The Argument of Happiness
Critics level two charges against capitalism: First, they say, that the possession of a motor car, a television set and a refrigerator does not make a man happy. Secondly, they add, that there are still people who own none of these gadgets. Both propositions are correct, but they do not cast blame upon the capitalistic system of social cooperation.
People do not toil and trouble in order to attain perfect happiness, but in order to remove as much as possible some felt uneasiness and thus to become happier than they were before. A man who buys a television set thereby gives evidence to the effect that he thinks that the possession of this contrivance will increase his well-being and make him more content than he was without it. If it were otherwise, he would not have bought it. The task of the doctor is not to make the patient happy, but to remove his pain and to put him in better shape for the pursuit of the main concern of every living being, the fight against all factors pernicious to his life and ease.
It may be true that there are among Buddhist mendicants, living on alms in dirt and penury, some who feel perfectly happy and do not envy any nabob. However, it is a fact that for the immense majority of people such a life would appear unbearable. To them the impulse toward ceaselessly aiming at the improvement of the external conditions of existence is inwrought. Who would presume to set an Asiatic beggar as an example to the average American? One of the most remarkable achievements of capitalism is the drop in infant mortality. Who wants to deny that this phenomenon has at least removed one of the causes of many people’s unhappiness?
No less absurd is the second reproach thrown upon capitalism—namely, that technological and therapeutical innovations do not benefit all people. Changes in human conditions are brought about by the pioneering of the most clever and most energetic men. They take the lead and the rest of mankind follows them little by little. The innovation is first a luxury of only a few people, until by degrees it comes into the reach of the many. It is not a sensible objection to the use of shoes or of forks that they spread only slowly and that even today millions do without them. The dainty ladies and gentlemen who first began to use soap were the harbingers of the big-scale production of soap for the common man. If those who have today the means to buy a television set were to abstain from the purchase because some people cannot afford it, they would not further, but hinder, the popularization of this contrivance. ([See the previous article in this series] about the inherent tendency of capitalism toward shortening
the interval between the appearance of a new improvement and the moment its use becomes general.)
Again there are grumblers who blame capitalism for what they call its mean materialism. They cannot help admitting that capitalism has the tendency to improve the material conditions of mankind. But, they say, it has diverted men from the higher and nobler pursuits. It feeds the bodies, but it starves the souls and the minds. It has brought about a decay of the arts. Gone are the days of the great poets, painters, sculptors and architects. Our age produces merely trash.
The judgment about the merits of a work of art is entirely subjective. Some people praise what others disdain. There is no yardstick to measure the aesthetic worth of a poem or of a building. Those who are delighted by the Cathedral of Chartres and the Meninas of Velasquez may think that those who remain unaffected by these marvels are boors. Many students are bored to death when the school forces them to read Hamlet. Only people who are endowed with a spark of the artistic mentality are fit to appreciate and to enjoy the work of an artist.
Among those who make pretense to the appellation of educated men there is much hypocrisy. They put on an air of connoisseurship and feign enthusiasm for the art of the past and artists passed away long ago.  They show no similar sympathy for the contemporary artist who still fights for recognition. Dissembled adoration for the old masters is with them a means to disparage and ridicule the new ones who deviate from traditional canons and create their own.
John Ruskin will be remembered—together with Carlyle, the Webbs, Bernard Shaw, and some others—as one of the gravediggers of British freedom, civilization, and prosperity. A wretched character in his private no less than in his public life, he glorified war and bloodshed and fanatically slandered the teachings of political economy which he did not understand. He was a bigoted detractor of the market economy and a romantic eulogist of the guilds. He paid homage to the arts of earlier centuries. But when he faced the work of a great living artist, Whistler, he dispraised it in such foul and objurgatory language that he was sued for libel and found guilty by the jury. It was the writings of Ruskin that popularized the prejudice that capitalism, apart from being a bad economic system, has substituted ugliness for beauty, pettiness for grandeur, trash for art.
As people widely disagree in the appreciation of artistic achievements, it is not possible to explode the talk about the artistic inferiority of the age of capitalism in the same apodictic way in which one may refute errors in logical reasoning or in the establishment of facts of experience. Yet no sane man would be insolent enough as to belittle the grandeur of the artistic exploits of the age of capitalism.
The preeminent art of this age of “mean materialism and money-making” was music. Wagner and Verdi, Berlioz and Bizet, Brahms and Bruckner, Hugo Wolf and Mahler, Puccini and Richard Strauss, what an illustrious cavalcade! What an era in which such masters as Schumann and Donizetti were overshadowed by still superior genius!
Then there were the great novels of Balzac, Flaubert, Maupassant, Jens Jacobsen, Proust, and the poems of Victor Hugo, Walt Whitman, Rilke, Yeats. How poor our lives would be if we had to miss the work of these giants and of many other no less sublime authors.
Let us not forget the French painters and sculptors who taught us new ways of looking at the world and enjoying light and color.
Nobody ever contested that this age has encouraged all branches of scientific activities. But, say the grumblers, this was mainly the work of specialists while “synthesis” was lacking. One can hardly misconstrue in a more absurd way the teachings of modern mathematics, physics, and biology. And what about the books of philosophers like Croce, Bergson, Husserl, and Whitehead?
Each epoch has its own character in its artistic exploits. Imitation of masterworks of the past is not art; it is routine. What gives value to a work is those features in which it differs from other works. This is what is called the style of a period.
In one respect the eulogists of the past seem to be justified. The last generations did not bequeath to the future such monuments as the pyramids, the Greek temples, the Gothic cathedrals and the churches and palaces of the Renaissance and the Barroco. In the last hundred years many churches and even cathedrals were built and many more government palaces, schools, and libraries. But they do not show any original conception; they reflect old styles or hybridize divers old styles. Only in apartment houses, office buildings and private homes have we seen something develop that may be qualified as an architectural style of our age. Although it would be mere pedantry not to appreciate the peculiar grandeur of such sights as the New York skyline, it can be admitted that modern architecture has not attained the distinction of that of past centuries.
The reasons are various. As far as religious buildings are concerned, the accentuated conservatism of the churches shuns any innovation. With the passing of dynasties and aristocracies, the impulse to construct new palaces disappeared. The wealth of entrepreneurs and capitalists is, whatever the anti-capitalistic demagogues may fable, so much inferior to that of kings and princes that they cannot indulge in such luxurious construction. No one is today rich enough to plan such palaces as that of Versailles or the Escorial. The orders for the construction of government buildings do no longer emanate from despots who were free, in defiance of public opinion, to choose a master whom they themselves held in esteem and to sponsor a project that scandalized the dull majority. Committees and councils are not likely to adopt the ideas of bold pioneers. They prefer to range themselves on the safe side.
There has never been an era in which the many were prepared to do justice to contemporary art. Reverence to the great authors and artists has always been limited to small groups. What characterizes capitalism is not the bad taste of the crowds, but the fact that these crowds, made prosperous by capitalism, became “consumers” of literature—of course, of trashy literature. The book market is flooded by a downpour  of trivial fiction for the semibarbarians. But this does not prevent great authors from creating imperishable works.
The critics shed tears on the alleged decay of the industrial arts. They contrast, e.g., old furniture as preserved in the castles of European aristocratic families and in the collections of the museums with the cheap things turned out by big-scale production. They fail to see that these collectors’ items were made exclusively for the well-to-do. The carved chests and the intarsia tables could not be found in the miserable huts of the poorer strata. Those caviling about the inexpensive furniture of the American wage earner should cross the Rio Grande del Norte and inspect the abodes of the Mexican peons which are devoid of any furniture. When modern industry began to provide the masses with the paraphernalia of a better life, their main concern was to produce as cheaply as possible without any regard to aesthetic values. Later, when the progress of capitalism had raised the masses’ standard of living, they turned step-by-step to the fabrication of things that do not lack refinement and beauty. Only romantic prepossession can induce an observer to ignore the fact that more and more citizens of the capitalistic countries live in an environment that cannot be simply dismissed as ugly.
The most passionate detractors of capitalism are those who reject it on account of its alleged injustice.
It is a gratuitous pastime to depict what ought to be and is not because it is contrary to inflexible laws of the real universe. Such reveries may be considered as innocuous as long as they remain daydreams. But when their authors begin to ignore the difference between fantasy and reality, they become the most serious obstacle to human endeavors to improve the external conditions of life and well-being.
The worst of all these delusions is the idea that “nature” has bestowed upon every man certain rights. According to this doctrine, nature is openhanded toward every child born. There is plenty of everything for everybody. Consequently, everyone has a fair inalienable claim against all his fellow men and against society that he should get the full portion which nature has allotted to him. The eternal laws of natural and divine justice require that nobody should appropriate to himself what by rights belongs to other people. The poor are needy only because unjust people have deprived them of their birthright. It is the task of the church and the secular authorities to prevent such spoliation and to make all people prosperous.
Every word of this doctrine is false. Nature is not bountiful but stingy. It has restricted the supply of all things indispensable for the preservation of human life. It has populated the world with animals and plants to whom the impulse to destroy human life and welfare is inwrought. It displays powers and elements whose operation is damaging to human life and to human endeavors to preserve it. Man’s survival and well-being are an achievement of the skill with which he has utilized the main instrument with which nature has equipped him—reason. Men, cooperating under the system of the division of labor, have created all the wealth which the daydreamers consider as a free gift of nature. With regard to the “distribution” of this wealth, it is nonsensical to refer to an allegedly divine or natural principle of justice. What matters is not the allocation of portions out of a fund presented to man by nature. The problem is rather to further those social institutions which enable people to continue and to enlarge the production of all those things which they need.
The World Council of Churches, an ecumenical organization of Protestant Churches, declared in 1948: “Justice demands that the inhabitants of Asia and Africa, for instance, should have the benefits of more machine production.” (The Church and the Disorder of Society, New York, 1948, p. 198.) This makes sense only if one implies that the Lord presented mankind with a definite quantity of machines and expected that these contrivances will be distributed equally among the various nations. Yet the capitalistic countries were bad enough to take possession of much more of this stock than “justice” would have assigned to them and thus to deprive the inhabitants of Asia and Africa of their fair portion. What a shame!
The truth is that the accumulation of capital and its investment in machines, the source of the comparatively greater wealth of the Western peoples, are due exclusively to laissez-faire capitalism which the same document of the Churches passionately misrepresents and rejects on moral grounds. It is not the fault of the capitalists that the Asiatics and Africans did not adopt those ideologies and policies which would have made the evolution of autochthonous capitalism possible. Neither  is it the fault of the capitalists that the policies of these nations thwarted the attempts of foreign investors to give them “the benefits of more machine production.” No one contests that what makes hundreds of millions in Asia and Africa destitute is that they cling to primitive methods of production and miss the benefits which the employment of better tools and up-to-date technological designs could bestow upon them. But there is only one means to relieve their distress—namely, the full adoption of laissez-faire capitalism. What they need is private enterprise and the accumulation of new capital, capitalists, and entrepreneurs. It is nonsensical to blame capitalism and the capitalistic nations of the West for the plight the backward peoples have brought upon themselves. The remedy indicated is not “justice” but the substitution of sound, i.e., laissez-faire, policies for unsound policies.
It was not vain disquisitions about a vague concept of justice that raised the standard of living of the common man in the capitalistic countries to its present height, but the activities of men dubbed as “rugged individualists” and “exploiters.” The poverty of the backward nations is due to the fact that their policies of expropriation, discriminatory taxation, and foreign exchange control prevent the investment of foreign capital while their domestic policies preclude the accumulation of indigenous capital.
All those rejecting capitalism on moral grounds as an unfair system are deluded by their failure to comprehend what capital is, how it comes into existence and how it is maintained, and what the benefits are which are derived from its employment in production processes.
The only source of the generation of additional capital goods is saving. If all the goods produced are consumed, no new capital comes into being. But if consumption lags behind the production and the surplus of goods newly produced over goods consumed is utilized in further production processes, these processes are henceforth carried out by the aid of more capital goods. All the capital goods are intermediary goods, stages on the road that leads from the first employment of the original factors of production, i.e., natural resources and human labor, to the final turning out of goods ready for consumption. They all are perishable. They are, sooner or later, worn out in the processes of production. If all the products are consumed without replacement of the capital goods which have been used up in their production, capital is consumed. If this happens, further production will be aided only by a smaller amount of capital goods and will therefore render a smaller output per unit of the natural  resources and labor employed. To prevent this sort of dissaving and disinvestment, one must dedicate a part of the productive effort to capital maintenance, to the replacement of the capital goods absorbed in the production of usable goods.
Capital is not a free gift of God or of nature. It is the outcome of a provident restriction of consumption on the part of man. It is created and increased by saving and maintained by the abstention from dissaving.
Neither have capital or capital goods in themselves the power to raise the productivity of natural resources and of human labor. Only if the fruits of saving are wisely employed or invested, do they increase the output per unit of the input of natural resources and of labor. If this is not the case, they are dissipated or wasted.
The accumulation of new capital, the maintenance of previously accumulated capital and the utilization of capital for raising the productivity of human effort are the fruits of purposive human action. They are the outcome of the conduct of thrifty people who save and abstain from dissaving, viz., the capitalists who earn interest, and of people who succeed in utilizing the capital available for the best possible satisfaction of the needs of the consumers, viz., the entrepreneurs who earn profit.
Neither capital (or capital goods) nor the conduct of the capitalists and entrepreneurs in dealing with capital could improve the standard of living for the rest of the people, if these noncapitalists and non-entrepreneurs did not react in a certain way. If the wage earners were to behave in the way which the spurious “iron law of wages” describes and would know of no use for their earnings other than to feed and to procreate more offspring, the increase in capital accumulated would not keep pace with the increase in population figures. All the benefits derived from the accumulation of additional capital would be absorbed by multiplying the number of people. However, men do not respond to an improvement in the external conditions of their lives in the way in which rodents and germs do. They know also of other satisfactions than feeding and proliferation. Consequently, in the countries of capitalistic civilization, the increase of capital accumulated outruns the increase in population figures. To the extent that this happens, the marginal productivity of labor is increased as against the marginal productivity of the material factors of production. There emerges a tendency toward higher wage rates. The proportion of the total output of production that goes to the wage earners is enhanced as against that which goes as interest to the capitalists and as rent to the landowners. (Profits are not affected. They are the gain derived from adjusting the employment of material factors of production and of labor to changes occurring in demand and supply and solely depend on the size of the previous maladjustment and the degree of its removal. They are transient and disappear once the maladjustment has been entirely removed. But as changes in demand and supply, again and again, occur, new sources of profit emerge also again and again.)
To speak of the productivity of labor makes sense only if one refers to the marginal productivity of labor, i.e., to the deduction in net output to be caused by the elimination of one worker. Then it refers to a definite economic quantity, to a determinate amount of goods or its equivalent in money. The concept of a general productivity of labor as resorted to in popular talk about an allegedly natural right of the workers to claim the total increase in productivity is empty and indefinable. It is based on the illusion that it is possible to determine the shares that each of the various complementary factors of production has physically contributed to the turning out of the product. If one cuts a sheet of paper with scissors, it is impossible to ascertain quotas of the outcome to the scissors (or to each of the two blades) and to the man who handled them. To manufacture a car one needs various machines and tools, various raw materials, the labor of various manual workers and, first of all, the plan of a designer. But nobody can decide what quota of the finished car is to be physically ascribed to each of the various factors the cooperation of which was required for the production of the car.
For the sake of argument, we may for a moment set aside all the considerations which show the fallacies of the popular treatment of the problem and ask: Which of the two factors, labor or capital, caused the increase in productivity? But precisely if we put the question in this way, the answer must be: capital. What renders the total output in the present-day United States higher (per head of manpower employed) than output in earlier ages or in economically backward countries—for instance, China—is the fact that the contemporary American worker is aided by more and better tools. If capital equipment (per head of the worker) were not more abundant than it was three hundred years ago or than it is today in China, output (per head of the worker) would not be higher. What is required to raise, in the absence of an increase in the number of workers employed, the total amount of America’s industrial output is the investment of additional capital that can only be accumulated by new saving. It is those saving and investing to whom credit is to be given for the multiplication of the productivity of the total labor force.
What raises wage rates and allots to the wage earners an ever increasing portion out of the output which has been enhanced by additional capital accumulation is the fact that the rate of capital accumulation exceeds the rate of increase in population. The official doctrine passes over this fact in silence or even denies it emphatically. But the policies of the unions clearly show that their leaders are fully aware of the correctness of the theory which they publicly smear as silly bourgeois apologetics. They are eager to restrict the number of job seekers in the whole country by anti-immigration laws and in each segment of the labor market by preventing the influx of newcomers.
That the increase in wage rates does not depend on the individual worker’s “productivity,” but on the marginal productivity of labor, is clearly demonstrated by the fact that wage rates are moving upward also for performances in which the “productivity” of the individual has not changed at all. There are many such jobs. A barber shaves a customer today precisely in the same manner his predecessors used to shave people two hundred years ago. A butler waits at the table of the British prime minister in the same way in which once butlers served Pitt and Palmerston. In agriculture some kinds of work are still performed with the same tools in the same way in which they were performed centuries ago. Yet the wage rates earned by all such workers are today much higher than they were in the past. They are higher because they are determined by the marginal productivity of labor. The employer of a butler withholds this man from employment in a factory and must therefore pay the equivalent of the increase in output which the additional employment of one man in a factory would bring about. It is not any merit on the part of the butler that causes this rise in his wages, but the fact that the increase in capital invested surpasses the increase in the number of hands.
All pseudo-economic doctrines which depreciate the role of saving and capital accumulation are absurd. What constitutes the greater wealth of a capitalistic society as against the smaller wealth of a noncapitalistic society is the fact that the available supply of capital goods is greater in the former than in the latter. What has improved the wage earners’ standard of living is the fact that the capital equipment per head of the men eager to earn wages has increased. It is a consequence of this fact that an ever increasing portion of the total amount of usable  goods produced goes to the wage earners. None of the passionate tirades of Marx, Keynes and a host of less well-known authors could show a weak point in the statement that there is only one means to raise wage rates permanently and for the benefit of all those eager to earn wages—namely, to accelerate the increase in capital available as against population. If this be “unjust,” then the blame rests with nature and not with man.
The “Bourgeois Prejudice” for Liberty
The history of Western civilization is the record of a ceaseless struggle for liberty.
Social cooperation under the division of labor is the ultimate and sole source of man’s success in his struggle for survival and his endeavors to improve as much as possible the material conditions of his well-being. But as human nature is, society cannot exist if there is no provision for preventing unruly people from actions incompatible with community life. In order to preserve peaceful cooperation, one must be ready to resort to violent suppression of those disturbing the peace. Society cannot do without a social apparatus of coercion and compulsion, i.e., without state and government. Then a further problem emerges: to restrain the men who are in charge of the governmental functions lest they abuse their power and convert all other people into virtual slaves. The aim of all struggles for liberty is to keep in bounds the armed defenders of peace, the governors and their constables. The political concept of the individual’s freedom means freedom from arbitrary action on the part of the police power.
The idea of liberty is and has always been peculiar to the West. What separates East and West is first of all the fact that the peoples of the East never conceived the idea of liberty. The imperishable glory of the ancient Greeks was that they were the first to grasp the meaning and significance of institutions warranting liberty. Recent historical research has traced back the origin of some of the scientific achievements previously credited to the Hellenes to oriental sources. But nobody has ever contested that the idea of liberty originated in the cities of ancient Greece. The writings of Greek philosophers and historians transmitted it to the Romans and later to modern Europe and America. It became the essential concern of all Western plans for the establishment of the good society. It begot the laissez-faire philosophy to which mankind owes all the unprecedented achievements of the age of capitalism.
The purpose of all modern political and judicial institutions is to safeguard the individuals’ freedom against encroachments on the part of the government. Representative government and the rule of law, the independence of courts and tribunals from interference on the part of administrative agencies, habeas corpus, judicial examination and redress of acts of the administration, freedom of speech and the press, separation of state and church, and many other institutions aimed at one end only: to restrain the discretion of the officeholders and to render the individuals free from their arbitrariness. The age of capitalism has abolished all vestiges of slavery and serfdom. It has put an end to cruel punishments and has reduced the penalty for crimes committed to the minimum indispensable for discouraging offenders. It has done away with torture and other objectionable methods of dealing with suspects and law breakers. It has repealed all privileges and promulgated equality of all men under the law. It has transformed the subjects of tyranny into free citizens.
The material improvements were the fruit of these reforms and innovations in the conduct of government affairs. As all privileges disappeared and everybody was granted the right to challenge the vested interests of all other people, a free hand was given to those who had the ingenuity to develop all the new industries which today render the material conditions of people more satisfactory. Population figures multiplied and yet the increased population could enjoy a better life than their ancestors.
Also in the countries of Western civilization there have always been advocates of tyranny—the absolute arbitrary rule of an autocrat or of an aristocracy on the one hand, and the subjection of all other people on the other hand. But in the age of Enlightenment these voices became thinner and thinner. The cause of liberty prevailed. In the first part of the nineteenth century the victorious advance of the principle of freedom seemed to be irresistible. The most eminent philosophers and historians got the conviction that historical evolution tends toward the establishment of institutions warranting freedom and that no intrigues and machinations on the part of the champions of servilism could stop the trend toward liberalism.
In dealing with the liberal social philosophy there is a disposition to overlook the power of an important factor that worked in favor of the  idea of liberty, viz., the eminent role assigned to the literature of ancient Greece in the education of the élite. There were among the Greek authors also champions of government omnipotence, such as Plato. But the essential tenor of Greek ideology was the pursuit of liberty. Judged by the standards of modern institutions, the Greek city-states must be called oligarchies. The liberty which the Greek statesmen, philosophers and historians glorified as the most precious good of man was a privilege reserved to a minority. In denying it to metics and slaves they virtually advocated the despotic rule of a hereditary caste of oligarchs. Yet it would be a grave error to dismiss their hymns to liberty as mendacious. They were no less sincere in their praise and quest of freedom than were, two thousand years later, the slaveholders among the signers of the American Declaration of Independence. It was the political literature of the ancient Greeks that begot the ideas of the Monarchomachs, the philosophy of the Whigs, the doctrines of Althusius, Grotius and John Locke and the ideology of the fathers of modern constitutions and bills of rights. It was the classical studies, the essential feature of a liberal education, that kept awake the spirit of freedom in the England of the Stuarts, in the France of the Bourbons, and in Italy subject to the despotism of a galaxy of princes. No less a man than Bismarck, among the nineteenth-century statesmen next to Metternich the foremost foe of liberty, bears witness to the fact that, even in the Prussia of Frederick William III, the Gymnasium, the education based on Greek and Roman literature, was a stronghold of republicanism. (Cf. Bismarck, Gedanken und Erinnerungen, New York, 1898, Vol. I, p. I.) The passionate endeavors to eliminate the classical studies from the curriculum of the liberal education and thus virtually to destroy its very character were one of the major manifestations of the revival of the servile ideology.
It is a fact that a hundred years ago only a few people anticipated the overpowering momentum which the antilibertarian ideas were destined to acquire in a very short time. The ideal of liberty seemed to be so firmly rooted that everybody thought that no reactionary movement could ever succeed in eradicating it. It is true, it would have been a hopeless venture to attack freedom openly and to advocate unfeignedly a return to subjection and bondage. But antiliberalism got hold of peoples’ minds camouflaged as superliberalism, as the fulfillment and consummation of the very ideas of freedom and liberty. It came disguised as socialism, communism, planning.
No intelligent man could fail to recognize that what the socialists, communists and planners were aiming at was the most radical abolition of the individuals’ freedom and the establishment of government omnipotence. Yet the immense majority of the socialist intellectuals were convinced that in fighting for socialism they were fighting for freedom. They called themselves left-wingers and democrats, and nowadays they are even claiming for themselves the epithet “liberal.”
We have already dealt with the psychological factors that dimmed the judgment of these intellectuals and the masses who followed their lead. They were in their subconsciousness fully aware of the fact that their failure to attain the far-flung goals which their ambition impelled them to aim at was due to deficiencies of their own. They knew very well that they were either not bright enough or not industrious enough. But they were eager not to avow their inferiority both to themselves and to their fellow men and to search for a scapegoat. They consoled themselves and tried to convince other people that the cause of their failure was not their own inferiority but the injustice of society’s economic organization. Under capitalism, they declared, self-realization is only possible for the few. “Liberty in a laissez-faire society is attainable only by those who have the wealth or opportunity to purchase it.” (Cf. H. Laski, article Liberty in the Encyclopa~dja of the Social Scimcu, IX, p. 443.) Hence, they concluded, the state must interfere in order to realize “social justice”—what they really meant was, in order to give to the frustrated mediocrity “according to his needs.”
As long as the problems of socialism were merely a matter of debates, people who lack clear judgment and understanding could fall prey to the illusion that freedom could be preserved under a socialist regime. Such self-deceit can no longer be nurtured since the Soviet experience has shown to everybody what conditions are in a socialist commonwealth. Today the apologists of socialism are forced to distort facts and to misrepresent the manifest meaning of words when they want to make people believe in the compatibility of socialism and freedom.
The late Professor Laski—in his lifetime an eminent member and chairman of the British Labour Party, a self-styled noncommunist or even anti-communist—told us that “no doubt in Soviet Russia a Communist has a full sense of liberty; no doubt also he has a keen sense that liberty is denied him in Fascist Italy.” (Laski, I.e., pp. 445-446.) The truth is that a Russian is free to obey all the orders issued by his superiors. But as soon as he deviates a hundredth of an inch from the correct way of thinking as laid down by the authorities, he is mercilessly liquidated. All those politicians, officeholders, authors, musicians and scientists who were “purged” were—to be sure—not anticommunists. They were, on the contrary, fanatical communists, party members in good standing, whom the supreme authorities, in due recognition of their loyalty to the Soviet creed, had promoted to high positions. The only offense they had committed was that they were not quick enough in adjusting their ideas, policies, books or compositions to the latest changes in the ideas and tastes of Stalin. It is difficult to believe that these people had “a full sense of liberty” if one does not attach to the word liberty a sense which is precisely the contrary of the sense which all people always used to attach to it.
Fascist Italy was certainly a country in which there was no liberty. It had adopted the notorious Soviet pattern of the “one-party principle” and accordingly suppressed all dissenting views. Yet there was still a conspicuous difference between the Bolshevik and the Fascist application of this principle. For instance, there lived in Fascist Italy a former member of the parliamentary group of communist deputies, who remained loyal unto death to his communist tenets, Professor Antonio Graziadei. He received the government pension which he was entitled to claim as professor emeritus, and he was free to write and to publish, with the most eminent Italian publishing firms, books which were orthodox Marxian. His lack of liberty was certainly less rigid than that of the Russian communists who, as Professor Laski chose to say, “no doubt” have “a full sense of liberty.”
Professor Laski took pleasure in repeating the truism that liberty in practice always means liberty within law. He goes on saying that the law always aims at “the conference of security upon a way of life which is deemed satisfactory by those who dominate the machinery of state.” (Cf. Laski, I.e., p. 446.) This is a correct description of the laws of a free country if it means that the law aims at protecting society against conspiracies intent upon kindling civil war and upon overthrowing the government by violence. But it is a serious misstatement when Professor Laski adds that in a capitalistic society “an effort on the part of the poor to alter in a radical  way the property rights of the rich at once throws the whole scheme of liberties into jeopardy.” (Cf. Laski, l.c., p. 446 .)
Take the case of the great idol of Professor Laski and all his friends, Karl Marx. When in 1848 and 1849 he took an active part in the organization and the conduct of the revolution, first in Prussia and later also in other German states, he was—being legally an alien—expelled and moved, with his wife, his children and his maid, first to Paris and then to London. (About Marx’s activities in the years 1848 and 1849 see: Karl Marx, Chronik seines Lebens In Einzeldaten, published by the Marx-Engels-Lenin-Institut in Moskau, 1934, pp. 43-81.) Later, when peace returned and the abettors of the abortive revolution were amnestied, he was free to return to all parts of Germany and often made use of this opportunity. He was no longer an exile, and he chose of his own accord to make his home in London. (In 1845 Marx voluntarily of his own accord renounced his Prussian citizenship. When later. in the early sixties, he considered a political career in Prussia, the government denied his application for restoring his citizenship. Thus, a political career was c1o.ed to him. Perhaps this fact decided him to remain in London.) Nobody molested him when he founded, in 1864, the International Working Men’s Association, a body whose avowed sole purpose was to prepare the great world revolution. He was not stopped when, on behalf of this association, he visited various continental countries. He was free to write and to publish books and articles which, to use the words of Professor Laski, were certainly an effort “to alter in a radical way the property rights of the rich.” And he died quietly in his London home, 41 Maitland Park Road, on March 14, 1883.
Or take the case of the British Labour Party. Their effort “to alter in a radical way the property rights of the rich” was, as Professor Laski knew very well, not hindered by any action incompatible with the principle of liberty.
Marx, the dissenter, could live, write and advocate revolution, at ease, in Victorian England just as the Labour Party could engage in all political activities, at ease, in post-Victorian England. In Soviet Russia not the slightest opposition is tolerated. This is the difference between liberty and slavery.
Liberty and Western Civilization
The critics of the legal and constitutional concept of liberty and the institutions devised for its practical realization are right in their assertion that freedom from arbitrary action on the part of the officeholders is in itself not yet sufficient to make an individual free. But in emphasizing this indisputable truth they are running against open doors. For no advocate of liberty ever contended that to restrain the arbitrariness of officialdom is all that is needed to make the citizens free. What gives to the individuals as much freedom as is compatible with life in society is the operation of the market economy. The constitutions and bills of rights do not create freedom. They merely protect the freedom that the competitive economic system grants to the individuals against encroachments on the part of the police power.
In the market economy people have the opportunity to strive after the station they want to attain in the structure of the social division of labor. They are free to choose the vocation in which they plan to serve their fellow men. In a planned economy they lack this right. Here the authorities determine each man’s occupation. The discretion of the superiors promotes a man to a better position or denies him such promotion. The individual depends entirely on the good graces of those in power. But under capitalism everybody is free to challenge the vested interests of everybody else. If he thinks that he has the ability to supply the public better or more cheaply than other people do, he may try to demonstrate his efficiency. Lack of funds cannot frustrate his projects. For the capitalists are always in search of men who can utilize their funds in the most profitable way. The outcome of a man’s business activities depends alone on the conduct of the consumers who buy what they like best.
Neither does the wage earner depend on the employer’s arbitrariness. An entrepreneur who fails to hire those workers who are best fitted for the job concerned and to pay them enough to prevent them from taking another job is penalized by a reduction of net revenue. The employer does not grant to his employees a favor. He hires them as an indispensable means for the success of his business in the same way in which he buys raw materials and factory equipment. The worker is free to find the employment which suits him best.
The process of social selection that determines each individual’s position and income is continuously going on in the market economy. Great fortunes are shrinking and finally melting away completely  while other people, born in poverty, ascend to eminent positions and considerable incomes. Where there are no privileges and where governments do not grant protection to vested interests threatened by the superior efficiency of newcomers, those who have acquired wealth in the past are forced to acquire it every day anew in competition with all other people.
Within the framework of social cooperation under the division of labor everybody depends on the recognition of his services on the part of the buying public of which he himself is a member. Everybody in buying or abstaining from buying is a member of the supreme court which assigns to all people—and thereby also to himself—a definite place in society. Everybody is instrumental in the process that assigns to some people a higher, and to others a smaller, income. Everybody is free to make a contribution which his fellow men are prepared to reward by the allocation of a higher income. Freedom under capitalism means not to depend more on other people’s discretion than these others depend on one’s own. No other freedom is conceivable where production is performed under the division of labor, and there is no perfect economic autarky of everybody.
There is no need to stress the point that the essential argument advanced in favor of capitalism and against socialism is not the fact that socialism must necessarily abolish all vestiges of freedom and convert all people into slaves of those in power. Socialism is unrealizable as an economic system because a socialist society would not have any possibility of resorting to economic calculation. This is why it cannot be considered as a system of society’s economic organization. It is a means to disintegrate social cooperation and to bring about poverty and chaos.
In dealing with the liberty issue one does not refer to the essential economic problem of the antagonism between capitalism and socialism. One rather points out that Western man as different from the Asiatics is entirely a being adjusted to life in freedom and formed by life in freedom. The civilizations of China, Japan, India and the Mohammedan countries of the near East as they existed before these nations became acquainted with Western ways of life certainly cannot be dismissed as barbarism. These peoples, already many hundreds, even thousands of years ago, brought about marvelous achievements in the industrial arts, in architecture, in literature and philosophy and in the development of educational institutions. They founded and organized powerful  empires. But then their effort was arrested, their cultures became numb and torpid, and they lost the ability to cope successfully with economic problems. Their intellectual and artistic genius withered away. Their artists and authors bluntly copied traditional patterns. Their theologians, philosophers, and lawyers indulged in unvarying exegesis of old works. The monuments erected by their ancestors crumbled. Their empires disintegrated. Their citizens lost vigor and energy and became apathetic in the face of progressing decay and impoverishment.
The ancient works of oriental philosophy and poetry can compare with the most valuable works of the West. But for many centuries the East has not generated any book of importance. The intellectual and literary history of modern ages hardly records any name of an oriental author. The East has no longer contributed anything to the intellectual effort of mankind. The problems and controversies that agitated the West remained unknown to the East. In Europe there was commotion; in the East there was stagnation, indolence, and indifference.
The reason is obvious. The East lacked the primordial thing, the idea of freedom from the state. The East never raised the banner of freedom, it never tried to stress the rights of the individual against the power of the rulers. It never called into question the arbitrariness of the despots. And, consequently, it never established the legal framework that would protect the private citizens’ wealth against confiscation on the part of the tyrants. On the contrary, deluded by the idea that the wealth of the rich is the cause of the poverty of the poor, all people approved of the practice of the governors of expropriating successful businessmen. Thus big-scale capital accumulation was prevented, and the nations had to miss all those improvements that require considerable investment of capital. No “bourgeoisie” could develop, and consequently, there was no public to encourage and to patronize authors, artists, and inventors. To the sons of the people all roads toward personal distinction were closed but one. They could try to make their way in serving the princes. Western society was a community of individuals who could compete for the highest prizes. Eastern society was an agglomeration of subjects entirely dependent on the good graces of the sovereigns. The alert youth of the West looks upon the world as a field of action in which he can win fame, eminence, honors, and wealth; nothing appears too difficult for his ambition. The meek progeny of Eastern parents know of nothing else than to follow the routine of their environment. The noble self-reliance of Western man found triumphant expression in  such dithyrambs as Sophocles’ choric Antigone-hymn upon man and his enterprising effort and Beethoven’s Ninth Symphony. Nothing of the kind has been ever heard in the Orient.
Is it possible that the scions of the builders of the white man’s civilization should renounce their freedom and voluntarily surrender to the suzerainty of omnipotent government? That they should seek contentment in a system in which their only task will be to serve as cogs in a vast machine designed and operated by an almighty planmaker? Should the mentality of the arrested civilizations sweep the ideals for the ascendancy of which thousands and thousands have sacrificed their lives?
Ruere in servitium, they plunged into slavery, Tacitus sadly observed in speaking of the Romans of the age of Tiberius.
Excerpted from Ludwig Von Mises The Anti-Capitalist Mentality. First published in 1956.