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Mises on the interconnection between economic and political freedom (1949)

The Austrian free market economist Ludwig von Mises (1881-1973) argues not only that political and economic liberty are inextricably linked but that economic liberty is the foundation stone for all political liberties:

Freedom, as people enjoyed it in the democratic countries of Western civilization in the years of the old liberalism’s triumph, was not a product of constitutions, bills of rights, laws, and statutes. Those documents aimed only at safeguarding liberty and freedom, firmly established by the operation of the market economy, against encroachments on the part of officeholders. No government and no civil law can guarantee and bring about freedom otherwise than by supporting and defending the fundamental institutions of the market economy. Government means always coercion and compulsion and is by necessity the opposite of liberty. Government is a guarantor of liberty and is compatible with liberty only if its range is adequately restricted to the preservation of what is called economic freedom. Where there is no market economy, the best-intentioned provisions of constitutions and laws remain a dead letter.

In spite of these serious shortcomings of the defenders of economic freedom it was impossible to fool all the people all the time about the essential features of socialism. The most fanatical planners were forced to admit that their projects involve the abolition of many freedoms people enjoy under capitalism and “plutodemocracy.” Pressed hard, they resorted to a new subterfuge. The freedom to be abolished, they emphasize, is merely the spurious “economic” freedom of the capitalists that harms the common man. Outside the “economic sphere” freedom will not only be fully preserved, but considerably expanded. “Planning for Freedom” has lately become the most popular slogan of the champions of totalitarian government and the Russification of all nations.

The fallacy of this argument stems from the spurious distinction between two realms of human life and action, entirely separated from one another, viz., the “economic” sphere and the “noneconomic” sphere. With regard to this issue there is no need to add anything to what has been said in the preceding parts of this book. However, there is another point to be stressed.

Freedom, as people enjoyed it in the democratic countries of Western civilization in the years of the old liberalism’s triumph, was not a product of constitutions, bills of rights, laws, and statutes. Those documents aimed only at safeguarding liberty and freedom, firmly established by the operation of the market economy, against encroachments on the part of officeholders. No government and no civil law can guarantee and bring about freedom otherwise than by supporting and defending the fundamental institutions of the market economy. Government means always coercion and compulsion and is by necessity the opposite of liberty. Government is a guarantor of liberty and is compatible with liberty only if its range is adequately restricted to the preservation of what is called economic freedom. Where there is no market economy, the best-intentioned provisions of constitutions and laws remain a dead letter.

The freedom of man under capitalism is an effect of competition. The worker does not depend on the good graces of an employer. If his employer discharges him, he finds another employer. The consumer is not at the mercy of the shopkeeper. He is free to patronize another shop if he likes. Nobody must kiss other people’s hands or fear their disfavor. Interpersonal relations are businesslike. The exchange of goods and services is mutual; it is not a favor to sell or to buy, it is a transaction dictated by selfishness on both sides.

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Milton Friedman argued for many years that economic and political liberty were interlinked and that to destroy one (such as economic liberty) would eventually harm the other (political liberty). He was aiming his argument at the “political liberals” (i.e. social democrats) who were happy to regulate and control the economy without thinking that they would thereby end up harming what they considered to be a higher value, namely political freedom. Mises goes much further than this is his chapter “On Freedom” in Human Action in which he argues that political freedom is dependent about flourishing free markets and that written constitutions merely protect already existing institutions created by market activities. If these free market institutions are weakened too much then the political edifice which is built upon them will come crashing down.

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