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Advancing Austrian Economics, Liberty, and Peace

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IV The Noneconomic Objections to Capitalism

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1.   THE ARGUMENT OF HAPPINESS

Critics level two charges against capitalism:  First, they say, that the possession of a motor car, a television set, and a refrigera­tor does not make a man happy. Secondly, they add that there are still people who own none of these gadg­ets. Both propositions are correct, but they do not cast blame upon the capitalistic system of social cooperation.

People do not toil and trouble in order to attain perfect hap­piness, but in order to remove as much as possible some felt un­easiness and thus to become happier than they were before. A man who buys a television set thereby gives evi­dence to the ef­fect that he thinks that the possession of this contrivance will in­crease his well‑being and make him more content than he was without it. If it were otherwise, he would not have bought it. The task of the doctor is not to make the patient happy, but to remove his pain and to put him in better shape for the pursuit of the main concern of every living being, the fight against all fac­tors pernicious to his life and ease.

It may be true that there are among Buddhist mendicants, living on alms in dirt and penury, some who feel perfectly happy and do not envy any nabob. However, it is a fact that for the immense majority of people such a life would appear unbearable. To them the impulse toward ceaselessly aiming at the improve­ment of the external conditions of existence is inwrought. Who would presume to set an Asiatic beggar as an example to the av­erage American?  One of the most re­markable achievements of capitalism is the drop in infant mortality. Who wants to deny that this phenomenon has at least removed one of the causes of many people’s unhappi­ness ?

No less absurd is the second reproach thrown upon capital­ism—namely, that technological and therapeutical innova­tions do not benefit all people. Changes in human conditions are brought about by the pioneering of the cleverest and most en­ergetic men. They take the lead and the rest of man­kind follows them little by little. The innovation is first a luxury of only a few people, until by degrees it comes into the reach of the many. It is not a sensible objection to the use of shoes or of forks that they spread only slowly and that even today millions do without them. The dainty ladies and gentlemen who first began to use soap were the har­bingers of the big‑scale production of soap for the common man. If those who have today the means to buy a tele­vision set were to abstain from the purchase because some peo­ple cannot afford it, they would not further, but hinder, the popu­larization of this contrivance.*

2.   MATERIALISM

Again there are grumblers who blame capitalism for what they call its mean materialism. They cannot help admitting that capitalism has the tendency to improve the material con­ditions of mankind. But, they say, it has diverted men from the higher and nobler pursuits. It feeds the bodies, but it starves the souls and the minds. It has brought about a decay of the arts. Gone are the days of the great poets, painters, sculptors and architects. Our age produces merely trash.

The judgment about the merits of a work of art is entirely subjective. Some people praise what others disdain. There is no yardstick to measure the aesthetic worth of a poem or of a building. Those who are delighted by the cathedral of Chartres and the Meninas of Velasquez may think that those who remain unaffected by these marvels are boors. Many students are bored to death when the school forces them to read Hamlet. Only people who are endowed with a spark of the artistic mentality are fit to appreciate and to enjoy the work of an artist.

Among those who make pretense to the appellation of edu­cated men there is much hypocrisy. They put on an air of con­noisseurship and feign enthusiasm for the art of the past and artists passed away long ago. They show no similar sympathy for the contemporary artist who still fights for recognition. Dis­sembled adoration for the Old Masters is with them a means to disparage and ridicule the new ones who deviate from traditional canons and create their own.

John Ruskin will be remembered—together with Carlyle, the Webbs, Bernard Shaw and some others—as one of the gravedig­gers of British freedom, civilization and prosperity. A wretched character in his private no less than in his public life, he glorified war and bloodshed and fanatically slan­dered the teachings of political economy which he did not understand. He was a big­oted detractor of the market econ­omy and a romantic eulogist of the guilds. He paid homage to the arts of earlier centuries. But when he faced the work of a great living artist, Whistler, he dis­praised it in such foul and objurgatory language that he was sued for libel and found guilty by the jury. It was the writings of Ruskin that popularized the prejudice that capitalism, apart from being a bad economic system, has substituted ugliness for beauty, pettiness for grandeur, trash for art.

As people widely disagree in the appreciation of artistic achievements, it is not possible to explode the talk about the artistic inferiority of the age of capitalism in the same apo­dictic way in which one may refute errors in logical reason­ing or in the establishment of facts of experience. Yet no sane man would be insolent enough as to belittle the gran­deur of the artistic ex­ploits of the age of capitalism.

The preeminent art of this age of “mean materialism and money‑making” was music. Wagner and Verdi, Berlioz and Bizet, Brahms and Bruckner, Hugo Wolf and Mahler, Puc­cini and Richard Strauss, what an illustrious cavalcade!  What an era in which such masters as Schumann and Donizetti were over­shadowed by still superior genius!

Then there were the great novels of Balzac, Flaubert, Mau­passant, Jens Jacobsen, Proust, and the poems of Victor Hugo, Walt Whitman, Rilke, Yeats. How poor our lives would be if we had to miss the work of these giants and of many other no less sublime authors.

Let us not forget the French painters and sculptors who taught us new ways of looking at the world and enjoying light and color.

Nobody ever contested that this age has encouraged all branches of scientific activities. But, say the grumblers, this was mainly the work of specialists while “synthesis” was lacking. One can hardly misconstrue in a more absurd way the teachings of modern mathematics, physics and biology. And what about the books of philosophers like Croce, Berg­son, Husserl and Whitehead?

Each epoch has its own character in its artistic exploits. Imitation of masterworks of the past is not art; it is routine. What gives value to a work is those features in which it differs from other works. This is what is called the style of a period.

In one respect the eulogists of the past seem to be justified. The last generations did not bequeath to the future such monu­ments as the pyramids, the Greek temples, the Gothic cathedrals and the churches and palaces of the Renaissance and the Baroque. In the last hundred years many churches and even cathe­drals were built and many more government palaces, schools and libraries. But they do not show any original conception; they re­flect old styles or hybridize divers old styles. Only in apartment houses, office buildings and private homes have we seen some­thing develop that may be qualified as an architectural style of our age. Although it would be mere pedantry not to appreciate the peculiar gran­deur of such sights as the New York skyline, it can be ad­mitted that modern architecture has not attained the distinction of that of past centuries.

The reasons are various. As far as religious buildings are concerned, the accentuated conservatism of the churches shuns any innovation. With the passing of dynasties and aristocracies, the impulse to construct new palaces disap­peared. The wealth of entrepreneurs and capitalists is, what­ever the anticapitalistic demagogues may fable, so much inferior to that of kings and princes that they cannot indulge in such luxurious construction. No one is today rich enough to plan such palaces as that of Ver­sailles or the Escorial. The orders for the construction of gov­ernment buildings do no longer emanate from despots who were free, in defiance of public opinion, to choose a master whom they themselves held in esteem and to sponsor a project that scandalized the dull majority. Committees and councils are not likely to adopt the ideas of bold pioneers. They prefer to range them­selves on the safe side.

There has never been an era in which the many were pre­pared to do justice to contemporary art. Reverence to the great authors and artists has always been limited to small groups. What characterizes capitalism is not the bad taste of the crowds, but the fact that these crowds, made prosper­ous by capitalism, became “consumers” of literature—of course, of trashy litera­ture. The book market is flooded by a downpour of trivial fic­tion for the semibarbarians. But this does not prevent great au­thors from creating imperishable works.

The critics shed tears on the alleged decay of the indus­trial arts. They contrast, e.g., old furniture as preserved in the castles of European aristocratic families and in the collections of the museums with the cheap things turned out by big‑scale produc­tion. They fail to see that these collectors’ items were made ex­clusively for the well-to-do. The carved chests and the intarsia tables could not be found in the mis­erable huts of the poorer strata. Those caviling about the inexpensive furniture of the American wage earner should cross the Rio Grande del Norte and inspect the abodes of the Mexican peons which are devoid of any furniture. When modern industry began to provide the masses with the para­phernalia of a better life, their main con­cern was to produce as cheaply as possible without any regard to aesthetic values. Later, when the progress of capitalism had raised the masses’ standard of living, they turned step by step to the fabrication of things which do not lack refinement and beauty. Only romantic prepossession can induce an observer to ignore the fact that more and more citizens of the capitalistic countries live in an environment which cannot be simply dis­missed as ugly.

3.   INJUSTICE

The most passionate detractors of capitalism are those who reject it on account of its alleged injustice.

It is a gratuitous pastime to depict what ought to be and is not because it is contrary to inflexible laws of the real uni­verse. Such reveries may be considered as innocuous as long as they remain daydreams. But when their authors begin to ignore the difference between fantasy and reality, they be­come the most serious obstacle to human endeavors to im­prove the external conditions of life and well-being.

The worst of all these delusions is the idea that “nature” has bestowed upon every man certain rights. According to this doc­trine nature is openhanded toward every child born. There is plenty of everything for everybody. Consequently, everyone has a fair inalienable claim against all his fellowmen and against society that he should get the full portion which nature has allot­ted to him. The eternal laws of natu­ral and divine justice re­quire that nobody should appropri­ate to himself what by rights belongs to other people. The poor are needy only because unjust people have deprived them of their birthright. It is the task of the church and the secular authorities to prevent such spoliation and to make all people prosperous.

Every word of this doctrine is false. Nature is not bounti­ful but stingy. It has restricted the supply of all things in­dispens­able for the preservation of human life. It has populated the world with animals and plants to whom the impulse to destroy human life and welfare is inwrought. It displays powers and el­ements whose operation is damaging to human life and to human endeavors to preserve it. Man’s survival and well-being are an achievement of the skill with which he has utilized the main in­strument with which na­ture has equipped him—reason.

Men, cooperating under the system of the division of labor, have cre­ated all the wealth which the daydreamers consider as a free gift of nature. With regard to the “distribution” of this wealth, it is non­sensical to refer to an allegedly divine or natural principle of justice. What matters is not the allocation of portions out of a fund presented to man by nature. The problem is rather to fur­ther those social institutions which enable people to continue and to enlarge the production of all those things which they need.

The World Council of Churches, an ecumenical organi­za­tion of Protestant Churches, declared in 1948:  “Justice demands that the inhabitants of Asia and Africa, for in­stance, should have the benefits of more machine produc­tion.”*  This makes sense only if one implies that the Lord presented mankind with a def­inite quantity of machines and expected that these contrivances will be distributed equally among the various nations. Yet the capitalistic countries were bad enough to take possession of much more of this stock than “justice” would have assigned to them and thus to deprive the inhabitants of Asia and Africa of their fair portion. What a shame!

The truth is that the accumulation of capital and its in­vest­ment in machines, the source of the comparatively greater wealth of the Western peoples, are due exclusively to laissez-faire capi­talism which the same document of the churches passionately misrepresents and rejects on moral grounds. It is not the fault of the capitalists that the Asiatics and Afri­cans did not adopt those ideologies and policies which would have made the evolution of autochthonous capitalism possi­ble. Neither is it the fault of the capitalists that the policies of these nations thwarted the attempts of foreign investors to give them “the benefits of more machine production.”  No one contests that what makes hundreds of mil­lions in Asia and Africa destitute is that they cling to primitive methods of production and miss the benefits which the employ­ment of better tools and up-to-date technological designs could be­stow upon them. But there is only one means to relieve their distress—namely, the full adoption of laissez-faire capitalism. What they need is private enterprise and the accumulation of new capital, capitalists and entrepreneurs. It is nonsensical to blame capitalism and the capitalistic nations of the West for the plight the backward peoples have brought upon themselves. The remedy indicated is not “justice” but the substitution of sound, i.e., laissez-faire, policies for unsound policies.

It was not vain disquisitions about a vague concept of jus­tice that raised the standard of living of the common man in the capitalistic countries to its present height, but the activi­ties of men dubbed as “rugged individualists” and “exploit­ers.”  The poverty of the backward nations is due to the fact that their poli­cies of expropriation, discriminatory taxation and foreign ex­change control prevent the investment of for­eign capital while their domestic policies preclude the ac­cumulation of indigenous capital.

All those rejecting capitalism on moral grounds as an unfair system are deluded by their failure to comprehend what capital is, how it comes into existence and how it is maintained, and what the benefits are which are derived from its employment in production processes.

The only source of the generation of additional capital goods is saving. If all the goods produced are consumed, no new capi­tal comes into being. But if consumption lags be­hind produc­tion and the surplus of goods newly produced over goods con­sumed is utilized in further production proc­esses, these pro­cesses are henceforth carried out by the aid of more capital goods. All the capital goods are intermediary goods, stages on the road that leads from the first employ­ment of the original factors of production, i.e., natural re­sources and human labor, to the final turning out of goods ready for consumption. They all are perishable. They are, sooner or later, worn out in the pro­cesses of production. If all the products are consumed without replacement of the capital goods which have been used up in their production, capital is consumed. If this happens, further production will be aided only by a smaller amount of capital goods and will therefore render a smaller output per unit of the natural re­sources and labor employed. To prevent this sort of dissaving and disinvestment, one must dedicate a part of the pro­duc­tive effort to capital maintenance, to the replacement of the capital goods absorbed in the production of usable goods.

Capital is not a free gift of God or of nature. It is the out­come of a provident restriction of consumption on the part of man. It is created and increased by saving and maintained by the abstention from dissaving.

Neither have capital or capital goods in themselves the power to raise the productivity of natural resources and of human labor. Only if the fruits of saving are wisely em­ployed or in­vested, do they increase the output per unit of the input of natural resources and of labor. If this is not the case, they are dissipated or wasted.

The accumulation of new capital, the maintenance of pre­vi­ously accumulated capital and the utilization of capital for rais­ing the productivity of human effort are the fruits of purposive human action. They are the outcome of the con­duct of thrifty people who save and abstain from dissaving, viz., the capitalists who earn interest; and of people who succeed in utilizing the capital available for the best possible satisfaction of the needs of the consumers, viz., the entrepreneurs who earn profit.

Neither capital (or capital goods) nor the conduct of the capi­talists and entrepreneurs in dealing with capital could improve the standard of living for the rest of the people, if these noncapi­talists and nonentrepreneurs did not react in a certain way. If the wage earners were to behave in the way which the spurious “iron law of wages” describes and would know of no use for their earnings other than to feed and to procreate more offspring, the increase in capital accumulated would keep pace with the in­crease in population figures. All the benefits derived from the accumulation of additional capital would be absorbed by multi­plying the number of people. However, men do not respond to an improvement in the external conditions of their lives in the way in which rodents and germs do. They know also of other satisfactions than feeding and proliferation. Consequently, in the coun­tries of capitalistic civilization, the increase of capital ac­cum­ulated outruns the increase in population figures. To the extent that this happens, the marginal productivity of labor is in­creased as against the marginal productivity of the ma­terial factors of production. There emerges a tendency to­ward higher wage rates. The proportion of the total output of production that goes to the wage earners is enhanced as against that which goes as interest to the capitalists and as rent to the land owners.*

To speak of the productivity of labor makes sense only if one refers to the marginal productivity of labor, i.e., to the deduction in net output to be caused by the elimination of one worker. Then it refers to a definite economic quantity, to a determinate amount of goods or its equivalent in money. The concept of a general productivity of labor as resorted to in popular talk about an allegedly natural right of the work­ers to claim the total in­crease in productivity is empty and indefinable. It is based on the illusion that it is possible to determine the shares that each of the various complementary factors of production has physically contributed to the turning out of the product. If one cuts a sheet of paper with scissors, it is impossible to ascertain quotas of the outcome to the scissors (or to each of the two blades) and to the man who handled them. To manufacture a car one needs various machines and tools, various raw materials, the labor of vari­ous manual workers and, first of all, the plan of a designer. But no­body can decide what quota of the finished car is to be physically ascribed to each of the various factors the co­operation of which was required for the production of the car.

For the sake of argument, we may for a moment set aside all the considerations which show the fallacies of the popular treat­ment of the problem and ask:  Which of the two factors, labor or capital, caused the increase in productivity?  But precisely if we put the question in this way, the answer must be:  capital. What renders the total output in the present‑day United States higher (per head of manpower employed) than output in earlier ages or in economically backward countries—for instance, China—is the fact that the contem­porary American worker is aided by more and better tools. If capital equipment (per head of the worker) were not more abundant than it was three hundred years ago or than it is today in China, output (per head of the worker) would not be higher. What is required to raise, in the absence of an in­crease in the number of workers employed, the total amount of America’s industrial output is the investment of additional capi­tal that can only be accumulated by new sav­ing. It is those saving and investing to whom credit is to be given for the mul­tiplication of the productivity of the total labor force.

What raises wage rates and allots to the wage earners an ever increasing portion out of the output which has been enhanced by additional capital accumulation is the fact that the rate of capital accumulation exceeds the rate of increase in population. The of­ficial doctrine passes over this fact in silence or even denies it emphatically. But the policies of the unions clearly show that their leaders are fully aware of the correctness of the theory which they publicly smear as silly bourgeois apologetics. They are eager to restrict the number of job seekers in the whole country by anti‑immigra­tion laws and in each segment of the la­bor market by pre­venting the influx of newcomers.

That the increase in wage rates does not depend on the indi­vidual worker’s “productivity,” but on the marginal pro­ductivity of labor, is clearly demonstrated by the fact that wage rates are moving upward also for performances in which the “productivity” of the individual has not changed at all. There are many such jobs. A barber shaves a cus­tomer today precisely in the same manner his predecessors used to shave people two hun­dred years ago. A butler waits at the table of the British prime minister in the same way in which once butlers served Pitt and Palmerston. In agricul­ture some kinds of work are still per­formed with the same tools in the same way in which they were performed cen­turies ago. Yet the wage rates earned by all such workers are today much higher than they were in the past. They are higher because they are determined by the marginal produc­tivity of labor. The employer of a butler withholds this man from employment in a factory and must therefore pay the equiva­lent of the increase in output which the additional employment of one man in a factory would bring about. It is not any merit on the part of the butler that causes this rise in his wages, but the fact that the increase in capital invested surpasses the increase in the number of hands.

All pseudoeconomic doctrines which depreciate the role of saving and capital accumulation are absurd. What con­stitutes the greater wealth of a capitalistic society as against the smaller wealth of a noncapitalistic society is the fact that the available supply of capital goods is greater in the former than in the latter. What has improved the wage earners’ standard of living is the fact that the capital equipment per head of the men eager to earn wages has increased. It is a consequence of this fact that an ever increasing portion of the total amount of usable goods produced goes to the wage earners. None of the passionate tirades of Marx, Keynes and a host of less well known authors could show a weak point in the statement that there is only one means to raise wage rates permanently and for the benefit of all those ea­ger to earn wages—namely, to accelerate the increase in capital available as against population. If this be “unjust,” then the blame rests with nature and not with man.

4.   THE “BOURGEOIS PREJUDICE” OF LIBERTY

The history of Western civilization is the record of a cease­less struggle for liberty.

Social cooperation under the division of labor is the ulti­mate and sole source of man’s success in his struggle for sur­vival and his endeavors to improve as much as possible the ma­terial conditions of his well-being. But as human nature is, so­ciety cannot exist if there is no provision for preventing unruly people from actions incompatible with community life. In order to preserve peaceful cooperation, one must be ready to resort to violent suppression of those disturbing the peace. Society cannot do without a social apparatus of coercion and compulsion, i.e., without state and government. Then a further problem emerges:  to restrain the men who are in charge of the governmental func­tions lest they abuse their power and convert all other people into virtual slaves. The aim of all struggles for liberty is to keep in bounds the armed defenders of peace, the governors and their consta­bles. The political concept of the individual’s freedom means:  freedom from arbitrary action on the part of the police power.

The idea of liberty is and has always been peculiar to the West. What separates East and West is first of all the fact that the peoples of the East never conceived the idea of lib­erty. The imperishable glory of the ancient Greeks was that they were the first to grasp the meaning and significance of institutions war­ranting liberty. Recent historical research has traced back the origin of some of the scientific achieve­ments previously cred­ited to the Hellenes to Oriental sources. But nobody has ever contested that the idea of liberty origi­nated in the cities of an­cient Greece. The writings of Greek philosophers and historians transmitted it to the Romans and later to modern Europe and America. It became the essen­tial concern of all Western plans for the establishment of the good society. It begot the laissez-faire philosophy to which mankind owes all the unprecedented achievements of the age of capitalism.

The purpose of all modern political and judicial institu­tions is to safeguard the individuals’ freedom against en­croachments on the part of the government. Representative government and the rule of law, the independence of courts and tribunals from interference on the part of administra­tive agencies, habeas cor­pus, judicial examination and redress of acts of the administra­tion, freedom of speech and the press, separation of state and church, and many other insti­tutions aimed at one end only: to restrain the discretion of the officeholders and to render the in­dividuals free from their arbitrariness. The age of capitalism has abolished all vestiges of slavery and serfdom. It has put an end to cruel punishments and has reduced the penalty for crimes com­mitted to the minimum indispensable for discouraging of­fenders. It has done away with torture and other objec­tionable methods of dealing with suspects and lawbreakers.

It has repealed all privileges and promulgated equality of all men under the law. It has transformed the subjects of tyr­anny into free citizens.

The material improvements were the fruit of these reforms and innovations in the conduct of government affairs. As all privileges disappeared and everybody was granted the right to challenge the vested interests of all other people, a free hand was given to those who had the ingenuity to develop all the new in­dustries which today render the material con­ditions of people more satisfactory. Population figures multi­plied and yet the in­creased population could enjoy a better life than their ancestors.

Also in the countries of Western civilization there have al­ways been advocates of tyranny—the absolute arbitrary rule of an autocrat or of an aristocracy on the one hand, and the subjec­tion of all other people on the other hand. But in the age of En­lightenment these voices became thinner and thinner. The cause of liberty prevailed. In the first part of the nineteenth century the victorious advance of the princi­ple of freedom seemed to be ir­resistible. The most eminent philosophers and historians got the conviction that historical evolution tends toward the establish­ment of institutions war­ranting freedom and that no intrigues and machinations on the part of the champions of servilism could stop the trend toward liberalism.

In dealing with the liberal social philosophy there is a dis­position to overlook the power of an important factor that worked in favor of the idea of liberty, viz., the eminent role as­signed to the literature of ancient Greece in the educa­tion of the elite. There were among the Greek authors also champions of government omnipotence such as Plato. But the essential tenor of Greek ideology was the pursuit of lib­erty. Judged by the standards of modern institutions, the Greek city states must be called oligarchies. The liberty which the Greek statesmen, philosophers and historians glo­rified as the most precious good of man was a privilege re­served to a minority. In denying it to metics and slaves they virtually advocated the despotic rule of a hereditary caste of oligarchs. Yet it would be a grave error to dismiss their hymns to liberty as mendacious. They were no less sincere in their praise and quest of freedom than were, two thou­sand years later, the slaveholders among the signers of the American Declaration of Independence. It was the political lit­erature of the ancient Greeks that begot the ideas of the Monar­chomachs, the philosophy of the Whigs, the doctrines of Althu­sius, Grotius and John Locke and the ideology of the fathers of modern constitutions and bills of rights. It was the classical studies, the essential feature of a liberal educa­tion, that kept awake the spirit of freedom in the England of the Stuarts, in the France of the Bourbons, and in Italy subject to the despotism of a galaxy of princes. No less a man than Bismarck, among the nineteenth-century states­men next to Metternich the foremost foe of liberty, bears witness to the fact that, even in the Prussia of Frederick William III, the Gymnasium, the education based on Greek and Roman literature, was a stronghold of republicanism.*  The passionate endeavors to eliminate the classical studies from the curriculum of the liberal education and thus virtu­ally to de­stroy its very character were one of the major manifestations of the revival of the servile ideology.

It is a fact that a hundred years ago only a few people antici­pated the overpowering momentum which the anti­libertarian ideas were destined to acquire in a very short time. The ideal of liberty seemed to be so firmly rooted that everybody thought that no reactionary movement could ever succeed in eradicating it. It is true, it would have been a hopeless venture to attack freedom openly and to advocate unfeignedly a return to subjection and bondage. But anti­liberalism got hold of peoples’ minds camou­flaged as super­liberalism, as the fulfillment and consummation of the very ideas of freedom and liberty. It came disguised as socialism, communism, planning.

No intelligent man could fail to recognize that what the so­cialists, communists and planners were aiming at was the most radical abolition of the individuals’ freedom and the establish­ment of government omnipotence. Yet the immense majority of the socialist intellectuals were convinced that in fighting for so­cialism they were fighting for freedom. They called themselves left-wingers and democrats, and nowadays they are even claim­ing for themselves the epithet, “liberal.”  We have already dealt with the psychological factors that dimmed the judgment of these intellectuals and the masses who followed their lead. They were in their subconscious­ness fully aware of the fact that their fail­ure to attain the far-flung goals which their ambition impelled them to aim at was due to deficiencies of their own. They knew very well that they were either not bright enough or not industri­ous enough. But they were eager not to avow their inferiority both to themselves and to their fellowmen and to search for a scapegoat. They consoled themselves and tried to convince other people that the cause of their failure was not their own in­feriority but the injustice of society’s economic organi­zation. Under capitalism, they declared, self‑realization is only possible for the few. “Liberty in a laissez-faire society is attainable only by those who have the wealth or opportunity to purchase it.”*  Hence, they concluded, the state must interfere in order to realize “social justice”—what they really meant was, in order to give to the frustrated mediocrity “ac­cording to his needs.”

As long as the problems of socialism were merely a matter of debates, people who lack clear judgment and understand­ing could fall prey to the illusion that freedom could be preserved under a socialist regime. Such self‑deceit can no longer be nur­tured since the Soviet experience has shown to everybody what conditions are in a socialist commonwealth.

Today the apologists of socialism are forced to distort facts and to misrepresent the manifest meaning of words when they want to make people believe in the compatibility of socialism and freedom.

The late Professor Laski—in his lifetime an eminent mem­ber and chairman of the British Labour Party, a self-styled non­communist or even anticommunist—told us that “no doubt in Soviet Russia a Communist has a full sense of lib­erty; no doubt also he has a keen sense that liberty is denied him in Fascist Italy.”*  The truth is that a Russian is free to obey all the orders issued by his superiors. But as soon as he deviates a hundredth of an inch from the correct way of thinking as laid down by the authorities, he is mercilessly liquidated. All those politicians, officeholders, authors, mu­sicians and scientists who were “purged” were—to be sure—not anticommunists. They were, on the contrary, fanatical communists, party members in good standing, whom the supreme authorities, in due recognition of their loyalty to the Soviet creed, had promoted to high positions. The only of­fense they had committed was that they were not quick enough in adjusting their ideas, policies, books or com­posi­tions to the latest changes in the ideas and tastes of Stalin. It is difficult to believe that these people had “a full sense of lib­erty” if one does not attach to the word liberty a sense which is precisely the contrary of the sense which all people always used to attach to it.

Fascist Italy was certainly a country in which there was no liberty. It had adopted the notorious Soviet pattern of the “one party principle” and accordingly suppressed all dis­senting views. Yet there was still a conspicuous difference between the Bolshevik and the Fascist application of this principle. For in­stance, there lived in Fascist Italy a former member of the par­liamentary group of communist deputies, who remained loyal unto death to his communist tenets, Professor Antonio Graziadei. He received the government pension which he was entitled to claim as professor emeritus, and he was free to write and to pub­lish, with the most eminent Italian publishing firms, books which were ortho­dox Marxian. His lack of liberty was certainly less rigid than that of the Russian communists who, as Professor Laski chose to say, “no doubt” have “a full sense of liberty.”

Professor Laski took pleasure in repeating the truism that liberty in practice always means liberty within law. He goes on saying that the law always aims at “the conference of security upon a way of life which is deemed satisfactory by those who dominate the machinery of state.”*  This is a cor­rect description of the laws of a free country if it means that the law aims at pro­tecting society against conspiracies intent upon kindling civil war and upon overthrowing the govern­ment by violence. But it is a serious misstatement when Professor Laski adds that in a capitalistic society “an effort on the part of the poor to alter in a radical way the property rights of the rich at once throws the whole scheme of lib­erties into jeopardy.”**

Take the case of the great idol of Professor Laski and all his friends, Karl Marx. When in 1848 and 1849 he took an active part in the organization and the conduct of the revo­lution, first in Prussia and later also in other German states, he was—being legally an alien—ex­pelled and moved, with his wife, his children and his maid, first to Paris and then to London.*  Later, when peace returned and the abettors of the abortive revolution were amnestied, he was free to return to all parts of Germany and often made use of this oppor­tunity. He was no longer an exile, and he chose of his own ac­cord to make his home in London.**  Nobody mo­lested him when he founded, in 1864, the International Working Men’s Associa­tion, a body whose avowed sole pur­pose was to prepare the great world revolution. He was not stopped when, on behalf of this association, he visited various continental countries. He was free to write and to publish books and articles which, to use the words of Professor Laski, were certainly an effort “to alter in a radical way the property rights of the rich.”  And he died quietly in his London home, 41 Maitland Park Road, on March 14, 1883.

Or take the case of the British Labour Party. Their effort “to alter in a radical way the property rights of the rich” was, as Pro­fessor Laski knew very well, not hindered by any ac­tion incom­patible with the principle of liberty.

Marx, the dissenter, could live, write and advocate revo­lu­tion, at ease, in Victorian England just as the Labour Party could engage in all political activities, at ease, in post-Vic­torian Eng­land. In Soviet Russia not the slightest opposi­tion is tolerated. This is the difference between liberty and slavery.

5.   LIBERTY AND WESTERN CIVILIZATION

The critics of the legal and constitutional concept of lib­erty and the institutions devised for its practical realization are right in their assertion that freedom from arbitrary ac­tion on the part of the officeholders is in itself not yet suf­ficient to make an in­dividual free. But in emphasizing this indisputable truth they are running against open doors. For no advocate of liberty ever contended that to restrain the arbitrariness of officialdom is all that is needed to make the citizens free. What gives to the indi­viduals as much freedom as is compatible with life in society is the operation of the market economy. The constitutions and bills of rights do not create freedom. They merely protect the free­dom that the competitive economic system grants to the individ­uals against encroachments on the part of the police power.

In the market economy people have the opportunity to strive after the station they want to attain in the structure of the social division of labor. They are free to choose the voca­tion in which they plan to serve their fellowmen. In a planned economy they lack this right. Here the authorities determine each man’s occu­pation. The discretion of the superiors promotes a man to a bet­ter position or denies him such promotion. The individual de­pends entirely on the good graces of those in power. But under capitalism every­body is free to challenge the vested interests of everybody else. If he thinks that he has the ability to supply the public better or more cheaply than other people do, he may try to demonstrate his efficiency. Lack of funds cannot frustrate his projects. For the capitalists are always in search of men who can utilize their funds in the most profitable way. The out­come of a man’s business activities depends alone on the conduct of the consumers who buy what they like best.

Neither does the wage earner depend on the employer’s arbi­trariness. An entrepreneur who fails to hire those work­ers who are best fitted for the job concerned and to pay them enough to prevent them from taking another job is penal­ized by a reduc­tion of net revenue. The employer does not grant to his employ­ees a favor. He hires them as an indis­pensable means for the success of his business in the same way in which he buys raw materials and factory equipment. The worker is free to find the employment which suits him best.

The process of social selection that determines each in­di­vidual’s position and income is continuously going on in the market economy. Great fortunes are shrinking and fi­nally melting away completely while other people, born in poverty, ascend to eminent positions and considerable in­comes. Where there are no privileges and where govern­ments do not grant protection to vested interests threatened by the superior effi­ciency of newcomers, those who have acquired wealth in the past are forced to acquire it every day anew in competition with all other people.

Within the framework of social cooperation under the divi­sion of labor everybody depends on the recognition of his ser­vices on the part of the buying public of which he himself is a member. Everybody in buying or abstaining from buying is a member of the supreme court which as­signs to all people—and thereby also to himself—a definite place in society. Everybody is instrumental in the process that assigns to some people a higher, and to others a smaller, income. Everybody is free to make a contribution which his fellowmen are prepared to reward by the allocation of a higher income. Freedom under capitalism means: not to depend more on other people’s discretion than these others depend on one’s own. No other freedom is conceiv­able where production is performed under the division of labor, and there is no perfect economic autarky of everybody.

There is no need to stress the point that the essential argu­ment advanced in favor of capitalism and against social­ism is not the fact that socialism must necessarily abolish all vestiges of freedom and convert all people into slaves of those in power. Socialism is unrealizable as an economic system because a so­cialist society would not have any possi­bility of resorting to economic calculation. This is why it cannot be considered as a system of society’s economic organ­ization. It is a means to disintegrate social cooperation and to bring about poverty and chaos.

In dealing with the liberty issue one does not refer to the es­sential economic problem of the antagonism between capi­talism and socialism. One rather points out that Western man as differ­ent from the Asiatics is entirely a being ad­justed to life in free­dom and formed by life in freedom. The civilizations of China, Japan, India and the Mohammedan countries of the near East as they existed before these nations became acquainted with West­ern ways of life certainly can­not be dismissed as barbarism. These peoples, already many hundreds, even thousands of years ago, brought about mar­velous achievements in the industrial arts, in architecture, in literature and philosophy and in the de­velopment of educa­tional institutions. They founded and orga­nized powerful empires. But then their effort was arrested, their cultures became numb and torpid, and they lost the ability to cope successfully with economic problems. Their intellectual and artistic genius withered away. Their artists and authors bluntly copied traditional patterns. Their theologians, phi­loso­phers and lawyers indulged in unvarying exegesis of old works. The monuments erected by their ancestors crum­bled. Their empires disintegrated. Their citizens lost vigor and energy and became apathetic in the face of progressing decay and impover­ishment.

The ancient works of Oriental philosophy and poetry can compare with the most valuable works of the West. But for many centuries the East has not generated any book of im­por­tance. The intellectual and literary history of modern ages hardly records any name of an Oriental author. The East has no longer contributed anything to the intellectual effort of mankind. The problems and controversies that agitated the West remained unknown to the East. In Europe there was commotion; in the East there was stagnation, in­dolence and indifference.

The reason is obvious. The East lacked the primordial thing, the idea of freedom from the state. The East never raised the banner of freedom, it never tried to stress the rights of the indi­vidual against the power of the rulers. It never called into ques­tion the arbitrariness of the despots. And, consequently, it never established the legal framework that would protect the private citizens’ wealth against con­fiscation on the part of the tyrants. On the contrary, deluded by the idea that the wealth of the rich is the cause of the poverty of the poor, all people approved of the practice of the governors of expropriating successful business­men. Thus big-scale capital accumulation was prevented, and the na­tions had to miss all those improvements that require con­siderable investment of capital. No “bourgeoisie” could develop, and consequently there was no public to encourage and to pa­tronize authors, artists and inventors. To the sons of the people all roads toward personal distinction were closed but one. They could try to make their way in serving the princes. Western so­ciety was a community of individ­uals who could compete for the highest prizes. Eastern so­ciety was an agglomeration of subjects entirely dependent on the good graces of the sovereigns. The alert youth of the West looks upon the world as a field of action in which he can win fame, eminence, honors and wealth; nothing ap­pears too difficult for his ambition. The meek progeny of Eastern parents know of nothing else than to follow the rou­tine of their environment. The noble self-reliance of Western man found triumphant expression in such dithyrambs as Sophocles’ choric Antigone hymn upon man and his enter­pris­ing effort and Beethoven’s Ninth Symphony. Nothing of the kind has been ever heard in the Orient.

Is it possible that the scions of the builders of the white man’s civilization should renounce their freedom and volun­tar­ily surrender to the suzerainty of omnipotent govern­ment?  That they should seek contentment in a system in which their only task will be to serve as cogs in a vast ma­chine designed and op­erated by an almighty planmaker?  Should the mentality of the arrested civilizations sweep the ideals for the ascendancy of which thousands and thousands have sacrificed their lives?

Ruere in servitium, they plunged into slavery, Tacitus sadly observed in speaking of the Romans of the age of Tiberius.


*See pp. 42–43 about the inherent tendency of capitalism toward shortening the interval between the appearance of a new improvement and the moment its use becomes general.

*Cf. The Church and the Disorder of Society, New York, 1948, p. 198.

*Profits are not affected. They are the gain derived from adjusting the employment of material factors of production and of labor to changes occurring in demand and supply and solely depend on the size of the previous maladjustment and the degree of its removal. They are transient and disappear once the maladjustment has been entirely removed. But as changes in demand and supply again and again occur, new sources of profit emerge also again and again.

*Cf. Bismarck, Gedanken und Erinnerungen, New York, 1898, Vol. I, p. 1.

*Cf. H. Laski, article Liberty in the Encyclopedia of the Social Sciences, IX, p. 443.

*Cf. Laski, l.c., pp. 445–446.

*Cf. Laski, l.c., p. 446.

**Cf. Laski, l.c., p. 446.

*About Marx’s activities in the years 1848 and 1849 see:  Karl Marx, Chronik seines Lebens in Einzeldaten, published by the Marx-Engels-Lenins-Institut in Moskau, 1934, pp. 43–81.

**In 1845 Marx voluntarily renounced his Prussian citizenship. When he later, in the early sixties, considered a political career in Prussia, the government denied his application for restoring his citizenship. Thus, a political career was closed to him. Perhaps this fact decided him to remain in London.

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