Years in Geneva

0:00Good morning and welcome to our seventh lecture. We will deal with the Geneva years. Mises spent six years of his life in the southern Swiss city of Geneva. He left Vienna in 1934 and taught then at a chair at the Graduate Institute of International Studies from the fall of 1934 to the spring of 1940 and then moved on to the US which will be our subject tomorrow. Why did Mises leave from Austria? Well, there were several reasons.

0:49First of all, he qualified for early retirement, so there was certainly a temptation for him to use the opportunity and focus entirely on his scholarly interests. After all, his Chamber of Commerce activities had given him some prominence and, of course, especially in income, In fact, his main interests were intellectual and so it would have offered him an opportunity to finally write comprehensive treatise on economics. That's what he did in fact during these Geneva years. He prepared his book, Nationale Economie, which was the predecessor of Human Action, so a 700-page book. But there were other reasons as well so I mean he did not have to starve in Geneva either.

1:38He received a very attractive offer. Also it was not just a little stipend but he had a full salary there that was comparable to the salary that he had in Vienna. The offside was that it was just a one-year contract, but eventually the contract was renewed six consecutive times, six years. And then last but not least, there was also the fact that life in Vienna became increasingly unpleasant, and this was due to the fact of the rising power of the Nazi party within Austria. Now, we need to make a fine distinction here. The rise of the Nazi party means the rise of the power of the Austrian branch of the NSDAP, that is the National Socialist Party under Hitler in Germany.

2:32It does not mean the authoritarian government of Engelbert Dolfus. Adolfus, Austria had from 1934 to 1938 to the Anschluss, the annexation to Germany had an authoritarian government that ruled more or less dictatorially. But this was not the Nazi party, although of course some of our extreme left-wing colleagues tend to conflate the two, but it's not at all the same. The authoritarian Dolfus Party's main mission was to preserve Austria's independence. The Nazis, of course, wanted precisely the opposite. They wanted to integrate Austria into Germany. And in this, paradoxically and ironically, they were united with the Social Democrats.

3:21The Social Democrats, of course, they felt uneasy about this in those days Because integrating Austria into Germany in 1934 would have meant subjecting Austria to Nazi rule. That was of course not what they wished to do. But until the end, in fact, of World War II, the Austrian Social Democrats were a larger German party. They were German nationalists. They were not Austrian patriots. So we had this Austrian patriotic party of Dolfus, which was in the process of becoming a minority and therefore decided to use its power and to rule dictatorially. It was not democracy, but it was not a Nazi party.

4:09The Nazis were rising in power and Mises felt that storm clouds were approaching Vienna and so there was an additional incentive for him to leave. He therefore accepted very readily an invitation by William Rappard who was the president and founder and director of the Credit Institute of International Studies in Geneva. In Geneva, Rothbard wrote to Mises in the spring of 1934 and Mises more or less replied immediately accepting this proposition. Geneva was, in those days and still today, a center of international organizations.

4:57The first international organization, in fact the very first international organization, was the International Red Cross, which had its headquarters in Geneva already before World War I. And then after World War I, there were two other institutions that were set up in Geneva. The first one was the International Labor Office, established in 1919, which still exists today of course. and the League of Nations established in 1920 at the initiative of Woodrow Wilson, the American President. Finally, the US did not join the League of Nations because Wilson did not get the support of the Parliament, of Congress.

5:43Now, why Geneva? Well, Geneva was in Switzerland, so a neutral ground, traditional Swiss neutrality. And then it was also a French speaking town, so it was easy to command the adherents of the French war ally. Now these international organizations needed qualified personnel, personnel trained in political science, economics, social sciences in general, in general, but also with certain language capacities. They needed to be able to speak both English and French at the very minimum, and if possible other languages as well.

6:28So there was a need for a special bilingual school which was perceived by Rappard. Rappard was a contemporary of Mises, born in 1883 and he died in 1958. He was an He was an economist, historian, was first of all a brilliant and impressive personality, tall and charming, and spoke, I don't know, five or six languages. And he was a brilliant scholar as well. We had excellent connections already before World War I. He had been a visiting professor at Harvard where he met Woodrow Wilson. Wilson was his colleague for a few years. So you can imagine what this meant then for Rapa's standing during the war and then in the immediate aftermath of the war he had very big leverage on the decisions that were being made in Geneva and it certainly helped to establish the school which was then founded in 1927 with the help of another wartime acquaintance namely Paul Manteau, an economic historian, also very much appreciated by Mises, And the institute was created as a joint venture of the University of Geneva.

7:54In the year in which it was created, Rappard was the rector of the University of Geneva. So we might guess that one of the reasons that prompted him to be elected, to be a candidate for rector, was that precisely he wanted to establish the school. So take the head of the university and then strike a deal to set up this institute. And the other partner in the joint venture was the Rockefeller Foundation. We already talked a little bit about the Rockefeller Foundation. The reason for its emergence and said, well, the Rockefeller Foundation financed especially business cycle institutes those years. But the Rockefeller Foundation financed virtually the entire League of Nations.

8:40Well, not 100% but to a large extent. And in the case of the Graduate Institute of International Studies, the Rockefeller Foundation contributed approximately 50% of the budget and in some years more. So, we have here a financial connection, well again between Mises and the Rockefeller Foundation. I mentioned yesterday that Mises got in personal contact with these people on his 1926 trip to the United States. was then the Vienna referee of suitable students to receive scholarships from the Rockefeller Foundation and in the early 1930s then when the Nazis rose to power in Germany in 1933 and several Jewish or left-wing intellectuals had to leave Germany, Mises was instrumental in finding for them new positions in Anglo-Saxon countries And these positions were, as a rule, financed, at least in part, by the Rockefeller Foundation.

9:50So Mises was again an important intermediary here, and it was therefore only natural that at some point he would also benefit from their support. And we'll see that this connection held on through to his arrival in the United States. In fact, the first four years of his stay in the United States, he was again financed essentially by the Rockefeller Foundation, though less enthusiastically. So Mises held the chair for international economic relations for six consecutive years. His predecessors on this chair had been Patterson, Graham and Weiner, so three American economists.

10:35He knew these economists from conferences and so on. He had known Rappard from the very early days in Vienna. And he had known other visiting professors at the graduate institute such as, for example, Theodore Gregory, which we had known through the connection to the London School of Economics. So all these came together and paved the way to Mises departure for Geneva. How do we have to imagine academic life at this school? Well, first, the most important thing to grasp is sheer numbers.

11:23It was a small school, only 100 students, 50 of which were doctoral students. The Faculty of 12. And now, hold your breath, an administration of six heads. Okay, six. Now that's, of course in our days we can barely imagine this, right? I mean, if three students, then you need at least ten administrators, maybe one professor. So in those years there were much more healthy proportions and essentially everything was done by the professors themselves. Mises found good friends not only in Rappard and Montu, so those academics who led the institution, but also in Maurice Bourquin, who was a professor of diplomatic history, in Guglielmo Ferrero, an Italian professor of modern history, and of course in his friends, old-time friends Kelsen, Hans Kelsen and Gottfried von Haberla.

12:34These people very often came to the school, stayed at the school because of political pressure in their home countries. In the first few years of the operation of the institute, people would stay just for a year, but then people would eventually stay on. And those who stayed on came essentially from Germany and from Italy. from Italy. So Rappard said, sometimes jokingly, well thanks be to Hitler and thanks be to Mussolini, he gave us all these great scholars. They could no longer stay in their own countries, they had to go somewhere else, so they came and stayed here. But there were also other Rockefeller-funded groups in Geneva, as I've pointed out, the League of Nations, for example, there was an economics intelligence unit, There was the International Labor Office and there was a Geneva Research Center and all these people therefore cooperated more or less spontaneously.

13:38Certainly we must imagine that there must have been functions, organized parties given by the Rockefeller Foundation and so on. And in any way they had fairly similar research interests. Each professor at the school chose the subject of his courses and seminars. That's of course an academic paradise. The amazing thing is that it worked. It did work. And all this at a very comfortable salary. Mises had a contract providing for 25,000 Swiss francs per year. I re-translated this into ounces of gold, because ounces of gold still exist today.

14:23So it gives us a rough idea. So this was roughly 234 ounces of gold per year. If we calculate this times, what is it today, 700, seven times, more than $140,000, $160,000 approximately. Okay, just to have an idea, and at the time it was $8,200. Okay, now you see what has become of the US dollar. So Mises chooses his classes, he teaches approximately three hours per week, it's not too much, so essentially he can concentrate on research.

15:11and from time to time he is obliged to teach an economics class, a basic economics class for the new students. But this is not every year, so he shares the task with other economics professors. Mises teaches in English. Now that's an interesting fact with important historical repercussions as we now know because he eventually moved to the US. So he chooses English. English was not his main foreign language. He was fluent in French. We must have imagined him speaking French with an accent but he spoke French very well and fluently.

15:58He did not speak English very well and fluently. So why did he do this? The professors were free to pick their language. They could teach either in French or in English. And in the practice of the class, well, it was so that it was really a bilingual school. So even if the professor teaches in French, then students could ask a question in English. And he would reply in French. And so as long as you asked and replied in any of these two languages, it was okay. Written works could be authored in other languages too. So you could also write your thesis and your doctoral work and so on in German and in Italian.

16:46So, it's fairly cosmopolitan school. Well, Mises chooses English because he thinks one of the consequences of Hitlerism as he writes to Fritz Machlop at the time is to destroy the international importance of German. of Germany. Of course he was right. He sees it immediately. That's the consequence. German will become unimportant and English will rise in importance because all these people who had to leave, all the intellectuals who had to leave from Austria and Germany in particular, well they predominantly went to the Anglo-Saxon countries. So, reinforcement of the importance of English. Now, in order to get an idea of how his English must have, it was not very good.

17:38It was not very good and he wrote all his talks out in full. So, he created a manuscript and then read his manuscript. This has sounded difficult to imagine, but what we will do now is to listen to a tape recording of a 1958 talk that he gave at a Monpèlerin meeting in Princeton University. So that means after 18 years of sojourn in the US and after 24 years of teaching in English, using the English language regularly. So we'll listen to this now. So these are pictures from the top.

18:25One of the most sympathetic pictures that we have of Mises, very spontaneous, usually if he stands like this, a knight. And here he is relaxed, look at this, this is great, smiling, it's a pity there are no more pictures like this. So, we are now listening to him as he speaks.

19:17and the people, that oligarchy, the sovereignty of the full right citizens in a community in which the majority were meditators or slaves. Even this rather limited freedom after the 4th century before Christ was not dealt with by the philosophers, historians and orators as a practicable constitutional institution. As they saw it, it was a feature of the past, lost forever. They demand the passing of this golden age, but they didn't know of any method of returning to it. The second notion of liberty was no less oligarchic, although it was not inspired by any literary reminiscences.

20:10It was the ambition of the land of aristocracy, and sometimes also of urban patricians, to preserve their privilege against the rising power of royal absolutism. In most parts of continental Europe, the princes remained victorious in this conflict. Only in England and in the Netherlands did the gentry and the patricians succeed in defeating the dynasties. But what they won was not freedom for all, but only freedom for an elite, for a minority of people.

21:02I knew the tape already, but you see, so he had a very strong accent, still in 1958, his whole intonation is still colored by his Austrian origin, it's far from being fully assimilated, it never would, so we can imagine how it must have been in 1934, if he gave his first year of courses, So we have here, of course, a very strong disincentive for the students to take part in his classes. A strange guy and you hardly can understand him.

21:47So how come that he had any impact at all? Now we have a very interesting document that testifies to the impact that he would have I have the impression that he would create in his lectures, namely in the form of a student evaluation written by an American student who attended the institute in 1935 to 1936, so in the second year of Mises. Sojourn, and when he returned to the US he wrote this report and it was then forwarded back to Switzerland as a feedback to the Institute. There's one passage in this report that concerns Mises. I'll read this for you now.

22:36So the student writes, I have gradually come to the conclusion that Professor Mises ranks as one of the best here, as an analyzer of current economic problems. The title of his course is likely to have little relation to the topics treated. But his lectures are always stimulating and lucid, and as a unique feature, always carefully written out in advance. His English leaves a good bit to be desired, from a grammatical point of view, and a first impression is likely to be unfavorable. However, his vocabulary is rich and his meaning always clear. In short, he wears well.

23:25And for those interested in the economic riddle left by the breakup of the old Austro-Hungarian Empire, he has an especially valuable contribution to make. Best of all, he is able to enliven his discussions and lectures by concrete experience and first-hand observations drawn from wide travel and research on the spot. So that's the impression that Mises creates. But again, even in the Geneva years, there is no Mises School that emerges for various reasons. One saw his limited abilities as a speaker, only if you attended his classes thoroughly.

24:18Well, you came maybe like this American student to the conclusion that he were as well. But then also we must consider the motivation of most of those students going there. They're not per se interested in economic theory. They don't want to be academic economists. They do want to join one of these international organizations. Okay, now comes Mises, who is a classical liberal, and the practical offshoot of his teachings is, well, there's not really much that government can do. Mostly they overdo it, they're just in the way, counterproductive. Now that's not very likely to be a welcome message to these young people who go there precisely because they are full of the conviction as he himself had been when he was young, right, that something needs to be done and the government should run the show.

25:11So, we have here another explanation and then, of course, again, his encompassing treatise of economics does not yet exist. So, you cannot train them. Based on this, you can train them on the basis of his publications, which were essentially in German. And only in those years, we have the first English translation coming forward. 1934 appears the translation of his theory of money and credit. 1936, a translation of his book Socialism.

25:49Now the impact of these writings is also mitigated by the fact that they coincide with the Keynesian Revolution. So 1936 is of course the year in which Keynes' general treatise appears. So we might raise the question of what did Mises think about the general theory, not much of course, but how precisely did he react? Well, he did not comment on this book when it appeared. He reacted only when the Keynesian movement came into full swing and elevated the British economist to the status of a guru of the profession. In Mises' eyes, the Keynesian Revolution was insignificant from the point of view of the history of ideas.

26:36Keynes had not brought forth a single new doctrine. At the onset of the Keynesian Revolution, in fact, a few eminent historians of thought had pointed out that Keynes' view about the relationship between variations of the money supply, employment and output and Output had been anticipated and stressed in mercantilist thought. And those of you who are interested, you're going to read Elie Heckscher's book on mercantilism and also Jacob Biner's studies in the theory of international trade. The implication is of course that Keynes was not so much a revolutionary, but a reactionary champion of the ancien regime. Henry Hazlitt later published, for those of you who are interested, we have this book here on sale too, a point by point refutation, a critique, analysis and critique of the general theory, and he confirmed this implication in rather devastating terms, here is what Hazlitt said, Now, though I have analyzed Keynes' general theory in the following pages, theorem by theorem, chapter by chapter and sometimes even sentence by sentence,

27:51to what some readers may appear a tedious length, I have been unable to find in it a single important doctrine that is both true and original. and Original. So, even Keynes' major fallacies were old and had been refuted hundreds of times. The proper deal to deal with Keynesianism, therefore, was to consider it from a sociological point of view. As an intellectual matter, from a scholarly point of view, well, it was a death birth. So why is it such a success? This requires an explanation.

28:36Here is what Mises wrote a few years later in 1948. For a correct appraisal of the success which Keynes' general theory found in academic circles, one must consider the conditions prevailing in university economics during the period between the two wars. Among the men who occupied the chairs of economics in the last few decades, There have been only a few genuine economists, that is, men fully conversant with the theories developed by modern subjective economics. The ideas of the old classical economists as well as those of the modern economists were caricatured in the textbooks and in the classrooms. Well, for those of you who are economics students, you know that things have not changed much.

29:22There were called such names as old-fashioned, orthodox, reactionary, bourgeois or Wall Street economics. The teachers prided themselves on having refuted for all times the abstract doctrines of Manchesterism and laissez-faire. And two years later, Mises then added the following observation. The great classical economists were harbing us of new ideas. So Keynes was a reactionary, Adam Smith was a true revolutionary. The economic policies they recommended were at variance with the policies practiced by contemporary governments and political parties. As a rule, many years, even decades passed before public opinion accepted the new ideas as propagated by the economists and before the required corresponding changes in policies were effected.

30:18It was different with the new economics of Lord Keynes. The policies he advocated were precisely those which almost all governments, including the British, had already adopted many years before his general theory was published. Keynes was not an innovator and champion of new methods of managing economic affairs. His contribution consisted rather in providing an apparent justification for the policies, which were popular with those in power, in spite of the fact that all economists viewed them as disastrous. His achievement was a rationalization of the policies already practiced. And that was it. There is no more comment on Keynes. For example, you will search in vain for such lengthy passages in Human Action.

31:12These are shorter papers that Mises wrote elsewhere. Again, the reason is that he found that Keynesian economics was irrelevant from an intellectual point of view. Now, in the Geneva years, we might mention, apart from his activities in the school, there was one thing that is quite charming that we may mention here, namely that he found a new hobby, which was driving a car. Mises started taking driving lessons in 1935 or 1936 and in the fall of 1936 he bought a Ford vehicle with the name Grand Tourism Lux, for which he paid about one quarter of his annual salary.

32:03Okay, and so he shared this with great enthusiasm, first with colleagues, right, took them on rides, they drive into Italy and into France, and later on he would take out Margret for rides and she would enjoy it too, and they would spend many many happy hours on the road, and have three severe accidents in the course of time. Yeah, he was not a very good driver, he was a bad dancer, he was also a bad driver, but he enjoyed both. Mises made in the fall of 1937, some three years or so, Mises made plans to return to Vienna.

32:48The reasons were that there were financial difficulties of his school, So in particular, the Rockefeller Foundation threatened with the withdrawal of its funds, too much money, and there's not enough coming out of this. And then Rothbard does what any academic administrator would do, well, he organized conferences and organized publications, collective publications. People were not publishing enough, so there were nice books on international economic problems being published in 1937 and 1938. But there were also other reasons, namely in particular that Mises received a very attractive proposition from his old employer in Vienna.

33:36More precisely there was a reorganization of the Chamber of Commerce organization within the entire country before you adjusted local chambers of commerce and the most important one was the Chamber of Commerce in Vienna for which he worked. But then in the mid 1930s all chambers of commerce in Austria were reorganized into a central organization. And so they created a central chamber of commerce for all of Austria, which they called the Federal Chamber, the Bundeskammer. Now Mises was approached to be appointed the head of the Department for Monetary and Financial Affairs of this new Federal Chamber. And of course, also interesting from a financial point of view, it's interesting because of greater prestige and impact on policies.

34:28And so he was certainly considering it, but probably not only considering it, but also making active steps to taking up this new position after the academic year 1937-1938. and the reason why it didn't do it finally was because the German army marched into Austria in March 1938. It was the famous Anschluss for reasons that we do not have to analyze now. Essentially what had happened was Austria was independent in those few years from 1934 to 1936, 1936 because it had the support of Italy.

35:16Hitler and Mussolini were not buddies from the outset. Mussolini did not want to have the Wehrmacht on his northern frontier. So when Hitler, after rising to power, threatened to invade Austria, and there were several situations of this sort, one important one in 1934, Well, Mussolini brought the Italian troops to the Brenner, to the frontier, the southern border of Austria. That is, it was clear that he would have marched into the country too to prevent that the German army moved to the Italian frontier, to the Italian border. So, Austria was ruled in those days by an autocratic regime, dictatorial regime, and pursued a policy of independence, but which it could not assure out of its own forces, but which relied on the support of the Italians.

36:15Now, Italy lost its interest in this matter. Italy joined Germany as an ally, abandoned its policy of opposition and joined Germany as an ally in the fall of 1936 when the Italians invaded a country at the time that was called Abyssinia. Russia coincides with Ethiopia today. The Italians wanted to have a Mediterranean Empire. Mussolini saw himself as a successor to the Caesars and so on. And the problem was, well, they didn't have any province in Africa. So they needed to have a self-respecting emperor, needed to have a province in Africa.

37:02So they invaded this poor Abyssinia, a very poor country with virtually no army and no resources to exploit, but at least you have a province. And the British and the French didn't take it well. So they now started diplomatic sanctions against Italy, and with the Western support vanishing away, Mussolini then turns to Hitler, and the only one who still accepts him who has no bad feelings about the Mediterranean Empire and the South. And so with Mussolini joining Hitler, then it's clear that Austria suddenly is between two bodies and the situation becomes more or less untenable.

37:48And therefore the German pressure on Austria increases and then finally the German army marches into the country in March 1938. So Mises plans for a return to the Chamber of Commerce in Austria, has to be abandoned and he stays for this reason in Geneva. But the German march into Austria also deranged his affairs in another respect, namely on the private level. Because Mises was just about to marry Margate. Yesterday we said they first met in 1925 and now we have 1938, they finally get married in 1938.

38:351938, quite a becoming, but well of course it's not very surprising given Mises' views that we have heard about yesterday, but also because of Mother, there's still Adela von Mises there and well she didn't take much of a liking to any of his girlfriends before whom we don't know anything, by the way Richard von Mises never got married either and apparently he started well Well, he did get married, but also after the death of the mother only. So now Adele von Mises dies in April 1937. She dies in April 1937. Eight months later, Ludwig proposes to Margaret.

39:24Well, okay, that's a coincidence, but I do not really believe this. I believe this, I believe and maybe most other people believe this too, that there is a causal connection here. Now, Margret had waited patiently for him to propose for more than ten years. Eight months after the death of the mother at Christmas 1937, Ludwig was finally ready. True to himself, he left out all ornamental talk and went on to propose with this habitual concision. Quote, now that's a quote from Margit from Mises who recalls the scene, I cannot go on further, I cannot live without you darling, let's get married.

40:12Wonderful proposition. Margit was of course incredulous and the happiest she had ever been. They lost no time making plans. One of the formalities was the public announcement of their wedding plans six weeks before the ceremony. But world events conspired now against their personal happiness, precisely what we talked about. Adolf Hitler threatened Austrian Chancellor Schuschnig, Germany would provoke civil war in Austria and invade the country. On extremely short notice, Schuschnig announced a general referendum on Austria's unification with Germany. with Germany. It was a last-minute attempt to provide a political counterattack.

41:00If the referendum had been positive or negative on the unification with Germany, it would have been a political disaster for Hitler internationally, but it never came to this vote. Mises was in town on one of his short visits, probably coming in from a conference he had attended in Venice. In the course of the week, that is the week before Sunday March 13, 1938, it became clear that the Germans were preparing to invade Austria to prevent the referendum from ever taking place. The cautious Mises knew that he was high on the Nazi enemy list and he left Vienna either on Thursday or early on Friday the 11th of March.

41:51Not a moment too soon as it turned out, because on Friday the SS chief Heinrich Himmler arrived in Vienna with an advance contingent to arrest the most important adversaries of Hitler and seize their property. Two days later on March 13, after the German army had reached Vienna at the end of a triumphant march through the country, a group of men broke into Mises' apartment and searched it. So Mises had maintained an apartment in Vienna, more precisely because they had strict renting laws. In those days you could not just preserve all on your own a big apartment as he had. as he had, especially if he did not leave the country, so he had to give it up.

42:41What he did then was to strike a deal with a new renter and say, well, okay, I'm giving it to you rather than to somebody else, in exchange you keep me a room. So Mises had still one room in this apartment in which he kept his library and his other stuff. So, some unknown men, well of course it must be Hitler's men, broke into the apartment on that Sunday and searched it. At the end of March, the Gestapo came, so the German secret police, and took 21 boxes full of Mises' possessions and sealed the apartment when they left. In the fall of 1938, the Gestapo returned and took the rest. They looted everything they could find, the books Mises had lovingly collected over decades, his personal correspondence, paintings, silver, personal and administrative documents, everything, even the laundry.

43:39Mises would never see these belongings again and never learn what happened to them. At the end of World War II, the Red Army found his personal files together with the documents of other prominent enemies of the Nazi regime in a train that had been abandoned by the Nazis in Bohemia, so a train full of documents. From there they were sent to a secret archive in Moscow. In 1991, 18 years after Mises' death, they were rediscovered because the existence of the archive was revealed. And today they are a most precious tool for biographers of the great economist. So far, as I know, two Mises biographers have traveled to Moscow. First, Richard Eberling and then myself.

44:32That's an unavoidable step for those who want to research this in depth. We both brought copies of the most relevant documents, and I'm happy to say that I got copies of virtually everything that is important. is important and we have it here at the Mises Institute. So for future Americans, Westerners, let's say, things are much facilitated. Those who want to continue where I left off, well, they can start here in Auburn, Alabama, stay here for a couple of months and read these documents. So, the marriage could not take place in Vienna. Mises was already out of the country but Margit was still there and her children were still there too.

45:22are all there too. So there were a few very dangerous months ahead of them. Their connection to Mises was not generally known. So Mises was not driving around with Margit demonstrating their association and so on. And this was of course vital for their survival. If it had been known that they were the girlfriend or fiancé of Ludwig von Mises, they would have been arrested, would not have been allowed to leave the country. But so they were finally allowed to leave the country and could do this in the spring of 1938. Finally on July 6, 1938, they got married in Geneva, simple civil procedure, no synagogue, no church, no bells and so on, simple administrative procedure in the presence of two witnesses, which is interesting for us, Hans Kelsen and Gottfried von Haberla.

46:26Okay, so it shows that there was a strong personal relationship here, a strong personal friendship, despite all things that separated them on an intellectual level. Before we come to, to speak briefly of Mises' departure from Geneva, we might mention among the more interesting intellectual events of those years, The emergence of neoliberalism was a new phenomenon in those days. In a way, Mises had acknowledged some sort of new liberalism already in the 1920s. In one of the chapters that are now contained in the book Critique of Interventionism, so it's analysis of interventionism, he had dealt with the new liberals.

47:17The neoliberals, these were people who departed from the notion that there was an important difference to be made between economic liberties and civil liberties. Of course that's the distinction that we still find today in those people who call themselves liberals in the United States or also in England. What is important, what is most important are civil liberties and economic liberties is a completely different chapter. It can be easily dissociated from this. Classical liberals, of course, did not believe in this, and there's a very nice sentence from Kondiak who says, civil rights as opposed to economic rights? What gibberish!

48:04But so, starting in the late 19th century and then the early 20th century, some people set out to write and to think without considering that that was gibberish. And by the late 1920s and early 1930s there was a beginning movement that set out. Now, part of this movement extended to the circle of Mises' pupils and acquaintances. In fact, as we have said, Mises had a very strong impact on several important young thinkers, and thinkers, those who were young in the early 1920s such as Hayek, Machlo Pabala, Wilhelm Röpke, Lionel Robbins and others, who had been brought up in not in a neoliberal intellectual environment but in an outright status or shall we say a socialist environment.

49:06So, they were brought up with the notion that, well, the government should run more or less everything. There were great disturbances created and problems created by uncontrolled private interests operating in an unfettered market economy and so on. and therefore the government was necessary, was held to intervene and control things, channel activities into more becoming directions. Now, Mises then comes with his treatise on socialism and shows that this tendency is not very becoming either. It's not a good idea to search for the encompassing state. It's not a good idea to try to establish a socialist economy for all the various reasons that he discussed in socialism.

50:00So this then creates a shock of course for these young people and whatever the limitations of Mises' impact are, but in any case he does one thing, he destroys once and for all all this socialist ideal in them. So they no longer long for complete statism, they no longer long for complete socialization as a policy ideal. On the other hand, his impact is not strong enough to completely turn them into classical liberals or libertarians as we might say today. He does not turn them into adherents of the Manchester School, complete laissez-faire. Some intermixture, they do not know yet where to go and how to reconcile these different elements.

50:46They are convinced socialism does not work, that's what Mises did. On the other hand, they also believe that laissez-faire just creates a lot of problems, immiseration of the working classes, monopolies and other nasty things. So what do we do? We need a new synthesis, and this new synthesis is a third way, neoliberalism, a new liberalism, not the old Manchester, laissez-faire liberalism, but a new liberalism. The solution that emerged in the 1930s was based on an intellectual construct that split the social economy into two elements.

51:35First, an institutional framework, and second, the processes that played themselves out within that framework. That's the fundamental setup, the framework on the one end, the institutions and the processes that play out within the framework. Among these processes, most notably the pricing process. According to this new creed, government should not meddle with the processes, but it did have to establish and maintain the institutional framework. This set of assumptions is characteristic of what has come to be called neoliberalism.

52:20We find a clear expression of the neoliberal worldview in a paper that Hayek wrote in 1935. Commenting on Mises' theory of interventionism, Hayek observes that it did not follow from Mises' argument that the only form of capitalism which can be rationally advocated is that of complete laissez-faire Let's say fair in the old sense, unquote. He goes on. The recognition of the principle of private property does not by any means necessarily imply that the particular delimitation of the contents of these rights, as determined by the existing laws, are the most appropriate. The question as to which is the most appropriate permanent framework which will secure the smoothest and most efficient working of competition is of the greatest importance and one which must be admitted has been sadly neglected by economists.

53:18So not only you have a new analytical framework but you also have a research agenda. And now we've got to think about which kind of institutions precisely do we need? What kind of institutions should this state create and maintain? Today, of course, for those of you who are economists, we have very similar undertaking in the form of banking in the form of constitutional political economy. There's nothing but a repetition of this research agenda that emerged in the 1930s. The roots of the neoliberal ideology went back at least to the 1880s and 1890s when German economists of the historical school and their American disciples became convinced that industrial concentration has harmful effects and required moderation through government intervention.

54:10One of the visible consequences of this mindset was the Sherman Act, which to the present day has replaced the power of consumers with that of bureaucrats. In Germany, the philosophy of the third way became pervasive in the social policy, about which you already talked. France followed, invoking the necessity of a third solution, as did the United States under the New Deal. The first programmatic statements of neoliberalism were published only in the 1930s, conscious statement of these principles in Germany and the United States. The most influential statement came from Chicago economist Henry Simons, who in 1934 circulated a working paper with the title a positive program for laissez-faire in which the word positive indicated that this program justified ample government intervention whereas classical laissez-faire was a negative program in that it did not provide such a justification Simons called on government to regulate money and banking banking, prevent the formation of monopolies and provide minimum income for the destitute, departure indeed from laissez-faire liberalism.

55:36These ideas perfectly express the feelings of a generation of economists who had been raised in a thoroughly statist intellectual environment, but who still knew the teachings of the classical liberals. Hayek, Röpke, Machlub, Friedman, Milton Friedman, Michael Polanyi, Walter Eucken and many others received their university training and their decisive intellectual impulses during the 1920s and early 1930s. During the later 1930s they began to acquire more senior positions and would, after World War II, assume intellectual leadership of the right. Their neo-liberalism animated the work of the post-war institutions that would stem the tide of growing statism, in particular, the Mont Pelerin Society and the Institute for Economic Affairs in London.

56:27In more recent years, the neo-liberal agenda is carried forward by a new wave of educational institutions, such as the Institute for Humane Studies, the Cato Institute and the Atlas Research Institution. Now, we'll talk tomorrow a little bit more, not much more, but a little bit more about the Montpelleran Society. And we'll see that the history of the Montpelleran Society, especially in the early years, the first 20 years or so, consisted essentially of the confrontation between Manchester liberals of Mises' brand and neo-liberals. and neoliberals, and that was the history of the early Mont Pelerin Society.

57:15And so it is for us, of course, very important to see the institutions that emerged after World War II. They had this new liberal inspiration and promoted this and spread this message. And the question is, well, how did laissez-faire liberalism survive? and here Mises indeed played a central role and the institution that supported him, though much less powerful, much less important than the neoliberal institutions, well, still had an impact and provided the ground on which in the past 25 years the Mises Institute and similar institutions have been operating. Now there are other things that we might mention about the Geneva years, but we'll cut short here and I'll briefly narrate for you the circumstances of Mises departure from Geneva.

58:14It occurred in 1940, roughly 8 or 10 months after the war, the Second World War had broken out, which was at first a very strange war, in any case from the point of view of Western Europe, because nothing happened on the Western front. The war breaks out in September 1939. There is no hostile activity, no fighting, nothing on the Western front for nine months until May 1940. And the reason, so why don't the Western armies invade Germany, Germany is busy with the Poles, Why don't they use this in attack from the West?

59:04Well, because by and large they are demoralized. World War I did not really settle international relations, did not give the world peace, it just created resentment and so on. And several studies in the interwar period had explained to the French and to the British that by and large they had been lured into a destructive war for the interests of various small minorities. So they are unwilling now to again risk their neck to save Eastern Europe and nothing happens on the Western front. Mises still explores the possibility of moving to the U.S., principally at the behest of his wife, still gets a little bit nervous, who knows what can happen.

1:00:01And he did so in correspondence with his brother Richard and Fritz Machlop, both of whom had already crossed the Atlantic. So Richard had gone, he had a chair at the University of Berlin until 1933 when Hitler came to power, then he had to leave, he went to Turkey, He studied in Turkey, taught in Istanbul for six years, and then in the fall, summer 1939, he left for the United States, for Harvard. And Mark Lope had already been in the US since 1935, since 1935 he had a full professorship at the University of Buffalo, which was by the way also Rockefeller creation.

1:00:48Mark Lope had discussed the idea of a California vacation for Mises with Benjamin Anderson and other friends from the University of California. Anderson had just moved to the Los Angeles campus of the University of California and was the most influential man in the hitherto unprestigious Department of Economics. UCLA showed interest and the chairman of the department wrote two letters to Machlub who then mediated between the two parties. So Mises almost would have gone to UCLA and things would have turned out very, very different had he done so in 1939. But in this process of negotiation with correspondents, things got mixed up.

1:01:38At first, Mises declined the proposition when Machlop told him UCLA could offer only a comparatively low salary. Machlop's guess was UCLA could pay at most $4,000 per annum. Now, this compares to the $8,200 that Mises has in Switzerland. As compared to this, of course, it was not much, but it was, in fact, ultimately it turns out to be the double turns out to be the double of what he finally got when he arrived in the United States. A year later, when he had to go anyway, he got finally a stipend of $2,000. So even from that point of view, it was a bad decision, a bad entrepreneurial decision.

1:02:27Mises asked his friend, Mark Loeb, to tell Dudley Pegram, the chair of the department, that his Austrian passport had expired and that he could therefore not accept the offer at the moment and would be grateful if the invitation could be postponed a year while Mises letter was on its way. Machlop wrote again this time pointing out that an invitation from UCLA would procure you with a permanent non-quota immigration visa for the United States which might be considered an asset these This convinced Mises. Meanwhile, he had received a cable from his friend Unger, a former Geneva student of his, who was already in New York City, and who told him in telegraphic language, I need to find my page again, that in any case that Mises was making a mistake, that's what he told him.

1:03:51Yeah, Mises was making a mistake. As soon as he received Maklub's letter on February 28, 1940, Mises wrote back that his concerns about passport and visa question had been dispelled and that he would be ready to go to California. Now, if he had cabled this message to Machlub, Mises might have begun a career in California in August 1940, and history would indeed have been different. But Mises sent the letter by surface mail, or as we say today, snail mail. And it reached Machlub only after he had already declined the offer on Mises' behalf. When Machlub wrote to Anderson trying as diplomatically as he could to reopen the negotiations, he received a response from Anderson's secretary that her boss was on a short vacation.

1:04:46One month later, Pegram, Anderson's boss, gave a definite no. Now, the next thing that happens is May 1940. In May 1940, the German army creates what in Mises' eyes was a military wonder, a military miracle. Because Mises was firmly convinced that World War II would start just as World War I had ended, namely in the trenches. would be a very static front and well people would be killing themselves and maybe bomb things and so on but that would by and large be the Germans could not overcome the Maginot Line, the defense line that had been established by the French in the interwar years, very heavily fortified. But meanwhile well there was technological progress, most notably in the form of aviation, military Aviation and several new military theoreticians had worked out plans, especially during the 1930s, how to overcome such defense lines and this new strategy was based on speed, speed that could be realized with the help of planes but also of tanks and that's what the Germans did.

1:06:07So, this very nice French defense plan was based on old technology and could not withstand the attack of very quickly moving troops as in the case of the tank divisions of General Guderian, Heinz Guderian. So, who broke through the French and British lines and cut off their supply lines and overran France in May 1940. When you look at Mises' diary of those days, you see the shock, right? There's always exclamation marks, Brussels exclamation mark, Paris exclamation mark, and so on. Well, so he later said that May 1940 was the most catastrophic month in European history, possibly under the impact that it had on him personally.

1:07:02So now it was clear that he had to leave, in any case for him, not necessarily for all of his colleagues. Kelsen and Repke were essentially in the same position. Repke was not a Jew, but he was also very high on the Nazi enemy list. And then finally, Kelsen and Mises left, Röpke stayed. Kelsen was much better organized, prepared than Mises. He managed to get the last plane leaving from Switzerland to Spain and from Spain to Portugal and took the ship over the Atlantic. And Mises did not do this. He started his preparations too late. And the question was, should I stay or should I go?

1:07:47a few years ago, Röpke finally stayed and it turned out to be a viable choice because the Nazis never invaded Switzerland. The school maintained its operations, so Mises could have stayed there, could have survived the war. But then of course as we know, history would have been very different, probably we would not be in this room here today. The Mises Institute would probably not exist, Mises would have continued writing in German, somebody might have translated more of his books into English, who knows, but in any case he would never have had a school of students as he had in New York in the 1950s and early 1960s.

1:08:33There would never have been a human action movement such as the one that we will describe tomorrow. So Mises decides to leave Austria and it was a rather adventurous escape. At one point there was a risk that they would be caught by the Nazi troops that were then invading southern France. But, well, they managed to get through the lines and then took, on July 25th, took a ship to the United States from Lisbon, a ship with the name Europe, and leave for the United States. And Mises would return to Europe only seven years later, in 1947, when he attended the first Mont Pelerin Society meeting in Switzerland, again.

1:09:25Okay, I'll stop here and give you time for questions.

1:09:48Why are there personal documents in Moscow? Well, because the Russians would not surrender it. All these documents are still in the secret archive. For me, of course, I was interested in Mises and there are also documents from Otmar Spannenpark, for example, the Adlers and various other many Jewish intellectuals, but also regime opponents in general. The Russians were interested in this to understand the personal relationships, connections between various opposition groups and the Nazis. Of course, they wanted to use this material to exercise pressure, maybe blackmail people and so on. But there's also other stuff. For example, there are administrative documents from the Auschwitz concentration camp there.

1:10:40That was in fact the number one item that most researchers were interested in. When I came to Moscow, I said, I want to see the Mises papers. Okay, here are the Mises papers. And they looked at me, nothing else? I could not believe that I came just for this Austrian economist. I thought I was interested in some of the more sexy stuff. For example, the diaries, the Goebbels diaries, were published a few years ago, were discovered by David Irving, a British historian, and then published. I'm not quite sure whether they fully exploited the archive or the other treasures to be discovered, I don't know. I only researched the Mises stuff and looked at every single item and there were a few things that I could not bring.

1:11:30For example, to mention one thing that could be interesting for the history of economics in Austria, In Austria, there are copies of the doctoral dissertations of some of the female students who wrote under Mises in the late 1910s. For example, there is a doctoral dissertation by Helene Lieser as a copy in this archive. So somebody writing the history of female economists in Austria would have to go there and look this up unless you can find a copy somewhere in Vienna. Yeah, but otherwise. So the Russians have no intention of giving up this thing, just as various museums in various countries have no interest of surrendering the treasures of art that they have by various means acquired in other countries.

1:12:19What about the books? We know something about the books. The books have been brought to a central library that was called the Judenbibliothek, the Jewish library, and was located in Berlin. So Mises books have certainly been brought to this library and from there they were lent out and brought back to various other libraries within the country. And then at the end of the year vanished in circumstances that are described in a paper that I quote in this chapter. So then later on Mises knew that some of his books turned up in used bookshops.

1:13:06Okay, so he knew this, there was this inscription and so on, but he was not quite sure exactly how they ended up there. But today we know that there was this Juden Bibliotheque, so the books were first brought to Germany and from there on then also sold to other people to finance part of the war and so on. The question is, did Mises lament the fate of the Jews in correspondence or so? No, I mean, lamentation was not his style.

1:13:53No, he would never lament, would never complain. Sometimes, I mean, when he said anything approaching this, it would be rather ironic. One of his letters said, well, you cannot deny it. He didn't quite say it that way. I'm an old chap, I'm a contemporary of Willem I and Karl Marx. So what do you want? I cannot change this. No, he never really lamented this, but he sometimes expressed outrage occasionally. I said, okay, so these were monsters who killed decent people and so on or tortured them. But that's very rare. So that's what you find in some letters to former acquaintances or friends in Vienna, But never with his friends in the U.S. Now, I have, of course, I have only the correspondence.

1:14:47I mean, it's a completely different story what went on in personal discussions and so on. But this I cannot tell. Yeah, there were other questions? Yeah? You were speaking a little bit in this period to the distinction between what was called a new liberalism at that time, and I guess it's not clear to me what its relationship is to what we call classical liberalism. Today we have this term neoliberalism which is thrown around, and it's not clear to me how that's separate from neoconservatism or not. So this whole neoliberalism is a very elusive term, and then you say that there's a separation, neoliberalism of civil liberties and economic liberties, which classical liberalism would reject, as I understand saying.

1:15:40What I'm more interested in is, could you concisely make a statement as to what is the self-governing character of civil liberties when it's joined with economic liberties? What's the task of our civil liberties? Okay, so these are many questions. Let me start with this history of thought aspects. Neoliberalism, from the point of those who understood themselves to be neoliberals, those who emerged in the 1930s, meant what I described before. A third way, a combination of liberty, economic liberty, as embodied in the pricing process of the market. And on the other hand, the creation and maintenance of an institutional framework, which was the task of the government.

1:16:30That's the government, okay? Now that is how the neoliberals perceive themselves. I think that's a fair description of what the novelty was. They really were trying to forge a third way. And of course, we're now today in the 18th generation of third way policies. but they not always have the same characteristics that I described before but what is common to all of them is of course that you somehow want to explain whether you have both liberty and some role for government intervention. You need to have a theory that explains to you where precisely government needs to intervene beyond the laissez-faire agenda. Again for Adam Smith you just have defense, suppression of crime of Crime and public goods, a few public goods, and today, of course, much more ample.

1:17:20Now, neoliberalism as used in some circles today, especially left-wing writers, means something different. Not necessarily the same thing. It means, well, there are a new, some liberals, some classical liberals. There's people who believe that the government should not run everything. So it's an expression of their shock. We thought we got rid of these guys, and here they are anew. So there is anew liberalism, that's what they mean. And they are just starting now in various countries because many of them are very lazy, so they didn't do their homework for a long time. They're starting now to see the finer distinctions between the different groups.

1:18:09So what we call Manchester liberals and neo-liberals or anarcho-capitalists and so on. These are different groups with not necessarily share the same analytical framework and the same political agenda. Okay, then your, what was the last question again? If the neo-liberals are advocating for separation of civil liberties from economic liberties and would say that the classical liberal position is absurd, then what does self-government look like when you bring civil liberties and economic liberties together as a concept? So what does a government look like when you bring economic liberties and civil liberties together?

1:18:56I'm not quite sure whether I understand the question. I will answer in a different way. Maybe this will bring us closer. Well, the reason why classical liberals do not believe it's meaningful to make this distinction is because any true liberty presupposes some autonomous control over real resources. So if the government owns all real resources, if you have a complete socialist state, and you say, okay, in this case we have no economic liberties, but you still have civil liberties, then the question is how can this be? How can you have, for example, freedom of expression? That's the point that Mises made starting in the 1920s. How can you have liberty of expression if the government runs all the printing presses? Or let's say today if the government was exclusive one institution to give access to the internet?

1:19:42to the Internet. You could have none. And so it's not meaningful to make this, you cannot separate economic liberties from civil liberties. Economic liberties are unavoidable. It's rather the other way around. In some cases you would say you have economic liberties, but you take away some of the so-called civil liberties. You suppress some uses of private property in an interventionist regime. You say, okay, you can own what you want, but you cannot say what you want, which is the case in many European countries today. We have limited freedom of expression. So in general, then the question is, how can you guarantee these rights or these liberties?

1:20:32How can you enforce them? How can you protect them? That's a different question. Here the classical liberals answer, well, you need a government for this. Because there is an economic jargon, market failure in security production. The anarcho-capitalist answer, well, you do not need government for this. The protection of property rights and therefore the protection of civil liberties and of economic liberties can be ensured by the market process itself. This is firms working with a profit incentive, but also private individuals and non-profit organizations. They all can take part in this protection process. How much recorded glass work remains?

1:21:28I'm aware of only two tapes, so this is one and I think we'll try to listen to the other one tomorrow. So the other one is about four years later, early 1962, and we will use this to see how he became more frail just in the mere space of four years. But apart from these two tapes, there are no other ones that I knew of, no film documents either. There are no documents either. We have many photos. There must be many more photos from the 1920s and 1930s if you go to newspaper archives, which I did not do.

1:22:14So there's ample room for people coming after me to make viable contributions. I did not do this, but I'm sure if you go to the Berliner Zeitung or Neue Freie Presse archives, you will find more stuff.

1:22:32No other question? Okay, thank you very much for your attention.