Socialism versus Free Market Exchange

0:00Ladies and gentlemen, it is a difficult problem for me to address this group that had already so many excellent speakers and will probably in the future have still more of them. But I don't want to stop at nice words of introduction. I want to enter in the middle of the thing, into media stress, in order to use the limited time that is given to us in the best possible way.

0:55Human beings are not only a biological class, that means a class of people who are connected and Related to One Another by Biological Facts, Human Beings are not only Relatives to One Another, Human Beings are first of all also Collaborators, they are first of all not only Biological, Identical and Biological were very closely related.

1:51They are also a praxeological class, using this term, which was unknown only a few decades ago. They are not only spiritually and intellectually close together, they are also close together in the way in which they are living and working. They are collaborators. Collaborators are not only people who cooperate with one another, they are also people who, before they start cooperation, are thinking in the same way and are bringing about a state of affairs in which we could speak of a unity of a group or of a class.

3:02There are several patterns of collaboration.

3:10One pattern which alone is known to people who see only how the small groups in which people are collaborating with one another This only group is the organized collaboration, the collaboration which is led by people who are giving the direction and consists of people who are following their leaders. This organized system of collaboration is extremely popular, is extremely well known, especially from the political point of view.

4:12but it is a system in which the individuals are integrated into which the individuals are integrated in a different way. It is an organized system, the system which we can very easily describe and we say it is a system today known under the term of socialism. Socialism is a cooperation of people, but a special kind of this cooperation. There is one individual or one group or class of individuals that gives the direction for the whole way of cooperation to all other members of the group.

5:07In the socialist system, or in the way that the socialist system is depicted by the individuals, in the socialist system there is one will that determines everything. And all the people, all the members of the system have to comply with the orders and provisions made by a small group or even only by an individual that is leading the whole organization.

5:55The way in which this furor was called or signified in the most elaborated social system that the world has now up to know and theoretically best elaborated is the furor. Under the Führer principle, Führer means the head, the guide, the man who alone determines where the whole system has to walk. In this system there is only one will that determines everything.

6:43There are no controversies, there is only the leader at the head, the führer at the head and the others have to obey and to follow. This system is very well known, it can very well easily be described, But it is a system whose consequences and effects are known to very few people, if to any people at all.

7:29Under the few principle, under the kind of collaboration which we call socialism or organized society, Under this system, there is one central way that determines everything, and all the other people have to follow, have to obey, they are our followers. There is certainly, under such a system, no waste of actions and of powers. But this alone doesn't mean anything. It means only what we have to say is that all the other people have no will of their own, have no possibility, no opportunity, no power to influence the direction of the whole system, the direction of the cooperation and collaboration of the people.

8:37It is a wonderful system, wonderful, very good, excellent, if we accept the ideas of the Fuhrer, if we accept the only idea that leads the whole thing today. But it is a very different thing if we look at it from the point of view of reality. In real life, we realize that there are different ideas and different wishes and different plans of different individuals. And that these individuals, the immense majority of people, would be extremely unhappy if they had to abandon their own vicious plans and ways, and would have to obey only to the orders of other people.

9:49We would call this system a present system, a system of lack of freedom of all the individuals if we were not committed to a fundamental mistake, which is practically or in fact the fundamental reason why so many people accept the ideas of socialism and the general direction of all human affairs.

10:35People accept socialism from the point of view of their own ideas. They are fully convinced that a socialist system will precisely proceed in the way in which they themselves would like to proceed and that all other people would be forced to adopt themselves to this system, which of course they themselves consider as the best and the only possible system. When we are talking about socialism, we assume, if we are in favor of it, that the socialist system will precisely work in the way in which the individual socialist wants it to work.

11:43and this system, this method, will precisely bring about those effects and those situations which this individual supporter of the socialist idea wants to have attained. If we assume that this system will also have the power to determine everything that an individual does with regard to problems commonly called religious problems, We must assume that such a system of socialism would adopt one specific religious system and what all other religious systems mean, made systems of minorities, persecuted minorities.

13:00We never think, in speaking of socialist conditions, that this socialist system could do and force people to do something which they consider as the worst of all possible things. We have, therefore, a state of affairs which we can simply only qualify as a state of bad thinking. People believe, people say, I am in favor of socialists or, they may use some other terms, which are synonyms of the world of socialism.

13:58But they assume that this system of socialism will be precisely the system which they themselves consider in every regard as the only good system, as the only system that ought to exist and that all other systems or other methods of doing things, whatever, the good, the great things, the noble things and the common things of every day, in a way which they do not want to tolerate. The idea of socialism may be considered, by some people, as a wonderful and great idea.

14:50If people may assume that it would be a wonderful thing if the whole world would be dedicated, is fully dedicated to only one definite method of working, thinking and living and would reject all other methods as bad, let us say. But the question is always, and this question is not always considered sufficiently, The question is, will this system be precisely a system which I can support, will support, may support?

15:40The idea of socialism was always connected with a firm conviction that there is only one good plan possible and as only one plan ought to be put into practice. And all the other things should be left to the decision to the state of affairs which is considered as illegal, as forbidden, The Great Popularity that Socialism enjoys in broad spheres of the world, this great popularity is due to the fact that people always believe that of course Socialism will can only support the right things and not the bad things, and that the bad things would be prohibited.

16:58And of course, what is good and what is bad, what is right and what is wrong, this is decided by my wishes, by my feelings, by what I have in mind. And the great popularity of socialism consists precisely in the fact that people always consider themselves as members of the ruling majority, of the ruling power of the socialist system, and never as members of a group whose feelings, thinking, teachings are not permitted, not tolerated, not accepted by the majority.

17:58Therefore, when we are talking about socialism, we are always forgetting that it could happen, That under socialism, I will not belong to the members of the majority, or of the group, that also a minority with various technical methods has got the rule of the whole world and the power to persecute all dissenters. that people are fully convinced that in this system it will be wonderful for me, just for me.

18:55I don't care whether it will also be wonderful for other people. The sort of great popularity of all such systems consists precisely in the fact that people are convinced that their own ideas, their own plans and their own situations will be the right ones, considered as the only one permitted. When we compare with this system of rigid monocracy, When we compare with this system, the system which is called the system of the market economy or the system of liberalism or many other terms which we know, the system in which everybody or every group is free to choose certain fields of conviction and Action, which are different from other people, from those chosen by other people, then we see there is certainly an inferior state of affairs, people say, because why should so many people, so many good people not accept it?

20:30What these people do not see is, they see from the point of view of human cooperation, of human co-existence, we have only one way to bring about full unanimity in every regard of thinking and acting, And this is by prohibiting the deviation, by persecuting the people who are deviating from the generally accepted, or that is safe from what is accepted by the majority, by those who have the power to force the dissenters to subjection.

21:26We have therefore to realize that human conditions would have developed in a very different way If there had been always only the attempts of people to make their own ideas, their own methods of acting and living supreme in the whole world and to prohibit everything else. We had a way out of it. We had to think to say it could be that in one part of the world, among one group of the people, there should be one system and among other people another system.

22:26system, that means they are sketching the state of affairs in a world in which there will be many, what we call, independent states, and in each of these independent states an other system of strict socialism, of strict determination by the ruling group of all All and every thing would prevail. This would have brought about a world of many groups, probably fighting one another, fighting one another because if you consider these things as absolutely necessary, You will not tolerate the development of other groups also beyond the borders of your own country.

23:31That we have human civilization, that we have what we call certain, let us say, improvements realized in the course of the centuries, is due to the fact that, first of all, such a general system that rules the whole world has never been realized and never been accepted. Also, there were many groups in the course of history who tried to bring this about. There were groups who thought that it is their right, their duty and their power to force all other people to submit.

24:31There were wars of this type, for instance religious wars, in which people tried to force a group of people of different religions to submit to their own religion and to accept it. There were hundreds and hundreds of years of struggles concerning such problems. But finally, out of these fights and wars, there emerged the idea that people are different and that it is not necessary, not absolutely necessary to have a state of affairs in which all other people are forced to behave precisely in the way in which a certain dictator wants them to behave.

25:35They have developed the system of cooperation, of cooperation in a state of affairs in which people can cooperate because they are committed to the same ideas. It is not necessary that people are acting precisely in the same way, behaving in the same way, thinking in the same way in which other people do. But what is needed and what is brought about and what has really started human civilization as we know it is the system of cooperation in those fields in which cooperation is accepted by greater or smaller groups.

26:41We have, therefore, in the course of the centuries, we have, therefore, the development of systems that are based on what is called the exchange. The exchange, which in Latin words, which were so often used in order to describe in the most simple way the conditions, are characterized as, Don't death. I give in order that you should give. I mean, I give in order to exchange with you.

27:29And we have brought, and this brought about in the course of the centuries, all those conditions which we consider as conditions of modern civilized life. We may say, of course, under some other conditions, it would be better. There, under the system of market economy, under the system of the exchange of goods, there prevailed still many things which would have disappeared if a superhuman being, not limited in any way, would have had the power to organize and to order all human affairs.

28:21We have a system and this system alone has in the thousands of years of human history developed to have a system in which people who are prepared to cooperate with one another are cooperating and even enter into a restricted kind of cooperation with other groups in which other ideas are prevailing. We have a system in which I can do something in order to satisfy another man from whom I expected something to end.

29:14We have a system of exchange of actions and the exchange of the product of these actions, and we have this system based on the exchange of services. One man renders a service in the expectation to receive another service from those people to whom he has rendered his service.

30:14And we have elaborated this system of exchange of workings, we have elaborated this system with the technical help of mediums of exchange. It is not necessary that one man should find precisely and other men who is able to give something to him for that what he gives to these other men. It is enough if we can elaborate such a system as it has been done and as everybody knows by the system of so-called media of exchange.

31:02And you have our, this human system as it exists today in the world, consistent with the fact that people are doing something in order to receive something for what they have done as a premium for their own services. And this system has been elaborated by the use of medium of exchange. That means that people are not giving away always necessarily what they have produced or what they are serving to do against the thing which they themselves want to consume or want to have.

31:52What to have? It is possible to use some medium of exchange that enters into the working of the boom, and we have in this way elaborated a complete system of civilization and human action that works satisfactorily. We have the system of the money economy and people are saying how dirty, how bad is to do something only for somebody else because you are expecting something from him. But it is not so bad.

32:38It is the condition in which human life can exist. And it is necessary in this situation, in this vein, to have some media of exchange because a man who wants to receive something does not always have what the other man from whom he wants to receive it would accept as a compensation. And we have therefore a system of the media of exchange, developed a system of money which makes it possible for the individual to do something in exchange for an action made by somebody else who is very different in every regard.

33:33We have developed in the years, in several thousand years, we have developed a system in which practically the people can use their different qualities, their different knowledge, their different abilities, and the various things which they are finding or can do in their geographical environment in order to receive from other people other things which they want to do. We have in this way a system of markets.

34:23might that people say, this is something very common, you know. Why only do something to another man, something, to give something to another man when you are expecting to get something from him? This may be a stupid objection or not, But the fact is that it brought about this development of human civilization of which we are proud today because we have made enormous progress against the conditions as they existed in the past ages.

35:10We say how common to give to another man to drink only because you are angry and want to receive something from him. I don't want to say whether this is very noble or common or not. But it is the basis of our civilization, the exchange of commodities and services. And this exchange of commodities and services, which brought about a civilization, as we know it, this system has only one alternative, and this alternative is the Fuhrer principle, the Fuhrer tool, The system of the central dictator who brings about everything by punishing people and by rewarding people.

36:21The alternative to our system of common marketing, these people say, or a system in which people always want to get something better by giving away something and receiving a payment for it. The alternative for this system, which is so common, you should be free to render services as far as you can render them and you will receive a premium for it. This system, which we have, may not be so noble from the point of view of a theoretical nobility, but it is a system that brought about all those things which we know today, and which we have today succeeded in doing away with many diseases and with finding for the sick people and for the people who are, for some other reasons, prevented from doing something a system in which they too can live and enjoy life, then this is due to the fact that we have created this wonderful system of marketing, that we have created this world market that makes it possible that somebody who gets some disease

37:52In Europe can find the cure, the only available cure which we know against it. Also, in order to get this, it is necessary to travel thousands and thousands of miles and establish many establishments which for their building and construction require years or even decades. We have established this wonderful system in which, of course, only the people who are healthy and have the power to work, can actively participate.

38:51But we cannot, but we have this system connected with another system which makes it also possible to give and to provide for those who are not in a position to provide for themselves. We have therefore a system in which we have to say The centre of our activities is the do-good-ness that I give in order to receive something. And in this system we have established the medium of exchange for technical reasons, because it makes the exchange possible.

39:41And this system of the medium of exchange of money requires certain special rules in order not to lose the goals which it has to attain. We can therefore say, in thousands and thousands of years, that mankind started with very low standards of living, with very simple things, with absolute ignorance of all those things, which we consider the highest things of life. In these thousands and thousands of years have they developed this system in which there are so many things which can be considered as fully satisfactory.

40:41And at the site of these many things, fully satisfactory, there prevail many things which are even today very unsatisfactory. But we have seen that this system developed step by step by the fact that individuals try to bring about some method of doing away with unsatisfactory conditions and making even very unsatisfactory conditions, in many cases, much less satisfactory, if not fully satisfactory. And this system is based on the market.

41:35And it is based on the exchange, on the market, against media of exchange. And such media of exchange are what we need in order to bring about a system in which people can do those things which we consider today, after thousands of years of development, as absolutely necessary, absolutely satisfactory, and so on. It is therefore not justified to look upon the conditions of the market exchange, of money, of selling things at the highest possible price that can be received, and of all these things, as things which belong just to the lower things of life, to the things which are absolutely necessary because the conditions are not satisfactory at the world and to make them more satisfactory requires such things as being selfish in many cases, selfish in acting in a way in which one tries to get the best what can be received in exchange ratios, and so on.

43:09We have certainly not reached an ideal state of affairs. We cannot reach such an ideal state of affairs because conditions in the world are such that men must work in order to feed themselves and that this is less, let us say, pleasant than just enjoying life without any necessity to work. But we have brought about such a system, and in this system there is the medium of exchange, money plays an important role, It plays a role that cannot, as far as we can see, be substituted by anything else.

44:06And therefore, if we say that the conditions in the world are not very satisfactory because you must try to bargain, you must try to exchange what you have against other things which you want to acquire, and so on. This is not very pleasant. This belongs to the lower strata of human life and human activities. This is not true. All the great things which men have brought about, the arts, and all the noble things which men have done, help to people who need help, help to people who are in bad conditions.

45:03All these things would be impossible if we had not developed in the course of the centuries and centuries, systems in which we are improving more and more the methods of preserving our human life and of making it purer and of making it more satisfactory from the point of view of ethical and artistic points of view. Therefore, if we are, say, if we are contrasting the bad conditions of the world with the ideas which we have in our minds about a finer and higher world.

45:54We must say such comparisons and such conditions have no value at all. What has made people better, what has given to people better conditions and what has created all those things which we consider today as the pride of women was not some declamations, some talks, some dreams about a better world or some attempts to realize by the power of arms a better world, But what it wrote about all these things was the daily fine works of people, the attempt of people to improve their own conditions by hard working and by doing things which were unknown to previous ages and to themselves in their previous times.

47:12And therefore we must say the market system, the system of producing something for the sake of giving it away, but only for giving it away to people whose themselves are giving something away to us for our improvement. This system may be considered as a very common system, as a system that does not compare with certain manifestations of human life in art, in religion, in philosophy, and so on.

48:03But it is the system that has improved everything. It is the system that has converted people whose ancestors were living on the scale of life which we consider as extremely unsatisfactory in conditions, in descendants who are continually committed to the idea that improving conditions by working more and more, and improving conditions by studying the conditions of nature more and more, and finding out better methods to fight all those things which we consider as unsatisfactory, that this is the right way for men to live.

48:56And therefore, if some people say everything on this earth is bad and the only thing which is satisfactory from the point of view of a higher philosophy is to retire from active duty and to live as anachorets used to live and so on. We can answer to say, no. Look around. And where you see even the smallest improvement of conditions, you may say, this is the effect of the intentions and of the works of our ancestors, and we have only one method of improving conditions.

49:49This is to do the same as said it, also to try to attain, to improve the conditions more and more.

50:19The Theory of Money and Credit Is it possible for a system to...

50:34Yes, I want to answer the first question, because I consider this also as a general question, as the most important problem we have to deal with. It is possible for a system of a socialist democracy to exist. That means, if there were people who were prepared to work so hard as the great people who brought about all great things did work, merely in order to improve something, perhaps to improve something, merely to bring about some change in other conditions somewhere in the world, then I would say, yes, it is possible.

51:36But if we take into account that the question is not to do something great that never existed before, but that the question is to improve step by step, small changes, to break up, to do somewhere, everywhere in the world, to avoid the waste of power and opportunities, then we must say no. We must say no, it is not possible, because what is here in the world, we have clear what has to be done.

52:26There is something, there is some apparatus that is very important and useful. But it could not serve in the same way in which it could serve if some deficiency, which is still connected with it, is to avoid it. And to avoid such a small deficiency, people must work and work hard and harder, and this they must be able to measure, And this measurement is precisely the system of market economy, which we have. Can this system of medium of exchange continue among this medium of exchange, is not backed by gold in order to strong?

53:18Now this is the problem of world. The question of money is, We have exchanged something which we have produced, not against the thing which we really need, but against something which will make it easier for us to attain in the next exchange this other thing. We are getting something as a medium of exchange which has some value, which somebody else will want to get because it serves some purpose.

54:15What we sought was that this can be done by, let us say, a kind of deception. We are giving away things, people say, against paper money. This paper money was not created as paper money. It was created as a title to get something which has value on account of the fact that people are asking for it, in the case of gold, for certain valuables, and for the medium of exchange.

55:08The great advantage of gold is a medium of exchange consistent with the fact that in order to increase the quantity of gold, you have to spend as much as the purchasing power of the gold unit. Therefore, we have to save what we need in order to have a system of Money is something that cannot be produced neither by the government nor by individuals at lower cost than the purchasing power of the monetary unit.

55:56If it were possible for the government to increase the quantity of money, as it is today the case, without any effects, then the use of money would disappear immediately.

56:22Where is the weakness in our system that has allowed an inferior ideology to undermine our free enterprise economy? Can our system survive? The weakness in our system is that we do not think the things up to the ultimate end. We say the paper money issued by a bank who redeems this paper immediately if we want it into gold, such a paper is not the same as a paper that does not make this redemption.

57:20And therefore, we did not make a difference between writing books, we didn't make a difference between a piece of paper money that is redeemed in gold and such a paper money which is not redeemed in gold. If we do not make this difference, then of course the whole thing disappears. Are the concepts of cooperation and competition really antithetical, as asserted by those who ascribe the form of socialism in the wake of capitalism?

58:15If not, at what level are these concepts reconcilable and indeed mutually complementary? There is no conflict between cooperation and competition. Cooperation is in the... I could say, cooperating in competition means that when something has to be exchanged against something else, Then the individual will try to get the best possible solution, the greatest quantity available.

59:13And those who are not in a position to provide this are not, practically, not competing. And therefore, we can say that the two things belong to the same idea and to the same group of affairs.

59:42Is inflation inevitable with full employment? More. It is simply to say that full employment does not mean anything else than full sale of commodities. If there is not full employment, this means that there are people who are asking too much for their employment. unemployment. That means people who overrate themselves, and this is not something very rare. Most people have the tendency to overrate themselves and to ask for money, and then if they realize how reality is, then they accept it.

1:00:35If we have unemployment as a great problem, it is due to the fact that the government interferes or the union interferes by raising the price of certain kinds of labour. And of course, if you raise the price of something above the value which the prospective buyers could get in some other field by spending this amount of money, then of course you will remain without these things.

1:01:26I have heard many people lately during economic problems in the state claim they think the government should freeze wages and prices. Where is the false thinking here? When you... I have heard many people lately during our economic problems in the state claim they think that the government should freeze wages and prices, etc. The government cannot freeze something. The government can make it illegal to sell at a higher price, for instance. Then those people who are not satisfied with the lower price ordered by the government will not sell.

1:02:15That means the government forbids practically certain methods of operation. The fact that the government says the price ought to be higher or that the government says the price ought to be lower is not different practically from my declaration this price should be lower or higher. Nobody cares what I am saying about it.

1:02:45Do you think our monetary system will collapse? Or are we going to continue with our present form of money? Our system will collapse when we are printing quantities of money without any economic reason for it, you know. There is no such thing as the possibility of increasing the quantity of paper money. We could imagine a state of affairs in which once in the past a certain quantity of paper money was printed and that in the future never again any addition to this quantity will be made.

1:03:38This would be a nonsensical system, but it would be a system that can work. But what cannot work is the system which we have, and it is this. The government wants to spend. The government wants to spend because it is very popular, if the government spends. The government wants the vote of certain people, and it will give them some money, not directly saying, I pay you for your voting, but they will give them some subsidies in order to become popular. Now, what does this mean? Any increase in the quantity of paper money, money on the part of the government means that there are now people who are offering more in buying than they could yesterday.

1:04:39And therefore that there is an upward movement of prices. That means inflation is the increase in the quantity of money in the hands of some people, of course, not of everybody. But if it were also at the hands of everybody, it would have the same need, you know. If the quantity of money increases, then people will be able to spend more, and people who are selling will receive more. But this must come to an end. If it goes on without an end, then ask the historians what happened a hundred times in various countries.

1:05:25Ask, for instance, the American historian what happened in the war of revolution and what happened with the currency of the Confederate states at the end of the civil war. And then you will have the answer. Can socialism survive without the help of capitalism?

1:05:54What does it mean, survive? For a man, I know what it means, survive. What for socialism it means is what will socialism... You mean socialism in one country can survive if there is capitalism in other countries. Socialism could survive, could exist. It exists in Russia. But the question is, how do those people who are living there survive? This is the question. It is not a question of survival of a system. Isn't all human action directed by selfishness?

1:06:44Of course everybody is selfish. He wants to eat, to eat himself, you know. And if you call this selfishness, then you must say everybody is selfish. But if we use the term selfish in order to describe the condition, the situation of a man who is not prepared to render his fellow citizens those services How is the rational man to react to the Führer system if conditions necessitate his remaining with its control?

1:07:30How is the rational man to react to the Fuhrer system if conditions necessitate his remaining with its control? The Fuhrer system means that there is an absolute monarch. He alone determines everything. It is of course supposed or self-understood that the Fuhrer is a wonderful man. A man who does everything only in order to satisfy the masses and is gifted enough to know what they need and is clever enough to produce these things.

1:08:17The theory principle was, in fact, merely the exclusion of the influence of all other people upon the direction of action. The theory alone determines everything. And what you other people do doesn't count whether you like it or you don't like it. The Führer has said that you have to dig holes in the earth somewhere, and then you have to be quiet. Would you care to answer this? In a communist controlled country, how much of their production is accomplished by slave labor? Does this method produce quality goods?

1:09:03In communist controlled countries, how much of their production is accomplished by slave labor? Does this method produce quality goods? Now, I would not criticize the use of slave labor for the work in a communist state. The characteristic of slave labor is that what the slave produces is not consumed by people whose consumption he has an influence. The labor of a freeman consists of the fact that he enjoys directly or indirectly the products of his labor. Indirectly, that means by selling them, by getting the wages for his work and so on.

1:10:10Slave labor means that the slave is forced to produce by the owner. And slave labor was extremely unproductive because the slaves were not interested in the quality of their own labor. This should be the last one, Professor. What book would you recommend as a basic beginner's course in economics for a college student who has a professor who is a Keynesian economist?

1:10:52You see, today the great difficulty with recommending books consists in the fact that people are different And that for some people, a certain book may be very useful, while the book for other people is less useful because its mind is a little bit different. Fortunately, people are different from one another. Fortunately, we are not a group of people who have always the same ideas and the same mental capacities.

1:11:42I would therefore say read not only books which are saying what you like and developing the theories with which you are already familiar, read also other books and read these books critically. The most important thing in human life as far as it is scientifically important, the most important thing is a critical mind to think over the things. Many people are lacking this quality, but many more people who believe that they are lacking this quality and therefore abstain from reading good books should be a little bit less modest and have the courage to read difficult books and to read books also which say those things which they consider as very disagreeable and very bad.

1:13:02And you should read these books which you consider as bad, written, intentioned, to answer the question, why is this book bad? In what consists the badness, the poverty of this book? There is no medicine for people who are lacking this quality. There are no books which you can say, read these books, and then you will be an excellent economist, an excellent philosopher, an excellent mathematician.

1:13:48This is precisely not the case. It is very difficult, and there are even people whose mental capacities are not sufficient for such a thing. But what can you do? What can these people do? I can only give the advice, study, read, think over. Do not accept what you hear, do not believe what people once told you, And don't forget that nothing is more difficult than to think correct.