Wage Earners and Employers; L. von Mises

The private sector can also more effectively as sure adequate capital backing to the market makers and specialists than government regula tions can. Indeed, the NYSE might do well to reconsider the entire specialist system. The U.S. also would profit to look at London as an example. Studies there urge less regula tion, more arbitrage, and more investor in volvement. U.S. investment firms are cowering away from arbitrage and program trading for little apparent reason. It is this reaction by U.S. investment firms that perpetuates - not alle viates-fear of market safety. And this fear, like a disease, could soon be contracted by Congress. With any luck, Congress will give short shrift to the Brady Commission recommenda tions as it continues to hold hearings throughout the year. Creating higher futures margins and circuit breakers will have the ef fect of increasing-not decreasing-the likeli hood that Black Monday will happen all over ~~. D 1. Merton H. Miller, et aI., Preliminary Report of the Committee of Inquiry Appointed by the Chicago Mercantile Exchange to Ex amine the Events Surrounding October 19, 1987, December 22, 1987, p. 48.

2. Ibid., p. 46. 3. Ibid., p. 30. 4. Charles Seeger, Vice President of Governmental Affairs, Chi cago Mercantile Exchange, address before The Jefferson Group, February 5, 1988. Wage Earners and Employers by Ludwig von Mises Q. "Are the interests of the American wage earners in conflict with those of their em ployers, or are the two in agreement?" A. To answer that question we must first look at a little history. In the pre-capitalistic ages, a nation's social order and economic system were based upon the military superiority of an elite. The victorious conqueror appropriated to him self all the country's utilizable land, retained a part for himself, and distributed the rest among his retinue. Some got more, others less, and the great majority nothing. In the England of the early Plantagenets, a Saxon was right when he thought: "I am poor because there are Normans to whom more was given than is needed for the support of their families. " In those days the af fluence of the rich was the cause of the poverty of the poor.

Conditions in the capitalistic society are dif ferent. In the market economy the only way left to the more gifted individuals to take advantage of their superior abilities is to serve the masses of their fellowmen. Profits go to those who succeed in filling the most urgent of the not yet-satisfied wants of the consumers in the best possible and cheapest way. The profits saved, accumulated, and plowed back into the plant benefit the common man twice. First, in his capacity as a wage earner, by raising the marginal productivity of labor 173 Editors' note: Ludwig von Mises (1881-1973) was a pre-eminent exponent offree market eco nomics during his long and distinguished aca demic career . He was associated with The Foundation for Economic Education as a con sultant and part-time staff member from shortly after FEE was founded in 1946 until his death in 1973. We wish to thank his widow, Margit von Mises, for permission to publish this tran script of Professor Mises' response to the ques tion: "Are the interests of the American wage earners in conflict with those of their em ployers, or are the two in agreement?" These remarks were· broadcast during the intermis sion of the U.S. Steel Concert Hour, May 17, 1962.

and thereby real wage rates for all those eager to find jobs. Then later again, in his capacity as a consumer when the products manufactured with the aid of the additional capital flow into the market and become available at the lowest possible prices. The characteristic principle of capitalism is that it is mass production to supply the masses. Big business serves the many. Those outfits that are producing for the special tastes of the rich never outgrow medium or even small size. Under such conditions those anxious to get jobs and to earn wages and salaries have a vital in terest in the prosperity of the business enter prises. For only the prosperous firm or corpora tion has the opportunity to invest, that is, to expand and to improve its activities by the em ployment of ever better and more efficient tools and machines. The better equipped the plant is, the more the individual worker can produce within a unit of time, and the higher is what the economists call the marginal productivity of his labor and, thereby, the real wages he gets. The funda mental difference between the conditions of an economically underdeveloped country like India and those of the United States is that in India the per head quota of capital invested, and thereby the marginal productivity of labor, and consequently wage rates, are much lower than in this country. The capital of the capi talists benefits not only those. who own it, but also those who work in the plants and those who buy and consume the goods produced.

And then there is one very important fact to keep in mind. When, as we did in the preceding observations, one distinguishes between the concerns of the capitalists and those of the people employed in the plants owned by the capitalists, one must not forget that this is a simplification that does not correctly describe the real state of present-day American affairs. For the typical American wage earner is not penniless. He is a saver and investor. He owns savingsaccounts,UnitedStatesSavingsBonds and other bonds, and fIrst of all insurance policies. But he is also a stockholder. At the end of the last year [1961] the accumulatedpersonal savings reached $338 billion. A considerable part of this sum is lent to business by the banks, savings banks, and insurance companies. Thus the average American household owns well over $6000 that are invested in American business. The typical family's stake in the flourishing of the nation's business enterprises consists not only in the fact that these firms and corpora tions are employing the head of the family.

There is a second fact that counts for them, to wit, that the principal and interest of their savings are safe only as far as American free enterprise is in good shape and prospering. It is a myth that there prevails a conflict between the interests of the corporations and firms and those of the people employed by them. In fact, good profits and high real wages go hand in hand. 0 174 Democracy's Road to Tyranny by Erik von Kuehnelt-Leddihn P lato, in his Republic, tells us that tyranny arises, as a rule, from democracy. His torically, this process has occurred in three quite different ways. Before describing these several patterns of social change, let us state precisely what we mean by "democ racy." Pondering the question of "Who should rule," the democrat gives his answer: "the ma jority of politically equal citizens, either in person or through their representatives." In other words, equality and majority rule are the two fundamental principles of democracy. A democracy may be either liberal or illiberal.