Where did All Those “Capitalist Pigs” Go

There are few ways in which a man can be more innocently employed than in getting money,” is an insight the famed biographer James Boswell attributed to Samuel Johnson.

Clients of the late Bernie Madoff, however, might take issue.

Over four decades, Madoff, acclaimed as the greatest fraudster of them all, ran a Ponzi scheme that swindled 40,000 people, including his closest friends, out of $65 billion.

But if “getting money” is among the most innocent of callings, America has more than its fair share of the goodly people who excel at it.

According to Forbes’s 35th annual ranking of billionaires, last year witnessed a population explosion. Some 660 new billionaires were added to the number for a total of 2,755.

And more than one in every four billionaires is an American.

According to Forbes, the richest man in the world is Jeff Bezos, founder of Amazon and owner of The Washington Post, with $177 billion.

Last year was the fourth in a row that Bezos led the list. His wealth exceeds the entire GDP of almost 150 nations.

Directly behind Bezos, at No. 2, is Elon Musk, chief executive of Tesla, whose wealth rose to $151 billion.

Numbers 4 and 5 were Bill Gates, co-founder of Microsoft, with $124 billion, and Mark Zuckerberg of Facebook with $97 billion.

“As a class billionaires added about $8 trillion to their total net worth from last year, totaling $13.1 trillion,” says the Washington Post.

“The United States had the most billionaires, at 724, extending a rapid rise in wealth that hasn’t happened since the Rockefellers and the Carnegies roughly a century ago. China, including Macau and Hong Kong, had the second highest number of billionaires: 698.”

This tripling of the wealth of the world’s billionaires and 30% increase in their number came during a year when America and the West endured the worst pandemic in a century and worst economic collapse since the Great Depression.

“While most of the world’s wealthiest people prospered during the pandemic, thanks in part to stock prices,” writes the Post, “millions of Americans grappled with job loss, food insecurity, debt, eviction and poverty.”

Query: Where was the outrage?

In previous times like these, where the rich got richer and the poor and working class rode the rails, we would have heard the excoriations of economic populists and echoes of TR’s “malefactors of great wealth” and FDR’s “forces of entrenched greed.”

But Forbes’ report of the population explosion among billionaires in 2020 passed seemingly without protest.

The dogs did not bark. Why not?

One reason: Whatever one may think of Bezos, Amazon, in 2020, was indispensable for delivering food and medicines to tens of millions of Americans who, given the “lockdowns,” depended on such deliveries for survival. You don’t castigate people providing your food and medicine.

Also, today’s billionaires’ boys club has come to understand how to make its astonishing wealth acceptable, by ingratiating themselves with their old ideological enemies.

Set up a tax-exempt foundation, fund it with billions of dollars, invite in liberals to sit on the board, and, at munificent salaries, to run it and distribute its income to liberal causes. The way to diminish leftist resentment at huge piles of private wealth is to give them a cut.

No wonder Elizabeth Warren’s wealth tax went nowhere.

However, they did it, America’s most successful capitalists have learned the lesson some previous generations of capitalists did not — how to preserve their wealth, privilege and economic power and avoid such derisive terms as “capitalist pig.”

Yet, of greater interest, and import, is that the China of the new Great Helmsman, Xi Jinping, a one-party Communist dictatorship, coexists with hundreds of Chinese billionaires.

What would Marx, Lenin, Stalin or the Mao of the Revolution that triumphed in 1949, who put his country through the Great Proletarian Cultural Revolution of the 1960s and 1970s, say of Chinese oligarchs and plutocrats, each of whom possessed at least a billion dollars in wealth?

Politically, China remains under an ever-tightening Communist rule.

But today, there are inequalities of wealth between the working poor and middle class, and the well-to-do and rich, that would have been anathema to the revolutionaries who founded Communist China.

Is China running a capitalist economy to generate the wealth to consolidate Communist Party control of the nation and grow China’s economic, military and geostrategic power until China displaces America as the first power on earth? So it would appear.

One wonders: Has China found the formula for global ascendancy that eluded the Soviet Union of Stalin, Khrushchev and Brezhnev?

Use state capitalism and market incentives to build the economic wealth that can be translated into the growth to enable China to ascend to a level of power where it is indisputably the first nation on earth?

Are the Chinese billionaires the geese laying the golden eggs for the Chinese Communist party? Is Communist doctrine being updated to accommodate the most successful Communist country of them all?

Patrick J. Buchanan is the author of “Nixon’s White House Wars: The Battles That Made and Broke a President and Divided America Forever.”

Let Us Be Clear Once and For All: Socialism Is Not at Root About Economics!

For the Conservatives, Capitalism is moral only to the extent that the capitalist lives to serve others. Self-interest can be smuggled silently in but not as a moral right or as a moral ideal. This means that “creeping socialism” always has the advantage and thus creeps unabated.

Over and over for decades, Conservatives have made the point that socialism does not “work,” that it does not create wealth but rather leads to poverty. This is true. Despite promising nirvana, “utopian” (socialist) communities and countries based on communism and socialism always failed economically.

Conservatives (including Wall Street Journal op-ed writers, right-wing think tanks, and pro-free enterprise economics departments) keep repeating the obvious and assert that people simply need better economic education to set them straight. Yet Conservatives keep losing every battle; the left repeatedly responds by ignoring their argument and rationalizing socialist failures.

The rationalizations run the gamut:

  • Previous socialist programs were not run correctly.
  • The moral ideal was right, but people are just too corrupt to practice it—there is a flaw in human nature.
  • The failure was caused by a plot by the U.S. (usually the CIA).
  • Socialism takes years to come to fruition and will triumph at some unspecified, future date….and so on.

What is striking is that no matter what the economic failures, true socialists rarely give it up. Why not. Because it has a moral base. Ayn Rand has made it clear that, “The power of morality is the strongest of all intellectual powers…men will not act, in major issues, without a sense of being morally right.” (quoted in Binswanger, 1986, p. 315).

Morality trumps economic facts if there is a conflict. This is true even if one’s accepted code of morality is objectively wrong. Millions have died fighting for Communism and Nazism (national socialism), including murdering millions of victims and keeping millions of others in hopeless poverty.

What is the problem with Conservatives (for more details, see Binswanger, 1986, pp. 95-100)? The Conservative argument is based on a contradiction: Capitalism is practical because most people want to live better, but morally it is defended by altruism, the premise that one must live only for the sake of others. Thus, Capitalism is only permissible so long as one lives, or claims to live, for “the public good.” For the Conservatives, Capitalism is moral only to the extent that the capitalist lives to serve others. Self-interest can be smuggled silently in but not as a moral right or as a moral ideal. This means that “creeping socialism” always has the advantage and thus creeps unabated. The hapless Conservative defense is routinely: “Hey, let us not overdo it. Let us have some capitalism. The welfare state will work better if capitalists have permission to function.” Socialists face no such internal contradiction; sacrifice for and of others is the morally right thing to do even when everyone stays poor, cf. Cuba and Venezuela. (See Locke, 2020, for a detailed discussion of Venezuela).

The socialist’s indifference to poverty reveals that there is a deeper moral (objectively anti-moral) layer than altruism which means sacrifice for the benefit of others. Since others do not actually benefit, the deeper standard is the destruction of economic freedom as an end in itself. This is pure nihilism, destruction for the sake of destruction: better to have everyone grovel in poverty than to let one person make a profit. Socialism is based on hatred for human life. In socialist societies, the worst people, power lusters, rise to the top, but they only rise because socialism gives them a moral sanction.

What then would change a socialist’s mind? Convincing them that socialism is anti-life and that Capitalism, which is based on individual rights, is morally good, i.e., that every individual has a right to their own life, which includes the right to trade freely with others, based on self-interest, and profit from it (i.e., without fraud or coercion). This would mean that capitalists would be admired, both practically and morally, rather than reluctantly tolerated as a necessary evil or totally forbidden. Economic education will only be embraced by people who think that Capitalism is not just practical but morally good. Moral education is needed as the proper base for economic education.

Some might ask about the puzzling situation of a Communist dictatorship, China, openly fostering Capitalism (though with numerous controls). This is a historically unprecedented event. So, what explains it? It is not based on respect for individual rights since communists deny them. It is based purely on power lust. For centuries China was backwards in relation to the west. Now they have decided to be imperialists, and they saw that the only way they could get the needed power was to create wealth which would give them the ability to intimidate or dominate other countries by using economic and military force together, e.g., massive exports, cyber-crime, building a large, military including a nuclear arsenal, trying to forcibly take over international waters in the South China Sea, threatening and harming fishing vessels from other countries, seizing islands they do not own to build military bases, stealing copyrighted and military technology from foreign countries, bullying countries which displease them (Australia), invasion (Hong Kong, Tibet), continual military threats (Taiwan), loaning money to poor countries, who will not be able to repay them, as a means of gaining power over them, cooperating with other dictatorships such as North Korea and Iran which are also building nuclear weapons to attack the U.S., etc.

China recently acknowledged that their use of Capitalism was only a strategic move until full socialism could be established. China, right now, is the single biggest threat to world peace and freedom. The old-line Marxists said capitalists would buy or make the rope that will be used to hang them. China wants to make their own rope and hang us with it. It remains to be seen how all this will turn out. Our weapons are:  the Declaration of Independence, the Constitution, our military might, Capitalism, and our commitment to freedom as a moral ideal–if we can keep them.

Edwin Locke

Celebrate Capitalism

We should not only allow global capitalism; we should welcome it and foster it in every way possible. It is time to rephrase Karl Marx: Workers of the world unite for global capitalism; you have nothing to lose but your poverty.

A version of this article was first published in 2003. CM is republishing it because its message still remains relevant today.

May Day will once again be celebrated by left-wing and environmentalist protestors united by a single emotion: a virulent hatred of capitalism, especially global capitalism. Why the hatred?

The advantage of a global economy based on free trade and capitalism is so obvious and so enormous that it is difficult to conceive of anyone opposing it. The benefit is based on the law of comparative advantage: every country becomes more prosperous the more it invests in producing and exporting what it does best (in terms of quality, cost, uniqueness, etc.), and importing goods and services that other countries can produce more efficiently. For example, let us say that Nigerian companies can produce T-shirts for $1 a piece whereas U.S. companies can only produce them for $5 a piece. Under free trade, Americans will buy their T-shirts from Nigeria. This division of labor benefits people in both countries. Nigerians will have more money to buy food, clothing and housing. Americans will spend less on T-shirts and have more money to buy cell phones and SUVs, and the investment capital formerly spent on T-shirts will be put to more productive uses, say in the area of technology or drug research. Multiply this by millions of products and hundreds of countries and over time the benefits run into the trillions of dollars.

How, then, do we reconcile the incredible benefits of global capitalism with the anti-globalization movement? The protestors make three claims repeatedly. First, they argue that multinational corporations are becoming too powerful and threaten the sovereignty of smaller nations. This is absurd on the face of it. Governments have the power of physical coercion (the gun); corporations do not; they have only the dollar–they function through voluntary trade.

Second, anti-globalists claim that multinational companies exploit workers in poor countries by paying lower wages than they would pay in their home countries. Well, what is the alternative? It is: no wages! The comparative advantage of poorer countries is precisely that their wages are low, thus reducing the costs of production. If multinational corporations had to pay the same wages as in their home countries, they would not bother to invest in poorer countries at all and millions of people would lose their livelihoods.

Third, it is claimed that multinational corporations destroy the environments of smaller, poorer countries. Note that if 19th-century America had been subjected to the environmental legislation that now pervades most Western countries, we ourselves would still be a third-world country. Most of the industries that made the United States a world economic power–the steel, automobile, chemicals and electrical industries–would never have been able to develop. By what right do we deprive poor, destitute people in other countries from trying to create prosperity in the same way that we did, which is the only way possible?

All of these objections to global capitalism are just rationalizations. The giveaway, and the clue to the real motive of today’s left and their hangers-on, is that all their protests are against–they are anti-capitalism, anti-free trade, anti-using the environment for man’s benefit–but they are not for anything. In the first third of the 20th century, most leftists were idealists–they stood for and fought for an imagined, industrialized utopia–Communism (or Socialism). The left’s vision was man as a selfless slave of the state, and the state as the omniscient manager of the economy. However, instead of prosperity, happiness and freedom, Communism and Socialism produced nothing but poverty, misery and terror (witness Soviet Russia, North Korea and Cuba, among others). Their system had to fail, because it was based on a lie. You cannot create freedom and happiness by destroying individual rights; and you cannot create prosperity by negating the mind and evading the laws of economics.

Furious over the fact that their envisioned utopia has collapsed in ruins, the leftists now seek only destruction. They want to annihilate the system that has produced the very prosperity, happiness and freedom that their system could not produce. That system is capitalism, the system of true social justice where people are free to produce and keep what they earn.

The fact that free trade is now becoming truly global is one of the most important achievements in the history of mankind. If, in the end, it wins out over statism, global capitalism will bring about the greatest degree of prosperity and the greatest period of peaceful cooperation in world history.

We should scornfully ignore the nihilist protestors–they have nothing positive to offer. We should not only allow global capitalism; we should welcome it and foster it in every way possible. It is time to rephrase Karl Marx: Workers of the world unite for global capitalism; you have nothing to lose but your poverty.

Copyright 2003 Ayn Rand Institute. All rights reserved. That the Ayn Rand Institute (ARI) has granted permission to Capitalism Magazine to republish this article, does not mean ARI necessarily endorses or agrees with the other content on this website.

ABOUT EDWIN A LOCKEEdwin A. Locke is Dean’s Professor of Leadership and Motivation Emeritus at the R.H. Smith School of Business, University of Maryland. He is a Fellow of the Association for Psychological Science (APS), the American Psychological Association, the Society for Industrial & Organizational Behavior, and the Academy of Management. He is the recipient of the Distinguished Scientific Contribution Award (Society for I/O Psychology), the Lifetime Achievement Award from the Academy of Management (OB Division), the J. M. Cattell Award (APS) and the Distinguished Scientific Contribution Award from the Academy of Management. He, with Gary Latham, has spent over 50 years developing Goal Setting Theory, ranked No. 1 in importance among 73 management theories. He has published over 320 chapters, articles, reviews and notes, and has authored or edited 13 books including (w. Kenner) The Selfish Path to Romance, (w. Latham) New Directions in Goal Setting and Task Performance, and The Prime Movers: Traits of the Great Wealth Creators. He is internationally known for his research on motivation, job satisfaction, leadership, and other topics. His website is: EdwinLocke.com

Liberty Winning

Louis XIV had hundreds of servants who prepared him dinner. Today, my supermarket offers me a buffet Louis XIV couldn’t imagine. Thanks to trade and property rights and markets, each of us lives as if we had more servants than kings.

Do I live in an alternate universe?

The media tell me my side is winning.

Salon claims, “We all live in Kochland, the Koch brothers’ libertarian utopia.”

Tucker Carlson says, “Our leadership class remains resolutely libertarian.”

What? Who? Not President Biden.

Biden already spent $1.9 trillion on COVID-19 “recovery” mostly unrelated to COVID. Now, he wants trillions more for an “infrastructure” bill, even though most of the spending would not go to infrastructure. He’s eager to regulate more, too.

Maybe the pundits were talking about former President Trump. He tried to deregulate — a little.

But Trump vilified trade and raised military spending, increasing our debt by trillions.

We libertarians want to reduce debt and believe trade and immigration are good for America. Above all, we believe the best government governs least.

That’s not what I hear from most Democrats and Republicans.

So, how can pundits from both left and right say libertarian ideas are winning?

In a way, we are winning,” answers the Cato Institute’s David Boaz, author of “The Libertarian Mind,” in my latest video.

“Over the past couple of hundred years, we’ve moved from a world where very few people had rights and markets were not free — to a world mostly marked by religious freedom, personal freedom, freedom of speech, property rights markets, the rule of law.”

For most of history, no country had those things. As a result, says Boaz, “There was practically no economic growth, no increase in human rights and justice.”

Kings and tyrants ruled, enslaving people, stealing property and waging wars that lasted decades.

Then, in 1700 “suddenly, limited government and property rights and markets came into the world,” Boaz points out.

The result was a sudden increase in prosperity. Americans now are told that “the poor get poorer,” but it’s not true. Americans are 30 times richer than we were 200 years ago. When America began, rich people were poorer than poor people are today.

“In Colonial America,” says Boaz, “(if) you were traveling and you wanted a place to sleep, you’d go to an inn where everyone shared a bed.”

Benjamin Franklin and John Adams shared a bed on one of their diplomatic missions. They fought whether or not the window should be open.

John Jay, America’s first chief justice of the Supreme Court, complained about “sleeping with strangers and picking up bedbugs and lice,” says Boaz. “It’s not like that anymore because of the increase in wealth.”

Today, at motels all over America, middle-class and poor people have their own beds.

When markets are free and private property is protected, innovation happens in ways that allow ordinary people to live better. Over time, that innovation multiplies. It’s why, today, most of us live better than kings once did.

Louis XIV had hundreds of servants who prepared him dinner. Today, my supermarket offers me a buffet Louis XIV couldn’t imagine. Thanks to trade and property rights and markets, each of us lives as if we had more servants than kings.

We also live longer.

“President Calvin Coolidge’s teenage son was playing tennis on the White House tennis court,” says Boaz. “He got a blister on his foot and the blister got infected, and the health care available to the son of the president of the United States was not sufficient to keep him from dying.”

Few of us notice such steady progress.

The media give us bad news. “They tell us about cancer clusters and coups in Myanmar,” says Boaz. As a result: “We forget the big picture. It’s important to remember the big picture so that we don’t lose it.”

The big picture also includes progress in fairness and decency.

“We’ve moved from ‘some people have privileges that others don’t’ to ‘human rights belong to women and Black people and gay people,’” Boaz reminds us.

“The direction of history has been in the direction of markets, personal freedom, human rights, democratic governance, and that’s what libertarians advocate.”

John Stossel

Always Remember Capitalism

Always remember what created the splendor and intensity of mankind’s cities, once they’re gone, or impoverished beyond recognition. Remember all the things we have shamed, canceled and will, before long, be outlawed: Profit; free enterprise; rationality; individualism; self-responsibility; hard work; equal rights under the law with no guarantee of equal outcome. The woke world will permit none of these. Sooner than you think, America will have the most dramatic contrast between capitalism and socialism the world has ever seen.

Endless lockdowns, confiscatory tax rates, rigged elections, state-regulated media, and socialized everything will not permit the prosperity and vitality so many of us knew to continue. Save pictures like this, because they will be outlawed and cancelled under the next regime. How fortunate for those of us in our 40s and 50s, and older, to have known all that was possible. Hopefully future generations will figure out what eluded today’s pitifully ignorant charlatans who lost the greatest experiment in freedom human history has ever known.

Michael J. Hurd, Daily Dose of Reason

NOTE: The photo to whom the author refers is the classic photo of the New York skyline.

The Wisdom of Ayn Rand on Businessmen

“America’s industrial progress, in the short span of a century and a half, has acquired the character of a legend: it has never been equaled anywhere on earth, in any period of history. The American businessmen, as a class, have demonstrated the greatest productive genius and the most spectacular achievements ever recorded in the economic history of mankind. What reward did they receive from our culture and its intellectuals? The position of a hated, persecuted minority. The position of a scapegoat for the evils of the bureaucrats.”

AYN RAND, America’s Persecuted Minority: Big Business

Real Socialism Creates Misery

When the Soviets made private businesses illegal, says Powell, “that’s about as close as the world ever saw” to pure socialism.

People hate America’s big disparities in wealth. It’s a reason why, among young people, socialism is as popular as capitalism.

The Democratic Socialists of America want a country based on “freedom, equality and solidarity.” That sure sounds good.

But does socialism bring that?

My new video debunks several myths about socialism.

One reason for socialism’s continued appeal is linguist Noam Chomsky. For generations, his work has taught students that capitalism is “a grotesque catastrophe.”

I assumed the fall of the Soviet Union would put an end to such misinformation. It did — for about a month.

But since then, the lust for socialism has come back strong. Today, Chomsky says that the Soviet Union “was about as remote from socialism as you could imagine.”

“Absurd!” responds economist Ben Powell, author of “Socialism Sucks: Two Economists Drink Their Way Through the Unfree World.”

When the Soviets made private businesses illegal, says Powell, “that’s about as close as the world ever saw” to pure socialism.

Now that the Soviet Union is gone, MSNBC anchor Ali Velshi says, “there is no true socialist country that exists.”

No? What about Cuba, China, North Korea, Vietnam and Venezuela?

Velshi didn’t respond when we asked him.

Venezuela was once Latin America’s richest country. Now it’s the poorest. Many in the media claim that its fall has “nothing to do with socialism,” just “poor governance.”

John Oliver says, “Chavez’s programs could have been sustainable if he pursued a sound economic policy.”

“Yeah,” laughs Powell. “Sustainable if he had a sound economic policy called capitalism.”

I push back. “Why does it have to be capitalism?” Why not socialism without bad management?

“That’s the nature of socialism!” Powell replies. “Their economic policies fail to adjust to reality because economic reality evolves every day. It’s millions of decentralized entrepreneurs and consumers making fine-tuning adjustments.”

Powell notes that in our capitalist society, when COVID-19 hit, businesses quickly adjusted. Restaurants switched to takeout and delivery. They built outdoor patios with heat lamps. Supermarkets opened early so the elderly could shop with less risk. Alcohol companies started producing hand sanitizer. Ford used its 3D printers to make face masks.

The media whined about “lack of federal direction,” but no central authority could direct all those individual adjustments in thousands of different places. In fact, federal direction would have prevented it.

“In a socialist economy, you get a one-size-fits-all adjustment,” adds Powell. “You miss out on this learning process where entrepreneurs copy others when they see things successful and stop doing it when it’s not.” By contrast, “In a market economy, everybody’s little adjustments get tested, and we get to see what works.”

In America, Blockbuster video was a great success. But then Netflix offered something better — no driving to a store, no late fees. Because Blockbuster didn’t immediately adjust, it went bankrupt.

“In a socialist economy, every adjustment needs to be commanded,” says Powell. “Communicate it down and get everybody to do the right thing. That’s impossible.”

That’s why under socialism, shortages are routine. In Venezuela, there’s so little food for sale that Venezuelans have lost weight.

Yet, “journalists” at Vox produced a video titled, “The Collapse of Venezuela, Explained,” without mentioning socialism even once. Vox’s explanation for Venezuela’s fall: “Oil prices plummeted.”

“The oil price is a complete distraction,” says an exasperated Powell. “There’s plenty of countries that depend on oil revenue. When oil prices went down, people there didn’t start losing weight. That just happened in Venezuela.”

Some claim Venezuela and Cuba’s people struggle mainly because of America’s economic sanctions and embargo.

“They certainly don’t help the people,” says Powell, “but it’s an afterthought as a reason for their suffering.”

The U.S. only sanctioned a few Venezuelan officials and their operations — not the country as a whole.

In Cuba, Powell points out: “They drive around 1950s U.S. cars … but there’s no U.S. Navy destroyers prevent Kia, Fiat and whoever else around the world from sending them cars. The reason for their suffering is they have an economic system that can’t deliver.”

Socialism delivers misery.

John Stossel, Capitalism Magazine

Ayn Rand on Capitalism

The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve “the common good.” It is true that capitalism does — if that catch-phrase has any meaning — but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice.

— AYN RAND

Socialism vs. Economic Freedom

I am here in Buenos Aires as a guest of the Centro de Difusión Economía Libre.1 What is economía libre? What does this system of economic freedom mean? The answer is simple: it is the market economy, it is the system in which the cooperation of individuals in the social division of labor is achieved by the market. This market is not a place; it is a process, it is the way in which, by selling and buying, by producing and consuming, the individuals contribute to the total workings of society.

In dealing with this system of economic organization—the market economy—we employ the term “economic freedom.” Very often, people misunderstand what it means, believing that economic freedom is something quite apart from other freedoms, and that these other freedoms—which they hold to be more important—can be preserved even in the absence of economic freedom. The meaning of economic freedom is this: that the individual is in a position to choose the way in which he wants to integrate himself into the totality of society. The individual is able to choose his career, he is free to do what he wants to do.

This is of course not meant in any sense which so many people attach to the word freedom today; it is meant rather in the sense that, through economic freedom, man is freed from natural conditions. In nature, there is nothing that can be termed freedom, there is only the regularity of the laws of nature, which man must obey if he wants to attain something.

I.

In using the term freedom as applied to human beings, we think only of freedom within society. Yet, today, social freedoms are considered by many people to be independent of one another. Those who call themselves “liberals” today are asking for policies which are precisely the opposite of those policies which the liberals of the nineteenth century advocated in their liberal programs. The so-called liberals of today have the very popular idea that freedom of speech, of thought, of the press, freedom of religion, freedom from imprisonment without trial—that all these freedoms can be preserved in the absence of what is called economic freedom. They do not realize that, in a system where there is no market, where the government directs everything, all those other freedoms are illusory, even if they are made into laws and written up in constitutions.

Let us take one freedom, the freedom of the press. If the government owns all the printing presses, it will determine what is to be printed and what is not to be printed. And if the government owns all the printing presses and determines what shall or shall not be printed, then the possibility of printing any kind of opposing arguments against the ideas of the government becomes practically nonexistent. Freedom of the press disappears. And it is the same with all the other freedoms.

In a market economy, the individual has the freedom to choose whatever career he wishes to pursue, to choose his own way of integrating himself into society. But in a socialist system, that is not so: his career is decided by decree of the government. The government can order people whom it dislikes, whom it does not want to live in certain regions, to move into other regions and to other places. And the government is always in a position to justify and to explain such procedure by declaring that the governmental plan requires the presence of this eminent citizen five thousand miles away from the place in which he could be disagreeable to those in power.

It is true that the freedom a man may have in a market economy is not a perfect freedom from the metaphysical point of view. But there is no such thing as perfect freedom. Freedom means something only within the framework of society. The eighteenth-century authors of “natural law”—above all, Jean Jacques Rousseau—believed that once, in the remote past, men enjoyed something called “natural” freedom. But in that remote age, individuals were not free, they were at the mercy of everyone who was stronger than they were. The famous words of Rousseau: “Man is born free and everywhere he is in chains” may sound good, but man is in fact not born free. Man is born a very weak suckling. Without the protection of his parents, without the protection given to his parents by society, he would not be able to preserve his life.

Freedom in society means that a man depends as much upon other people as other people depend upon him. Society under the market economy, under the conditions of “economía libre,” means a state of affairs in which everybody serves his fellow citizens and is served by them in return. People believe that there are in the market economy bosses who are independent of the good will and support of other people. They believe that the captains of industry, the businessmen, the entrepreneurs are the real bosses in the economic system. But this is an illusion. The real bosses in the economic system are the consumers. And if the consumers stop patronizing a branch of business, these businessmen are either forced to abandon their eminent position in the economic system or to adjust their actions to the wishes and to the orders of the consumers.

One of the best-known propagators of communism was Lady Passfield, under her maiden name Beatrice Potter, and well-known also through her husband Sidney Webb. This lady was the daughter of a wealthy businessman and, when she was a young adult, she served as her father’s secretary. In her memoirs she writes: “In the business of my father everybody had to obey the orders issued by my father, the boss. He alone had to give orders, but to him nobody gave any orders.” This is a very short-sighted view. Orders were given to her father by the consumers, by the buyers. Unfortunately, she could not see these orders; she could not see what goes on in a market economy, because she was interested only in the orders given within her father’s office or his factory.

In all economic problems, we must bear in mind the words of the great French economist Frédéric Bastiat, who titled one of his brilliant essays: “Ce qu’on voit et ce qu’on ne voit pas” (“That which is seen and that which is not seen”). In order to comprehend the operation of an economic system, we must deal not only with the things that can be seen, but we also have to give our attention to the things which cannot be perceived directly. For instance, an order issued by a boss to an office boy can be heard by everybody who is present in the room. What cannot be heard are the orders given to the boss by his customers.

II.

The fact is that, under the capitalistic system, the ultimate bosses are the consumers. The sovereign is not the state, it is the people. And the proof that they are the sovereign is borne out by the fact that they have the right to be foolish. This is the privilege of the sovereign. He has the right to make mistakes, no one can prevent him from making them, but of course he has to pay for his mistakes. If we say the consumer is supreme or that the consumer is sovereign, we do not say that the consumer is free from faults, that the consumer is a man who always knows what would be best for him. The consumers very often buy things or consume things they ought not to buy or ought not to consume.

But the notion that a capitalist form of government can prevent people from hurting themselves by controlling their consumption is false. The idea of government as a paternal authority, as a guardian for everybody, is the idea of those who favor socialism. In the United States some years ago, the government tried what was called “a noble experiment.” This noble experiment was a law making it illegal to buy or sell intoxicating beverages. It is certainly true that many people drink too much brandy and whiskey, and that they may hurt themselves by doing so. Some authorities in the United States are even opposed to smoking. Certainly there are many people who smoke too much and who smoke in spite of the fact that it would be better for them not to smoke. This raises a question which goes far beyond economic discussion: it shows what freedom really means.

Granted, that it is good to keep people from hurting themselves by drinking or smoking too much. But once you have admitted this, other people will say: Is the body everything? Is not the mind of man much more important? Is not the mind of man the real human endowment, the real human quality? If you give the government the right to determine the consumption of the human body, to determine whether one should smoke or not smoke, drink or not drink, there is no good reply you can give to people who say: “More important than the body is the mind and the soul, and man hurts himself much more by reading bad books, by listening to bad music and looking at bad movies. Therefore it is the duty of the government to prevent people from committing these faults.”

And, as you know, for many hundreds of years governments and authorities believed that this really was their duty. Nor did this happen in far distant ages only; not long ago, there was a government in Germany that considered it a governmental duty to distinguish between good and bad paintings—which of course meant good and bad from the point of view of a man who, in his youth, had failed the entrance examination at the Academy of Art in Vienna; good and bad from the point of view of a picture-postcard painter, Adolf Hitler. And it became illegal for people to utter other views about art and paintings than his, the Supreme Führer’s.

Once you begin to admit that it is the duty of the government to control your consumption of alcohol, what can you reply to those who say the control of books and ideas is much more important?

Freedom really means the freedom to make mistakes. This we have to realize. We may be highly critical with regard to the way in which our fellow citizens are spending their money and living their lives. We may believe that what they are doing is absolutely foolish and bad, but in a free society, there are many ways for people to air their opinions on how their fellow citizens should change their ways of life. They can write books; they can write articles; they can make speeches; they can even preach at street comers if they want—and they do this in many countries. But they must not try to police other people in order to prevent them from doing certain things simply because they themselves do not want these other people to have the freedom to do it.

III.

This is the difference between slavery and freedom. The slave must do what his superior orders him to do, but the free citizen—and this is what freedom means—is in a position to choose his own way of life. Certainly this capitalistic system can be abused, and is abused, by some people. It is certainly possible to do things which ought not to be done. But if these things are approved by a majority of the people, a disapproving person always has a way to attempt to change the minds of his fellow citizens. He can try to persuade them, to convince them, but he may not try to force them by the use of power, of governmental police power.

In the market economy, everyone serves his fellow citizens by serving himself. This is what the liberal authors of the eighteenth century had in mind when they spoke of the harmony of the rightly understood interests of all groups and of all individuals of the population. And it was this doctrine of the harmony of interests which the socialists opposed. They spoke of an “irreconcilable conflict of interests” between various groups.

What does this mean? When Karl Marx—in the first chapter of the Communist Manifesto, that small pamphlet which inaugurated his socialist movement—claimed that there was an irreconcilable conflict between classes, he could not illustrate his thesis by any examples other than those drawn from the conditions of precapitalistic society. In precapitalistic ages, society was divided into hereditary status groups, which in India are called “castes.” In a status society a man was not, for example, born a Frenchman; he was born as a member of the French aristocracy or of the French bourgeoisie or of the French peasantry. In the greater part of the Middle Ages, he was simply a serf. And serfdom, in France, did not disappear completely until after the American Revolution. In other parts of Europe it disappeared even later.

But the worst form in which serfdom existed—and continued to exist even after the abolition of slavery—was in the British colonies abroad. The individual inherited his status from his parents, and he retained it throughout his life. He transferred it to his children. Every group had privileges and disadvantages. The highest groups had only privileges, the lowest groups only disadvantages. And there was no way a man could rid himself of the legal disadvantages placed upon him by his status other than by fighting a political struggle against the other classes. Under such conditions, you could say that there was an “irreconcilable conflict of interests between the slave owners and the slaves,” because what the slaves wanted was to be rid of their slavery, of their quality of being slaves. This meant a loss, however, for the owners. Therefore, there is no question that there had to be this irreconcilable conflict of interests between the members of the various classes.

One must not forget that in those ages—in which the status societies were predominant in Europe, as well as in the colonies which the Europeans later founded in America—people did not consider themselves to be connected in any special way with the other classes of their own nation; they felt much more at one with the members of their own class in other countries. A French aristocrat did not look upon lower class Frenchmen as his fellow citizens; they were the “rabble,” which he did not like. He regarded only the aristocrats of other countries—those of Italy, England, and Germany, for instance, as his equals.

The most visible effect of this state of affairs was the fact that the aristocrats all over Europe used the same language. And this language was French, a language which was not understood, outside France, by other groups of the population. The middle classes—the bourgeoisie—had their own language, while the lower classes—the peasantry—used local dialects which very often were not understood by other groups of the population. The same was true with regard to the way people dressed. When you travelled in 1750 from one country to another, you found that the upper classes, the aristocrats, were usually dressed in the same way all over Europe, and you found that the lower classes dressed differently. When you met someone in the street, you could see immediately—from the way he dressed—to which class, to which status he belonged.

It is difficult to imagine how different these conditions were from present-day conditions. When I come from the United States to Argentina and I see a man on the street, I cannot know what his status is. I only assume that he is a citizen of Argentina and that he is not a member of some legally restricted group. This is one thing that capitalism has brought about. Of course, there are also differences within capitalism. There are differences in wealth, differences which Marxians mistakenly consider to be equivalent to the old differences that existed between men in the status society.

IV.

The differences within a capitalist society are not the same as those in a socialist society. In the Middle Ages—and in many countries even much later—a family could be an aristocrat family and possess great wealth, it could be a family of dukes for hundreds and hundreds of years, whatever its qualities, its talents, its character or morals. But, under modem capitalistic conditions, there is what has been technically described by sociologists as “social mobility.” The operating principle of this social mobility, according to the Italian sociologist and economist Vilfredo Pareto, is “la circulation des élites” (the circulation of the elites). This means that there are always people who are at the top of the social ladder, who are wealthy, who are politically important, but these people—these elites—are continually changing.

This is perfectly true in a capitalist society. It was not true for a precapitalistic status society. The families who were considered the great aristocratic families of Europe are still the same families today or, let us say, they are the descendants of families that were foremost in Europe, 800 or 1000 or more years ago. The Capetians of Bourbon—who for a very long time ruled here in Argentina—were a royal house as early as the tenth century. These kings ruled the territory which is known now as the Ile-de-France, extending their reign from generation to generation. But in a capitalist society, there is continuous mobility—poor people becoming rich and the descendants of those rich people losing their wealth and becoming poor.

Today I saw in a bookshop in one of the central streets of Buenos Aires the biography of a businessman who was so eminent, so important, so characteristic of big business in the nineteenth century in Europe that, even in this country, far away from Europe, the bookshop carried copies of his biography. I happen to know the grandson of this man. He has the same name his grandfather had, and he still has a right to wear the title of nobility which his grandfather—who started as a blacksmith—had received eighty years ago. Today this grandson is a poor photographer in New York City.

Other people, who were poor at the time this photographer’s grandfather became one of Europe’s biggest industrialists, are today captains of industry. Everyone is free to change his status. That is the difference between the status system and the capitalist system of economic freedom, in which everyone has only himself to blame if he does not reach the position he wants to reach.

The most famous industrialist of the twentieth century up to now is Henry Ford. He started with a few hundred dollars which he had borrowed from his friends, and within a very short time he developed one of the most important big business firms of the world. And one can discover hundreds of such cases every day.

Every day, the New York Times prints long notices of people who have died. If you read these biographies, you may come across the name of an eminent businessman, who started out as a seller of newspapers at street corners in New York. Or he started as an office boy, and at his death he was the president of the same banking firm where he started on the lowest rung of the ladder. Of course, not all people can attain these positions. Not all people want to attain them. There are people who are more interested in other problems and, for these people, other ways are open today which were not open in the days of feudal society, in the ages of the status society.

V.

The socialist system, however, forbids this fundamental freedom to choose one’s own career. Under socialist conditions, there is only one economic authority, and it has the right to determine all matters concerning production.

One of the characteristic features of our day is that people use many names for the same thing. One synonym for socialism and communism is “planning.” If people speak of “planning” they mean, of course, central planning, which means one plan made by the government—one plan that prevents planning by anyone except the government.

A British lady, who also is a member of the Upper House, wrote a book entitled Plan or No Plan, a book which was quite popular around the world. What does the title of her book mean? When she says “plan,” she means only the type of plan envisioned by Lenin and Stalin and their successors, the type which governs all the activities of all the people of a nation. Thus, this lady means a central plan which excludes all the personal plans that individuals may have. Her title Plan or No Plan is therefore an illusion, a deception; the alternative is not a central plan or no plan, it is the total plan of a central governmental authority or freedom for individuals to make their own plans, to do their own planning. The individual plans his life, every day, changing his daily plans whenever he will.

The free man plans daily for his needs; he says, for example: “Yesterday I planned to work all my life in Cordoba.” Now he learns about better conditions in Buenos Aires and changes his plans, saying: “Instead of working in Cordoba, I want to go to Buenos Aires.” And that is what freedom means. It may be that he is mistaken, it may be that his going to Buenos Aires will turn out to have been a mistake. Conditions may have been better for him in Cordoba, but he himself made his plans.

Under government planning, he is like a soldier in an army. The soldier in the army does not have the right to choose his garrison, to choose the place where he will serve. He has to obey orders. And the socialist system—as Karl Marx, Lenin, and all socialist leaders knew and admitted—is the transfer of army rule to the whole production system. Marx spoke of “industrial armies,” and Lenin called for “the organization of everything—the postoffice, the factory, and other industries, according to the model of the army.”

Therefore, in the socialist system everything depends on the wisdom, the talents, and the gifts of those people who form the supreme authority. That which the supreme dictator—or his committee—does not know, is not taken into account. But the knowledge which mankind has accumulated in its long history is not acquired by everyone; we have accumulated such an enormous amount of scientific and technical knowledge over the centuries that it is humanly impossible for one individual to know all these things, even though he be a most gifted man.

And people are different, they are unequal. They always will be. There are some people who are more gifted in one subject and less in another one. And there are people who have the gift to find new paths, to change the trend of knowledge. In capitalist societies, technological progress and economic progress are gained through such people. If a man has an idea, he will try to find a few people who are clever enough to realize the value of his idea. Some capitalists, who dare to look into the future, who realize the possible consequences of such an idea, will start to put it to work. Other people, at first, may say: “They are fools”; but they will stop saying so when they discover that this enterprise, which they called foolish, is flourishing, and that people are happy to buy its products.

Under the Marxian system, on the other hand, the supreme government body must first be convinced of the value of such an idea before it can be pursued and developed. This can be a very difficult thing to do, for only the group of people at the head—or the supreme dictator himself—has the power to make decisions. And if these people—because of laziness or old age, or because they are not very bright and learned—are unable to grasp the importance of the new idea, then the new project will not be undertaken.

We can think of examples from military history. Napoleon was certainly a genius in military affairs; he had one serious problem, however, and his inability to solve that problem culminated, finally, in his defeat and exile to the loneliness of St. Helena. Napoleon’s problem was: “How to conquer England?” In order to do that, he needed a navy to cross the English Channel, and there were people who told him they had a way to accomplish that crossing, people who—in an age of sailing ships—had come up with the new idea of steam ships. But Napoleon did not understand their proposal.

Then there was Germany’s Generalstab, the famous German general staff. Before the First World War, it was universally considered to be unsurpassed in military wisdom. A similar reputation was held by the staff of General Foch in France. But neither the Germans nor the French—who, under the leadership of General Foch, later defeated the Germans—realized the importance of aviation for military purposes. The German general staff said: “Aviation is merely for pleasure, flying is good for idle people. From a military point of view, only the Zeppelins are important,” and the French general staff was of the same opinion.

Later, during the period between World War I and World War II, there was a general in the United States who was convinced that aviation would be very important in the next war. But all other experts in the United States were against him. He could not convince them. If you have to convince a group of people who are not directly dependent on the solution of a problem, you will never succeed. This is true also of noneconomic problems.

There have been painters, poets, writers, composers, who complained that the public did not acknowledge their work and caused them to remain poor. The public may certainly have had poor judgment, but when these artists said: “The government ought to support great artists, painters, and writers,” they were very much in the wrong. Whom should the government entrust with the task of deciding whether a newcomer is really a great painter or not? It would have to rely on the judgment of the critics, and the professors of the history of art who are always looking back into the past yet who very rarely have shown the talent to discover new genius. This is the great difference between a system of “planning” and a system in which everyone can plan and act for himself.

It is true, of course, that great painters and great writers have often had to endure great hardships. They might have succeeded in their art, but not always in getting money. Van Gogh was certainly a great painter. He had to suffer unbearable hardship and, finally, when he was thirty-seven years old, he committed suicide. In all his life he sold only one painting and the buyer of it was his cousin. Apart from this one sale, he lived from the money of his brother, who was not an artist nor a painter. But van Gogh’s brother understood a painter’s needs. Today you cannot buy a van Gogh for less than hundred or two hundred thousand dollars.

Under a socialist system, van Gogh’s fate might have been different. Some government official would have asked some well-known painters (whom van Gogh certainly would not have regarded as artists at all) whether this young man, half or completely crazy, was really a painter worthy to be supported. And they without a doubt, would have answered: “No, he is not a painter; he is not an artist; he is just a man who wastes paint;” and they would have sent him into a milk factory or into a home for the insane. Therefore all this enthusiasm in favor of socialism by the rising generation of painters, poets, musicians, journalists, actors, is based on an illusion. I mention this because these groups are among the most fanatical supporters of the socialist idea.

VI.

When it comes to choosing between socialism and capitalism as an economic system, the problem is somewhat different. The authors of socialism never suspected that modern industry, and all the operations of modern business, are based on calculation. Engineers are by no means the only ones who make plans on the basis of calculations, businessmen also must do so. And businessmen’s calculations are all based on the fact that, in the market economy, the money prices of goods inform not only the consumer, they also provide vital information to businessmen about the factors of production, the main function of the market being not merely to determine the cost of the last part of the process of production and transfer of goods to the hands of the consumer, but the cost of those steps leading up to it. The whole market system is bound up with the fact that there is a mentally calculated division of labor between the various businessmen who vie with each other in bidding for the factors of production—the raw materials, the machines, the instruments—and for the human factor of production, the wages paid to labor. This sort of calculation by the businessman cannot be accomplished in the absence of prices supplied by the market.

At the very instant you abolish the market—which is what the socialists would like to do—you render useless all the computations and calculations of the engineers and technologists. The technologists can give you a great number of projects which, from the point of view of the natural sciences, are equally feasible, but it takes the market-based calculations of the businessman to make clear which of those projects is the most advantageous, from the economic point of view.

The problem with which I am dealing here is the fundamental issue of capitalistic economic calculation as opposed to socialism. The fact is that economic calculation, and therefore all technological planning, is possible only if there are money prices, not only for consumer goods but also for the factors of production. This means there has to be a market for raw materials, for all half-finished goods, for all tools and machines, and for all kinds of human labor and human services.

When this fact was discovered, the socialists did not know how to respond. For 150 years they had said: “All the evils in the world come from the fact that there are markets and market prices. We want to abolish the market and with it, of course, the market economy, and substitute for it a system without prices and without markets.” They wanted to abolish what Marx called the “commodity character” of commodities and of labor.

When faced with this new problem, the authors of socialism, having no answer, finally said: “We will not abolish the market altogether; we will pretend that a market exists; we will play market, like children who play school.” But everyone knows that when children play school, they do not learn anything. It is just an exercise, a game, and you can “play” at many things.

This is a very difficult and complicated problem and in order to deal with it in full one needs a little more time than I have here. I have explained it in detail in my writings. In six lectures I cannot enter into an analysis of all its aspects. Therefore, I want to advise you, if you are interested in the fundamental problem of the impossibility of calculation and planning under socialism, read my book Human Action, which is available in an excellent Spanish translation.

But read other books, too, like the book of the Norwegian economist Trygve Hoff, who wrote on economic calculation. And if you do not want to be one-sided, I recommend that you read the highly-regarded socialist book on this subject by the eminent Polish economist Oskar Lange, who at one time was a professor at an American university, then became a Polish ambassador, and later returned to Poland.

VII.

You will probably ask me: “What about Russia? How do the Russians handle this question?” This changes the problem. The Russians operate their socialistic system within a world in which there are prices for all the factors of production, for all raw materials, for everything. They can therefore employ, for their planning, the foreign prices of the world market. And because there are certain differences between conditions in Russia and those in United States, the result is very often that the Russians consider something to be justified and advisable—from their economic point of view—that the Americans would not consider economically justifiable at all.

The “Soviet experiment,” as it was called, does not prove anything. It does not tell us anything about the fundamental problem of socialism, the problem of calculation. But are we entitled to speak of it as an experiment? I do not believe there is such a thing as a scientific experiment in the field of human action and economics. You cannot make laboratory experiments in the field of human action because a scientific experiment requires that you do the same thing under various conditions, or that you maintain the same conditions, changing perhaps only one factor. For instance, if you inject into a cancerous animal some experimental medication, the result may be that the cancer will disappear. You can test this with various animals of the same kind which suffer from the same malignancy. If you treat some of them with the new method and do not treat the rest, then you can compare the result. You cannot do this within the field of human action. There are no laboratory experiments in human action.

The so-called Soviet “experiment” merely shows that the standard of living is incomparably lower in Soviet Russia than it is in the country that is considered, by the whole world, as the paragon of capitalism: the United States.

Of course, if you tell this to a socialist, he will say: “Things are wonderful in Russia.” And you tell him: “They may be wonderful, but the average standard of living is much lower.” Then he will answer: “Yes, but remember how terrible it was for the Russians under the tsars and how terrible a war we had to fight.”

I do not want to enter into discussion of whether this is or is not a correct explanation, but if you deny that the conditions are the same, you deny that it was an experiment. You must then say this (which would be much more correct): “Socialism in Russia has not brought about an improvement in the conditions of the average man which can be compared with the improvement of conditions, during the same period, in the United States.”

In the United States you hear of something new, of some improvement, almost every week. These are improvements that business has generated, because thousands and thousands of business people are trying day and night to find some new product which satisfies the consumer better or is less expensive to produce, or better and less expensive than the existing products. They do not do this out of altruism, they do it because they want to make money. And the effect is that you have an improvement in the standard of living in the United States which is almost miraculous, when compared with the conditions that existed fifty or a hundred years ago. But in Soviet Russia, where you do not have such a system, you do not have a comparable improvement. So those people who tell us that we ought to adopt the Soviet system are badly mistaken.

There is something else that should be mentioned. The American consumer, the individual, is both a buyer and a boss. When you leave a store in America, you may find a sign saying: “Thank you for your patronage. Please come again.” But when you go into a shop in a totalitarian country—be it in present-day Russia, or in Germany as it was under the regime of Hitler—the shopkeeper tells you: “You have to be thankful to the great leader for giving you this.”

In socialist countries, it is not the seller who has to be grateful, it is the buyer. The citizen is not the boss; the boss is the Central Committee, the Central Office. Those socialist committees and leaders and dictators are supreme, and the people simply have to obey them.

  • Ludwig von Mises is an originator in economic theory, and a prolific author. Mises’s writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of e
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