Mises Debates American Libertarians

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

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

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

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

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

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

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

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

Mises did not even bother to address the issue, but observed that he never addressed people who called his writings “stuff” and “nonsense”—as Lane had done in a book review.⁴⁴ And that was that for more than two years, after which the debate resumed on more civilized terms, probably because of Lane's friendship with Howard Pew. Mises's basic objection to Lane was that she had misunderstood him. He had never advocated any concrete regime of parliamentary democracy. He merely stressed the fact that all political systems ultimately hinge on mass opinion.⁴⁵

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

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

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

If it is politically unthinkable to outlaw labor unions—and I assume this is the case today—can one consider government limitations on private wage increases? I am not thinking, of course, of a fixing of wages through the state, but of a general interdiction to increase wages... by more than 10% in three years, or something of this sort. Of course this is entirely fantastic. Would it be smarter not to mention such makeshift solutions at all? They have no prospect of being accepted.⁴⁶

Mises replied that he would tell the Chamber: “First of all, liberate yourself from false ideas. Study economics. Then go on to convince others.” And he emphasized: “I reject any outlawing or limitation of the liberty of association. No liberties shall be abolished, only coercion.”⁴⁷

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