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A Lost Treasure

Mises Daily: Thursday, June 14, 2001 by


[Interventionism: An Economic Analysis by Ludwig von Mises; Bettina Bien Greaves, ed. (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1998), xiv + 93 pp. Reviewed by Robert P. Murphy]

One never tires of reading eloquent passages from Ludwig von Mises’s Human Action or Socialism, no matter how familiar they become. But to read something new by Mises is downright delightful. Though Interventionism: An Economic Analysis, which exposes the fallacy of "middle-of-the-road" policies, contains ideas expressed elsewhere by Mises, the book deserves to be read simply because he here states these ideas in a different way. Written in 1940, Interventionism shows the prophetic nature of Mises’s work. In a sense, Mises pioneered World War II revisionism, for he rewrote the history books before many of the events in question even occurred.

His expert grasp of political, historical, military, and even psychological factors — and the ability to weave such diverse elements into a coherent understanding of the world — is what sets Mises apart from other economists. The reader trusts that no "convenient assumption" is being made by an ivory-tower intellectual. The intelligent academic may state truths, but only the wise one knows which truths are worth stating. While discussing mass unemployment, Mises does not merely expose the fallacies of unionism and Keynesian pump-priming; he goes on to point out the real danger:

Unemployment as a permanent phenomenon of considerable magnitude has become the foremost political problem of all democratic countries. That millions are permanently excluded from the productive process is a condition which cannot be tolerated for any length of time. The unemployed individual wants work. He wants to earn because he considers the opportunities which wages afford higher than the doubtful value of permanent leisure in poverty. He despairs because he is unable to find work. From among the unemployed, the adventurers and the aspiring dictators select their storm troopers. (p. 33)

In a similar thrust, Mises first carefully picks apart the economic case for foreign exchange controls. But then the innocent economist once again turns into the wary seer:

The effects of such a nationalization of all economic relations with foreign countries on the life of the individual citizen are the more decisive the smaller the country and the more closely connected are its international economic relations. Foreign travel, attendance at foreign universities, and the reading of books and newspapers published abroad are only possible if the government places the necessary foreign exchange at the individual’s disposal. As a means of lowering the price of foreign exchange, the control is a complete failure. But it is an effective implement of dictatorship. (p. 46)

By the second edition of Human Action (1963), Mises had concluded that conscription was a necessary evil in the struggle against the totalitarian menace. Yet in a striking passage from the present book (the only of its kind available in English), Mises classifies conscription as just another halfway measure between market economy and socialism:

Compulsory military service proposes putting everyone in the army who is able-bodied; only the ailing, the physically unfit, the old, the women, and the children are exempted. But when it is realized that a part of the able-bodied must be used on the industrial front for work which may be performed by the old and the young, the less fit and the women, then there is no reason to differentiate in compulsory service between the able-bodied and the physically unfit. Compulsory military service thus leads to compulsory labor service of all citizens who are able to work, male and female. . . . The supreme commander then decides what is to be produced and how. . . . Mobilization has become total; the nation and the state have been transformed into an army; war socialism has replaced the market economy. (pp. 69-70)

In all of his books, Mises stresses the primacy of ideas. In Interventionism, he makes the bold claim that the war itself was the result of the hatred of capitalism that so animated the thinkers of his day:

One of the most popular anti-capitalist legends wants us to believe that the machinations of the munitions industry have brought about the resurgence of the war spirit. . . . In order to avoid the recurrence of such a catastrophe [as the first World War], it is believed necessary to prevent the munitions industry from making profits.

[Thus the French] government nationalized the French armament industry. When the war broke out and it became imperative to place the productive power of all French plants into the service of the rearmament effort, the French authorities considered it more important to block war profits than to win the war. From September 1939 until June 1940, France in actuality did not fight the war against the Nazis, but in fact fought a war against war profiteering. In this one respect, they were successful. (p. 72)

When the capitalist nations in time of war give up the industrial superiority which their economic system provides them, their power to resist and their chances to win are considerably reduced. . . . In war, too, there is only the choice between the market economy and socialism. The third alternative, interventionism, is not even possible in war. At the outbreak of the present war it may have been possible to nationalize the whole of industry, but there is no doubt that this would have led to a complete failure. If one did not want to adopt that method, the market economy should have been accepted with all its implications. Had the market method been chosen, the Hitler onslaught would have been stopped on the eastern borders of France. The defeat of France and the destruction of English cities was the first price paid for the interventionist suppression of war profits. (pp. 73-75)

These ominous quotations should not scare away the potential reader; on the contrary, Interventionism contains passages in which Mises comes close to cracking jokes. In the Preface he tells us:

The man who sips his morning coffee does not say, "Capitalism has brought this beverage to my breakfast table." But when he reads in the papers that the government of Brazil has ordered part of the coffee crop destroyed, he does not say, "That is government for you"; he exclaims, "That is capitalism for you." (p. xiii)

After pointing out that it is the German workers who support Hitler, and not the German capitalists, Mises anticipates an obvious communist objection:

The fact that the capitalists and entrepreneurs, faced with the alternative of Communism or Nazism, chose the latter, does not require any further explanation. They preferred to live as shop managers under Hitler than to be "liquidated" as "bourgeois" by Stalin. Capitalists don’t like to be killed any more than other people do. (p. 89)

Interventionism: An Economic Analysis represents Mises at his finest, using reason and integrity to make sense out of the seeming senselessness in human affairs. Although this review has emphasized the book’s appeal to the layman, in the technical sections, Mises demands much from his reader. (For example, he takes the time to demolish the argument of idle capacity [p. 41], and defends his theory of the trade cycle against criticisms leveled by other Austrian economists [p. 43].) Like so much of Mises’s work, Interventionism should appeal to every reader.