At first glance the role of limited government in [Ludwig von] Mises’ system of classical liberalism appears as a somewhat uneasy compromise between two conflicting goals: on the one hand to achieve the advantages of a free market; on the other hand to benefit, in certain respects, by co ordinated central direction. Indeed this compromise might appear to differ only in degree from the kind of compromise enshrined in those “mixed economic systems” that have become so dear to the hearts of the economists and politicians of our time. But such a view of the role of limited government in Misesian liberalism would be utterly incorrect. For Mises, limited government is in no sense a compromise; and the possibility of any viable, stable kind of “mixed” system was categorically rejected by Mises: “There is simply no other choice than this: either to abstain from interference in the free play of the market, or to delegate the entire management of production and distribution to the government . . . there exists no middle way.” (Liberalism, p. 79) The truth is that for Mises’ liberalism the appropriate and important functions of government, as well as the severely circumscribed limits to government are both directly and consistently implied by the very essence of liberalism itself. “The program of liberalism . . . if condensed into a single word, would have to read: property, that is, private ownership of the means of production . . . .” (p. 19) It is the preservation of the institution of private property that most emphatically renders government a necessity for the liberal society; it is the preservation of precisely that same institution that makes it essential to prescribe strict and definite limits to government.
That government is necessary for liberalism was forthrightly emphasized by Mises. Government is defined as “the organs charged with the responsibility of administering the apparatus of compulsion.” (p. 35) And “the liberal understands quite clearly that without resort to compulsion, the existence of society would be endangered . . . One must be in a position to compel the person who will not respect the lives, health, personal freedom, or private property of others to acquiesce in the rules of life in society.” (p. 37) And, again, “For the liberal, the state is an absolute necessity, since the most important tasks are incumbent upon it: the protection not only of private property, but also of peace, for in the absence of the latter the full benefits of private property cannot be reaped.” (p. 39)
Recognition of the necessity of the state apparatus of compulsion does not, however, lead the liberal to ascribe special nobility, virtue, or esteem to the exercise of state functions. On the contrary, the liberal is thoroughly sensitive to the enormous potential for evil and corruption that inheres in the exercise of government. “Nothing corrupts a man so much as being an arm of the law and making men suffer. The lot of the subject is anxiety, a spirit of servility and fawning adulation; but the pharisaical self-righteousness, conceit, and arrogance of the master are no better.” (p. 58)
It is because for Mises the exercise of state functions carries with it no inherent nobility or dignity, that he sees the merits of democracy in a manner entirely free of the mystique with which it is invested in current political ideology. There is, for the liberal, no special glory attached to the task of governing, and no indignity attached to being subject to (limited) governmental rule. The rule of government is a practical necessity; that is all. Division of labor then exercises its claims. “One cannot be an engineer and a policeman at the same time. It in no way detracts from my dignity, my well-being, or my freedom that I am not myself a policeman.”
It then follows that there is nothing particularly glorious about a system that seeks to replace government by the few by self-government by the whole people—even were such a goal in fact a possible one. The only reason for endorsing democracy for the liberal society is a pragmatic one. “Democracy is that form of political constitution which makes possible the adaptation of the government to the wishes of the governed without violent struggles . . . By means of elections and parliamentary arrangements, the change of government is executed smoothly and without friction, violence, or bloodshed.” (p. 42)
But if the preservation of private property was the basis for liberal acknowledgment of a vitally important role to government, that same essential element in liberalism implies a severely circumscribed set of functions for government. Liberalism reflects the teachings of economics concerning the enormous benefits that society reaps from the institution of private property in the means of production. But the very concept of private ownership involves “for the individual a sphere in which he is free of the state. It sets limits to the operation of the authoritarian will.” Every attempt by the state to go beyond its function of “guaranteeing life, health, liberty and private property against violent attacks” is then seen by the liberal as “evil.” (p. 52) No matter how well-meaning paternalistic acts of government may be, such acts necessarily invade the domain of private property. Consistent paternalism cannot but lead. to complete authoritarianism, stifling all progress and innovation. “The wielding of powers of this kind even by men imbued with the best of intentions must needs reduce the world to a graveyard of the spirit.” (p. 54)
Here then we have the single goal and raison d’etre of limited government in the Misesian system: The pragmatic lessons of economic science, joined with a passionate regard for individual freedom, point unequivocally to the liberal system of private ownership of the means of production. Preservation of this fundamental framework of individual rights calls for government that protects these rights against potential enemies; the concern that such protection emphatically refrain from itself invading those very rights is not the expression of any kind of compromise—it is merely the other side of the very same coin, the essentiality to liberalism of a protected, inviolate sphere of individual rights.