Ludwig van Mises published this short book in 1944, around the same time as Hayek’s Road to Serfdom was published but before Hayek’s 1945 article, “The Use of Knowledge in Society.” These other references are important because (a) Mises was Hayek’s teacher and (b) both were heavily involved in the “calculation debate” in which they (as non-planners who supported the “emergent order” of markets) opposed the planners in the USSR and other countries who wanted “scientific management.”
This book’s place in that debate is even more obvious when you read what Mises writes, in his relentless, yet clear style:
- The main issue in present-day social and political conflicts is whether or not man should give away freedom, private initiative, and individual responsibility and surrender to the guardianship of a gigantic apparatus of compulsion and coercion, the socialist state. Subtle.
- But now, for many years and especially since the appearance of the New Deal, powerful forces are on the point of substituting for this old and well-tried democratic system the tyrannical rule of an irresponsible and arbitrary bureaucracy… Government commissions and bureaus issue decrees and regulations undertaking the management and direction of every aspect of the citizens’ lives. Not only do they regulate matters which hitherto have been left to the discretion of the individual; they do not shrink from decreeing what is virtually a repeal of duly enacted laws. By means of this quasilegislation the bureaus usurp the power to decide many important matters according to their own judgment of the merits of each case, that is, quite arbitrarily. Whelp, the Supreme Court just did a number on THAT power, but it tool them 80 years?
- Powerful political parties and pressure groups are fervently asking for public control of all economic activities, for thorough government planning, and for the nationalization of business. They aim at full government control of education and at the socialization of the medical profession. There is no sphere of human activity that they would not be prepared to subordinate to regimentation by the authorities. In their eyes, state control is the panacea for all ills. These enthusiastic advocates of government omnipotence are very modest in the appraisal of the role they themselves play in the evolution toward totalitarianism. While I agree that this vision is scary, I wonder if/when Mises will exclude any sort of “bureaucracy” from critique. (Yep. See #10.)
- Capitalism means free enterprise, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means full government control of every sphere of the individual’s life and the unrestricted supremacy of the government in its capacity as central board of production management. There is no compromise possible between these two systems. Sweden (and others) have entered the chat.
- But which capitalism? The present-day champions of free enterprise are romantics like the eulogists of the medieval arts and crafts. They are entirely mistaken in attributing to mammoth corporations the qualities which once were the excellence of small or medium-size business. There cannot be any question of breaking up the big aggregates into smaller units. On the contrary, the tendency toward a further concentration of economic power will prevail. Monopolized big business will congeal into rigid bureaucratism. Its managers, responsible to nobody, will become a hereditary aristocracy; the governments will become mere puppets of an omnipotent business clique. Ahh, not that kind!
- A genius is precisely a man who defies all schools and rules, who deviates from the traditional roads of routine and opens up new paths through land inaccessible before. A genius is always a teacher, never a pupil; he is always self-made. He does not owe anything to the favor of those in power. But, on the other hand, the government can bring about conditions which paralyze the efforts of a creative spirit and prevent him from rendering useful services to the community. Channeling Ayn Rand (1943)?
- The modern state is built upon the ruins of feudalism. It substituted bureaucratic management of public affairs for the supremacy of a multitude of petty princes and counts… Totalitarianism is much more than mere bureaucracy. It is the subordination of every individual’s whole life, work, and leisure, to the orders of those in power and office. It is the reduction of man to a cog in an all-embracing machine of compulsion and coercion. It forces the individual to renounce any activity of which the government does not approve. It tolerates no expression of dissent. It is the transformation of society into a strictly disciplined labor-army—as the advocates of socialism say—or into a penitentiary—as its opponents say… Modern socialism… is totalitarian in the strict sense of the term. It holds the individual in tight rein from the womb to the tomb. At every instant of his life the “comrade” is bound to obey implicitly the orders issued by the supreme authority. The State is both his guardian and his employer. The State determines his work, his diet, and his pleasures. The State tells him what to think and what to believe in.
- The preëminence of the capitalist system consists in the fact that it is the only system of social coöperation and division of labor which makes it possible to apply a method of reckoning and computation in planning new projects and appraising the usefulness of the operation of those plants, farms, and workshops already working. The impracticability of all schemes of socialism and central planning is to be seen in the impossibility of any kind of economic calculation under conditions in which there is no private ownership of the means of production and consequently no market prices for these factors. Hayek said the same a year later, but here’s a good example of the zeitgeist. Mises continues for several pages on this theme, highlighting the need for “groping” for profits: The actual world is a world of permanent change. Population figures, tastes, and wants, the supply of factors of production and technological methods are in a ceaseless flux. In such a state of affairs there is need for a continuous adjustment of production to the change in conditions. This is where the entrepreneur comes in.
- What’s needed is competition! Consumers are merciless. They never buy in order to benefit a less efficient producer and to protect him against the consequences of his failure to manage better. They want to be served as well as possible. And the working of the capitalist system forces the entrepreneur to obey the orders issued by the consumers… The price of labor is a market phenomenon determined by the consumers’ demands for goods and services. Virtually every employer is always in search of cheaper labor and every employee in search of a job with higher remuneration.
- Bureaucracy in itself is neither good nor bad. It is a method of management which can be applied in different spheres of human activity. There is a field, namely, the handling of the apparatus of government, in which bureaucratic methods are required by necessity. What many people nowadays consider an evil is not bureaucracy as such, but the expansion of the sphere in which bureaucratic management is applied. This expansion is the unavoidable consequence of the progressive restriction of the individual citizen’s freedom, of the inherent trend of present-day economic and social policies toward the substitution of government control for private initiative. People blame bureaucracy, but what they really have in mind are the endeavors to make the state socialist and totalitarian.
- Now, to definitions: In public administration there is no market price for achievements. This makes it indispensable to operate public offices according to principles entirely different from those applied under the profit motive… Now we are in a position to provide a definition of bureaucratic management: Bureaucratic management is the method applied in the conduct of administrative affairs the result of which has no cash value on the market. And Public Choice — a term dating from the 1940s — has a lot to say about how those principles (the ones incongruent with the profit motive) are abused by bureaucrats favoring themselves over citizens.
- Homo bureaucratis? The majority were tied up with the bureaus for life. They developed a character peculiar to their permanent removal from the world of profit-seeking business. Their intellectual horizon was the hierarchy and its rules and regulations… In a properly arranged civil-service system the promotion to higher ranks depends primarily on seniority. The heads of the bureaus are for the most part old men who know that after a few years they will be retired. Having spent the greater part of their lives in subordinate positions, they have lost vigor and initiative. They shun innovations and improvements. They look on every project for reform as a disturbance of their quiet. Thus, my proposal for a time limit for bureaucrats.
- Ahhh…. the sins of a bureaucratic monopoly: If a government-owned enterprise operates at a loss or with a part only of the profit which it could attain if it were conducted solely according to the profit motive, the falling off affects the budget and thereby the taxpayers. If, for instance, a city-owned transportation system charges the customers so low a fare that the costs of the operation cannot be covered, the taxpayers are virtually subsidizing those riding the trains. Or a city-owned parking system? Indeed.
- And why do they fail? Missing profit motive, wrong prices, weak competition? It is precisely the efficient and honest manager [of a state enterprise] who will try to make the services of his outfit as good as possible. But as he is not restrained by any considerations of financial success, the costs involved would place a heavy burden on the public funds. He would become a sort of irresponsible spender of the taxpayers’ money. As this is out of the question, the government must give attention to many details of the management. It must define in a precise way the quality and the quantity of the services to be rendered and the commodities to be sold…. The criterion of good [bureaucratic] management is not the approval of the customers resulting in an excess of revenue over costs but the strict obedience to a set of bureaucratic rules.
- Mises against fascists: The good is embodied in the great god State, the materialization of the eternal idea of morality, and the bad in the “rugged individualism” of selfish men. In this antagonism the State is always right and the individual always wrong. The State is the representative of the commonweal, of justice, civilization, and superior wisdom. The individual is a poor wretch, a vicious fool. When a German says “der Staat” or when a Marxian says “society,” they are overwhelmed by reverential awe. How can a man be so entirely corrupt as to rise in rebellion against this Supreme Being?
- You could revolt against a Bourbon king, and the French did it. This was, of course, a struggle of man against man. But you cannot revolt against the god State and against his humble handy man, the bureaucrat… The individual citizen, in violating one of the laws of his country, is a criminal deserving punishment. He has acted for his own selfish advantage. But it is quite a different thing if an officeholder evades the duly promulgated laws of the nation for the benefit of the “State.” In the opinion of “reactionary” courts he may be technically guilty of a contravention. But in a higher moral sense he was right. He has broken human laws lest he violate a divine law. Kafka would recognize this issue.
- In the nineteenth century the parliaments were intent on restricting public expenditures as much as possible. But now thrift became despicable. Boundless spending was considered a wise policy. Both the party in power and the opposition strove for popularity by openhandedness. To create new offices with new employees was called a “positive” policy, and every attempt to prevent squandering public funds was disparaged as “negativism.” Representative democracy cannot subsist if a great part of the voters are on the government pay roll. If the members of parliament no longer consider themselves mandatories of the taxpayers but deputies of those receiving salaries, wages, subsidies, doles, and other benefits from the treasury, democracy is done for. Mises must be rolling in his grave now!
- Nineteenth-century liberalism tried to limit the right of the Ministry of Education to interfere with the freedom of university professors to teach what they considered true and correct. But as the government appointed the professors, it appointed only trustworthy and reliable men, that is, men who shared the government’s viewpoint and were ready to disparage economics and to teach the doctrine of government omnipotence… To maintain the theory that there are such things as economic laws was deemed a kind of rebellion. For if there are economic laws, then governments cannot be regarded as omnipotent, as their policies could only succeed when adjusted to the operation of these laws. Thus the main concern of the German professors of the social sciences was to denounce the scandalous heresy that there is a regularity in economic phenomena.
- 1944! European totalitarianism is an upshot of bureaucracy’s preëminence in the field of education. The universities paved the way for the dictators… Every dictator plans to rear, raise, feed, and train his fellow men as the breeder does his cattle. His aim is not to make the people happy but to bring them into a condition which renders him, the dictator, happy. He wants to domesticate them, to give them cattle status. The cattle breeder also is a benevolent despot.
- Is there hope? Every half-wit can use a whip and force other people to obey. But it requires brains and diligence to serve the public. Only a few people succeed in producing shoes better and cheaper than their competitors. The inefficient expert will always aim at bureaucratic supremacy. He is fully aware of the fact that he cannot succeed within a competitive system. For him all-round bureaucratization is a refuge… The man who is aware of his inability to stand competition scorns “this mad competitive system.” He who is unfit to serve his fellow citizens wants to rule them. Not too much.
- Interesting foreshadowing: Those who were not killed in the wars and revolutions are today pedantic and timid bureaucrats in the innumerable offices of the German Zwangswirtschaft [planned economy]. They are obedient and faithful slaves of Hitler. But they will be no less obedient and faithful handy men of Hitler’s successor, whether he is a German nationalist or a puppet of Stalin. Porque no los dos?
- T.I.L. Marx never attempted to explain in unambiguous language what the characteristic mark of an economic class is. When he died, thirty-five years after the publication of the Communist Manifesto, he left the manuscript of the third volume of his main treatise, Capital, unfinished. And, very significantly, the manuscript breaks off just at the point at which the explanation of this fundamental notion of his entire philosophy was to be given. Neither Marx nor any one of the host of Marxian writers could tell us what a social class is, much less whether such social classes really play in the social structure the role assigned to them in the doctrine.
- Cui bono? The capitalist variety of competition is to outdo other people on the market through offering better and cheaper goods. The bureaucratic variety consists in intrigues at the “courts” of those in power. There was a good deal of flattery, adulation, servility, and cringing at the courts of all despotic rulers.
- Beware the Intelligensia: The most enthusiastic supporters of Marxism, Nazism, and Fascism were the intellectuals, not the boors. The intellectuals were never keen enough to see the manifest contradictions of their creeds. It did not in the least impair the popularity of Fascism that Mussolini in the same speech praised the Italians as the representatives of the oldest Western civilization and as the youngest among the civilized nations. No German nationalist minded it when dark-haired Hitler, corpulent Goering, and lame Goebbels were praised as the shining representatives of the tall, slim, fair-haired, heroic Aryan master race. Is it not amazing that many millions of non-Russians are firmly convinced that the Soviet regime is democratic, even more democratic than America?… They always tacitly assume that the dictator will do exactly what they themselves want him to do. Like many Trump voters.
- When citizens are under the intellectual hegemony of the bureaucratic professionals, society breaks up into two castes: the ruling professionals, the Brahmins, and the gullible citizenry. Then despotism emerges, whatever the wording of constitutions and laws may be. Democracy means self-determination. How can people determine their own affairs if they are too indifferent to gain through their own thinking an independent judgment on fundamental political and economic problems? Democracy is not a good that people can enjoy without trouble. It is, on the contrary, a treasure that must be daily defended and conquered anew by strenuous effort.
- It is imperative to unmask the inferiority of bureaucratic methods when compared with those of private business. The aim of such a scrutiny is certainly not to disparage the work of tax collectors, customs officers, and patrolmen or to belittle their achievements. But it is necessary to show in what essential respects a steel plant differs from an embassy and a shoe plant from a marriage license bureau, and why it would be mischievous to reorganize a bakery according to the pattern of the post office. I got you!
- And we leave with this zinger! The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office.
I recommend this book to anyone interested in its intellectual history; for the rest, I think it’s a bit long and perhaps off-topic for them, although it seems rather timely to me! FOUR STARS.