All Commentary
Thursday, April 1, 1971

A Reviewer’s Notebook – 1971/4


In Christianity and the Class Struggle (Arlington House, $7.00), the Reverend Harold 0. J. Brown has addressed himself to that ever-growing band of masochists, nominally Christian, who think that guilt can be “collective.” The heresy to which Dr. Brown takes exception comes in many guises. The “capitalists” are to blame for oppressing the “masses.” The “Germans” were collectively guilty of murdering the Jews. The mod­ern “white” population of Amer­ica must pay reparations for what their forebears did to the blacks in enslaving them. The “over thir­ties” have wronged the “under twenties” by bringing them into a defective world of war and pol­lution. Everything gets reduced to a terrible and absolutely unreal simplicity.

To the true Christian the theory that a collectivity can be guilty denies the proposition that all men are human, each with his share of original sin, and each with his varying propensity to redeem himself. Only individuals may be held responsible. The “class war” solves nothing in Christian, or human, terms for the simple rea­son that it seeks an external change that has no relation to the individual. When the “up” class is abolished, the “down” class be­comes, in Djilas’s phrase, the “new class.” It not only perpetuates all the old wrongs, but it actually in­tensifies them. As Max Nomad once said, “the Kaiser and Czar were liberals” in comparison to the national socialistic and prole­tarian tyrants that came after them.

Dr. Brown accurately notes that the theory of the class struggle has ceased to serve the Marxists in most of the “developed” na­tions. The “capitalists” were never the vicious oppressors that Marx and Engels originally thought them to be, but even granting for the sake of argument they had been, the supposed “exploitation” of nineteenth century days is now very far behind us. The “masses” in the Western nations now par­take of a general well-being that can’t be matched in “Marxist” so­cieties. It is hard to nurse a grudge against the man with a Cadillac if you yourself are driving a Chevy or a Plymouth to your own pleasures. So the “class struggle” no longer serves as a useful revo­lutionary prod in the Western democracies. Marxism is now a cure in search of a problem.

Nevertheless, the professional dividers among us, including many Christians who should know bet­ter, have found convenient substi­tutes for the concept of class war. There is now the “race war:” Or, if not that, there is the genera­tional war. These are the “New Left” substitutes for the older, and now ineffective, propaganda of the “class struggle.”

Race War Is Suicide

Since racial differences are in­eradicable unless we assume a few generations of world-wide inter­marriages, it is, in Dr. Brown’s opinion, a “heinous crime” to pro­mote any theory of race war. Ra­cial differences must be accepted or they will end in death and des­truction to the weaker side. The Christian, according to Dr. Brown, must accept man as man, trying to ameliorate problems on individ­ual terms. Dr. Brown is extremely critical of his co-religionists who, acting on the theory that all Chris­tians were guilty for what hap­pened before the Civil War, ac­cepted James Forman’s demand for money reparations to be paid by the churches to the National Black Economic Development Council. The idea of “reparations” is, to Dr. Brown, sheer extortion. The money, if paid over, wouldn’t go to the original victims who had suffered the ignominy and cruelty of being enslaved. Nor would the truly guilty parties, the slave raiders (both black and white) who tore men away from their an­cestral homes in Africa, be paying the reparations. Church members whose grandfathers and grand­mothers weren’t even living in America in the early nineteenth century would be the victims of the extortion plot. And there would be no guarantee that the money would be used in a way to benefit the black community.

The practicing Christian, says Dr. Brown, who feels he must do something about the blacks, or the central cities, or whatever, would do better to invest in businesses that are “color blind” in their hir­ing policies. Or, if he is so minded as a charitable individual, he could give his own money to a Negro college, or to the National Associ­ation for the Advancement of Col­ored People. The point is that the individual must feel for the in­dividual if the ideals of Christ are to be upheld.

Parents and Children

The “generation war” makes even less sense to Dr. Brown than the race war. There can be no per­manent lines of battle in a gen­erational war, for today’s “youth” are in all too short a time tomor­row’s “middle-aged.” If the mem­bers of a single generation could bluff their fathers into giving them power, would they, in turn, be likely to relinquish that power at age thirty to the next wave of on-coming youth? It is hardly likely.

The class struggle and the vari­ous substitutes for it are, in Dr. Brown’s description, “the devil’s program.” They set men against each other not in fruitful compe­tition but in the delusion that evil can be destroyed by destroying human beings. You think you are doing something for “humanity” and you end by killing three mil­lion kulaks whose knowledge might have saved other millions from periodic famine. If you fol­low Jerry Rubin’s advice to kill your parents, you can have no logical objection if your children, in turn, decide to murder you. And if you preach Black Power in the race war sense, you risk a revival of the Ku Klux Klan mentality in a numerically superior portion of the population. This, of course, is a sure recipe for suicide.

Dr. Brown’s book comes with an introductory note by Billy Gra­ham. Its evangelical imagery may put off some readers in our secular civilization, but its substance is eternally true. The problem facing the world is not one that can be solved by “revolution,” for in rev­olution the ugly means take over and become the permanently evil ends. What we need is reforma­tion, which begins with the indi­vidual. This is not only true for orthodox Christians, it is also true for all believers in the traditions of the West.

The Theory of Money and Credit by Ludwig von Mises (Irvington-on-Hudson, N. Y.: The Foundation for Economic Educa­tion, new printing, 1971), 493 pp. $4.00

Reviewed by Hans F. Sennholz

Few books have contributed more to the advancement of monetary theory than Mises’ Theory of Money and Credit. And yet, few serious books have had such little impact on contemporary thought and policy as this treatise. The world continues to ignore or reject it while it is clinging to antiquated notions and practices. Of course, it is more pleasing and popular for governments to follow the advice of statists and inflationists than to heed the warnings of economists like Professor Ludwig von Mises.

Nearly all contemporary econ­omists adhere to holistic theories that are utterly futile and sterile for an understanding of monetary phenomena. There is the popular “income-expenditure analysis” which swayed economic thought during the 1930′s with the publica­tion of the General Theory of Em­ployment, Interest and Money by John Maynard Keynes.

According to Keynesian analy­sis, there is an ideal level of mone­tary expenditure at which the na­tional economy achieves full em­ployment under stable price condi­tions. In its search for this ideal level the income-expenditure analysis endeavors to trace the flow of money payments through the economy. As income is quanti­tatively the largest source of funds spent, an analysis of its determi­nation and disposition is basic to the approach. In addition, funds for spending may be derived from existing reserves of currency and demand deposits, time deposits, and other liquid assets that are easily converted to cash. And finally, when the ideal level of total spending has not yet been reached, newly created money, preferably demand deposits created through bank credit expansion, may be used to achieve the desired total. In short, it is the principal role of monetary authorities to ensure growth in the monetary reserve base sufficient to facilitate credit expansion for full employment.

As a holistic theory (from the standpoint of the whole rather than the parts) it does not profess to be concerned with individual economic actions, merely with policy guidelines for governments seeking economic growth and full employment. But even in this limited objective it has failed con­spicuously wherever it was tried. For massive unemployment con­tinues to be with us after more than thirty years of Keynesian policies.

And finally, there are the “mone­tarists” of the Chicago School whose holistic theories resemble the Keynesian doctrines. The fa­mous “equation of exchange,” as developed by Professors Fisher, Marshall, and Pigou, provides their starting point (PT =MV, or P =MV/T). As the price level can­not be expected to remain stable for various reasons, which renders the market system rather unstable, they call on government to take measures to stabilize the level and thus cure the business cycle.

It is true, the economists of the Chicago School reject the compensatory fiscal policies prescribed by the Keynesians because they real­ize the futility of continuous fine-tuning. But they recommend long­ term stabilization through a steady 3 to 4 per cent expansion of the money supply. They have no special trade cycle theory, merely the prescription for government to “hold it steady.” “If there is a recession issue more money, and if there is inflation take some out!”

Both schools of thought, the in­come-expenditure analysts as well as the monetarists, are unalterably opposed to the gold standard. Its discipline is rejected in favor of governmental power over money.

Von Mises’ subjective theory makes individual choice and ac­tion the center of his investiga­tion. On the cornerstone laid by Carl Menger’s theory of the nature and origin of money Professor Mises, in his Theory of Money and Credit, built a comprehensive fully integrated structure. With the help of his notable regression theory he completed the subjective theory of money, which had frus­trated other economists before him.

Professor Mises demonstrated that the individual demand for money springs from the fact that it is the most marketable good a person can acquire. It is true, money is not suitable to satisfy directly anyone’s needs. But its possession permits him to acquire consumers’ or producers’ goods in the near or more distant future. People want to keep a store of money to provide exchange power for an uncertain future. Some are satisfied with relatively small hold­ings, others prefer to hoard larger supplies. And we all change fre­quently our holdings in accordance with our changing appraisals of future conditions. Money is never “idle,” nor is it just “in circula­tion”; it is always in the posses­sion or under the control of some­one.

The demand for money is sub­ject to the same consideration as that for all other goods and serv­ices. People expend labor or fore­go the enjoyment of goods and services in order to acquire money. This is why individual demand and supply ultimately determine the purchasing power of money in the same way as they determine the mutual exchange ratios of all other goods. The quantity theory of money as understood by Professor Mises is merely another case of the general theory of demand and supply. However, he rejects the quantity theory as commonly pre­sented by the “monetarists” and other contemporary economists as a sterile aberration that proceeds holistically and arrives at empty equations and models.

Professor Mises’ trade cycle theory integrated the sphere of money and that of real goods. If the monetary authorities expand credit and thereby lower the in­terest in the loan market below the natural rate of interest, eco­nomic production is distorted. At first, it generates overinvestment in capital goods and causes their prices to rise while production of consumers’ goods is necessarily neglected. But because of lack of real capital the investment boom is bound to run aground. The boom causes factor prices to rise, which are business costs. When profit margins finally falter, a recession develops in the capital goods indus­try. During the recession a new readjustment takes place: the mal­investments are abandoned or cor­rected, and the long neglected con­sumers’ goods industries attract more resources in accordance with the true state of public saving and spending.

This Mises theory has explained numerous economic booms and busts ever since 1912 when the first edition of The Theory of Money and Credit appeared in print. And it continues to provide the only explanation of the rapid succession of booms and reces­sions that continue to plague our system.

The subjective theory of Pro­fessor Mises also points up the desirability of money that is not managed by government. The or­thodox gold standard or gold-coin standard is such money, the value of which is independent of gov­ernment. It is true, it cannot achieve the unattainable ideal of an absolutely stable currency. There is no such thing as stability and unchangeability of purchasing power. But the gold standard pro­tects the monetary system from the influence of governments as the quantity of gold in existence is utterly independent of the wish­es and manipulations of govern­ment officials and politicians, par­ties and pressure groups. There are no “rules of the game,” no arbitrary rules which people must learn to observe. It is a social in­stitution that is controlled by in­exorable economic law.

For nearly 60 years of world­wide inflation and credit expan­sion, depreciations and devalua­tions, feverish booms and violent busts, Ludwig von Mises’ Theory of Money and Credit has given light in the growing darkness of monetary thought and policy. The world should be grateful that the light is maintained through a new printing of this remarkable analysis.


  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.