WEBVTT NOTE XV. The Market (continued) 1 00:00:00.000 --> 00:00:10.160 5. Competition. In nature there prevail irreconcilable conflicts of interests. The means of subsistence 2 00:00:10.160 --> 00:00:19.520 are scarce. Proliferation tends to outrun subsistence. Only the fittest plants and animals survive. 3 00:00:19.520 --> 00:00:24.360 The antagonism between an animal starving to death and another that snatches the food 4 00:00:24.360 --> 00:00:33.080 away from it is implacable. Social cooperation under the division of labor removes such antagonisms. 5 00:00:33.080 --> 00:00:40.320 It substitutes partnership and mutuality for hostility. The members of society are united 6 00:00:40.320 --> 00:00:46.760 in a common venture. The term competition as applied to the conditions of animal life 7 00:00:46.760 --> 00:00:53.480 signifies the rivalry between animals which manifests itself in their search for food. 8 00:00:53.480 --> 00:00:58.600 We may call this phenomenon biological competition. 9 00:00:58.600 --> 00:01:04.240 Biological competition must not be confused with social competition, that is, the striving 10 00:01:04.240 --> 00:01:11.060 of individuals to attain the most favorable position in the system of social cooperation. 11 00:01:11.060 --> 00:01:16.600 As there will always be positions which men value more highly than others, people will 12 00:01:16.600 --> 00:01:21.160 strive for them and try to outdo rivals. 13 00:01:21.160 --> 00:01:27.920 Social competition is consequently present in every conceivable mode of social organization. 14 00:01:27.920 --> 00:01:33.120 If we want to think of a state of affairs in which there is no social competition, we 15 00:01:33.120 --> 00:01:39.120 must construct the image of a socialist system in which the chief in his endeavors to assign 16 00:01:39.120 --> 00:01:45.980 to everybody his place and task in society is not aided by any ambition on the part of 17 00:01:45.980 --> 00:01:47.720 his subjects. 18 00:01:47.720 --> 00:01:53.660 The individuals are entirely indifferent and do not apply for special appointments. 19 00:01:53.660 --> 00:01:59.060 They behave like the stud horses, which do not try to put themselves in a favorable light 20 00:01:59.060 --> 00:02:04.420 when the owner picks out the stallion to impregnate his best brood mare. 21 00:02:04.420 --> 00:02:08.680 But such people would no longer be acting men. 22 00:02:08.680 --> 00:02:14.440 In a totalitarian system, social competition manifests itself in the endeavors of people 23 00:02:14.440 --> 00:02:17.960 to Court the Favor of Those in Power. 24 00:02:17.960 --> 00:02:23.480 In the market economy, competition manifests itself in the facts that the sellers must 25 00:02:23.480 --> 00:02:30.080 outdo one another by offering better or cheaper goods and services, and that the buyers must 26 00:02:30.080 --> 00:02:34.360 outdo one another by offering higher prices. 27 00:02:34.360 --> 00:02:40.920 In dealing with this variety of social competition, which may be called catallactic competition, 28 00:02:40.920 --> 00:02:45.560 We must guard ourselves against various popular fallacies. 29 00:02:45.560 --> 00:02:51.080 The classical economists favored the abolition of all trade barriers preventing people from 30 00:02:51.080 --> 00:02:53.500 competing on the market. 31 00:02:53.500 --> 00:02:58.960 Such restrictive laws, they explained, result in shifting production from those places in 32 00:02:58.960 --> 00:03:04.300 which natural conditions of production are more favorable to places in which they are 33 00:03:04.300 --> 00:03:06.220 less favorable. 34 00:03:06.220 --> 00:03:11.420 They protect the less efficient man against his more efficient rival. 35 00:03:11.420 --> 00:03:16.580 They tend to perpetuate backward technological methods of production. 36 00:03:16.580 --> 00:03:22.180 In short, they curtail production and thus lower the standard of living. 37 00:03:22.180 --> 00:03:27.620 In order to make all people more prosperous, the economists argued, competition should 38 00:03:27.620 --> 00:03:30.100 be free to everybody. 39 00:03:30.100 --> 00:03:34.800 In this sense, they used the term free competition. 40 00:03:34.800 --> 00:03:39.240 There was nothing metaphysical in their employment of the term free. 41 00:03:39.240 --> 00:03:45.160 They advocated the nullification of privileges barring people from access to certain trades 42 00:03:45.160 --> 00:03:47.160 and markets. 43 00:03:47.160 --> 00:03:52.440 All the sophisticated lucabrations cavilling at the metaphysical connotations of the adjective 44 00:03:52.440 --> 00:03:56.800 free, as applied to competition, are spurious. 45 00:03:56.800 --> 00:04:02.300 They have no reference whatever to the catalactic problem of competition. 46 00:04:02.300 --> 00:04:08.700 As far as natural conditions come into play, competition can only be free with regard to 47 00:04:08.700 --> 00:04:14.340 those factors of production which are not scarce, and therefore not objects of human 48 00:04:14.340 --> 00:04:16.020 action. 49 00:04:16.020 --> 00:04:22.180 In the catallactic field, competition is always restricted by the inexorable scarcity of the 50 00:04:22.180 --> 00:04:25.340 economic goods and services. 51 00:04:25.340 --> 00:04:31.440 Even in the absence of institutional barriers erected to restrict the number of those competing, 52 00:04:31.440 --> 00:04:37.320 The state of affairs is never such as to enable everyone to compete in all sectors of the 53 00:04:37.320 --> 00:04:38.840 market. 54 00:04:38.840 --> 00:04:45.580 In each sector, only comparatively small groups can engage in competition. 55 00:04:45.580 --> 00:04:51.080 Catalactic competition, one of the characteristic features of the market economy, is a social 56 00:04:51.080 --> 00:04:52.600 phenomenon. 57 00:04:52.600 --> 00:04:57.760 It is not a right, guaranteed by the state and the laws, that would make it possible 58 00:04:57.760 --> 00:05:02.720 It is possible for every individual to choose ad libitum, the place in the structure of 59 00:05:02.720 --> 00:05:05.960 the division of labor he likes best. 60 00:05:05.960 --> 00:05:12.560 To assign to everybody his proper place in society is the task of the consumers. 61 00:05:12.560 --> 00:05:18.160 Their buying and abstention from buying is instrumental in determining each individual's 62 00:05:18.160 --> 00:05:20.360 social position. 63 00:05:20.360 --> 00:05:27.640 Their supremacy is not impaired by any privileges granted to the individual's qua producers. 64 00:05:27.640 --> 00:05:33.640 Entrance into a definite branch of industry is virtually free to newcomers only as far 65 00:05:33.640 --> 00:05:40.280 as the consumers approve of this branch's expansion, or as far as the newcomers succeed 66 00:05:40.280 --> 00:05:46.680 in supplanting those already occupied in it by filling better or more cheaply the demands 67 00:05:46.680 --> 00:05:49.280 of the consumers. 68 00:05:49.280 --> 00:05:54.540 Additional investment is reasonable only to the extent that it fills the most urgent among 69 00:05:54.540 --> 00:05:58.940 and the not yet satisfied needs of the consumers. 70 00:05:58.940 --> 00:06:04.140 If the existing plants are sufficient, it would be wasteful to invest more capital in 71 00:06:04.140 --> 00:06:06.080 the same industry. 72 00:06:06.080 --> 00:06:11.960 The structure of market prices pushes the new investors into other branches. 73 00:06:11.960 --> 00:06:17.460 It is necessary to emphasize this point because the failure to grasp it is at the root of 74 00:06:17.460 --> 00:06:23.120 many popular complaints about the impossibility of competition. 75 00:06:23.120 --> 00:06:26.240 Some fifty years ago, people used to declare, 76 00:06:26.240 --> 00:06:29.040 You cannot compete with the railroad companies. 77 00:06:29.040 --> 00:06:34.000 It is impossible to challenge their position by starting competing lines. 78 00:06:34.000 --> 00:06:38.920 In the field of land transportation, there is no longer competition. 79 00:06:38.920 --> 00:06:46.080 The truth was that at that time, the already operating lines were by and large sufficient. 80 00:06:46.080 --> 00:06:51.880 For additional capital investment, the prospects were more favorable in improving the serviceableness 81 00:06:51.880 --> 00:06:57.680 of the already operating lines, and in other branches of business than in the construction 82 00:06:57.680 --> 00:06:59.280 of new railroads. 83 00:06:59.280 --> 00:07:06.760 However, this did not interfere with further technological progress in transportation technique. 84 00:07:06.760 --> 00:07:12.260 The bigness and the economic power of the railroad companies did not impede the emergence 85 00:07:12.260 --> 00:07:15.400 of the motor car and the airplane. 86 00:07:15.400 --> 00:07:20.800 Today people assert the same with regard to various branches of big business. 87 00:07:20.800 --> 00:07:23.200 You cannot challenge their position. 88 00:07:23.200 --> 00:07:26.240 They are too big and too powerful. 89 00:07:26.240 --> 00:07:31.920 But competition does not mean that anybody can prosper by simply imitating what other 90 00:07:31.920 --> 00:07:33.700 people do. 91 00:07:33.700 --> 00:07:40.640 It means the opportunity to serve the consumers in a better or cheaper way without being restrained 92 00:07:40.640 --> 00:07:47.000 by privileges granted to those whose vested interests the innovation hurts. 93 00:07:47.000 --> 00:07:52.420 What a newcomer who wants to defy the vested interests of the old established firms needs 94 00:07:52.420 --> 00:07:56.200 most is brains and ideas. 95 00:07:56.200 --> 00:08:02.660 If his project is fit to fill the most urgent of the unsatisfied needs of the consumers, 96 00:08:02.660 --> 00:08:08.920 or to purvey them at a cheaper price than their old purveyors, he will succeed, in spite 97 00:08:08.920 --> 00:08:14.260 of the much talked-of bigness and power of the old firms. 98 00:08:14.260 --> 00:08:20.080 Catalactic competition must not be confused with prize fights and beauty contests. 99 00:08:20.080 --> 00:08:25.940 The purpose of such fights and contests is to discover who is the best boxer or the prettiest 100 00:08:25.940 --> 00:08:27.420 girl. 101 00:08:27.420 --> 00:08:33.700 The social function of catalactic competition is to be sure, not to establish who is the 102 00:08:33.700 --> 00:08:39.020 smartest boy and to reward the winner by a title and medals. 103 00:08:39.020 --> 00:08:45.180 Its function is to safeguard the best satisfaction of the consumers, which they can attain under 104 00:08:45.180 --> 00:08:48.940 the given state of the economic data. 105 00:08:48.940 --> 00:08:54.580 Equality of opportunity is a factor neither in prize fights and beauty contests, nor in 106 00:08:54.580 --> 00:08:59.860 any other field of competition, whether biological or social. 107 00:08:59.860 --> 00:09:05.720 The immense majority of people are, by the physiological structure of their bodies, deprived 108 00:09:05.720 --> 00:09:11.520 and of a chance to attain the honors of a boxing champion or a beauty queen. 109 00:09:11.520 --> 00:09:17.900 Only very few people can compete on the labor market as opera singers and movie stars. 110 00:09:17.900 --> 00:09:22.920 The most favorable opportunity to compete in the field of scientific achievement is 111 00:09:22.920 --> 00:09:26.040 provided to the university professors. 112 00:09:26.040 --> 00:09:31.980 Yet thousands and thousands of professors pass away without leaving any trace in the 113 00:09:31.980 --> 00:09:38.140 and the History of Ideas and Scientific Progress, while many of the handicapped outsiders win 114 00:09:38.140 --> 00:09:41.620 glory through marvelous contributions. 115 00:09:41.620 --> 00:09:47.500 It is usual to find fault with the fact that catalactic competition is not open to everybody 116 00:09:47.500 --> 00:09:49.580 in the same way. 117 00:09:49.580 --> 00:09:55.060 The start is much more difficult for a poor boy than for the son of a wealthy man. 118 00:09:55.060 --> 00:09:59.700 But the consumers are not concerned about the problem of whether or not the men who 119 00:09:59.700 --> 00:10:04.540 who shall serve them start their careers under equal conditions. 120 00:10:04.540 --> 00:10:11.180 Their only interest is to secure the best possible satisfaction of their needs. 121 00:10:11.180 --> 00:10:16.620 If the system of hereditary property is more efficient in this regard, they prefer it to 122 00:10:16.620 --> 00:10:19.420 other less efficient systems. 123 00:10:19.420 --> 00:10:25.380 They look at the matter from the point of view of social expediency and social welfare, 124 00:10:25.380 --> 00:10:32.540 from the point of view of an alleged, imaginary and unrealizable natural right of every individual 125 00:10:32.540 --> 00:10:35.940 to compete with equal opportunity. 126 00:10:35.940 --> 00:10:41.640 The realization of such a right would require placing at a disadvantage those born with 127 00:10:41.640 --> 00:10:46.460 better intelligence and greater willpower than the average man. 128 00:10:46.460 --> 00:10:49.500 It is obvious that this would be absurd. 129 00:10:49.500 --> 00:10:55.640 The term competition is mainly employed as the antithesis of monopoly. 130 00:10:55.640 --> 00:11:00.780 In this mode of speech, the term monopoly is applied in different meanings, which must 131 00:11:00.780 --> 00:11:03.020 be clearly separated. 132 00:11:03.020 --> 00:11:09.500 The first connotation of monopoly, very frequently implied in the popular use of the term, signifies 133 00:11:09.500 --> 00:11:15.260 a state of affairs in which the monopolist, whether an individual or a group of individuals, 134 00:11:15.260 --> 00:11:20.860 exclusively controls one of the vital conditions of human survival. 135 00:11:20.860 --> 00:11:26.680 Such a monopolist has the power to starve to death all those who do not obey his orders. 136 00:11:26.680 --> 00:11:33.260 He dictates, and the others have no alternative but either to surrender or to die. 137 00:11:33.260 --> 00:11:40.220 With regard to such a monopoly, there is no market or any other kind of catalactic competition. 138 00:11:40.220 --> 00:11:46.020 The monopolist is the master, and the rest are slaves, entirely dependent on his good 139 00:11:46.020 --> 00:11:47.580 graces. 140 00:11:47.580 --> 00:11:51.260 There is no need to dwell upon this kind of monopoly. 141 00:11:51.260 --> 00:11:54.780 It has no reference whatever to a market economy. 142 00:11:54.780 --> 00:11:57.100 It is enough to cite one instance. 143 00:11:57.100 --> 00:12:03.700 A world-embracing socialist state would exercise such an absolute and total monopoly. 144 00:12:03.700 --> 00:12:08.460 It would have the power to crush its opponents by starving them to death. 145 00:12:08.460 --> 00:12:13.780 The second connotation of monopoly differs from the first in that it describes a state 146 00:12:13.780 --> 00:12:18.380 of affairs compatible with the conditions of a market economy. 147 00:12:18.380 --> 00:12:23.980 A monopolist in this sense is an individual or a group of individuals, fully combining 148 00:12:23.980 --> 00:12:31.260 for joint action, who has the exclusive control of the supply of a definite commodity. 149 00:12:31.260 --> 00:12:37.820 If we define the term monopoly in this way, the domain of monopoly appears very vast. 150 00:12:37.820 --> 00:12:43.040 The products of the processing industries are more or less different from one another. 151 00:12:43.040 --> 00:12:47.940 Each factory turns out products different from those of the other plants. 152 00:12:47.940 --> 00:12:54.420 Each hotel has a monopoly on the sale of its services on the site of its premises. 153 00:12:54.420 --> 00:13:00.320 The professional services rendered by a physician or a lawyer are never perfectly equal to those 154 00:13:00.320 --> 00:13:04.300 rendered by any other physician or lawyer. 155 00:13:04.300 --> 00:13:10.500 But for certain raw materials, foodstuffs and other staple goods, monopoly is everywhere 156 00:13:10.500 --> 00:13:11.900 on the market. 157 00:13:11.900 --> 00:13:17.820 However, the mere phenomenon of monopoly is without any significance and relevance for 158 00:13:17.820 --> 00:13:22.380 the operation of the market and the determination of prices. 159 00:13:22.380 --> 00:13:27.340 It does not give the monopolist any advantage in selling his products. 160 00:13:27.340 --> 00:13:33.240 Under copyright law, every rimester enjoys a monopoly in the sale of his poetry. 161 00:13:33.240 --> 00:13:39.360 But this does not influence the market. It may happen that no price whatever can be realized 162 00:13:39.360 --> 00:13:45.460 for his stuff, and that his books can only be sold at their waste paper value. 163 00:13:45.460 --> 00:13:50.040 Monopoly in this second connotation of the term becomes a factor in the determination 164 00:13:50.040 --> 00:13:57.040 of prices only if the demand curve for the monopoly good concerned is shaped in a particular 165 00:13:57.040 --> 00:14:21.040 If conditions are such that the monopolist can secure higher net proceeds by selling a smaller quantity of his product at a higher price than by selling a greater quantity of his supply at a lower price, there emerges a monopoly price higher than the potential market price would have been in the absence of monopoly. 166 00:14:21.040 --> 00:14:33.040 Monopoly prices are an important market phenomenon, while monopoly as such is only important if it can result in the formation of monopoly prices. 167 00:14:33.040 --> 00:14:40.040 It is customary to call prices which are not monopoly prices, competitive prices. 168 00:14:40.040 --> 00:14:48.040 While it is questionable whether or not this terminology is expedient, it is generally accepted, and it would be difficult to change it. 169 00:14:48.040 --> 00:15:10.040 But one must guard oneself against its misinterpretation. It would be a serious blunder to deduce from the antithesis between monopoly price and competitive price that the monopoly price is the outgrowth of the absence of competition. There is always catalactic competition on the market. 170 00:15:10.040 --> 00:15:19.040 Catallactic competition is no less a factor in the determination of monopoly prices than it is in the determination of competitive prices. 171 00:15:19.040 --> 00:15:34.040 The shape of the demand curve that makes the appearance of monopoly prices possible and directs the monopolist's conduct is determined by the competition of all other commodities competing for the buyer's dollars. 172 00:15:34.040 --> 00:15:40.700 The higher the monopolist fixes the price at which he is ready to sell, the more potential 173 00:15:40.700 --> 00:15:45.360 buyers turn their dollars toward other vendable goods. 174 00:15:45.360 --> 00:15:51.000 On the market, every commodity competes with all other commodities. 175 00:15:51.000 --> 00:15:56.760 There are people who maintain that the catallactic theory of prices is of no use for the study 176 00:15:56.760 --> 00:16:03.820 of reality, because there has never been free competition, or because, at least today, there 177 00:16:03.820 --> 00:16:06.900 There is no longer any such thing. 178 00:16:06.900 --> 00:16:09.460 All these doctrines are wrong. 179 00:16:09.460 --> 00:16:15.620 They misconstrue the phenomena and simply do not know what competition really is. 180 00:16:15.620 --> 00:16:20.900 It is a fact that the history of the last decades is a record of policies aiming at 181 00:16:20.900 --> 00:16:23.960 the restriction of competition. 182 00:16:23.960 --> 00:16:30.140 It is the manifest intention of these schemes to grant privileges to certain groups of producers 183 00:16:30.140 --> 00:16:35.740 by protecting them against the competition of more efficient competitors. 184 00:16:35.740 --> 00:16:40.900 In many instances, these policies have brought about the conditions required for the emergence 185 00:16:40.900 --> 00:16:43.300 of monopoly prices. 186 00:16:43.300 --> 00:16:48.500 In many other instances, this was not the case, and the result was only a state of affairs 187 00:16:48.500 --> 00:16:55.020 preventing many capitalists, entrepreneurs, farmers and workers from entering those branches 188 00:16:55.020 --> 00:16:59.780 of industry in which they would have rendered the most valuable services to their fellow 189 00:16:59.780 --> 00:17:01.780 by fellow citizens. 190 00:17:01.780 --> 00:17:08.780 Catallactic competition has been seriously restricted, but the market economy is still in operation, 191 00:17:08.780 --> 00:17:13.780 although sabotaged by government and labor union interference. 192 00:17:13.780 --> 00:17:22.780 The system of catallactic competition is still functioning, although the productivity of labor has been seriously reduced. 193 00:17:22.780 --> 00:17:35.780 It is the ultimate end of these anti-competition policies to substitute for capitalism a socialist system of planning in which there is no catalactic competition at all. 194 00:17:35.780 --> 00:17:45.780 While shedding crocodile tears about the decline of competition, the planners want to abolish this mad competitive system. 195 00:17:45.780 --> 00:17:50.760 They have attained their goal in some countries, but in the rest of the world they have only 196 00:17:50.760 --> 00:17:56.280 restricted competition in some branches of business by increasing the number of people 197 00:17:56.280 --> 00:17:59.120 competing in other branches. 198 00:17:59.120 --> 00:18:04.960 The forces aiming at restriction of competition play a great role in our day. 199 00:18:04.960 --> 00:18:10.280 It is an important task of the history of our age to deal with them. 200 00:18:10.280 --> 00:18:14.360 Economic theory has no need to refer to them in particular. 201 00:18:14.360 --> 00:18:20.520 The fact that there are trade barriers, privileges, cartels, government monopolies and labor unions 202 00:18:20.520 --> 00:18:23.840 is merely a datum of economic history. 203 00:18:23.840 --> 00:18:28.440 It does not require special theorems for its interpretation. 204 00:18:28.440 --> 00:18:30.100 6. 205 00:18:30.100 --> 00:18:31.100 Freedom 206 00:18:31.100 --> 00:18:36.840 The words freedom and liberty signified for the most eminent representatives of mankind 207 00:18:36.840 --> 00:18:40.720 one of the most precious and desirable goods. 208 00:18:40.720 --> 00:18:43.860 Today it is fashionable to sneer at them. 209 00:18:43.860 --> 00:18:50.660 They are, trumpets the modern sage, slippery notions and bourgeois prejudices. 210 00:18:50.660 --> 00:18:54.140 Freedom and liberty are not to be found in nature. 211 00:18:54.140 --> 00:19:00.340 In nature, there is no phenomenon to which these terms could be meaningfully applied. 212 00:19:00.340 --> 00:19:05.940 Whatever man does, he can never free himself from the restraints which nature imposes upon 213 00:19:05.940 --> 00:19:07.180 him. 214 00:19:07.180 --> 00:19:13.840 If he wants to succeed in acting, he must submit unconditionally to the laws of nature. 215 00:19:13.840 --> 00:19:18.760 Freedom and liberty always refer to inter-human relations. 216 00:19:18.760 --> 00:19:25.040 A man is free as far as he can live and get on without being at the mercy of arbitrary 217 00:19:25.040 --> 00:19:28.360 decisions on the part of other people. 218 00:19:28.360 --> 00:19:33.800 In the frame of society, everybody depends upon his fellow citizens. 219 00:19:33.800 --> 00:19:41.080 Social man cannot become independent without forsaking all the advantages of social cooperation. 220 00:19:41.080 --> 00:19:46.200 The self-sufficient individual is independent, but he is not free. 221 00:19:46.200 --> 00:19:50.520 He is at the mercy of everybody who is stronger than himself. 222 00:19:50.520 --> 00:19:54.680 The stronger fellow has the power to kill him with impunity. 223 00:19:54.680 --> 00:20:00.920 It is therefore nonsense to rant about an alleged natural and inborn freedom which people 224 00:20:00.920 --> 00:20:06.980 are supposed to have enjoyed in the ages preceding the emergence of social bonds. 225 00:20:06.980 --> 00:20:09.860 Man was not created free. 226 00:20:09.860 --> 00:20:15.220 That freedom he may possess has been given to him by society. 227 00:20:15.220 --> 00:20:20.420 Only societal conditions can present a man with an orbit within the limits of which he 228 00:20:20.420 --> 00:20:23.160 can attain liberty. 229 00:20:23.160 --> 00:20:29.180 Liberty and freedom are the conditions of man within a contractual society. 230 00:20:29.180 --> 00:20:34.460 Social cooperation under a system of private ownership of the means of production means 231 00:20:34.460 --> 00:20:40.380 says that within the range of the market the individual is not bound to obey and to serve 232 00:20:40.380 --> 00:20:42.340 an overlord. 233 00:20:42.340 --> 00:20:48.060 As far as he gives and serves other people he does so of his own accord in order to be 234 00:20:48.060 --> 00:20:51.480 rewarded and served by the receivers. 235 00:20:51.480 --> 00:20:54.140 He exchanges goods and services. 236 00:20:54.140 --> 00:20:58.780 He does not do compulsory labor and does not pay tribute. 237 00:20:58.780 --> 00:21:01.520 He is certainly not independent. 238 00:21:01.520 --> 00:21:07.320 He depends on the other members of society, but this dependence is mutual. 239 00:21:07.320 --> 00:21:12.000 The buyer depends on the seller and the seller on the buyer. 240 00:21:12.000 --> 00:21:17.920 The main concern of many writers of the 19th and 20th centuries was to misrepresent and 241 00:21:17.920 --> 00:21:21.640 to distort this obvious state of affairs. 242 00:21:21.640 --> 00:21:26.240 The workers, they said, are at the mercy of their employers. 243 00:21:26.240 --> 00:21:31.080 Now it is true that the employer has the right to fire the employee. 244 00:21:31.080 --> 00:21:36.320 But if he makes use of this right in order to indulge in his whims, he hurts his own 245 00:21:36.320 --> 00:21:37.320 interests. 246 00:21:37.320 --> 00:21:44.040 It is to his own disadvantage if he discharges a better man in order to hire a less efficient 247 00:21:44.040 --> 00:21:45.220 one. 248 00:21:45.220 --> 00:21:51.400 The market does not directly prevent anybody from arbitrarily inflicting harm on his fellow 249 00:21:51.400 --> 00:21:52.400 citizens. 250 00:21:52.400 --> 00:21:56.440 It only puts a penalty upon such conduct. 251 00:21:56.440 --> 00:22:03.200 The shopkeeper is free to be rude to his customers, provided he is ready to bear the consequences. 252 00:22:03.200 --> 00:22:09.520 The consumers are free to boycott a purveyor, provided they are ready to pay the costs. 253 00:22:09.520 --> 00:22:15.640 What impels every man to the utmost exertion in the service of his fellow men, and curbs 254 00:22:15.640 --> 00:22:22.000 innate tendencies toward arbitrariness and malice, is, in the market, not compulsion 255 00:22:22.000 --> 00:22:27.400 Human and coercion on the part of gendarmes, hangmen and penal courts. 256 00:22:27.400 --> 00:22:29.960 It is self-interest. 257 00:22:29.960 --> 00:22:37.880 The member of a contractual society is free because he serves others only in serving himself. 258 00:22:37.880 --> 00:22:43.760 What restrains him is only the inevitable natural phenomenon of scarcity. 259 00:22:43.760 --> 00:22:48.120 For the rest, he is free in the range of the market. 260 00:22:48.120 --> 00:22:53.880 There is no kind of freedom and liberty other than the kind which the market economy brings 261 00:22:53.880 --> 00:22:55.280 about. 262 00:22:55.280 --> 00:23:01.240 In a totalitarian, hegemonic society, the only freedom that is left to the individual, 263 00:23:01.240 --> 00:23:06.520 because it cannot be denied to him, is the freedom to commit suicide. 264 00:23:06.520 --> 00:23:13.360 The state, the social apparatus of coercion and compulsion, is by necessity a hegemonic 265 00:23:13.360 --> 00:23:14.920 bond. 266 00:23:14.920 --> 00:23:20.280 If government were in a position to expand its power ad libitum, it could abolish the 267 00:23:20.280 --> 00:23:26.760 market economy and substitute for it all-round totalitarian socialism. 268 00:23:26.760 --> 00:23:32.120 In order to prevent this, it is necessary to curb the power of government. 269 00:23:32.120 --> 00:23:37.360 This is the task of all constitutions, bills of rights and laws. 270 00:23:37.360 --> 00:23:42.320 This is the meaning of all the struggles which men have fought for liberty. 271 00:23:42.320 --> 00:23:48.360 The detractors of liberty are in this sense right in calling it a bourgeois issue and 272 00:23:48.360 --> 00:23:53.180 in blaming the rights guaranteeing liberty for being negative. 273 00:23:53.180 --> 00:23:59.280 In the realm of state and government, liberty means restraint imposed upon the exercise 274 00:23:59.280 --> 00:24:02.000 of the police power. 275 00:24:02.000 --> 00:24:06.700 Liberty and freedom are terms employed for the description of the social conditions of 276 00:24:06.700 --> 00:24:19.700 and the individual members of a market society, in which the power of the indispensable hegemonic bond, the state, is curbed, lest the operation of the market be endangered. 277 00:24:19.700 --> 00:24:29.700 In a totalitarian system, there is nothing to which the attribute free could be attached, but the unlimited arbitrariness of the dictator. 278 00:24:29.700 --> 00:24:35.260 There would be no need to dwell upon this obvious fact if the champions of the abolition 279 00:24:35.260 --> 00:24:40.560 of liberty had not purposely brought about a semantic confusion. 280 00:24:40.560 --> 00:24:46.020 They realized that it was hopeless for them to fight openly and sincerely for restraint 281 00:24:46.020 --> 00:24:47.800 and servitude. 282 00:24:47.800 --> 00:24:55.660 The notions liberty and freedom had such prestige that no propaganda could shake their popularity. 283 00:24:55.660 --> 00:25:01.220 Since time immemorial in the realm of Western civilization, liberty has been considered as 284 00:25:01.220 --> 00:25:03.480 the most precious good. 285 00:25:03.480 --> 00:25:10.260 What gave to the West its eminence was precisely its concern about liberty, a social ideal 286 00:25:10.260 --> 00:25:13.240 foreign to the Oriental peoples. 287 00:25:13.240 --> 00:25:18.820 The social philosophy of the Occident is essentially a philosophy of freedom. 288 00:25:18.820 --> 00:25:24.160 The main content of the history of Europe and the communities founded by European emigrants 289 00:25:24.160 --> 00:25:34.320 The struggle for liberty Rugged individualism is the signature of our civilization. 290 00:25:34.320 --> 00:25:40.680 No open attack upon the freedom of the individual had any prospect of success. 291 00:25:40.680 --> 00:25:45.120 Thus the advocates of totalitarianism chose other tactics. 292 00:25:45.120 --> 00:25:47.820 They reversed the meaning of words. 293 00:25:47.820 --> 00:25:53.600 They call true or genuine liberty the condition of the individuals under a system in which 294 00:25:53.600 --> 00:25:57.760 which they have no right other than to obey orders. 295 00:25:57.760 --> 00:26:03.760 They call themselves true liberals because they strive after such a social order. 296 00:26:03.760 --> 00:26:08.820 They call democracy the Russian methods of dictatorial government. 297 00:26:08.820 --> 00:26:14.800 They call the labor union methods of violence and coercion industrial democracy. 298 00:26:14.800 --> 00:26:19.840 They call freedom of the press a state of affairs in which only the government is free 299 00:26:19.840 --> 00:26:22.940 to publish books and newspapers. 300 00:26:22.940 --> 00:26:29.580 They define liberty as the opportunity to do the right things and, of course, they arrogate 301 00:26:29.580 --> 00:26:35.040 to themselves the determination of what is right and what is not. 302 00:26:35.040 --> 00:26:39.560 In their eyes, government omnipotence means full liberty. 303 00:26:39.560 --> 00:26:45.100 To free the police power from all restraints is the true meaning of their struggle for 304 00:26:45.100 --> 00:26:46.300 freedom. 305 00:26:46.300 --> 00:26:52.540 The market economy, say these self-styled liberals, grants liberty only to a parasitic 306 00:26:52.540 --> 00:26:56.360 class of exploiters, the bourgeoisie. 307 00:26:56.360 --> 00:27:00.720 These scoundrels enjoy the freedom to enslave the masses. 308 00:27:00.720 --> 00:27:02.920 The wage earner is not free. 309 00:27:02.920 --> 00:27:07.920 He must toil for the sole benefit of his masters, the employers. 310 00:27:07.920 --> 00:27:12.820 The capitalists appropriate to themselves what, according to the inalienable rights 311 00:27:12.820 --> 00:27:18.980 Doctrines of Man Should Belong to the Worker Under socialism, the worker will enjoy freedom 312 00:27:18.980 --> 00:27:25.200 and human dignity because he will no longer have to slave for a capitalist. 313 00:27:25.200 --> 00:27:30.700 Socialism means the emancipation of the common man, means freedom for all. 314 00:27:30.700 --> 00:27:34.520 It means, moreover, riches for all. 315 00:27:34.520 --> 00:27:39.660 These doctrines have been able to triumph because they did not encounter effective rational 316 00:27:39.660 --> 00:27:41.500 criticism. 317 00:27:41.500 --> 00:27:47.780 Some economists did a brilliant job in unmasking their crass fallacies and contradictions, 318 00:27:47.780 --> 00:27:51.060 but the public ignores the teachings of economics. 319 00:27:51.060 --> 00:27:55.540 They are too heavy for the readers of tabloids and pulp magazines. 320 00:27:55.540 --> 00:28:01.420 The arguments advanced by average politicians and writers against socialism are either silly 321 00:28:01.420 --> 00:28:03.140 or irrelevant. 322 00:28:03.140 --> 00:28:09.300 It is useless to stand upon an alleged natural right of individuals to own property if other 323 00:28:09.300 --> 00:28:15.140 Other people assert that the foremost natural right is that of income equality. 324 00:28:15.140 --> 00:28:18.000 Such disputes can never be settled. 325 00:28:18.000 --> 00:28:24.580 It is beside the point to criticize non-essential attendant features of the socialist program. 326 00:28:24.580 --> 00:28:30.500 One does not refute socialism by attacking the socialist stand on religion, marriage, 327 00:28:30.500 --> 00:28:32.700 birth control and art. 328 00:28:32.700 --> 00:28:38.340 Moreover, in dealing with such matters, the critics of socialism were often in the wrong. 329 00:28:38.340 --> 00:28:43.580 Thus, for instance, they were so inept as to turn the disapproval of the Bolshevist 330 00:28:43.580 --> 00:28:49.860 persecution of the Russian Church into an approbation of this debased, adamantly intolerant 331 00:28:49.860 --> 00:28:53.420 Church and its superstitious practices. 332 00:28:53.420 --> 00:28:59.460 In spite of these serious shortcomings of the defenders of economic freedom, it was impossible 333 00:28:59.460 --> 00:29:05.700 to fool all the people all the time about the essential features of socialism. 334 00:29:05.700 --> 00:29:11.220 The most fanatical planners were forced to admit that their projects involved the abolition 335 00:29:11.220 --> 00:29:17.460 of many freedoms people enjoy under capitalism and Pluto democracy. 336 00:29:17.460 --> 00:29:21.420 Pressed hard, they resorted to a new subterfuge. 337 00:29:21.420 --> 00:29:27.260 The freedom to be abolished, they emphasize, is merely the spurious economic freedom of 338 00:29:27.260 --> 00:29:30.980 the capitalists that harms the common man. 339 00:29:30.980 --> 00:29:36.820 Outside the economic sphere, freedom will not only be fully preserved, but considerably 340 00:29:36.820 --> 00:29:38.620 expanded. 341 00:29:38.620 --> 00:29:44.920 Planning for freedom has lately become the most popular slogan of the champions of totalitarian 342 00:29:44.920 --> 00:29:48.860 government and the Russification of all nations. 343 00:29:48.860 --> 00:29:54.280 The fallacy of this argument stems from the spurious distinction between two realms of 344 00:29:54.280 --> 00:30:01.300 of Human Life and Action entirely separated from one another, namely the economic sphere 345 00:30:01.300 --> 00:30:04.500 and the non-economic sphere. 346 00:30:04.500 --> 00:30:09.240 With regard to this issue, there is no need to add anything to what has been said in the 347 00:30:09.240 --> 00:30:11.560 preceding parts of this book. 348 00:30:11.560 --> 00:30:15.480 However, there is another point to be stressed. 349 00:30:15.480 --> 00:30:21.160 Freedom, as people enjoyed it in the democratic countries of western civilization in the years 350 00:30:21.160 --> 00:30:30.160 was not a product of constitutions, bills of rights, laws and statutes. 351 00:30:30.160 --> 00:30:35.960 Those documents aimed only at safeguarding liberty and freedom, firmly established by 352 00:30:35.960 --> 00:30:42.660 the operation of the market economy against encroachments on the part of officeholders. 353 00:30:42.660 --> 00:30:49.100 No government and no civil law can guarantee and bring about freedom otherwise than by 354 00:30:49.100 --> 00:30:55.620 by Supporting and Defending the Fundamental Institutions of the Market Economy. 355 00:30:55.620 --> 00:31:04.300 Government means always coercion and compulsion, and is by necessity the opposite of liberty. 356 00:31:04.300 --> 00:31:09.840 Government is a guarantor of liberty and is compatible with liberty only if its range 357 00:31:09.840 --> 00:31:15.040 is adequately restricted to the preservation of economic freedom. 358 00:31:15.040 --> 00:31:20.440 Where there is no market economy, the best intentioned provisions of constitutions and 359 00:31:20.440 --> 00:31:23.440 laws remain a dead letter. 360 00:31:23.440 --> 00:31:28.320 The freedom of man under capitalism is an effect of competition. 361 00:31:28.320 --> 00:31:32.600 The worker does not depend on the good graces of an employer. 362 00:31:32.600 --> 00:31:36.820 If his employer discharges him, he finds another employer. 363 00:31:36.820 --> 00:31:40.040 The consumer is not at the mercy of the shopkeeper. 364 00:31:40.040 --> 00:31:44.160 He is free to patronize another shop if he likes. 365 00:31:44.160 --> 00:31:49.280 Everybody must kiss other people's hands or fear their disfavor. 366 00:31:49.280 --> 00:31:51.600 Interpersonal relations are businesslike. 367 00:31:51.600 --> 00:31:54.980 The exchange of goods and services is mutual. 368 00:31:54.980 --> 00:31:57.620 It is not a favor to sell or to buy. 369 00:31:57.620 --> 00:32:02.560 It is a transaction dictated by selfishness on either side. 370 00:32:02.560 --> 00:32:09.520 It is true that in his capacity as a producer, every man depends either directly, for example, 371 00:32:09.520 --> 00:32:17.120 of the Entrepreneur, or indirectly, for example, the hired worker, on the demands of the consumers. 372 00:32:17.120 --> 00:32:23.220 However, this dependence upon the supremacy of the consumers is not unlimited. 373 00:32:23.220 --> 00:32:28.400 If a man has a weighty reason for defying the sovereignty of the consumers, he can try 374 00:32:28.400 --> 00:32:29.400 it. 375 00:32:29.400 --> 00:32:36.460 There is, in the range of the market, a very substantial and effective right to resist oppression. 376 00:32:36.460 --> 00:32:43.360 Money is forced to go into the liquor industry or into a gun factory if his conscience objects. 377 00:32:43.360 --> 00:32:46.520 He may have to pay a price for his conviction. 378 00:32:46.520 --> 00:32:51.520 There are in this world no ends, the attainment of which is gratuitous. 379 00:32:51.520 --> 00:32:57.380 But it is left to a man's own decision to choose between a material advantage and the 380 00:32:57.380 --> 00:33:00.960 call of what he believes to be his duty. 381 00:33:00.960 --> 00:33:08.700 In the market economy, the individual alone is the supreme arbiter in matters of his satisfaction. 382 00:33:08.700 --> 00:33:14.420 In the political sphere, resistance to oppression practiced by the established government is 383 00:33:14.420 --> 00:33:18.140 the ultima ratio of those oppressed. 384 00:33:18.140 --> 00:33:23.920 However illegal and unbearable the oppression, however lofty and noble the motives of the 385 00:33:23.920 --> 00:33:29.460 rebels, and however beneficial the consequences of their violent resistance, a revolution 386 00:33:29.460 --> 00:33:36.820 Revolution is always an illegal act, disintegrating the established order of state and government. 387 00:33:36.820 --> 00:33:42.580 It is an essential mark of civil government that it is in its territory the only agency 388 00:33:42.580 --> 00:33:48.240 which is in a position to resort to measures of violence or to declare legitimate whatever 389 00:33:48.240 --> 00:33:51.700 violence is practiced by other agencies. 390 00:33:51.700 --> 00:33:56.160 A revolution is an act of warfare between the citizens. 391 00:33:56.160 --> 00:34:02.300 It abolishes the very foundations of legality and is at best restrained by the questionable 392 00:34:02.300 --> 00:34:06.120 international customs concerning belligerency. 393 00:34:06.120 --> 00:34:12.300 If victorious, it can afterwards establish a new legal order and a new government. 394 00:34:12.300 --> 00:34:17.440 But it can never enact a legal right to resist oppression. 395 00:34:17.440 --> 00:34:22.680 Such an impunity granted to people venturing armed resistance to the armed forces of the 396 00:34:22.680 --> 00:34:29.360 to Government is tantamount to anarchy and incompatible with any mode of government. 397 00:34:29.360 --> 00:34:34.120 The constituent assembly of the first French Revolution was foolish enough to decree such 398 00:34:34.120 --> 00:34:40.200 a right, but it was not so foolish as to take its own decree seriously. 399 00:34:40.200 --> 00:34:45.760 Capitalist society has no means of compelling a man to change his occupation or his place 400 00:34:45.760 --> 00:34:52.760 of Money, The Theory of Money and State, The Theory of Money and State, The Theory of Money 401 00:35:15.760 --> 00:35:18.360 However, man is no less free. 402 00:35:18.360 --> 00:35:23.000 He alone decides what is more and what is less important for him. 403 00:35:23.000 --> 00:35:28.120 He chooses how to spend his money according to his own will. 404 00:35:28.120 --> 00:35:34.200 The substitution of economic planning for the market economy removes all freedom and 405 00:35:34.200 --> 00:35:38.460 leaves to the individual merely the right to obey. 406 00:35:38.460 --> 00:35:44.600 The authority directing all economic matters controls all aspects of a man's life and 407 00:35:44.600 --> 00:35:52.320 Activities. It is the only employer. All labor becomes compulsory labor because the 408 00:35:52.320 --> 00:35:59.120 employee must accept what the chief deigns to offer him. The economic czar determines 409 00:35:59.120 --> 00:36:05.400 what and how much of each the consumer may consume. There is no sector of human life 410 00:36:05.400 --> 00:36:12.000 in which a decision is left to the individual's value judgments. The authority assigns a definite 411 00:36:12.000 --> 00:36:18.240 task to him, trains him for this job, and employs him at the place and in the manner 412 00:36:18.240 --> 00:36:20.880 it deems expedient. 413 00:36:20.880 --> 00:36:26.800 As soon as the economic freedom which the market economy grants to its members is removed, 414 00:36:26.800 --> 00:36:31.360 all political liberties and bills of rights become humbug. 415 00:36:31.360 --> 00:36:38.120 Habeas corpus and trial by jury are a sham if under the pretext of economic expediency 416 00:36:38.120 --> 00:36:44.240 The authority has full power to relegate every citizen it dislikes to the Arctic or to a 417 00:36:44.240 --> 00:36:48.800 desert and to assign him hard labor for life. 418 00:36:48.800 --> 00:36:54.100 Freedom of the press is a mere blind if the authority controls all printing offices and 419 00:36:54.100 --> 00:36:58.700 paper plants, and so are all the other rights of men. 420 00:36:58.700 --> 00:37:04.960 A man has freedom as far as he shapes his life according to his own plans. 421 00:37:04.960 --> 00:37:10.960 A man whose fate is determined by the plans of a superior authority, in which the exclusive 422 00:37:10.960 --> 00:37:17.920 power to plan is vested, is not free, in the sense in which this term, free, was used and 423 00:37:17.920 --> 00:37:24.280 understood by all people, until the semantic revolution of our day brought about a confusion 424 00:37:24.280 --> 00:37:26.080 of tongues. 425 00:37:26.080 --> 00:37:27.960 7. 426 00:37:27.960 --> 00:37:32.920 Inequality of Wealth and Income The inequality of individuals with regard 427 00:37:32.920 --> 00:37:37.920 to Wealth and Income is an essential feature of the market economy. 428 00:37:37.920 --> 00:37:43.680 The fact that freedom is incompatible with equality of wealth and income has been stressed 429 00:37:43.680 --> 00:37:45.600 by many authors. 430 00:37:45.600 --> 00:37:50.920 There is no need to enter into an examination of the emotional arguments advanced in these 431 00:37:50.920 --> 00:37:51.920 writings. 432 00:37:51.920 --> 00:37:57.120 Neither is it necessary to raise the question of whether the renunciation of liberty could 433 00:37:57.120 --> 00:38:02.720 could in itself guarantee the establishment of equality of wealth and income, and whether 434 00:38:02.720 --> 00:38:08.360 or not a society could subsist on the basis of such an equality. 435 00:38:08.360 --> 00:38:16.180 Our task is merely to describe the role inequality plays in the framework of the market society. 436 00:38:16.180 --> 00:38:22.000 In the market society, direct compulsion and coercion are practiced only for the sake of 437 00:38:22.000 --> 00:38:26.720 preventing acts detrimental to social cooperation. 438 00:38:26.720 --> 00:38:31.600 For the rest, individuals are not molested by the police power. 439 00:38:31.600 --> 00:38:37.360 The law-abiding citizen is free from the interference of jailers and hangmen. 440 00:38:37.360 --> 00:38:42.880 What pressure is needed to impel an individual to contribute his share to the cooperative 441 00:38:42.880 --> 00:38:48.720 effort of production is exercised by the price structure of the market. 442 00:38:48.720 --> 00:38:50.960 This pressure is indirect. 443 00:38:50.960 --> 00:38:57.000 puts on each individual's contribution a premium, graduated according to the value 444 00:38:57.000 --> 00:39:01.040 which the consumers attach to this contribution. 445 00:39:01.040 --> 00:39:06.520 In rewarding the individual's effort according to its value, it leaves to everybody the choice 446 00:39:06.520 --> 00:39:13.100 between a more or less complete utilization of his own faculties and abilities. 447 00:39:13.100 --> 00:39:20.320 This method can, of course, not eliminate the disadvantages of inherent personal inferiority, 448 00:39:20.320 --> 00:39:27.400 and it provides an incentive to everybody to exert his faculties and abilities to the utmost. 449 00:39:27.400 --> 00:39:34.460 The only alternative to this financial pressure as exercised by the market is direct pressure 450 00:39:34.460 --> 00:39:38.860 and compulsion as exercised by the police power. 451 00:39:38.860 --> 00:39:43.940 The authorities must be entrusted with the task of determining the quantity and quality 452 00:39:43.940 --> 00:39:48.500 of work that each individual is bound to perform. 453 00:39:48.500 --> 00:39:54.320 As individuals are unequal with regard to their abilities, this requires an examination 454 00:39:54.320 --> 00:39:58.240 of their personalities on the part of the authorities. 455 00:39:58.240 --> 00:40:05.800 The individual becomes an inmate of a penitentiary, as it were, to whom a definite task is assigned. 456 00:40:05.800 --> 00:40:11.980 If he fails to achieve what the authorities have ordered him to do, he is liable to punishment. 457 00:40:11.980 --> 00:40:18.360 It is important to realize in what the difference consists between direct pressure exercised 458 00:40:18.360 --> 00:40:25.280 for the Prevention of Crime, and that exercised for the extortion of a definite performance. 459 00:40:25.280 --> 00:40:30.640 In the former case, all that is required from the individual is to avoid a certain mode 460 00:40:30.640 --> 00:40:34.820 of conduct, precisely determined by law. 461 00:40:34.820 --> 00:40:41.040 As a rule, it is easy to establish whether or not this interdiction has been observed. 462 00:40:41.040 --> 00:40:46.460 In the second case, the individual is liable to accomplish a definite task. 463 00:40:46.460 --> 00:40:52.260 The law forces him toward an indefinite action, the determination of which is left to the 464 00:40:52.260 --> 00:40:55.100 decision of the executive power. 465 00:40:55.100 --> 00:41:01.320 The individual is bound to obey whatever the administration orders him to do. 466 00:41:01.320 --> 00:41:07.940 Whether or not the command issued by the executive power was adequate to his forces and faculties, 467 00:41:07.940 --> 00:41:12.660 and whether or not he has complied with it to the best of his abilities, is extremely 468 00:41:12.660 --> 00:41:15.540 difficult to establish. 469 00:41:15.540 --> 00:41:21.460 Every citizen is, with regard to all aspects of his personality and with regard to all 470 00:41:21.460 --> 00:41:27.500 manifestations of his conduct, subject to the decisions of the authorities. 471 00:41:27.500 --> 00:41:33.220 In the market economy, in a trial before a penal court, the prosecutor is obliged to 472 00:41:33.220 --> 00:41:37.620 produce sufficient evidence that the defendant is guilty. 473 00:41:37.620 --> 00:41:43.420 But in matters of the performance of compulsory work, it devolves upon the defendant to prove 474 00:42:13.420 --> 00:42:20.420 can do without a method that makes individuals responsible for their contributions to the joint productive effort. 475 00:42:20.420 --> 00:42:29.420 If this responsibility is not brought about by the price structure of the market and the inequality of wealth and income it begets, 476 00:42:29.420 --> 00:42:36.420 it must be enforced by the methods of direct compulsion as practiced by the police.