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

2.

Parliamentary Government and Interventionism

Government by the people is based on the idea that all citizens are linked by common interests. The framers of the modern constitutions did not overlook the fact that in the short run the particular interests of individual groups may conflict with those of the overwhelming majority. But they had full confidence in the intelligence of their fellow citizens. They did not doubt that their fellow citizens would be wise enough to realize that selfish group interests must be sacrificed when they run counter to the welfare of the majority. They were convinced that every group would recognize that privileges cannot be maintained in the long run. Privileges are only of value if they benefit a minority; they lose value as they become more general. When every individual group of citizens is granted privileges, the privileges as such become meaningless; everybody suffers, nobody gains.

Government by the people can, therefore, only be maintained under the system of the market economy. In the market economy only the interests of the citizens as consumers are considered. No producer is granted a privilege, because privileges given to producers diminish productivity and impair the satisfaction of the consumers. No one suffers if the cheapest and best satisfaction of the consumers is accepted as the guiding principle of policy; what producers then fail to gain as producers, because privileges are denied to them, they gain as consumers.

Every technological progress first injures vested interests of entrepreneurs, capitalists, landowners, or workers. But if the desire to prevent such injuries is to prompt measures to prevent the development of new techniques, this would in the long run harm not only the interests of all citizens, but also of those who supposedly were to be benefited. The automobile and the airplane hurt the railway business, the radio hurts the publishing business, the motion pictures the legitimate theater. Should automobiles, planes, broadcasting, and movies have been forbidden in order to spare the interests of the injured entrepreneurs, capitalists, and workers? It was the great achievement of the old liberalism that it abolished the privileges of the guilds and thus opened the way for modern industry. If there are today many more people on earth than two hundred years ago and if every worker in the countries of Western civilization lives today far better than his ancestors, in some respects even better than Louis XIV in his palace at Versailles, then this is only due to this liberation of the productive forces.

The idea underlying representative government is that the members of parliament are to represent the whole nation, not to represent individual counties or the particular interests of their constituencies. The political parties may represent different opinions about what helps the whole nation, but they should not represent the particular selfish interests of certain districts or pressure groups.

The parliaments of interventionist countries are today quite different from this old ideal. There are representatives of silver, cotton, steel, farming, and labor. But no legislator feels it his duty to represent the nation as a whole.

The democratic form of government which Hitler destroyed in Germany and France was not workable because it was thoroughly infested with the interventionist spirit. There were many small parties which catered to particular local and professional interests. Every proposed bill and every executive measure was judged by one standard: What does it offer my constituents and the pressure groups on which I depend? The representatives of a wine-producing district considered everything from the standpoint of the wine producers. Questions of national defense were for the labor representatives nothing but an opportunity to enhance the power of the trade unions. The spokesmen of the French front populaire demanded cooperation with Russia, those of the Right an alliance with Italy. Neither group was concerned with the welfare and the independence of France; in every problem they saw only its relation to, and effect on, the particular interests of particular voting blocks. Interventionism has transformed parliamentary government into a government of lobbies. It is not parliamentarianism and democracy that have failed. Interventionism has paralyzed parliamentarianism as well as the market economy.

The failure of parliamentarianism becomes more evident in the practice of delegating authority. The parliament voluntarily gives up its legislative power and hands it over to the executive. Hitler, Mussolini, and Pétain* govern by such “delegations of power.” The dictatorship thus assumed a vestige of legality by a formal link to the democratic institutions. It abolished democracy and retained the democratic terminology, just as in the system of German socialism it abolished private property while retaining its nomenclature. The tyrants of the cities of ancient Greece and the Roman Caesars, too, preserved the phraseology of the Republic.

At the present stage in the development of the means of communication and transportation no emergency can justify the delegation of power. Even in a large country like the United States, all representatives can be assembled in the capital within 24 hours. It would also be possible to have the representative bodies remain in permanent session. Whenever it appeared advisable to keep secret the proceedings and decisions, secret sessions could be held.

Frequently, we hear the assertion that the democratic institutions are only a disguise for the “dictatorship of capital.” The Marxists have used this slogan for a long time. Georges Sorel and the syndicalists repeated it. Today Hitler and Mussolini ask the nations to rise up against “plutodemocracy.” In answer to this it suffices to point out that in Great Britain, in the British Dominions, and in the United States the elections are completely free of coercion. Franklin D. Roosevelt was elected president by a majority of the voters. Nobody forced any American citizen to vote for him. Nobody prevented anyone from voicing publicly what he considered an argument against the reelection of Roosevelt. The citizens of America were free to decide, and they did decide.

[* ][Henri Philippe Pétain (1856–1951), French World War I hero, vice premier in June 1940 when Germany defeated and occupied half of France, became “chief of state” of the fascist unoccupied portion of the country, with its capital at Vichy. After the war he was tried and convicted of collaborating with the Germans.—Editor]