the dictatorship of the proletariat through violent overthrow of nonproletarian governments, is diametrically opposed to the democratic concept of the West. In the communist states persons and systems in the government can be changed by violence only; in the West they are constantly changed through the institution of free election. Therefore, the will of the Western public continuously redetermines the will of the organs of government, whereas the popular will in the communist states may or may not concur with that of the state. If it actually does, the communist system does not suffer from the absence of the institution of free elections and the legal apparatus of government readjustment. However, if the popular will in the communist states should begin to diverge from the will of the state, the lack of the democratic form of government becomes fatal, and violence and revolution are unavoidable. All revolutions in human history resulted from this absence of the democratic institution of readjustment of government to the will of the public. And sooner or later the communist empires will be plunged into internal strife and civil war because of this shortcoming. For change is intrinsic to human nature.

Human coexistence and cooperation are safeguarded through a form of government that prevents conflict and strife. A democratic government whose single responsibility is this protection of society can discharge its function in an ideal manner. It does not matter whether every stratum of society is represented in accordance with its numerical importance in the making and administration of laws. As long as government is dependent on the will of the politically conscious and active members of society, peace and order are safeguarded. But democratic government suffers in its operation and becomes the source of insoluble conflicts as soon as the scope of its functions is enhanced. The proof of this point shall be attempted in the following.

In an interventionist system of society, government is given the additional task of directing the operation of the market economy into channels of “greater general welfare” as it is conceived by the welfare planners. The government apparatus of coercion is employed not only for the protection of social cooperation, but also to influence the utilization of the means of production. The sphere of government coercion is enlarged and that of individual freedom reduced. The individual’s right to choose and to act is suppressed and government power is substituted for the discretion of the citizen. It is inevitable that the interests of the citizen who is forced to yield to an official’s decision are impeded. His loss of freedom gives rise to conflict between him and the state. But government interventionism not only means bereavement of someone’s freedom but also deterioration of someone’s well-being. Government is an apparatus of coercion, and not an economic organization of production. Whatever benefits it may apportion to some of its citizens are taken from others whose material well-being is thus diminished. This deterioration of someone’s well-being gives rise to conflict between individuals or groups of individuals and the state.

It is true this conflict created by the intervention of a democratic government for the sake of “greater general welfare” does not immediately endanger the peace and bring about domestic disorder. But human coexistence and cooperation suffer from every government act that creates and injects social conflict. It is obvious that such a policy constitutes a rejection of capitalism and is incompatible with the elementary function of democracy.

To restrain effectively governmental action that is likely to hinder the pacifying operation of government, the liberal philosophers and lawyers of the seventeenth, eighteenth and nineteenth centuries insisted upon and finally succeeded in making their governments constitutional, i.e., they established and maintained effective restraint upon governmental action. In its functional sense, a liberal constitution merely is an effective, regularized restraint of government to prevent it from becoming the source of insoluble conflicts. And man’s “natural rights” as protected by the “bills of rights” merely constitute a pattern of such restraint upon governmental action. For limitation of the power of government over individuals does not lose its importance simply because government officials are freely removable by the majority of electors. Self-government does not mean government of each by himself, but of each individual by the majority of the rest. The will of the people does not mean the aggregate will of all individuals, but the will of the majority of the voters. This conception of government consequently demands precautions against any abuse of power and oppression by the government of the majority over the rest. It leads us to include the tyranny of the majority through acts of its governing authorities among the evils against which a democratic society must be on guard.20

Where democratic government is diverted from its true purpose—the protection of the smooth operation of the system of social organization—everyone will want to participate or at least be represented in the governing bodies. Participation in political matters becomes of greatest importance, for the interventionist coercion of government may be turned either against oneself or against others. We may observe furious bickering among the victims and beneficiaries of “progressive” policies in all parliaments rejecting unhampered capitalism. Various groups of beneficiaries struggle for the spoils of government intervention. And with every new act for the sake of “greater general welfare,” new conflict and discord are created—until democracy itself is destroyed. The presence of capitalism does not call for destruction of the state, as Marx contends, but its very absence destroys democracy.

Take the example of the American income and inheritance taxation. It is the main instrument of progressive democracy. In order to raise the funds for popular spending programs or to equalize the material position of all members of society, the interventionists advocate systems of discriminatory taxation that confiscates “excessive” income and wealth. Our government employees and politicians enjoy spending billions of dollars of tax funds which are their very source of livelihood. To improve their own living conditions they must succeed in reducing the income of others. Numerous recipients of public revenues are eager to increase taxes in order to increase their income. Thus conflict of interest is created between two distinct classes of citizens: the bureaucrats and other beneficiaries of public revenues on the one hand, and those citizens from whom the funds are taken. Since taxes on “excess” income and inheritance are paid by the successful capitalist and entrepreneur, the conflict mainly arises between the bureaucrats and the most able and beneficient members of society—those who serve the wishes of the consumers in the cheapest and most efficient way. But this is not the only conflict created. Under capitalism millions of consumers ultimately determine, through their buying or abstention from buying, each individual’s income and wealth. Confiscatory taxation, in fact, means removal of the consumers from this position. They no longer can determine who shall be in possession of the means of production, nor can they issue the ultimate instructions regarding the production process. Their material well-being, finally, is diminished by the consumption of the tax funds taken out of the sphere of production. Again, conflict is created between progressive government and certain groups of the people.

We readily admit that this policy of confiscation and redistribution by fiscal means is lauded and authorized by the majority of modern progressive governments. But it cannot be denied that it impedes human coexistence and cooperation. Conflict arises wherever nations abandon the system of unhampered capitalism for that of interventionism, socialism, and communism. The Western nations in fact have abandoned this road of true democracy that led them to the unprecedented achievements. Under the influence of the enemies of capitalism they have embarked upon the road of interventionism and socialism that leads to the ultimate destruction of Western democracies. Karl Marx and his followers, German holistic philosophers, Western reformers and planners, and other destructionists are leading the way—a way on which the legislator feels free of all limitations, a way of limitless rule of the majority which proclaims itself above the natural conditions of social and economic life.

But this is not all. There is the possibility and actual existence of conflicts between the interests of the parliamentary majority and those of the vast majority of the people. That is to say, the interests of the majority of legislators as expressed in parliamentary acts and resolutions no longer coincide with the interests of the majority of the people. Although it is the uncontested feature of constitutional government that coincidence of interests and will of constituents and representatives is most essential in all the various forms of representation, in modern “progressive democracy,” however, the interests of representatives often differ from and prevail over those of their constituents. It is true, a member of the representative body is not a delegate but a representative; and his duty is to use his own judgment on any question that comes before him. But he ought not to sacrifice the interests of his constituents to diverging interests of his own.

The way in which modern progressive government necessarily is managed too often results in the public being unaware of the true nature of progressive legislation. Hundreds of bills and resolutions have to be dealt with in each parliamentary session. The great number of laws which socialist and interventionist governments ask the representative to pass makes adequate consideration by the public, and often even by the very members of the legislative body, impossible. Furthermore, “time-tables” for the various stages of bills before parliament often are introduced to shorten the time for public discussion of complicated government measures which are unintelligible to most constituents. Under these conditions the formation of a public opinion on each single bill is prevented, providing the leeway for representatives to further their own special interests or those of special favor groups.

In an increasing number of cases the representative is either a “professional politician” entirely dependent on his parliamentary salary with no expectation of earning a comparable livelihood outside his public employ, or he is the representative of economic interest groups, a lawyer for trade associations, or an official of a labor union. In these cases the representative tends to speak and vote in accordance with the recommendations of the local and national organizations of his party, a labor union or any organization whose endorsement and support he deems important for his re-election. Since organized pressure groups or lobbies can offer powerful support, such as monetary contributions to campaign funds, or can threaten organized opposition to his re-election, the representative tends to act in harmony with the wishes of the lobbyist. Thus the ignorance of the vast majority of the public on the one hand, and the opportunity to promote his own interests on the other hand, tend to make the representative sacrifice the interests of his constituency.

Under socialism, and progressively so under interventionism, where the means of production are either owned or controlled by the state, the material well-being of each citizen, including that of representatives, depends on the decisions of the rulers of the state. The representative cannot afford to flout their instructions, for the socialist state is his sole employer whose wrath may spell economic ruin after his expulsion from party and legislature at the next election. A man who may be threatened with a “return to the mine” tends automatically to record approval of decisions by the men in power. Under capitalism the material independence of a representative is mostly secured by independent means or by income not derived from public employment. He can always be sure of earning his livelihood in private enterprise. But under socialism and interventionism, where personal incomes derived from rent, interest, and profit are abolished or severely curtailed through progressive taxation, the representative lacks the material independence which is the basis for independent judgment. Thus through his cooperation with the leaders in power the representative may further his own interests even if he must sacrifice the interests of his constituency. But democracy perishes where the representative has no independence of decision and where the state is constituted merely according to the will of the men in power.21

It lies in the nature of interventionism and socialism that the intellectual and moral qualifications of men in parliamentary life deplorably decline. Dexterity, energy, and independence of judgment no longer are the criteria of election. The special-interest groups, such as agriculture and labor, prefer and promote the passive and subservient character, the one who faithfully represents their special interests. To struggle for spoils and privileges is repugnant to the generous spirit anxious for the advancement of mankind. He does not choose to run for a political office or stands no chance of being elected where success in such a struggle is the only criterion.

Let us look at an example offered by present-day American politics where the lawmakers no longer act to represent the interests of the vast majority of the people. Because there is a tiny pressure group well organized and financed—the lobby of the American peanut growers—Congress repeatedly passed legislation requesting the Administration to raise the price for peanuts through government purchases with tax money. There cannot be any doubt that the majority of the American population favors lower peanut prices which mean lower costs of living. And yet the majority of lawmakers enacts legislation that increases peanut prices at the expense of the vast majority of the constituency. Protected by the indifference of the people, the legislator readily yields to the pressure by special-interest groups and sacrifices the interests of his constituents.

In an increasing number of cases the American Congress passes legislation that favors tiny minorities who can command support and offer benefits to legislators. Indeed most representatives have become the spokesmen and delegates of minorities in their struggle for spoils and privileges at the expense of the public. There are delegates of peanut growers, producers of cotton, sugar, potatoes, butter and cheese—each group comprising a tiny minority of the people. The fundamental function of government is flagrantly disregarded at the risk of creating discontent and strife among numerous groups of society. This serious defect of progressive democracy tends to lead to its functional inactivation and to political catastrophe.

In defense of minority legislation the advocates for the special favor and privilege groups advance the following argument: the group we represent is an essential part of the whole economic body. If we suffer from economic distress and unemployment of capital and labor, all other members of the body inevitably will be contaminated by the plight that has overcome us. But if we should prosper, the whole economic body will prosper with us. Therefore, it is in the interest of the whole to assist its parts in distress.

In the first place, the concept of “economic distress” is very ambiguous. Who is to determine the plight in which an industry claims to have fallen? Are we to take each industry’s own contentions? All other industries may claim and actually may prove similar states of distress which merely is another term for productive maladjustment. Unprofitable enterprises exist in every industry. Furthermore, the term implies a factor of temporariness and the possibility of recuperation and recovery. But if we look at the industries that, in the past, have received economic aid and privilege, we find that the beneficiaries have been enjoying their position for many decades. The American sugar industry, for example, which is constantly clamoring for public aid and protection, has been receiving public favors for more than a hundred years. The American silver industry, another special favor industry, tried to get its hands into the public treasury for almost a hundred years and repeatedly succeeded. Certain farm groups have been drawing funds from the treasury for more than three decades; and the present Administration is still spending two to three billion dollars anually to raise the prices of their products. Are these industries still suffering from temporary distress and unemployment? Or are they rather permanent guests loitering at the doors of our public treasuries?

Let us also inquire into the economic reasons for an industry’s maladjustment and plight. Why does an industry suffer from low income? In a market economy it is the consumer who ultimately determines prices and thereby the income of every producer. If the price of certain commodities and services are lower than the producers would like them to be, it is because the consumers established lower prices. To accept the contentions of producers means to reject the sovereignty of consumers and to abolish the free market economy. Government intervention hampers economic readjustment to the wishes and decisions of consumers.

The contention that the whole economic body must prosper if a certain industry prospers is not only misleading but downright incorrect. How can the public prosper if some industries continuously extract heavy doles and contributions? The means of production and subsistence are scarce. If the government gives to someone, it must first take from someone else. If, some fifty or sixty years ago, the American government had heeded the same contention advanced by the once prosperous industries of horse breeding and buggy manufacturing, it would have encouraged them not to readjust to new economic conditions and would thus have prolonged their adjustment plight. It would have retarded the growth of the automobile industry or made it impossible altogether. If government were to guarantee everybody’s income, changes and progress would be rendered impossible. Economic conditions would be arrested forever. Indeed, an enemy of the United States could have no greater wish than that such policies would have been conducted since the beginning of this nation’s history, at a time when 95% of the American population was earning its livelihood in agriculture. If a New Deal government in 1800 had arrested this ratio of 95% to agriculture and 5% to trade and industry, the consequences would indeed be indescribable.

A conceivable remedy against special privilege legislation would be the development and extended application of the legislative referendum, i.e., the process of submitting a bill to a direct vote of the citizens for approval or rejection. The advantages of this legislative procedure are twofold. First, being faced with definite political problems and issues, a larger part of the constituency would endeavor to form an opinion on the proposed government measure and its effects. The sovereignty of the people would no longer be limited to the exercise of election, but would be extended to the direct act of legislation. That is to say, the will of the people would be formed and made known in each case subject to the referendum. Second, the referendum would eliminate the opportunity for representatives to rush through hundreds of acts that further their own interests or those of special favor groups through individual action and assistance of another. The power of lobbies and pressure groups would be instantly reduced to its proper size, i.e., that of tiny minorities. Thus the danger of discontent and strife through minority legislation would be eliminated in each case of referendum.

In the case of the American peanut legislation a referendum would ascertain whether the American public wants the government to raise prices through purchases of peanuts with tax funds or whether it favors market prices as determined by the actions of consumers. There cannot be any doubt that the vast majority of Americans would prefer market prices which mean lower prices and a higher standard of living. The American public undoubtedly would rebuke the majority of its representatives for its special favor legislation.

It is significant that the American government frequently uses a limited referendum when this serves its own political purpose or defends minority legislation. Government officials, for instance, arbitrarily select certain members of a pressure group and ask them to endorse the government policy of price supports, subsidies, acreage controls, etc. If the majority of this lobby group approves of the handouts to itself, government embarks upon legislation that benefits this minority at the expense of the vast majority of the public. The fact that 87 per cent of the voting wheat farmers comprising less than 30 per cent of all American wheat farmers and less than 1 per cent of the public endorsed government support of prices through acreage controls and enforced restraint of production, served to justify the policy of favoring a small minority of wheat farmers at the expense of the taxpayers. It is obvious that such a referendum fails to express the will of the majority of the people; it rather ascertains the will of the majority of a tiny pressure group. Thus the referendum as employed by present-day government is apt further to separate the will of the public from that of its officials, and to create conflict rather than to alleviate it.

The ever-increasing scope of functions of progressive democracy not only creates classes of beneficiaries and victims of special-interest legislation, but also separates nations joined in division of labor. Most welfare measures by national governments produce inescapable effects on foreign relations and the international exchange of goods. Most welfare measures are identical with economic nationalism and are the causes of international conflicts. International conflicts among the Western nations, however, endanger the existence of the Western democracies and the continuance of the democratic form of government. The principle of progressive planning, for instance, requires government to maintain wage rates by limiting the labor supply through rigid immigration laws and other institutional barriers. Welfare planning requires government to raise costs of production to assist and favor certain industries and especially labor groups. These measures depend for their effectiveness upon complementary trade barriers, on tariffs, foreign exchange control, import restrictions, etc. All these measures constitute causes of international conflict.22

The cooperation of the various departments in each national government even suffers from this international conflict. On the one hand, the agricultural department, which is the public agency for the special interests of the farmers, is eager to dump on the international market “surplus commodities” purchased with public funds for the purpose of raising domestic agricultural prices and farm income. The State Department, on the other hand, is under pressure from foreign countries who compete in world markets, for international dumping harms foreign producers and constitutes international conflict. It is eager to avoid international conflict and therefore opposes the policies of the Department of Agriculture. All these effects are the consequences of modern progressive policies. They are inevitable when capitalism is abandoned.

The examples of sinister interests gnawing at the foundations of modern democracy can be easily extended. The ideological background for the social conflicts between the two classes of citizens created by interventionism, the beneficiaries and the tributaries, is provided by the prevailing ideology of the welfare state. It is expounded by a score of contemporary writers on political science demanding the realization of “social objectives” of the democratic state. They speak of the “general welfare” as the ultimate end of democracy, or of “morality,” “economic order” and “world order,” or the realization of “equality,” etc. Governments willingly adopt their recommendations and continuously enhance the scope of functions of democratic government. But any expansion inevitably makes government a desirable instrument for the advancement of sinister interests and consequently the source of numerous social conflicts. The common feeling of disappointment over the ill effects of interventionist policies, finally, turns the people to a demand for further intervention and greater coercive power of government. The people ultimately become an agglomeration of organizations struggling for the favors of the state as the source from which all earthly blessings flow.

The deepening interventionist conflict generates social tension and causes government to embark upon a rapid succession of remedial policies to solve the problems, only to have these policies actually lead to more dissatisfaction. With the increased scope of governmental functions the power of governmental agencies is enhanced. All share in the expansion of authority—the federal, state, and municipal authorities, and the executive, legislative, and judiciary branches. This growth of political and economic authority and its need of coordination finally create a tendency for power to concentrate and fuse in the hands of those who apply that power: the executive.

The founders of Western democracy provided for functional and territorial division of powers in order to protect the people from abuses by government and to restrain effectively governmental action. To them it was a measure of caution against tyranny in government through undue concentration of power. It was to save the people from autocracy, for division of power makes it difficult for any one man or group to seize all the power and exercise it for the subjugation of the rest. Under modern interventionism and socialism, however, the traditional separation of powers gradually vanishes and the ultimate right to make and enforce laws is vested with fewer but more powerful men.

Contemplating the course of Western democracy during the last four decades leads to a despair for its future. Critics have raised their voices and condemned democracy as the rule of the common man. “It is the rule of demagoguery and deceit,” they say, “a rule of the low and mean clamoring for policies of follies. Democracy in a triumph of platitude will ultimately vest the power of decision with the most incapable. It lies in the nature of democracy to destroy itself.” These critics fail to understand the true nature of democracy. They fail to see that it constitutes the only form of government that is capable of avoiding conflict between the governing minority and the politically conscious part of the people. Democracy makes the governing body dependent on the will of the people for the sake of peaceful social coexistence and cooperation. No other form of government can conceivably discharge this most essential social function. Lasting coexistence and cooperation require democracy. There is no other alternative.

It is true, democracy is in grave danger because the large majority of Western nations step by step are abandoning the only economic system in the soil of which democracy can grow. People are not infallible; they can be led astray. If they prefer unsound principles to sounder principles, the policies conducted will reflect their choice with all its consequences. To defend democracy, we must defend capitalism. For it is in the soil of capitalism that democracy has grown and without which it must vanish. To defend capitalism we must demonstrate the advantages of freedom and free enterprise to the people. We must oppose the demagogues and agitators and convince the people of the beneficial effects of capitalism. This is the task of our philosophers and economists. But if they themselves embrace ideologies that are destructive, democracy must perish. If they themselves embrace holistic concepts of social fife, society must suffer from turmoil of mental confusion, social conflict, and political and economic chaos.

Democracy, this pride of Western man, is a political concomitant of capitalism. If capitalism should perish, democracy must also perish. And with every step towards the destruction of capitalism, democracy is hastening towards its own end.

23 Karl Marx, The Paris Commune, 1871, edition New York Labor News Co., 1920, p. 74 et seq.

24 Karl Marx, Class Struggles in France, Lawrence & Wishart, London, 1942, p. 60.

25 Letter of Marx to Bracke, May 15, 1875; see also Marx, Zur Kritik des sozialdemokratischen Parteiprogramms von Gotha, Berlin, 1912, p. 23 et seq.

26 Letter of 18th-28th March, 1875, published in August Bebel, Aus meinem Leben, Stuttgart 1911, Vol. II, p. 322.

27 Ibid. See also F. Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, 7th ed., Stuttgart, 1910, pp. 302, 303.

28 Ibid.

29 George Allen & Unwin, Ltd., London, 1920.

30 Ibid., p. 89.

31 Ibid., p. 48.

32 Ibid., pp. 48, 49.

33 Ibid., p. 92.

34 W. I. Lenin, Der Imperialismus als höchstes Stadium des Kapitalismus, Moscow, 1946, p. 151.

35 J. Stalin, Über den Entwurf der Verfassung der USSR, Moscow, 1945, pp. 23, 24.

36 Ibid., p. 26.

37 Ibid., p. 37.

38 Article 2 of the Soviet Constitution, Ibid., p. 61.

39 Article 12 of the Soviet Constitution, Ibid., p. 63.

40 See also John Stuart Mill, “Representative Government” in Utilitarianism, Liberty, and Representative Government, E. P. Dutton and Co., N.Y., 1951, p. 271 et seq.; Ludwig von Mises, Human Action, Yale University Press, 1949, pp. 42, 43, 145-153, 772; Clarence Manion, “Legalized Immorality” in Essays on Liberty, The Foundation for Economic Education, Inc., Irvington-on-Hudson, N.Y., 1952, p. 23 et seq.: Hans Kelsen, Vom Wesen und Wert der Demokratie, Tübingen, 1929, p. 53 et seq.

41 For an excellent comparison between the bureaucratic system of management and management under the system of free enterprise, see L. von Mises, Bureaucracy, New Haven, Yale University Press, 1946.

42 See also John Stuart Mill, “On Liberty,” in Utilitarianism, Liberty, and Representative Government, E. P. Dutton and Co., N.Y., 1951, pp. 88, 89.

43 For an excellent discussion of parliamentary democracy in socialist Great Britain see Ivor Thomas, The Socialist Tragedy, The MacMillan Company, New York, 1951, p. 139 et seq. See also Carl J. Friedrich, Constitutional Government and Democracy, Ginn and Company, New York, 1946, pp. 255-267, and 414-442.

44 For a discussion of the problems of international relations under socialism and interventionism see this author’s How Can Europe Survive?, D. Van Nostrand, New York, 1955.

1Le refus de Ludwig von Mises.
2Ludwig von Mises, Human Action. Yale University Press, New Haven, 1949, p. 188.
3Stalin, Les problèmes économiques du socialisme en U.S.S.R., Ed. Sociale, p. 4.
4Ludwig von Mises, Ibid., p. 187.
5Leibnitz, Nouveaux Essais, I.II.12.
6Paul Valéry, Monsieur Teste. NR.F., p. 86.
7Ibid., p. 104.
8Ibid., p. 152.
9Ibid., p. 824.
10Ibid., p. 828.
11Ibid., pp. 821-822.
12Ibid., pp. 715 et seq.
13Ibid., p. 718.
14Ibid., p. 715.
15Ibid., pp. 736-737.
16Ibid., p. 373.
17Ibid., p. 617.
18Ibid., pp. 618-619.
19Ibid., pp. 438 and 439.
20Ibid., pp. 872 et seq.
21Ibid., p. 19.
22Ibid., p. 96.
23The Intransigence of Ludwig von Mises
24LUDWIG VON MISES is a rara avis in this twentieth century of ours, for he considers reason a valid and efficacious instrument even in the study of questions that concern economics. According to him, “any given social order was thought out and designed before it could be realized . . . any existing state of social affairs is the product of ideologies previously thought out . . . action is always directed by ideas.”
25The very title of his great book, Human Action, is in and of itself both an affirmation and a denial. It indicates what, for its author, constitutes the real economic problem, which is raised by the behavior of men with respect to the things they desire—the things called wealth. And it shows that the real economic problem is completely encompassed within the study of such behavior; that it does not consist only in an analysis “of objective processes taking place quite independently of human will.”
26This problem constitutes an object of science and is open to only two kinds of solution—those which are effective, and those which are not. Reason—and only reason—enables us to choose between them. “Man has only one tool to fight error: reason.” It is the task of the economist to tell the politician which system he must set up in order to give men what they want, and not the very opposite.
27It would be cruel to insist on learning the reasons for the practically universal renunciation of thinking. Leibnitz already indicated that, “If geometry conflicted with our passions and interests as much as morality does, we would no less question and violate its laws. And this despite all the proofs offered by Euclid and Archimedes, which we would then treat as flights of fancy and believe to be full of fallacies. And in that case Joseph Scaliger, Hobbes, and others who attacked Euclid and Archimedes, would not be so bereft of supporters as they now are.”
28In the following words, one of Mr. Teste’s listeners reports the sensations experienced while listening to him. “He shatters my mind with a word, and I feel like a defective vase that the potter has discarded. He is as hard, sir, as an angel. He is unaware of his own strength; he finds unexpected words that are all too true, that overwhelm people, that awaken them in the midst of great folly confronting them, all ensnared in being what they are, in the meshes of living, in foolishness. We live in comfort, each in his own absurdity, like fish in water, and we never become aware, except by chance, of how much stupidity is contained in the life of a reasonable person.” And the same listener goes on to say, “There is in him some appalling purity, detachment, undeniable strength and light. Never have I observed such complete absence of confusion and of doubt in an intelligence that is so deeply industrious. He is awfully quiet! There can be ascribed to him no uneasiness of soul, no shadow in his heart.”
29In the following words, one of Mr. Teste’s listeners reports the sensations experienced while listening to him. “He shatters my mind with a word, and I feel like a defective vase that the potter has discarded. He is as hard, sir, as an angel. He is unaware of his own strength; he finds unexpected words that are all too true, that overwhelm people, that awaken them in the midst of great folly confronting them, all ensnared in being what they are, in the meshes of living, in foolishness. We live in comfort, each in his own absurdity, like fish in water, and we never become aware, except by chance, of how much stupidity is contained in the life of a reasonable person.” And the same listener goes on to say, “There is in him some appalling purity, detachment, undeniable strength and light. Never have I observed such complete absence of confusion and of doubt in an intelligence that is so deeply industrious. He is awfully quiet! There can be ascribed to him no uneasiness of soul, no shadow in his heart.”
30The alternatives to the liberal and democratic principle of majority rule are the militarist principles of armed conflict and dictatorial oppression.
31. . . in the long run war and the preservation of the market economy are incompatible. Capitalism is essentially a scheme for peaceful nations.
32Modern civilization is a product of the philosophy of laissez faire. It cannot be preserved under the ideology of government omnipotence. Statolatry owes much to the doctrines of Hegel. However, one may pass over many of Hegel’s inexcusable faults, for Hegel also coined the phrase “the futility of victory” (die Ohnmacht des Sieges). To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war.
33But the government deliberately adopted a policy which was bound to make it impossible for it to rely upon the operation of the unhampered market. It resorted to price control and made it illegal to raise commodity prices. Furthermore it was very slow in taxing the incomes swollen by the inflation. It surrendered to the claim of the unions that the workers’ real take-home wages should be kept at a height which would enable them to preserve in the war their prewar standard of living. In fact, the most numerous class of the nation, the class which in peacetime consumed the greatest part of the total amount of goods consumed, had so much more money in their pockets that their power to buy and to consume was greater than in peacetime. The wage earners—and to some extent also the farmers and the owners of plants producing for the government—would have frustrated the government’s endeavors to direct industries toward the production of war materials. They would have induced business to produce more, not less, of those goods which in wartime are considered superfluous luxuries. It was this circumstance that forced the Administration to resort to the systems of priorities and of rationing. The shortcomings of the methods adopted for financing war expenditure made government control of business necessary. If no inflation had been made and if taxation had cut down the income (after taxes) of all citizens, not only of those enjoying higher incomes, to a fraction of their peacetime revenues, these controls would have been supererogatory. The endorsement of the doctrine that the wage earners’ real income must in wartime be even higher than in peacetime made them unavoidable.
34There is not, in Human Action, any precise delimitation of the state’s legitimate activities. Von Mises expressly rejects the possibility of regulating this matter in accordance with any norms of right or wrong, just or unjust. Two points, however, stand out very clearly in his exposition. On the one hand, besides the recognized necessity of national defense, the state must protect the individual against the consequences of social disorder and violence. “The only purpose of the laws and the social apparatus of coercion and compulsion is to safeguard the smooth functioning of social cooperation.”
35There is not, in Human Action, any precise delimitation of the state’s legitimate activities. Von Mises expressly rejects the possibility of regulating this matter in accordance with any norms of right or wrong, just or unjust. Two points, however, stand out very clearly in his exposition. On the one hand, besides the recognized necessity of national defense, the state must protect the individual against the consequences of social disorder and violence. “The only purpose of the laws and the social apparatus of coercion and compulsion is to safeguard the smooth functioning of social cooperation.”
36. . . government interference always means either violent action or the threat of such action. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.
37. . . While government has no power to make people more prosperous by interference with business, it certainly does have the power to make them less satisfied by restriction of production.
38The outcome of the municipalization and nationalization policies of the last decades was almost without exception financial failure, poor service, and political corruption. Blinded by their anticapitalistic prejudices people condone poor service and corruption and for a long time did not bother about the financial failure. However, this failure is one of the factors which contributed to the emergence of the present-day crisis of interventionism.
39The history of capitalism in Great Britain as well as in all other capitalist countries is a record of an unceasing tendency toward the improvement in the wage earners’ standard of living. This evolution coincided with the development of prolabor legislation and the spread of labor unionism on the one hand and with the increase in the marginal productivity of labor on the other hand. The economists assert that the improvement in the workers’ material conditions is due to the increase in the per capita quota of capital invested and the technological achievements which the employment of this additional capital brought about. As far as labor legislation and union pressure did not exceed the limits of what the workers would have got without them as a necessary consequence of the acceleration of capital accumulation as compared with population, they were superfluous. As far as they exceeded these limits, they were harmful to the interests of the masses. They delayed the accumulation of capital thus slowing down the tendency toward a rise in the marginal productivity of labor and in wage rates.
40Vast areas—Eastern Asia, the East Indies, Southern and Southeastern Europe, Latin America—are only superficially affected by modern capitalism. Conditions in these countries by and large do not differ from those of England on the eve of the “Industrial Revolution.” There are millions and millions of people for whom there is no secure place left in the traditional economic setting. The fate of these wretched masses can be improved only by industrialization. What they need most is entrepreneurs and capitalists. As their own foolish policies have deprived these nations of the further enjoyment of the assistance imported foreign capital hitherto gave them, they must embark upon domestic capital accumulation. They must go through all the stages through which the evolution of Western industrialism had to pass. They must start with comparatively low wage rates and long hours of work. But, deluded by the doctrines prevailing in present-day Western Europe and North America, their statesmen think that they can proceed in a different way. They encourage labor-union pressure and alleged prolabor legislation. Their interventionist radicalism nips in the bud all attempts to create domestic industries. These men do not comprehend that industrialization cannot begin with the adoption of the precepts of the International Labor Office and the principles of the American Congress of Industrial Organizations. Their stubborn dogmatism spells the doom of the Indian and Chinese coolies, the Mexican peons, and millions of other peoples, desperately struggling on the verge of starvation.
41But even at the time liberalism enjoyed its highest prestige and governments were more eager to preserve peace and well-being than to foment war, death, destruction, and misery, people were biased in dealing with the problems of banking.
42Much as I would like to pursue this recital of the anti-state views of L. von Mises, notably in the field of public instruction, where his radical individualism leads him into a position of almost complete isolation amongst our contemporaries, it is time to conclude.
43It is true that the appetite for food and warmth is common to men and other mammals and that as a rule a man who lacks food and shelter concentrates his efforts upon the satisfaction of these urgent needs and does not care much for other things. The impulse to live, to preserve one’s own life, and to take advantage of every opportunity of strengthening one’s vital forces is a primal feature of life, present in every living being.
44Notwithstanding all declarations to the contrary, the immense majority of men aim first of all at an improvement of the material conditions of well-being. They want more and better food, better homes and clothes, and a thousand other amenities. They strive after abundance and health.

On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises

On the Nature of People’s Democracies

On the Nature of Western Democracies