Non-Marxian Socialism Socialist  Controversy


Ludwig von Mises on Capitalism vs Socialism

by Raisa Sorokko, April 2002

Ludwig Von Mises, with a great deal of humor, criticizes both capitalism and socialism. He believes "man's economic task is not the distribution of gifts dispensed by a benevolent donor, but production." His philosophic and economic analysis of socialism versus capitalism gives great insight into what the westerners thought of Russia and its socialist regime. Russian propaganda taught me from when I was born that Russia was the greatest, I have never read any work that, with such humor, and such truthfulness analyzed the Russian regime.

In his critique of both of these systems he obviously picks the capitalist system over socialism. The first part of Chapter 13 of Money, Method, and the Market talks about savings. Mises suggests that savings is not individual to humans. Animals also save they just save food and store it for later consumption in the winter. But man alone, temporarily abstains from instantaneous consumption in order to enjoy a bigger consumption later. Mises also states: "Where there is no saving, no capital goods come into existence." By this he means that capital goods can only exist as the property of a certain owner. This is crucial because "the way in which capital goods come into existence as private property determines the democratic institutions of the capitalistic system."

As for socialist system, Mises suggests that it is a system in which the material factors of production are owned by the state and every individual entirely depends on the state's will and has to obey the state's orders. According to him, in this system man does not differ much from animals.

In the second part, Mises discusses the feudalist period and the fact that after feudalism, in the west, the systems could have been either socialist or capitalist. There was the liberal movement in which the socialists were thought to be "more to the left" than the liberals, who were more or less the early capitalists. During the 18th and 19th centuries, it was popular to think like the early socialists who believed that the liberal party represents only the selfish class' interests in exploiting people, while the socialists themselves, represent the majority, the proletariat. Even though it was popular, in politics, socialists were still a minority in the government in most Western Countries.

  An exception from this was Germany. The nationalization methods adopted by the Imperial Reich of Germany had brought unsatisfactory financial results and rather poor service. So, when German Revolutionary government was formed in 1918, they did not know what to do. Mises states: "Socialism was the great panacea, but it seemed that nobody really knew what it meant and how to bring it about properly." So, they confessed that they did not know what to do and that was the end of that Revolutionary government in Germany. Socialism also quietly disappeared from Britain. Russia and other Eastern European countries, on the other hand, apparently did not learn anything from the Western countries' failure.  They thought that they were smarter than the west, so they figured out how to implement the socialist policies. In the end, it ended up being a failure as well.

 In the third part of Chapter 13 of his book, Mises compares economic systems to political systems. He writes: "the market is the prototype of what are called democratic institutions." The power is in the buyers just as in the government, the power is in the voters. The vendors succeed only when they satisfy the wants of the buyers in the economy, as the representatives succeed only by satisfying the voters wants. But, Mises argues that economic democracy of the market is superior to the political democracy of representative government. In the market, he writes, not only the wants of the majority are taken into account, but the wants of minorities as well. In politics, on the other hand, only the majority counts.

Likewise, the centrally planned is the prototype of the socialist government, which Mises does not speak highly of. He states: "Marxism became the quasi-religion of the backwards nations..." Mises says that the East wanted to get the machines and the deadly weapons of the west without getting the politics and economics that produced them.Mises also does not support the Western countries trying to help the former Eastern European countries. He believes that it is unfair, that out of the taxpayers' money, the western countries, first of all the United States, are giving aid to the Eastern European countries.

In conclusion, Mises writes: "Socialism is for the peoples of the industrial world no longer a living force." In this he voices his opinion, and the opinion of the convinced reader that socialism is dead. Mises wrote this book before the collapse of the Soviet Union. He already understood that socialism was fading away. Mises was right, socialism is no longer a living force. It seemed like hope for a difference in the way of life before, but now seeing what it does to people and their lives, capitalism and the market economic system makes a better life. Mises was too harsh in saying that the people that live under socialist regime are animals, but he was right in the fact that choice is taken away from them.

references Money,Method, and the Market Process. Chapter 13.






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