The Online Library of Liberty

A project of Liberty Fund, Inc.

• Editor’s Foreword
• Preface to the First Edition
• Preface to the 1962 Edition
• Bureaucracy
• Introduction
• 1.: The Opprobrious Connotation of the Term Bureaucracy
• 2.: The American Citizen’s Indictment of Bureaucratism
• 3.: The “progressives’” View of Bureaucratism
• 4.: Bureaucratism and Totalitarianism
• 5.: The Alternative: Profit Management Or Bureaucratic Management
• I: Profit Management
• 1.: The Operation of the Market Mechanism
• 2.: Economic Calculation
• 3.: Management Under the Profit System
• 4.: Personnel Management Under an Unhampered Labor Market
• II: Bureaucratic Management
• 1.: Bureaucracy Under Despotic Government
• 2.: Bureaucracy Within a Democracy
• 3.: The Essential Features of Bureaucratic Management
• 4.: The Crux of Bureaucratic Management
• 5.: Bureaucratic Personnel Management
• III: Bureaucratic Management of Publicly Owned Enterprises
• 1.: The Impracticability of Government All-round Control
• 2.: Public Enterprise Within a Market Economy
• IV: Bureaucratic Management of Private Enterprises
• 1.: How Government Interference and the Impairment of the Profit Motive Drive Business Toward Bureaucratization
• 2.: Interference With the Height of Profit
• 3.: Interference With the Choice of Personnel
• 4.: Unlimited Dependence On the Discretion of Government Bureaus
• V: The Social and Political Implications of Bureaucratization
• 1.: The Philosophy of Bureaucratism
• 2.: Bureaucratic Complacency
• 3.: The Bureaucrat As a Voter
• 4.: The Bureaucratization of the Mind
• 5.: Who Should Be the Master?
• VI: The Psychological Consequences of Bureaucratization
• 1.: The German Youth Movement
• 2.: The Fate of the Rising Generation Within a Bureaucratic Environment
• 3.: Authoritarian Guardianship and Progress
• 4.: The Selection of the Dictator
• 5.: The Vanishing of the Critical Sense
• VII: Is There Any Remedy Available?
• 1.: Past Failures
• 2.: Economics Versus Planning and Totalitarianism
• 3.: The Plain Citizen Versus the Professional Propagandist of Bureaucratization
• Conclusion

4.

The Bureaucratization of the Mind

The modern trend toward government omnipotence and totalitarianism would have been nipped in the bud if its advocates had not succeeded in indoctrinating youth with their tenets and in preventing them from becoming acquainted with the teachings of economics.

Economics is a theoretical science and as such does not tell man what values he should prefer and what ends he should aim at. It does not establish ultimate ends. This is not the task of the thinking man but that of the acting man. Science is a product of thought, action a product of will. In this sense we may say that economics as a science is neutral with regard to the ultimate ends of human endeavor.

But it is different with regard to the means to be applied for the attainment of given social ends. There economics is the only reliable guide of action. If men are eager to succeed in the pursuit of any social ends, they must adjust their conduct to the results of economic thinking.

The outstanding fact of the intellectual history of the last hundred years is the struggle against economics. The advocates of government omnipotence did not enter into a discussion of the problems involved. They called the economists names, they cast suspicion upon their motives, they ridiculed them and called down curses upon them.

It is, however, not the task of this book to deal with this phenomenon. We have to limit ourselves to the description of the role that bureaucracy played in this development.

In most countries of the European continent the universities are owned and operated by the government. They are subject to the control of the Ministry of Education as a police station is subject to the head of the police department. The teachers are civil servants like patrolmen and customs officers. Nineteenth-century liberalism tried to limit the right of the Ministry of Education to interfere with the freedom of university professors to teach what they considered true and correct. But as the government appointed the professors, it appointed only trustworthy and reliable men, that is, men who shared the government’s viewpoint and were ready to disparage economics and to teach the doctrine of government omnipotence.

As in all other fields of bureaucratization, nineteenth-century Germany was far ahead of other nations in this matter too. Nothing characterizes the spirit of the German universities better than a passage of an oration that the physiologist Emil du Bois-Reymond delivered in 1870 in his double capacity as Rector of the University of Berlin and as President of the Prussian Academy of Science: “We, the University of Berlin, quartered opposite the King’s palace, are, by the deed of our foundation, the intellectual bodyguard of the House of Hohenzollern.” The idea that such a royal henchman should profess views contrary to the tenets of the government, his employer, was incomprehensible to the Prussian mind. To maintain the theory that there are such things as economic laws was deemed a kind of rebellion. For if there are economic laws, then governments cannot be regarded as omnipotent, as their policies could only succeed when adjusted to the operation of these laws. Thus the main concern of the German professors of the social sciences was to denounce the scandalous heresy that there is a regularity in economic phenomena. The teaching of economics was anathematized and wirtschaftliche Staatswissenschaften (economic aspects of political science) put in its place. The only qualities required in an academic teacher of the social sciences were disparagement of the operation of the market system and enthusiastic support of government control. Under the Kaiser radical Marxians who openly advocated a revolutionary upheaval and the violent overthrow of the government were not appointed to full-time professorships; the Weimar Republic virtually abolished this discrimination.

Economics deals with the operation of the whole system of social cooperation, with the interplay of all its determinants, and with the interdependence of the various branches of production. It cannot be broken up into separate fields open to treatment by specialists who neglect the rest. It is simply nonsensical to study money or labor or foreign trade with the same kind of specialization which historians apply when dividing human history into various compartments. The history of Sweden can be treated with almost no reference to the history of Peru. But you cannot deal with wage rates without dealing at the same time with commodity prices, interest rates, and profits. Every change occurring in one of the economic elements affects all other elements. One will never discover what a definite policy or change brings about if one limits his investigation to a special segment of the whole system.

It is precisely this interdependence that the government does not want to see when it meddles in economic affairs. The government pretends to be endowed with the mystical power to accord favors out of an inexhaustible horn of plenty. It is both omniscient and omnipotent. It can by a magic wand create happiness and abundance.

The truth is that the government cannot give if it does not take from somebody. A subsidy is never paid by the government out of its own funds; it is at the expense of the taxpayer that the state grants subsidies. Inflation and credit expansion, the preferred methods of present-day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer. Interference with the market, with commodity prices, wage rates, and interest rates as determined by demand and supply, may in the short run attain the ends aimed at by the government. But in the long run such measures always result in a state of affairs which—from the viewpoint of the government—is more unsatisfactory than the previous state they were intended to alter.

It is not in the power of the government to make everybody more prosperous. It can raise the income of the farmers by forcibly restricting domestic agricultural production. But the higher prices of farm products are paid by the consumers, not by the state. The counterpart of the farmers’ higher standard of living is the lowering of the standard of living of the rest of the nation. The government can protect the small shops against the competition of department stores and chain stores. But here again the consumers foot the bill. The state can improve the conditions of a part of the wage earners by allegedly pro-labor legislation or by giving a free hand to labor union pressure and compulsion. But if this policy does not result in a corresponding rise in the prices of manufactures, thereby bringing real wage rates back to the market level, it brings about unemployment of a considerable part of those willing to earn wages.

A scrutiny of such policies from the viewpoint of economic theory must necessarily show their futility. This is why economics is tabooed by the bureaucrats. But the governments encourage the specialists who limit their observations to a narrow field without bothering about the further consequences of a policy. The labor economist deals only with the immediate results of pro-labor policies, the farm economist only with the rise of agricultural prices. They both view the problems only from the angle of those pressure groups which are immediately favored by the measure in question and disregard its ultimate social consequences. They are not economists, but expounders of government activities in a particular branch of the administration.

For under government interference with business, the unity of government policies has long since disintegrated into badly coordinated parts. Gone are the days when it was still possible to speak of a government’s policy. Today in most countries each department follows its own course, working against the endeavors of the other departments. The department of labor aims at higher wage rates and at lower living costs. But the same administration’s department of agriculture aims at higher food prices, and the department of commerce tries to raise domestic commodity prices by tariffs. One department fights against monopoly, but other departments are eager to bring about—by tariffs, patents, and other means—the conditions required for the building of monopolistic restraint. And each department refers to the expert opinion of those specialized in their respective fields.

Thus the students no longer receive an initiation into economics. They learn incoherent and disconnected facts about various government measures thwarting one another. Their doctor’s theses and their graduate research work deal not with economics but with various topics of economic history and various instances of government interference with business. Such detailed and well-documented statistical studies of the conditions of the immediate past (mistakenly often labeled studies about “present-day” conditions) are of great value for the future historian. They are no less important for the vocational tasks of lawyers and office clerks. But they are certainly not a substitute for the lack of instruction in economics. It is amazing that Stresemann’s doctoral thesis dealt with the conditions of the bottled beer trade in Berlin. Under the conditions of the German university curriculum this meant that he devoted a considerable part of his university work to the study of the marketing of beer and of the drinking habits of the population. This was the intellectual equipment that the glorified German university system gave to a man who later acted as the Reich’s chancellor in the most critical years of German history.*

After the old professors who had got their chairs in the short flowering of German liberalism had died, it became impossible to hear anything about economics at the universities of the Reich. There were no longer any German economists, and the books of foreign economists could not be found in the libraries of the university seminars. The social scientists did not follow the example of the professors of theology who acquainted their students with the tenets and dogmas of other churches and sects and with the philosophy of atheism because they were eager to refute the creeds they deemed heretical. All that the students of the social sciences learned from their teachers was that economics is a spurious science and that the so-called economists are, as Marx said, sycophantic apologists of the unfair class interests of bourgeois exploiters, ready to sell the people to big business and finance capital.3 The graduates left the universities convinced advocates of totalitarianism either of the Nazi variety or of the Marxian brand.

Conditions in other countries were similar. The most eminent establishment of French learning was the École Normale Supérieure in Paris; its graduates filled the most important posts in public administration, politics, and higher education. This school was dominated by Marxians and other supporters of full government control. In Russia the Imperial Government did not admit to a university chair anybody suspected of the liberal ideas of “Western” economics. But, on the other hand, it appointed many Marxians of the “loyal” wing of Marxism, i.e., those who kept out of the way of the revolutionary fanatics. Thus the Czars themselves contributed to the later triumph of Marxism.

European totalitarianism is an upshot of bureaucracy’s preeminence in the field of education. The universities paved the way for the dictators.

Today both in Russia and in Germany the universities are the main strongholds of the one-party system. Not only the social sciences, history, and philosophy, but all other branches of knowledge, of art, and of literature are regimented or, as the Nazis say, gleichgeschaltet. Even Sidney and Beatrice Webb, naive and uncritical admirers of the Soviets as they are, were shocked when they discovered that the Journal for Marxist-Leninist Natural Sciences stands “for party in mathematics” and “for the purity of Marxist-Leninist theory in surgery” and that the Soviet Herald of Venereology and Dermatology aims at considering all problems that it discusses from the point of view of dialectical materialism.4

[* ][Editor’s note: Gustav Stresemann served as chancellor of Germany in 1923 and as minister of foreign affairs 1923–29.]

[3. ]Cf. Pohle, Die gegenwärtige Krise der deutschen Volkswirtschaftslehre (2d ed. Leipzig, 1921).

[4. ]Sidney and Beatrice Webb, Soviet Communism: A New Civilization? (New York, 1936), II, 1000.