Wisdom of a Liberal Giant; W. Peterson

In 1920 he foresaw the end of the Soviet Union for its lack of market calculation. A prominent Polish socialist economist, Oskar Lange, conceding the lack but holding it could still be met, proposed a statue in his honor. In 1949 he set forth a monumental book on philosophy, economics, and politics, Human Action, now out in a fourth revised edition prepared by Bettina Bien Greaves (The Foun dation for Economic Education, Irvington on-Hudson, N.Y., 928 pages, $49.95). Other editions have been published in German, French, Italian, Spanish, Portuguese, Chi nese, and Japanese. Yet he has been largely ignored by profes sional economists who feel he is too "literary," too "nonquantitative," too down on "macro economics," too opposed to "social engineerDr. Peterson, Heritage Foundation adjunct scholar, is Distinguished Lundy Professor Emeritus of Busi ness Philosophy at Campbell University,Buies Creek, North Carolina.

ing" by the state. First-edition reviews were mixed. Vermont Royster praised the book in the Wall Street Journal, John Kenneth Gal braith panned it in the New York Times. Yet The Economist, while wary of the work's libertarian implications, still said: "Intellec tual power roars through it like a great wind; it has the impetus of a first-rate polemic and the impeccable coherence of Euclid." He is Ludwig von Mises (1881-1973), the modern leader of Austrian free-market eco nomics. The Nazis had three strikes against him: he was a Jew; he was antisocialist and cham pioned the free market; and he refused to compromise. In 1938 the Nazis confiscated the contents of his apartment in Vienna. (His personal papers were in turn seized by the Soviets and preserved in Moscow. These newly discovered treasures should soon be available to the world.) Soon after the fall of Paris in June 1940, he and his wife, Margit, bravely fled from Swit zerland through occupied France to America.

Human Action says it all. It is a paean to freedom and free enterprise, a classic on voluntarism and laissez faire. In it Mises employs an odd word, praxeology, as the science of human action or choice. He says the drive behind choice is ineptly described as the profit motive even though the end of any action is always satisfaction of some desire of man-ever choosing, acting, rejecting. Choosing determines all human decisions. In making his choice man chooses not only be tween various material things and services.All 260 human values are offered for option. All ends and all means, both material and ideal issues, the sublime and the base, the noble and the ignoble, are ranged in a single row and subjected to a decision which picks out one thing and sets aside another. (p. 3) Choosing reflects man's free will, ongoing reasoning, subjective evaluation: a process of continual removal of felt uneasiness. The process evidences the fact that man thinks, that thought distinguishes him from the lower animals.

Man is a being capable of subduing his instincts, emotions, and impulses; he can ratio nalize his behavior. He renounces the satis faction of a burning impulse in order to satisfy other desires. He is not a puppet ofhis appetites. A man does not ravish every female that stirs his senses; he does not devour every piece of food that entices him; he does not knock down everyfellow he would like to kill. He arrangeshis wishes and desires into a scale, he chooses; in short, he acts. (pp. 16-17) What also distinguishes man is his very social being. He engages in extensive human interaction, including unforced exchanges of goods and services. Society, says Mises, is social cooperation, concerted action, division of labor, and combination of labor. Even so, he rejects a line by the politically correct who see societyas a thinking entity and say"society believes this," or "society thinks that."

It is always the individual who thinks. Society does not think any more than it eats or drinks. The evolution of human reasoning from the naive thinking of primitive man to the more subtle thinking of modern science took place within society. However, thinking itself is always an achievement of individuals. There is joint action, but no joint thinking. (p. 177) The politically correct also confuse society for the state and use the two terms inter changeably. Too, oblivious to what Hayek called "the fatal conceit," they confuse the role of government in society and endow it with omnipotence and benevolence, see it as a somehow wise and compassionate Santa 261 Ludwig von Mises Claus. Mises does not share the confusion. He condemns the modern revival of collec tivism as "the main cause of all the agonies and disasters of our day." He asks the polit ically correct to rethink the nature of man, state, and society in light of Adam Smith's "invisible hand" of self-interest under the rule of law as the high road to social order and civil society.

State or government is the social apparatus of compulsion and coercion. It has the monop oly ofviolent action. No individual is free to use violence or the threat of violence if the govern ment has not accorded this right to him. The state is essentially an institution for the preser vation ofpeaceful interhuman relations. (p. 149) The Mises viewpoint is similar to that of Thomas Paine, who called government "a necessary evil." But while Mises also regards government as necessary, he does not regard it as necessarily evil. Government . .. is by necessity the opposite of liberty. Government is a guarantor oflibertyand is compatible with liberty only if its range is 262 THE FREEMAN • MAY 1997 adequately restrictedto the preselVation ofwhat is called economic freedom. Where there is no market economy, the best-intentioned provi sions of constitutions and laws remain a dead letter. (p. 285) Socialism may be a dead letter today across' the world but not its vigorous half-brothers welfarism and interventionism-both of which similarly lack the corrective action of market calculation. Interventionism tallied a home run when Congress recently raised the minimum wage by 90 cents an hour, a bit unmindful of its hit on entry-level employ ability. So Mises cues you on state boomer angs, to explain why "government help" is an oxymoron.

All varieties of [government} interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which-from the point of view of their authors' and advocates' valuations-is less desirable than theprevious state ofaffairswhich they were designed to alter. (p. 858) So the irony of today's play on democracy is that-via protectionism, welfare, interven tion, hyper-regulation, egalitarianism, and so on-the state ignores or overrules individual rights, the market rule of majority and mi nority rights, and thus reaps a whirlwind. Egalitarianism plays on group rights to compensate for past inequities, to promote equality of outcomes. Mises disagrees. He espouses equal individual rights but sees natural inequality in terms of intelligence, drive, integrity, beauty, talent, and other at tributes. (His use of the word "liberal" in the following is in the nineteenth-century sense of the word.) The liberal champions of equality under the law were fully aware of the fact that men are born unequal and that it is precisely their inequality that generates social cooperation and civilization. Equality under the law was in their opinion not designed to correct the inexorable facts of the universe and to make natural inequality disappear. It was, on the contrary, the device to secure for the whole of mankind the maximum ofbenefits it can derivefrom it. ... It leaves it to the voters to decide who should hold public office and to the consumers to decide who should direct production activities. (pp. 841 842) Note that Mises holds that consumers are sovereign-the real bosses in the democratic marketplace. Here every day is Election Day, every candidate runs scared, and every con sumer, young and old, daily has an economic vote. Indeed, every consumer has quite a few such votes.

The consumers patronize those shops in which they can buy what they want at the cheapest price. Their buying and their absten tion from buying decides who should own and run the plants and the farms. They make poor people rich and rich people poor. They deter mine precisely what should be produced, in what quality, and in what quantities. They are merciless bosses, full of whims and fancies, changeable and unpredictable. For them noth ing counts other than their own satisfaction. They do not care a whit for past merit and vested interests. (p. 270) Such reasoning clashes with the modern liberal battlecry of "entrenched wealth," with the Hobbesian argument of war of all against all-of, for example, the rich against the poor. If anything, it's practically the other way around. Mises says the wealthy are at the mercy of consumers, even poor consumers. Wealth, once invested, becomes "a social liability."

Ownership of the means ofproduction is not a privilege, but a social liability. Capitalists and landowners are compelled to employ theirprop erty for the best possible satisfaction of the consumers. If they are slow and inept in the performance of their duties, they are penalized by losses. If they do not learn the lesson and do not reform their conduct ofaffairs,they lose their wealth. No investment is safe forever. (pp. 311-312) Well, if consumers are so powerful, why the Welfare State, why the Nanny State, why so many governmental agencies designed to pro tect the hapless shopper? And, with govern ment taking 47 percent of the national income, with "entitlements" alone running at $1.1 trillion a year-and growing fast-why the persistence of planning in a thousand beguiling guises? The alternative is not plan or no plan. The question is whose planning? Should each mem ber of society plan for himself, or should a benevolent government alone plan for them all?

The issue is not automatism versus conscious action; it is autonomous action of each in dividual versus the exclusive action of the government. It is freedom versus government omnipotence. (p. 731) But surely the government should inter vene against any type of excessive or danger ous consumption such as cigarettes. Recall America's backfiring Noble Experiment, its violent episode of Prohibition (1920-1933). Opium and morphine are certainly danger ous, habit-forming drugs. But once the principle is admitted that it is the duty of government to protect the individual against his own fool ishness, no serious objections can be advanced against further encroachments. . . . Is not the WISDOM OF A "LIBERAL" GIANT 263 harm a man can inflict on his mind and soul even more disastrous than any bodily evils? Why not prevent him from reading bad books and seeing bad plays, from looking at bad paintings and statues and from hearing bad music? The mischief done by bad ideologies,surely, is much more pernicious, both for the individual and for the whole society, than that done by narcotic drugs. (pp. 733-734) For many, Mises, who proved so right on socialism, remains too unappreciated. He and his magnum opus, Human Action, await dis covery or rediscovery as the New Deal and the Great Society live on, as many wonder anew if "the era of big government" is really over, as social insurance and social justice indeed all manner of subtle and unsubtle state interventions-continue to mushroom and self-destruct.

The market economy needs no apologistsand propagandists. It can apply to itself the words of [architect] Sir Christopher Wren's epitaph in St. Paul's [Cathedral in London]: Si monu mentum requiris, circumspice. ["If you seek his monument, look around. "J (p. 854) D BACK IN PRINT! Critique of Interventionism BY LUDWIG VON MISES New Introduction by Hans F. Sennholz T he economic principles that Ludwig von Mises expounded in these six essays during the 1920s have endured; they are as valid today as they were in the past. In this volume, Ludwig von Mises emphasizes again and again that soci ety must choose between two systems of social organization: either it can create a social order that is built on private property in the means of production, or it can establish a command system in which government owns or manages all production and distribution. There is no logical third system of a private property order subject to government regulations. The "middle of the roadl/leads to socialism because gov ernment intervention is not only superfluous and useless, but also harmful.

ISBN 1-57246-058-X • 136 pages • paperback $12.95 Published by The Foundation for Economic Education, Inc. Irvington-on-Hudson, NY 10533 To order, call (800) 452-3518 or fax (914) 591-8910 Ideas and Consequences The New Zealand "Revolution" "And now that the legislators and do gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty.... " -Frederic Bastiat, 1850 F or producing both material goods and personal fulfillment, economic freedom makes all the difference in the world. No country proves that more convincingly than tiny but beautiful New Zealand. The story of that island country's dramatic transformation over the past 12 years needs to be shouted from the rooftops. Situated in the South Pacific midway be tween the equator and the South Pole, New Zealand is just two-thirds the size of Califor nia. Its 3.5 million inhabitants live on two main islands and a scattering of tiny ones.