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.

“Altruistic” Entrepreneurship

When the self-styled “progressives” use the word profit they rant and rave. They would like completely to eliminate profits. In their view, the entrepreneur should serve the people altruistically, not seek profits. He is either not to receive anything, or to be content, if his business is successful, with a small margin over his actual costs. That the entrepreneur has to bear the possible loss is never objected to.

But the profit orientation of the activities of entrepreneurs is precisely what gives sense and meaning, guidance and direction, to the market economy based on private ownership of the means of production. To eliminate the profit motive is to transform the market economy into chaos.

We have already dealt with the confiscation of profits and the effects of such action. Now, we shall discuss the limitation of profits to a definite percentage of costs. If the entrepreneur is to receive more, the higher his costs rise, his incentive to produce as cheaply as possible is changed to the opposite. Every reduction in production costs reduces his receipts; every increase in production costs means more income for him. We do not have to presuppose here a sinister intention on the part of the entrepreneur. We merely have to understand what a cut in production costs involves for the entrepreneur.

For the most part, the entrepreneur can achieve cost reductions in two different ways: By careful purchases of raw materials and semi-finished products, and by adopting more efficient methods of production. Both involve a high degree of risk and the exercise of intelligence and foresight. Like every other action of the entrepreneur, whether the most opportune moment to purchase has come, or whether it is better to wait longer, is speculation on an uncertain future. The entrepreneur who bears the entire loss but participates in only a part of the gain, his share increasing with rising expenditures, is in a different position from the entrepreneur who is credited or debited with the entire profit or loss. His attitude toward the risks of the market will be fundamentally altered. He will be inclined, therefore, to buy at higher market prices than the entrepreneur in the free economy. The same is true of improvements in production methods. They too are always risky; additional investments are necessary of which it cannot be said with certainty in advance whether they will pay. Why should an entrepreneur take chances if, in case of success, he is to be punished by a reduction in his receipts?

V.

Corporativism and Syndicalism