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

3.

Freedom and the Economic System

The first argument advanced against proposals to replace capitalism by socialism was that in the socialist economic system there could be no room for freedom of the individual. Socialism, it was said, means slavery for all. It is impossible to deny the truth of this argument. If the government controls all means of production, if the government is the only employer and has the sole right to decide what training the individual is to receive, where and how he is to work, then the individual is not free. He has the duty to obey, but he has no rights.

The advocates of socialism have never been able to present an effective counterargument to this. They have merely retorted that in the democratic countries of the market economy there was only freedom for the rich, not for the poor, and that for such freedom it was not worth renouncing the supposed blessings of socialism.

In order to analyze these questions we first have to understand what freedom really means. Freedom is a sociological concept. In nature and with regard to nature there is nothing to which we could apply this term. Freedom is the opportunity granted to the individual by the social system to mold his life according to his wishes. That people have to work in order to survive is a law of nature; no social system can alter this fact. That the rich may live without working does not impair the freedom of those who are not in this fortunate position. Wealth in the market economy represents rewards granted by society as a whole for services rendered to the consumers in the past, and it can only be preserved by continued employment in the interest of the consumers. That the market economy rewards successful activity in the service of the consumers does not harm the consumers; it benefits them. Nothing is taken from the worker by this, but much is given to him by increasing the productivity of labor. The freedom of the worker who does not own property rests on his right to choose the place and the type of his work. He does not have an overlord to whose arbitrariness he is subjected. He sells his services on the market. If one entrepreneur refuses to pay him the wage which corresponds to the market conditions he will find another employer who is willing, out of his (the employer’s) own interest, to pay the worker the market wage. The worker does not owe his employer subservience and obedience; he owes him services; he receives his wage not as a favor, but as an earned reward.

The poor too have an opportunity in the capitalistic society to work themselves up through their own efforts. This is not the case only in business. Among those who today occupy top positions in the professions, in art, science, and politics, the majority are men who have started their careers in poverty. Among the path-breakers and leaders there are men born almost exclusively from poor parents. Those who want great accomplishments, no matter what the social system, must overcome the resistance of apathy, prejudice, and ignorance. It can hardly be denied that capitalism offers this opportunity.

Instances are pointed out where great men were badly treated by their contemporaries. Some of the great masters of the French modern school of painting have experienced great difficulties or were not able to sell their paintings at all. Does anyone believe that a socialist government would show more understanding for an art which appeared to traditional concepts as so much scribbling? The great composer Hugo Wolf* once wrote it was a shame that the state did not provide for its artists. But what Hugo Wolf suffered from was a lack of understanding on the part of the recognized older artists, critics, and friends of art; a socialist government would have had to rely on the judgment of state-appointed experts and it certainly would not have given more recognition to that irritable, unsociable, and mentally unbalanced man. When Sigmund Freud† advanced his theories, the established authorities, doctors, and psychologists, that is the experts whose judgment must be decisive for the government, laughed and called him crazy.

But in the capitalistic society the genius at least has an opportunity to continue his work.

The great French painters were free to paint; Hugo Wolf was in a position to put Moerike’s‡ poems to music; Freud was free to continue his studies. They would not have been able to produce anything if the government, following the unanimous opinion of the experts, had assigned them work which deprived them of the opportunity to fulfill their destiny.

Unfortunately, it happens not infrequently that, for political reasons, the universities fail to appoint as professors outstanding men in the fields of social science, or they dismiss them after they have been appointed. But are we to believe that the state university of a socialist country would employ men who taught doctrines unpleasing to the government? In the socialist state publishing, too, is a function of the state. Will the state have books and papers printed and published with which it disagrees? Will it make available to the stage dramas which it thinks inappropriate?

Compare the position in which science, art, literature, the press, and radio find themselves in Russia and Germany with their positions in America; then we will understand what freedom and lack of freedom mean. Many things appear unsatisfactory in America as well, but no one will be able to deny that the Americans are freer than the Russians or the Germans.

The freedom of scientific and artistic creation is actively made use of by only a small minority, but all benefit from it. Progress is always displacement of the old by the new; progress always means change. No planned economy can plan progress; no organization can organize it. It is the one thing that defies any limitation or regimentation. State and society cannot promote progress. Capitalism cannot do anything for progress either. But, and this is achievement enough, capitalism doesn’t place insurmountable barriers in the way of progress. The socialist society would become utterly rigid because it would make progress impossible.

Interventionism does not take all freedom from the citizens. But every one of its measures takes away a part of the freedom and narrows the field of activity.

Let us consider, for instance, foreign exchange control. The smaller a country, the more important the part played in its total trade by foreign transactions. If subscriptions to foreign books and newspapers, foreign travel and study abroad, are made conditional upon the granting of foreign exchange by the government, the entire intellectual life of the country comes under the guardianship of the government. In this respect foreign exchange control is not at all different from the despotic system of Prince Metternich.* The only difference is that Metternich did openly what foreign exchange control effects through disguise.

[* ][Hugo Wolf (1860–1903), Viennese composer and music critic, spent the last seven years of his life in a mental asylum.—Editor]

[† ][Sigmund Freud (1856–1939), Viennese founder of psychoanalysis.—Editor]

[‡ ][Eduard Moerike (1804–1875), German Protestant minister and poet.—Editor]

[* ][Prince Klemens W. N. L. von Metternich (1773–1859), Austrian statesman, relied on censorship, espionage, and repression to control much of Europe.—Editor]