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Editors’ note: Ludwig von Mises (1881-1973) was a pre-eminent exponent of free market economics during his long and distinguished academic career. He was associated with The Foundation for Economic Education as a consultant and part-time staff member from shortly after FEE was founded in 1946 until his death. These extracts from a 1948 memorandum to Leonard E. Read, founder and president of FEE, appear in Economic Freedom and Interventionism, an anthology of articles and essays by Dr. Mises recently published by The Foundation for Economic Education.

The struggle between the two systems of social organization, freedom and totalitarianism, will be decided in the democratic nations at the polls. As things are today, the outcome in the United States will determine the out come for all other peoples too. As long as this country does not go socialist, socialist victories in other parts of the world are of minor relevance.

Some people—among them very keen minds—expect either a revolutionary upheaval of the Communists, a war with Russia and its satellites, or a combination of both events.

However this may be, it is obvious that the final result depends on ideological factors. The champions of freedom can win only if they are supported by a citizenry fully and unconditionally committed to the ideals of freedom. They will be defeated if those moulding public opinion in their own camp are infected with sympathies for the totalitarian program. Men fight unto death for their convictions. But nobody is ready to dedicate himself seriously to a cause which in his eyes is only 50 percent right. Those who say: “I am not a Communist, but . . .” cannot be counted upon to fight rigorously for freedom and against Communism.

In Russia, in 1917, the Bolsheviks numbered only a few thousand men. From the arithmetical point of view their forces were negligible. Yet, they were able to seize power and beat into submission the whole nation because they did not encounter any ideological opposition. In the vast empire of the Tsars there was no group or party advocating economic freedom. There was no author or teacher, no book, magazine, or newspaper that would have declared that freedom from bureaucratic regimentation is the only method to make the Russian people as prosperous as possible.

All people agree that in France and in Italy [1948] the Communist danger is very great. Yet, it is a fact that the majorities in both countries are hostile to Communism. However, the resistance of these majorities is weak, as they have espoused essential parts of socialism and of the Marxian criticism of capitalism. Thanks to this ideological penetration of Communist adversaries in France and Italy, the chances of the Communists are much better than the numbers of Communist Party members warrant.

Those engaged in the conduct of business, the professions, politics, and the editing and writing of newspapers and magazines are so fully absorbed by the sundry problems they have to face that they neglect to pay attention to the great ideological conflicts of our age. The urgent tasks of the daily routine impose on them an enormous quantity of pressing work, and no time is left for a thoroughgoing examination of the principles and doctrines implied. Perplexed by the vast amount of detail and trivia, the practical man looks only at the short-run consequences of the alternatives between which he has to choose at the moment and does not bother about long-run consequences. He falls prey to the illusion that this attitude alone is worthy of an active citizen successfully contributing to progress and welfare; preoccupation with fundamental questions is just a pastime for authors and readers of useless highbrow books and magazines. In democratic America the men most distinguished in business, the professions, and politics have today the same attitude toward “theories” and “abstractions” that Napoleon Bonaparte displayed in ridiculing and abusing the “ideologues.”

The disdain of theories and philosophies is mainly mused by the mistaken belief that the facts of experience speak for themselves, that facts by themselves can explode erroneous interpretations. The idea prevails that no serious harm can be done by a fallacious philosophy, an “ism,” however vitriolic and insidious; reality is stronger than fables and myths; truth automatically dispels lies; there is no reason to worry about the propaganda of the apostles of untruth.

There is no need to enter into an investigation of the epistemological issues implied in this widely held opinion. It may be enough to quote a few lines of John Stuart Mill. “Man,” says Mill, “. . . is capable of rectifying his mistakes, by discussion and experience. Not by experience alone. There must be discussion, to show how experience is to be interpreted. Wrong opinions and practices gradually yield to fact and argument; but facts and arguments, to produce any effect on the mind, must be brought before it. Very few facts are able to tell their own story, without comments to bring out their meaning.”

Marxian Polylogism

Those people who believe that the mere record of the American achievements of economic individualism makes the youth of the United States safe from indoctrination with the ideas of Karl Marx, Thorstein Veblen, John Dewey, Bertrand Russell, and Harold Laski are badly mistaken. They fail to discern the role that Marxian polylo-gism plays in the living philosophy of our age.

According to the doctrine of Marxian polylogism, a man’s ideas necessarily reflect his class position; they are nothing but a disguise for the selfish interest Of his class and are irreconcilably opposed to the interests of all other social classes. The “material productive forces” that determine the course of human history have chosen the working “class,” the proletariat, to abolish all class antagonisms and to bring lasting salvation to the whole of mankind. The interests of the proletarians, who are already the immense majority today, will finally coincide with the interests of all. Thus from the point of view of the inevitable destiny of man, the Marxians say, the proletarians are right and the bourgeois are wrong. There is no need, therefore, to refute an author who disagrees with the “progressive” teachings of Marx, Engels, and Lenin; all that is needed is to unmask his bourgeois background and show that he is wrong because he is either a bourgeois or a “sycophant” of the bourgeoisie.

In its consistent and radical form polylogism is accepted only by the Russian Bolsheviks. They distinguish between “bourgeois” and “proletarian” doctrines even in mathematics, physics, biology, and medicine. But the more moderate brand of polylogism, which applies the “bourgeois” or “proletarian” yardstick only to the social and historical branches of knowledge, is endorsed by and large even by many of those schools and authors who emphatically call themselves anti-Marxian. Even at universities, which radical Marxians vilify as strongholds of bourgeois mentality, general history as well as the history of philosophy, literature, and art are often taught from the point of Marxian materialistic philosophy.

The tenets of people committed to Marxian polylogism cannot be shaken by any argument advanced by an author, politician, or other citizen suspected of bourgeois affiliation. As long as a considerable part of the nation is imbued—many of them unwittingly—with the polylogistic doctrine, it is useless to argue with them about special theories of various branches of science or about the interpretation of concrete facts. These men are immune to thought, ideas, and factual information that stem from the sordid source of the bourgeois mind. Hence it is obvious that the attempts to free the people, especially the intellectual youth, from the fetters of “unorthodox” indoctrination must begin on the philosophical and epistemological level.

The disinclination to deal with “theory” is tantamount to yielding submissively to Marx’s dialec-tical materialism. The intellectual conflict between freedom and totalitarianism will not be decided in discussions about the meaning of concrete statistical figures and historical events, but in a thorough examination of the fundamental issues of epistemology and the theory of knowledge.

It is true that the masses have only a very crude and simplified cognition of dialectical materialism and its offshoot, the so-called sociology of knowledge. But all knowledge of the many is crude and simplified. What matters is not to change the ideology of the masses, but to change first the ideology of the intellectual strata, the “highbrows,” whose mentality determines the content of the simplifications which are held by the “lowbrows.”

Marxism and “Progressivism”

The social and economic teachings of the self-styled “un-orthodox Progressives” are a garbled mixture of divers particles of heterogeneous doctrines incompatible with one another. The main components of this body of opinion were taken from Marxism, British Fabianism, and the Prussian Historical School. Essential elements were also borrowed from the teachings of those monetary reformers, inflationists who were long known only as “monetary cranks.” And the legacy of Mercantilism is important too.

All Progressives loathe the 19th century, its ideas and its policies. However, the principal ingredients of Progressivism (except for Mercantilism which stems from the 17th century), were formed in that much-defamed 19th century. But, of course, Progressivism is different from every one of these doctrines, parts of each of which were synthesized to make Progressivism what it is . . . . Among those who call themselves Progressives there are certainly a number of consistent Marxians . . . . The great majority of the Progressives, however, are moderate and eclectic in their appraisal of Marx. Although sympathizing by and large with the material objectives of the Bolsheviks, they criticize certain attending phenomena of the revolutionary movement, for instance, the Soviet regime’s dictatorial methods, its anti-Christianism, and its “Iron Curtain.” . . .

Many outstanding champions of Progressivism openly declare that they aim ultimately at a substi-tution of socialism for free enterprise. But other Progressives announce again and again that by the suggested reforms they want to save capitalism, which would be doomed if not reformed and improved. They advocate interventionism as a permanent system of society’s economic organization, not as do the moderate Marxian groups, as a method for the gradual realization of socialism. There is no need to enter here into an analysis of interventionism. It has been shown in an irrefutable way that all measures of intervention-ism bring about consequences which—from the point of view of the governments and parties resorting to them—are less satisfactory than the previous state of affairs which they were devised to alter. If the government and the politicians do not learn the lesson which these failures teach and do not want to abstain from all meddling with commodity prices, wages, and interest rates, they must add more and more regimentation to their first measures until the whole system of market economy has been replaced by all-round planning and socialism.

However, my purpose here is not to deal with the policies recommended by the champions of interventionism. These practical policies differ from group to group. It is merely a slight exaggeration to say that not only does each pressure group have its own brand of interventionism but so does every professor. Each is keenly intent upon exploding the shortcomings of all rival brands. But the doctrine which is at the bottom of interventionist ventures, the assumption that contradictions and evils are allegedly inherent in capitalism, is by and large uniform with all varieties of Progressivism and generally accepted with hardly any opposition. Theories which are at variance are virtually outlawed. Anti-progressive ideas are represented in caricature in university lectures, books, pamphlets, articles, and newspapers. The rising generation does not hear anything about them except that they are the doctrines of the economic Bourbons, the ruthless exploiters and “robber barons” whose supremacy is gone forever.

The Main Thesis of Progressivism

The doctrines which are taught today under the appellation “Progressive economics” can he condensed in the following ten points.

1. The fundamental economic thesis common to all socialist groups is that there is a potential plenty, thanks to the technological achievements of the last 200 years. The insufficient supply of useful things is due merely, as Marx and Engels repeated again and again, to the inherent contradictions and shortcomings of the capitalist mode of production. Once socialism is adopted, once socialism has reached its “higher stage,” and after the last vestiges of capitalism have been eradicated, there will be abundance. To work then will no longer cause pain, but pleasure. Society will be in a position to give “to each according to his needs.” Marx and Engels never noticed that there is an inexorable scarcity of the material factors of production.

The academic Progressives are more cautious in the choice of terms, but virtually all of them adopt the socialist thesis.

2. The inflationist wing of Progressivism agrees with the most bigoted Marxians in ignoring the fact of the scarcity of the material factors of production. It draws from this error the conclusion that the rate of interest and entrepreneurial profit can be eliminated by credit expansion. As they see it, only the selfish class interests of bankers and usurers are opposed to credit expansion.

The overwhelming success of the inflationist party manifests itself in the monetary and credit policies of all countries. The doctrinal and semantic changes that preceded this victory, which made this victory possible, and which now prevent the adoption of sound monetary policies are the following:

a. Until a few years ago, the term inflation meant a substantial increase in the quantity of money and money-substitutes. Such an increase necessarily tends to bring about a general rise in commodity prices. But today the term inflation is used to signify the inevitable consequences of what was previously called inflation. It is implied that an increase in the quantity of money and money-substitutes does not affect prices and that the general rise in prices which we have witnessed in these last years was not caused by the government’s monetary policy, but by the insatiable greed of business.

b. It is assumed that the rise of foreign exchange rates in those countries, where the magnitude of the inflationary increment to the quantity of money and money-substitutes in circulation exceeded that of other countries, is not a consequence of this monetary excess but a product of other agents, such as: the unfavorable balance of payments, the sinister machinations of speculators, the “scarcity” of foreign exchange, and the trade barriers erected by foreign governments, not by one’s own.

c. It is assumed that a government, which is not on the gold standard and which has control of a central bank system, has the power to manipulate the rate of interest downward ad libitum without bringing about any undesired effects. It is vehemently denied that such an “easy money” policy inevitably leads to an economic crisis. The theory, which explains the recurrence of periods of economic depression as the necessary outcome of the repeated attempts to reduce interest rates artificially and expand credit, is either intentionally passed over in silence or distorted in order to ridicule it and to abuse its authors.

3. Thus the way is free to describe the recurrence of periods of economic depression as an evil inherent in capitalism. The capitalist society, it is asserted, lacks the power to control its own destiny.

4. The most disastrous consequence of the economic crisis is mass unemployment prolonged year after year. People are starving it is claimed, because free enterprise is unable to provide enough jobs. Under capitalism technological improvement which could be a blessing for all is a scourge for the most numerous class.

5. The improvement in the material conditions of labor, the rise in real wage rates, the shortening of the hours of work, the abolition of child labor, and all other “social gains” are achievements of government pro-labor legislation and labor unions. But for the interference of the government and the unions, the conditions of the laboring class would be as bad as they were in the early period of the “industrial revolution.”

6. In spite of all the endeavors of popular governments and labor unions, it is argued, the lot of the wage earners is desperate. Marx was quite right in predicting the inevitable progressive panperization of the proletariat. The fact that accidental factors have temporarily secured a slight improvement in the standard of living of the American wage earner is of no avail; this improvement concerns merely a country whose population is not more than 7 percent of the world’s population and moreover, so the argument runs, it is only a passing phenomenon. The rich are still getting richer, the poor are still getting poorer, the middle classes are still disappearing. The greater part of wealth is concentrated in the hands of a few families. Lackeys of these families hold the most important public offices and manage them for the sole benefit of “Wall Street.” What the bourgeois call democracy means in reality “pluto-democracy,” a cunning disguise for the class rule of the exploiters.

7. In the absence of government price control, commodity prices are manipulated ad libitum by the businessmen. In the absence of minimum wage rates and collective bargaining, the employers would manipulate wages in the same way too. The result is that profits are absorbing more and more of the national income. There would prevail a tendency for real wage rates to drop if efficient unions were not intent upon checking the machinations of the employers.

8. The description of capitalism as a system of competitive business may have been correct for its early stages. Today it is manifestly inadequate. Mammoth-size cartels and monopolistic combines dominate the national markets. Their endeavors to attain exclusive monopoly of the world market result in imperialistic wars in which the poor bleed in order to make the rich richer.

9. As production under capitalism is for profit and not for use, those things manufactured are not those which could most effectively supply the real wants of the consumers, but those the sale of which is most profitable. The “merchants of death” produce destructive weapons. Other business groups poison the body and soul of the mass-es by habit-creating drugs, intoxicating beverages, tobacco, lascivious books and magazines, silly moving pictures, and idiotic comic strips.

10. The share of the national income that goes to the propertied classes is so enormous that, for all practical purposes, it can be considered inexhaustible. For a popular government, not afraid to tax the rich according to their ability to pay, there is no reason to abstain from any expenditure beneficial to the voters. On the other hand profits can be freely tapped to raise wage rates and lower prices of consumers’ goods.

These are the main dogmas of the “un-orthodoxy” of our age, the fallacies of which economic education must unmask. Success or failure of endeavors to substitute sound ideas for unsound will depend ultimately on the abilities and the personalities of the men who seek to achieve this task. If the right men are lacking in the hour of decision, the fate of our civilization is sealed. Even if such pioneers are available, however, their efforts will be futile if they meet with indifference and apathy on the part of their fellow citizens. The survival of civilization can be jeopardized by the misdeeds of individual dictators, Fuhrers, or Duces. Its preservation, reconstruction, and continuation, however, require the joint efforts of all men of good will.

1.   Mill, On Liberty, Third Edition, London 1864, pp. 38-39.

Ludwig von Mises
Ludwig von Mises

Ludwig von Mises (1881-1973) taught in Vienna and New York and served as a closes adviser to the Foundation for Economic Education. He is considered the leading theorist of the Austrian School of the 20th century.