Free Market and the Interventionist State

7/27/2019 Free Market and the Interventionist State

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Hillsda le College , Hillsda le, Michiga n 49242

Richard M. Ebelin g is the Ludwigvon Mises Professor of Eco-nom ics at Hillsdale Colle ge. A for-mer professor at the University ofDal las , he jo ined the Hi l l sdalefaculty in 1988. In addition, heserves on the edi toria l board of th e Revi ew of Austr i an Eco-nomicsand as v ice president o f the Future of Freedom Founda-

t ion. He has edi tedMoney, Method, and

the Market Process:Essays by Ludwig vonMisesand a numberof vo lumes in theHi l l sd a l e Co l l eg ePress Champions ofFreedom series . Heis co-edi tor of TheDanger of Soci al -i zed Medici ne.

Ebeling lecturesextensively on pri-vatization and mon-

etary reform throughout the UnitedStates, Latin America, and the for-mer Soviet Union, where he hasconsulted with the Lithuanian gov-ernment, the city of Moscow, andthe Russ ian parliament. Currently,he i s a lso working on a b iographyof Ludwig von Mises.

IMPRIMISBecause Ideas Have Consequences

August 1997 Volume 26, Number 8

In this issue, Richard M. Ebeling offers acompelling historical and economic analysis ofAmericas experiments with free market andinterventionist policies. His remarks weredelivered at Hillsdale Colleges Center forConstructive Alternatives and Ludwig von MisesLecture Series seminar, Between Power andLiberty: Economics and the Law, last March.All the presentations from this seminar willbe published in November in Volume 25ofChampions o f Freedom from the HillsdaleCollege Press.

In 1926 , A us t r i an economi s t Ludw i g vonMises visi ted the United States on a lecturetour. Upon h is return , he delivered a talk onChanges in American Economic Policy at

a m e e t i n g o f t h e V i e n n a I n d u s t r i a l C l u b .He expla ined:

The Uni ted Sta tes has become great andr ich u nd er the power of an econom ic sys-t e m t h a t h a s s et n o l i m i ts o n t h e f r e epursui t of the individual , and has there-by ma de r oom fo r t he deve lopm en t o f the

cou n t r y s p r odu c t i ve pow er. Am er i ca su n p r e c ed e n t e d e c o n o m i c p r o s p er i ty i sn ot the resul t of the r ichn ess of the Am er-i ca n l a n d , b u t r a t h e r o f t h e e co n o m i cpo l i cy t ha t u nde r s t ood how bes t t o t akeadvan t age o f t he oppor t un i t i e s t ha t t hel an d o ff er s . Am er i can econom i c po l i cyh a s a l w a ys r e j e ct e d a n d s t i ll r e j e ct stoday an y protect ion for infer ior i ty an du n c o m p e t i ti ve n e s s o v e r e ff ic i e n c y a n dcom peti t iven ess. Th e su ccess of this poli-c y h a s b e e n s o g r e a t t h a t o n e w o u l db e l i ev e t h e Am e r i c a n s w o u l d n e v er

chan ge it .

The Free Market and theInterventionist StateRichard M . Ebel ing

Ludw ig von M ises Pro fessor o f Econom ics

Hillsdale Coll ege

25thyear

740,000

subsc

ribers


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But Mises went on to te l l h is Viennese audiencetha t n ew voices were being h eard in Am erica , voicestha t c l a im ed tha t Am er ica s econom ic syst em wasn o t r a t i o n a l e n o u g h a n d t h a t i t wa s n t d e m o c -ra t i c eno ugh because the vo ter s d id no t h ave i t inthe i r imm ed ia te power to in f lu ence the d i r ec tion o f indu s tr i a l deve lopmen t . Gove rnm en ta l con t ro l swere be ing in t roduced no t to na t iona l i ze p r iva tee n t e r p r i s e b u t t o d i r e c t i t t h r o u g h v a r i o u sregu la to ry m e thods .

In com par i son to Eu rope , Am er ica was ce r ta in -ly no t iceably less regu la ted. But there were st ron gt r ends mov ing the na t ion a long the same heav i lyin te rven t ion i s t pa th Eu rope ha d been t r ave l ing fo ra long t ime. In the Am erica of 1926, Misesobserved, Both pol i t ica l par t ies , the Republ icansas wel l as the Democrats , are ready to take radical

s teps in th is d irect ion, in order to re ta in the votes of the electora te . He con cluded that the resul tsf rom su ch a pol icy wil l be n o dif ferent in Am ericathan from those ach ieved in Eu rope .

In Europe, the t rend towards col lect iv ism inthe 1930s and 1940s took some ex t r eme fo rms .Soc ia l i sm, communism, f a sc i sm and Naz i sm wereal l t r ied on th e other s ide of the Atlan t ic . Th ey rep-resented a to ta l re ject ion of a f ree economy andind ividu al l iber ty. In Am erica , the col lect iv ist t rendneve r wen t to such an ex t r em e , thou gh Fran k l in D.Roo sevelts first New Deal cam e very close to th efascis t m odel .

Defining the FreeM arket Economy

Soc ia l i sm , comm un ism , fa sc ism an d Naz i smare now al l but dead. They have fa i led mis-erably. But they have been replaced by wha tis merely another more watered down form

of col lect iv ism that may be cal led intervent ion-ism . Ind eed, in tervent ion ism is thep r e d o m i n a n teconom ic system in the world today. In 19 29, Misespublished a collection of essays under the title,

Critique of Interventionism. He argued,

N ear l y a l l w r i t e r s on economi c po l i cya n d n e a r l y a l l s ta t e sm e n a n d p a r t yl e a d e r s a r e s e e k i n g a n i d e a l s y s t e mwhich, in the i r be l ief , i s ne i ther [pure-ly] capi ta l i s t i c nor socia l i s t i c , i s basedne i t he r on [ un r e s t r i c t ed ] p r i va t e p r op-e r ty in t h e m eans o f p r oduc ti on n o r onpu bl ic proper ty. They are search ing fora s y s te m o f p r i va t e p r o p e r t y t h a t i sh a m p e r e d , r e g u l a t e d , a n d d i r e c t e d

t h r o u g h g o v e r n m e n t i n t e r v e n t i o n a n do t h e r s o c i a l f o r c e s , s u c h a s l a b o r

un i ons . We ca l l such a n econom i c po l -ic y interventionism, the sys tem i t se l f th e hampered market order.

He added, All i ts fo l lowers and advocates fu l lyagree that i t i s the correct pol icy for the comingdecades, yea , even th e comin g gene ra t ions . And a l lag ree tha t i n t e rven t ion i sm cons t itu t e s an econom -ic pol icy tha t wil l prevai l in the foreseeable fu ture .

Wi th the demise o f communism, pub l i c po l i -cy especia l ly in the Western world is back towhere i t was when Mises wrote these words near lyseven ty yea r s ago . Compreh ens ive gove rnm en towner sh ip o f the means o f p roduc t ion and a fu l lycen t r a l i zed p lan ned econom y ha ve ve ry few adh e r -ents left , even on the left . At the sam e t im e, insp i t e o f a l l t he ca sua l rhe to r i c abou t the t r iumph

of cap i t a l ism, we ha ve no t seen m uch ev idence .Here a r e e igh t po in t s tha t de f ine a genu ine f r eemarket economy, or what Mises referred to as the u n h a m p e re d e co n o m y :

1 . Al l m eans o f p r oduc t ion a r e p r iva te ly ow ned .

2 . The u s e o f the m eans o f p r oduc t ion i s under the con -

trol of pr ivate owners who m ay be individua ls or

corporate en t i t ies .

3 . Cons um er dem an ds dete r mine how the m eans o f p r o -

duct ion wil l be used.

4 . Competi t ive forces of supply and demand determine

pr ices for consumer goods and var ious factors of

production l ike labor .5 . The success or fai lure of individual and corporate

enterpr ises is determ ined b y the prof i ts or losses these

enterpr ises earn, based on their grea ter or lesser abi l-

i ty to sat is fy consumer demand in competi t ion with

the i r r iva l s in th e m ar ke tp lace .

6 . The m ar ke t i s no t con f ined to dom es ti c t r ans ac t ions

an d inc ludes fr eedom o f in t e r na t iona l t r ade .

7 . The m one ta r y sy stem i s bas ed on a m ar ke t -

de ter m ined com m odi ty ( e . g ., go ld o r s i lve r ) , an d the

banking sys tem is pr ivate and competi t ive, nei ther

con t r o l led no r r egu la ted by gover nm en t .

8 . Governm ent is l im ited in i ts act iv it ies to the en force-

m ent a nd protect ion of l i fe , liber ty, an d proper ty.

Defining theInterventionistEconomy

Unfo r tuna te ly , many mode rn po l i t i c i ans andacadem ics who say they endor se such a n econom yare wi l l ing to to l e r a t e a g rea t dea l o f hamper ingind eed. When i t com es to iden t i fy ing the role of gove rnmen t in the i r concep t ion o f the marke t

o rde r , many i f no t mos t conse rva t ive economis t ss t i l l a s sume tha t gove rnmen t mus t be r e spons ib le

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IMPRIMIS Because Ideas Have Consequences


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for a socia l safety net tha t inclu des Socia l Secur i tya n d u n e m p l o y m e n t c o m p e n s a t i on ; m u s t h a v e d is -c re t iona ry mone ta ry and f i s ca l powers to suppor tdes i r ed l eve l s o f emp loymen t and ou tpu t ; mus tr egu la t e indus t ry to a s su re compe t i t i ve cond i -

t ions in the marke t and fa i r l abo r cond i t ionsfo r worke r s ; and mus t d i r ec t ly supp ly ce r t a ingoods and services that the market a l legedly doesno t p rov ide .

Indeed, thousands of individuals who c la im tobe on the r igh t be l i eve tha t gove rnmen t shou ldinstitute som e or all of these pu blic policies. It isimportant to apprecia te , however , that the verynot ion of publ ic pol icy , as the term is a lmosta lways used, supports government in tervent ion inthe m arket in ways tha t are s im ply incon sis tent witha genu ine free m arket econom y. Interven t ionism aspu bl ic pol icy is no t consis tent with the f ree ma rkets ince i t in tent ional ly prevents or modif ies the out-com es of the m arket . Here are the e ight points of the in tervent ionis t economy:

1 . The p r iva te ow ner sh ip o f the mea ns o f p roduc t ion i s

res tr icted or a br idged.

2 . The u s e o f the m eans o f p r oduc t ion by p r iva te own-

ers is prohibi ted, l im ited, or regulated.

3 . The u s e r s o f the m eans o f p r oduc t ion a r e p r even ted

f r om be ing gu ided by cons umer demand .

4 . G over nm en t in f luen ces o r con t r o l s the f or m at ion

of pr ices for consumer goods and/or the factors

of production.

5 . G over nm en t r educes the impac t o f m ar ke t supp ly

an d dem an d on th e s ucces s o r fa i lu r e o f va r ious

enterpr ises while i t increa ses the im pact of i ts own

in f luen ce and con t r o l th r ough s uch a r t i fi c ia l m eans

as p r i ce and p r oduc t ion r egu la t ion , l imi t s on fr ee -

dom o f en t r y in to s egmen ts o f the m ar ke t , and d i r ec t

or in direct subs idies.

6 . F r ee en t r y in to the dom est i c ma r ke t by po ten t i a l f o r-

eign r ivals is d iscouraged or out lawed through

im port proh ibi t ions , quotas , or tar if fs .

7 . The m one ta r y sy stem i s r egu la ted by gover nm en t f o r

the pu rpose of inf luen cing wha t is used as m oney, the

va lue o f m oney, and th e r a t e a t w h ich the qu an t i ty o f

m oney is increa sed or decreased. And a l l these are

used as tools for af fect ing employment, output , and

g r ow th in the econom y.

8 . G over nm en t s r o le i s no t l im i ted to the p r o tec t ion o f

life, liberty, an d pro perty.

I t i s impor t an t t o no te tha t t he pub l i c po l i c i e sthese eigh t po in t s r ep re sen t m us t be im p lemen tedth rou gh v io len t m eans . On ly the th rea t o r u se o f force can m ake people fol low cou rses of ac t ion tha tare d if ferent f rom the ones that they would havepeaceful ly taken i f i t were not for governm ent in ter-

ven t ion . The re i s r ea l ly no th ing pu b l ic abou tthese policies, after all; they are coercive policies.

The Law ofAssociation

Contras t these pol ic ies with the pol ic ies of

the free m arket . What is m ost s t r ik ing ist h e v o l u n t a r y n a t u r e o f e c o n o m i ca r r an gem en t s . The m ean s o f p roduc t ion

are pr ivate ly owned, and the owners are f ree tode te rmine how the means o f p roduc t ion wi l l beem ployed . Thu s , con t ro l ove r the m eans o f p ro -du ct ion is depol i t ic ized. Since i t i s n ot located inone p lace bu t i s d i spe r sed among a wide segmen tof the socie tys popu lat ion , i t i s a lso decentra l ized.Ind iv idua l s con t ro l t he means th rough wh ich theyc a n m a i n t a i n a n d i m p r o v e t h e i r o w n c i r c u m -s tances and they a re no t dependen t upon a s ing lepol i t ica l source for employment or the necessi t ies

an d lux u ries of li fe . But i t is not jus t the own ers of the m eans o f p roduc t ion who h ave a h igh deg ree o f a u t o n o m y in t h e fr e e m a r k e t e co n o m y ; c o n s u m e r sdo , t oo , s ince they a re the ones who de te rminewha t p rodu c t s an d se rvices wil l be in dem an d .

Th e ba sis of socie ty, Mises a lways em ph asized,is wha t h e cal led th e law of associa t ion. Mencan more success fu l ly improve the i r i nd iv idua lc o n d i t i o n t h r o u g h c o o p e r a t i o n , a n d t h e m e a n st h r o u g h w h i ch t h a t c o op e r a ti o n c a n b e m a d e m o s tprodu ct ive is the divis ion of labor . By takin gadvan tage o f ind iv idu a l t a l en t s an d c i r cum s tan cesth rough spec ia l i za t ion , t he to t a l quan t i ty andqual i ty of socie tys output can be dramatical lyim proved. In dividua ls do no t h ave to t ry to sa t isfyal l their own wants through isola ted act iv i ty .

And once they specia l ize their ac t iv i t ies , theybecome in t e rdependen t ; t hey re ly up on each o th e rfor the vast major i ty of goods and services theydesire . But i t i s th is very in terdepen den cy th at g ivesprodu ct ion i ts real and t rue socia l ch ara cter. I f men a re to acqu i r e f rom o the r s wha t they des i r e ,they m us t devo te the i r ene rg ies to p roduc ing wha to the r s a r e wi l li ng to accep t in t r ade . The fun da -m e n t a l r u l e o f t h e m a r k e t i s m u t u a l a g r e e m e n tan d vo lun ta ry exchan ge . Each m em ber o f soc ie tymust or ient h is ac t iv i t ies toward serving the wantso f a t l ea s t som e o f the o the r m em bers in an un end-ing c i r c le o f t r ade . The Sco t ti sh m ora l ph i lo soph e rAdam Sm i th obse rved over two hu nd red yea r s ago :

Man has a l mos t cons t an t occas i on f o rthe h elp of h i s bre thren, an d i t is in vainfor him to expect i t f rom thei r benevo-l ence on l y. H e wi l l be m or e l i ke l y t oprevail i f he can interest their self-lovein h i s favour , and shew them tha t i t i s tot he i r ow n advan t age t o do f or h i m w ha t

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h e requires of them . Whosoever offers toan o t he r a ba r ga i n o f any k i nd , p r oposesto do thi s . Give me tha t which I wan t ,an d you sha l l ha ve th i s w h i ch you w an t ,i s the meaning of every such of fer ; and

i t is in th i s m an ner tha t we obta in f romon e an other the far greater par t of thoseg o o d o f f i c e s w h i c h w e s t a n d i n n e e dof . I t i s n o t fr om t he ben evo l en ce o f t he bu t che r , t he b r ew er , o r t he bake r ,t h a t w e e x p e c t o u r d i n n e r , b u t f r o mthei r regard for the i r own interes t. Weaddress ourse lves , not to the i r h um an i ty,but to the i r se l f - love , and never t a lk tothem of our own n ecess it i es but of the i rown advantages .

This i s wha t a s su re s tha t t he u ses fo r wh ich themeans o f p roduc t ion a re app l i ed a re gu ided byc o n s u m e r d e m a n d .E a c h i n d i vi d u a l m u s tf ind a way to sa t isfysome o f the needs o f o thers before he cansatisfy h im self. As aresul t , the pr ices forc o n s u m e r g o o d s a n dthe factors of produ c-t ion a re no t dec reedb y g o v e r n m e n t b u t

a r e f o r m e d i n t h em a r k e tp l a ce t h r o u g hthe com petitive forcesof supply and deman d.Success or failure isdetermined by theprofits and lossesearned on the basis ofthe greater or lesserability to meet con-s u m e r d e m a n d i ncom petition with rivalsin the marketplace.

Abandoning OurConstitution

In 1936, the Swiss econom ist and p ol i tica l sci -ent is t Wil l iam E. Rappard del ivered a lec turei n Ph i l a d e l p h i a o n T h e R e l a t i o n o f t h eInd iv idua l t o the Sta t e in wh ich he empha-

sized that no one could read the accounts of thecons t i tu t iona l deba te s o f 1787 o r the f amousFederalist Papersw i t h o u t r e a l i z i n g t h a t t h eFoun ders were essent ia l ly anim ated by the desire to

free th e individu al f rom th e sta te . He even went onto say, I do not th in k tha t anyon e who h as ser ious-

ly studied th e or ig in of the Con sti tu t ion o f the UnitedStates will deny that it is an essentially individualis-t ic docum ent , inspired by the suspic ion tha t the s ta teis a lways, or a lways tends to be , d ic ta tor ia l .Reflect ing u pon the t rends h e observed in the Un ited

States in the New Deal era of the 1930s, ProfessorRappa rd conc luded : The ind iv idua l dema nd in gthat the s ta te provide him with every secur i ty hasthereby jeopardized his possession of that freedomfor wh ich h is an cestors fou gh t an d bled.

I s Sov ie t - s ty l e communis t c en t r a l p l ann ingn ow in the ashh eap of h is tory in th e 1990s? Yes.Are m asses of people in the West wil l in g to wa lk inbl ind, lockstep obedience to fascis t demagogues intorchl igh t para des? No. An d h opeful ly n ei therform o f to ta l i tar ian ism wil l ever aga in cast i ts darkcollectivist sh ad ow over th e West. However, sixdecades af ter Professor Rappards observat ionsa b o u t s t a t i s t t r e n d s i n A m e r i c a a n d a r o u n d

the wor ld , Wes te rndem ocracies are st i l le n v e l o p e d i n t h et i g h t g r i p o f t h eintervent ion is t sta te .

Pr iva te p rope r tyinc reas ing ly ex i s t son ly on paper. An dwi th the ab r idgmen tof proper ty r ights hasc o m e t h e a b r i dg m e n tof a l l the other indi-vidual l iber t ies uponwh ich a free society isbased. Our l ives aresupervised, regu la ted,con t ro l l ed , d i r ec t edand overseen by thesta te . Look a t an ypa r t o f ou r economicand socia l l ives andtry to f ind even oneco rne r tha t i s f r ee

f rom some fo rm o f d i r ec t o r i nd i r ec t gove rnmen tin t ru s ion . I t i s p rac t i ca l ly im possib le to find sucha corn er. Th is is becau se ou r l ives are no t our ownan ym ore. Th ey are th e proper ty of the sta te . Weare the tools and the vic t ims of publ ic pol ic ies thata re in t ended to cons t ruc t b rave new wor ld s con -cocted by in te l lec tual and pol i t ica l e l i tes who s t i l ld r e a m t h e u t o p i a n d r e a m t h a t t h e y k n o w b e t t e rthan u s h ow ou r l i ves shou ld be l ived .

Today, i t i s not f ree m ark et forces bu t pol i t ica ld i r ec t ives tha t mos t o f t en in f luence wha t goodsan d se rv ice s a r e p rodu ced , whe re an d h ow they a rep rodu ced and fo r wha t pu rposes they ma y be u sed .I f we p ick up a ny p rodu c t in an y sto re anywhere in

the Un ited Sta tes we wil l d iscover tha t hu n dreds of federal and s ta te regula t ions have actual ly deter-


4

Socialism, communism, fas-

cism and Nazism are now

a ll but dea d. They ha ve

fa iled misera bly. But they

have been replaced by

what is merely another

more watered down formof collectivism that may be

ca lled int ervent ion ism.

Indeed, interventionism is

t hepredominant economic

system in t he w orld to da y.


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m i n e d t h e m e t h o d s b y w h i c h i t h a s b e e n m a n u -fac tu red , i t s qua l i ty an d con ten t , it s packag ing a ndte rms o f s a l e , and the cond i t ions unde r wh ich i tm ay be safely u sed by the pur cha ser. I f we bu ya t ract of land or a bui ld ing, we wil l be t rapped in

a spiders web of res t r ic t ions on h ow we m ay u se ,im prove, or se ll i t . Every facet of ou r l ives is n owsubject to the whims of the s ta te .

Economics, M orality,and the Law

In an environment in which publ icpolicy determin es individu allives and fortunes andin which social

and economic l i f ehas become pol i t i -cized, it is not su rpris-ing that many Amer-i cans have tu rnedtheir attention to pol-itics to improve their market position and relativeincom e share . Legal ized coercion h as becom e th em e thod by wh ich they ge t ah ead in l i fe . And m aken o m istake abo u t i t : Every incom e t ran sfer, everytar i f f or im port qu ota , every busin ess su bsidy, everyr e gu l a t i o n o r p r o h i b i ti o n o n w h o m a y c o m p e t e o rh o w a p r o d u c t m a y b e p r o d u c e d a n d m a r k e t e d ,

an d every r es tr a in t on the u se and t r an s fe r o f p rop -er ty is an act of coercion. Pol i t ica l force is in ter-je ct ed in to wh a t wo u ld o th er wi se b e a sys te m o fpeace fu l a nd vo lun ta ry t ran sac tions .

Over t ime, in tervent ionism blurs the dis t inc-t ion be tween wha t is m ora l and wha t is no t . I nordin ary l i fe , m ost people take for gran ted that cer-t a in fo rm s o f condu c t a r e pe rm iss ib l e wh i l e o the r sare n ot . Th ese are the Golden Ru les they l ive by.Gove rnm en t s t a sk in h um an socie ty i s to en fo rceand p ro tec t t he se ru l e s , wh ich , a s I have a l r eadyind ica ted , a r e sum m ar ized in two bas ic p r inc ip les :Nei ther force nor f raud shal l be pract iced in deal-

ings wi th o the r s ; an d r igh t s an d p rope r ty o f o the r sm us t be r e spec ted . In the m ora l o rde r tha t i s t hefree m arket econ om y, these pr inciples are th e well -s p r in g o f h o n e st y a n d tr u s t . Wi t h o u t t h e m ,Am er ica i s th rea tened wi th u l t im a te ru in wi th awar o f a l l - aga ins t - a l l in the pu r su i t o f p lun de r.

When ind iv idua l s began to a sk gove rnmen t todo th ings fo r them, r a the r than mere ly to secu rer igh t s and p rope r ty, t hey began a sk ing gove rnm en tto viola te o thers r ights an d prop er ty for their ben -e fi t . The i r dem an ds on gove rnm en t have beenra t iona l i zed by in t e l lec tua l s and soc ia l en g inee r swho have pe r suaded them tha t wha t they wan ted

bu t d idn t have was due to th e g reed , exp lo i ta t ion ,an d imm ora l i ty o f o the r s . Bas ic mora l i ty an d ju s -

t i ce ha s been t r anscended in th e po l i ti c a l a r ena ino rde r to t ake f rom the haves and g ive to theh ave no t s . The f t t h rou gh po l i ti c a l m eans hasbecome the bas i s o f a h ighe r m ora l i ty : socia lju st ic e, wh ic h is su pp osed to re m ed y th e a ll eg ed

injust ices of the f ree market economy.But once the market became pol i t ic ized in th is

m an ner, m orality began to disintegrate. Increasingly,the only way to survive in society is to resort to thesam e types of political meth ods for gain as others areusing or to devise ways to evade controls and regula-t ions . More an d m ore people ha ve been drawn intothe arena of pol i t ica l in t r igue and manipula t ion

or v iola t ion of the law for economicg a i n . H u m a n r e l a ti o n s h i p s a n d t h e

political process have becomeincreasingly corrupted.

I n t h e 1 9 2 0 s ,Mises explained acrucia l aspect of th is corrupt ion of m ora l ity and l aw:

B y cons t an t l y v io l a t i ng c r i m i na l l aw sa n d m o r a l d e c r e e s [ p e o p l e ] l o s e t h eabi l i ty to di st ingu ish between r igh t an dw r on g , g o o d a n d b a d . T h e m e r c h a n tw h o b e g a n b y v i o l a t i n g f o r e i g nexchange con t r o l s , i mpor t and expor tres t r ic t ions , pr ice ce i l ings , e tc . , eas i ly

proceeds to def raud hi s par tn ers . Th ed e c a y o f b u s i n e s s m o r a l s . . . i s t h ei nev i t ab l e concomi t an t o f t he r egu l a -t ions i m posed on t r ade .

Mises was, of course , repeat ing the lesson thatthe French c lassical econ om ist Freder ic Bast ia t ha dat tem pted to teach in th e 1850s in h is fam ou s essay,Th e Law. When th e sta te becom es the viola tor of l iber ty and proper ty ra ther than i ts guarantor , i tdeba ses respect for all law. Peop le in society devel-op an increasing disrespect and disregard for whatthe l aw dem an ds . They view the law a s the agen t

for immoral i ty in the form of legal ized plunder forthe ben efi t of som e at the expense of o thers . Andthis same disrespect and disregard sooner or la ters tar ts to creep in to deal ings between individuals .Society verges on the brink of lawlessness.

Bast ia t predic ted the moral bankruptcy that hasbeen brou gh t on by th e in tervent ionis t sta te . But arewe condem ned to con t inue in a s ta t e o f m ora l andpol i t ica l corrupt ion ? Man y thou gh tfu l observersshake the i r heads an d conc lude tha t t h e an swer i syes . But i t i s worth recal l ing th at in 1951 Miseswrote an essay called Trends Can Chan ge. He was

5

Continued on page 8


6/8


A Historic Find: Lost PapersExhibite d Du ring March 1 9 9 7

Lud wig vo n Mis e s Le cture sPhotos in order of appearance:Mises Professor Richa rd Ebel ing an d h is wife An n a receive the

Mises Medal f rom Mexicos Inst i tu to Cu l tura l de Ludwig von Mises President Carol in a de Bol ivar ;

sponsors Mr. and Mrs. Quinten Ward tour the exhibi t with Professor Ebel ing; newspaper publ isher

Wil l iam Morr is speaks to a capaci ty crowd; off-campus guests examine Misess correspondence and

un pu b l i shed m ono graph s wri t ten be fo re Wor ld War I I ; a 1951 docu m en t r ega rd ing th e sec ret s to rage

of the Lost Pap ers in th e Centra l Sta te Specia l Archives of the U.S.S.R.


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replying to tho se who d espaired th at socia l ist centra lplan n ing was increasingly dom ina t ing the world . Atthe time, the situation did seem irreversible; political,econom ic, an d socia l t rends a l l seemed to be head ingin the direct ion of com prehen sive col lect iv ism :

One of the cher i shed dogmas impl ied incontem porary fashion able doct r ines i s the

belief tha t tenden cies of social evolution a sm an ifested in th e recent past wil l prevail inthe futu re, too. An y at tem pt to reverse oreven to stop a trend is doom ed to fai lu re... .The pres t ige of th i s myth i s so enormoustha t i t qu ells an y opposit ion. I t spreadsdefeat i sm among those who do not sharethe opinion that everything which comesla ter is be tter tha n what preceded, an d arefully aware of the disastrous effects of all-round planning, i .e . , to ta l i t ar ian socia l -ism. Th ey, too, m eekly su bm it to wha t thepseudo-sch olars tel l them is inevitable. I t

is this m enta l i ty of passively acceptin gdefeat tha t ha s ma de socia l ism t r ium ph inmany Eur opean coun t r i e s and may ve r ysoon make i t conquer in th i s count ry [ theUnited States] too.. .. Now trends o f evolu-t ion can change, and hi ther to they a lmosta lways ha ve cha nged. But they cha ngedonly because they met f i rm opposi t ion.

The prevail ing trend toward what HilaireBelloc called the servile state will certainlynot be reversed if nobody has the courageto a t tack i ts un der lying dogm as.

The t rend towards to ta l i tar ian socia l ism wasreversed. It was reversed by its own in h erent u n work-ability. It was reversed by the faith o f m illions of peo-

ple in the Soviet b loc who would not g ive up on thedream of f reedom and by a courageous few who sac-rificed their careers, their property, and even theirlives to m ake th at dream a rea lity. An d it was reversedby fr iends of freedom in the West who helped preventi ts tr ium ph in the i r hom e lan ds and who p rov ided aninte l lec tual d efense of l iber ty and the f ree m arket .

In tervent ionism in America in the la te twent ie thcentu ry is a t rend th at can a lso be reversed. I ts owninhe ren t unworkab i l i t y and s t r angu la t ion o f thewea lth -c rea t ing m echan i sm s o f the m arke t wil l st a r tthe reversal process. But th at is no t enou gh . Wemust rekindle our bel ief in and desire for f reedom.

And some o f u s have to speak ou t and r e fu te thera t ion ales for in tervent ionism . We n eed to sha rewith our fellow citizens a powerful vision of the freesocie ty an d the un ha m pered econom y. I f we suc -ceed, the great t rend of the twen ty-f irs t century wil lbe a t rend toward greater individual f reedom, anexpand in g g loba l m arke tp lace , an d r i sing s t anda rdsof l iving an d l iber ty for a l l .

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Free Market and the Interventionist State