Mises: The Impact of Ideas; W. Peterson

35 BOOKS Mises: The Impact of Ideas by William H. Peterson I deas direct thinking, govern lives, and forge history. The impact of ideas is a theme that echoes and re-echoes in the works of Ludwig von Mises (1881-1973). Mises held that man is a thinking and acting being, that his values are highly subjective, that he can be swayed by politi cal parties and spurious doctrines, that choosing determines everyone of his decisions, that he should never relax in his quest for truth, that in the end his only weapon in the war on error is reason. Mises held further that correct ideas are crucial to the human race, that the very essence of the human condition is the inescapable and insur mountable dualism of that condition: the dualism of man's two separate, distinct, unbridgeable, and not always perceptible or completely understand able realms. One realm is physical, the outer world of corpo real, material, external reality-the reality that impinges on the senses, the things we can see, hear, taste, touch, and feel, the reality that reflects such mysterious earth forces as energy, gravity,electric ity, and rotation. This, too, is the world of not always-hospitable nature, of what Darwin viewed as the struggle for existence and survival of the fittest for all the earth's species.

It is also the external world of chemistry, physics,biology,physiology,geology,meteorology, and other hard "natural" sciences that help unlock some of the mysteries of the universe, of the world of flora and fauna, of tooth and fang, of earthDr. Peterson, an adjunct scholar at the Heritage Founda tion, holds the Burrows T. and Mabel L. Lundy Chair of Business Philosophy at Campbell University, Buies Creek, North Carolina. quakes and hurricanes, of droughts and floods, and of-insofar as economics is concerned-stark scarcity. The other realm is mental, abstract, intangible, almost ethereal, the inner world of the individual and his unique individuality, of his different and changing ideas, thoughts, ends, feelings, values, aims, missions, emotions, goals, intentions, pur poses, ideologies, and traditions, the internal world of reason and reasoning, including false rea soning, the broad and largely uncharted universe of the human mind.

This is, in addition, the internal world where man ineluctably has to align and realign, continu ously,his chosen ends with chosen means, to cope, again continuously, with endless scarcity, with the ceaseless change long ago spotted by Heraclitus, with social relations, religious questions, political problems, family matters, and all other praxiolog ical concerns. It is this inner realm-impacted by ideas-that generates thinking, that stirs emotions, that impels human action, that facilitates change for better or worse, that alterably shapes and shakes the future and, to a degree, the outer realm, that makes or breaks social cooperation, especially via politics, that sows peace or wages war-that hence deter mines man's fate-in the past, present, and future. So, to repeat the observation of Mises, ideas direct thinking, govern lives, and forge history. Which is why Economic Freedom and Interven tionism: An Anthology of Articles and Essays by Ludwig von Mises as selected and edited by Betti na Bien Greaves (Foundation for Economic Edu cation, Irvington-on-Hudson, New York 10533, 36 THE FREEMAN • JANUARY 1991 250 pages, $29.95 cloth, $14.95 paper) is so vital and timely.

This fistful of ideas, this welcome and most readable book (with sideheads to ease the reading further) constitutes another chance for the West to re-examine the remarkable thought of a giant of our age. It marks another intellectual tie to the Mises legacy of understanding man's critical spheres of economics and politics, of telling us what we can do about them before it is too late. It is hence a book on human survival as well as human understanding. Mrs. Greaves, a close friend of Mises and a faithful student in his famous graduate seminar at New York University, notes that she collected some of these articles from Mises himself and oth ers from such sources as the Institute for Humane Studies, Liberty Fund, Regnery Gateway, Nation al Review, The Freeman,and The Commercial and FinancialChronicle.She thoughtfully collates the 47 pieces, most of them out-of-print or not eas ily available, into four sections: Economic Free dom, Interventionism, Mises As Critic, and Eco nomics and Ideas. Ideas of course permeate the entire anthology-much-needed ideas of a most constructive sort.

Take the Marxist idea of class conflict, for exam ple, and the Mises idea in response. In an article reprinted here from ChristianEconomicsof Octo ber 3, 1961,Mises takes Marx to task. Mises notes how the emerging market or contractual society of some two or three centuries ago soon obliterated the class lines drawn by serfdom and slavery. Yet, maintains Mises, class or status survives today only by government fiat in such dubious tax onomy and forms as subsidies (which views farm ers, for example, as a class), discriminatory taxa tion (which converts, among others, smokers, drinkers, and the rich into classes), affirmative action (which converts race and gender into class es), and union privileges (which transform employees into a class). So classes today become legal fictions and; by law, social frictions. In this sense, Marx's class struggle does persist, an unde served triumph for the Left.

Indeed, in the posthumously published third volume of Das Kapital,observes Mises, Marx was at his wit's end on how to sustain the validity of his dogma of the class struggle. He failed to solve the puzzle and so abruptly ended his manuscript with but a one-page chapter (the 52nd) on "The Classes," with his editor Friedrich Engels succinctlynot ing: "Here the manuscript breaks off." But Marx died many years after he ceased work on his major opus; and Mises sees that Marx had painted him self into a corner, simply unable to put forth a cred ible definition of classes in a capitalistic age. Or consider the Keynesian idea of the business cycle. In an article here reprinted from The Free manof September 24, 1951,Mises attacks that idea in commenting on Keynesian Alvin Hansen's book, BusinessCyclesand NationalIncome(Nor ton, 1951). In it Harvard Professor Hansen up holds the concept of.counter-cyclical· macro~ demand management by the government, dwells on such supposed causal factors as general overin vestment and overproduction (thereby ignoring the insight of classicaleconomist Jean Baptiste Say and his Law of Markets), and castigates those who see credit expansion and inflation as the underly ing causes of the cycle.

Rebuts Mises with a better idea: "People must learn that the only means to avoid the recurrence of economic catastrophes islo let the market-and not the governmentdetermine interest rates. There is but one pattern of positive counter-cycli cal policies, viz., not to increase the quantity of money in circulation and bank deposits subject to check. Deficit spending by borrowing from the commercial banks is the surest way toward eco nomic disaster." Or look at the idea of government intervention ism and the alleged need for supernational govern ments such as the European Community (which comes into full force in 1992). In a 1955 article commenting on How Can Europe Survive? by Hans Sennholz (Van Nostrand, 1955), Mises hails the Sennholz idea that the economic disintegration of then un-united Western Europe is hardly the outcome of the unhampered operation of the cap italistic market order.

It is rather, holds Sennholz, seconded by Mises, the result of the various West European govern ments (some ruled by outright socialist parties) erecting welfare states, interfering with domestic industries, even nationalizing some of them, restricting foreign trade and investment, and engendering economic retaliation in return. The further result is-no surprise! -widespread eco nomic isolationism and consequent European dis integration, even though this •. disintegration did eventually lead to the concept and implementation of a European Common Market, now known as the European Community (EC). What makes the Mises-Sennholz discussion so relevant if not poignant today is the political and economic context of this big and growing EC, which may one day conceivably take in part or all of th,e once-Eurocommunist Bloc. For while Marxism has gone down in ignominious defeat in Eastern Europe, is it not relevant to inquire: How are the Misesian ideas of the unhampered market society now faring in the EC halls in Brussels and Strasbourg, and in the respective capitals of the EC member countries? Answer: Not well.

For is the talk there not still, paradoxically, Marxian, Le., about the "need" for farmer protec tionism, welfare measures, and other "social democracy" impediments to the free trade idea? Which raises in turn this question: How does the EC propose to treat in the years ahead the foreign trade and investment of non-EC member coun tries such as the United States and Japan seeking to do business inside the Community? Or, to put this question more bluntly: Will the EC, perhaps under the pressure of a global recession, revert to Western Europe's economic isolationism of the 1950s, perhaps even with an economic Festung Europahiding behind high tariff and import quota walls? Comments Mises (again the year is 1955): "As long as there is domestic interventionism, the pre sent unsatisfactory state will last. The funds spent by the U.S. taxpayer for the economic unification of Europe were wasted."

Or consider the idea of land reform now so per tinent in an era when private property rights throughout the West are still unclear, when further decisions on just how to reallocate-hopefully, to privatize-the huge, literally millions of square miles of formerly state-held lands of Eastern Europe, including the Soviet Union, have to be made. Too, land reform is still a major issue in much of Latin America where landlords continue to operate large coffee, sugar, banana, and other plantations. In a contribution (beautifully entitled "On Some Atavistic Economic Ideas") to a 1966 Festschriftfor Jacques Rueff, previously available only in French translation, Mises again supplies superior ideas on land reform that illuminate the background behind today's headlines. Mises says the program of land reform, inc1udMISES:THE IMPACT OF IDEAS 37 ing confiscation and redistribution-usually in small equal parcels to the "peasants" or "citizens"

-no longer makes sense in a capitalistic market economy. He observes how in a market society the consumers dailyvote anew on just who should own or not own the factors of production, including land. All on a voluntary basis. Thus by their buying or abstention from buying, the consumers decide who should be allowed to be entrepreneurs and who should supply the other productive factors of land, labor, and capital. In other words, the consumers determine just who should operate the factors in the best and cheapest way for the satisfaction of their own wishes and needs. Entrepreneurs and other land and non-land fac tor owner/operators who do not measure up to these consumer wishes and needs are in effect assigned losses and soon turn to other pursuits. Factor owners who do measure up are rewarded with profits or other returns and so tend to expand their operations. It follows that economic re sources flow toward their social optimum and that the consumer is not only sovereign, but a dictator as well:ruthlessly direct, sparing no one, least of all the landowners however large.

Now, what of the idea of official favoritism for debtors (the "poor") over creditors (the "rich")? Governments historically and contemporaneously have long followed such an idea, from Solon in Ancient Greece and the Gracchi brothers in Ancient Rome on to our present Congress and to parliaments the world over. Here also, argues Mis es in his reprinted contribution to the Rueff Festschrift,the idea is to see that the capitalistic system already has radically altered the scheme of things. He writes: Under the modern credit organization the more opulent strata are more often debtors than cred itors. They own mortgaged real estate, business firms that are indebted to the banks and insur ance companies, [and] common stock of corpo rations that have issued corporate bonds. On the other hand the common man is a creditor insofar as he has taken out insurance policies, has savingsdeposits with commercial banks and savingsbanks, owns bonds whether government issued or corporate, and is entitled to receive retirement and old age pensions.

Thus the irony of modern-day deficit spending 38 THE FREEMAN • JANUARY 1991 ECONOMIC FREEDOM AND INTERVENTIONISM by Ludwig von Mises is available in cloth at $29.95 and in paperback at $14.95 from The Foundation for Economic Epuca tion, Irvington -on -Hudson, New York 10533. and easymoneyideasis that they are at oncepop ular-buttressed by conventionalwisdomin high academicand politicalplaces-and yet run direct ly counter to the interests of the broad populace. These ideas breed inflation and recessions.Since the end of World War II they have spelled the destruction of literally trillions of dollars in the total value of savingsin bank deposits,insurance policies, and pension funds, public and private, including the savings of hundreds of millions of low-incomeand middle-incomepeople.Currently the inflationary cancer induced by these ideas is and has long been global; and governments and central banks, trapped by false ideas, seem help less to stop it-even though they could, given the right ideas.