The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• Author’s Preface
• Interventionism
• Introduction
• 1.: The Problem
• 2.: Capitalism Or Market Economy
• 3.: The Socialist Economy
• 4.: The Capitalist State and the Socialist State
• 5.: The Interventionist State
• 6.: The Plea For Moral Reform
• I.: Interference By Restriction
• 1.: The Nature of Restrictive Measures
• 2.: Costs and Benefits of Restrictive Measures
• 3.: The Restrictive Measure As a Privilege
• 4.: Restrictive Measures As Expenditures
• II.: Interference By Price Control
• 1.: The Alternative: Statutory Law Versus Economic Law
• 2.: The Reaction of the Market
• 3.: Minimum Wages and Unemployment
• 4.: The Political Consequences of Unemployment
• III.: Inflation and Credit Expansion
• 1.: Inflation
• 2.: Credit Expansion
• 3.: Foreign Exchange Control
• 4.: The Flight of Capital and the Problem of “hot Money”
• IV.: Confiscation and Subsidies
• 1.: Confiscation
• 2.: The Procurement of Funds For Public Expenditure
• 3.: Unprofitable Public Works and Subsidies
• 4.: “altruistic” Entrepreneurship
• V.: Corporativism and Syndicalism
• 1.: Corporativism
• 2.: Syndicalism
• VI.: War Economy
• 1.: War and the Market Economy
• 2.: Total War and War Socialism
• 3.: Market Economy and National Defense
• VII.: The Economic, Social, and Political Consequences of Interventionism
• 1.: The Economic Consequences
• 2.: Parliamentary Government and Interventionism
• 3.: Freedom and the Economic System
• 4.: The Great Delusion
• 5.: The Source of Hitler’s Success
• VIII.: Conclusions
• Reading References

4.

The Political Consequences of Unemployment

Unemployment as a permanent phenomenon of considerable magnitude has become the foremost political problem of all democratic countries. That millions are permanently excluded from the productive process is a condition which cannot be tolerated for any length of time. The unemployed individual wants work. He wants to earn because he considers the opportunities which wages afford higher than the doubtful value of permanent leisure in poverty. He despairs because he is unable to find work. From among the unemployed, the adventurers and the aspiring dictators select their storm troopers.

Public opinion regards the pressure of unemployment as a proof of the failure of the market economy. The public believes that capitalism has shown its inability to solve the problems of social cooperation. Unemployment appears as the inescapable result of the antinomies, the contradictions, of the capitalistic economy. Public opinion fails to realize that the real cause for the permanent and large unemployment is to be sought in the wage policy of the trade unions and in the assistance granted to such policy by the government. The voice of the economist does not reach the public.

Laymen have always believed that technological progress deprived people of their livelihood. For this reason the guilds persecuted every inventor; for this reason craftsmen destroyed machines. Today the opponents of technological progress have the support of men who are commonly regarded as scientists. In books and articles it is asserted that technological unemployment is unavoidable—in the capitalistic system, at least. As a means to fight unemployment shorter working hours are recommended; as weekly wages are to remain stable or to be lowered less than proportionately, or even increased, this means in most cases further wage rate raises and thus increased unemployment. Public works projects are recommended as a means to provide employment. But if the necessary funds are secured by issuing government bonds or by taxation, the situation remains unchanged. The funds used for the relief projects are withdrawn from other production, the increase of employment opportunities is counteracted by a decrease of employment opportunities in other branches of the economic system.

Finally credit expansion and inflation are resorted to. But with rising prices and falling real wages the trade union demands for higher wages are gaining momentum. However, we have to note that devaluations and similar inflationary measures have, in some instances, been temporarily successful in alleviating the effects of union wage policy and in halting temporarily the growth of unemployment.

Compared with the ineffectual handling of the unemployment problem by countries which customarily are called democratic, the policy of dictatorships appears extremely successful. Unemployment disappears if compulsory labor is introduced by inducting the unemployed into the army and other military units, into labor camps and similar compulsory service. The workers in these services must be satisfied with wages which are far below those of other workers. Gradually an approximation of wage rates is sought by raising the wages of the service workers and by lowering the wages of other workers. The political successes of the totalitarian countries are primarily based on the results which they achieved in the fight against service workers and by lowering the wages of other workers. The political successes of the totalitarian countries are primarily based on the results which they achieved in the fight against unemployment.

III.

Inflation and Credit Expansion