Human Action: A Treatise on Economics

by Ludwig VonMises

  In developing the ideology-doctrine Marx exclusively aims at economics and the social philosophy of Utilitarianism. His only intention was to destroy the reputation of economic teachings which he was unable to refute by means of logic and ratiocination. He gave to his doctrine the form of a universal law valid for the whole historical age of social classes because a statement which is applicable only to one individual historical event could not be considered as a law. For the same reasons he did not restrict its validity to economic thought only, but included every branch of knowledge.

  The service which bourgeois economics rendered to the bourgeoisie was in Marx’s eyes twofold. It aided them first in their fight against feudalism and royal despotism and then later again in their fight against the rising proletarian class. It provided a rational and moral justification for capitalist exploitation. It was, if we want to use a notion developed after Marx’s death, a rationalization of the claims of the capitalists.8 The capitalists, in their subconsciousness ashamed of the mean greed motivating their own conduct and anxious to avoid social disapproval, encouraged their sycophants, the economists, to proclaim doctrines which could rehabilitate them in public opinion.

  Now, recourse to the notion of rationalization provides a psychological description of the incentives which impelled a man or a group of men to formulate a theorem or a whole theory. But it does not predicate anything about the validity or invalidity of the theory advanced. If it is proved that the theory concerned is untenable, the notion of rationalization is a psychological interpretation of the causes which made their authors liable to error. But if we are not in a position to find any fault in the theory advanced, no appeal to the concept of rationalization can possibly explode its validity. If it were true that the economists had in their sub consciousness no design other than that of justifying the unfair claims of the capitalists, their theories could nevertheless be quite correct. There is no means to expose a faulty theory other than to refute it by discursive reasoning and to substitute a better theory for it. In dealing with the theorem of Pythagoras or with the theory of comparative costs, we are not interested in the psychological factors that impelled Pythagoras and Ricardo to construct these theorems, although these things may be important for the historian and the biographer. For science the only relevant question is whether or not these theorems can stand the test of rational examination. The social or racial background of their authors is beside the point.

  It is a fact that people in the pursuit of their selfish interests try to use doctrines more or less universally accepted by public opinion. Moreover, they are eager to invent and to propagate doctrines which they could possibly use for furthering their own interests. But this does not explain why such doctrines, favoring the interests of a minority and contrary to the interests of the rest of the people, are endorsed by public opinion. No matter whether such “ideological” doctrines are the product of a “false consciousness,” forcing a man to think unwittingly in a manner that serves the interests of his class, or whether they are the product of a purposeful distortion of truth, they must encounter the ideologies of other classes and try to supplant them. Then a rivalry between antagonistic ideologies emerges. The Marxians explain victory and defeat in such conflicts as an outcome of the interference of historical providence. Geist, the mythical prime mover, operates according to a definite plan. He leads mankind through various preliminary stages to the final bliss of socialism. Every stage is the product of a certain state of technology; all its other characteristics are the necessary ideological superstructure of this technological state. Geist causes man to bring about in due time the technological ideas adequate to the stage in which he lives, and to realize them. All the rest is an outgrowth of the state of technology. The hand-mill made feudal society; the steam-mill made capitalism.9 Human will and reason play only an ancillary role in these changes. The inexorable law of historical development forces men—independently of their wills—to think and to behave according to the patterns corresponding to the material basis of their age. Men fool themselves in believing that they are free to choose between various ideas and between what they call truth and error. They themselves do not think; it is historical providence that manifests itself in their thoughts.

  This is a purely mystical doctrine. The only proof given in its support is the recourse to Hegelian dialectics. Capitalist private property is the first negation of individual private property. It begets, with the inexorability of a law of nature, its own negation, namely common ownership of the means of production.10 However, a mystical doctrine based on intuition does not lose its mysticism by referring to another no less mystical doctrine. This makeshift by no means answers the question why a thinker must necessarily develop an ideology in accordance with the interests of his class. For the sake of argument we may admit that man’s thoughts must result in doctrines beneficial to his interests. But are a man’s interests necessarily identical with those of his whole class? Marx himself had to admit that the organization of the proletarians into a class, and consequently into a political party, is continually being upset again by the competition between the workers themselves.11 It is an undeniable fact that there prevails an irreconcilable conflict of interests between those workers who are employed at union wage rates and those who remain unemployed because the enforcement of union rates prevents the demand for and the supply of labor from finding the appropriate price for meeting. It is no less true that the interests of the workers of the comparatively overpopulated countries and those of the comparatively underpopulated countries are antagonistic with regard to migration barriers. The statement that the interests of all proletarians uniformly require the substitution of socialism for capitalism is an arbitrary postulate of Marx and the other socialists. It cannot be proved by the mere assertion that the socialist idea is the emanation of proletarian thought and therefore certainly beneficial to the interests of the proletariat as such.

  A popular interpretation of the vicissitudes of British foreign trade policies, based on the ideas of Sismondi, Frederick List, Marx, and the German Historical School, runs this way: In the second part of the eighteenth century and in the greater part of the nineteenth century the class interests of the British bourgeoisie required a free trade policy. Therefore British political economy elaborated a free trade doctrine, and the British manufacturers organized a popular movement which finally succeeded in abolishing protective tariffs. Then later conditions changed. The British bourgeoisie could no longer stand the competition of foreign manufacturing and badly needed protective tariffs. Consequently the economists substituted a theory of protection for the antiquated free trade ideology, and Great Britain returned to protectionism.

  The first error in this interpretation is that it considers the “bourgeoisie” as a homogeneous class composed of members whose interests are identical. A businessman is always under the necessity of adjusting the conduct of his business to the institutional conditions of his country. In the long run he is, in his capacity as entrepreneur and capitalist, neither favored nor injured by tariffs or the absence of tariffs. He will turn to the production of those commodities which under the given state of affairs he can most profitably produce. What may hurt or further his short-run interests are only changes in the institutional setting. But such changes do not affect the various branches of business and the various enterprises in the same way and to the same extent. A measure that benefits one branch or enterprise may be detrimental to other branches or enterprises. What counts for a businessman is only a limited number of customs items. And with regard to these items the interests of various branches and firms are mostly antagonistic.

  It is not true that in the years of the supremacy of free trade ideas the interests of all branches of British manufacturing were homogeneous and could be uniformly favored by the abandonment of protectionism. Nor did the fact that the British plants were then technologically far ahead of the plants of the rest of the world render foreign competition innocuous for them. Today th
e American plants enjoy a similar superiority. Nevertheless a great part of American manufacturing believes that they badly need protection against the backward industries of other countries.

  The interests of every branch or firm can be favored by all kinds of privileges granted to it by the government. But if privileges are granted to the same extent to the other branches and firms, every businessman loses—not only in his capacity as consumer, but also in his capacity as buyer of raw materials, half-finished products, machines and other equipment—on the one hand as much as he profits on the other. Selfish group interests may impel a man to ask for protection for his own branch or firm. They can never motivate him to ask for universal protection for all branches or firms if he is not sure to be protected to a greater extent than the other industries or enterprises.

  Neither were the British manufacturers from the point of view of their class concerns more interested in the abolition of the Corn Laws than other British citizens. The landowners were opposed to the repeal of these laws because a lowering of the prices for agricultural products reduced the rent of land. A special class interest of the manufacturers can only be construed on the basis of the long since discarded iron law of wages and the no less untenable doctrine that profits are an outcome of the exploitation of the workers.

  Within a world organized on the basis of the division of labor, every change must in one way or another effect the short-run interests of many groups. It is therefore always easy to expose every doctrine supporting an alteration of existing conditions as an “ideological” disguise of the selfish interests of a special group of people. The main occupation of many present-day authors is such unmasking. Marx did not invent this procedure. It was known long before him. Its most curious manifestation was the attempts of some eighteenth-century writers to explain religious creeds as a fraudulent deception on the part of the priests eager to gain power and wealth both for themselves and for their allies, the exploiters. The Marxians endorsed this statement in labeling religion “opium for the masses.”12 It never occurred to the supporters of such teachings that where there are selfish interests pro there must necessarily be selfish interests contra too. It is by no means a satisfactory explanation of any event that it favored a special class. The question to be answered is why the rest of the population whose interests it injured did not succeed in frustrating the endeavors of those favored by it.

  Every firm and every branch of business is in the short run interested in increased sales of its products. In the long run, however, there prevails a tendency toward an equalization of returns in the various branches of production. If demand for the products of a branch increases and raises profits, more capital flows into it and the competition of the new enterprises cuts down the profits. Profits are by no means higher in the sale of socially detrimental articles than in the sale of socially beneficial articles. If a certain branch of business is outlawed and those engaged in it risk prosecution, penalties, and imprisonment, gross profits must be high enough to compensate for the risks involved. But this does not interfere with the height of net returns.

  The rich, the owners of the already operating plants, have no particular class interest in the maintenance of free competition. They are opposed to confiscation and expropriation of their fortunes, but their vested interests are rather in favor of measures preventing newcomers from challenging their position. Those fighting for free enterprise and free competition do not defend the interests of those rich today. They want a free hand left to unknown men who will be the entrepreneurs of tomorrow and whose ingenuity will make the life of coming generations more agreeable. They want the way left open to further economic improvements. They are the spokesmen of progress.

  The nineteenth-century success of free trade ideas was effected by the theories of classical economics. The prestige of these ideas was so great that those whose selfish class interests they hurt could not hinder their endorsement by public opinion and their realization by legislative measures. It is ideas that make history, and not history that makes ideas.

  It is useless to argue with mystics and seers. They base their assertions on intuition and are not prepared to submit them to rational examination. The Marxians pretend that what their inner voice proclaims is history’s self-revelation. If other people do not hear this voice, it is only a proof that they are not chosen. It is insolence that those groping in darkness dare to contradict the inspired ones. Decency should impel them to creep into a corner and keep silent.

  However, science cannot abstain from thinking although it is obvious that it will never succeed in convincing those who dispute the supremacy of reason. Science must emphasize that the appeal to intuition cannot settle the question which of several antagonistic doctrines is the right one and which are wrong. It is an undeniable fact that Marxism is not the only doctrine advanced in our time. There are other “ideologies” besides Marxism. The Marxians assert that the application of these other doctrines would hurt the interests of the many. But the supporters of these doctrines say precisely the same with regard to Marxism.

  Of course, the Marxians consider a doctrine vicious if their author’s background is not proletarian. But who is proletarian? Doctor Marx, the manufacturer and “exploiter” Engels, and Lenin, the scion of the Russian gentry, were certainly not of proletarian background. But Hitler and Mussolini were genuine proletarians and spent their youth in poverty. The conflict of the Bolsheviks and the Mensheviks or that between Stalin and Trotsky cannot be presented as class conflicts. They were conflicts between various sects of fanatics who called one another traitors.

  The essence of Marxian philosophy is this: We are right because we are the spokesmen of the rising proletarian class. Discursive reasoning cannot invalidate our teachings, for they are inspired by the supreme power that determines the destiny of mankind. Our adversaries are wrong because they lack the intuition that guides our minds. It is, of course, not their fault that on account of their class affiliation they are not equipped with the genuine proletarian logic and are blinded by ideologies. The unfathomable decrees of history that have elected us have doomed them. The future is ours.

  4. Racial Polylogism

  Marxian polylogism is an abortive makeshift to salvage the untenable doctrines of socialism. Its attempt to substitute intuition for ratiocination appeals to popular superstitions. But it is precisely this attitude that places Marxian polylogism and its offshoot, the socalled “sociology of knowledge,” in irreconcilable antagonism to science and reason.

  It is different with the polylogism of the racists. This brand of polylogism is in agreement with fashionable, although mistaken, tendencies in present-day empiricism. It is an established fact that mankind is divided into various races. The races differ in bodily features. Materialist philosophers assert that thoughts are a secretion of the brain as bile is a secretion of the gall-bladder. It would be inconsistent for them to reject beforehand the hypothesis that the thought-secretion of the various races may differ in essential qualities. The fact that anatomy has not succeeded up to now in discovering anatomical differences in the brain cells of various races cannot invalidate the doctrine that the logical structure of mind is different with different races. It does not exclude the assumption that later research may discover such anatomical peculiarities.

  Some ethnologists tell us that it is a mistake to speak of higher and lower civilizations and of an alleged backwardness of alien races. The civilization of various races are different from the Western civilization of the peoples of Caucasian stock, but they are not inferior. Every race has its peculiar mentality. It is faulty to apply to the civilization of any of them yardsticks abstracted from the achievements of other races. Westerners call the civilization of China an arrested civilization and that of the inhabitants of New Guinea primitive barbarism. But the Chinese and the natives of New Guinea despise our civilization no less than we despise theirs. Such estimates are judgments of value and hence arbitrary. Those other races have a different structure of
mind. Their civilizations are adequate to their mind as our civilization is adequate to our mind. We are incapable of comprehending that what we call backwardness does not appear such to them. It is, from the point of view of their logic, a better method of coming to a satisfactory arrangement with given natural conditions of life than is our progressivism.

  These ethnologists are right in emphasizing that it is not the task of a historian—and the ethnologist too is a historian—to express value judgments. But they are utterly mistaken in contending that these other races have been guided in their activities by motives other than those which have actuated the white race. The Asiatics and the Africans no less than the peoples of European descent have been eager to struggle successfully for survival and to use reason as the foremost weapon in these endeavors. They have sought to get rid of the beasts of prey and of disease, to prevent famines and to raise the productivity of labor. There can be no doubt that in the pursuit of these aims they have been less successful than the whites. The proof is that they are eager to profit from all achievements of the West. Those ethnologists would be right, if Mongols or Africans, tormented by a painful disease, were to renounce the aid of a European doctor because their mentality or their world view led them to believe that it is better to suffer than to be relieved of pain. Mahatma Gandhi disavowed his whole philosophy when he entered a modern hospital to be treated for appendicitis.