CHAPTER 15 THE MARKET
1.
THE CHARACTERISTICS OF THE MARKET ECONOMY
The market economy is the social system of the division of labor under private ownership
of the means of production.
Everybody acts on his own behalf.
But everybody's actions aim at the satisfaction of other people's needs as well as at the
satisfaction of his own.
Everybody in acting serves his fellow citizens.
Everybody on the other hand is served by his fellow citizens.
Everybody is both a means and an end in himself, an ultimate end for himself and a means to
other people in their endeavors to attain their own ends.
This system is steered by the market.
The market directs the individual's activities into those channels in which he best serves
is the wants of his fellow men.
There is in the operation of the market no compulsion and coercion.
The state, the social apparatus of coercion and compulsion, does not interfere with the
market and with the citizens' activities directed by the market.
It employs its power to beat people into submission solely for the prevention of actions destructive
to the preservation and the smooth operation of the market economy.
protects the individual's life, health and property against violent or fraudulent aggression
on the part of domestic gangsters and external foes.
Thus, the state creates and preserves the environment in which the market economy can
safely operate.
The Marxian slogan, Anarchic Production, pertinently characterizes this social structure as an economic
System which is not directed by a dictator, a production czar who assigns to each a task
and compels him to obey this command.
Each man is free, nobody is subject to a despot.
Of his own accord, the individual integrates himself into the cooperative system.
The market directs him and reveals to him in what way he can best promote his own welfare
as well as that of other people.
The market is supreme.
The market alone puts the whole social system in order and provides it with sense and meaning.
The market is not a place, a thing, or a collective entity.
The market is a process, actuated by the interplay of the actions of the various individuals
cooperating under the division of labor.
The forces determining the continually changing state of the market are the value judgments
of these individuals and their actions as directed by these value judgments.
The state of the market at any instant is the price structure, that is, the totality
of the exchange ratios as established by the interaction of those eager to buy and those
eager to sell.
There is nothing inhuman or mystical with regard to the market.
The market process is entirely a resultant of human actions.
Every market phenomenon can be traced back to definite choices of the members of the
market society.
The market process is the adjustment of the individual actions of the various members
of the market society to the requirements of mutual cooperation.
The market prices tell the producers what to produce, how to produce and in what quantity.
The market is the focal point to which the activities of the individuals converge.
It is the center from which the activities of the individuals radiate.
The market economy must be strictly differentiated from the second thinkable, although not realizable
system of social cooperation under the division of labor.
The system of social or government ownership of the means of production.
This second system is commonly called socialism, communism, planned economy or state capitalism.
The market economy or capitalism as it is usually called and the socialist economy preclude
one another.
There is no mixture of the two systems possible or thinkable.
There is no such thing as a mixed economy, a system that would be in part capitalistic
and in part socialist.
Production is directed either by the market or by the decrees of a production czar or
a committee of production czars.
If within a society based on private ownership of the means of production, some of these
means are publicly owned and operated, that is, owned and operated by the government or
for one of its agencies. This does not make for a mixed system which would combine socialism
and capitalism. The fact that the state or municipalities own and operate some plants
does not alter the characteristic features of the market economy. These publicly owned
and operated enterprises are subject to the sovereignty of the market. They must fit themselves
as buyers of raw materials, equipment and labor, and as sellers of goods and services
into the scheme of the market economy. They are subject to the laws of the market and
thereby depend on the consumers who may or may not patronize them. They must strive for
profits, or, at least, to avoid losses. The government may cover losses of its plants
or Shops by Drawing on Public Funds, but this neither eliminates nor mitigates the supremacy
of the market, it merely shifts it to another sector, for the means for covering the losses
must be raised by the imposition of taxes, but this taxation has its effects on the market
and influences the economic structure according to the laws of the market.
It is the operation of the market and not the government collecting the taxes that decides
upon whom the incidence of the taxes falls and how they affect production and consumption.
Thus, the market, not a government bureau, determines the working of these publicly operated
enterprises.
Nothing that is in any way connected with the operation of a market is in the praxeological
Social or economic sense to be called socialism.
The notion of socialism as conceived and defined by all socialists implies the absence of a
market for factors of production and of prices of such factors.
The socialization of individual plants, shops and farms, that is, their transfer from private
into public ownership, is a method of bringing about socialism by successive measures.
is a step on the way toward socialism, but not in itself socialism.
Marx and the orthodox Marxians flatly deny the possibility of such a gradual approach to socialism.
According to their doctrine, the evolution of capitalism will one day reach a point
in which, at one stroke, capitalism is transformed into socialism.
Government-operated enterprises and the Russian-Soviet economy are, by the mere fact that they buy and sell on markets, connected with the capitalist system.
They themselves bear witness to this connection by calculating in terms of money.
They thus utilize the intellectual methods of the capitalist system that they fanatically condemn.
For monetary economic calculation is the intellectual basis of the market economy.
The tasks set to acting within any system of the division of labor cannot be achieved without economic calculation.
The market economy calculates in terms of money prices.
That it is capable of such calculation was instrumental in its evolution and conditions its present-day operation.
The market economy is real because it can calculate.
2. Capital
The metal tool of the market economy is economic calculation.
The fundamental notion of economic calculation is the notion of capital and its correlative income.
The notions of capital and income as applied in accountancy and in the mundane reflections
The collections, of which accountancy is merely a refinement, contrast the means and the ends.
The calculating mind of the actor draws a boundary line between the consumer's goods,
which he plans to employ for the immediate satisfaction of his wants, and the goods of
all orders, including those of the first order, which he plans to employ for providing, by
further acting, for the satisfaction of future wants.
The differentiation of means and ends thus becomes a differentiation of acquisition and
consumption, of business and household, of trading funds and of household goods.
The whole complex of goods destined for acquisition is evaluated in money terms, and this sum,
the capital, is the starting point of economic calculation.
The immediate end of acquisitive action is to increase, or at least to preserve, the
capital.
That amount which can be consumed within a definite period without lowering the capital
is called income.
If consumption exceeds the income available, the difference is called capital consumption.
If the income available is greater than the amount consumed, the difference is called
saving.
Among the main tasks of economic calculation are those of establishing the magnitudes of
income, saving and capital consumption.
The reflections which led acting man to the notions implied in the concepts of capital
and income are latent in every premeditation and planning of action.
Even the most primitive husbandmen are dimly aware of the consequences of acts which to
to a modern accountant would appear as capital consumption.
The hunter's reluctance to kill a pregnant hind and the uneasiness felt even by the most
ruthless warriors in cutting fruit trees were manifestations of a mentality which was influenced
by such considerations.
These considerations were present in the age-old legal institution of usufruct and in analogous
Business Customs and Practices.
But only people who are in a position to resort to monetary calculation can evolve to full
clarity the distinction between an economic substance and the advantages derived from
it, and can apply it neatly to all classes, kinds and orders of goods and services.
They alone can establish such distinctions with regard to the perpetually changing conditions
of Highly Developed Processing Industries and the complicated structure of the social
cooperation of hundreds of thousands of specialized jobs and performances.
Looking backward from the cognition provided by modern accountancy to the conditions of
the savage ancestors of the human race, we may say metaphorically that they too used
capital.
A contemporary accountant could apply all the methods of his profession to their primitive
tools of hunting and fishing, to their cattle breeding and their tilling of the soil, if
he knew what prices to assign to the various items concerned.
Some economists concluded therefrom that capital is a category of all human production, that
It is present in every thinkable system of the conduct of production processes, that
is, no less in Robinson Crusoe's involuntary hermitage than in a socialist society, and
that it does not depend upon the practice of monetary calculation.
This is, however, a confusion.
The concept of capital cannot be separated from the context of monetary calculation and
and from the social structure of a market economy in which alone monetary calculation
is possible.
It is a concept which makes no sense outside the conditions of a market economy.
It plays a role exclusively in the plans and records of individuals acting on their own
account in such a system of private ownership of the means of production, and it developed
with the spread of economic calculation in monetary terms.
Modern accountancy is the fruit of a long historical evolution.
Today there is, among businessmen and accountants, unanimity with regard to the meaning of capital.
Capital is the sum of the money equivalent of all assets minus the sum of the money equivalent
of All Liabilities as dedicated at a definite date to the conduct of the operations of a
definite business unit.
It does not matter in what these assets may consist, whether they are pieces of land,
buildings, equipment, tools, goods of any kind and order, claims, receivables, cash,
or whatever.
It is a historical fact that in the early days of accountancy, the tradesmen, the pacemakers
Farmers on the way toward monetary calculation did not for the most part include the money
equivalent of their buildings and land in the notion of capital. It is another historical
fact that agriculturists were slow in applying the capital concept to their land. Even today
in the most advanced countries, only a part of the farmers are familiar with the practice
of Sound Accountancy.
Many farmers acquiesce in a system of bookkeeping that neglects to pay heed to the land and
its contribution to production.
Their book entries do not include the money equivalent of the land, and are consequently
indifferent to changes in this equivalent.
Such accounts are defective because they fail to convey that information which is the sole
aim sought by capital accounting.
They do not indicate whether or not the operation of the farm has brought about a deterioration
in the land's capacity to contribute to production, that is, in its objective use value.
If an erosion of the soil has taken place, their books ignore it, and thus the calculated
income, net yield, is greater than a more complete method of bookkeeping would have
shown.
It is necessary to mention these historical facts because they influence the endeavors
of the economists to construct the notion of real capital.
The economists were and are still today confronted with the superstitious belief that the scarcity
of factors of production could be brushed away, either entirely or at least to some
In order to deal adequately with this fundamental problem of economic policy, they considered
it necessary to construct a notion of real capital, and to oppose it to the notion of
capital as applied by the businessman whose calculation refers to the whole complex of
his acquisitive activities.
At the time the economists embarked upon these endeavors, the place of the money equivalent
of land in the concept of capital was still questioned.
Thus the economists thought it reasonable to disregard land in constructing their notion
of real capital.
They defined real capital as the totality of the produced factors of production available.
Prior splitting discussions were started as to whether inventories of consumers' goods
held by business units are or are not real capital.
But there was almost unanimity that cash is not real capital.
Now this concept of a totality of the produced factors of production is an empty concept.
The money equivalent of the various factors of production owned by a business unit can
can be determined and summed up.
But if we abstract from such an evaluation in money terms, the totality of the produced
factors of production is merely an enumeration of physical quantities of thousands and thousands
of various goods.
Such an inventory is of no use to acting.
It is a description of a part of the universe in terms of technology and topography and
and has no reference whatever to the problems raised by the endeavors to improve human well-being.
We may acquiesce in the terminological usage of calling the produced factors of production
capital goods, but this does not render the concept of real capital any more meaningful.
The worst outgrowth of the use of the mythical notion of real capital was that economists
Scientists began to speculate about a spurious problem called the productivity of real capital.
A factor of production is by definition a thing that is able to contribute to the success
of a process of production.
Its market price reflects entirely the value that people attach to this contribution.
The services expected from the employment of a factor of production, that is its contribution
and to productivity are in market transactions paid according to the full value people attach
to them.
These factors are considered valuable only on account of these services.
These services are the only reason why prices are paid for them.
Once these prices are paid, nothing remains that can bring about further payments on the
are part of anybody as a compensation for additional productive services of these factors
of production.
It was a blunder to explain interest as an income derived from the productivity of capital.
No less detrimental was a second confusion derived from the real capital concept.
People began to meditate upon a concept of social capital as different from private capital.
From the imaginary construction of a socialist economy, they were intent upon defining a
capital concept suitable to the economic activities of the general manager of such a system.
They were right in assuming that this manager would be eager to know whether his conduct
of affairs was successful, namely, from the point of view of his own valuations and the
The Ends aimed at in accordance with these valuations, and how much he could expend for
his ward's consumption without diminishing the available stock of factors of production
and thus impairing the yield of further production.
A socialist government would badly need the concepts of capital and income as a guide
for its operations.
However, in an economic system in which there is no private ownership of the means of production,
In a socialist economy, there are capital goods, but no capital.
The notion of capital makes sense only in the market economy.
It serves the deliberations and calculations of individuals or groups of individuals operating
Capitalism
All civilizations have up to now been based on private ownership of the means of production.
In the past, civilization and private property have been linked together.
Those who maintain that economics is an experimental science, and nevertheless recommend public
control of the means of production, lamentably contradict themselves.
If historical experience could teach us anything, it would be that private property is inextricably
linked with civilization.
There is no experience to the effect that socialism could provide a standard of living
as high as that provided by capitalism.
The system of market economy has never been fully and purely tried, but there prevailed
in the orbit of Western civilization since the Middle Ages by and large a general tendency
toward the abolition of institutions hindering the operation of the market economy.
With the successive progress of this tendency, population figures multiplied, and the masses'
standard of living was raised to an unprecedented and hitherto undreamed-of level.
The average American worker enjoys amenities for which Croesus, Crassus, the Medici and
Louis XIV would have envied him.
The problems raised by the socialist and interventionist critique of the market economy are purely
are generally economic and can be dealt with only in the way in which this book tries to
deal with them, by a thorough analysis of human action and all thinkable systems of
social cooperation.
The psychological problem of why people scorn and disparage capitalism and call everything
they dislike capitalistic and everything they praise socialistic concerns history and must
be left to the historians.
But there are several other issues, which we must stress at this point.
The advocates of totalitarianism consider capitalism a ghastly evil, an awful illness
that came upon mankind.
In the eyes of Marx, it was an inevitable stage of mankind's evolution, but for all
that the worst of evils.
Fortunately, salvation is imminent and will free man forever from this disaster.
In the opinion of other people, it would have been possible to avoid capitalism if only men
had been more moral or more skillful in the choice of economic policies.
All such lucabrations have one feature in common.
They look upon capitalism as if it were an accidental phenomenon, which could be eliminated
without altering conditions that are essential in civilized man's acting and thinking.
As they neglect to bother about the problem of economic calculation, they are not aware
of the consequences which the abolition of the monetary calculus is bound to bring about.
They do not realize that socialist men, for whom arithmetic will be of no use in planning
action, will differ entirely in their mentality and in their mode of thinking from our contemporaries.
In dealing with socialism, we must not overlook this mental transformation, even if we were
ready to pass over in silence the disastrous consequences which would result for man's
material well-being.
The market economy is a man-made mode of acting under the division of labor.
But this does not imply that it is something accidental or artificial and could be replaced
by another mode.
The market economy is the product of a long evolutionary process.
It is the outcome of man's endeavors to adjust his action in the best possible way to the
given conditions of his environment that he cannot alter.
It is the strategy, as it were, by the application of which man has triumphantly progressed from
savagery to civilization.
This mode of argumentation is very popular among present-day authors.
Capitalism was the economic system which brought about the marvelous achievements of the last
200 years.
Therefore it is done for, because what was beneficial in the past cannot be so for our
time and for the future.
Such reasoning is in open contradiction to the principles of experimental cognition.
There is no need at this point to raise again the question of whether or not the science
of human action can adopt the methods of the experimental natural sciences.
Even if it were permissible to answer this question in the affirmative, it would be absurd
to argue as these Aurobure experimentalists do.
Experimental science argues that because A was valid in the past, it will be valid in
the future too.
It must never argue the other way round and assert that because A was valid in the past,
it is not valid in the future.
It is customary to blame the economists for an alleged disregard of history.
The economists, it is contended, consider the market economy as the ideal and eternal
pattern of social cooperation.
They concentrate their studies upon investigating the conditions of the market economy and neglect
and everything else.
They do not bother about the fact that capitalism emerged only in the last 200 years, and that
even today it is restricted to a comparatively small area of the earth's surface and to
a minority of peoples.
There were and are other civilizations with a different mentality and different modes
of conducting economic affairs.
Economicsism is, when seen sub specie eternitatis, a passing phenomenon, an ephemeral stage of
historical evolution, just the transition from pre-capitalistic ages to a post-capitalistic
future.
All these criticisms are spurious.
Economics is, of course, not a branch of history or of any other historical science.
It is the theory of all human action, the general science of the immutable categories
of action, and of their operation under all thinkable special conditions under which man
acts.
It provides, as such, the indispensable mental tool for dealing with historical and ethnographic
problems.
A historian or an ethnographer who neglects in his work to take full advantage of the
and the results of economics is doing a poor job.
In fact, he does not approach the subject matter of his research unaffected by what
he disregards as theory.
He is at every step of his gathering of allegedly unadulterated facts, in arranging these facts
and in his conclusions derived from them, guided by confused and garbled remnants of
perfunctory economic doctrines constructed by botchers in the centuries preceding the
elaboration of an economic science, and long since entirely exploded.
The analysis of the problems of the market society, the only pattern of human action
in which calculation can be applied in planning action, opens access to the analysis of all
and of all economic problems with which historians and ethnographers are confronted.
All non-capitalistic methods of economic management can be studied only under the hypothetical
assumption that in them, too, cardinal numbers can be used in recording past action and planning
future action.
This is why economists place the study of the pure market economy in the center of their
investigations.
It is not the economists who lack the historical sense and ignore the factor of evolution,
but their critics.
The economists have always been fully aware of the fact that the market economy is the
product of a long historical process, which began when the human race emerged from the
ranks of the other primates.
The champions of what is mistakenly called historicism are intent upon undoing the effects
of evolutionary changes.
In their eyes, everything the existence of which they cannot trace back to a remote past
or cannot discover in the customs of some primitive Polynesian tribes is artificial,
even decadent.
They consider the fact that an institution was unknown to savages as a proof of its uselessness
and Rottenness, Marx and Engels and the Prussian professors of the historical school exalted
when they learned that private property is only a historical phenomenon.
For them, this was the proof that their socialist plans were realizable.
The creative genius is at variance with his fellow citizens.
As the pioneer of things new and unheard of, he is in conflict with their uncritical acceptance
of Traditional Standards and Values. In his eyes, the routine of the regular citizen,
the average or common man, is simply stupidity. For him, bourgeois is a synonym of imbecility.
The frustrated artists who take delight in aping the genius's mannerism in order to forget
and to conceal their own impotence adopt this terminology. These bohemians call everything
In the vocabulary of all languages, the words capitalistic and bourgeois signify today all
that is shameful, degrading and infamous.
Contrary wise, people call all that they deem good and praiseworthy socialist.
The regular scheme of arguing is this, a man arbitrarily calls anything he dislikes capitalistic
and then deduces from this appellation that the thing is bad.
This semantic confusion goes still further.
Sismondi, the Romantic eulogists of the Middle Ages, all socialist authors, the Prussian
Historical School and the American institutionalists, taught that capitalism is an unfair system
Capitalism of Exploitation Sacrificing the Vital Interests of the Majority of People
for the Sole Benefit of a Small Group of Profiteers.
No decent man can advocate this mad system.
The economists who contend that capitalism is beneficial not only to a small group but
to everyone are sycophants of the bourgeoisie.
They are either too dull to recognize the truth or bribed apologists of the selfish
Capitalism, in the terminology of these foes of liberty, democracy and the market economy, means the economic policy advocated by big business and millionaires.
Confronted with the fact that some, but certainly not all, wealthy entrepreneurs and capitalists nowadays favor measures restricting free trade and competition and resulting in monopoly,
And they say, contemporary capitalism stands for protectionism, cartels and the abolition
of competition.
It is true, they add, that at a definite period of the past, British capitalism favored free
trade both on the domestic market and in international relations.
This was because at that time the class interests of the British bourgeoisie were best served
by such a policy.
has, however, changed, and today, capitalism, that is, the policy advocated by the exploiters,
aims at another policy.
It has already been pointed out that this doctrine badly distorts both economic theory
and historical facts.
There were, and there will always be, people whose selfish ambitions demand protection for
for vested interests and who hope to derive advantage from measures restricting competition.
Entrepreneurs grown old and tired and the decadent heirs of people who succeeded in
the past dislike the agile parvenues who challenge their wealth and their eminent social position.
Whether or not their desire to make economic conditions rigid and to hinder improvements
can be realized depends on the climate of public opinion.
The ideological structure of the 19th century, as fashioned by the prestige of the teachings
of the liberal economists, rendered such wishes vain.
When the technological improvements of the age of liberalism revolutionized the traditional
methods of production, transportation and marketing, those whose vested interests were
for Hurt did not ask for protection because it would have been a hopeless venture.
But today it is deemed a legitimate task of government to prevent an efficient man from
competing with the less efficient.
Public opinion sympathizes with the demands of powerful pressure groups to stop progress.
The butter producers are with considerable success fighting against margarine and the
musicians against recorded music.
The labor unions are deadly foes of every new machine. It is not amazing that in such
an environment, less efficient businessmen aim at protection against more efficient competitors.
It would be correct to describe this state of affairs in this way. Today, many or some
groups of business are no longer liberal. They do not advocate a pure market economy
Money and Free Enterprise, but on the contrary are asking for various measures of government
interference with business.
But it is entirely misleading to say that the meaning of the concept of capitalism has
changed and that mature capitalism, as the Americans call it, or late capitalism, as
the Marxians call it, is characterized by restrictive policies to protect the vested
and interests of wage earners, farmers, shopkeepers, artisans, and sometimes also of capitalists
and entrepreneurs.
The concept of capitalism is, as an economic concept, immutable.
If it means anything, it means market economy.
One deprives oneself of the semantic tools to deal adequately with the problems of contemporary
History and Economic Policies, if one acquiesces in a different terminology.
This faulty nomenclature becomes understandable only if we realize that the pseudo-economists
and the politicians who apply it want to prevent people from knowing what the market economy
really is.
They want to make people believe that all the repulsive manifestations of restrictive
of Government Policies are produced by Capitalism.
4. The Sovereignty of the Consumers
The direction of all economic affairs is in the market society a task of the entrepreneurs.
Theirs is the control of production. They are at the helm and steer the ship.
A superficial observer would believe that they are supreme, but they are not.
They are bound to obey unconditionally the captain's orders.
The captain is the consumer.
Neither the entrepreneurs nor the farmers nor the capitalists determine what has to
be produced.
The consumers do that.
If a businessman does not strictly obey the orders of the public as they are conveyed
to him by the structure of market prices, he suffers losses, he goes bankrupt, and is
is thus removed from his eminent position at the helm. Other men who did better in satisfying
the demand of the consumers replace him. The consumers patronize those shops in which they
can buy what they want at the cheapest price. Their buying and their abstention from buying
decides who should own and run the plants and the land. They make poor people rich and
and Rich People Poor.
They determine precisely what should be produced, in what quality and in what quantities.
They are merciless, egoistic bosses, full of whims and fancies, changeable and unpredictable.
For them, nothing counts other than their own satisfaction.
They do not care a whit for past merit and vested interests.
If something is offered to them that they like better or that is cheaper, they desert
and their old purveyors. In their capacity as buyers and consumers, they are hard-hearted
and callous, without consideration for other people. Only the sellers of goods and services
of the first order are in direct contact with the consumers and directly depend on their
orders. But they transmit the orders received from the public to all those producing goods
Business and Services of the Higher Orders For the manufacturers of consumers' goods,
the retailers, the service trades and the professions are forced to acquire what they
need for the conduct of their own business from those purveyors who offer them at the
cheapest price.
If they were not intent upon buying in the cheapest market and arranging their processing
of the factors of production so as to fill the demands of the consumers in the best and
In the cheapest way, they would be forced to go out of business.
More efficient men who succeeded better in buying and processing the factors of production
would supplant them.
The consumer is in a position to give free rein to his caprices and fancies.
The entrepreneurs, capitalists and farmers have their hands tied.
They are bound to comply in their operations with the orders of the buying public.
Any deviation from the lines prescribed by the demand of the consumers debits their account.
The slightest deviation, whether willfully brought about or caused by error, bad judgment
or inefficiency, restricts their profits or makes them disappear.
A more serious deviation results in losses and thus impairs or entirely absorbs their
wealth.
Capitalists, entrepreneurs and landowners can only preserve and increase their wealth
by filling best the orders of the consumers.
They are not free to spend money which the consumers are not prepared to refund to them
in paying more for the products.
In the conduct of their business affairs, they must be unfeeling and stony-hearted,
Because the consumers, their bosses, are themselves unfeeling and stony-hearted.
The consumers determine ultimately not only the prices of the consumers' goods, but no
less the prices of all factors of production.
They determine the income of every member of the market economy.
The consumers, not the entrepreneurs, pay ultimately the wages earned by every worker.
The Glamorous Movie Star as well as The Char Woman.
With every penny spent, the consumers determine the direction of all production processes
and the minutest details of the organization of all business activities.
This state of affairs has been described by calling the market a democracy in which every
penny gives a right to cast a ballot.
would be more correct to say that a democratic constitution is a scheme to assign to the
citizens in the conduct of government the same supremacy the market economy gives them
in their capacity as consumers.
However, the comparison is imperfect.
In the political democracy, only the votes cast for the majority candidate or the majority
plan are effective in shaping the course of affairs.
The votes polled by the minority do not directly influence policies.
But on the market, no vote is cast in vain.
Every penny spent has the power to work upon the production processes.
The publishers cater not only to the majority by publishing detective stories, but also
to the minority, reading lyrical poetry and philosophical tracts.
The bakeries bake bread not only for healthy people but also for the sick on special diets.
The decision of a consumer is carried into effect with the full momentum he gives it
through his readiness to spend a definite amount of money.
It is true in the market the various consumers have not the same voting right.
The rich cast more votes than the poorer citizens.
But this inequality is itself the outcome of a previous voting process.
To be rich in a pure market economy is the outcome of success in filling best the demands
of the consumers.
A wealthy man can preserve his wealth only by continuing to serve the consumers in the
most efficient way.
Thus, the owners of the material factors of production and the entrepreneurs are virtually
Mandatories or Trustees of the Consumers, revocably appointed by an election daily repeated.
There is in the operation of a market economy only one instance in which the proprietary
class is not completely subject to the supremacy of the consumers.
Monopoly prices are an infringement of the sway of the consumers.
The Metaphorical Employment of the Terminology of Political Rule
The orders given by businessmen in the conduct of their affairs can be heard and seen.
Nobody can fail to become aware of them.
Even messenger boys know that the boss runs things around the shop.
But it requires a little more brains to notice the entrepreneur's dependence on the market.
The orders given by the consumers are not tangible. They cannot be perceived by the
senses. Many people lack the discernment to take cognizance of them. They fall victim
to the delusion that entrepreneurs and capitalists are irresponsible autocrats whom nobody calls
to account for their actions.
The outgrowth of this mentality is the practice of applying to business the terminology of
of Political Rule and Military Action.
Successful businessmen are called kings or dukes.
They're enterprises and empire, a kingdom or a dukedom.
If this idiom were only a harmless metaphor, there would be no need to criticize it.
But it is the source of serious errors which play a sinister role in contemporary doctrines.
Government is an apparatus of compulsion and coercion.
It has the power to obtain obedience by force. The political sovereign, be it an autocrat
or the people as represented by its mandataries, has power to crush rebellions as long as his
ideological might subsists. The position which entrepreneurs and capitalists occupy in the
market economy is of a different character. A chocolate king has no power over the consumers,
Capitalists are ready to restore to him and buying the product.
Still less do the capitalists and entrepreneurs exercise political control.
The civilized nations of Europe and America were long controlled by governments which
did not considerably hinder the operation of the market economy.
Today, many of these countries, too, are dominated by parties which are hostile to capitalism,
and believe that every harm inflicted upon capitalists and entrepreneurs is extremely
beneficial to the people.
In an unhampered market economy, the capitalists and entrepreneurs cannot expect an advantage
from bribing officeholders and politicians.
On the other hand, the officeholders and politicians are not in a position to blackmail businessmen
and to extort graft from them.
In an interventionist country, powerful pressure groups are intent upon securing for their
members privileges at the expense of weaker groups and individuals.
Then the businessmen may deem it expedient to protect themselves against discriminatory
acts on the part of the executive officers and the legislature by bribery.
Once used to such methods, they may even try to employ them in order to secure privileges
is for themselves.
At any rate, the fact that businessmen corrupt politicians and officeholders and are blackmailed
by such people does not indicate that they are supreme and rule the countries.
It is those ruled and not the rulers who bribe and are paying tribute.
The majority of businessmen are prevented from resorting to bribery either by their
moral convictions or by fear.
They venture to preserve the free enterprise system and to defend themselves against discrimination
by legitimate democratic methods.
They form trade associations and try to influence public opinion.
The results of these endeavors have been rather poor, as is evidenced by the triumphant advance
of anti-capitalist policies.
The best that they have been able to achieve is to delay for a while some especially obnoxious
Demagogues misrepresent this state of affairs in the crassest way. They tell us that these associations of bankers and manufacturers are the true rulers of their countries, and that the whole apparatus of what they call Pluto-Democratic Government is dominated by them. A simple enumeration of the laws passed in the last decades by any country's legislature is enough to explode such legends.