VI / Le Monde / Tuesday 7 October 2003
Economic Thought
In Alabama in the United States, at Auburn University, the Ludwig von Mises
Institute, named after one of the most important economists of the 20th
century, is one of the chief clearinghouses of the liberal intellectual movement known as the “Austrian School”*
AUBURN (Alabama)
from our special correspondent
More than a hundred of them have come from the four corners of the United
States, from Canada, from Latin America, from Europe, but also from Singapore,
Tokyo, Hong Kong, and Brunei. For the most part, students, and a handful of
businessmen. Why do they find themselves here, in Auburn, this modest city in the
southeastern United States, populated by some 40,000 inhabitants?
Ordinarily, half the population is made up of students at Auburn University. But in
summer this campus is empty. The heat is stifling. The few bars with beer close at
9 o’clock in the evening. “I was so bored on Sunday that I went to mass,”
confides one of these pilgrim strangers. Certainly he had an embarrassment of
riches to choose from, for Auburn offers a church or a chapel on every street
corner ….
Stranger yet, these pilgrims come to take courses in “Austrian economics,”
covering all the traditional subjects (money, banking, entrepreneurship, prices,
wages, profits, business cycles, the environment, etc.) in the summer school
organized, for the eighteenth year, by the Ludwig von Mises Institute – an
elegant, brand-new building outside the campus of Auburn University and with no
affiliation to it. What is Austria doing here? Mises’ name is known only to a
few specialists. How can he attract so much enthusiasm, so much fervor? And
why is he today at the heart of libertarian thought in America, indeed in the
world?
This extraordinary story begins on 15 March 1938, the date that German troops
marched in Austria. Or rather on the very eve of the Anschluss: one of the
Hitlerite commandos under Himmler’s command had forced open the door of Ludwig
von Mises’ apartment in Vienna in order to pack up cases full of books, files,
manuscripts, and all the valuable articles which they could collect – except
for Mises himself and his wife, who had already fled.
On the very day that the German army marched into Paris, in June 1940, the
Hitlerites broke into the Curies’ laboratory in the same way. But in this case
it was a matter of seizing the secret of the atom. Nothing of the kind two
years earlier with Mises. He enjoyed so little recognition in his own country
that he had to work at the Institut des Hautes Études Internationales in Geneva.
What then could the Nazi advance guard be seeking?
It is true that Mises had made himself known in academic circles in 1920,
through an article that demonstrated the impossibility of a socialist economy’s
avoiding total bankruptcy. Thus one might now say that Mises was the very first
one to foresee the fall of the Berlin Wall. The reasoning is simple: all
planning involves economic calculations, which can be based only on real prices.
But real prices can proceed only from voluntary exchanges. Such exchanges
require that those doing the exchanging are the owners of what they exchange. In a
socialist economy, however, production goods are collectivised. Thus no real
price can arise from exchanging them, and consequently no economic calculation
is possible, and errors of investment are inevitable. The article of 1920 had
sparked an enormous debate, because many economists, even non-socialist ones,
believed that economic calculation in a collectivist economy was possible.
Mises’ demonstration certainly could not have been pleasing to the Nazis, who
had aspirations to economic planning. What made his case still worse in
their eyes was that they sensed, with remarkable acuity, that he was the most authentic heir of the “Austrian School,” founded in the previous century by Karl [spelling sic] Menger and continued by Eugen
Böhm-Bawerk. This current of thought had given a scientific foundation to the subjective theory of value. “Value lies in us, not in things,” summarises Mises. The task of the economist, accordingly, is to explain what man does, not what man should do. He seeks to explain the price of tobacco, alcohol, or marijuana, not their merits or demerits. Nothing to do with the “labour theory of value” coming from the English School (Adam Smith, Ricardo) and taken up again by Marx. Likewise nothing to do with the positivist economics professed in Germany, which trapped itself in the dead end of historicism, piling up mountains of mutually irreducible “historical facts.”
In fact, the Nazis on that 15 March 1938 had put their hand on a veritable treasure of economic thought, but they could do nothing with it but what they did: transport it somewhere in Germany in a sealed coach.
As an aggravating circumstance, Mises was Jewish, and the fact that his grandfather had been raised to the nobility by Emperor Franz-Josef in 1881, the very day of Ludwig’s birth, evidently changed nothing in the eyes of the Nazis (the Mises Institute’s crest is none other than the Mises family’s coat-of-arms after its ennoblement).
At the moment when the Hitlerites are ransacking his Viennese apartment, Mises and his wife are already in Geneva, trying to begin a new life. But the
defeat of France in May-June 1940 convinces them that the whole of Europe is likely
to fall under the Nazi assault. And they attempt, along with other Jews including the economist Charles Kindleberger, to reach Spain by bus in order to get from there to America. The bus is stopped in France, in the non-occupied zone. Mises telephones Professor Louis Rougier, whom he has come to know through having met him at scientific congresses before the war. Rougier plays a mysterious role in Vichy, charged with a “secret mission” to Churchill in London, a mission which will come to nothing. In any case, shortly after the telephone call all the Jews on the bus that had been stopped receive visas for America via Spain and Portugal.
When Mises disembarks in New York he is nearly 60 years old. The least one can say is that the academic reception he is accorded is meager. The “Austrian School” is at this time regarded as a museum piece. Keynes is at the height of his glory, and Keynesianism is practiced to some extent throughout the world, including the United States and Germany. It is only thanks to a grant from the Rockefeller Foundation that he obtains a post as a “visiting professor” at the National Bureau of Economic Research. The grant is valid for one year; it is renewed twice. In 1943, he is given to understand that he should exert his talents elsewhere. It is another foundation, the William Volker Fund, that finances his position as “visiting professor” at New York University at the end of 1945, “populated, as has been said, by an overwhelming majority of non-entities,” where he will conduct a seminar until 1969. He will also find invaluable assistance in the Foundation for Economic Education (FEE), launched in 1946 by Leonard Read, a champion at “fund raising” from potential donors.
These various forms of assistance make it possible for Mises to publish, in 1949, his English-language masterpiece Human Action, in which, following the tradition of the “Austrian School,” he founds a new economic science called praxeology. It is completely axiomatico-deductive, in that it derives economic theory deductively from the fact that man cannot do otherwise than make choices. At a stroke, economic science is definitively separated from the natural sciences. Example: by the most rigorous reasoning it can be demonstrated that an increase in the money supply inevitably results in a rise in prices. But this proposition cannot be verified in the facts, since the conditions for a laboratory experiment are never in place. Likewise, the circle conceived by the geometer is not found in nature; nevertheless it is useful to know its properties. And it is equally useful for action to know those properties of money that come to light from praxeological analysis.
One of the economists who attends Mises’ seminar is Murray Rothbard. At age 24, this unusually gifted student is working on a popular version of Human Action, thanks to a grant from the Volker Fund. The result will be the monumental Man, Economy, and State, which through its more thoroughgoing investigation of the subjective theory of value will provide the libertarian movement with economic logic and an economic foundation. When Mises dies, in 1973, Rothbard is seen as his spiritual heir. A prolific author and political agitator, in 1982, with the blessing of Mises’ widow and the assistance of Lew Rockwell, a Catholic libertarian and another champion at “fund raising,” he founds the Ludwig von Mises Institute, dedicated to teaching the “Austrian” approach to economics.
In May 1997, a divine surprise: Mises’ papers (some 20,000 items covering the period 1900-1938) are rediscovered, perfectly preserved, in Moscow, in the files brought back from Germany in 1945 by Soviet troops. Several researchers become involved. One copy of this treaure is located in Auburn, in the very office of Jörg Guido Hülsmann, one of the young professors of the Institute. Another is in the hands of Richard Eberling [spelling sic], who has just been named President of FEE. They are each preparing, concurrently, a biography of the Austrian economist. The rediscovery of what may well be the greatest economist of the 20th century has only begun.
Philippe Simonnot
For the disciple of
Ludwig von Mises, the causes of the Crisis of 1929 are linked to the interventionist excesses of the preceding years
A disciple of Ludwig von Mises, the economist Murray Newton Rothbard made two major contributions to economic knowledge: a re-reading of the Great Crisis in his work America’s Great Depression, where he shows that the gigantic crash
of 1929 is not due to a failure of the market, as Keynes claimed, nor even to an error of management on the part of the central Bank of the United States. This latter thesis was employed by Milton Friedman to dethrone Keynes, to establish his own reputation, and to found the Chicago School, seedbed of a multitude of Nobel Prizes in economics (“Le Monde des livres,” 7 June 2002).
For Rothbard – and this was for him a way of way of dethroning the dethroner of Keynes – the Crisis of 1929 was quite simply the product of excessive intervention by the State during the 1920s.
Rothbard’s other contribution is his monumental History of Economic Thought, which he was unfortunately unable to complete before his death in 1995. The two published volumes trace the advance of economic knowledge from Plato to Bastiat, connecting the Austrian School with Scholasticism via the French School (Turgot, Condillac, Say), neglected even in France, and treating the English School (Smith, Ricardo) as a deviation in comparison with this tradition – all the more fatal a deviation since it leads, in his view, to Marxism and Communism.
Like his teacher Ludwig von Mises, Rothbard spent his entire life on the margins of academic status, financing his own research and books. He taught economics for many years at the modest Brooklyn Polytechnic before obtaining a position at the University of Nevada at Las Vegas. Perhaps he paid the price for being a militant firebrand of the American libertarian movement, for which he was the principal inspiration and of which he hoped to be the guide. A mimeographed text of 170 pages, dated April 1977, “strictly confidential,” to which we were able to obtain access, makes clear his ambition to take Lenin as a model.
In this text, titled Toward A Strategy for Libertarian Social Change, Rothbard takes as his model Lenin, who knew enough to promote capitulation before Germany in 1917, and to let the peasants occupy feudal lands.
In the manner of Lenin, Rothbard recommends a “centrist” strategy designed to avoid left-wing utopian deviations and right-wing opportunist deviations. To do this it is necessary to establish a genuine hierarchy within the libertarian movement. And to define a party line. “The Marxists,” writes Rothbard, “like the libertarians, identify certain majority classes in society as being oppressed by other classes which are in the minority. The Marxists, like the libertarians, aim to demonstrate to the oppressed majority the true nature of their exploitation, so as to remove from the existing State all legitimacy in the minds of the oppressed, and thereby to deprive the State of the support it needs.”
However, in contrast to the Marxists, the libertarians have a much clearer vision of the enemy. The enemy is the State, which has known for centuries how to mobilize an entire propaganda machine so as to induce, with the aid of the intellectuals, a “false consciousness” – a term taken directly from the vocabulary of Marxism – among the exploited, namely the “net taxpayers” (those who pay more to the State than they receive from it). The enemy is that entire elite that receives more from the State than it pays to it (the “net tax-consumers”): intellectuals, businessmen, and trade-unionists living more or less at the expense of the State. It is also the conservative, militaristic, and theocratic Right. Now just as for the Marxists capitalism is doomed to perish from its inevitable contradictions, paving the way for its eventual abolition by the proletarian movement, so in the same way the libertarians maintain that statism, governmental intervention, will perish from its inevitable contradictions, and that this disintegration will pave the way to its eventual abolition by the libertarian movement. And, according to Rothbard, “this collapse has already begun.” In order to speed its arrival, Rothbard was ready to make alliances with the “New Left” – notably in opposing nuclear armament, the Vietnam War, and compulsory military service – for which the traditional Right has never forgiven him.
Ph. Si.
