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© 2009 by the Ludwig von Mises Instituteand published under the Creative CommonsAttribution License 3.0.http://creativecommons.org/licenses/by/3.0/Ludwig von Mises Institute518 West Magnolia AvenueAuburn, Alabama 36832www.mises.orgISBN: 978-1-933550-54-1

...the policies of individualism andof capitalism, its application to economicmatters, do not need any apologistsor propagandists. The achievementsspeak for themselves.— Ludwig von Mises

C o n t e n t sPart I. . . . . . . . . . . . . . 11“At the end of the eighteenth century thereprevailed two notions of liberty, each of themvery different from what we have in mindtoday referring to liberty and freedom.”Part II . . . . . . . . . . . . . 15“The pre-capitalistic system of product wasrestrictive. Its historical basis was militaryconquest.”Part III . . . . . . . . . . . . . 23“What vitiates entirely the socialists’economic critique of capitalism is theirfailure to grasp the sovereignty of theconsumers in the market economy.”Part IV. . . . . . . . . . . . . 29“It was different in the esoteric discussionsamong the inner circles of the greatconspiracy. There the initiated did notdissemble their intentions concerningliberty.”

Part V . . . . . . . . . . . . . 33“Romantic philosophy labored under theillusion that in the early ages of history theindividual was free and that the course ofhistorical evolution deprived him of hisprimordial liberty.”Part VI. . . . . . . . . . . . . 45“However, one does not exhaustively describethe sweeping changes that capitalismbrought about in the conditions of thecommon man if one merely deals with thesupremacy he enjoys on the market as aconsumer.”Part VII . . . . . . . . . . . . 48“The distinctive principle of Western socialphilosophy is individualism. It aims at thecreation of a sphere in which the individualis free to think, to choose, and to act withoutbeing restrained by the interference of thesocial apparatus of coercion and oppression,the State.”

Liberty and Property

10Liberty and Property

Liberty and Property 11IAt the end of the eighteenth centurythere prevailed two notions ofliberty, each of them very differentfrom what we have in mind today referringto liberty and freedom.The first of these conceptions was purelyacademic and without any application tothe conduct of political affairs. It was anidea derived from the books of the ancientauthors, the study of which was then theThis article was originally delivered as a lecture at PrincetonUniversity, October 1958, at the 9th Meeting of the Mont PelerinSociety.11

12Liberty and Propertysum and substance of higher education. Inthe eyes of these Greek and Roman writers,freedom was not something that had to begranted to all men. It was a privilege of theminority, to be withheld from the majority.What the Greeks called democracy was, inthe light of present-day terminology, notwhat Lincoln called government by the people,but oligarchy, the sovereignty of fullrightcitizens in a community in which themasses were meteques or slaves. Even thisrather limited freedom after the fourth centurybefore Christ was not dealt with by thephilosophers, historians, and orators as apractical constitutional institution. As theysaw it, it was a feature of the past irretrievablylost. They bemoaned the passing ofthis golden age, but they did not know anymethod of returning to it.The second notion of liberty was no lessoligarchic, although it was not inspired byany literary reminiscences. It was the ambitionof the landed aristocracy, and sometimesalso of urban patricians, to preserve

Liberty and Property 13their privileges against the rising power ofroyal absolutism. In most parts of continentalEurope, the princes remained victoriousin these conflicts. Only in England andin the Netherlands did the gentry and theurban patricians succeed in defeating thedynasties. But what they won was not freedomfor all, but only freedom for an elite, fora minority of the people.We must not condemn as hypocrites themen who in those ages praised liberty, whilethey preserved the legal disabilities of themany, even serfdom and slavery. They werefaced with a problem which they did notknow how to solve satisfactorily. The traditionalsystem of production was too narrowfor a continually rising population. Thenumber of people for whom there was, ina full sense of the term, no room left by thepre-capitalistic methods of agriculture andartisanship was increasing. These supernumerarieswere starving paupers. They werea menace to the preservation of the existingorder of society and, for a long time, nobody

14Liberty and Propertycould think of another order, a state of affairs,that would feed all of these poor wretches.There could not be any question of grantingthem full civil rights, still less of giving thema share of the conduct of affairs of state. Theonly expedient the rulers knew was to keepthem quiet by resorting to force.

Liberty and Property 15IIThe pre-capitalistic systemof product was restrictive. Its historicalbasis was military conquest. Thevictorious kings had given the land to theirpaladins. These aristocrats were lords inthe literal meaning of the word, as they didnot depend on the patronage of consumersbuying or abstaining from buying on amarket. On the other hand, they themselveswere the main customers of the processingindustries which, under the guild system,were organized on a corporative scheme.This scheme was opposed to innovation. Itforbade deviation from the traditional methodsof production. The number of peoplefor whom there were jobs even in agricultureor in the arts and crafts was limited.Under these conditions, many a man, to use15

16Liberty and Propertythe words of Malthus, had to discover that“at nature’s mighty feast there is no vacantcover for him” and that “she tells him to begone.” But some of these outcasts neverthelessmanaged to survive, begot children, andmade the number of destitute grow hopelesslymore and more.But then came capitalism. It is customaryto see the radical innovations that capitalismbrought about in the substitution ofthe mechanical factory for the more primitiveand less efficient methods of the artisans’shops. This is a rather superficial view. Thecharacteristic feature of capitalism that distinguishesit from pre-capitalist methods ofproduction was its new principle of marketing.Capitalism is not simply mass production,but mass production to satisfy theneeds of the masses. The arts and crafts ofthe good old days had catered almost exclusivelyto the wants of the well-to-do. ButThomas R. Malthus, An Essay on the Principle of Population,2nd ed. (London, 1803), p. 531.

Liberty and Property 17the factories produced cheap goods for themany. All the early factories turned out wasdesigned to serve the masses, the same stratathat worked in the factories. They servedthem either by supplying them directly orindirectly by exporting and thus providingfor them foreign food and raw materials.This principle of marketing was the signatureof early capitalism as it is of present-daycapitalism. The employees themselves arethe customers consuming the much greaterpart of all goods produced. They are the sovereigncustomers who are “always right.”Their buying or abstention from buyingdetermines what has to be produced, in whatquantity, and of what quality. In buying whatsuits them best they make some enterprisesprofit and expand and make other enterpriseslose money and shrink. Thereby theyare continually shifting control of the factorsof production into the hands of those businessmenwho are most successful in fillingtheir wants. Under capitalism private propertyof the factors of production is a socialfunction. The entrepreneurs, capitalists, and

18Liberty and Propertyland owners are mandataries, as it were, ofthe consumers, and their mandate is revocable.In order to be rich, it is not sufficientto have once saved and accumulated capital.It is necessary to invest it again and again inthose lines in which it best fills the wants ofthe consumers. The market process is a dailyrepeated plebiscite, and it ejects inevitablyfrom the ranks of profitable people thosewho do not employ their property accordingto the orders given by the public. But business,the target of fanatical hatred on the partof all contemporary governments and selfstyledintellectuals, acquires and preservesbigness only because it works for the masses.The plants that cater to the luxuries of thefew never attain big size. The shortcoming ofnineteenth-century historians and politicianswas that they failed to realize that the workerswere the main consumers of the products ofindustry. In their view, the wage earner was aman toiling for the sole benefit of a parasiticleisure class. They labored under the delusionthat the factories had impaired the lotof the manual workers. If they had paid any

Liberty and Property 19attention to statistics they would easily havediscovered the fallaciousness of their opinion.Infant mortality dropped, the averagelength of life was prolonged, the populationmultiplied, and the average common manenjoyed amenities of which even the well-todoof earlier ages did not dream.However this unprecedented enrichmentof the masses were merely a by-product ofthe Industrial Revolution. Its main achievementwas the transfer of economic supremacyfrom the owners of land to the totality of thepopulation. The common man was no longera drudge who had to be satisfied with thecrumbs that fell from the tables of the rich.The three pariah castes which were characteristicof the pre-capitalistic ages—the slaves,the serfs, and those people whom patristic andscholastic authors as well as British legislationfrom the sixteenth to the nineteenth centuriesreferred to as the poor—disappeared. Theirscions became, in this new setting of business,not only free workers, but also customers.This radical change was reflected in the

20Liberty and Propertyemphasis laid by business on markets. Whatbusiness needs first of all is markets and againmarkets. This was the watch-word of capitalisticenterprise. Markets, that means patrons,buyers, consumers. There is under capitalismone way to wealth: to serve the consumersbetter and cheaper than other people do.Within the shop and factory the owner—or in the corporations, the representative ofthe shareholders, the president—is the boss.But this mastership is merely apparent andconditional. It is subject to the supremacy ofthe consumers. The consumer is king, is thereal boss, and the manufacturer is done for ifhe does not outstrip his competitors in bestserving consumers.It was this great economic transformationthat changed the face of the world. It verysoon transferred political power from thehands of a privileged minority into the handsof the people. Adult franchise followed in thewake of industrial enfranchisement. The commonman, to whom the market process hadgiven the power to choose the entrepreneur

Liberty and Property 21and capitalists, acquired the analogous powerin the field of government. He became a voter.It has been observed by eminent economists,I think first by the late Frank A. Fetter,that the market is a democracy in which everypenny gives a right to vote. It would be morecorrect to say that representative governmentby the people is an attempt to arrange constitutionalaffairs according to the model ofthe market, but this design can never be fullyachieved. In the political field it is alwaysthe will of the majority that prevails, andthe minorities must yield to it. It serves alsominorities, provided they are not so insignificantin number as to become negligible. Thegarment industry produces clothes not onlyfor normal people, but also for the stout, andthe publishing trade publishes not only westernsand detective stories for the crowd, butalso books for discriminating readers. Thereis a second important difference. In the politicalsphere, there is no means for an individualor a small group of individuals to disobeythe will of the majority. But in the intellectual

22Liberty and Propertyfield private property makes rebellion possible.The rebel has to pay a price for hisindependence; there are in this universe noprizes that can be won without sacrifices.But if a man is willing to pay the price, he isfree to deviate from the ruling orthodoxy orneo-orthodoxy. What would conditions havebeen in the socialist commonwealth for hereticslike Kierkegaard, Schopenauer, Veblen,or Freud? For Monet, Courbet, Walt Whitman,Rilke, or Kafka? In all ages, pioneers ofnew ways of thinking and acting could workonly because private property made contemptof the majority’s ways possible. Only afew of these separatists were themselves economicallyindependent enough to defy thegovernment into the opinions of the majority.But they found in the climate of the freeeconomy among the public people preparedto aid and support them. What would Marxhave done without his patron, the manufacturerFriedrich Engels?

Liberty and Property 23IIIWhat vitiates entirely the socialists’economic critique of capitalismis their failure to grasp the sovereigntyof the consumers in the market economy.They see only hierarchical organizationof the various enterprises and plans, and areat a loss to realize that the profit system forcesbusiness to serve the consumers. In theirdealings with their employers, the unionsproceed as if only malice and greed were toprevent what they call management from payinghigher wage rates. Their shortsightednessdoes not see anything beyond the doorsof the factory. They and their henchmen talkabout the concentration of economic power,and do not realize that economic power isultimately vested in the hands of the buyingpublic of which the employees themselves23

24Liberty and Propertyform the immense majority. Their inabilityto comprehend things as they are is reflectedin such inappropriate metaphors as industrialkingdom and dukedoms. They are toodull to see the difference between a sovereignking or duke who could be dispossessed onlyby a more powerful conqueror and a “chocolateking” who forfeits his “kingdom” as soonas the customers prefer to patronize anothersupplier. This distortion is at the bottom of allsocialist plans. If any of the socialist chiefs hadtried to earn his living by selling hot dogs, hewould have learned something about the sovereigntyof the customers. But they were professionalrevolutionaries and their only jobwas to kindle civil war. Lenin’s ideal was tobuild a nation’s production effort accordingto the model of the post office, an outfit thatdoes not depend on the consumers, becauseits deficits are covered by compulsory collectionof taxes. “The whole of society,” he said,was to “become one office and one factory.” V.I. Lenin, State and Revolution (New York: InternationalPublishers, s.d.) p. 84.

Liberty and Property 25He did not see that the very character of theoffice and the factory is entirely changedwhen it is alone in the world and no longergrants to people the opportunity to chooseamong the products and services of variousenterprises. Because his blindness made itimpossible for him to see the role the marketand the consumers play under capitalism, hecould not see the difference between freedomand slavery. Because in his eyes the workerswere only workers and not also customers, hebelieved they were already slaves under capitalism,and that one did not change their statuswhen nationalizing all plants and shops.Socialism substitutes the sovereignty of a dictator,or committee of dictators, for the sovereigntyof the consumers. Along with the economicsovereignty of the citizens disappearsalso their political sovereignty. To the uniqueproduction plan that annuls any planning onthe part of the consumers corresponds in theconstitutional sphere the one party principlethat deprives the citizens of any opportunityto plan the course of public affairs. Freedom

26Liberty and Propertyis indivisible. He who has not the faculty tochoose among various brands of cannedfood or soap, is also deprived of the power tochoose between various political parties andprograms and to elect the officeholders. Heis no longer a man; he becomes a pawn in thehands of the supreme social engineer. Evenhis freedom to rear progeny will be takenaway by eugenics. Of course, the socialistleaders occasionally assure us that dictatorialtyranny is to last only for the period oftransition from capitalism and representativegovernment to the socialist millenniumin which everybody’s wants and wishes willbe fully satisfied. Once the socialist regimeis “sufficiently secure to risk criticism,” MissJoan Robinson, the eminent representativeof the British neo-Cambridge school, is kindenough to promise us, “even independentphilharmonic societies” will be allowed toKarl Marx, Sur Kritik des Sozialdemoskratischen Programmsvon Gotha, ed. Kreibich (Reichenberg, 1920), p. 23.

Liberty and Property 27exist. Thus the liquidation of all dissenters isthe condition that will bring us what the communistscall freedom. From this point of viewwe may also understand what another distinguishedEnglishman, Mr. J.G. Crowther,had in mind when he praised inquisition as“beneficial to science when it protects a risingclass.” The meaning of all this is clear.When all people meekly bow to a dictator,there will no longer be any dissenters left forliquidation. Caligula, Torquemada, Robespierrewould have agreed with this solution.The socialists have engineered a semanticrevolution in converting the meaning ofterms into their opposite. In the vocabularyof their “Newspeak,” as George Orwell calledit, there is a term “the one-party principle.”Now etymologically party is derived from thenoun part. The brotherless part is no longerJoan Robinson, Private Enterprise and Public Control (publishedfor the Association for Education in Citzenship by theEnglish Universities Press, Ltd., s.d.), pp. 13–14.J.G. Crowther, Social Relations of Science (London, 1941),p. 333.

28Liberty and Propertydifferent from its antonym, the whole; it isidentical with it. A brotherless party is not aparty, and the one party principle is in fact ano-party principle. It is a suppression of anykind of opposition. Freedom implies theright to choose between assent and dissent.But in Newspeak it means the duty to assentunconditionally and strict interdiction of dissent.This reversal of the traditional connotationof all words of the political terminology isnot merely a peculiarity of the language of theRussian Communists and their Fascist andNazi disciples. The social order that in abolishingprivate property deprives the consumersof their autonomy and independence, andthereby subjects every man to the arbitrarydiscretion of the central planning board, couldnot win the support of the masses if they werenot to camouflage its main character. Thesocialists would have never duped the voters ifthey had openly told them that their ultimateend is to cast them into bondage. For exotericuse they were forced to pay lip-service to thetraditional appreciation of liberty.

Liberty and Property 29IVIt was different in the esoteric discussionsamong the inner circles of thegreat conspiracy. There the initiated didnot dissemble their intentions concerningliberty. Liberty was, in their opinion, certainlya good feature in the past in the frameof bourgeois society because it providedthem with the opportunity to embark ontheir schemes. But once socialism has triumphed,there is no longer any need for freethought and autonomous action on the partof individuals. Any further change can onlybe a deviation from the perfect state thatmankind has attained in reaching the bliss ofsocialism. Under such conditions, it wouldbe simply lunacy to tolerate dissent.Liberty, says the Bolshevist, is a bourgeoisprejudice. The common man does29

30Liberty and Propertynot have any ideas of his own, he does notwrite books, does not hatch heresies, anddoes not invent new methods of production.He just wants to enjoy life. He has nouse for the class interests of the intellectualswho make a living as professional dissentersand innovators.This is certainly the most arrogant disdainof the plain citizen ever devised. Thereis no need to argue this point. For the questionis not whether or not the commonman can himself take advantage of the libertyto think, to speak, and to write books.The question is whether or not the sluggishroutinist profits from the freedom grantedto those who eclipse him in intelligenceand will power. The common man maylook with indifference and even contemptupon the dealings of better people. But heis delighted to enjoy all the benefits whichthe endeavors of the innovators put at hisdisposal. He has no comprehension of whatin his eyes is merely inane hair-splitting. Butas soon as these thoughts and theories are

Liberty and Property 31utilized by enterprising businessmen for satisfyingsome of his latent wishes, he hurriesto acquire the new products. The commonman is without doubt the main beneficiaryof all the accomplishments of modern scienceand technology.It is true, a man of average intellectualabilities has no chance to rise to the rankof a captain of industry. But the sovereigntythat the market assigns to him in economicaffairs stimulates technologists and promotersto convert to his use all the achievementsof scientific research. Only people whoseintellectual horizon does not extend beyondthe internal organization of the factory andwho do not realize what makes the businessmenrun, fail to notice this fact.The admirers of the Soviet system tellus again and again that freedom is not thesupreme good. It is “not worth having,” ifit implies poverty. To sacrifice it in order toattain wealth for the masses, is in their eyesfully justified. But for a few unruly individualistswho cannot adjust themselves

32Liberty and Propertyto the ways of regular fellows, all people inRussia are perfectly happy. We may leave itundecided whether this happiness was alsoshared by the millions of Ukrainian peasantswho died from starvation, by the inmates ofthe forced labor camps, and by the Marxianleaders who were purged. But we cannotpass over the fact that the standard of livingwas incomparably higher in the free countriesof the West than in the communist East.In giving away liberty as the price to be paidfor the acquisition of prosperity, the Russiansmade a poor bargain. They now haveneither the one nor the other.

Liberty and Property 33VRomantic philosophy laboredunder the illusion that in the earlyages of history the individual was freeand that the course of historical evolutiondeprived him of his primordial liberty.As Jean Jacques Rousseau saw it, natureaccorded men freedom and society enslavedhim. In fact, primeval man was at the mercyof every fellow who was stronger and thereforecould snatch away from him the scarcemeans of subsistence. There is in naturenothing to which the name of liberty couldbe given. The concept of freedom alwaysrefers to social relations between men. True,society cannot realize the illusory conceptof the individual’s absolute independence.Within society everyone depends on whatother people are prepared to contribute to33

34Liberty and Propertyhis well-being in return for his own contributionto their well-being. Society is essentiallythe mutual exchange of services. Asfar as individuals have the opportunity tochoose, they are free; if they are forced byviolence or threat of violence to surrenderto the terms of an exchange, no matter howthey feel about it, they lack freedom. Thisslave is unfree precisely because the masterassigns him his tasks and determines whathe has to receive if he fulfills it.As regards the social apparatus of repressionand coercion, the government, therecannot be any question of freedom. Governmentis essentially the negation of liberty. Itis the recourse to violence or threat of violencein order to make all people obey theorders of the government, whether they likeit or not. As far as the government’s jurisdictionextends, there is coercion, not freedom.Government is a necessary institution,the means to make the social system ofcooperation work smoothly without beingdisturbed by violent acts on the part of

Liberty and Property 35gangsters whether of domestic or of foreignorigin. Government is not, as some peoplelike to say, a necessary evil; it is not an evil,but a means, the only means available tomake peaceful human coexistence possible.But it is the opposite of liberty. It is beating,imprisoning, hanging. Whatever a governmentdoes it is ultimately supported by theactions of armed constables. If the governmentoperates a school or a hospital, thefunds required are collected by taxes, i.e., bypayments exacted from the citizens.If we take into account the fact that, ashuman nature is, there can neither be civilizationnor peace without the functioning ofthe government apparatus of violent action,we may call government the most beneficialhuman institution. But the fact remainsthat government is repression not freedom.Freedom is to be found only in the sphere inwhich government does not interfere. Libertyis always freedom from the government.It is the restriction of the government’s interference.It prevails only in the fields in which

36Liberty and Propertythe citizens have the opportunity to choosethe way in which they want to proceed. Civilrights are the statutes that precisely circumscribethe sphere in which the men conductingthe affairs of state are permitted torestrict the individuals’ freedom to act.The ultimate end that men aim at byestablishing government is to make possiblethe operation of a definite system of socialcooperation under the principle of the divisionof labor. If the social system which peoplewant to have is socialism (communism,planning) there is no sphere of freedom left.All citizens are in every regard subject toorders of the government. The state is a totalstate; the regime is totalitarian. The governmentalone plans and forces everybodyto behave according with this unique plan.In the market economy the individuals arefree to choose the way in which they want tointegrate themselves into the frame of socialcooperation. As far as the sphere of marketexchange extends, there is spontaneousaction on the part of individuals. Under this

Liberty and Property 37system that is called laissez-faire, and whichFerdinand Lassalle dubbed as the nightwatchmanstate, there is freedom becausethere is a field in which individuals are freeto plan for themselves.The socialists must admit there cannotbe any freedom under a socialist system. Butthey try to obliterate the difference betweenthe servile state and economic freedom bydenying that there is any freedom in themutual exchange of commodities and serviceson the market. Every market exchangeis, in the words of a school of pro-socialistlawyers, “a coercion over other people’sliberty.” There is, in their eyes, no differenceworth mentioning between a man’s payinga tax or a fine imposed by a magistrate,or his buying a newspaper or admission toa movie. In each of these cases the man issubject to governing power. He’s not free,for, as professor Hale says, a man’s freedommeans “the absence of any obstacle to his

38Liberty and Propertyuse of material goods.” This means: I amnot free, because a woman who has knitteda sweater, perhaps as a birthday present forher husband, puts an obstacle to my usingit. I myself am restricting all other people’sfreedom because I object to their using mytoothbrush. In doing this I am, according tothis doctrine, exercising private governingpower, which is analogous to public governmentpower, the powers that the governmentexercises in imprisoning a man in Sing Sing.Those expounding this amazing doctrineconsistently conclude that liberty isnowhere to be found. They assert that whatthey call economic pressures do not essentiallydiffer from the pressures the masterspractice with regard to their slaves.They reject what they call private governmentalpower, but they don’t object to therestriction of liberty by public governmentpower. They want to concentrate all whatRobert L. Hale, Freedom Through Law, Public Control of PrivateGoverning Power (New York: Columbia University, 1952),pp. 4 ff.

Liberty and Property 39they call restrictions of liberty in the handsof the government. They attack the institutionof private property and the laws that, asthey say, stand “ready to enforce propertyrights—that is, to deny liberty to anyone toact in a way which violates them.” A generation ago all housewives preparedsoup by proceeding in accordance with therecipes that they had got from their mothersor from a cookbook. Today many housewivesprefer to buy a canned soup, to warmit and to serve it to their family. But, say ourlearned doctors, the canning corporation isin a position to restrict the housewife’s freedombecause, in asking a price for the tincan, it puts an obstacle to her use of it. Peoplewho did not enjoy the privilege of beingtutored by these eminent teachers, wouldsay that the canned product was turned outby the cannery, and that the corporation inproducing it removed the greatest obstacleto a consumer’s getting and using a can,Ibid., p. 5.

40Liberty and Propertyviz., its nonexistence. The mere essence of aproduct cannot gratify anybody without itsexistence. But they are wrong, say the doctors.The corporation dominates the housewife,it destroys by its excessive concentratedpower over her individual freedom, and it isthe duty of the government to prevent sucha gross offense. Corporations, say, under theauspices of the Ford Foundation, anotherof this group, Professor Berle, must be subjectedto the control of the government. Why does our housewife buy the cannedproduct rather than cling to the methods ofher mother and grandmother? No doubtbecause she thinks this way of acting is moreadvantageous for her than the traditionalcustom. Nobody forced her. There werepeople—they are called jobbers, promoters,capitalists, speculators, stock exchange gamblers—whohad the idea of satisfying a latentwish of millions of housewives by investingA.A. Berle, Jr., Economic Power and the Free Society, a PreliminaryDiscussion of the Corporation (New York: The Fundfor the Republic, 1954).

Liberty and Property 41in the cannery industry. And there are otherequally selfish capitalists who, in many hundredsof other corporations, provide consumerswith many hundreds of other things.The better a corporation serves the public,the more customers it gets, the biggerit grows. Go into the home of the averageAmerican family and you will see for whomthe wheels of the machines are turning.In a free country nobody is preventedfrom acquiring riches by serving the consumersbetter than they are served already.What he needs is only brains and hard work.“Modern civilization, nearly all civilization,”said Edwin Cannan, the last in a long lineof eminent British economists, “is based onthe principle of making things pleasant forthose who please the market, and unpleasantfor those who fail to do so.” All this talkabout the concentration of economic poweris vain. The bigger a corporation is, the moreEdwin Cannan, An Economist’s Protest (London, 1928), pp.VI ff.

42Liberty and Propertypeople it serves, the more does it dependon pleasing the consumers, the many, themasses. Economic power, in the marketeconomy, is in the hands of the consumers.Capitalistic business is not perseverancein the once attained state of production. It israther ceaseless innovation, daily repeatedattempts to improve the provision of theconsumers by new, better and cheaperproducts. Any actual state of productionactivities is merely transitory. There prevailsincessantly the tendency to supplantwhat is already achieved by something thatserves the consumers better. There is consequentlyunder capitalism a continuouscirculation of elites. What characterizes themen whom one calls the captains of industryis the ability to contribute new ideas andto put them to work. However big a corporationmust be, it is doomed as soon asit does not succeed in adjusting itself dailyanew to the best possible methods of servingthe consumers. But the politicians andother would-be reformers see only the

Liberty and Property 43structure of industry as its exists today.They think that they are cleaver enough tosnatch from business control of the plantsas they are today, and to manage them bysticking to already established routines.While the ambitious newcomer, who will bethe tycoon of tomorrow, is already preparingplans for things unheard of before, allthey have in mind is to conduct affairs alongtracks already beaten. There is no record ofan industrial innovation contrived and putinto practice by bureaucrats. If one does notwant to plunge into stagnation, a free handmust be left to those today unknown menwho have the ingenuity to lead mankindforward on the way to more and more satisfactoryconditions. This is the main problemof a nation’s economic organization.Private property of the material factors ofproduction is not a restriction of the freedomof all other people to choose what suits thembest. It is, on the contrary, the means thatassigns to the common man, in his capacityas a buyer, supremacy in all economic

44Liberty and Propertyaffairs. It is the means to stimulate a nation’smost enterprising men to exert themselvesto the best of their abilities in the service ofall of the people.

Liberty and Property 45VIHowever, one does not exhaustivelydescribe the sweeping changes thatcapitalism brought about in the conditionsof the common man if one merelydeals with the supremacy he enjoys on themarket as a consumer and in the affairs ofstate as a voter and with the unprecedentedimprovement of his standard of living. Noless important is the fact that capitalism hasmade it possible for him to save, to accumulatecapital and to invest it. The gulf that inthe pre-capitalistic status and caste societyseparated the owners of property from thepenniless poor has been narrowed down. Inolder ages the journeyman had such a lowpay that he could hardly lay by somethingand, if he nevertheless did so, he could onlykeep his savings by hoarding and hiding a45

46Liberty and Propertyfew coins. Under capitalism his competencemakes saving possible, and there areinstitutions that enable him to invest hisfunds in business. A not inconsiderableamount of the capital employed in Americanindustries is the counterpart of the savingsof employees. In acquiring savingsdeposits, insurance policies, bonds and alsocommon stock, wage earners and salariedpeople are themselves earning interest anddividends and thereby, in the terminologyof Marxism, are exploiters. The commonman is directly interested in the floweringof business not only as a consumer and asan employee, but also as an investor. Thereprevails a tendency to efface to some extentthe once sharp difference between thosewho own factors of production and thosewho do not. But, of course, this trend canonly develop where the market economy isnot sabotaged by allegedly social policies.The welfare state with its methods of easymoney, credit expansion and undisguisedinflation continually takes bites out of allclaims payable in units of the nation’s legal

Liberty and Property 47tender. The self‐styled champions of thecommon man are still guided by the obsoleteidea that a policy that favors the debtorsat the expense of the creditors is very beneficialto the majority of the people. Theirinability to comprehend the essential characteristicsof the market economy manifestsitself also in their failure to see the obviousfact that those whom they feign to aid arecreditors in their capacity as savers, policyholders, and owners of bonds.

48Liberty and PropertyVIIThe distinctive principle ofWestern social philosophy is individualism.It aims at the creation of a spherein which the individual is free to think, tochoose, and to act without being restrainedby the interference of the social apparatus ofcoercion and oppression, the State. All thespiritual and material achievements of Westerncivilization were the result of the operationof this idea of liberty.This doctrine and the policies of individualismand of capitalism, its application toeconomic matters, do not need any apologistsor propagandists. The achievementsspeak for themselves.The case for capitalism and private propertyrests, apart from other considerations,48

Liberty and Property 49also upon the incomparable efficiency ofits productive effort. It is this efficiency thatmakes it possible for capitalistic businessto support a rapidly increasing populationat a continually improving standard of living.The resulting progressive prosperity ofthe masses creates a social environment inwhich the exceptionally gifted individualsare free to give to their fellow-citizens all theyare able to give. The social system of privateproperty and limited government is the onlysystem that tends to debarbarize all thosewho have the innate capacity to acquire personalculture.It is a gratuitous pastime to belittle thematerial achievements of capitalism byobserving that there are things that are moreessential for mankind than bigger and speediermotorcars, and homes equipped withcentral heating, air conditioning, refrigerators,washing machines, and television sets.There certainly are such higher and noblerpursuits. But they are higher and noblerprecisely because they cannot be aspired

50Liberty and Propertyto by any external effort, but require theindividual’s personal determination andexertion. Those levelling this reproachagainst capitalism display a rather crude andmaterialistic view in assuming that moraland spiritual culture could be built eitherby the government or by the organization ofproduction activities. All that these externalfactors can achieve in this regard is to bringabout an environment and a competencewhich offers the individuals the opportunityto work at their own personal perfectionand edification. It is not the fault of capitalismthat the masses prefer a boxing match toa performance of Sophocles’ Antigone, jazzmusic to Beethoven symphonies, and comicsto poetry. But it is certain that while pre-capitalisticconditions as they still prevail in themuch greater part of the world makes thesegood things accessible only to a small minorityof people, capitalism gives to the many afavorable chance of striving after them.From whatever angle one may look at capitalismthere is no reason to lament the passing

Liberty and Property 51of the allegedly good old days. Still less is itjustified to long for the totalitarian utopias,whether of the Nazi or of the Soviet type.We are inaugurating tonight the ninthmeeting of the Mont Pelerin Society. It isfitting to remember on this occasion thatmeetings of this kind in which opinionsopposed to those of the majority of our contemporariesand to those of their governmentsare advanced and are possible onlyin the climate of liberty and freedom that isthe most precious mark of Western civilization.Let us hope that this right to dissentwill never disappear.

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