Ludicrous Ludwig von Mises

Hypocrisy, intellectual irresponsibility and the shameful silence of the scourge of capitalism follows Ludwig von Mises and his pledge to human freedom.

The restoration of capitalism in the Yugoslav territories was accompanied by an ideological hurricane, the center of which is the effort to strengthen the quasi-legitimacy of the market and private property as “natural” and “rational” conditions for a social order which, despite some shortcomings here and there, still has no alternative. Liberalism, either in its classical representatives or in the libertarian company of epigones, is proclaimed victorious and а lighthouse before which social thought and the political organization of the modern world should be aligned.

The publication of books, performances and lectures by prominent theoreticians, or perhaps rather doctrinaires, whose rallying cry is the free market and the “invisible hand”, was signed in a striking disregard for the history of the inhuman exploitation of labor in the epoch of the primitive accumulation of capital, accompanied by the slavery of millions of blacks and the grotesque poverty of million women with accompanying imperial wars of the 18th and 19th century bourgeoisie.

In this, a special role is played by Ludwig von Mises, one of the celebrated “founding fathers” of the so-called Austrian school of thought in economics and political philosophy, who did his best to enthrone capitalism on the altar of timelessness and sinlessness, proving that there is no rational alternative and that criticism of the “spontaneous” order of the market is the result of a delusion whose price is paid by “totalitarian” socialism.

His lecture, given to Argentine students in 1954,[1] was recorded, in which he outlined the emergence of capitalism and what benefits it brought to people who languished in alleged centuries-old poverty. In a narrative style of simplified comparisons and jumps, Mises conjures up an idyllic picture of a technologically competitive market society, which, regardless of class status, brought and brings the wealth of mass production and constant progress to all of us.

Casting a curse on feudalism for its social static and class immobility, where an individual had the misfortune to be born a serf, he would remain so throughout his life, Mises insists on scarce production, which supposedly could not satisfy the population’s needs for food and other necessities of life, thus leading to general famine and population extinction, while forming the basis for the repression of nobles in order to collect tribute for warrior glory and aristocratic prestige.

In his book What is capitalism?[2] Economist Slaviša Tasić shows that modern sympathizers and apologists of libertarian ideology uncritically repeat this narrative, using dubious methodologies for measuring real income throughout history, citing an often used graph that supposedly testifies to the exponential growth of welfare since the era when capitalism took the throne.

However, we will take England as an example, since Mises refers to it mostly as an exemplary history of progress brought about by the social order of the free market and the private property of manufacturers. Gregory Clark[3] made a study of the movement of real wages expressed in bushels[4] of grain (oats, wheat, oats) from 1220 to 1864. It is well known to historical science that after the great plague, which shook medieval Europe in the middle of the 14th century, kings and feudal lords had to limit the level of wages by force of law.[5] The double jump in the amount of food that could be afforded by a medieval worker or a free peasant seriously threatened the social order of the time and the already started process of the primitive accumulation of capital. We will only cite an example of the law from 1363, when it was forbidden for domestic servants of gentlemen, merchants and craftsmen to have more than one meal with meat or fish and they had to be satisfied with milk, butter and cheese.

Such a situation lasted for almost two hundred years until the end of the 16th century, when wages gradually fell back to the level of the late Middle Ages. It is striking how Mises is silent on the entire constellation of bloody historical processes that led to it, while the same course of events prepared the institutional ground for capitalism in the various cultures of Western Europe. This bard of libertarianism is either truly ignorant or perfidiously conceals the violent expulsion of once free peasants[6] from their cottages and guaranteed homesteads[7] and completely ignores the criminal enclosure of municipal land, which for centuries in the Germanic tradition was at the service of farmers and their families, including free access to forests and water sources.

History knows very well what caused this process: a high jump in wool prices due to the development of the Flemish textile industry at the end of the 15th century and the desire of large landowners to turn fertile arable land into pastures for sheep. The banished serfs represent the original proletariat that struggled in poverty all over England at the time and the reason for its miserable position was not the inability of the feudal economy to feed the people but the interest of the aristocrats to turn themselves into capitalists in order to gain profit in the production of wool.

That these unfortunates were not given any freedom of choice, of which Mises and his epigones constantly speak, is again evidenced by the well-known history of the brutal penal laws against vagrants and homeless persons, which Henry VII began to enact. The bloody irony is reflected in the fact that the once-employed peasants on feudal lordships, as exiled victims, are imprisoned and beaten as vagabonds and “lazy people” under the threat of having to return to their place of birth and “accept work”. The law of Henry VIII becomes even harsher with the addition that whoever is caught a second time in vagrancy should have half of his ear cut off with whipping, and for the third time the punishment is death.

Edward VI passed an act that anyone who does not want to work must surrender as a slave to the person who reported him to be idle, and the master has the right to feed his servant with bread and water, weak drink and such scraps of meat as he wants. If the unfortunate man voluntarily leaves work for 14 days, he is caught and branded on his face with the letter S (the first letter of the English word for slave) as a sign that he is enslaved, and on the third attempt to escape, he is punished by death.

We will not continue to cite numerous examples, the reader can easily find them, we want to emphasize the role played by this kind of legislative brutality in the suppression of wages, which benefited the primitive capital accumulation of emerging factories and now capitalist agricultural tenants, for whom the proletariat had to work as would keep himself alive.

The destruction of grain production in order to turn arable land into pastures for sheep is also indicated by the change in their scale over time. For example, in the 14th and 15th centuries the ratio was 3:1 or 4:1 in favor of arable fields. This advantage was reduced to 1:1 in the 16th century, and later the ratio was reduced to 2 acres of pasture for 1 acre of arable land, until the ratio settled at 3:1 in favor of sheep meadows.[8] Even during the enthroned industrial capitalism, which Mises admires, in the period from 1801 to 1831, the peasants were robbed without compensation of 3,511,770 acres of municipal land, on which their fathers and grandfathers worked unhindered, supporting their families since ever. The irony is that the landlords did it by the decision of the parliament in which they themselves sat and voted for the laws that suit them.

It becomes clear what was the cause of the famine throughout the centuries, actually the pastures, which swallowed the much-needed arable land for the growing population. To make matters worse for the intellectual honesty of Ludwig von Mises, the reckless conversion of fertile fields into meadows played a hellish role in driving down the wages of the newly minted working class in the interests of capital accumulation in textile and wider manufacturing. To put it plainly, England had twice as many people with three times less arable land for growing food at the end of the 18th century than three hundred years earlier, when feudalism had practically collapsed. So, capitalism has caused hunger, misery and suffering.

We will not dwell on the difficult and exploitative working conditions for the descendants of former farmers, who replaced the winter idyll of village life with exhausting work in stuffy factories from 12, 14, and even 16 hours. We do not want to say that feudalism was suitable for human development. On the contrary, it was terribly cramped, rough and inhumane for most of the serfs, but we want to emphasize the atrocity and bloodlust of the emergence of capitalism.

It is incomprehensible that Ludwig von Mises could smoothly pass over the crippling poverty of millions of workers and their children despite the progress brought by the steam engine and the reorganization of manufacturing and factory production. On the above graph of the index of real income expressed in grains, it can be seen that its height from the 14th century was reached only in 1864. The question really arises, what kind of economic system is capitalism when it takes almost more than 80 years from the beginning of the industrial revolution for the average worker to be able to feed himself like a peasant from 1330?

It is almost unbelievable that Mises can say how “out of this serious social situation emerged the beginnings of modern capitalism. There were some persons among those outcasts, among those poor people, who tried to organize others to set up small shops which could produce something. This was an innovation. These innovators did not produce expensive goods suitable only for the upper classes; they produced cheaper products for everyone’s needs. And this was the origin of capitalism as it operates today. It was the beginning of mass production, the fundamental principle of capitalistic industry. (…) It was mass production to satisfy the needs of the masses.”

The drivers of large-scale capitalist production, as we could see, were former feudal landowners for the needs of wool production and trade, then bankers who speculated on ever-increasing public debts due to the king’s adventures with conquests on the world’s seas, merchant travelers and manufacturers who accumulated capital by exploiting the vast multitudes of proletarians who poured in from the former rural areas.

However, Mises loses all decency with the claims: “The famous old story, repeated hundreds of times, that the factories employed women and children and that these women and children, before they were working in factories, had lived under satisfactory conditions, is one of the greatest falsehoods of history. The mothers who worked in the factories had nothing to cook with; they did not leave their homes and their kitchens to go into the factories, they went into factories because they had no kitchens, and if they had a kitchen they had no food to cook in those kitchens.”

We will remind you that Prime Minister William Pitt proposed his act “Poor Law Bill”, according to which it would be legal for boys and girls from the age of five to be employed. It was not until 1819 that children under the age of 9 were prohibited from working, and working hours were limited to 12 hours for those under the age of 16. The regulation was barely passed in 1825 when employment on Saturdays was limited to 9 hours, and finally in 1831, night work for children and young people from 9 to 21 years of age was prohibited. We will also mention that children were often harshly disciplined for intensive work, and from that period there are numerous medical reports about their very poor health and short life.

This is a fact that is often overlooked in the extensive apologetic literature that celebrates capitalism’s supposed unprecedented expansive power to mass produce. Mises exposes himself to a particular embarrassment when he minimizes or completely denies the terrible exploitative child labor, which at the beginning of the 19th century in England and other parts of Europe was a completely normal thing, and it was not recorded that children were so cruelly and systematically exploited in previous socio-economic formations.

This apostle of libertarianism constantly points out how capitalism in England in the period from 1760 to 1830 doubled the population in contrast to “hungry” feudalism. However, even a cursory review of demographic trends throughout the history of Great Britain since the 15th century shows, indeed, a very slight, but still continuous population growth of a few million people despite the “inability” of non-industrialized agriculture to produce enough food. Here we especially want to emphasize the increase in the population, even though we could see what kind of cruel criminal measures were taken by the landowners and the royal government, in order to turn arable land into pastures and drive the former peasants into vagrants.

On the other hand, a similar large increase in population from 1760 to 1830 also happened in Celtic Ireland, and the industrial revolution did not penetrate there,[9] so one can doubt that the demographic increase in England is due exclusively to capitalist development, which Mises unquestioningly propagates by falsifying history. Population growth in Great Britain can rather be attributed to the medical eradication of plague, the drainage of land to prevent malaria, the establishment of sanitary hospitals and maternity wards for mothers and children, and a better understanding of the importance of cleanliness.

The role of black and colonial slavery in the primitive accumulation of capital, not only by Ludwig von Mises, but also by contemporary authors on the history of capitalism, is also noticeable. Often, this shameful episode of the new century European states is interpreted by the blindness of the elites of that time, the greed of monarchist imperialism and the geopolitical games of the courts. However, slavery had its specific capitalist function in establishing the first sugar plantations and refineries throughout the North and South American colonies. Liverpool built itself on the slave trade and from 15 ships in 1730, it reached 132 ships in 1792 for this shameful business. In the table below,[10] we can see what was the relationship between the free population and the slaves in various parts of the world.

The search for the extraction of surplus value and the fertilization of ever-increasing capital could not be satisfied by the exploitation of proletarians on the territory of imperial European metropolises, but had to start hunting for black labor, whose maintenance costs were below any level. Without slavery, the cotton industry would not have arisen, and without it, world trade would not have been created, which in turn favors the development of large-scale industry. One can only estimate how many people died during capture and being taken to the galleys, where they died of infectious diseases. Max Weber goes so far as to say that only 25% of those shipped survived to reach slave labor.

In several of his writings, Ludwig von Mises subverts the so-called “Iron law of wages” to Marx, according to which market wages for workers cannot rise above the subsistence minimum for the bare biological survival of themselves and their families, because with the increase in population due to good nutrition, the supply of labor would also increase, which would lower earnings below elementary level. This would lead to a famine that would reduce the number of the working population and so market wages would return to equilibrium, sufficient for mere survival.

It is astonishing how intellectually dishonest Mises is. Karl Marx criticized the iron law of wages on several occasions, most impressively in his Critique of the Gotha Program, blaming Lassalle for firmly holding the given axiom. In fact, a large number of political economists considered this phenomenon necessary in a capitalist economy and used it as a polemical tool against the early socialists and their demands to improve the position of the working class.

Unfortunately, a number of socialist thinkers accepted the correctness of this “law” and Marx denied its universality. In fact, as we could see in the graph of real wages in bushels throughout the history of England, wages really depended on the demographic movement of the population in the conditions of scarce productive forces of the late Middle Ages and early capitalism. Such opportunities continued with various fluctuations during the industrial revolution and Marx only detected them in his analyzes of British capitalism of the 19th century.

The law in question did not consider it an inevitable and necessary feature of bourgeois society. This is shown by his theory of capital accumulation itself, which looks at the level of wages depending on the relative degree of technological development of capitalism, in diverse historical and cultural environments of the world. In addition, wages are determined by the phases of cyclical crises that burden the capitalist mode of production. Wages rise in boom times, but also fall sharply in recessions, regardless of the increase in labor productivity due to technological progress. Then, in the whole issue, the question of the outcome of the institutional struggle of the workers and the bourgeoisie on the long-term level of wages, which are established as a cultural habit for an acceptable standard of working people, must be raised. There is no predetermined equilibrium level that is “legal”. This is not Marx’s idea or the position of Marxism.

Summarizing everything that has been said so far, we cannot help but recall the record that John Locke, as one of the apostles of the political philosophy of liberalism, owned shares in a company that held slaves.[11] Hypocrisy, intellectual irresponsibility and the shameful silence of the scourge of capitalism follows Ludwig von Mises and his pledge to human freedom.

Author: Vladimir Vasić graduated from the Faculty of Political Sciences in Belgrade. He deals with political economy, econophysics, theory of economic development, theory of planned economy, methodology of social sciences. He studies Marxism, systems theory in sociology, loves epistemology, poetry, philosophy, artistic photography and programs on the .NET platform. He is a member of the editorial staff of Novi Plamen.

Translation from Croatian in English: Tomislav Zahov

[1] https://mises.org/library/economic-policy-thoughts-today-and-tomorrow/html/c/46

[2] Taken from Slaviša Tasić, Šta je kapitalizam, Heliks, Smederevo, Beograd, 2016, str. 11.

[3] The chart is taken from: Gregory Clark, The Economic History Review, New Series, Vol. 60, №1 (Feb., 2007), p. 104.

[4] One bushel is 36,368 liters in volume, or 27,215 kilograms of grain.

[5] For detailed sources see Emmanuel Arghiri, L’échange inégal, Izdavački centar „Komunist“, Beograd, 1974, p.145.

[6] Who were actually small tenants on large estates.

[7] Which was usually 4 acres. One acre is 4,046.7 square meters.

[8] According to the testimony of the famous political economist from the end of the 18th century, Sir Frederick Morton Eden. About this see: Karl Marks, Kapital, Bigz, Prosveta, Beograd, 1973, p. 643.

[9] About this see the seventh chapter of the fifth book in George Macaulay Trevelyan, History of England, Kultura, Zagreb, 1956.

[10] Based on the data from Henryk Grossmann, The Law of Accumulation and Breakdown of the Capitalist System, Prosveta, Beograd, 1983., p. 318.

[11] About this see Lucien Sève, Liberalizam, ideologija “rase gospodara”: https://www.troplet.ba/?p=44447