David Glasner, “Ludwig von Mises Explains (and Solves) Market Failure,” Uneasy Money, November 16, 2014.In it, he quotes a surprising passage from Human Action (4th rev. edn. 1963) in which Mises says that war by a government in legitimate self-defence and even conscription are justified:
“From this point of view one has to deal with the often-raised problem of whether conscription and the levy of taxes mean a restriction of freedom. If the principles of the market economy were acknowledged by all people all over the world, there would not be any reason to wage war and the individual states could live in undisturbed peace. But as conditions are in our age, a free nation is continually threatened by the aggressive schemes of totalitarian autocracies. If it wants to preserve its freedom, it must be prepared to defend its independence. If the government of a free country forces every citizen to cooperate fully in its designs to repel the aggressors and every able-bodied man to join the armed forces, it does not impose upon the individual a duty that would step beyond the tasks the praxeological law dictates. In a world full of unswerving aggressors and enslavers, integral unconditional pacifism is tantamount to unconditional surrender to the most ruthless oppressors. He who wants to remain free, must fight unto death those who are intent upon depriving him of his freedom. As isolated attempts on the part of each individual to resist are doomed to failure, the only workable way is to organize resistance by the government. The essential task of government is defense of the social system not only against domestic gangsters but also against external foes. He who in our age opposes armaments and conscription is, perhaps unbeknown to himself, an abettor of those aiming at the enslavement of all.Even though Mises still condemns what he calls “confiscatory and discriminatory taxation methods practiced today by the self-styled progressive governments,” he still asserts that:
The maintenance of a government apparatus of courts, police officers, prisons, and of armed forces requires considerable expenditure. To levy taxes for these purposes is fully compatible with the freedom the individual enjoys in a free market economy. To assert this does not, of course, amount to a justification of the confiscatory and discriminatory taxation methods practiced today by the self-styled progressive governments. There is need to stress this fact, because in our age of interventionism and the steady ‘progress’ toward totalitarianism the governments employ the power to tax for the destruction of the market economy.
Every step a government takes beyond the fulfillment of its essential functions of protecting the smooth operation of the market economy against aggression, whether on the part of domestic or foreign disturbers, is a step forward on a road that directly leads into the totalitarian system where there is no freedom at all.” (Mises 1996 : 282).
“The maintenance of a government apparatus of courts, police officers, prisons, and of armed forces requires considerable expenditure. To levy taxes for these purposes is fully compatible with the freedom the individual enjoys in a free market economy.” (Mises 1996 : 282).And on the subject of war, it is extraordinary to see Mises defend conscription:
“The essential task of government is defense of the social system not only against domestic gangsters but also against external foes. He who in our age opposes armaments and conscription is, perhaps unbeknown to himself, an abettor of those aiming at the enslavement of all.” (Mises 1996 : 282).These statements show how far Mises was from the extremist and ridiculous Rothbardian anarcho-capitalists who plague the Austrian movement these days.
Finally, Mises ends with his famously incoherent view that every step a government takes beyond its limited classical liberal “nightwatchman” role is a move towards totalitarianism:
“Every step a government takes beyond the fulfillment of its essential functions of protecting the smooth operation of the market economy against aggression, whether on the part of domestic or foreign disturbers, is a step forward on a road that directly leads into the totalitarian system where there is no freedom at all.” (Mises 1996 : 282).The view that restrictions on what Mises sees as “market freedom” lead inevitably to “socialism” or “chaos” was brilliantly shown to be ridiculous by George J. Schuller a long time ago when he reriewed Human Action.
Schuller makes the following point:
“What does ‘interventionist measures logically lead to’ mean? Either Mises believes that interventionism is cumulative and necessarily leads toward socialism and into ‘chaos’ (another undefined term), or he does not. If he does, can he explain how western nations reversed mercantilist intervention and established partially free markets in the 18th and 19th centuries, or how they accomplished partial decontrol after World Wars I and II? Can he explain how the purely free market is ever to be attained? On the other hand, if interventionism need not be cumulative (and Rothbard says it logically leads to the free market as well as to socialism) then is it necessarily incoherent, unstable, and transitory? If interventionism logically points in two opposite directions (toward zero and infinity), does it have to continue in either until it reaches respectively Elysium or chaos?” (Schuller 1951: 190).We need only think of how there was significant mercantilist intervention in the early modern period in Europe as well as numerous other restrictions on private enterprise. But this period did not end in “chaos” or “socialism” (if by “socialism” we mean a command economy, and not some absurd, nebulous term of abuse that gets applied to every system where government intervention exists). Rather than “chaos” or “socialism,” there was order and mostly orderly reform of economic systems, as, for example, free trade or at least much less restrictive trade was adopted in the 19th century and economies became more laissez faire.
Curiously, it seems that Hayek in regard to his book The Road to Serfdom gets unfairly blamed for the ridiculous, extremist view that in fact was held by Mises. For in The Road to Serfdom Hayek seems to distance himself from Mises, at least by the time of the preface to the 1976 edition:
“The reader will probably ask whether this means that I am still prepared to defend all the main conclusions of this book, and the answer to this is on the whole affirmative. The most important qualification I must add is that during the interval of time terminology has changed and for this reason what I say in the book may be misunderstood. At the time I wrote, socialism meant unambiguously the nationalization of the means of production and the central economic planning which this made possible and necessary. In this sense Sweden, for instance, is today very much less socialistically organized than Great Britain or Austria, though Sweden is commonly regarded as much more socialistic. This is due to the fact that socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state. In the latter kind of socialism the effects I discuss in this book are brought about more slowly, indirectly, and imperfectly. I believe that the ultimate outcome tends to be very much the same, although the process by which it is brought about is not quite the same as that described in this book.Further Reading
It has frequently been alleged that I have contended that any movement in the direction of socialism is bound to lead to totalitarianism. Even though this danger exists, this is not what the book says. What it contains is a warning that unless we mend the principles of our policy, some very unpleasant consequences will follow which most of those who advocate these policies do not want.” (preface, Hayek, The Road to Serfdom 1976 edn.).
“Mises on Mixed Economies and Socialism: He is Incoherent,” March 24, 2013.
“Rothbard on Mises’ Utilitarianism: Why the Systems of Mises and Rothbard both Collapse,” October 8, 2010.
“Was Mises a Socialist?: Why Mises Refutes Himself on Government Intervention,” October 7, 2010.
“Mises on War Debt: Not What you would Expect,” May 9, 2013.
Mises, L. von. 1996 . Human Action. A Treatise on Economics (4th rev. edn.). Fox & Wilkes, San Francisco.
Schuller, G. J. 1951. “Mises’ ‘Human Action’: Rejoinder,” American Economic Review 41.1: 185–190.