The Last Knight of Liberalism

Chapter 11. A Treatise on Socialism

1 The book was also notable in that Mises here used the only diagram he would ever display in one of his publications, depicting typical shapes of the curve of the utility of labor, as a function of labor-time. See Mises, Gemeinwirtschaft, 1st ed. (Jena: Gustav Fischer, 1922), p. 154. Significantly, Mises adopted this figure from William Stanley Jevons’s Theory of Political Economy (London: Macmillan, 1888).

2 These were the words Felix Kaufmann used to describe Mises to his future wife, Margit Serény, after they first met in 1925. See Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984), p. 14.

3 See F.A. Hayek, “Einleitung,” introduction to Ludwig von Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), pp. xif. See also Erich Voegelin, Autobiographical Reflections, vol. 34 of the Collected Works of Eric Voegelin (Baton Rouge: Louisiana State University Press, 1989), p. 10.

4 Fritz G. Steiner to Mises, letter dated December 8, 1930; Mises Archive 66: 23: “It was always my opinion that its current title was the reason this brilliant book did not find the broad circulation it could have earned.”

5 Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981), p. 31.

6 Some 160 years earlier, Adam Smith had analyzed the economic impact of unequal land ownership in very similar terms. He argued that this inequality had a negligible impact on how the land was actually used. Land owners, he said “are led by an invisible hand to make nearly the same distribution of the necessaries of life which would have been made had the earth been divided into equal portions among its inhabitants.” Adam Smith, The Theory of Moral Sentiments (Indianapolis: Liberty Fund, [1759] 1976), p. 304.

7 Ibid., pp. 61f. He notes that Marsilius of Padua seemed to have argued along similar lines in Defensor Pacis. Today this line of argument is often attributed to Karl Popper, The Open Society and Its Enemies (London: Routledge, 1945), vol. 1, chap. 7. But the young Popper is likely to have learned it, as did many other intellectuals of his time, from Socialism.

8 Notice that the premise of Mises’s argument—that governments cannot rule against the will of the majority—had a long tradition in Western thought. See in particular Thomas Aquinas, “Über die Herrschaft der Fürsten,” Staatslehre des Thomas von Aquino, F. Schreyvogel, ed. (Vienna, [1274] 1923), part 2, chap. 2, pp. 65f. (more recent scholarship argues that this chapter must actually be counted as chap. 10 of part 1); Etienne de la Boétie, The Politics of Obedience: The Discourse of Voluntary Servitude (New York: Free Life Editions, [1562] 1975), p. 50; and David Hume, “Of the First Principle of Government,” Essays, Moral and Political (Minneapolis: Liberty Fund).

9 Quoting Max Weber, Mises said:

Democracy is not less democracy because leaders come forth from the masses to devote themselves entirely to politics. Like any other profession in the society dividing labour, politics demand the entire man; dilettante politicians are of no use. (Socialism, pp. 63–64)

10 Ibid., p. 64.

11 Ibid., p. 66.

12 At the time of his writing, this was still the case in various western countries. For example, in an early case of social engineering, the French Code Napoléon had enshrined male dominance into the law by making the husband the sole legal owner of all family assets; see Xavier Martin, L’homme des droits de l’homme et sa compagne (Bouère: Dominique Martin Morin, 2001). The female right to vote had been introduced in Austria only in 1918. The dates for other countries: Germany (1919), Canada (1920), Great Britain (1928), France (1946), Italy (1946), Japan (1947), Switzerland (1971); see article “Wahlen,” Staatslexikon, 7th ed. (Freiburg i.Br.: Herder, 1989), col. 830.

13 Mises, Socialism, pp. 90–91. On another page we find:

So far as Feminism seeks to adjust the legal position of woman to that of man, so far as it seeks to offer her legal and economic freedom to develop and act in accordance with her inclinations, desires, and economic circumstances—so far it is nothing more than a branch of the great liberal movement, which advocates peaceful and free evolution. When, going beyond this, it attacks the institutions of social life under the impression that it will thus be able to remove the natural barriers, it is a spiritual child of Socialism. (p. 87)

14 Ibid., p. 90.

15 Otto Weininger, Geschlecht und Charakter, 19th ed. (Vienna: Braumüller, 1920), chap 2, pp. 106–08. In chapter 12, Weininger goes on to argue that the only vital positive interest of women is in sexual intercourse. Only because women are also essentially passive and receptive, they tend to adopt male values such as chastity and interest in art and science. Thus is comes to an inner conflict between their true sexual nature and the values that they officially endorse. The natural reaction is hysteria, about which Weininger has not much to say except that Breuer and Freud study it with a promising new method.

16 Mises, Socialism, p. 86.

17 Ibid., p. 90.

18 Ibid., p. 139.

19 Ibid., p. 163.

20 Ibid., p. 169.

21 Ibid., pp. 167–68.

22 Ibid., p. 161.

23 Ibid., p. 178.

24 Ibid., p. 186.

25 Ibid., p. 191.

26 This not only concerned questions of business management, but also “private” decisions about the number and timing of offspring. In socialist systems, individuals had no incentive to “harmonize the number of births with the limitations of the means of subsistence.” Mises concluded: “Without coercive regulation of the growth of population, a socialist community is inconceivable” (p. 175). This too turned out to be a prophetic statement. The People’s Republic of China found it necessary to limit births with the help of the death penalty.

27 Ibid., pp. 154f.

28 Ibid., pp. 155–56. See also p. 152.

29 Mises, Liberalism: In the Classical Tradition (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, [1927] 1985), p. 195.

30 Mises, Socialism, pp. 260f. He goes on to illustrate the principle:

If, through his superiority to B, A needs three hours’ labour for the production of one unit of commodity p compared with B’s five, and for the production of commodity q two hours against B’s four, then A will gain if he confines his labour to producing q and leaves B to produce p. If each gives sixty hours to producing both p and q, the result of A’s labour is 20p + 30q, of B’s 12p + 15q, and for both together 32p + 45q. If however, A confines himself to producing q alone he produces sixty units in 120 hours, whilst B, if he confines himself to producing p, produces in the same time twenty-four units. The result of the activity is then 24p + 60q, which, as p has for A a substitution value of 3: 2q and for B one of 5: 4q, signifies a larger production than 32p + 45q.

31 See Vilfredo Pareto, Cours d’économie politique (reprint, Geneva: Droz, [1896] 1964]), vol. 2, p. 859. Edwin Seligman, Principles of Economics (New York: Longmans, Green, 1905), § 95, pp. 225f. and § 200, pp. 491f.

32 Mises used this expression only in his later treatises on economics. See Mises, Nationalökonomie (Geneva: Editions Union, 1940), pp. 126ff.; idem, Human Action (New Haven, Conn.: Yale University Press, 1949), pp. 158ff. Here he spoke of “Das Ricardo’sche Vergesellschaftungsgesetz” and of “The Ricardian law of Association.” But the generalization of Ricardo’s discovery had occurred already in Socialism.

33 Mises, Socialism:

Historically division of labour originates in two facts of nature: the inequality of human abilities and the variety of the external conditions of human life on the earth. These two facts are really one: the diversity of Nature, which does not repeat itself but creates the universe in infinite, inexhaustible variety. (p. 259)

34 Ibid., p. 261.

35 Mises to Ballvé, letter dated December 26, 1950; Grove City Archive: Ballvé files.

36 Mises, Socialism, p. 272.

37 Ibid., p. 275. He emphasized:

There is no evidence that social evolution must move steadily upwards in a straight line. Social standstill and social retrogression are historical facts which we cannot ignore. World history is the graveyard of dead civilizations, and in India and Eastern Asia we see large-scale examples of civilization at a standstill.

38 Schumpeter just recently had endorsed this theory. See Joseph A. Schumpeter, “Sozialistische Möglichkeiten von heute,” Archiv für Sozialwissenschaften und Sozialpolitik 48, no. 2 (1921): 314. See also idem, Capitalism, Socialism, and Democracy (New York: Harper & Row, 1942).

39 Mises would defend his position against anti-trust policies for the rest of his life, often isolated in his stance, most notably when, as an octogenarian, he made the case for concentration in the debates of the Mont Pèlerin Society in the 1960s. See for example Mises, “Ein Wort zum Monopolpreisproblem,” Peter Muthesius, ed., Vom Sinn der Konzentration (Frankfurt: Knapp, 1965).

40 Quite apart from the corruption that plagued the implementation of anti-trust policies (Mittelstandspolitik), these policies often proved to be disastrous in practice because they benefited the more inefficient shops at the expense of the better ones, without improving their overall situation vis-à-vis the big industry. There was no critical study accounting for these practical failures. Mises obtained information from Hofrat Pösendeiner, a civil servant charged with the implementation of “industrial policy.” He tried to persuade him to put these experiences into print. See Mises to Brodnitz, letter dated April 5, 1927; Mises Archive 62: 21.

41 Mises, Socialism, p. 344.

42 Ibid., p. 346.

43 Ibid., p. 348. Mises, Gemeinwirtschaft, 2nd ed. (Jena: Gustav Fischer, 1932), p. 359.

44 Before 1922, the most elaborate exposition of the theory of monopoly price could be found in the work of John Bates Clark, who was much admired among Viennese theoreticians. Clark had claimed that monopoly weakens free competition, and that private monopoly was worse than public monopoly. See John Bates Clark, Essentials of Economic Theory (New York and London: Macmillan, 1914), pp. 374ff., 397.

45 Mises to Hans Hellwig, letter dated November 29, 1956; Grove City Archive: Hellwig file. Mises here also refers to a passage in Nationalökonomie (p. 336), where he stated the issue even more clearly.

46 See Murray N. Rothbard, Man, Economy, and State with Power and Market, Scholar’s edition (Auburn, Ala.: Ludwig von Mises Institute, 2003), chap. 10.

47 Rudolf Hilferding, Das Finanzkapital (Berlin: Dietz, [1910] 1947), chaps. 21 and 22 had made very similar observations in his influential book. However, the Austro-Marxist theoretician argued that state monopolies were an outgrowth of capitalism. Mises was therefore unable to endorse Hilferding’s analysis and preferred to recommend a study by the Freiburg professor Robert Liefmann, which detailed how the German government had created monopolies in the recent past. See Robert Liefmann, Kartelle und Trusts (Stuttgart: Moritz, 1924).

48 Mises, Socialism, p. 350.

49 Ibid., p. 370.

50 The same point had been made, though from a completely different point of view, in Carl Schmitt, Politische Theologie (Berlin: Duncker & Humblot, 1922). A great critic of classical-liberal legal doctrines, Schmitt attacked the notion that modern juridical scholarship had done away with the theological foundation of politics. Othmar Spann too was a Catholic intellectual of the old school, who believed with Pius IX that all things had to be remade in Christ. In Mises’s own circle of friends, Erich Voegelin was most interested in these questions. See Voegelin’s early work Die politischen Religionen (Stockholm: Bermann-Fischer, 1939).

51 See Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), pp. 299f.

52 Mises, Socialism, pp. 375f.

53 See ibid., p. 376. Again, this thesis parallels a contemporary work by the anti-liberal Carl Schmitt, Römischer Katholizismus und politische Form (Berlin: Duncker & Humblot, 1923). Schmitt however did not believe that Christ’s teachings were utterly otherworldly. He held that the Catholic Church survived because she always enjoyed the margin of liberty necessary to accomplish her mission.

54 Mises, Socialism, p. 379.

55 Ibid., p. 380.

56 Mises, Gemeinwirtschaft, 1st ed., p. 421; my translation. For unknown reasons, the published English translation sounds less categorical than the original:

In face of all this evidence, it would seem that only a negative answer can be made to the question asked above: whether it might not be possible to reconcile Christianity with a free social order based on private ownership in the means of production. A living Christianity cannot, it seems, exist side by side with Capitalism. (Mises, Socialism, p. 386)

57 Mises, Socialism, pp. 386f.

58 Mises to Parker, letter dated May 14, 1953; Grove City Archive: Tax Foundation file. Mises had Nell-Breuning sent a copy of the Tax Foundation’s handbook Fiscal Facts for ‘53.

59 The Bolshevist reaction was predictable: he was presented as a “theoretician of fascism.” See the article by F. Kapeljush in The Bolshevik 15 (August 15th, 1924); Mises Archive 1: 9ff. The file contains a German translation of this piece, which Mises received in the fall of 1925 from the Austrian Mission in Moscow.

60 Ibid., p. 414.

61 Mises to an unknown correspondent, letter dated February 9, 1926; Mises Archive 80: 24. The correspondent was presumably the author of the (lost) novel Polythea.

62 Carl Ludwig Haller, “Über einige Parteienbenennungen zum besseren Verständnis der Zeitungen und anderer moderner Schriften,” Satan und die Revolution—und andere Schriften (Vienna: Karolinger, 1991), p. 78.

63 Mises to Meyendorff; letter dated July 10, 1928; Mises Archive 88:6. See also Meyendorff’s letter to Mises in 88: 8.