Capitalism and Human Progress by Ludwig von Mises

Capitalism and Human Progress by Ludwig von Mises

See also Capitalism in America - 100 Books on DVDrom and The History & Mystery of Money & Economics-250 Books on DVDrom

I WANT TO START...WITH THE RELATION between economics and human practical life, and the consequences of the development of the theory of economics.

Kipling said, "East is East, and West is West, and never the twain shall meet." Differences between the East and the West have certainly existed for thousands of years. The East never developed the idea of scientific research — the search for knowledge and truth for its own sake — which the Greeks gave to civilization. A second achievement of the Greeks, which has always been foreign to the East, is the idea of political liberty of government — of political responsibility of the individual citizen. These ideas, widely accepted in the West, never found counterparts in the East.
Even today, only a small group of Eastern intellectuals follow these ideas. Nevertheless, the world was more or less one world, in spite of these ideas, until about 250 years ago.

Social relations and living conditions were more or less the same all over the world until 250 years ago. The average standard of living varied little between East and West. Modern methods of production and standards of consumption, technological knowledge, and equality under the law were unknown. Today we would consider most unsatisfactory the conditions that prevailed then. Aside from its political meaning, Wendell Willkie s word, "One World," was more applicable then than now.

The general improvement in political tranquility, which had reached a certain degree about 250 years ago, contributed to an increase in population. This additional population was too much for the social system of those ages. The countries where poHtical conditions were most favorable became infested with robbers, thieves, and murderers — people for whom there was no place under the existing economic situation.

Then something occurred in Europe — first in western Europe, Great Britain, and the Netherlands — which spread over the rest of the Western world. It was this movement that led to considerable differences between the East and the West. This movement is called by historians the Industrial Revolution. Radical changes were brought about by preceding radical intellectual changes, that is, by the intellectual movement that produced economics as an autonomous branch of human knowledge. These radical changes multiplied population figures and changed the face of the world.

Because it was considered a crime to depart from traditional methods of production and trade — and any changes are necessarily always innovations — we are apt to ignore another development, a new idea heretofore unknown. We are blind to the great changes that took place, not only in production, but also in consumption. We see the mass production, but fail to see that this mass production was produced for the satisfaction of the needs of the masses. The guilds and handicraftsmen of the Middle Ages had produced for the well-to-do. Before the Industrial Revolution, and in the early days of the Industrial Revolution, there was a great trade in second-hand clothing. Clothes that were made to order for the well-to-do were bought secondhand by the poor. This trade in secondhand clothing, a really important part of the economy, disappeared as a result of the development of modern methods of production.

The Industrial Revolution started by producing for the needs of the poor, of the masses. Mass production started by producing the cheapest and the poorest things. The cotton industry was one of the early developments of the Industrial Revolution. Cotton was a poor man's material — no member of the upper or middle classes wanted cotton. The quality of mass production improved only when the conditions of the masses improved to the extent that they also became biased against cheap products. Not so long ago no lady or gentlemen would have bought factory-made shoes, or ready-made clothes. Not until 100 or 120 years ago could one even buy a ready-made shirt in Germany All these industries have developed during the last 100 to 150 years.

As a consequence of the Industrial Revolution in the West, an enormous gulf developed, a gulf which today separates the West from the East. The East still clings to the idea that once hindered the development of capital in the Western world, the idea that one man's wealth is the cause of the poverty of others. The concept of the "underdeveloped nations" has arisen and the idea that it is necessary to give them technological advice, i.e., "know-how." This is really ridiculous! There are lots of Indians, Chinese, and students from other countries in our universities who are very capable persons and who are acquiring know-how. And even if they weren't, many Americans would be willing to go to those countries to work and to give advice. What they really need is the capital. What is lacking is capitalism.

One of the consequences of the Industrial Revolution was that the world is now populated by many more people than could have been supported before. Each individual in the capitalist countries also lives at a much higher standard of living than before. This means that the average length of life is much longer. The growth in population was not achieved by an increase in the birth rate, but by a decrease in the mortality rate, especially of infants. Queen Anne of England, the last reigning member of the Stuarts, had seventeen children, but not a single one lived to reach
adulthood. This situation had serious significance for England; it created the historical and religious problem of the Protestant succession. As further evidence of the extent of infant mortality, most of the charming children in the Habsburg famihes that Velasquez painted died in childhood. You may call the improvement of living standards brought about by the Industrial
Revolution "materialism." But from the point of view of the parents, the improved life expectancy of their children may not have seemed merely materialistic.

Engels said people must eat before they can develop philosophical ideas. With this I can agree. The Europeans are now claiming that they are fighting the "Coca-Cola civilization," but it would be a mistake to say that capitalism has developed nothing but Coca-Cola. Capitalism has certainly led to philosophical and theological improvements also. In the light of the great scientific discoveries of the nineteenth and twentieth centuries, to say that the capitalist economy is the "Coca-Cola civilization" would not seem to be an "unbiased" statement.

The peaceful exchange of ideas and the peaceful coexistence of people with various ideas were in triumphal progress at the beginning of the nineteenth century There was then a development toward freedom and peace, especially toward intellectual freedom for ideas, toward the elimination of government cruelty in punishment and of government torture in criminal procedure, and also toward an improvement in the standard of living. People came to believe that this development toward freedom and peace was inevitable. In the nineteenth century they were truly convinced that nothing could stop this trend toward more freedom. The Manchester Chamber of Commerce in Great Britain even declared in the 1820s that the age of war was gone forever. That was the bloodless economic theory.
There need be no war if there was free trade and representative government.

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