Mises Daily October 13, 2010

October 13, 2010

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The Historicist Indictment of Capitalism
by Ludwig von Mises on October 13, 2010

[Excerpted from chapter 10 of Theory and History. An audio version of this article, excerpted from the forthcoming audiobook version, read by John Pruden, is available as a free MP3 download.]

The ideas of historicism can be understood only if one takes into account that they sought exclusively one end: to negate everything that rationalist social philosophy and economics had established. In this pursuit many historicists did not shrink from any absurdity. Thus to the statement of the economists that there is an inevitable scarcity of nature-given factors upon which human well-being depends they opposed the fantastic assertion that there is abundance and plenty. What brings about poverty and want, they say, is the inadequacy of social institutions.

When the economists referred to progress, they looked upon conditions from the point of view of the ends sought by acting men. There was nothing metaphysical in their concept of progress. Most men want to live and to prolong their lives; they want to be healthy and to avoid sickness; they want to live comfortably and not to exist on the verge of starvation. In the eyes of acting men advance toward these goals means improvement, the reverse means impairment. This is the meaning of the terms “progress” and “retrogression” as applied by economists. In this sense they call a drop in infant mortality or success in fighting contagious diseases progress.

The question is not whether such progress makes people happy. It makes them happier than they would otherwise have been. Most mothers feel happier if their children survive, and most people feel happier without tuberculosis than with it. Looking upon conditions from his personal point of view, Nietzsche expressed misgivings about the “much too many.” But the objects of his contempt thought differently.

In dealing with the means to which men resorted in their actions history as well as economics distinguishes between means that were fit to attain the ends sought and those that were not. In this sense progress is the substitution of more suitable methods of action for less suitable. Historicism takes offense at this terminology. All things are relative and must be viewed from the point of view of their age. Yet no champion of historicism has the boldness to contend that exorcism ever was a suitable means to cure sick cows.

But the historicists are less cautious in dealing with economics. For instance, they declare that what economics teaches about the effects of price control is inapplicable to the conditions of the Middle Ages. The historical works of authors imbued with the ideas of historicism are muddled precisely on account of their rejection of economics.

While emphasizing that they do not want to judge the past by any preconceived standard, the historicists in fact try to justify the policies of the “good old days.” Instead of approaching the theme of their studies with the best mental equipment available, they rely upon the fables of pseudo economics. They cling to the superstition that decreeing and enforcing maximum prices below the height of the potential prices which the unhampered market would fix is a suitable means to improve the conditions of the buyers. They omit to mention the documentary evidence of the failure of the just-price policy and of its effects which, from the point of view of the rulers who resorted to it, were more undesirable than the previous state of affairs which they were designed to alter.

“There is but one road that leads toward prosperity and freedom.”

One of the vain reproaches heaped by historicists on the economists is their alleged lack of historical sense. Economists, they say, believe that it would have been possible to improve the material conditions of earlier ages if only people had been familiar with the theories of modern economics. Now, there can be no doubt that the conditions of the Roman Empire would have been considerably affected if the emperors had not resorted to currency debasement and had not adopted a policy of price ceilings.

It is no less obvious that the mass penury in Asia was caused by the fact that the despotic governments nipped in the bud all endeavors to accumulate capital. The Asiatics, unlike the Western Europeans, did not develop a legal and constitutional system which would have provided the opportunity for large-scale capital accumulation. And the public, actuated by the old fallacy that a businessman’s wealth is the cause of other people’s poverty, applauded whenever rulers confiscated the holdings of successful merchants.

The economists have always been aware that the evolution of ideas is a slow, time-consuming process. The history of knowledge is the account of a series of successive steps made by men each of whom adds something to the thoughts of his predecessors. It is not surprising that Democritus of Abdera did not develop the quantum theory or that the geometry of Pythagoras and Euclid is different from that of Hilbert. Nobody ever thought that a contemporary of Pericles could have created the free-trade philosophy of Hume, Adam Smith, and Ricardo and converted Athens into an emporium of capitalism.

There is no need to analyze the opinion of many historicists that to the soul of some nations the practices of capitalism appear so repulsive that they will never adopt them. If there are such peoples, they will forever remain poor. There is but one road that leads toward prosperity and freedom. Can any historicist on the ground of historical experience contest this truth?

No general rules about the effects of various modes of action and of definite social institutions can be derived from historical experience. In this sense the famous dictum is true that the study of history can teach only one thing: viz., that nothing can be learned from history. We could therefore agree with the historicists in not paying much attention to the indisputable fact that no people ever raised itself to a somewhat satisfactory state of welfare and civilization without the institution of private ownership of the means of production. It is not history but economics that clarifies our thoughts about the effects of property rights.

But we must entirely reject the reasoning, very popular with many 19th-century writers, that the alleged fact that the institution of private property was unknown to peoples in primitive stages of civilization is a valid argument in favor of socialism. Having started as the harbingers of a future society which will wipe out all that is unsatisfactory and will transform the earth into a paradise, many socialists, for instance Engels, virtually became advocates of a return to the supposedly blissful conditions of a fabulous golden age of the remote past.

It never occurred to the historicists that man must pay a price for every achievement. People pay the price if they believe that the benefits derived from the thing to be acquired outweigh the disadvantages resulting from the sacrifice of something else. In dealing with this issue historicism adopts the illusions of romantic poetry. It sheds tears about the defacement of nature by civilization. How beautiful were the untouched virgin forests, the waterfalls, the solitary shores before the greed of acquisitive people spoiled their beauty! The romantic historicists pass over in silence the fact that the forests were cut down in order to win arable land and the falls were utilized to produce power and light. There is no doubt that Coney Island was more idyllic in the days of the Indians than it is today. But in its present state it gives millions of New Yorkers an opportunity to refresh themselves which they cannot get elsewhere.

Talk about the magnificence of untouched nature is idle if it does not take into account what man has got by “desecrating” nature. The earth’s marvels were certainly splendid when visitors seldom set foot upon them. Commercially organized tourist traffic made them accessible to the many. The man who thinks “What a pity not to be alone on this peak! Intruders spoil my pleasure,” fails to remember that he himself probably would not be on the spot if business had not provided all the facilities required.

The technique of the historicists’ indictment of capitalism is simple indeed. They take all its achievements for granted but blame it for the disappearance of some enjoyments that are incompatible with it and for some imperfections that still may disfigure its products. They forget that mankind has had to pay a price for its achievements — a price paid willingly because people believe that the gain derived, e.g., the prolongation of the average length of life, is more to be desired.

Ludwig von Mises was the acknowledged leader of the Austrian School of economic thought, a prodigious originator in economic theory, and a prolific author. Mises’s writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science that Mises called “praxeology.” See Ludwig von Mises’s article archives.

This article is excerpted from chapter 10 of Theory and History. An audio version of this article, excerpted from the forthcoming audiobook version, read by John Pruden, is available as a free MP3 download.

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