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Saturday, February 1, 1986

A Reviewers Notebook: Liberalism

When Ludwig von Mises wrote his Liberalismus (in German) in the Twenties, he was already worried about the title. As he was to observe much later in 1962, the tenets of nineteenth-century liberalism (free trade in a setting of limited government) had been pretty well forgotten on the European continent. In England, the Fabians were using the word “liberalism” to describe their slow-motion approach to socialism. And in America, the editorial policies of the weeklies that called themselves liberal (The Nation, The New Republic) favored all the interventionist ideas that would shortly become law with the coming of the New Deal.

Fearful that a literal translation of the original German title would be confusing, Mises, in 1962, called the English version of his book The Free and Prosperous Commonwealth. This was accurate enough in the context of Mises’ assertion that freedom was menaced by every departure from the so-called “night watchman State,” but Mises wasn’t satisfied with it! Bettina Bien Greaves describes Mises’ feeling that the word “liberalism” must be rescued from the collectivists. She quotes him as saying, in Human Action, that “there is simply no other term available to signify the great political and intellectual movement” that had fostered the free market economy.

So we come to the third edition of Liberalismus. It now bears the title of Liberalism In the Classical Tradition. The translation is by Ralph Raico, and there are, in addition to Mises’ own introduction to the 1962 edition, a new preface by Bettina Bien Greaves, and a foreword by Louis M. Spadaro of Fordham University. The book (208 pages, $9.95) is published by The Foundation for Economic Education (Irvington-on-Hudson, New York 10533) and the Cobden Press, 1800 Market Street, San Francisco 94102.

Liberalism represents Mises at his most positive. He had already explained in the early Twenties why socialism can’t work. Without a price system based on the higgling of the market as individual traders go through the motions of buying and selling, there can be no way of calculating. Socialism can stagger along in Soviet Russia or middle way Scandinavia as long as there is a free world to the West to provide international price references. But when monetary calculation can’t be applied to the grain trade, for example, nobody would know how much wheat to plant, or where, and even the production of hoes would have to be a matter of guesswork, to say nothing of such advanced things as reaper combines and tractors.

Mises gives full attention to this negative aspect of socialism in his Liberalism. But he is more concerned with the positive foundations of liberal policy. Leftists accuse liberalism of putting the interests of the propertied Classes ahead of all other concerns. But this assertion, says Mises, is “completely mistaken.” Liberalism had always had in view the good of the whole, as expressed in the Benthamite formula of “the greatest happiness of the greatest number.”

Mises didn’t think this formula was particularly well-phrased (it tries to multiply a quality by a quantity), but it does convey something. The early liberals tried to get away from the short-time promotion of special interests. Peel and Gladstone in England wanted to lower taxes to encourage a production that, in the long term, would benefit both workers and property owners. But, as the nineteenth century grew older, the anti-liberal parties grew stronger. They wanted tariffs to benefit specific manufacturers. The socialists among them wanted a steadily increasing welfarism. The rich must be made to pay for cradle-to-grave support of the poor, without regard to what this might do to the capital formation needed to create more jobs.

lib (lib er•al iz m), n.

The great political and intellectual movement that (1) substituted free enterprise and the market economy for precapitalistic methods of production, (2) established constitutional representative government in place of absolutism, and (3) promoted freedom for all individuals instead of slavery, serfdom, and other forms of bondage.

Mises doesn’t name names in Liberalism. But his gift for clear abstraction will enable the 1986 reader to make the jump from the Twenties to modern times. His “parties of special interest” in the Twenties included the British laborites, the German social democrats, the French dirigistes, the fascists of various stripes, the Viennese socialists, the American “progressives” and farmer-laborites, and the union-oriented political bosses in the American big cities. In the Eighties there is a slight turn for the better. Fascism and Nazism have been discredited. In England, Margaret Thatcher has won something of a victory by breaking the stranglehold which the leftist coal miners had on British energy policy. In America, there are so-called supply-siders in both major parties. Republican Congressman Jack Kemp can agree with Democratic Senator Bill Bradley that something must be done for the investment system as a whole by cutting high marginal tax rates.

Mises puts it all in a paragraph when he says “liberalism has demonstrated that the antagonism of interests, which, according to a widely prevalent opinion, is supposed to exist among different persons, groups, and strata within a society based on private ownership of the means of production, does not in fact occur. Any increase in the total capital raises the income of capitalists and landowners absolutely and that of workers both absolutely and relatively . . . The interests of the entrepreneurs can never diverge from those of the consumers.”

When Mises was writing in the Twenties, Bolshevik Russia was the poorest power in the world. Mises would have left the Russians to try to make up for their deficiencies on their own. “Let the Russians be Russians,” he said. “Let them do what they want in their own country. But do not let them pass beyond the boundaries of their own land to destroy European civilization . . . the governments of Europe and America must stop promoting Soviet destructionism by paying premiums for exports to Soviet Russia and thereby furthering the Russian Soviet system by financial contributions. Let them stop propagandizing for . . . the export of capital to Soviet Russia.”

The Mises advice is still good. But it must be extended a bit to include the denial of help to such Communist outposts as Castro’s Cuba and Ortega’s Nicaragua. Liberalism has no business propping up its enemies.

  • 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.