WEBVTT NOTE XV. The Market 1 00:00:00.000 --> 00:00:03.440 CHAPTER 15 THE MARKET 2 00:00:03.440 --> 00:00:05.960 1. 3 00:00:05.960 --> 00:00:09.920 THE CHARACTERISTICS OF THE MARKET ECONOMY 4 00:00:09.920 --> 00:00:15.000 The market economy is the social system of the division of labor under private ownership 5 00:00:15.000 --> 00:00:17.720 of the means of production. 6 00:00:17.720 --> 00:00:20.240 Everybody acts on his own behalf. 7 00:00:20.240 --> 00:00:26.080 But everybody's actions aim at the satisfaction of other people's needs as well as at the 8 00:00:26.080 --> 00:00:29.120 satisfaction of his own. 9 00:00:29.120 --> 00:00:33.020 Everybody in acting serves his fellow citizens. 10 00:00:33.020 --> 00:00:37.840 Everybody on the other hand is served by his fellow citizens. 11 00:00:37.840 --> 00:00:45.060 Everybody is both a means and an end in himself, an ultimate end for himself and a means to 12 00:00:45.060 --> 00:00:49.860 other people in their endeavors to attain their own ends. 13 00:00:49.860 --> 00:00:52.620 This system is steered by the market. 14 00:00:52.620 --> 00:00:57.900 The market directs the individual's activities into those channels in which he best serves 15 00:00:57.900 --> 00:01:00.720 is the wants of his fellow men. 16 00:01:00.720 --> 00:01:05.920 There is in the operation of the market no compulsion and coercion. 17 00:01:05.920 --> 00:01:11.480 The state, the social apparatus of coercion and compulsion, does not interfere with the 18 00:01:11.480 --> 00:01:16.240 market and with the citizens' activities directed by the market. 19 00:01:16.240 --> 00:01:22.760 It employs its power to beat people into submission solely for the prevention of actions destructive 20 00:01:22.760 --> 00:01:27.880 to the preservation and the smooth operation of the market economy. 21 00:01:27.880 --> 00:01:34.160 protects the individual's life, health and property against violent or fraudulent aggression 22 00:01:34.160 --> 00:01:37.880 on the part of domestic gangsters and external foes. 23 00:01:37.880 --> 00:01:43.840 Thus, the state creates and preserves the environment in which the market economy can 24 00:01:43.840 --> 00:01:46.240 safely operate. 25 00:01:46.240 --> 00:01:53.440 The Marxian slogan, Anarchic Production, pertinently characterizes this social structure as an economic 26 00:01:53.440 --> 00:02:00.320 System which is not directed by a dictator, a production czar who assigns to each a task 27 00:02:00.320 --> 00:02:04.020 and compels him to obey this command. 28 00:02:04.020 --> 00:02:08.700 Each man is free, nobody is subject to a despot. 29 00:02:08.700 --> 00:02:14.520 Of his own accord, the individual integrates himself into the cooperative system. 30 00:02:14.520 --> 00:02:20.640 The market directs him and reveals to him in what way he can best promote his own welfare 31 00:02:20.640 --> 00:02:23.360 as well as that of other people. 32 00:02:23.360 --> 00:02:25.760 The market is supreme. 33 00:02:25.760 --> 00:02:33.340 The market alone puts the whole social system in order and provides it with sense and meaning. 34 00:02:33.340 --> 00:02:38.380 The market is not a place, a thing, or a collective entity. 35 00:02:38.380 --> 00:02:44.680 The market is a process, actuated by the interplay of the actions of the various individuals 36 00:02:44.680 --> 00:02:48.380 cooperating under the division of labor. 37 00:02:48.380 --> 00:02:54.440 The forces determining the continually changing state of the market are the value judgments 38 00:02:54.440 --> 00:03:00.660 of these individuals and their actions as directed by these value judgments. 39 00:03:00.660 --> 00:03:06.140 The state of the market at any instant is the price structure, that is, the totality 40 00:03:06.140 --> 00:03:12.660 of the exchange ratios as established by the interaction of those eager to buy and those 41 00:03:12.660 --> 00:03:14.600 eager to sell. 42 00:03:14.600 --> 00:03:19.160 There is nothing inhuman or mystical with regard to the market. 43 00:03:19.160 --> 00:03:24.520 The market process is entirely a resultant of human actions. 44 00:03:24.520 --> 00:03:29.960 Every market phenomenon can be traced back to definite choices of the members of the 45 00:03:29.960 --> 00:03:31.800 market society. 46 00:03:31.800 --> 00:03:36.800 The market process is the adjustment of the individual actions of the various members 47 00:03:36.800 --> 00:03:42.160 of the market society to the requirements of mutual cooperation. 48 00:03:42.160 --> 00:03:48.960 The market prices tell the producers what to produce, how to produce and in what quantity. 49 00:03:48.960 --> 00:03:54.500 The market is the focal point to which the activities of the individuals converge. 50 00:03:54.500 --> 00:03:59.980 It is the center from which the activities of the individuals radiate. 51 00:03:59.980 --> 00:04:06.520 The market economy must be strictly differentiated from the second thinkable, although not realizable 52 00:04:06.520 --> 00:04:10.960 system of social cooperation under the division of labor. 53 00:04:10.960 --> 00:04:16.240 The system of social or government ownership of the means of production. 54 00:04:16.240 --> 00:04:24.600 This second system is commonly called socialism, communism, planned economy or state capitalism. 55 00:04:24.600 --> 00:04:31.360 The market economy or capitalism as it is usually called and the socialist economy preclude 56 00:04:31.360 --> 00:04:32.880 one another. 57 00:04:32.880 --> 00:04:37.440 There is no mixture of the two systems possible or thinkable. 58 00:04:37.440 --> 00:04:43.300 There is no such thing as a mixed economy, a system that would be in part capitalistic 59 00:04:43.300 --> 00:04:46.280 and in part socialist. 60 00:04:46.280 --> 00:04:51.520 Production is directed either by the market or by the decrees of a production czar or 61 00:04:51.520 --> 00:04:55.060 a committee of production czars. 62 00:04:55.060 --> 00:05:00.560 If within a society based on private ownership of the means of production, some of these 63 00:05:00.560 --> 00:05:06.920 means are publicly owned and operated, that is, owned and operated by the government or 64 00:05:06.920 --> 00:05:13.520 for one of its agencies. This does not make for a mixed system which would combine socialism 65 00:05:13.520 --> 00:05:20.520 and capitalism. The fact that the state or municipalities own and operate some plants 66 00:05:20.640 --> 00:05:26.820 does not alter the characteristic features of the market economy. These publicly owned 67 00:05:26.820 --> 00:05:33.320 and operated enterprises are subject to the sovereignty of the market. They must fit themselves 68 00:05:33.320 --> 00:05:39.920 as buyers of raw materials, equipment and labor, and as sellers of goods and services 69 00:05:39.920 --> 00:05:45.720 into the scheme of the market economy. They are subject to the laws of the market and 70 00:05:45.720 --> 00:05:52.720 thereby depend on the consumers who may or may not patronize them. They must strive for 71 00:05:52.720 --> 00:05:59.720 profits, or, at least, to avoid losses. The government may cover losses of its plants 72 00:05:59.720 --> 00:06:06.320 or Shops by Drawing on Public Funds, but this neither eliminates nor mitigates the supremacy 73 00:06:06.320 --> 00:06:13.320 of the market, it merely shifts it to another sector, for the means for covering the losses 74 00:06:13.320 --> 00:06:20.400 must be raised by the imposition of taxes, but this taxation has its effects on the market 75 00:06:20.400 --> 00:06:25.860 and influences the economic structure according to the laws of the market. 76 00:06:25.860 --> 00:06:31.600 It is the operation of the market and not the government collecting the taxes that decides 77 00:06:31.600 --> 00:06:38.420 upon whom the incidence of the taxes falls and how they affect production and consumption. 78 00:06:38.420 --> 00:06:45.060 Thus, the market, not a government bureau, determines the working of these publicly operated 79 00:06:45.060 --> 00:06:47.460 enterprises. 80 00:06:47.460 --> 00:06:53.300 Nothing that is in any way connected with the operation of a market is in the praxeological 81 00:06:53.300 --> 00:06:57.540 Social or economic sense to be called socialism. 82 00:06:57.540 --> 00:07:04.020 The notion of socialism as conceived and defined by all socialists implies the absence of a 83 00:07:04.020 --> 00:07:09.840 market for factors of production and of prices of such factors. 84 00:07:09.840 --> 00:07:16.540 The socialization of individual plants, shops and farms, that is, their transfer from private 85 00:07:16.540 --> 00:07:23.200 into public ownership, is a method of bringing about socialism by successive measures. 86 00:07:23.200 --> 00:07:29.200 is a step on the way toward socialism, but not in itself socialism. 87 00:07:29.200 --> 00:07:36.200 Marx and the orthodox Marxians flatly deny the possibility of such a gradual approach to socialism. 88 00:07:36.200 --> 00:07:42.200 According to their doctrine, the evolution of capitalism will one day reach a point 89 00:07:42.200 --> 00:07:48.200 in which, at one stroke, capitalism is transformed into socialism. 90 00:07:48.200 --> 00:07:59.200 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. 91 00:07:59.200 --> 00:08:05.200 They themselves bear witness to this connection by calculating in terms of money. 92 00:08:05.200 --> 00:08:12.200 They thus utilize the intellectual methods of the capitalist system that they fanatically condemn. 93 00:08:12.200 --> 00:08:19.200 For monetary economic calculation is the intellectual basis of the market economy. 94 00:08:19.200 --> 00:08:28.200 The tasks set to acting within any system of the division of labor cannot be achieved without economic calculation. 95 00:08:28.200 --> 00:08:33.200 The market economy calculates in terms of money prices. 96 00:08:33.200 --> 00:08:41.200 That it is capable of such calculation was instrumental in its evolution and conditions its present-day operation. 97 00:08:41.200 --> 00:08:46.200 The market economy is real because it can calculate. 98 00:08:47.200 --> 00:08:49.200 2. Capital 99 00:08:50.200 --> 00:08:54.200 The metal tool of the market economy is economic calculation. 100 00:08:55.200 --> 00:09:02.200 The fundamental notion of economic calculation is the notion of capital and its correlative income. 101 00:09:03.200 --> 00:09:09.200 The notions of capital and income as applied in accountancy and in the mundane reflections 102 00:09:09.200 --> 00:09:16.240 The collections, of which accountancy is merely a refinement, contrast the means and the ends. 103 00:09:16.240 --> 00:09:21.960 The calculating mind of the actor draws a boundary line between the consumer's goods, 104 00:09:21.960 --> 00:09:27.360 which he plans to employ for the immediate satisfaction of his wants, and the goods of 105 00:09:27.360 --> 00:09:33.300 all orders, including those of the first order, which he plans to employ for providing, by 106 00:09:33.300 --> 00:09:38.120 further acting, for the satisfaction of future wants. 107 00:09:38.120 --> 00:09:44.120 The differentiation of means and ends thus becomes a differentiation of acquisition and 108 00:09:44.120 --> 00:09:51.560 consumption, of business and household, of trading funds and of household goods. 109 00:09:51.560 --> 00:09:59.200 The whole complex of goods destined for acquisition is evaluated in money terms, and this sum, 110 00:09:59.200 --> 00:10:04.000 the capital, is the starting point of economic calculation. 111 00:10:04.000 --> 00:10:10.440 The immediate end of acquisitive action is to increase, or at least to preserve, the 112 00:10:10.440 --> 00:10:11.720 capital. 113 00:10:11.720 --> 00:10:17.280 That amount which can be consumed within a definite period without lowering the capital 114 00:10:17.280 --> 00:10:19.920 is called income. 115 00:10:19.920 --> 00:10:26.960 If consumption exceeds the income available, the difference is called capital consumption. 116 00:10:26.960 --> 00:10:31.680 If the income available is greater than the amount consumed, the difference is called 117 00:10:31.680 --> 00:10:33.920 saving. 118 00:10:33.920 --> 00:10:39.360 Among the main tasks of economic calculation are those of establishing the magnitudes of 119 00:10:39.360 --> 00:10:43.760 income, saving and capital consumption. 120 00:10:43.760 --> 00:10:49.560 The reflections which led acting man to the notions implied in the concepts of capital 121 00:10:49.560 --> 00:10:56.000 and income are latent in every premeditation and planning of action. 122 00:10:56.000 --> 00:11:01.520 Even the most primitive husbandmen are dimly aware of the consequences of acts which to 123 00:11:01.520 --> 00:11:06.140 to a modern accountant would appear as capital consumption. 124 00:11:06.140 --> 00:11:11.800 The hunter's reluctance to kill a pregnant hind and the uneasiness felt even by the most 125 00:11:11.800 --> 00:11:18.660 ruthless warriors in cutting fruit trees were manifestations of a mentality which was influenced 126 00:11:18.660 --> 00:11:21.340 by such considerations. 127 00:11:21.340 --> 00:11:27.740 These considerations were present in the age-old legal institution of usufruct and in analogous 128 00:11:27.740 --> 00:11:30.240 Business Customs and Practices. 129 00:11:30.240 --> 00:11:36.380 But only people who are in a position to resort to monetary calculation can evolve to full 130 00:11:36.380 --> 00:11:42.180 clarity the distinction between an economic substance and the advantages derived from 131 00:11:42.180 --> 00:11:49.720 it, and can apply it neatly to all classes, kinds and orders of goods and services. 132 00:11:49.720 --> 00:11:55.620 They alone can establish such distinctions with regard to the perpetually changing conditions 133 00:11:55.620 --> 00:12:01.060 of Highly Developed Processing Industries and the complicated structure of the social 134 00:12:01.060 --> 00:12:07.900 cooperation of hundreds of thousands of specialized jobs and performances. 135 00:12:07.900 --> 00:12:13.100 Looking backward from the cognition provided by modern accountancy to the conditions of 136 00:12:13.100 --> 00:12:19.340 the savage ancestors of the human race, we may say metaphorically that they too used 137 00:12:19.340 --> 00:12:20.340 capital. 138 00:12:20.340 --> 00:12:26.140 A contemporary accountant could apply all the methods of his profession to their primitive 139 00:12:26.140 --> 00:12:31.940 tools of hunting and fishing, to their cattle breeding and their tilling of the soil, if 140 00:12:31.940 --> 00:12:37.820 he knew what prices to assign to the various items concerned. 141 00:12:37.820 --> 00:12:44.380 Some economists concluded therefrom that capital is a category of all human production, that 142 00:12:44.380 --> 00:12:50.100 It is present in every thinkable system of the conduct of production processes, that 143 00:12:50.100 --> 00:12:57.260 is, no less in Robinson Crusoe's involuntary hermitage than in a socialist society, and 144 00:12:57.260 --> 00:13:02.600 that it does not depend upon the practice of monetary calculation. 145 00:13:02.600 --> 00:13:05.340 This is, however, a confusion. 146 00:13:05.340 --> 00:13:11.580 The concept of capital cannot be separated from the context of monetary calculation and 147 00:13:11.580 --> 00:13:17.360 and from the social structure of a market economy in which alone monetary calculation 148 00:13:17.360 --> 00:13:19.400 is possible. 149 00:13:19.400 --> 00:13:25.280 It is a concept which makes no sense outside the conditions of a market economy. 150 00:13:25.280 --> 00:13:31.000 It plays a role exclusively in the plans and records of individuals acting on their own 151 00:13:31.000 --> 00:13:37.200 account in such a system of private ownership of the means of production, and it developed 152 00:13:37.200 --> 00:13:43.140 with the spread of economic calculation in monetary terms. 153 00:13:43.140 --> 00:13:47.720 Modern accountancy is the fruit of a long historical evolution. 154 00:13:47.720 --> 00:13:55.120 Today there is, among businessmen and accountants, unanimity with regard to the meaning of capital. 155 00:13:55.120 --> 00:14:01.120 Capital is the sum of the money equivalent of all assets minus the sum of the money equivalent 156 00:14:01.120 --> 00:14:07.680 of All Liabilities as dedicated at a definite date to the conduct of the operations of a 157 00:14:07.680 --> 00:14:10.200 definite business unit. 158 00:14:10.200 --> 00:14:15.960 It does not matter in what these assets may consist, whether they are pieces of land, 159 00:14:15.960 --> 00:14:23.360 buildings, equipment, tools, goods of any kind and order, claims, receivables, cash, 160 00:14:23.360 --> 00:14:25.040 or whatever. 161 00:14:25.040 --> 00:14:30.960 It is a historical fact that in the early days of accountancy, the tradesmen, the pacemakers 162 00:14:30.960 --> 00:14:36.440 Farmers on the way toward monetary calculation did not for the most part include the money 163 00:14:36.440 --> 00:14:42.580 equivalent of their buildings and land in the notion of capital. It is another historical 164 00:14:42.580 --> 00:14:49.800 fact that agriculturists were slow in applying the capital concept to their land. Even today 165 00:14:49.800 --> 00:14:55.800 in the most advanced countries, only a part of the farmers are familiar with the practice 166 00:14:55.800 --> 00:14:58.200 of Sound Accountancy. 167 00:14:58.200 --> 00:15:03.840 Many farmers acquiesce in a system of bookkeeping that neglects to pay heed to the land and 168 00:15:03.840 --> 00:15:06.760 its contribution to production. 169 00:15:06.760 --> 00:15:11.960 Their book entries do not include the money equivalent of the land, and are consequently 170 00:15:11.960 --> 00:15:15.920 indifferent to changes in this equivalent. 171 00:15:15.920 --> 00:15:21.680 Such accounts are defective because they fail to convey that information which is the sole 172 00:15:21.680 --> 00:15:24.960 aim sought by capital accounting. 173 00:15:24.960 --> 00:15:30.880 They do not indicate whether or not the operation of the farm has brought about a deterioration 174 00:15:30.880 --> 00:15:38.320 in the land's capacity to contribute to production, that is, in its objective use value. 175 00:15:38.320 --> 00:15:44.640 If an erosion of the soil has taken place, their books ignore it, and thus the calculated 176 00:15:44.640 --> 00:15:50.200 income, net yield, is greater than a more complete method of bookkeeping would have 177 00:15:50.200 --> 00:15:52.280 shown. 178 00:15:52.280 --> 00:15:57.400 It is necessary to mention these historical facts because they influence the endeavors 179 00:15:57.400 --> 00:16:03.320 of the economists to construct the notion of real capital. 180 00:16:03.320 --> 00:16:09.640 The economists were and are still today confronted with the superstitious belief that the scarcity 181 00:16:09.640 --> 00:16:15.500 of factors of production could be brushed away, either entirely or at least to some 182 00:16:15.500 --> 00:16:27.980 In order to deal adequately with this fundamental problem of economic policy, they considered 183 00:16:27.980 --> 00:16:34.260 it necessary to construct a notion of real capital, and to oppose it to the notion of 184 00:16:34.260 --> 00:16:40.260 capital as applied by the businessman whose calculation refers to the whole complex of 185 00:16:40.260 --> 00:16:43.040 his acquisitive activities. 186 00:16:43.040 --> 00:16:48.600 At the time the economists embarked upon these endeavors, the place of the money equivalent 187 00:16:48.600 --> 00:16:52.560 of land in the concept of capital was still questioned. 188 00:16:52.560 --> 00:16:58.880 Thus the economists thought it reasonable to disregard land in constructing their notion 189 00:16:58.880 --> 00:17:01.020 of real capital. 190 00:17:01.020 --> 00:17:08.080 They defined real capital as the totality of the produced factors of production available. 191 00:17:08.080 --> 00:17:13.520 Prior splitting discussions were started as to whether inventories of consumers' goods 192 00:17:13.520 --> 00:17:18.360 held by business units are or are not real capital. 193 00:17:18.360 --> 00:17:24.480 But there was almost unanimity that cash is not real capital. 194 00:17:24.480 --> 00:17:31.400 Now this concept of a totality of the produced factors of production is an empty concept. 195 00:17:31.400 --> 00:17:36.780 The money equivalent of the various factors of production owned by a business unit can 196 00:17:36.780 --> 00:17:39.640 can be determined and summed up. 197 00:17:39.640 --> 00:17:45.880 But if we abstract from such an evaluation in money terms, the totality of the produced 198 00:17:45.880 --> 00:17:52.640 factors of production is merely an enumeration of physical quantities of thousands and thousands 199 00:17:52.640 --> 00:17:55.160 of various goods. 200 00:17:55.160 --> 00:17:58.720 Such an inventory is of no use to acting. 201 00:17:58.720 --> 00:18:04.480 It is a description of a part of the universe in terms of technology and topography and 202 00:18:04.480 --> 00:18:11.680 and has no reference whatever to the problems raised by the endeavors to improve human well-being. 203 00:18:11.680 --> 00:18:17.560 We may acquiesce in the terminological usage of calling the produced factors of production 204 00:18:17.560 --> 00:18:25.320 capital goods, but this does not render the concept of real capital any more meaningful. 205 00:18:25.320 --> 00:18:31.120 The worst outgrowth of the use of the mythical notion of real capital was that economists 206 00:18:31.120 --> 00:18:38.680 Scientists began to speculate about a spurious problem called the productivity of real capital. 207 00:18:38.680 --> 00:18:44.880 A factor of production is by definition a thing that is able to contribute to the success 208 00:18:44.880 --> 00:18:47.640 of a process of production. 209 00:18:47.640 --> 00:18:54.200 Its market price reflects entirely the value that people attach to this contribution. 210 00:18:54.200 --> 00:19:00.120 The services expected from the employment of a factor of production, that is its contribution 211 00:19:00.120 --> 00:19:06.840 and to productivity are in market transactions paid according to the full value people attach 212 00:19:06.840 --> 00:19:08.680 to them. 213 00:19:08.680 --> 00:19:13.880 These factors are considered valuable only on account of these services. 214 00:19:13.880 --> 00:19:18.760 These services are the only reason why prices are paid for them. 215 00:19:18.760 --> 00:19:24.320 Once these prices are paid, nothing remains that can bring about further payments on the 216 00:19:24.320 --> 00:19:30.080 are part of anybody as a compensation for additional productive services of these factors 217 00:19:30.080 --> 00:19:32.020 of production. 218 00:19:32.020 --> 00:19:39.620 It was a blunder to explain interest as an income derived from the productivity of capital. 219 00:19:39.620 --> 00:19:45.960 No less detrimental was a second confusion derived from the real capital concept. 220 00:19:45.960 --> 00:19:53.760 People began to meditate upon a concept of social capital as different from private capital. 221 00:19:53.760 --> 00:19:59.200 From the imaginary construction of a socialist economy, they were intent upon defining a 222 00:19:59.200 --> 00:20:06.440 capital concept suitable to the economic activities of the general manager of such a system. 223 00:20:06.440 --> 00:20:11.560 They were right in assuming that this manager would be eager to know whether his conduct 224 00:20:11.560 --> 00:20:17.720 of affairs was successful, namely, from the point of view of his own valuations and the 225 00:20:17.720 --> 00:20:23.640 The Ends aimed at in accordance with these valuations, and how much he could expend for 226 00:20:23.640 --> 00:20:29.340 his ward's consumption without diminishing the available stock of factors of production 227 00:20:29.340 --> 00:20:33.680 and thus impairing the yield of further production. 228 00:20:33.680 --> 00:20:39.460 A socialist government would badly need the concepts of capital and income as a guide 229 00:20:39.460 --> 00:20:41.320 for its operations. 230 00:20:41.320 --> 00:20:47.640 However, in an economic system in which there is no private ownership of the means of production, 231 00:20:47.640 --> 00:21:05.960 In a socialist economy, there are capital goods, but no capital. 232 00:21:05.960 --> 00:21:11.040 The notion of capital makes sense only in the market economy. 233 00:21:11.040 --> 00:21:17.160 It serves the deliberations and calculations of individuals or groups of individuals operating 234 00:21:17.160 --> 00:21:40.760 Capitalism 235 00:21:40.760 --> 00:21:47.080 All civilizations have up to now been based on private ownership of the means of production. 236 00:21:47.080 --> 00:21:53.080 In the past, civilization and private property have been linked together. 237 00:21:53.080 --> 00:21:59.040 Those who maintain that economics is an experimental science, and nevertheless recommend public 238 00:21:59.040 --> 00:22:04.520 control of the means of production, lamentably contradict themselves. 239 00:22:04.520 --> 00:22:10.920 If historical experience could teach us anything, it would be that private property is inextricably 240 00:22:10.920 --> 00:22:13.600 linked with civilization. 241 00:22:13.600 --> 00:22:18.920 There is no experience to the effect that socialism could provide a standard of living 242 00:22:18.920 --> 00:22:22.980 as high as that provided by capitalism. 243 00:22:22.980 --> 00:22:29.000 The system of market economy has never been fully and purely tried, but there prevailed 244 00:22:29.000 --> 00:22:35.200 in the orbit of Western civilization since the Middle Ages by and large a general tendency 245 00:22:35.200 --> 00:22:41.820 toward the abolition of institutions hindering the operation of the market economy. 246 00:22:41.820 --> 00:22:47.780 With the successive progress of this tendency, population figures multiplied, and the masses' 247 00:22:47.780 --> 00:22:53.900 standard of living was raised to an unprecedented and hitherto undreamed-of level. 248 00:22:53.900 --> 00:22:59.780 The average American worker enjoys amenities for which Croesus, Crassus, the Medici and 249 00:22:59.780 --> 00:23:03.580 Louis XIV would have envied him. 250 00:23:03.580 --> 00:23:09.580 The problems raised by the socialist and interventionist critique of the market economy are purely 251 00:23:09.580 --> 00:23:14.940 are generally economic and can be dealt with only in the way in which this book tries to 252 00:23:14.940 --> 00:23:21.020 deal with them, by a thorough analysis of human action and all thinkable systems of 253 00:23:21.020 --> 00:23:23.520 social cooperation. 254 00:23:23.520 --> 00:23:29.820 The psychological problem of why people scorn and disparage capitalism and call everything 255 00:23:29.820 --> 00:23:36.900 they dislike capitalistic and everything they praise socialistic concerns history and must 256 00:23:36.900 --> 00:23:39.420 be left to the historians. 257 00:23:39.420 --> 00:23:44.700 But there are several other issues, which we must stress at this point. 258 00:23:44.700 --> 00:23:51.340 The advocates of totalitarianism consider capitalism a ghastly evil, an awful illness 259 00:23:51.340 --> 00:23:54.200 that came upon mankind. 260 00:23:54.200 --> 00:23:59.740 In the eyes of Marx, it was an inevitable stage of mankind's evolution, but for all 261 00:23:59.740 --> 00:24:02.260 that the worst of evils. 262 00:24:02.260 --> 00:24:08.320 Fortunately, salvation is imminent and will free man forever from this disaster. 263 00:24:08.320 --> 00:24:13.780 In the opinion of other people, it would have been possible to avoid capitalism if only men 264 00:24:13.780 --> 00:24:19.700 had been more moral or more skillful in the choice of economic policies. 265 00:24:19.700 --> 00:24:23.540 All such lucabrations have one feature in common. 266 00:24:23.540 --> 00:24:29.240 They look upon capitalism as if it were an accidental phenomenon, which could be eliminated 267 00:24:29.240 --> 00:24:35.780 without altering conditions that are essential in civilized man's acting and thinking. 268 00:24:35.780 --> 00:24:40.940 As they neglect to bother about the problem of economic calculation, they are not aware 269 00:24:40.940 --> 00:24:47.620 of the consequences which the abolition of the monetary calculus is bound to bring about. 270 00:24:47.620 --> 00:24:53.300 They do not realize that socialist men, for whom arithmetic will be of no use in planning 271 00:24:53.300 --> 00:25:01.220 action, will differ entirely in their mentality and in their mode of thinking from our contemporaries. 272 00:25:01.220 --> 00:25:06.860 In dealing with socialism, we must not overlook this mental transformation, even if we were 273 00:25:06.860 --> 00:25:12.540 ready to pass over in silence the disastrous consequences which would result for man's 274 00:25:12.540 --> 00:25:15.660 material well-being. 275 00:25:15.660 --> 00:25:21.660 The market economy is a man-made mode of acting under the division of labor. 276 00:25:21.660 --> 00:25:27.260 But this does not imply that it is something accidental or artificial and could be replaced 277 00:25:27.260 --> 00:25:29.380 by another mode. 278 00:25:29.380 --> 00:25:34.380 The market economy is the product of a long evolutionary process. 279 00:25:34.380 --> 00:25:40.320 It is the outcome of man's endeavors to adjust his action in the best possible way to the 280 00:25:40.320 --> 00:25:44.180 given conditions of his environment that he cannot alter. 281 00:25:44.180 --> 00:25:51.380 It is the strategy, as it were, by the application of which man has triumphantly progressed from 282 00:25:51.380 --> 00:25:55.020 savagery to civilization. 283 00:25:55.020 --> 00:26:00.780 This mode of argumentation is very popular among present-day authors. 284 00:26:00.780 --> 00:26:05.340 Capitalism was the economic system which brought about the marvelous achievements of the last 285 00:26:05.340 --> 00:26:07.140 200 years. 286 00:26:07.140 --> 00:26:12.780 Therefore it is done for, because what was beneficial in the past cannot be so for our 287 00:26:12.780 --> 00:26:15.740 time and for the future. 288 00:26:15.740 --> 00:26:21.560 Such reasoning is in open contradiction to the principles of experimental cognition. 289 00:26:21.560 --> 00:26:26.560 There is no need at this point to raise again the question of whether or not the science 290 00:26:26.560 --> 00:26:32.640 of human action can adopt the methods of the experimental natural sciences. 291 00:26:32.640 --> 00:26:37.640 Even if it were permissible to answer this question in the affirmative, it would be absurd 292 00:26:37.640 --> 00:26:43.040 to argue as these Aurobure experimentalists do. 293 00:26:43.040 --> 00:26:48.760 Experimental science argues that because A was valid in the past, it will be valid in 294 00:26:48.760 --> 00:26:50.800 the future too. 295 00:26:50.800 --> 00:26:56.800 It must never argue the other way round and assert that because A was valid in the past, 296 00:26:56.800 --> 00:26:59.880 it is not valid in the future. 297 00:26:59.880 --> 00:27:05.840 It is customary to blame the economists for an alleged disregard of history. 298 00:27:05.840 --> 00:27:11.440 The economists, it is contended, consider the market economy as the ideal and eternal 299 00:27:11.440 --> 00:27:14.440 pattern of social cooperation. 300 00:27:14.440 --> 00:27:20.280 They concentrate their studies upon investigating the conditions of the market economy and neglect 301 00:27:20.280 --> 00:27:22.120 and everything else. 302 00:27:22.120 --> 00:27:28.440 They do not bother about the fact that capitalism emerged only in the last 200 years, and that 303 00:27:28.440 --> 00:27:34.700 even today it is restricted to a comparatively small area of the earth's surface and to 304 00:27:34.700 --> 00:27:37.220 a minority of peoples. 305 00:27:37.220 --> 00:27:42.560 There were and are other civilizations with a different mentality and different modes 306 00:27:42.560 --> 00:27:46.220 of conducting economic affairs. 307 00:27:46.220 --> 00:27:53.180 Economicsism is, when seen sub specie eternitatis, a passing phenomenon, an ephemeral stage of 308 00:27:53.180 --> 00:28:00.180 historical evolution, just the transition from pre-capitalistic ages to a post-capitalistic 309 00:28:00.180 --> 00:28:02.060 future. 310 00:28:02.060 --> 00:28:05.700 All these criticisms are spurious. 311 00:28:05.700 --> 00:28:11.340 Economics is, of course, not a branch of history or of any other historical science. 312 00:28:11.340 --> 00:28:17.160 It is the theory of all human action, the general science of the immutable categories 313 00:28:17.160 --> 00:28:23.000 of action, and of their operation under all thinkable special conditions under which man 314 00:28:23.000 --> 00:28:24.680 acts. 315 00:28:24.680 --> 00:28:31.140 It provides, as such, the indispensable mental tool for dealing with historical and ethnographic 316 00:28:31.140 --> 00:28:32.140 problems. 317 00:28:32.140 --> 00:28:38.100 A historian or an ethnographer who neglects in his work to take full advantage of the 318 00:28:38.100 --> 00:28:42.080 and the results of economics is doing a poor job. 319 00:28:42.080 --> 00:28:46.980 In fact, he does not approach the subject matter of his research unaffected by what 320 00:28:46.980 --> 00:28:49.660 he disregards as theory. 321 00:28:49.660 --> 00:28:56.540 He is at every step of his gathering of allegedly unadulterated facts, in arranging these facts 322 00:28:56.540 --> 00:29:02.700 and in his conclusions derived from them, guided by confused and garbled remnants of 323 00:29:02.700 --> 00:29:08.340 perfunctory economic doctrines constructed by botchers in the centuries preceding the 324 00:29:08.340 --> 00:29:15.100 elaboration of an economic science, and long since entirely exploded. 325 00:29:15.100 --> 00:29:20.660 The analysis of the problems of the market society, the only pattern of human action 326 00:29:20.660 --> 00:29:27.540 in which calculation can be applied in planning action, opens access to the analysis of all 327 00:29:27.540 --> 00:29:36.260 and of all economic problems with which historians and ethnographers are confronted. 328 00:29:36.260 --> 00:29:42.660 All non-capitalistic methods of economic management can be studied only under the hypothetical 329 00:29:42.660 --> 00:29:50.620 assumption that in them, too, cardinal numbers can be used in recording past action and planning 330 00:29:50.620 --> 00:29:52.700 future action. 331 00:29:52.700 --> 00:29:58.540 This is why economists place the study of the pure market economy in the center of their 332 00:29:58.540 --> 00:30:00.840 investigations. 333 00:30:00.840 --> 00:30:07.240 It is not the economists who lack the historical sense and ignore the factor of evolution, 334 00:30:07.240 --> 00:30:08.980 but their critics. 335 00:30:08.980 --> 00:30:14.220 The economists have always been fully aware of the fact that the market economy is the 336 00:30:14.220 --> 00:30:19.880 product of a long historical process, which began when the human race emerged from the 337 00:30:19.880 --> 00:30:22.540 ranks of the other primates. 338 00:30:22.540 --> 00:30:29.180 The champions of what is mistakenly called historicism are intent upon undoing the effects 339 00:30:29.180 --> 00:30:31.840 of evolutionary changes. 340 00:30:31.840 --> 00:30:37.800 In their eyes, everything the existence of which they cannot trace back to a remote past 341 00:30:37.800 --> 00:30:44.140 or cannot discover in the customs of some primitive Polynesian tribes is artificial, 342 00:30:44.140 --> 00:30:45.900 even decadent. 343 00:30:45.900 --> 00:30:51.800 They consider the fact that an institution was unknown to savages as a proof of its uselessness 344 00:30:51.800 --> 00:30:58.920 and Rottenness, Marx and Engels and the Prussian professors of the historical school exalted 345 00:30:58.920 --> 00:31:04.680 when they learned that private property is only a historical phenomenon. 346 00:31:04.680 --> 00:31:10.360 For them, this was the proof that their socialist plans were realizable. 347 00:31:10.360 --> 00:31:14.740 The creative genius is at variance with his fellow citizens. 348 00:31:14.740 --> 00:31:21.080 As the pioneer of things new and unheard of, he is in conflict with their uncritical acceptance 349 00:31:21.080 --> 00:31:27.680 of Traditional Standards and Values. In his eyes, the routine of the regular citizen, 350 00:31:27.680 --> 00:31:36.360 the average or common man, is simply stupidity. For him, bourgeois is a synonym of imbecility. 351 00:31:36.360 --> 00:31:42.320 The frustrated artists who take delight in aping the genius's mannerism in order to forget 352 00:31:42.320 --> 00:31:49.200 and to conceal their own impotence adopt this terminology. These bohemians call everything 353 00:31:49.200 --> 00:32:06.760 In the vocabulary of all languages, the words capitalistic and bourgeois signify today all 354 00:32:06.760 --> 00:32:11.080 that is shameful, degrading and infamous. 355 00:32:11.080 --> 00:32:17.100 Contrary wise, people call all that they deem good and praiseworthy socialist. 356 00:32:17.100 --> 00:32:24.640 The regular scheme of arguing is this, a man arbitrarily calls anything he dislikes capitalistic 357 00:32:24.640 --> 00:32:29.820 and then deduces from this appellation that the thing is bad. 358 00:32:29.820 --> 00:32:32.660 This semantic confusion goes still further. 359 00:32:32.660 --> 00:32:38.780 Sismondi, the Romantic eulogists of the Middle Ages, all socialist authors, the Prussian 360 00:32:38.780 --> 00:32:45.580 Historical School and the American institutionalists, taught that capitalism is an unfair system 361 00:32:45.580 --> 00:32:51.080 Capitalism of Exploitation Sacrificing the Vital Interests of the Majority of People 362 00:32:51.080 --> 00:32:55.480 for the Sole Benefit of a Small Group of Profiteers. 363 00:32:55.480 --> 00:32:59.680 No decent man can advocate this mad system. 364 00:32:59.680 --> 00:33:05.280 The economists who contend that capitalism is beneficial not only to a small group but 365 00:33:05.280 --> 00:33:09.220 to everyone are sycophants of the bourgeoisie. 366 00:33:09.220 --> 00:33:14.780 They are either too dull to recognize the truth or bribed apologists of the selfish 367 00:33:14.780 --> 00:33:29.780 Capitalism, in the terminology of these foes of liberty, democracy and the market economy, means the economic policy advocated by big business and millionaires. 368 00:33:29.780 --> 00:33:42.780 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, 369 00:33:42.780 --> 00:33:49.220 And they say, contemporary capitalism stands for protectionism, cartels and the abolition 370 00:33:49.220 --> 00:33:51.100 of competition. 371 00:33:51.100 --> 00:33:57.180 It is true, they add, that at a definite period of the past, British capitalism favored free 372 00:33:57.180 --> 00:34:02.440 trade both on the domestic market and in international relations. 373 00:34:02.440 --> 00:34:08.860 This was because at that time the class interests of the British bourgeoisie were best served 374 00:34:08.860 --> 00:34:11.540 by such a policy. 375 00:34:11.540 --> 00:34:18.860 has, however, changed, and today, capitalism, that is, the policy advocated by the exploiters, 376 00:34:18.860 --> 00:34:21.900 aims at another policy. 377 00:34:21.900 --> 00:34:26.960 It has already been pointed out that this doctrine badly distorts both economic theory 378 00:34:26.960 --> 00:34:29.600 and historical facts. 379 00:34:29.600 --> 00:34:35.320 There were, and there will always be, people whose selfish ambitions demand protection for 380 00:34:35.320 --> 00:34:42.840 for vested interests and who hope to derive advantage from measures restricting competition. 381 00:34:42.840 --> 00:34:47.480 Entrepreneurs grown old and tired and the decadent heirs of people who succeeded in 382 00:34:47.480 --> 00:34:55.200 the past dislike the agile parvenues who challenge their wealth and their eminent social position. 383 00:34:55.200 --> 00:35:00.560 Whether or not their desire to make economic conditions rigid and to hinder improvements 384 00:35:00.560 --> 00:35:05.400 can be realized depends on the climate of public opinion. 385 00:35:05.400 --> 00:35:10.920 The ideological structure of the 19th century, as fashioned by the prestige of the teachings 386 00:35:10.920 --> 00:35:15.520 of the liberal economists, rendered such wishes vain. 387 00:35:15.520 --> 00:35:20.600 When the technological improvements of the age of liberalism revolutionized the traditional 388 00:35:20.600 --> 00:35:26.440 methods of production, transportation and marketing, those whose vested interests were 389 00:35:26.440 --> 00:35:31.900 for Hurt did not ask for protection because it would have been a hopeless venture. 390 00:35:31.900 --> 00:35:37.400 But today it is deemed a legitimate task of government to prevent an efficient man from 391 00:35:37.400 --> 00:35:40.480 competing with the less efficient. 392 00:35:40.480 --> 00:35:46.820 Public opinion sympathizes with the demands of powerful pressure groups to stop progress. 393 00:35:46.820 --> 00:35:52.160 The butter producers are with considerable success fighting against margarine and the 394 00:35:52.160 --> 00:35:55.120 musicians against recorded music. 395 00:35:55.120 --> 00:36:01.000 The labor unions are deadly foes of every new machine. It is not amazing that in such 396 00:36:01.000 --> 00:36:08.400 an environment, less efficient businessmen aim at protection against more efficient competitors. 397 00:36:08.400 --> 00:36:15.000 It would be correct to describe this state of affairs in this way. Today, many or some 398 00:36:15.000 --> 00:36:20.760 groups of business are no longer liberal. They do not advocate a pure market economy 399 00:36:20.760 --> 00:36:26.280 Money and Free Enterprise, but on the contrary are asking for various measures of government 400 00:36:26.280 --> 00:36:28.800 interference with business. 401 00:36:28.800 --> 00:36:34.280 But it is entirely misleading to say that the meaning of the concept of capitalism has 402 00:36:34.280 --> 00:36:41.480 changed and that mature capitalism, as the Americans call it, or late capitalism, as 403 00:36:41.480 --> 00:36:47.080 the Marxians call it, is characterized by restrictive policies to protect the vested 404 00:36:47.080 --> 00:36:54.480 and interests of wage earners, farmers, shopkeepers, artisans, and sometimes also of capitalists 405 00:36:54.480 --> 00:36:56.180 and entrepreneurs. 406 00:36:56.180 --> 00:37:01.800 The concept of capitalism is, as an economic concept, immutable. 407 00:37:01.800 --> 00:37:06.380 If it means anything, it means market economy. 408 00:37:06.380 --> 00:37:12.400 One deprives oneself of the semantic tools to deal adequately with the problems of contemporary 409 00:37:12.400 --> 00:37:19.120 History and Economic Policies, if one acquiesces in a different terminology. 410 00:37:19.120 --> 00:37:25.520 This faulty nomenclature becomes understandable only if we realize that the pseudo-economists 411 00:37:25.520 --> 00:37:31.600 and the politicians who apply it want to prevent people from knowing what the market economy 412 00:37:31.600 --> 00:37:33.560 really is. 413 00:37:33.560 --> 00:37:38.780 They want to make people believe that all the repulsive manifestations of restrictive 414 00:37:38.780 --> 00:37:42.780 of Government Policies are produced by Capitalism. 415 00:37:42.780 --> 00:37:47.780 4. The Sovereignty of the Consumers 416 00:37:47.780 --> 00:37:55.780 The direction of all economic affairs is in the market society a task of the entrepreneurs. 417 00:37:55.780 --> 00:38:01.780 Theirs is the control of production. They are at the helm and steer the ship. 418 00:38:01.780 --> 00:38:07.780 A superficial observer would believe that they are supreme, but they are not. 419 00:38:07.780 --> 00:38:12.780 They are bound to obey unconditionally the captain's orders. 420 00:38:12.780 --> 00:38:15.540 The captain is the consumer. 421 00:38:15.540 --> 00:38:20.500 Neither the entrepreneurs nor the farmers nor the capitalists determine what has to 422 00:38:20.500 --> 00:38:22.100 be produced. 423 00:38:22.100 --> 00:38:24.620 The consumers do that. 424 00:38:24.620 --> 00:38:29.540 If a businessman does not strictly obey the orders of the public as they are conveyed 425 00:38:29.540 --> 00:38:35.580 to him by the structure of market prices, he suffers losses, he goes bankrupt, and is 426 00:38:35.580 --> 00:38:42.340 is thus removed from his eminent position at the helm. Other men who did better in satisfying 427 00:38:42.340 --> 00:38:48.960 the demand of the consumers replace him. The consumers patronize those shops in which they 428 00:38:48.960 --> 00:38:55.460 can buy what they want at the cheapest price. Their buying and their abstention from buying 429 00:38:55.460 --> 00:39:02.020 decides who should own and run the plants and the land. They make poor people rich and 430 00:39:02.020 --> 00:39:04.100 and Rich People Poor. 431 00:39:04.100 --> 00:39:10.580 They determine precisely what should be produced, in what quality and in what quantities. 432 00:39:10.580 --> 00:39:17.700 They are merciless, egoistic bosses, full of whims and fancies, changeable and unpredictable. 433 00:39:17.700 --> 00:39:22.260 For them, nothing counts other than their own satisfaction. 434 00:39:22.260 --> 00:39:26.860 They do not care a whit for past merit and vested interests. 435 00:39:26.860 --> 00:39:31.540 If something is offered to them that they like better or that is cheaper, they desert 436 00:39:31.540 --> 00:39:37.900 and their old purveyors. In their capacity as buyers and consumers, they are hard-hearted 437 00:39:37.900 --> 00:39:45.260 and callous, without consideration for other people. Only the sellers of goods and services 438 00:39:45.260 --> 00:39:51.820 of the first order are in direct contact with the consumers and directly depend on their 439 00:39:51.820 --> 00:39:58.180 orders. But they transmit the orders received from the public to all those producing goods 440 00:39:58.180 --> 00:40:04.220 Business and Services of the Higher Orders For the manufacturers of consumers' goods, 441 00:40:04.220 --> 00:40:09.360 the retailers, the service trades and the professions are forced to acquire what they 442 00:40:09.360 --> 00:40:14.660 need for the conduct of their own business from those purveyors who offer them at the 443 00:40:14.660 --> 00:40:16.740 cheapest price. 444 00:40:16.740 --> 00:40:22.140 If they were not intent upon buying in the cheapest market and arranging their processing 445 00:40:22.140 --> 00:40:27.440 of the factors of production so as to fill the demands of the consumers in the best and 446 00:40:27.440 --> 00:40:32.080 In the cheapest way, they would be forced to go out of business. 447 00:40:32.080 --> 00:40:37.640 More efficient men who succeeded better in buying and processing the factors of production 448 00:40:37.640 --> 00:40:39.800 would supplant them. 449 00:40:39.800 --> 00:40:45.580 The consumer is in a position to give free rein to his caprices and fancies. 450 00:40:45.580 --> 00:40:50.440 The entrepreneurs, capitalists and farmers have their hands tied. 451 00:40:50.440 --> 00:40:56.480 They are bound to comply in their operations with the orders of the buying public. 452 00:40:56.480 --> 00:41:03.360 Any deviation from the lines prescribed by the demand of the consumers debits their account. 453 00:41:03.360 --> 00:41:09.360 The slightest deviation, whether willfully brought about or caused by error, bad judgment 454 00:41:09.360 --> 00:41:14.880 or inefficiency, restricts their profits or makes them disappear. 455 00:41:14.880 --> 00:41:21.280 A more serious deviation results in losses and thus impairs or entirely absorbs their 456 00:41:21.280 --> 00:41:22.280 wealth. 457 00:41:22.280 --> 00:41:28.480 Capitalists, entrepreneurs and landowners can only preserve and increase their wealth 458 00:41:28.480 --> 00:41:32.420 by filling best the orders of the consumers. 459 00:41:32.420 --> 00:41:37.840 They are not free to spend money which the consumers are not prepared to refund to them 460 00:41:37.840 --> 00:41:40.860 in paying more for the products. 461 00:41:40.860 --> 00:41:46.000 In the conduct of their business affairs, they must be unfeeling and stony-hearted, 462 00:41:46.000 --> 00:41:52.960 Because the consumers, their bosses, are themselves unfeeling and stony-hearted. 463 00:41:52.960 --> 00:41:58.440 The consumers determine ultimately not only the prices of the consumers' goods, but no 464 00:41:58.440 --> 00:42:02.560 less the prices of all factors of production. 465 00:42:02.560 --> 00:42:07.200 They determine the income of every member of the market economy. 466 00:42:07.200 --> 00:42:13.720 The consumers, not the entrepreneurs, pay ultimately the wages earned by every worker. 467 00:42:13.720 --> 00:42:17.620 The Glamorous Movie Star as well as The Char Woman. 468 00:42:17.620 --> 00:42:23.780 With every penny spent, the consumers determine the direction of all production processes 469 00:42:23.780 --> 00:42:29.760 and the minutest details of the organization of all business activities. 470 00:42:29.760 --> 00:42:35.100 This state of affairs has been described by calling the market a democracy in which every 471 00:42:35.100 --> 00:42:38.720 penny gives a right to cast a ballot. 472 00:42:38.720 --> 00:42:44.720 would be more correct to say that a democratic constitution is a scheme to assign to the 473 00:42:44.720 --> 00:42:50.480 citizens in the conduct of government the same supremacy the market economy gives them 474 00:42:50.480 --> 00:42:53.040 in their capacity as consumers. 475 00:42:53.040 --> 00:42:56.960 However, the comparison is imperfect. 476 00:42:56.960 --> 00:43:02.840 In the political democracy, only the votes cast for the majority candidate or the majority 477 00:43:02.840 --> 00:43:07.360 plan are effective in shaping the course of affairs. 478 00:43:07.360 --> 00:43:12.800 The votes polled by the minority do not directly influence policies. 479 00:43:12.800 --> 00:43:17.160 But on the market, no vote is cast in vain. 480 00:43:17.160 --> 00:43:22.380 Every penny spent has the power to work upon the production processes. 481 00:43:22.380 --> 00:43:28.120 The publishers cater not only to the majority by publishing detective stories, but also 482 00:43:28.120 --> 00:43:33.420 to the minority, reading lyrical poetry and philosophical tracts. 483 00:43:33.420 --> 00:43:40.220 The bakeries bake bread not only for healthy people but also for the sick on special diets. 484 00:43:40.220 --> 00:43:45.780 The decision of a consumer is carried into effect with the full momentum he gives it 485 00:43:45.780 --> 00:43:50.700 through his readiness to spend a definite amount of money. 486 00:43:50.700 --> 00:43:56.480 It is true in the market the various consumers have not the same voting right. 487 00:43:56.480 --> 00:44:00.140 The rich cast more votes than the poorer citizens. 488 00:44:00.140 --> 00:44:06.000 But this inequality is itself the outcome of a previous voting process. 489 00:44:06.000 --> 00:44:12.260 To be rich in a pure market economy is the outcome of success in filling best the demands 490 00:44:12.260 --> 00:44:14.140 of the consumers. 491 00:44:14.140 --> 00:44:20.100 A wealthy man can preserve his wealth only by continuing to serve the consumers in the 492 00:44:20.100 --> 00:44:22.020 most efficient way. 493 00:44:22.020 --> 00:44:28.540 Thus, the owners of the material factors of production and the entrepreneurs are virtually 494 00:44:28.540 --> 00:44:37.700 Mandatories or Trustees of the Consumers, revocably appointed by an election daily repeated. 495 00:44:37.700 --> 00:44:43.420 There is in the operation of a market economy only one instance in which the proprietary 496 00:44:43.420 --> 00:44:49.680 class is not completely subject to the supremacy of the consumers. 497 00:44:49.680 --> 00:44:55.420 Monopoly prices are an infringement of the sway of the consumers. 498 00:44:55.420 --> 00:45:01.220 The Metaphorical Employment of the Terminology of Political Rule 499 00:45:01.220 --> 00:45:07.580 The orders given by businessmen in the conduct of their affairs can be heard and seen. 500 00:45:07.580 --> 00:45:10.940 Nobody can fail to become aware of them. 501 00:45:10.940 --> 00:45:15.420 Even messenger boys know that the boss runs things around the shop. 502 00:45:15.420 --> 00:45:21.900 But it requires a little more brains to notice the entrepreneur's dependence on the market. 503 00:45:21.900 --> 00:45:27.700 The orders given by the consumers are not tangible. They cannot be perceived by the 504 00:45:27.700 --> 00:45:33.780 senses. Many people lack the discernment to take cognizance of them. They fall victim 505 00:45:33.780 --> 00:45:40.300 to the delusion that entrepreneurs and capitalists are irresponsible autocrats whom nobody calls 506 00:45:40.300 --> 00:45:43.660 to account for their actions. 507 00:45:43.660 --> 00:45:48.860 The outgrowth of this mentality is the practice of applying to business the terminology of 508 00:45:48.860 --> 00:45:53.140 of Political Rule and Military Action. 509 00:45:53.140 --> 00:45:56.740 Successful businessmen are called kings or dukes. 510 00:45:56.740 --> 00:46:01.420 They're enterprises and empire, a kingdom or a dukedom. 511 00:46:01.420 --> 00:46:06.700 If this idiom were only a harmless metaphor, there would be no need to criticize it. 512 00:46:06.700 --> 00:46:14.300 But it is the source of serious errors which play a sinister role in contemporary doctrines. 513 00:46:14.300 --> 00:46:18.120 Government is an apparatus of compulsion and coercion. 514 00:46:18.120 --> 00:46:24.880 It has the power to obtain obedience by force. The political sovereign, be it an autocrat 515 00:46:24.880 --> 00:46:31.640 or the people as represented by its mandataries, has power to crush rebellions as long as his 516 00:46:31.640 --> 00:46:39.120 ideological might subsists. The position which entrepreneurs and capitalists occupy in the 517 00:46:39.120 --> 00:46:46.400 market economy is of a different character. A chocolate king has no power over the consumers, 518 00:47:16.400 --> 00:47:20.720 Capitalists are ready to restore to him and buying the product. 519 00:47:20.720 --> 00:47:26.320 Still less do the capitalists and entrepreneurs exercise political control. 520 00:47:26.320 --> 00:47:31.240 The civilized nations of Europe and America were long controlled by governments which 521 00:47:31.240 --> 00:47:35.840 did not considerably hinder the operation of the market economy. 522 00:47:35.840 --> 00:47:42.600 Today, many of these countries, too, are dominated by parties which are hostile to capitalism, 523 00:47:42.600 --> 00:47:48.000 and believe that every harm inflicted upon capitalists and entrepreneurs is extremely 524 00:47:48.000 --> 00:47:51.140 beneficial to the people. 525 00:47:51.140 --> 00:47:57.220 In an unhampered market economy, the capitalists and entrepreneurs cannot expect an advantage 526 00:47:57.220 --> 00:48:01.060 from bribing officeholders and politicians. 527 00:48:01.060 --> 00:48:07.040 On the other hand, the officeholders and politicians are not in a position to blackmail businessmen 528 00:48:07.040 --> 00:48:10.100 and to extort graft from them. 529 00:48:10.100 --> 00:48:15.540 In an interventionist country, powerful pressure groups are intent upon securing for their 530 00:48:15.540 --> 00:48:21.600 members privileges at the expense of weaker groups and individuals. 531 00:48:21.600 --> 00:48:26.900 Then the businessmen may deem it expedient to protect themselves against discriminatory 532 00:48:26.900 --> 00:48:33.100 acts on the part of the executive officers and the legislature by bribery. 533 00:48:33.100 --> 00:48:38.320 Once used to such methods, they may even try to employ them in order to secure privileges 534 00:48:38.320 --> 00:48:40.380 is for themselves. 535 00:48:40.380 --> 00:48:46.580 At any rate, the fact that businessmen corrupt politicians and officeholders and are blackmailed 536 00:48:46.580 --> 00:48:52.440 by such people does not indicate that they are supreme and rule the countries. 537 00:48:52.440 --> 00:48:59.520 It is those ruled and not the rulers who bribe and are paying tribute. 538 00:48:59.520 --> 00:49:04.380 The majority of businessmen are prevented from resorting to bribery either by their 539 00:49:04.380 --> 00:49:07.520 moral convictions or by fear. 540 00:49:07.520 --> 00:49:13.240 They venture to preserve the free enterprise system and to defend themselves against discrimination 541 00:49:13.240 --> 00:49:16.320 by legitimate democratic methods. 542 00:49:16.320 --> 00:49:21.280 They form trade associations and try to influence public opinion. 543 00:49:21.280 --> 00:49:26.800 The results of these endeavors have been rather poor, as is evidenced by the triumphant advance 544 00:49:26.800 --> 00:49:29.880 of anti-capitalist policies. 545 00:49:29.880 --> 00:49:36.160 The best that they have been able to achieve is to delay for a while some especially obnoxious 546 00:49:36.160 --> 00:50:05.460 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.