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June 20, 2009
Conservatives & The Austrian School of Economics (Part 3)
The anti-capitalist mentality has been around a long time, but this is the first time it has wholly-owned the White House.
Ludwig von Mises (1881-1973), a leading scholar of the Austrian School of Economics, wrote The Anti-Capitalist Mentality. First printed in 1956, it came out in the midst of the Cold War.
After Hitler took over Austria, Professor von Mises, formerly of the University of Vienna and the Graduate Institute of International Studies in Geneva, Switzerland, left his homeland in 1940 and immigrated to the United States. At age 60, he was in a strange land, learning a new language. At 64, he began teaching at the New York University Graduate School of Business Administration. He stopped teaching at age 88.
In The Anti-Capitalist Mentality he examined the anti-capitalism thinking of those who favor a collectivist economic system - be it fascism, socialism or communism. Though their definitions overlap, they share the notion of central planning by an authoritarian government. Although his words are over fifty years old, they resonate with current events.
His perception of the role of the consumer in capitalism is unambiguous.
“Capitalism deproletarianizes the ‘common man’ and elevates him to the rank of a ‘bourgeois.’ On the market of a capitalistic society the common man is the sovereign consumer whose buying or abstention from buying ultimately determines what should be produced and in what quantity and quality.” (p. 1)
If the American automobile consumer wants to buy gas-guzzling SUVs, then, the specious science of manmade global warming aside, the capitalist system offers it for their purchase and enjoyment. Therefore,
“The control of the material means of production is a social function, subject to the confirmation or revocation by the sovereign consumers.” (p. 2)
In von Mises’ writings, “conservative” carried a different meaning than it does today, at least among those who consider themselves conservatives. It had more to do with Europe’s reactionary aristocracy than with free-market capitalism principles.
“While the conservative and the ‘progressive’ foes of capitalism disagree with regard to the evaluation of the old standards [of wealth distribution], they fully agree in condemning the standards of capitalistic society. As they see it, not those who deserve well of the fellow men acquire wealth and prestige, but frivolous unworthy people. Both groups pretend to aim at the substitution of fairer methods of ‘distribution’ for the manifestly unfair methods prevailing under laissez-faire capitalism.” (pp. 8-9)
As to what leads to individual prosperity, von Mises wrote,
“What makes a man more or less prosperous is not the evaluation of his contribution from any ‘absolute’ principle of justice, but evaluation on the part of his fellow men who exclusively apply the yardstick of their own personal wants, desires and ends. It is precisely this that the democratic system of the market means. The consumers are supreme - i.e., sovereign. They want to be satisfied…What counts in the frame of the market economy is not academic judgments of value, but the valuations actually manifested by people in buying or not buying.” (p. 9)
“Under capitalism, material success depends on the appreciation of a man’s achievements on the part of the sovereign consumers.” (p. 31)
“From the very beginnings of the socialist movement and the endeavors to revive the interventionist policies of the pre-capitalistic ages, both socialism and interventionism were utterly discredited in the eyes of those conversant with economic theory. But the ideas of the revolutionaries and reformers found approval with the immense majority of ignorant people exclusively driven by the most powerful human passions of envy and hatred.” (Emphasis added. p. 43)
Recollect A.C.O.R.N.’s bus tour of homes wherein lived AIG executives and their families. Envy and hatred on display.
“[P]eople do not ask for socialism because they know that socialism will improve their conditions, and they do not reject capitalism because they know that it is a system prejudicial to their interest. They are socialists because they believe that socialism will improve their conditions, and they hate capitalism because they believe that it harms them. They are socialists because they are blinded by envy and ignorance…They pretend to trust only in experience. But they no less stubbornly refuse to take cognizance of the undeniable facts of experience, viz., that the common man’s standard of living is incomparably higher in capitalist America than in the socialist paradigm of the Soviets.” (p. 46)
What von Mises could not foresee was the threat to capitalism as a result of the late 2008 implosion of the U.S. credit market. An increasingly interventionist federal government practiced social engineering by abrogating the fundamental, historical responsibility inherent in a mortgage. At the same time, the government failed miserably to oversee the financial markets. Its regulators set a new standard for dereliction-of-duty while a Wall Street culture replete with math-savvy derivative engineers, too smart by half, cranked out convoluted investment products that spread like a global virus. Nevermind, for now, how the Fed policies helped build and maintain this house of cards till they fell.
Capitalism takes the rap for government mis-interventionism and ineptitude, while the Wall Street wizards wreaked havoc.
For earlier post in this series see (Part 1) and (Part 2).