I. Reappraisal After Fifteen Years

What has happened in those fifteen years, and just where do we stand today? What is to be said now in the context of the problems discussed in The Social Crisis oj Our Time? These are the ques tions which first come to mind. They are questions to which one individual seeks an answer-the author of those earlier works and of this one-and they are questions to which it is not possible to give any hut a subjective reply, however much it may be based on 1 A HUMANE ECONOMY arguments made as cogent as possible and on the widest possible experience. It is, therefore, both honest and expedient for the author to begin with himself and to try to define his own position in regard to social and economic affairs. If this achieves nothing else, it may at least set an example. Those who, like myself, were born a few weeks before the close of the last century can regard themselves as coevals of the twentieth century, although they cannot hope to see its end. Anyone who has, as I have, the somewhat doubtful privilege of having been born a national of one of the great powers and, moreover, of one of the most turbulent powers of this great, tragic continent and who has shared its varied fate throughout the phases of his life may add, like millions of others, that his experience spans a wider range than is normally given to man. A village and small-town childhood which, with its confident ease, its plenty, and its now unimaginable freedom and almost cloudless optimism, was still set in the great century of liberalism that ended in 1914 was followed by a world war, a revolution, and crushing inflation; then came a period of deceptive calm, followed by the Great Depression, with its millions of unemployed; then a new upheaval and an eruption of evil when the very foundations of middle-class society seemed to give way and the pathetic stream of people driven from house and home ushered in the new age of the barbarians; and finally, as the inescapable end to this appalling horror, another and more terrible world war.

Now, before we have even taken the full measure of the political, economic, social, and spiritual shocks which this war engendered, the world is menaced by the sole surviving, the Communist, variety of totalitarianism and by the apocalyptic prospects of unleashed atomic energy. What has been the impact of this experience and of its inter pretation on a man like myself? Perhaps the one thing I know most definitely is something negative: I can hardly describe myself as a socialist in any meaningful or commonly accepted sense. It took me a long time to become quite clear on this point, but today it 2 REAPPRAISAL AFTER F'IFTEEN YEARS seems to me that this statement, properly understood, is the most clear-cut, firm, and definite part of my beliefs. But this is where the problem begins. Where does a man of my kind take his stand if he is to attack socialism because he believes it to be wrong?

Is the standpoint of liberalism the right one to deliver his attack? In a certain sense, yes, if liberalism is understood as faith in a par ticular "social technique," that is, in a particular economic order. If it is liberal to entrust economic order, not to planning, coercion, and penalties, but to the spontaneous and free co-operation of peo ple through the market, price, and competition, and at the same time to regard property as the pillar of this free order, then I speak as a liberal when I reject socialism. The technique of socialism-that is, economic planning, nationaliza.tion, the erosion of property, and the cradle-to-the-grave welfare state--has done great harm in our times; on the other hand, we have the irrefutable testimony of the last fifteen years, particularly in Germany, that the opposite-the liberal-technique of the market economy opens the way to well being, freedom, the rule of law, the distribution of power, and in ternational co-operation. These are the facts, and they demand the adoption of a firm position against the socialist and for the liberal kind of economic order.

The history of the last fifteen years, which is that of the failure of the socialist technique all along the line and of the triumph of the market economy, is indeed such as to lend great force to this faith. But, if we think it through, it is much more than simple faith in a social technique inspired by the laws of economics. I have rallied to it not merely because, as an economist, I flatter myself that I have some grasp of the working of prices, interest, costs, and ex change rates. The true reason lies deeper, in those levels where each man's social philosophy is rooted. And here I am not at all sure that I do not belong to the conservative rather than the liberal camp, in so far as I dissociate rnyself from certain principles of social philosophy which, over long stretches of the history of thought, rested on common foundations with liberalism and socialA HUMANE ECONOMY ism,. or at least accompanied them. I have in mind such "isms" as utilitarianism, progressivism, secularism, rationalism, 'optimism, and what Eric Voegelin aptly calls "immanentism" or "social gnos ticism."!

In the last resort, the distinction between socialists and non socialists is one which divides men who hold basically different views of life and its true meaning and of the nature of man and society. Cardinal Manning's statement that "all human differences are ultimately religious ones" goes to the core of the matter. The view we take of man's nature and position in the universe ultimately determines whether we choose man himself or else "society," the "group," or the "community" as our standard of reference for so cial values. Our decision on this point becomes the watershed of our political thinking, even though we may not always be clearly aware of this and may take some time to realize it. This remains true in spite of the fact that in most cases people's political thinking is by no means in line with their most profound religious and philosoph ical convictions because intricate economic or other questions mask the conflict. People may be led by Christian and humane convic tions to declare themselves in sympathy with socialism and may actually believe that this is the best safeguard of man's spiritual personality against the encroachments of power, but they fail to see that this means favoring a social and economic order which threat ens to destroy their ideal of man and human freedom. There re mains the hope that one may be able to make them aware of their error and persuade them by means of irrefutable, or at least reason able, arguments that their choice in the field of economic and social order may have consequences which are diametrically opposed to their own philosophy.

As far as I myself am concerned, what I reject in socialism is a philosophy which, any "liberal" phraseology it may use notwith standing, places too little emphasis on man, his nature, and his per sonality and which, at least in its enthusiasm for anything that may be described as organization, concentration, management, and ad4 REAPPRAISAL AFTER FIFTEEN YEARS ministrative machinery, makes light of the danger that all this may lead to the sacrifice of freedom in the plain and tragic sense exem plified by the totalitarian state. M[y picture of man is fashioned by the spiritual heritage of classical and Christian tradition. I see in man the likeness of God; I am profoundly convinced that it is an appalling sin to reduce man to a means (even in the name of high sounding phrases) and that each man's soul is something unique, irreplaceable, priceless, in comparison with which all other things are as naught. I am attached to a humanism which is rooted in these convictions and which regards man as the child and image of God, but not as God himself, to be idolized as he is by the hubris of a false and atheist humanism. These, I helieve, are the reasons why I so greatly distrust all forms of collectivism.

It is for the same reasons that I champion an economic order ruled by free prices and markets--and also because weighty argu ments and compelling evidence show clearly that in our age of highly developed industrial economy, this is the only economic or der compatible with human freedom, with a state and society which safeguard freedom, and with the rule of law. For these are the fun damental conditions without which a life possessing meaning and dignity is impossible for men of our religious and philosophical convictions and traditions. We would uphold this economic order even if it imposed upon nations some material sacrifice while social ism held out the certain promise of enhanced well-being. How for tunate for us it is, then, that precisely the opposite is true, as expe rience must surely have made obvious by now, even to the most stubborn. Thus we announce the theme which is the red thread running through this book: the vital things are those beyond supply and demand and the world of property. It is they which give meaning, dignity, and inner richness to life~, those purposes and values which belong to the realm of ethics in the widest sense. There is a pro found ethical reason why an economy governed by free prices, free markets, and free competition implies health and plenty, while the C·...) A HUMANE ECONOMY socialist economy means sickness, disorder, and lower productivity.

The liberal economic system releases and utilizes the extraordinary forces inherent in individual self-assertion, whereas the socialist system suppresses them and wears itself out in opposing them. We have-as we shall have occasion later to show in detail-every rea son to distrust the moralizing attitudes of those who condemn the free economy because they regard the individual's attempts to as sert and advance himself by productive effort ae ethically question able and prefer an economic system which summons the power of the state against them. We are entitled to set least store by such moralizing attitudes when they are preached by intellectuals who have the open or secret ambition to occupy positions of command in such an economic system but who are not critical enough of them .. selves to suspect their own, ethically none too edifying, libido dominandi. They want to use the horsewhip to drive the carriage of virtue through impracticable terrain, and they fail to see that it is downright immorality to lead people into temptation by an eco nomic order which forces them to act against their natural instinct of self-assertion and against the commands of reason. A govern ment which, in peacetime, relies on exchange control, price control, and invidious confiscatory taxation has little, if any, more moral justification on its side than the individual who defends himself against this sort of compulsion by circumventing, or even breaking, the law. It is the precept of ethical and humane behavior, no less than of political wisdom, to adapt economic policy to man, not man to economic policy.

In these considerations lies the essential justification of owner ship, profit, and competition. But-and we shall come back to this later-they are justifiable only within certain limits, and in remem bering this we return to the realm beyond supply and demand. In other words, the market economy is not everything. It must find its place within a higher order of things which is not ruled by supply and demand, free prices, and competition. Now nothing is more detrimental to a sound general order appro6 REAPPRAISAL AFTER F](FTEEN YEARS priate to human nature than two things: mass and concentration. Individual responsibility and independence in proper balance with the community, neighborly spirit, ilnd true civic sense-all of these presuppose that the communities in which we live do not exceed the human scale. They are possible only on the small or medium scale, in an environment of which one can take the measure, in conditions which do not completely destroy or stifle the primary forms of hu man existence such as survive in our villages and small-or medium sized towns.

We all know to what a pass we have come in this respect. There is no doubt that what, even fifteen years ago, sounded to many peo ple like fruitless nostalgia for a lost paradise is today a lone voice competing, without hope, against a hurricane. In all fields, mass and concentration are the mark of modern society; they smother the area of individual responsibility, life, and thought and give the strongest impulse to collective thought and feeling. The small cir cles-from the family on up-with their human warmth and natural solidarity, are giving way before mass and concentration, before the amorphous conglomeration of people in huge cities and indus trial centers, before rootlessness and Inass organizations, before the anonymous bureaucracy of giant concerns and, eventually, of gov ernment itself, which holds this crumbling society together through the coercive machinery of the welfare state, the police, and the tax screw. This is what was ailing modern society even before the Second World War, and since then the illness has become more acute and quite unmistakable. It is a desperate disease calling for the desperate cure of decentralization and deproletarianization.

People need to be taken out of the mass and given roots again. Here, too, lies one of the basic reasons for the crisis of modern democracy, which has gradually degenerated into a centralized mass democracy of Jacobin complexion and which stands more urgently than ever in need of those counterweights of which I spoke in my book Civitas Burnana. Thus we a.re led to a political view whose conservative ingredients are plainly recognizable in our predilection 7' A HUMANE ECONOMY for natural law, tradition, corps intermediaires, federalism, and other defenses against the flood of modern mass democracy. We should harbor no illusions about the fateful road which leads from the Jacobinism of the French Revolution to modern totalitarianism. Nor should we deceive ourselves about all the forces of spiritual and moral decay that are at work everywhere in the name of "mod ern living" or about the claims which this magic formula is naively supposed to justify. I have named some of these forces in my book Mass und Mitte, where I had harsh words to say apout such move ments as progressivism, sinistrismo, rationalism, and intellectual ism. We should know where all this will end unless we stop it in time. It is no use seeking salvation in institutions, programs, and projects. We shall save ourselves only if more and more of us have the unfashionable courage to take counsel with our own souls and, in the midst of all this modern hustle and bustle, to bethink our selves of the firm, enduring, and proved truths of life.

This brings me to the very center of my convictions, which, I hope, I share with many others. I have always been reluctant to talk about it because I am not one to air my religious views in public, but let me say it here quite plainly: the ultimate source of our civilization's disease is the spiritual and religious crisis which has overtaken all of us and which each must master for himself. Above all, man is Homo religiosus, and yet we have, for the past century, made the desperate attempt to get along without God, and in the place of God we have set up the cult of man, his profane or even ungodly science and art, his technical achievements, and his State. We may be certain that some day the whole world will come to see, in a blinding flash, what is now clear to only a few, namely, that this desperate attempt has created a situation in which man can have no spiritual and moral life, and this means that he cannot live at all for any length of time, in spite of television and speedways and holiday trips and comfortable apartments. We seem to have proved the existence of God in yet another way: by the practical consequences of His assumed non-existence.

8 REAPPRAISAL AFTER FIFTEEN YEARS Surely, no one who is at all honest with himself can fail to be struck by the shocking dechristianization and secularization of our culture. We may try to seek comfort in remembering that this is not the first time that Christianity has ceased to be a living force. As long ago as the eighteenth century it looked, mainly in France but to some extent also in England, as if the Christian tradition and Christian faith had irretrievably lost their hold. It is important and interesting to remember this, and it reminds us that today's lack of religion has its historical origin in eighteenth -century deism or open atheism. But this is cold comfort. However much the content of the Christian tradition was diluted at: that time, most people, with all their skepticism and secularism, still helieved in a divine order and in a life whose meaning extended beyond this world. But in our times, the situation is radically different. Although, in contrast to the situation in the eighteenth century, a minority takes its faith more seriously than ever and gathers round the equally steadfast churches, the dominating and prevailing opinion is completely atheistic. And since men obviously cannot live in a religious vacu um, they cling to surrogate religions of all kinds, to political pas sions, ideologies, and pipe dreams-unless, of course, they prefer to drug themselves with the sheer mechanics of producing and con suming, with sport and betting, with sexuality, with rowdiness and crime and the thousand other things which fill our daily news papers.

We may find some comfort in the reflection that in all this we are still reaping that which destructive spirits of the past have sown. This is still the direction, we may say, in which the same old spirit or non-spirit-blows, and why should the wind not change, and quite soon, too? It may do so. We certainly do not wish to exclude the possibility. However, and here we return again to our main theme, we would merely be deluding ourselves if we drew such a sharp dividing line between the realm of the spirit and the conditions of man's exist ence. We must not shirk the serious question of whether the forms 9 A HUMANE ECONOMY of our modern urban and industrial society are not in themselves a breeding ground for the godlessness and animalism of our times. "Certainly," a contemporary German writer says, "there is a con nection between a people's degree of civilization and the degree of its religious faith. In nature, God is revealed to us and we feel His breath; in the cities we are surrounded by man-made things. And the more the man-made things pile up and crowd out nature and natural things, the more we lose the ability to hear the voice of God. Absorbed in the contemplation of a garden, Luther once re marked that man is not capable of making a single rose. It is an obvious remark, and yet a significant one, which expresses a sense of the difference between God's handiwork and man's. In the open country, with the starry skies above our head and the brown fertile earth under our feet, we breathe in God's strength at every step.

The countryman, whose work is dictated by the changing seasons and is dependent on the elements, feels himself to be a creature of the Almighty like the corn in the field and the star following its pre destined orbit. The ancient invocations of the Psalms· come to his lips spontaneously as if but newly spoken. He knows in his heart how far beyond reach God is and at the same time how intimately close, how unfathomable His will and His mercy. It may be that we could precisely calculate the relation between the decline of true faith and the rise of urban civilization cut off from nature if we knew more about such mental processes as faith."2 There can be no doubt that the progress of our civilization has meant a steady expansion of the man-made area. On the spiritual plane, it has meant the concurrent spread of the belief that any thing which can be extolled as modern is true progress and that there is no limit to what man can "make." If we include in these limitless possibilities man himself as a spiritual and moral being, as well as human society and economy, we step right into Com munism. No one would deny that it becomes ever harder to hear God's voice in this man-made, artificial world of ours, on either side of the bank cashier's counter, in the factory, amid the columns 10 REAPPRAISAL AFTER FIFTEEN YEARS of motor traffic and the concrete canyons of our cities, not to men tion the underground cities of the full..blown atomic age, like a vision of hell worthy of Brueghel or Bosch, which a German scien tist not long ago cheerfully prognosticated for us as the next stage of life on this planet. Worse still, we are getting into the habit of screening off all the vital things, like birth and sickness and death, and we even deprive death of its dignity and moving solemnity hy rushing our funeral processions in rnotorcars through the busy streets to distant cemeteries, those human refuse heaps that are prudently removed, indeed hidden, from residential areas. Who can still have the courage to speak of the flight from the land, for instance, as a desirable by-product of an ever improving pattern of production?

Old and New Vistas It is quite terrifying to see how people, and not least their spokes.. men in puhlic, remain insensitive and criminally optimistic in the face of the social and cultural crisis of our times. If anything, the crisis is getting worse rather than better, and the danger of exag gerating it seems incomparably smaller than that of minimizing it with deceptive, soothing words. If there is a feeling that this crisis is something historically unprecedented and monstrous, that all the standards and precepts of experience are failing us, and that we can no longer count on any constants in human nature or on such un shakable convictions as have hitherto given meaning to our civiliza tion and cultural universe, then this feeling of having the ground cut from under one's feet, of being uprooted and at sea without an anchor, deserves respect and not derision. Is it really so wide of the mark. to think our epoch unique, un precedented, and unparalleled? Is it not made plain to us at every turn that there are things in our time which never were before, in deed things which determine our whole life?

In fact, it is precisely the decisive elements of our life today that 11 A HUMANE ECONOMY have never existed before in all the millennia of human history, back to its remotest sources, which we are now learning to trace. Never before was there such an increase in the world's population as has taken place during the last two centuries and still continues. Never before have the world's peoples so consciously realized their oneness and, indeed, taken it for granted. Never before has one par ticular form of civilization become so universal and spanned the whole world as does our Western civilization. Never before has there been anything like the technical triumphs originating in the Western world. 3 And the consequences of modern technology, like modern technology itself, have no precedent in the whole course of known history; they are consequences which affect the life and thought of all those millions whose pattern of existence is set by teeming cities and huge industrial concerns and proletarianism.

There finally arises the question of whether all this revolutionary novelty in the external conditions of life is not also accompanied by a radical transformation of the prevailing human type, a new mutation of Homo $apiens that is as novel and original as New York and General Motors, radio and nuclear fission, mass living and a world-wide engineering culture. 4 It is a poor species of human being which this grim vision con jures up before our eyes: "fragmentary and disintegrated" man, the end product of growing mechanization, specialization, and functionalization, which decompose the unity of human personality and dissolve it in the mass, an aborted form of Homo sapiens cre ated by a largely technical civilization, a race of spiritual and moral pygmies lending itself willingly-indeed gladly, because that way lies redemption-to use as raw material for the modern collectivist and totalitarian mass state. At the same time, this new type of man is spiritually homeless and morally shipwrecked. His capacity for true religious faith and for cherishing cultural traditions having been worn away by too much cerebral and psychoanalytic intro spection, he looks for surrogates in the fanatically intolerant po litical and social ideologies of our time (or "social religions," as 12 REAPPRAISAL AFTER FIFTEEN YEARS Alfred Weber aptly calls them) . At the top of the list are socialism, Communism, and nationalism.

No one has the right to make light of these dismal forebodings. Nevertheless, we may well ask ourselves whether this kind of pes simism is not so extreme that it becomes part of our cultural crisis and as such must be overcome if we are to find a way out. I am the last to deny the importance of external conditions of living as fashioned by technical progress, organization, and social institu tions, hut the ultimately decisive things for man lie in the deeper spiritual and moral levels. To assurne that external conditions alone determine man's spiritual and moral. make-up, and thereby his whole personality, is to concede one of the major aspects of the cultural crisis, namely, the dissolution of our traditional Christian and humanistic conception of man in a sort of historical relativism which defines man in terms of evolutionary stages, morphological types, and cultural cycles. The essential symptom of our cultural crisis is precisely that we are losing the inner certainty which the Christian and humanistic belief in the unity of civilization and man gave us. To overcome the crisis means to regain this certainty . We can save ourselves only if man finds the way hack to himself and to the firm shore of his own nature, assured value judgments, and binding faith. 5 At the same time, let there be no doubt about it: man must, of course, also master the immense problems for which we have to thank the unexampled upheaval in our external forms of living.

Therefore, if we must guard against the optimism which does not even suspect the quicksands surrounding us, we must equally guard against the pessimism which sinks in them and, indeed, hecomes a new danger and may prove itself true by its own effects on the cul tural crisis. We have to beware of an historicism which dissolves everything into change and evolution, as well as of a kind of rela tivistic sociology which cannot hut weaken our position still further. It would be self-contradiction to fail to associate myself with the warning against the extreme danger threatening man and society 13 A HUMANE ECONOMY today, and, to be sure, the causes of danger include some weighty ones previously unknown in history. But this is no reason to allow ourselves to be cast down by these apocalyptic visions. This is not the first time that danger has beset mankind. Nothing compels us to believe that we cannot overcome it, provided only that we hold fast to one ultimate belief: faith in man, faith in man's essentially unal terable nature, and faith in the absolute values from which human dignity derives.

These reflections are highly topical. We can test them at once against an event which, in the midst of all our troubles, we are entitled to enter on the credit side of the balance sheet of our hopes and fears. I have in mind the decline of Communism as a spiritual and moral world power. The colossal monument of totalitarianism left standing after the destruction of National Socialism is crum bling. True, the external military power of Communism is more redoubtable than ever, now that the Russians have gained a start in rocket techniques, and its internal police power remains as re volting as ever. Yet if we correctly interpret the development of the Communist empire since Stalin's death and assess at their true value recent events, not only in satellite countries but in Russia it self, then we can hardly doubt that the Communist doctrine, faith, and appeal have entered a phase of decline, at least in Europe, though less so in the underdeveloped countries of Asia and Africa.

It is, of course, too early to speak of collapse, hut for the first time in some thirty years we may at least hope, with legitimate con fidence, that the end will come. It would be fatal, however, to mis interpret that hope and to allow it to deflect us from the utmost firmness, vigilance, and resolution in the face of Communism as a dictatorship bent on world conquest or to succumb to the seduc tions of "co-existence" which build upon our gullibility, cowardice, and confusion. On the contrary, what this now justified hope should do is to give us back our long-lost courage and the confidence that we can win that battle for our own existence which Communism has forced upon the free world. 14 REAPPRAISAL AFTER. FIFTEEN YEARS This is the vantage point from which we should look, above all, at the chain of dramatic events in the Communist empire which shook the world not long ago. The defiance of the Poles and the open anti-Communist revolt of the heroic Hungarians were stu ..

pendous events never to be forgotten. Communism here suffered a moral defeat without our having lifted a finger and, indeed, with many of us in the Western world not even properly knowing what it was all about. It was a defeat whose implications cannot be over estimated, however much naked force seems to prevail once more. The painted stage-sets of Communism have collapsed; it stands un.. masked and in such a manner that it cannot hope to recover, how ever pessimistic a view we may take of the West's forgetfulness and apathy. If things have come to such a pass that a world movement which poses grandiloquently as the liberator of the masses has to treat workers, peasants, and students as its worst enemies, then this is the beginning of the end. It is a resounding defeat in the "Third World War," in which we have long been engaged on terms chosen by Moscow and Peking on the basis of momentary expediency.

What is more, the scene of the defeat was the Communists' favorite front, that of internal softening up. The smoke screen of "co-exist ence," behind which our downfall was being prepared, has blown away; the popular-front intrigues and the whisperings of contact men have become contemptible; gone, above all, is any faith in the Communist "remaking of man," which was to have started with the· young. The fund of confidence which Moscow had begun to accumulate in innocent minds with the dexterity of a marriage swindler is suddenly devalued. All we have to do is to make sure that this success is not frittered away by folly, forgetfulness, cow ardice, and insensibility. These are indeed already busy doing their wors~ and they are aided and abetted by a certain kind of intellec tual cleverness which is the very opposite of wisdom. There remains the essential fact that what we witnessed was the revolt of whole peoples against the violation of the human soul, the darkest and most dangerous aspect of Communism. That man can 15 A HUMANE ECONOMY be "remade" has always been one of the principal tenets of Com munism and one worthy of its extreme anti-humane doctrine. The fainthearted or perplexed in the non-Communist world despond ently shared this belief for a long time without realizing that they were thereby betraying the Christian and humane conception of the nature of man. Those of my readers who are familiar with my Mass und Mitte will recall that however pessimistic I may have been at that time, I always did the best I could to oppose and fight this insolent and degrading doctrine as a mechanistic and atheist denial of human dignity. The events which I have mentioned here are a triumph for our confidence in the essential human soul. Noth ing could have been more unequivocal and convincing. The Com munist "remaking" was, naturally enough, to have started with the young, but it was the young themselves, who had grown up with the trickery of Communism and had been fed at its trough, who hurled themselves against the Russian tanks most bravely, desperately, and implacably. Even in those parts of the Communist empire where, un like Hungary, no revolt has yet broken out, it is the rising genera tion which is the stronghold of spiritual resistance to Communism.

And so we have gained this supreme certainty: whatever dis asters Communism may still inflict upon the world, not least be cause of our own weakness, it will go the way of all godless effron tery. It will tremble before the rebellion of those who fight for freedom and human dignity and who spew the venom of this doc· trine out of their -mouths. This certainty rests on the conviction, confirmed by experience, that there is a limit to even the worst pes simism with which we may be inclined to view the present crisis of civilization and society. This pessimism isbounded by the primary constants of human nature. These we may trust, but such trust must include a profession of faith in the inviolable core of human na ture, as well as the resolution to defend this faith against all corro sive doctrines. However, having stated these limits and so erected a last bulwark against the philosophy of self-annihilation and despair, we are at 16 REAPPRAISAL AFTER FIFTEEN YEARS once compelled to pronounce another warning against underesti mating the extraordinary gravity of the situation. True, there is an end to all things and so to Communism also, and it is comforting to know that even the Russians cannot aXways have everything their own way. This is a cheering thought and we will give it its due.

True, also, the star of CommunislIl as a substitute for religion is declining, and therefore the prospect of our being engulfed forever in the night of totalitarianism has los1t much of its terror. But it would be fatal to draw too sanguine conclusions. The theory of the internal decay of Communism can all too easily be abused as a sop to our conscience and in extenuation and excuse of cowardice, fear, and confusion. And all this at a tilne when that part of the world which calls itself free is threatened as much as ever, and perhaps more, by perils requiring our relentless vigilance and effort, even if the danger of Communism be reduced to one of military and po litical power which, though still formidable, can be mastered. It is not the specter of totalitarianisln which raises its Gorgon's head in our midst. What we have to fear is a development which, like inflation, isa creeping process and, as will be shown, is indeed closely connected with the creeping inflation of our times. Security and personal comforts are rated Inore highly than freedom, law, and personality. That which still goes under the name of freedom is, as often as not, license, arbitrariness, laxity, and unlimited de mands. Few people today attach to the word "freedom" any clear meaning which might put them on guard against its demagogic abuse. The individual means less and less, mass and collectivity more and more-and so the net of·servitude which hems in personal development becomes ever denser, more closely meshed, and ines capable. The center of gravity of decisions keeps shifting upwards: from the individual, the family, and the small, compact group up to anonymous institutions. The power of the state grows uncontrol lably; yet, since powerful forces are at: the same time eroding its structure and weakening the sense of community, there is less and less assurance that administration and legislation unswervingly 17 A HUMANE ECONOMY serve the whole nation and its long-term interests. Demagogy and pressure groups turn politics into the art of finding the way of least resistance and immediate expediency or into a device for chan neling other people's money to one's own group.

Government, legislation, and politics of this kind are bound to forfeit public esteem and to lose their moral authority. They are alarmingly exposed to contempt, lawlessness, and lack of public spirit and to corruption in all forms. and degrees. Those who serve government, legislation, or politics experience, in their turn, a cor responding loss of esteem, and this impairs their capacity for re sistance to the forces undermining the state. The vicious circle closes. It is all the more vicious since, at the same time, the sheer power of the state, the area of legislation, and the influence of poli tics have grown enormously and are still expanding, even where governments have assumed office with the explicit promise of light ening this burden. Law and the principles of law, which should be as a rock, become uncertain. For Locke, the individual had an in alienable right to life, liberty, and property; but today, even in the "free world," the last-named pillar is badly dilapidated, and few realize that its fall would pull down the pillar of liberty as well and that the remaining pillar, the right to the inviolability of life, could not then stand alone.

If property is degraded into precarious de facto possession de pending on the whim of government (shocking cases of this kind have recently occurred in Locke's own country and are, indeed, the writing on the wall) or on the voter's favor; if property becomes a hostage in the hands of those who own less or nothing; if property, together with its inseparable concomitant, the law of inheritance, ceases to he one of the natural and primary rights which need no other justification than that of law itself-then the end of free society is in sight. When governments no longer regard their own nationals' property as sacrosanct, then it is hardly surprising that their rough treatment of foreign property exceeds all the bounds of law and propriety. Few things have so hampered Western govern18 REAPPRAISAL AFTER FIl~TEEN YEARS ments in dealing with the breaches of contract of Asian or African rulers as the irrefutable fact that nationalization in the West has set an example for the Mossadeghs and Nassers and Sukarnos.

Once the relations between nations are ruled no longer by respect for property but by arbitrariness and contempt of law, then the last foundations of international order are threatened and the ubi quitous social crisis extends to the international community. The economic consequences of such a crisis of confidence inevitably fall most heavily upon those underdeveloped countries which are re sponsible for it, for they are cutting themselves off from Western capital sources, without which economic development can proceed only at great sacrifice. The crisis of the state and the weakening of common purposes combine with the disregard of property rights to create a situation which is causing more and more concern to the nations of the free world: the diminishing of the value of money by inflation. On the one hand it is not at all certain that governments, in the position where mass society, with its pathological symptoms, has put them, are still able or even willing to stop the rot of their currencies. It is high time that we face the question of whether this problem has not grown out of hand and marks the JPoint where the inner weak ness of overblown government is first and most dangerously dis played. On the other hand, no great perspicacity is needed to recog nize the close kinship between laek of respect for property and indifference to the value of money. Erosion of property and erosion of money go together; in both cases, that which is solid, stable, firmly held, assured and meant to last is replaced by that which is brittle, precarious, fleeting, uncertain, and meant for the day.

Both kinds of erosion, too, promote each other. Not only are they the result of the same forces, but it can also be shown-and we shall do so later-that the erosion of property and the disintegra tion of an order of society resting on property create,in many ways, a most favorable climate for the erosion of money by infla tion. Conversely, it stands to reason that the erosion of money by 19 A HUMANE ECONOMY inflation strengthens the forces which undermine the position of property because the masses come to lose both the desire and the ability to accumulate individual property and concentrate instead on the flow of income guaranteed by the welfare state and full em ployment. It is true that inflation induces people to put their money into real values, but on the other hand, it exposes property to all the shocks and social tensions which are peculiar to an inflationary climate and widens the gap between the victims of inflation and those who know how to defend themselves. So, once more, we move in a fateful spiral from which no easy escape is now possible, least of all by the reckless optimism of those who'refuse to face the facts and problems of the crisis.

Market Economy and Collectivism With these considerations we have reached the more particular field of economics, which provides the occasion of conducting our reappraisal in a manner befitting the economist. The first question is this: To what extent and with what degree of lasting success has that economic order which is appropriate to a free society, namely, the market economy, been able to hold its own against the collec tivist economic order, which is incompatible with free society in the long run? At first sight it may seem as if the adherent of the market econ omy had good reason to feel both satisfied and hopeful when he considers the conflict between these two principles of economic order during the last fifteen years. He may feel all the more enti tled to do so if he recalls the straits in which the cause of the mar ket economy found itself when the Second World War and its out come seemed to clinch the triumph of collectivism throughout the world. Founded upon the corresponding collectivist ideologies, con trolled and planned economies, with their paraphernalia of forms, fixed prices, rationing, injunctions and permits, police checks, and penalties, seemed to be holding the field all along the line. When 20 REAPPRAISAL AFTER. FI:FTEEN YEARS the Second World War was drawing to its close, few had the cour· age to give the market economy a good character, let alone a future.

This small band was headed by a handful of men who had asked themselves long ago what were the fundamental difficulties on which the collectivist economy, with its central administration and com pulsion, was bound to come to grief, and what incomparable ad vantages the market economy had on its side. Long before the mar ket economy was again taken for granted and had become the source of prosperity, as they expected, these men in various coun tries had set to work to popularize the idea of economic order as a system of regulatory principles and incentives in the economy and to explain that in the last resort the choice lies .between only two systems: the collectivist system, resting on planning and com mands-as Walter Eucken says, the "economy of central adminis tration"-and the opposite system of the market economy. In our forgetful era it may be useful to recall how poor the pros pects for the market economy appeared at that time and how hope less the efforts of its advocates. What was the situation at the end of the Second World War? Throughout a whole century one of the principal reasons for the advance of socialism had been the myth of its historical necessity, with which Marx, above all, had equipped the movement. This myth was well adapted to the mental inertia of the man in the street, and its propaganda value was bound to in crease when the day of fulfillment actually seemed to he at hand.

It is hard to withstand the appeal of an idea which is not only the winner-designate in the timetable of history, known only to the initiates, but which actually seems to have won through already. This is exactly what the situation was then. Nearly everywhere in the world the purposes of .planning, na tionalization, and full employment had given rise to a mixture of expansionist monetary policy and oflilcial controls that paralyzed the price mechanism. The Leftist course of economic policy, with its varieties in different countries, owed its ascendancy in part to Keynes's oft-misunderstood ideas and in part to the heritage of war 21 A HUMANE ECONOMY and war economy. The triumph was also· furthered by the fiction that the Allied victory over the Fascist countries was tantamount to the victory of an anti· Fascist (that is, predominantly socialist and progressive) front over the bloc of powers mistaken for ultra· conservatives, reactionaries, and monopoly capitalists. The blind· ness with which collectivist totalitarian Russia was accepted as a member of this anti·Fascist front was matched by stubborn refusal to accept any proof that German National Socialism had, at least in a formal sense, paralleled Soviet Russia as a textbook example of socialism in full bloom and had, on the spiritual side, more than one ancestor in common with "democratic" socialism. Those who, like F. A. Hayek and the author of this book, were so deplorably tactless as to explode this myth know from experience what it means to challenge a popular misconception. 6 Only in the light of all this can we appreciate the full significance of the fact that gradually a number of European countries began to form a center of opposition and had the temerity to disregard the timetable of history. In 1945, Switzerland stood alone as a kind of museum piece of liberalism which could he dismissed with an in· dulgent smile. The first jolt came when, in 1946, Belgium followed in the tracks of Switzerland and set her economy on an even keel by stopping inflation and reintroducing a free-market system. She was soon so successful that her balance·of-payments equilibrium disqualified her from direct Marshall Plan aid, which was tailored to the needs of socialist countries. At the same time, Sweden, which had started out from a situation comparable to Switzerland's, effec tively demonstrated that determined Leftist policies, inspired by socialist theoreticians, enable even a rich country, and one spared by war, to soften the hardest currency almost overnight. But, the obtuse might have argued, did not Belgium possess the riches of the Congo, which would explain the miracle without destroying the socialist and inflationary creed? The answer was not long in com..

ing. By· adopting the now famous policy of Luigi Einaudi, then Governor of the Bank of Italy and later President of the Republic, 22 REAPPRAISAL AFTER FIFTEEN YEARS who put a professor's knowledge of economics into practice, Italy, in 1947, rallied to the nucleus of liberal and anti-inflationary coun tries and managed to extricate herself from the morass of inflation and economic controls. It was a striking success and most probably saved Italy from the victory of Communism; however, its demon stration value was somewhat overshadowed by the host of problems peculiar to Italy. The really decisive victory in the Icritical European economic situation was won by Germany in the summer of 1948. Again it was a professor who switched from theory to practice. Ludwig Erhard and his group, stepping into a situation of so-called repressed infla tion which was really nothing less than the stark and complete bank ruptcy of inflationary collectivism, countered with a resolute return to the market economy and monetary discipline. What is more, Erhard was unsporting enough to succeed beyond all expectations. 7 This was the beginning of an impressive chapter in economic his tory when in the span of a few years we witnessed a nation's pre cipitous fall and its rebirth and the alnlost total collapse and subse quent swift recovery of its economy. The world was treated to a unique and instructive example of the paralysis and anarchy which can amict an economy when utterly mistaken economic policies destroy the foundations of economic order and of how quickly and thoroughly it can recover from its fall and start on a steep, upward climb if only economic policy recognizes its error and reverses its course.

Germany lay prostrate, ravaged by war, impoverished by ten years of repressed inflation, mutilated, demoralized by defeat in an unjustified war and by the exposure of a hateful tyranny, and teeming with refugees: a country without hope which the pas sengers of international express trains traversed hastily, embar rassed by the children scrounging for leftovers of food on the em bankments. And of all countries, it was precisely this one which had the courage to swim against the tide of collectivist and infla tionary policies in Europe and set up its own-and contrary-pro23 A HUMANE ECONOMY gram of free markets and monetary discipline, much to the dismay of the young economists of the Occupation Powers, who had been reared on the doctrines of Marx and Keynes and their disciples. Not only was the success overwhelming, but it also happened to coincide with the patent failure of socialism in Great Britain (which had replaced the hopelessly discredited Soviet Union· as the prom ised land of the socialists). It began to look as if the country that had lost the war were better off than the winners. 8 This was an outrage because it meant the end of the socialist myth. What made it still harder to swallow was that defeated Ger many should be the one to set this example of prosperity through freedom, for there were few who grasped that this was a not un worthy manner of making good some of the evil that this same country had brought upon the world by means of its previous, op posite example of inflationary collectivism, which had marked the beginning of National Socialism and had been lapped up all too eagerly by others. But the success of the new economic course was proscribed by every single chapter of the fashionable Leftist eco nomic doctrine. This success simply could not be tolerated, and thus false theories combined with wishful thinking to produce those repeated prophecies of doom which accompanied German economic policy from one triumph to the next. When the false prophets, along with all their various disproved predictions, finally fell into ridi cule, they took refuge in the tactics of either remaining as silent as possible on the success of the German market economy or of ob scuring it with all kinds of statistical juggling and gross misrepre sentation of facts. They also liked to dwell upon such problems as still required solution, exaggerating their importance and unjustly blaming the market economy for them. The annual reports of the United Nations Economic Commission for Europe in Geneva are a treasure-trove in this respect.

The dire warnings began with the assertion that truncated West Germany was not economically viable. This theme was repeated in a minor key in all sorts of variations until the symphony of disaster 24 REAPPRAISAL AFTER FIFTEEN YEARS had to be broken off abruptly when it became obvious that Ger many had become one of the world's leading industrial and trading nations, the major economic power on the Continent, and the pos· sessor of one of the hardest and most sought-after currencies. Other arguments were then brought up. Sorne said that it was all a flash in the pan, others that currency reform and Marshall Plan aid were the good fairies rather than the market economy. Germany was a black sheep of sinister economic reaction and crippling deflation, the worst problem child of Europe besides Belgium and Italy, or so the annual reports of the European Economic Commission would have one believe. Still others said that even if Germany were quite obviously prospering, it had nothing to do with the market econ omy; it was only because the Germans were such a hard-working, frugal, and thrifty people. There is really no point now in continu ing this list of embarrassed evasions and absurdities because they have long been answered by the facts. The .lesson which Germany (and later Austria, in equally difficult conditions, and most recently France) taught the world with its example of market economy and monetary discipline gradually emerged from the sphere of dema gogic disparagement and ideological party strife and became one of the most important reasons why the market economy has put collectivism on the defensive everywhere this side of the Iron Cur tain-and, indeed, outside Europe, too, as the impressive example of Peru has shown.

If we look back today upon the economic development of the major countries of the West since the Second World War, the story is one of grave economic debility at .first and subsequent recovery. True, the recovery is far from being complete, nor can we be cer tain that it will be lasting, but all the same, it has produced impres sive improvements. The disease was caused by the economic experi ments of dabblers and an unholy alliance of inflation and collec tivism. The recovery, to the· extent that it has taken place, is, we repeat, attributable to a very simple prescription: the re-establish ment of a workable and stable currency system and the liberation 25 A HUMANE ECONOMY of the economy from the fetters of planning, which had hampered or entirely paralyzed the regulatory and incentive effects of free prices and free competition. In some countries, especially Germany, the recovery was as unparalleled as the preceding sickness, and it is this recovery which opened the way to the spectacular revival of international economic relations, especially within Europe.

Under the impact of these experiences, the dispute over the prin ciples of economic policy in a free society has now become much less acute. Nationalization and planning, the catch phrases of the immediate postwar period, have lost their appeal, and even in the socialist camp the response is now weak. Such enthusiastic recep tion as they still find-together with nationalism, which is closely connected with them-seems to be concentrated in the so-called underdeveloped countries, with their Nehrus and Sukarnos and Nassers and U Nus, or whatever their names may be. But even in these areas a cooling off may be expected in the near future. This is certainly a gratifying change in the climate of economic-policy discussions. However, a good many of the things which the open or-still more-the secret enemies of the market economy now demand under new labels come perilously close to those which are so discredited by their old name that one prefers not to mention them.

Nevertheless, it would be a mistake to overestimate the victory of the market economy or to think that its fruits are secure. First of all, we must not forget that the victory is anything but complete.. We may perhaps neglect, in this context, the fact that the domina tion of total collectivism over approximately one-third of mankind remains unbroken, notwithstanding some minor concessions to per sonal independence and decentralization. But a good many coun tries of the free world, too, are still permeated by considerable remnants of collectivist policies, the elimination of which meets with stubborn resistance, even under non-socialist governments like the British.. Some countries, especially in Scandinavia, are still so 26 REAPPRAISAL AFTER FIFTEEN YEARS strongly influenced by the principles, institutions, and ideologies of the socialist welfare state that their efforts to combat the ensuing inflationary pressure do not hold out much promise of success. This is one of the reasons why the re-establishment of complete currency convertibility on the basis of balanced international economic rela tions remains an unsolved problem in spite of some progress and occasional determined efforts. It follows that the real basis of inter national economic integration also remains· incomplete, that is,a universal currency system with free and stable foreign-exchange markets. This, in turn, creates a fertile field for all kinds of at tempts at international economic controls. Certain aspects of Euro., pean economic integration show quite clearly how this situation reacts on the separate national econornies and weakens the market economy.

Furthermore, we would be greatly deluding ourselves if we re garded the market economy as secure, even in countries like Ger many. First of all, we have to remove any misconception about what really happened. The German economic reform was not sim ply a once-and-for-all act of liberation, a removal of obstacles that blocked the way to an automatic and natural process of recovery and growth. It was not like that at all. The history of German eco nomic policy since 1948 has proved that economic freedom is like any other freedom: it must, as Goethe says, be conquered anew each day. The act of liberation was a necessary but not a sufficient condi tion for recovery and growth. The German example shows the mar ket economy must be won and secured over and over again and not just against new dangers and telnptations or in the face of new tasks. Since 1948, the German market economy has had to grapple continuously, both with old and persistent problems and with new and changing ones. It was now this and now that, now foreign trade and now the capital market, the budget, social tensions, agriculture, or transport. Residues of collectivism, such as rent control, were scattered about the market economy like unexploded mines, and 27 A HUMANE ECONOMY they proved to be exceedingly difficult to dispose of through normal democratic procedures· and under the cross fire of vote-catching demagogy.

On all of these and other fronts, German economic policy has continued to fight, with varying fortunes. Some grave and almost ir reparable mistakes were made. Some brilliant successes were scored, ~specially in the revival and expansion of foreign trade and the rehabilitation of the currency. In between the positive and negative poles there is a whole gamut of more or less satisfactory average results, half or three-quarter successes and-as in the case of agri culture and public finance-hitherto unavailing attempts to solve intractable chronic problems. The most serious feature was, and to some extent still is, capital shortage; in spite of all the progress achieved and in spite of an enormous rate of investment, this re mained for a long time a dead weight on the German market econ omy, and its effects were aggravated until quite recently by the failure to create a really free and well-functioning capital market.

There can be no doubt that in this· field the German market economy suffered. one of its most conspicuous defeats, and even. though the setback was due to the disregard rather than to the application of the market economy's own principles, the fact remains that there was a serious threat from this quarter. The si~uation is much the same in Austria. Indeed, it is no exaggeration to say that nowadays the central and most pressing problem everywhere is how to insure the continuing economic growth of the countries of the free world by means of adequate capital supply resting on true saving and not on inflation and taxation or too much on business profits (self financing) . Let us leave the instructive example of Germany and return to the general prospects of the market economy in its contest with collectivism. It can, I think, by no means be taken for granted that the nature, conditions, and operation of the market economy are generally understood-in spite of all the lessons of experience and the best efforts of economists. Otherwise, how could people again 28 REAPPRAISAL AFTER FIFTEEN YEARS seriously moot the idea of containing inflationary price rises with a new set of price ceilings and controls, as if the memory of decades of repressed inflation had simply been blotted out? Thus it is that the field still remains open, incredibly enough, to planned-economy sallies in various guises and in various places.

People are still in the habit of taking refuge in officialregulations whenever a new problem turns up. In Europe, this takes the par ticularly absurd form of expecting any problem found intractable on the national scale to be solved on an international scale by a supranational authority. Behind the fa~ade of the market economy, people are still, consciously or unconseiously, promoting a develop ment which leads to bureaucratic rigidity and the omnipotence of the state. They still tend, in the name of economic and social secur ity, to heap new tasks on the government and thereby new burdens on the taxpayer. Again and again we see ourselves cheated of the hope of reducing to tolerahle limits the crushing weight of taxation,which in the long run is incompatible with a free· or even moderately sound economy and society. It is not unusual today for the government's budget to absorb as much as 30 or 40 per cent of the national in come through various kinds of compulsory contributions. This reinforces inflationary pressure and has a disintegrating and ulti mately paralyzing effect on the market economy. In the presence of such excessive fiscal burdens, the market mechanism no longer works in the manner· which theory assumes and economic order requires. The whole process of the economy is distorted by those households and firms whose financial decisions are made with an eye toward the tax collector rather than toward the market, and incentive is weakened at all levels and· in all spheres. The tax sys tem, which today is highly intricate and impenetrable but is at the same time of decisive importance for individuals and firms alike, has become, in the hands of government, a no less insidious than effective tool with which to sway and distort the market economy's processes and the natural selection of firms according to their true 29 A HUMANE ECONOMY market performance. Saving is depressed· below the level necessary to finance growth investment without inflationary credit expan sion, and at the same time, the rate of interest loses its essential ef ficacy because, as a cost factor, it takes second place after tax pay ments. Thus the capital market is upset, and ominous encourage ment is given to inflationary tendencies. Old-style public finance is turned into a kind of fiscal socialism which more and more social izes the use of income. It is, unfortunately, becoming quite plain that the combination of the overexpansion of public expenditure and the reorientation of its purposes in socialist directions consti tutes a source of continuous inflationary pressure and is incom patible with the market system in the long run. 9 Still another circumstance accentuates this development. Not satisfied with their already enormous holdings of publicly operated enterprises, most governments, spurred on by the vested interests of the civil service, are still trying to acquire more and more such holdings and thus create veritable strongholds of public power and monopoly. This is happening even in Germany, the model of the market economy, to say nothing of Italy or France. At the same time, there remains a sense of social grievance, a hostile and eco nomically irrational distrust of everything that goes· by the name of capital or entrepreneur, together with a stubborn misconcep tion of the latter's task and the conditions in which he can fulfill his functions, which are essential to the market economy. Free econ omy stands or falls with the free entrepreneur and merchant, just as such an economy is inconceivable without free prices and mar· kets. There is no way of defending the free economy against the still powerful forces of collectivism except by having the courage to stand by these central figures of a free economy and protect them from the wave of distrust and resentment to which-more in the Old World than in the New-they are exposed.

We can do this more confidently and effectively if more entre preneurs embrace free competition, which makes them the servants of the market and causes their private success to depend upon their 30 REAPPRAISAL AFTER F'IFTEEN YEARS services to the community. Otherwise they stab us in the back. But the task of safeguarding free competition and preventing concen· tration of economic power is exceedingly difficult and at best cannot be solved without compromises and concessions. At the same time, of course, there is the related task of making sure that competition does not degenerate in any way but remains a fair fight, so that the only road to business success i.s through the narrow gate of bet ter performance in the service of the consumer and not through the many back doors of unfair and subversive competition, which are only too well known to the business world. In fact, these twin tasks have so far not been solved even tolerably satisfactorily in any country. At best they are being seriously tackled, as in the United States and Germany; at the worst no notice is taken of them at all.

Nevertheless, the progress made in safeguarding free competition among producers and protecting it from economic domination is sufficient to hope for eventual fuU success. But another monopolY' position· is gaining ground with uncanny speed and has, for very profound reasons, developed into the strongest and most dangerous bastion of social and economic power, and that is the monopoly of labor unions. This monopoly position remains unassailed, if indeed it is not further waxing in strength and danger. The concentration of supply on the labor markets in centralized trade-unions works with the whole arsenal of monopoly power and does not shrink from naked extortion. This monopoly is the most damaging of all be cause of its all-pervading effects, the most fatal of which is the inflationary pressure of our times. And yet the nature and signifi.. cance of this·labor monopoly are recognized by only a few, and even for them silence is the counsel of wisdom, unless they are free and independent or have the courage to face the consequences of openly stating unpopular truths. But since there is only a handful of people in the modern world with enough freedom and inde pendence to save themselves froml the suicidal effects of such cour ..

age, it is easy to imagine the·prospects of solving a problem which cannot even be raised. lo 31 A HUMANE ECONOMY Behind all of these perils we always encounter one predominant problem which we must face whenever we stop to think about the fate awaiting the industrial nations that are built upon the principle of economic freedom, a fate which these nations approach with alarming complacency or even with pride in something they call progress. This all-pervading problem is the process of growing con centration in the widest sense and in all spheres: concentration of the power of government and administration; concentration of eco nomic and social power beside and under the state; concentration of decision and responsibility, which thereby become more and more anonymous, unchallengeable, and inscrutable; and concen tration of people in organizations, towns and industrial centers, and firms and factories. If we want to name a common denominator for the social disease of our times, then it is concentration, and collec tivism and totalitarianism are merely the·extreme and lethal stages of the disease.

We all know what consequences progressive concentration en tails for the health, happiness, freedom, and order of society. First of all it destroys the middle class properly so called, that is, an in dependent class possessed of small or moderate property and in come, a sense of responsibility, and those civic virtues without which a free and well-ordered society cannot, in the long run, sur vive. The obverse of the same medal is the steady increase in the number of those who are not independent, the wage and salary earners, whose economic focus is not property but money income. The workers and employees are progressively merging into a uni form type of dependent labor, the teeming millions which populate the factories and offices of giant concerns. It may be that in many cases the large firm has a superiority of technical and organiza tional methods, although this superiority is often exaggerated and frequently rests merely on the artificial, though perhaps not delib erate, support of the government's economic and fiscal policy. But if this means denying man and the society determined by human values their due, then our accounts go seriously wrong, and this 32 REAPPRAISAL AFTER FIF'TEEN YEARS miscalculation may become the source of grave perils to free so ciety and free economy.

However, the most immediate and tangible threat is the state it self. I want to repeat this because it cannot be stressed too much. The state and the concentration of its power, exemplified in the predominance of the budget, have become a cancerous growth gnawing at the freedom and order of society and economy. Surely, no one has any illusions about what it means when the modern state increasingly-and most eagerly before elections, when the voter's favor is at stake-assumes the task of handing out security, welfare, and assistance to all and sundry, favoring now this and now that group, and when people of all classes and at all levels, not excluding entrepreneurs, get into the habit of looking on the state as a kind of human Providence. Is it not precisely this function which increases the power of the state beyond all bounds, even this side of the Iron Curtain? Is Frederic Bastiat's century-old malicious definition of the state as une grande fiction atravers laquelle tout le monde s'efJorce de vivre aux depens de tout Ie moude not now becoming an uncomfortably close fit?

The bloated colossus of the state, with its crushing taxation and boundless expenditure, is also chiefly to blame for the smoldering inflation that is a chronic evil of· our times. Its destructive action will continue as long as the state does n.ot radically curtail its pro gram and as long as we do not drastically revise some of the most cherished popular ideas of present-day economic and social policy, such as full employment at any cost, the welfare state, the use of trade-union power for inflationary wage increases, and so on. But what hope of this can there be in a "dependent labor" society and a mass democracy afflicted by concentration? It is evident that the actually existing forms of market economy, even in Germany, Switzerland, and the lUnited States, are a far cry from the assumptions of theory. What we have is a hodgepodge system in which the basic substance of the market economy is not always easily discernible, a cacophony in which the dominant note 33 A HUMANE ECONOMY of economic freedom is not always clearly audible. The fact that the market economy still functions in spite of a hitherto unimag ined degree of intervention is no proof that such distortions and handicaps are harmless, let alone useful. On the contrary, if it proves anything, it is the astonishing resilience of the market econ omy, which is obviously hard to kill.

On the other hand, there can be no doubt that there exists a critical point beyond which the symptoms of strain on such a mar ket economy become alarming. This is a problem which has so far never been treated with the attention it deserves. One thing is cer tain: an excess of government intervention deflecting the market economy from the paths prescribed by competition and price mech anism, an accumulation of prohibitions and commands, the blunt ing of incentives, official price-fixing, and restrictions on primary economic freedom must lead to mistakes, bottlenecks, less-than optimal performances, and imbalances of all kinds. At first these may be overcome comparatively easily, but with the proliferation of intervention, they end up in general chaos. The worst is that the disturbances caused by intervention are often taken as proof of the inadequacy of the market economy and so become a pretext for more and stronger intervention. It needs more understanding than can be generally expected to appreciate that intervention is at fault.

Rent control, which, as every well-informed person knows, outdoes everything else in injustice and economic irrationality and not only tends to perpetuate the housing shortage but places an additional burden on the capital market, is a glaring and most depressing example, even in the model countries of the market economy. This survey of the perils which today surround the market econ omy has shown that it is not nearly in such good condition as its outward success might suggest. We are concerned about the market economy. It is not that we think it is wrong; on the contrary, the reasons for defending it are as compelling as ever. It is precisely because we know how infinitely important it is to maintain, pro tect, and develop it in the face of the collectivist menace that we fear 34 REAPPRAISAL AFTER FIFTEEN YEARS for the market economy in a world where social and political condi tions are, on the whole, against it and threaten to become worse unless we remain vigilant and active. Market economy, price mecha nism, and competition are fine, but they are not enough. They may be associated with a sound or an unsound structure of society. But whether society is sound or unsound wiUeventually decide not only society's own measure of happiness, well-being, and freedom but also the fate of the free market econom.y. Market economy is one thing in a society where atomization, mass, proletarianization, and concentration rule; it is quite another in a society approaching anything like the "natural order" which I have described in some detail in my earlier book Mass und Mitte. In such a society, wealth would be widely dispersed; people's lives would have solid founda tions; genuine communities, from the family upward, would form a background of moral support for the individual; there would be counterweights to competition and the mechanical operation of prices; people would have roots and would not be adrift in life without anchor; there would be a broad belt of an independent middle class, a healthy balance between. town and country, indus try and agriculture.

The decision on the ultimate destiny of the market economy, with its admirable mechanism of supply and demand, lies, in other words, beyond supply and demand. 35 CHAPTER II Modern Mass Society Some twenty years ago, I made a first attempt to describe the nature of modern mass society and used the term Vermassung, "enmass ment," to characterize it. I also tried to point to the extraordinary dangers threatening every aspect of our civilization, not least the economic and social. I tried to demonstrate that the danger was immediate and that it was continually becoming more evident and more difficult to avert, while the world, in the midst of all its dis asters, still clung to the consoling idea of material progress, some times to the exclusion of all else. So much has happened in these twenty years that I feel I must try again, perhaps more insistently, and certainly in the light of new purposes and new events. While the discussion of this subject has in the meantime grown to vast dimensions, the features of modern mass society have become sharper and more unmistakable and its dangers, on the whole, more appalling and alarming, l certain equilibrating, healing, and com pensating processes notwithstanding. This makes my task a good deal easier. Today I can rely on my readers' being familiar with the nature and the problems of mass society and of the process of enmassment which generates it. Rather than repeat matters which have long ago been stated and understood, I can turn to the less thankless task of saying what seems to me most important at this juncture. Taking advantage of the presumed general understanding 36 MODERN MASS SOCIETY of the issue, I feel that I need not worry too much about presenting a coherent and complete picture and can safely leave my readers to fill in the gaps from their own knowledge and experience.