Key ideas: In this book, published in 1954. Mises tries to answer one of the greatest questions of all time: why the intellectuals hate capitalism.
To the grumbler who complains about the unfairness of the market system only one piece of advice can be given: If you want to acquire wealth, then try to satisfy the public by offering them something that is cheaper or which they like better.
The class of those who have the ability to think their own thoughts is through an unbridgeable gulf separated from the class of those who cannot.
Now we can try to understand why people loathe capitalism
In a society based on caste and status, the individual can ascribe adverse fate to conditions beyond his own control. He is a slave because the superhuman powers that determine all becoming had assigned him this rank. It is not his doing, and there is no reason for him to be ashamed of his humbleness.
His wife cannot find fault with his station. If she were to tell him: "Why are you not a duke? If you were a duke, I would be a duchess," he would reply: "If I had been born the son of a duke, I would not have married you, a slave girl, but the daughter of another duke; that you are not a duchess is exclusively your own fault; why were you not more clever in the choice of your parents?
It is quite another thing under capitalism. Here every body's station in life depends on his own doing. Everybody whose ambitions have not been fully gratified knows very well that he has missed chances, that he has been tried and found wanting by his fellow man.
Why do you make only eighty dollars a week? If you were as smart as your former pal, Paul, you would be a foreman and I would enjoy a better life," he becomes conscious of his own inferiority and feels humiliated.
The sway of the principle, to each according to his accomplishments, does not allow of any excuse for personal shortcomings. Everybody knows very well that there are people like himself who succeeded where he himself failed. Everybody knows that many of those whom he envies are self-made men who started from the same point from which he himself started. And, much worse, he knows that all other people know it too.
He reads in the eyes of his wife and his children the silent reproach: "Why have you not been smarter?" He sees how people admire those who have been more successful than he and look with contempt or with pity on his failure.
Whatever a man may have gained for himself, it is mostly a mere fraction of what his ambition has impelled him to win. There are always before his eyes people who have succeeded where he failed...
Everybody is aware of his own defeat and insufficiency.
One of the novel principles which aroused Moser's anger was the demand that the promotion of army officers and civil servants should depend on personal merit and ability and not on the incumbent's ancestry and noble lineage, his age and length of service. Life in a society in which success would exclusively depend on personal merit would, says Möser, simply be unbearable.
As human nature is, everybody is prone to overrate his own worth and deserts. If a man's station in life is conditioned by factors other than his inherent excellence, those who remain at the bottom of the ladder can acquiesce in this outcome and, knowing their own worth, still preserve their dignity and self-respect. But it is different if merit alone decides. Then the unsuccessful feel themselves insulted and humiliated.
"Hate and enmity against all those who superseded them must result." (Möser)
Whatever one may think of Moser's bias against the merit principle, one must admit that he was right in describing one of its psychological consequences. He had an insight into the feelings of those who had been tried and found wanting.
In order to console himself and to restore his self-assertion, such a man IS in search of a scapegoat.
He tries to persuade himself that he failed through no fault of his own. He tries to persuade himself that he failed through no fault of his own. He is at least as brilliant, efficient and industrious as those who outshine him.
Unfortunately this nefarious social order of ours does not accord the prizes to the most meritorious men; it crowns the dishonest unscrupulous scoundrel, the swindler, the exploiter, the "rugged individualist." What made himself fail was his honesty. He was too decent to resort to the base tricks to which his successful rivals owe their ascendancy. As conditions are under capitalism, a man is forced to choose between virtue and poverty on the one hand, and vice and riches on the other. He, himself, thank God, chose the former alternative and rejected the latter.
In capitalist society - society where everything depends on merit.
In such a society each member whose ambitions have not been fully satisfied resents the fortune of all those who succeeded better. The fool releases these feelings in slander and defamation. The more sophisticated do not indulge in personal calumny. They sublimate their hatred into a philosophy, the philosophy of anti-capitalism, in order to render inaudible the inner voice that tells them that their failure is entirely their own fault.
The suffering from frustrated ambition is peculiar to people living in a society of equality under the law. It is not caused by equality under the law, but by the fact that in a society of equality under the law the inequality of men with regard to intellectual abilities, will power and application becomes visible.
The gulf between what a man is and achieves and what he thinks of his own abilities and achievements is pitilessly revealed. Daydreams of a "fair" world which would treat him according to his "real worth" are the refuge of all those plagued by a lack of self-knowledge.
Poor people rarely meet and socialize with those have are more successful. As a result, they never learn from personal experience how different an entrepreneur or an executive is regards to all personal characteristics that led to their success. The resentment of the poor is not directed at particular flesh and blog people but against abstractions: "management", "capital", "Wall Street"...
They loathe capitalism because it has assigned to this other [more successful] man the position they themselves would like to have.
Such is the case with those people who are commonly called the intellectuals. To understand the intellectual's abhorrence of capitalism one must realize that in his mind this system is incarnated in a definite number of compeers whose success he resents and whom he makes responsible for the frustration of his own farflung ambitions. His passionate dislike of capitalism is a mere blind for his hatred of some successful "colleagues."
The anticapitalistic bias of the intellectuals is a phenomenon not limited to one or a few countries only. But it is more general and more bitter in the United States than it is in the European countries.
Society in this sense is foreign to the American scene. What is called "society" in the United States almost exclusively consists of the richest families. There is little social intercourse between the successful businessmen and the nation's eminent authors, artists and scientists.
An almost unsurmountable gulf separates "society" from the intellectuals.
Neither can it remove or alleviate the resentment with which the intellectuals react to the contempt in which they are held by the members of "society." American authors or scientists are prone to consider the wealthy businessman as a barbarian, as a man exclusively intent upon making money. The professor despises the alumni who are more interested in the university's football team than in its scholastic achievements. He feels insulted if he learns that the coach gets a higher salary than an eminent professor of philosophy. The men whose research has given rise to new methods of production hate the businessmen who are merely interested in the cash value of their research work.
It is very significant that such a large number of American research physicists sympathize with socialism or communism. As they are ignorant of economics and realize that the university teachers of economics are also opposed to what they disparagingly call the profit system, no other attitude can be expected from them.
If a group of people secludes itself from the rest of the nation, especially also from its intellectual leaders, in the way American "socialites'' do, they unavoidably become the target of rather hostile criticisms on the part of those whom they keep out of their own circles. The exclusivism practiced by the American rich has made them in a certain sense outcasts. They may take a vain pride in their own distinction. What they fail to see is that their self-chosen segregation isolates them and kindles animosities which make the intellectuals inclined to favor anticapitalistic policies.
The worst of all these delusions is the idea that "nature" has bestowed upon every man certain rights. According to this doctrine nature is openhanded toward every child born. There is plenty of everything for everybody. Consequently, everyone has a fair inalienable claim against all his fellow men and against society that he should get the full portion which nature has allotted to him.
Every word of this doctrine is false. Nature is not bountiful but stingy. It has restricted the supply of all things indispensable for the preservation of human life.
Man's survival and well-being are an achievement of the skill with which he has utilized the main instrument with which nature has equipped him-reason.
Men, cooperating under the system of the division of labor, have created all the wealth which the daydreamers consider as a free gift of nature. With regard to the "distribution" of this wealth, it is nonsensical to refer to an allegedly divine or natural principle of justice. What matters is not the allocation of portions out of a fund presented to man by nature. The problem is rather to further those social institutions which enable people to continue and to enlarge the production of all those things which they need...
They are [wages] higher because they are determined by the marginal productivity of labor. The employer of a butler withholds this man from employment in a factory and must therefore pay the equivalent of the increase in output which the additional employment of one man in a factory would bring about. It is not any merit on the part of the butler that causes this rise in his wages, but the fact that the increase in capital invested surpasses the increase in the number of hands.
We have already dealt with the psychological factors that dimmed the judgment of these intellectuals and the masses who followed their lead. They were in their subconsciousness fully aware of the fact that their failure to attain the far-flung goals which their ambition impelled them to aim at was due to deficiencies of their own. They knew very well that they were either not bright enough or not industrious enough. But they were eager not to avow their inferiority both to themselves and to their fellow men and to search for a scapegoat.
but they try to convince themselves that the reason for their miseries is "the injustice of society's economic organization."
Under capitalism, they declared, self-realization is only possible for the few. "Liberty in a laissez-faire society is attainable only by those who have the wealth or opportunity to purchase it." Hence, they concluded, the state must interfere in order to realize "social justice"--what they really meant was, in order to give to the frustrated mediocrity "according to his needs."
The most pernicious ideology of the last sixty years was George Sorel's syndicalism and his enthusiasm for the action directe. Generated by a frustrated French intellectual, it soon captivated the literati of all European countries.
"If you place yourself on this ground of myths, you are proof against any kind of critical refutation."
What a marvelous philosophy, to destroy for the sake of destruction! Do not talk, do not reason, kill! Sorel rejects the "intellectual effort" even of the literary champions of revolution. The essential aim of the myth is "to prepare people to fight for the destruction of what exists"