Ludwig von Mises can still teach the unknown truth about the nature of capitalism ...

Mises in Four Easy Pieces

by Dan Sanchez


One day in 1959, hundreds of students, educators, and grandees filled the enormous lecture hall of the University of Buenos Aires to capacity, overflowing into two neighboring rooms. Argentina was still reeling from the reign of populist president, Juan Perón, who had been ousted four years before. Perón’s economic policies were supposed to empower and uplift the people, but only created poverty and chaos. Perhaps the men and women in that auditorium were ready for a different message. They certainly got one.

A dignified old man stepped before them, and delivered a bold, bracing message: what truly empowers and uplifts the people iscapitalism, the much-maligned economic system that emerges from private ownership of the means of production.

This man, Ludwig von Mises, had been the world’s leading champion of capitalism for half a century, so his message was finely honed. Not only a creative genius, but a superb educator, he boiled down capitalism to the essential features that he believed every citizen needed to know. As his wife Margit recollected, the effect on the crowd was invigorating. Having spent years in an intellectual atmosphere of stale, stagnant ideas: “The audience reacted as if a window had been opened and fresh air allowed to breeze through the rooms.”

This lecture was the first in a series, the transcriptions of which are collected in the book Economic Policy: Thoughts for Today and Tomorrow, edited by Margit.

Life (and Death) Before Capitalism

To demonstrate in his lecture how revolutionary the advent of capitalism was in world history, Mises contrasted it with what he called the feudalistic principles of production during Europe’s earlier ages.

The feudal system was characterized by productive rigidity. Power, law, and custom prohibited individuals from leaving their station in the economic system and from entering another. Peasant serfs were irrevocably tied to the land they tilled, which in turn was inalienably tied to their noble lords. Princes and urban guilds strictly limited entry into whole industries, and precluded the emergence of new ones. Almost every productive role in society was a caste. This productive rigidity translated into socio-economic rigidity, or “social immobility.” As Mises reminded his Argentine audience:
a man’s social status was fixed from the beginning to the end of his life; he inherited it from his ancestors, and it never changed. If he was born poor, he always remained poor, and if he was born rich  —  a lord or a duke  —  he kept his dukedom and the property that went with it for the rest of his life.

Over 90 percent of the population was consigned to food production, so as to precariously eke out sustenance for their own families and contribute to the banquets of their domineering, parasitic suzerains. They also had to make their own clothing and other consumers’ goods at home. So, production was largely autarkic and nonspecialized. As Mises highlighted, the small amount of specialized manufacturing that existed in the towns was devoted largely to the production of luxury goods for the elite.

From the High Middle Ages onward, production in Western Europe was higher, and the average person much less likely to be a chattel slave, than during antiquity and the Dark Ages. But the economic system was still fixed and moribund; the common man had no hope of progressing beyond a life teetering between bare subsistence and starvation.

And in the eighteenth century, in the Netherlands and England, said Mises, multitudes were about to go over the ledge, because the population had grown beyond the land then available to employ and sustain them.

It was then and there that capitalism entered the scene, saving the lives of millions, and vastly improving the lives of millions more.

Four key distinguishing features of capitalism can be gleaned from Mises’s lecture. What follows is an exposition of those features, which can be thought of as, to paraphrase Richard Feynman, “Mises in four easy pieces.”

It is important to note that, as Mises fully noted elsewhere, what emerged in the eighteenth century and developed subsequently was never a purely free market. So, the following characteristics have never been universal. But these features did come into play far more extensively in this period than ever before.

• One: Dynamic Production ....
• Two: Consumer Sovereignty ....
• Three: Mass Production for the Masses ....
• Four: Prosperity for the People .....

Conclusion

If the subsequent policies adopted in Argentina, South America, and the world are any indication, Mises’s message, as lucid and affecting as it was, did not propagate far beyond the auditorium walls that day. Perhaps in the age of camera phones, YouTube, and social media, it would have. But his brilliant encapsulation of the beneficence and beauty of capitalism did not dissipate vainly into the Argentine air. Thanks to his Margit and to his institutional namesake, his message was preserved for the ages, and is now only a mouse click away for billions.

Ludwig von Mises can still save the world by posthumously teaching its people the unknown truth about the inherently populist nature of capitalism in a way which speaks to their hopes and longings: that private property means dynamic production, which means a competitive, consumer-steered economy, which means a production system geared toward improving the lives of the masses, which first means widespread succor and ultimately ever-rising prosperity for the people of the world.

Read more: mises.org