Mises on wealth creation and stopping the spirit of predatory militarism (1949)

In a section in Human Action (1949) dealing with time preference, the Austrian economist Ludwig von Mises (1881-1973) turns to the problem of the economic under-development of the third world. This was increasingly a problem following the Second World War as the leading European colonial powers had suffered severe economic losses during the war and domestic movements for political independence were growing in strength and would soon be victorious.

Marxists argued that the west was rich because it looted their colonies by trading with them and investing money in their economies. Mises challenged this view by arguing that key parts of Western Europe and North America grew rich ahead of other regions because they were able to “check the spirit of predatory militarism” which had traditionally prevented wealth accumulation in all countries. He further argued that, the developing world would not be able to develop economically if it did not do the same thing, whether this “predatory militarism” came from without (the colonial powers) or within their countries (the new Marxist or military regimes which took power). Another interesting thing to note here is his division of history into two periods - the first and more traditional period when “cooperation” took place as a result of “hegemonic bonds”, out of which only a few places in the world were able to break free and introduce a new and truer form of “cooperation” “by virtue of contractual bonds.” This is an argument which was also put forward in the 19th century by Henry Maine and Herbert Spencer with their distinction between societies based upon “status” vs. “contract.”