As part of my effort to read, engage with, and critique important thinkers on the right I recently read a collection of writings by Ludwig Von Mises, a key Austrian economist and foundational thinker in the development and revival of free market thinking in the 20th century. His essays cover a lot of ground. Here are some thoughts, organized around a few key themes.
Power
His basic story, laid out on pages 5-6, is that in capitalism the consumer is sovereign. This is because to be successful businessmen must constantly cater to the desires of the consumer. Thus we can say that the consumer in effect runs the economy. Von Mises sums this up by saying that “under capitalism there is one way to wealth: to serve the consumers better and cheaper than other people do.”
As far as social and political theory go, this is fascinating. Compare Von Mises to Vivek Chibber’s recent book, Confronting Capitalism, for a look at how differently the left and the right frame and understand capitalism. (I will say more on this in the next post).
In summation, on page 6, Von Mises argues that “within the shop and factory, the owner—or in corporations, the representative of shareholders, the president—is the boss. But this mastership is merely apparent and conditional. It is subject to the supremacy of the consumers. The consumer is king, is the real boss, and the manufacturer is done for if he does not outstrip his competitors in best serving consumers.”
My Response? Mises basically just sidesteps/concedes one of the main leftist criticisms of capitalism, namely that most people have to spend a majority of their waking life working under the control of someone else at a dictatorial workplace and also spend much of their “non-work” time commuting to and from work, showering/eating/getting ready for work, or just laying exhausted on the sofa afterwards recovering from work. In addition, many jobs are physically dangerous and/or soul-crushing. To ignore this and focus on the “freedom” and “power” of the consumer is hard to take seriously. I’m exhausted, tight on money, unhappy, but I’m free because I get to pick between Campbell’s and Progresso when I’m at the grocery store? Really, this is the capitalist conception of freedom?
As he says again on page 18, “economic power, in the market economy, is in the hands of the consumer.” But this consumer power is pretty overstated—companies spend billions to get people to buy things they don’t need or want (we see this in the massive plastic, clothing, packaging, and other waste produced under capitalism). Not to mention how he ignores the massive concentration of income and wealth among a tiny minority, the role they have on boards of directors, or as major shareholders, principle investors, connections to politicians, and so on. He also ignores inequality and poverty—about half of the people in America, for instance, have relatively little spare income and thus relatively little choice in what to consume. Rent, healthcare, groceries take up most people’s money.
Bernie Sanders describes how power is concentrated in straightforward language. It is in the hands of “Wall Street investors and corporate CEOS who determine whether jobs will stay in this country or go abroad, what kind of incomes working people will earn, and what the price of gas, prescription drugs, and food will be. And while these oligarchs exert enormous influence over our lives, ordinary people have virtually no power, or even the concept of power, in shaping the future of the country. They lack the institutions to exert influence, and they’re too busy just trying to survive.”
The Von Mises conception of power is so radically at odds with how those on the left see power that it is hard to see how to find any common ground. Books like Mills’ The Power Elite, Domhoff’s Who Rules America?, Miliband’s The State in Capitalist Society, and Gautney’s The New Power Elite, demonstrate how the left frames the distribution of power, which I think is frankly much more compelling than what is offered by the right. Looking around the world in 2023, Von Mises’ claims of consumer sovereignty sound about as compelling as Pravda must have sounded in 1989.
History
Von Mises sees the 1940s and 1950s, much like Hayek and Friedman, as a period dominated by anti-capitalist ideas. Obviously I wasn’t alive then but I think they overstated the power of the left and the marginalization of the right. The 1950s American identity was in many respects defined in stark opposition to the USSR, i.e. a Christian individualist capitalism contrasted with an atheist collectivist communism.
The second chapter, titled “Planned Chaos,” echoes Hayek’s Road to Serfdom argument. Von Mises also makes the standard claims about the bad consequences of minimum wages, price controls, and other market interventions. In sum, we get a huge number of causal claims about how the world works with basically no empirical evidence. He only really considers the USSR. But the past century of social democracy in Europe and elsewhere seems to largely disprove his major claims about “intervening” in the economy leading to either disastrous economic results (a standard claim of the right) or tyranny (Hayek’s specific claim).
Mises wants to say that the only options are either pure planning or pure markets. But this is far too simplistic. There are many varieties and in-betweens, which he dismissively labels “interventionists”, i.e. those who want government to “intervene” in the market without taking full control. He suggests all such positions don’t really work and either are mild, and reducible to market capitalism, or totalizing, and reducible to command communism. Again, the nearly century of history since the 1930s challenges his simplistic dichotomy.
His criticism of unions seems almost laughably wrong, since the heyday of the working class was also the time of greatest union power, roughly 1945-1975, in the US and much of Europe. Of course unions weren’t the only cause of widespread prosperity but they were a key part.
Ha-Joon Chang, in his Edible Economics, criticizes the simple and triumphant free market history offered by Von Mises, Hayek, and Friedman. “The best example of myth in economics is the distorted historiography that tells us that Britain and then the US became the world’s economic hegemons because of their free-trade, free-market policies—when they were the countries that most aggressively used protectionism in order to develop their national industries.”
This historical critique from Chang is powerful—we see this simple free trade, free market story about the success of the UK and the USA in the works of Von Mises, Hayek, and Friedman, though it is far from reality. Chang goes so far as to argue that the United States, which happens to be the richest country in history, is also historically the most protectionist.
The USSR and Nazi Germany
When Von Mises criticizes those who, in the 1930s, defended the USSR and its suppression of dissident speech, I agree strongly. It is sickening to see people like Harold Laski or the Webb’s defend the silencing of critical speech and thought under Stalin. There can be no defense of this. Although Von Mises is also cherry-picking his sources, ignoring leftists in the US, Europe, and elsewhere who criticized Soviet authoritarianism. Recently rereading essays by the great Russian anarchist Peter Kropotkin reminded me that he powerfully condemned Soviet dictatorship while defending an alternative vision of anti-authoritarian worker power.
Still, Von Mises’ critique of Soviet authoritarianism in the 1920s and 1930s is well-taken, as is his criticism of communist parties around the world blindly following the Soviet line from the 1920s-1940s. His critique of Stalin and post WW2 Soviet expansion is also justified but he almost seems to sympathize with Nazi Germany, Fascist Italy, and Imperial Japan’s nationalist claims for expansion. At the very least he suggests that their desires for expansion were more justified/grounded in reality than the Soviets. Which is horseshit. I have no sympathy for Soviet aggression, like Hungary in 1956 and Czechoslovakia in 1968, or their post-World War Two push for a greater sphere of influence, but to suggest that it was equal to, let alone worse than, the axis powers is utter nonsense. At no point did the Soviet military try to conquer the World and initiate a World War that killed 70 million humans. As monstrous as Stalin was, the Soviets fought against the axis powers and millions of their soldiers died battling the Nazis, a sacrifice Von Mises does his best to disparage, suggesting it was negligible to the victory of the allied powers.
The constant suggestions that Nazi Germany was “socialist” are hard to take seriously. Nathan Robinson tackles this dumb argument in detail in his Responding to the Right.
One problem with Von Mises—he is not a historian or a political scientist and much of the empirical claims and arguments he offers are not well-grounded in evidence and haven’t aged especially well. He is nonetheless right to critique Stalin’s tyranny and the embarrassing defenses of Soviet oppression offered by some Western intellectuals.
Although these thinkers, especially Mises and Hayek, can be powerful critics of the USSR (and to their credit they criticized Nazi Germany, unlike many others on the right), they see all injustices in the USSR as the inevitable consequences of communism, perhaps even its essence. But of course in their works they completely ignore the colonization of the Western hemisphere, the Atlantic slave trade, the 19th century conquest of Africa, and other injustices bound up in the modern development of capitalism and liberalism. Are these wrongs merely incidental to Western practices and ideas? Do they have nothing to do with capitalist modernity and liberal individualism? To treat these historic injustices as unrelated to the ideas Mises and Hayek champion seems about as honest as the most blatant apologists for Stalin.
Voters and Consumers
Turning to the issue of voting, Von Mises shows some elitism: “In choosing between various political parties and programs for the commonwealth’s social and economic organization most people are uninformed and groping in the dark. The average voter lacks the insight to distinguish between policies suitable to attain the ends he is aiming at and those unsuitable. He is at a loss to examine the long chains of aprioristic reasoning which constitute the philosophy of a comprehensive social program. He may at best form some opinion about the short-run effects of the policies concerned. He is helpless in dealing with the long-run effects.” (132).
He sounds like elitist philosopher Jason Brennan, who seems to think you need a social science PhD to vote but that consumers when they buy are, in contrast, fully competent and informed.
He also speaks of the right to vote as if it naturally followed from and emerged with capitalism. This isn’t really true. As more recent history has shown, capitalism and democracy don’t always go together. Second, it didn’t happen naturally, it happened through mass struggle generally driven by left-wing political movements.
Contra his perspective on voting, here is Von Mises on consumer competence:
“But in buying a commodity or abstaining from its purchase there is nothing else involved than the consumer’s longing for the best possible satisfaction of his instantaneous wishes. The consumer does not—like the voter in political voting—choose between different means whose effects appear only later. He chooses between things which immediately provide satisfaction. His decision is final.” (132-133).
Aside from Gerald Mackie’s research that shows consumers are not especially knowledgable or competent, it is as if Von Mises has never heard of externalities. No transactions are final. There are the environmental effects of production and supply chains, pollution by users of the end product, the concentration of money (and thus power) in the hands of owners, etc.
And of course most people don’t know where, how, or under what conditions the products they buy are produced or distributed. Are the jobs good, the materials sustainable, the animals treated well, etc? People care about these things, as evidenced in polling, election outcomes, laws, the work of NGOs, etc. But they don’t factor into consumer capitalism.
The final chapter “Economic Calculation in the Socialist Commonwealth” is engaging and by far the best essay in the collection. Written in a more academic manner, it deals with debates regarding information and the challenges a fully planned economy would face in generating and sharing information regarding scarcity, abundance, need, and so on. Von Mises and those on his side of the debate at the very least correctly anticipate many of the challenges the USSR would face with its five year plans. It is interesting reading these debates nearly a century later. In many respects I think Von Mises is basically correct. But the solution to these problems, I would argue, is not his beloved neoliberal capitalism but rather democratic socialism, à la Bernie Sanders. Such a system would combine markets, greater worker control of firms, and universal social programs, all in the context of a richly democratic polity.