WEBVTT NOTE XXIV. Harmony and Conflict of Interests (continued) 1 00:00:00.000 --> 00:00:07.040 3. The Harmony of the Rightly Understood Interests 2 00:00:07.040 --> 00:00:13.200 From time immemorial, men have prattled about the blissful conditions their ancestors enjoyed 3 00:00:13.200 --> 00:00:19.920 in the original state of nature. From old myths, fables and poems, the image of this 4 00:00:19.920 --> 00:00:27.140 primitive happiness passed into many popular philosophies of the 17th and 18th centuries. 5 00:00:27.140 --> 00:00:33.900 In their language, the term natural denoted what was good and beneficial in human affairs, 6 00:00:33.900 --> 00:00:38.580 while the term civilization had the connotation of opprobrium. 7 00:00:38.580 --> 00:00:44.040 The fall of man was seen in the deviation from the primitive conditions of ages in which 8 00:00:44.040 --> 00:00:49.000 there was but little difference between man and other animals. 9 00:00:49.000 --> 00:00:54.660 At that time, these Romantic eulogists of the past asserted, there were no conflicts 10 00:00:54.660 --> 00:00:56.500 between men. 11 00:00:56.500 --> 00:01:00.580 Peace was undisturbed in the Garden of Eden. 12 00:01:00.580 --> 00:01:04.660 Yet nature does not generate peace and goodwill. 13 00:01:04.660 --> 00:01:10.260 The characteristic mark of the state of nature is a reconcilable conflict. 14 00:01:10.260 --> 00:01:14.420 Each specimen is the rival of all other specimens. 15 00:01:14.420 --> 00:01:19.740 The means of subsistence are scarce and do not grant survival to all. 16 00:01:19.740 --> 00:01:22.900 The conflicts can never disappear. 17 00:01:22.900 --> 00:01:29.220 If a band of men, united with the object of defeating rival bands, succeeds in annihilating 18 00:01:29.220 --> 00:01:36.100 its foes, new antagonisms arise among the victors over the distribution of the booty. 19 00:01:36.100 --> 00:01:41.540 The source of the conflicts is always the fact that each man's portion curtails the 20 00:01:41.540 --> 00:01:44.400 portions of all other men. 21 00:01:44.400 --> 00:01:49.940 This is a dilemma that does not allow of any peaceful solution. 22 00:01:49.940 --> 00:01:55.380 What makes friendly relations between human beings possible is the higher productivity 23 00:01:55.380 --> 00:02:02.140 of the division of labor. It removes the natural conflict of interests. For where there is 24 00:02:02.140 --> 00:02:08.140 division of labor, there is no longer question of the distribution of a supply not capable 25 00:02:08.140 --> 00:02:15.380 of enlargement. Thanks to the higher productivity of labor performed under the division of tasks, 26 00:02:15.380 --> 00:02:22.340 The supply of goods multiplies. A preeminent common interest, the preservation and further 27 00:02:22.340 --> 00:02:31.340 intensification of social cooperation becomes paramount and obliterates all essential collisions. 28 00:02:31.340 --> 00:02:37.340 Catalactic competition is substituted for biological competition. It makes for harmony 29 00:02:37.340 --> 00:02:44.540 of the interests of all members of society. The very condition from which the irreconcilable 30 00:02:44.540 --> 00:02:51.160 Conflicts of Biological Competition Arise, namely the fact that all people by and large 31 00:02:51.160 --> 00:02:59.560 strive after the same things, is transformed into a factor making for harmony of interests. 32 00:02:59.560 --> 00:03:06.320 Because many people or even all people want bread, clothes, shoes and cars, large-scale 33 00:03:06.320 --> 00:03:11.880 production of these goods becomes feasible and reduces the costs of production to such 34 00:03:11.880 --> 00:03:16.380 Research and Extent that they are accessible at low prices. 35 00:03:16.380 --> 00:03:21.920 The fact that my fellow man wants to acquire shoes as I do does not make it harder for 36 00:03:21.920 --> 00:03:24.960 me to get shoes, but easier. 37 00:03:24.960 --> 00:03:30.480 What enhances the price of shoes is the fact that nature does not provide a more ample 38 00:03:30.480 --> 00:03:36.880 supply of leather and other raw materials required, and that one must submit to the 39 00:03:36.880 --> 00:03:43.400 and the disutility of labor in order to transform these raw materials into shoes. 40 00:03:43.400 --> 00:03:51.120 The catalactic competition of those who, like me, are eager to have shoes, makes shoes cheaper, 41 00:03:51.120 --> 00:03:53.380 not more expensive. 42 00:03:53.380 --> 00:03:58.280 This is the meaning of the theorem of the harmony of the rightly understood interests 43 00:03:58.280 --> 00:04:01.720 of all members of the market society. 44 00:04:01.720 --> 00:04:08.180 For rightly understood interests, we may as well say, interests in the long run. 45 00:04:08.180 --> 00:04:13.760 When the classical economists made this statement, they were trying to stress two points. 46 00:04:13.760 --> 00:04:19.540 First, that everybody is interested in the preservation of the social division of labor, 47 00:04:19.540 --> 00:04:23.760 the system that multiplies the productivity of human efforts. 48 00:04:23.760 --> 00:04:30.760 Second, that in the market society, consumer's demand ultimately directs all production activities. 49 00:04:31.720 --> 00:04:39.160 The fact that not all human wants can be satisfied is not due to inappropriate social institutions 50 00:04:39.160 --> 00:04:43.240 or to deficiencies of the system of the market economy. 51 00:04:43.240 --> 00:04:46.760 It is a natural condition of human life. 52 00:04:46.760 --> 00:04:53.440 The belief that nature bestows upon man inexhaustible riches and that misery is an outgrowth of 53 00:04:53.440 --> 00:04:59.040 man's failure to organize the good society is entirely fallacious. 54 00:04:59.040 --> 00:05:05.880 The state of nature, which the reformers and utopians depict as paradisiac, was in fact 55 00:05:05.880 --> 00:05:09.480 a state of extreme poverty and distress. 56 00:05:09.480 --> 00:05:13.720 Poverty, says Bentham, is not the work of the laws. 57 00:05:13.720 --> 00:05:17.640 It is the primitive condition of the human race. 58 00:05:17.640 --> 00:05:22.560 Even those at the base of the social pyramid are much better off than they would have been 59 00:05:22.560 --> 00:05:25.880 in the absence of social cooperation. 60 00:05:25.880 --> 00:05:31.280 They too are benefited by the operation of the market economy and participate in the 61 00:05:31.280 --> 00:05:35.000 advantages of civilized society. 62 00:05:35.000 --> 00:05:41.800 The 19th century reformers did not drop the cherished fable of the original earthly paradise. 63 00:05:41.800 --> 00:05:47.280 Frederick Engels incorporated it in the Marxian account of mankind's social evolution. 64 00:05:47.280 --> 00:05:53.680 However, they no longer set up the bliss of the Golden Age as a pattern for social and 65 00:05:53.680 --> 00:05:56.280 and Economic Reconstruction. 66 00:05:56.280 --> 00:06:03.040 They contrast the alleged depravity of capitalism with the ideal happiness man will enjoy in 67 00:06:03.040 --> 00:06:06.180 the socialist elysium of the future. 68 00:06:06.180 --> 00:06:12.000 The socialist mode of production will abolish the fetters by means of which capitalism checks 69 00:06:12.000 --> 00:06:17.280 the development of the productive forces, and will increase the productivity of labor 70 00:06:17.280 --> 00:06:20.540 and wealth beyond all measure. 71 00:06:20.540 --> 00:06:25.500 The preservation of free enterprise and the private ownership of the means of production 72 00:06:25.500 --> 00:06:31.940 benefits exclusively the small minority of parasitic exploiters and harms the immense 73 00:06:31.940 --> 00:06:34.740 majority of working men. 74 00:06:34.740 --> 00:06:40.340 Hence there prevails within the frame of the market economy an irreconcilable conflict 75 00:06:40.340 --> 00:06:44.940 between the interests of capital and those of labor. 76 00:06:44.940 --> 00:06:50.980 This class struggle can disappear only when a fair system of social organization, either 77 00:06:50.980 --> 00:06:57.580 socialism or interventionism, is substituted for the manifestly unfair capitalist mode 78 00:06:57.580 --> 00:06:59.820 of production. 79 00:06:59.820 --> 00:07:05.160 Such is the almost universally accepted social philosophy of our age. 80 00:07:05.160 --> 00:07:11.200 It was not created by Marx, although it owes its popularity mainly to the writings of Marx 81 00:07:11.200 --> 00:07:13.100 and the Marxians. 82 00:07:13.100 --> 00:07:19.440 It is today endorsed not only by the Marxians, but no less by most of those parties who emphatically 83 00:07:19.440 --> 00:07:25.260 declare their anti-Marxism and pay lip service to free enterprise. 84 00:07:25.260 --> 00:07:31.760 It is the official social philosophy of Roman Catholicism as well as of Anglo-Catholicism. 85 00:07:31.760 --> 00:07:37.100 It is supported by many eminent champions of the various Protestant denominations and 86 00:07:37.100 --> 00:07:39.980 of the Orthodox Oriental Church. 87 00:07:39.980 --> 00:07:45.660 It is an essential part of the teachings of Italian fascism and of German Nazism and of 88 00:07:45.660 --> 00:07:49.280 all varieties of interventionist doctrines. 89 00:07:49.280 --> 00:07:54.740 It was the ideology of the socialpolitik of the Hohenzollerns in Germany and the French 90 00:07:54.740 --> 00:08:00.440 royalists aiming at the restoration of the house of Bourbon-Orléans, of the New Deal 91 00:08:00.440 --> 00:08:06.720 of President Roosevelt and of the nationalists of Asia and Latin America. 92 00:08:06.720 --> 00:08:12.620 The antagonisms between these parties and factions refer to accidental issues, such 93 00:08:12.620 --> 00:08:19.400 as religious dogma, constitutional institutions, foreign policy, and, first of all, to the 94 00:08:19.400 --> 00:08:25.400 characteristic features of the social system that is to be substituted for capitalism. 95 00:08:25.400 --> 00:08:30.560 But they all agree in the fundamental thesis that the very existence of the capitalist 96 00:08:30.560 --> 00:08:38.320 system harms the vital interests of the immense majority of workers, artisans and small farmers, 97 00:08:38.320 --> 00:08:45.000 and they all ask in the name of social justice for the abolition of capitalism. 98 00:08:45.000 --> 00:08:50.920 All socialist and interventionist authors and politicians base their analysis and critique 99 00:08:50.920 --> 00:08:55.080 of the market economy on two fundamental errors. 100 00:08:55.080 --> 00:09:01.820 First, they fail to recognize the speculative character inherent in all endeavors to provide 101 00:09:01.820 --> 00:09:07.760 for future want satisfaction, that is, in all human action. 102 00:09:07.760 --> 00:09:13.560 They naively assume that there cannot exist any doubt about the measures to be applied 103 00:09:13.560 --> 00:09:17.760 for the best possible provisioning of the consumers. 104 00:09:17.760 --> 00:09:23.280 In a socialist commonwealth, there will be no need for the production czar, or the central 105 00:09:23.280 --> 00:09:26.880 The Federal Board of Production Management to speculate. 106 00:09:26.880 --> 00:09:32.600 He will simply have to resort to those measures which are beneficial to his wards. 107 00:09:32.600 --> 00:09:38.180 The advocates of a planned economy have never conceived that the task is to provide for 108 00:09:38.180 --> 00:09:44.520 future wants, which may differ from today's wants, and to employ the various available 109 00:09:44.520 --> 00:09:50.600 factors of production in the most expedient way for the best possible satisfaction of 110 00:09:50.600 --> 00:10:20.600 The Theory of Money and Credit The Theory of Money and Credit 111 00:10:20.600 --> 00:10:24.600 The problem must not be confused with the technological problem. 112 00:10:24.600 --> 00:10:32.600 Technological knowledge can merely tell us what could be achieved under the present state of our scientific insight. 113 00:10:32.600 --> 00:10:38.600 It does not answer the questions as to what should be produced and in what quantities, 114 00:10:38.600 --> 00:10:44.600 and which of the multitude of technological processes available should be chosen. 115 00:10:44.600 --> 00:10:49.600 Deluded by their failure to grasp this essential matter, 116 00:10:49.600 --> 00:10:55.080 The advocates of a planned society believe that the production czar will never air in 117 00:10:55.080 --> 00:10:57.260 his decisions. 118 00:10:57.260 --> 00:11:03.360 In the market economy, the entrepreneurs and capitalists cannot avoid committing serious 119 00:11:03.360 --> 00:11:09.200 blunders because they know neither what the consumers want nor what their competitors 120 00:11:09.200 --> 00:11:10.840 are doing. 121 00:11:10.840 --> 00:11:16.860 The general manager of a socialist state will be infallible because he alone will have the 122 00:11:16.860 --> 00:11:23.500 The Power to Determine What Should be Produced and How, and Because No Action of Other People 123 00:11:23.500 --> 00:11:26.020 Will Cross His Plans. 124 00:11:26.020 --> 00:11:31.320 The second fundamental error involved in the socialist's critique of the market economy 125 00:11:31.320 --> 00:11:34.960 stems from their faulty theory of wages. 126 00:11:34.960 --> 00:11:41.160 They have failed to realize that wages are the price paid for the wage earner's achievement, 127 00:11:41.160 --> 00:11:47.320 That is, for the contribution of his efforts to the processing of the good concerned, or, 128 00:11:47.320 --> 00:11:53.940 as people say, for the value which his services add to the value of the materials. 129 00:11:53.940 --> 00:12:00.080 No matter whether there are time wages or piecework wages, the employer always buys 130 00:12:00.080 --> 00:12:04.900 the worker's performance and services, not his time. 131 00:12:04.900 --> 00:12:11.140 It is therefore not true that in the unhampered market economy the worker has no personal 132 00:12:11.140 --> 00:12:20.700 The Socialists are badly mistaken in asserting that those paid a certain rate per hour, per 133 00:12:20.700 --> 00:12:27.860 day, per week, per month or per year are not impelled by their own selfish interests when 134 00:12:27.860 --> 00:12:30.220 they work efficiently. 135 00:12:30.220 --> 00:12:35.940 It is not lofty ideals and the sense of duty that deter a worker paid according to the 136 00:12:35.940 --> 00:12:42.380 The length of time worked, from carelessness and loafing around the shop, but very substantial 137 00:12:42.380 --> 00:12:43.820 arguments. 138 00:12:43.820 --> 00:12:50.460 He who works more and better gets higher pay, and he who wants to earn more must increase 139 00:12:50.460 --> 00:12:55.080 the quantity and improve the quality of his performance. 140 00:12:55.080 --> 00:13:01.220 The hard-boiled employers are not so gullible as to let themselves be cheated by slothful 141 00:13:01.220 --> 00:13:02.420 employees. 142 00:13:02.420 --> 00:13:09.020 They are not so negligent as those governments who pay salaries to hosts of loafing bureaucrats. 143 00:13:09.020 --> 00:13:14.860 Neither are the wage earners so stupid as to not know that laziness and inefficiency 144 00:13:14.860 --> 00:13:18.700 are heavily penalized on the labor market. 145 00:13:18.700 --> 00:13:24.620 On the shaky ground of their misconception of the catallactic nature of wages, the socialist 146 00:13:24.620 --> 00:13:30.340 authors have advanced fantastic fables about the increase in the productivity of labor 147 00:13:30.340 --> 00:13:34.500 to be expected from the realization of their plans. 148 00:13:34.500 --> 00:13:40.380 Under capitalism, they say, the worker's zeal is seriously impaired, because he is aware 149 00:13:40.380 --> 00:13:46.180 of the fact that he himself does not reap the fruits of his labor, and that his toil 150 00:13:46.180 --> 00:13:52.820 and trouble enrich merely his employer, this parasitic and idle exploiter. 151 00:13:52.820 --> 00:13:58.320 But under socialism, every worker will know that he works for the benefit of society, 152 00:13:58.320 --> 00:14:01.160 of which he himself is a part. 153 00:14:01.160 --> 00:14:06.400 This knowledge will provide him with the most powerful incentive to do his best. 154 00:14:06.400 --> 00:14:12.920 An enormous increase in the productivity of labor, and thereby in wealth, will result. 155 00:14:12.920 --> 00:14:18.500 However, the identification of the interests of each worker and those of the socialist 156 00:14:18.500 --> 00:14:25.280 commonwealth is a purely legalistic and formalistic fiction which has nothing to do with the real 157 00:14:25.280 --> 00:14:27.520 state of affairs. 158 00:14:27.520 --> 00:14:34.000 While the sacrifices an individual worker makes in intensifying his own exertion burden him 159 00:14:34.000 --> 00:14:40.880 alone, only an infinitesimal fraction of the produce of his additional exertion benefits 160 00:14:40.880 --> 00:14:45.200 himself and improves his own well-being. 161 00:14:45.200 --> 00:14:50.800 While the individual worker enjoys completely the pleasures he may reap by yielding to the 162 00:14:50.800 --> 00:14:57.040 temptation to carelessness and laziness, the resulting impairment of the social dividend 163 00:14:57.040 --> 00:15:01.840 curtails his own share only infinitesimally. 164 00:15:01.840 --> 00:15:07.160 Under such a socialist mode of production, all personal incentives which selfishness 165 00:15:07.160 --> 00:15:14.680 provides under capitalism are removed, and a premium is put upon laziness and negligence. 166 00:15:14.680 --> 00:15:21.240 Whereas in a capitalist society, selfishness incites everyone to the utmost diligence, 167 00:15:21.240 --> 00:15:26.100 in a socialist society it makes for inertia and laxity. 168 00:15:26.100 --> 00:15:31.140 The socialists may still babble about the miraculous change in human nature that the 169 00:15:31.140 --> 00:15:37.580 advent of socialism will effect, and about the substitution of lofty altruism for mean 170 00:15:37.580 --> 00:15:44.380 egotism, but they must no longer indulge in fables about the marvelous effects the selfishness 171 00:15:44.380 --> 00:15:48.900 of each individual will bring about under socialism. 172 00:15:48.900 --> 00:15:54.460 No judicious man can fail to conclude from the evidence of these considerations that 173 00:15:54.460 --> 00:16:00.020 in the market economy, the productivity of labor is incomparably higher than it would 174 00:16:00.020 --> 00:16:01.860 be under socialism. 175 00:16:01.860 --> 00:16:07.740 However, this cognition does not settle the question between the advocates of capitalism 176 00:16:07.740 --> 00:16:15.140 and those of socialism from a praxeological, that is, scientific, point of view. 177 00:16:15.140 --> 00:16:21.400 A bona fide advocate of socialism who is free from bigotry, pre-possession and malice could 178 00:16:21.400 --> 00:16:23.260 still contend. 179 00:16:23.260 --> 00:16:29.980 It may be true that P, the total net income turned out in a market society, is larger 180 00:16:29.980 --> 00:16:35.500 than P, the total net income turned out in a socialist society. 181 00:16:35.500 --> 00:16:43.540 But, if the socialist system assigns to each of its members an equal share of P, namely, 182 00:16:43.540 --> 00:16:51.820 P divided by Z equals D, all those whose income in the market society is smaller than D are 183 00:16:51.820 --> 00:16:56.480 are favored by the substitution of socialism for capitalism. 184 00:16:56.480 --> 00:17:01.300 It may happen that this group of people includes the majority of men. 185 00:17:01.300 --> 00:17:06.840 At any rate, it becomes evident that the doctrine of the harmony between the rightly understood 186 00:17:06.840 --> 00:17:12.040 interests of all members of the market society is untenable. 187 00:17:12.040 --> 00:17:18.720 There is a class of men whose interests are hurt by the very existence of the market economy, 188 00:17:18.720 --> 00:17:22.360 and Who Would Be Better Off under Socialism. 189 00:17:22.360 --> 00:17:26.280 The Liberals contest the conclusiveness of this reasoning. 190 00:17:26.280 --> 00:17:33.460 They believe that P will lag so much behind P that D will be smaller than the income which 191 00:17:33.460 --> 00:17:38.960 even those earning the lowest wages get in the market society. 192 00:17:38.960 --> 00:17:44.320 There can be no doubt that the objection raised by the Liberals is well founded. 193 00:17:44.320 --> 00:17:51.640 However, their refutation of the socialist claims is not based on praxeological considerations, 194 00:17:51.640 --> 00:17:58.440 and therefore lacks the apodictic and incontestable argumentative power inherent in a praxeological 195 00:17:58.440 --> 00:18:00.540 demonstration. 196 00:18:00.540 --> 00:18:06.280 It is based on a judgment of relevance, the quantitative appraisal of the difference between 197 00:18:06.280 --> 00:18:14.080 the two magnitudes P and P. In the field of human action, such quantitative cognition 198 00:18:14.080 --> 00:18:20.560 is obtained by understanding, with regard to which full agreement between men cannot be 199 00:18:20.560 --> 00:18:21.560 reached. 200 00:18:21.560 --> 00:18:28.040 Praxeology, economics, and catallactics are of no use for the settlement of such dissensions 201 00:18:28.040 --> 00:18:31.360 concerning quantitative issues. 202 00:18:31.360 --> 00:18:37.920 The advocates of socialism could go even farther and say, granted that each individual will 203 00:18:37.920 --> 00:18:42.800 be worse off under socialism than even the poorest under capitalism. 204 00:18:42.800 --> 00:18:48.920 Yet, we spurn the market economy in spite of the fact that it supplies everybody with 205 00:18:48.920 --> 00:18:51.560 more goods than socialism. 206 00:18:51.560 --> 00:18:58.060 We disapprove of capitalism on ethical grounds, as an unfair and amoral system. 207 00:18:58.060 --> 00:19:04.360 We prefer socialism on grounds commonly called non-economic, and put up with the fact that 208 00:19:04.360 --> 00:19:08.780 it impairs everybody's material well-being. 209 00:19:08.780 --> 00:19:14.540 This mode of reasoning was mainly resorted to by many eminent champions of Christian 210 00:19:14.540 --> 00:19:19.660 socialism. The Marxians used to recommend socialism on the ground that it would multiply 211 00:19:19.660 --> 00:19:26.500 productivity and bring unprecedented material wealth to everybody. Only lately have they 212 00:19:26.500 --> 00:19:32.060 changed their tactics. They declare that the Russian worker is happier than the American 213 00:19:32.060 --> 00:19:37.640 worker in spite of the fact that his standard of living is much lower. The knowledge that 214 00:19:37.640 --> 00:19:44.960 that he lives under a fair social system compensates by far for all his material hardships. 215 00:19:44.960 --> 00:19:51.640 It cannot be denied that this haughty indifference with regard to material well-being is a privilege 216 00:19:51.640 --> 00:19:59.560 reserved to ivory tower intellectuals secluded from reality and to ascetic anchorites. 217 00:19:59.560 --> 00:20:06.000 What made socialism popular with the immense majority of its supporters was, on the contrary, 218 00:20:06.000 --> 00:20:11.460 The illusion that it would supply them with more amenities than capitalism. 219 00:20:11.460 --> 00:20:17.800 But however this may be, it is obvious that this type of pro-socialist argumentation cannot 220 00:20:17.800 --> 00:20:23.720 be touched by the liberal reasoning concerning the productivity of labor. 221 00:20:23.720 --> 00:20:29.120 If no other objections could be raised to the socialist plans than that socialism will 222 00:20:29.120 --> 00:20:34.840 lower the standard of living of all, or at least of the immense majority, it would be 223 00:20:34.840 --> 00:20:39.980 be impossible for praxeology to pronounce a final judgment. 224 00:20:39.980 --> 00:20:45.220 Men would have to decide the issue between capitalism and socialism on the ground of 225 00:20:45.220 --> 00:20:49.280 judgments of value and of judgments of relevance. 226 00:20:49.280 --> 00:20:53.760 They would have to choose between the two systems as they choose between many other 227 00:20:53.760 --> 00:20:54.880 things. 228 00:20:54.880 --> 00:20:59.580 No objective standard could be discovered which would make it possible to settle the 229 00:20:59.580 --> 00:21:07.500 of Dispute in a manner which allows no contradiction and must be accepted by every sane individual. 230 00:21:07.500 --> 00:21:14.500 The freedom of each man's choice and discretion would not be annihilated by inexorable necessity. 231 00:21:14.500 --> 00:21:19.380 However, the true state of affairs is entirely different. 232 00:21:19.380 --> 00:21:24.340 Man is not in a position to choose between these two systems. 233 00:21:24.340 --> 00:21:29.620 Having cooperation under the system of the social division of labor is possible only 234 00:21:29.620 --> 00:21:32.660 in the market economy. 235 00:21:32.660 --> 00:21:38.900 Socialism is not a realizable system of society's economic organization because it lacks any 236 00:21:38.900 --> 00:21:41.820 method of economic calculation. 237 00:21:41.820 --> 00:21:48.060 To deal with this fundamental problem is the task of the fifth part of this book. 238 00:21:48.060 --> 00:21:53.820 The establishment of this truth does not amount to a depreciation of the conclusiveness and 239 00:21:53.820 --> 00:22:00.380 and the convincing power of the anti-socialist argument derived from the impairment of productivity 240 00:22:00.380 --> 00:22:03.380 to be expected from socialism. 241 00:22:03.380 --> 00:22:08.880 The weight of this objection raised to the socialist plans is so overwhelming that no 242 00:22:08.880 --> 00:22:13.380 judicious man could hesitate to choose capitalism. 243 00:22:13.380 --> 00:22:20.500 Yet this would still be a choice between alternative systems of society's economic organization, 244 00:22:20.500 --> 00:22:35.500 Socialism cannot be realized because it is beyond human power to establish it as a social system. 245 00:22:35.500 --> 00:22:39.500 The choice is between capitalism and chaos. 246 00:22:39.500 --> 00:22:46.500 A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide 247 00:22:46.500 --> 00:22:49.500 does not choose between two beverages. 248 00:22:49.500 --> 00:22:52.820 He chooses between life and death. 249 00:22:52.820 --> 00:22:58.800 A society that chooses between capitalism and socialism does not choose between two 250 00:22:58.800 --> 00:23:00.580 social systems. 251 00:23:00.580 --> 00:23:07.460 It chooses between social cooperation and the disintegration of society. 252 00:23:07.460 --> 00:23:10.780 Socialism is not an alternative to capitalism. 253 00:23:10.780 --> 00:23:17.460 It is an alternative to any system under which men can live as human beings. 254 00:23:17.460 --> 00:23:23.940 To stress this point is the task of economics, as it is the task of biology and chemistry 255 00:23:23.940 --> 00:23:30.640 to teach that potassium cyanide is not a nutriment but a deadly poison. 256 00:23:30.640 --> 00:23:37.100 The convincing power of the productivity argument is in fact so irresistible that the advocates 257 00:23:37.100 --> 00:23:43.500 of socialism were forced to abandon their old tactics and to resort to new methods. 258 00:23:43.500 --> 00:23:48.740 They are eager to divert attention from the productivity issue by throwing into relief 259 00:23:48.740 --> 00:23:51.220 the monopoly problem. 260 00:23:51.220 --> 00:23:57.140 All contemporary socialist manifestos expatiate on monopoly power. 261 00:23:57.140 --> 00:24:03.300 Statesmen and professors try to outdo one another in depicting the evils of monopoly. 262 00:24:03.300 --> 00:24:07.540 Our age is called the age of monopoly capitalism. 263 00:24:07.540 --> 00:24:14.540 The foremost argument advanced today in favor of socialism is the reference to monopoly. 264 00:24:14.540 --> 00:24:21.500 Now it is true that the emergence of monopoly prices, not of monopoly as such without monopoly 265 00:24:21.500 --> 00:24:26.980 prices, creates a discrepancy between the interests of the monopolist and those of the 266 00:24:26.980 --> 00:24:28.640 consumers. 267 00:24:28.640 --> 00:24:35.140 The monopolist does not employ the monopolized good according to the wishes of the consumers. 268 00:24:35.140 --> 00:24:41.140 As far as there are monopoly prices, the interests of the monopolist take precedence over those 269 00:24:41.140 --> 00:24:46.060 of the public, and the democracy of the market is restricted. 270 00:24:46.060 --> 00:24:52.780 With regard to monopoly prices, there is not harmony, but conflict of interests. 271 00:24:52.780 --> 00:24:58.180 It is possible to contest these statements with regard to the monopoly prices received 272 00:24:58.180 --> 00:25:02.780 in the sale of articles under patents and copyrights. 273 00:25:02.780 --> 00:25:09.140 One may argue that in the absence of patent and copyright legislation, these books, compositions 274 00:25:09.140 --> 00:25:14.180 and technological innovations would never have come into existence. 275 00:25:14.180 --> 00:25:20.380 The public pays monopoly prices for things they would not have enjoyed at all under competitive 276 00:25:20.380 --> 00:25:21.380 prices. 277 00:25:21.380 --> 00:25:25.260 However, we may fairly disregard this issue. 278 00:25:25.260 --> 00:25:30.100 It has little to do with the great monopoly controversy of our day. 279 00:25:30.100 --> 00:25:34.980 When people deal with the evils of monopoly, they imply that there prevails within the 280 00:25:34.980 --> 00:25:42.100 unhampered market economy a general and inevitable tendency toward the substitution of monopoly 281 00:25:42.100 --> 00:25:45.540 prices for competitive prices. 282 00:25:45.540 --> 00:25:52.820 This is, they say, a characteristic mark of mature, or late, capitalism. 283 00:25:52.820 --> 00:25:58.220 Whatever conditions may have been in the earlier stages of capitalist evolution, and whatever 284 00:25:58.220 --> 00:26:03.020 However one may think about the validity of the classical economist's statements concerning 285 00:26:03.020 --> 00:26:09.340 the harmony of the rightly understood interests, today there is no longer any question of such 286 00:26:09.340 --> 00:26:11.560 a harmony. 287 00:26:11.560 --> 00:26:17.500 As has been pointed out already, there is no such tendency toward monopolization. 288 00:26:17.500 --> 00:26:23.740 It is a fact that with many commodities in many countries monopoly prices prevail, and 289 00:26:23.740 --> 00:26:28.820 And moreover, many articles are sold at monopoly prices on the world market. 290 00:26:28.820 --> 00:26:35.020 However, almost all of these instances of monopoly prices are the outgrowth of government 291 00:26:35.020 --> 00:26:37.580 interference with business. 292 00:26:37.580 --> 00:26:42.980 They were not created by the interplay of the factors operating on a free market. 293 00:26:42.980 --> 00:26:49.220 They are not products of capitalism, but precisely of the endeavors to counteract the forces 294 00:26:49.220 --> 00:26:52.860 determining the height of the market prices. 295 00:26:52.860 --> 00:26:57.900 It is a distortion of fact to speak of monopoly capitalism. 296 00:26:57.900 --> 00:27:05.300 It would be more appropriate to speak of monopoly interventionism or of monopoly statism. 297 00:27:05.300 --> 00:27:11.980 Those instances of monopoly prices which would appear also on a market not hampered and sabotaged 298 00:27:11.980 --> 00:27:18.060 by the interference of the various national governments and by conspiracies between groups 299 00:27:18.060 --> 00:27:21.200 of governments are of minor importance. 300 00:27:21.200 --> 00:27:28.240 They concern some raw materials, the deposits of which are few and geographically concentrated, 301 00:27:28.240 --> 00:27:31.160 and local limited space monopolies. 302 00:27:31.160 --> 00:27:37.600 However, it is a fact that in these cases monopoly prices can be realized even in the 303 00:27:37.600 --> 00:27:44.580 absence of government policies aiming directly or indirectly at their establishment. 304 00:27:44.580 --> 00:27:50.120 It is necessary to realize that consumers' sovereignty is not perfect, and that there 305 00:27:50.120 --> 00:27:55.480 There are limits to the operation of the democratic process of the market. 306 00:27:55.480 --> 00:28:01.760 There is, it is true, in some exceptional and rare cases of minor importance, even on 307 00:28:01.760 --> 00:28:08.480 a market not hampered and sabotaged by government interference, an antagonism between the interests 308 00:28:08.480 --> 00:28:13.360 of the owners of factors of production and those of the rest of the people. 309 00:28:13.360 --> 00:28:20.360 However, the existence of such antagonisms by no means impairs the concord of the interests 310 00:28:20.360 --> 00:28:25.860 of all people with regard to the preservation of the market economy. 311 00:28:25.860 --> 00:28:32.960 The market economy is the only system of society's economic organization that can function and 312 00:28:32.960 --> 00:28:36.760 really has been functioning. 313 00:28:36.760 --> 00:28:42.960 Socialism is unrealizable because of its inability to develop a method for economic calculation. 314 00:28:42.960 --> 00:28:55.960 Interventionism must result in a state of affairs which, from the point of view of its advocates, is less desirable than the conditions of the unhampered market economy which it aims to alter. 315 00:28:55.960 --> 00:29:02.960 In addition, it liquidates itself as soon as it is pushed beyond a narrow field of application. 316 00:29:02.960 --> 00:29:10.200 Such being the case, the only social order that can preserve and further intensify the 317 00:29:10.200 --> 00:29:14.640 social division of labor is the market economy. 318 00:29:14.640 --> 00:29:20.400 All those who do not wish to disintegrate social cooperation and to return to the conditions 319 00:29:20.400 --> 00:29:26.780 of primitive barbarism are interested in the perpetuation of the market economy. 320 00:29:26.780 --> 00:29:32.440 The classical economist's teachings concerning the harmony of the rightly understood interests 321 00:29:32.440 --> 00:29:38.540 were defective, in so far as they failed to recognize the fact that the democratic process 322 00:29:38.540 --> 00:29:45.440 of the market is not perfect, because in some instances of minor importance, even in the 323 00:29:45.440 --> 00:29:50.920 unhampered market economy, monopoly prices may appear. 324 00:29:50.920 --> 00:29:57.840 But much more conspicuous was their failure to recognize that, and why, no socialist system 325 00:29:57.840 --> 00:30:03.560 can be considered as a system of society's economic organization. 326 00:30:03.560 --> 00:30:09.160 They base the doctrine of the harmony of interests upon the erroneous assumption that there are 327 00:30:09.160 --> 00:30:15.000 no exceptions to the rule that the owners of the means of production are forced by the 328 00:30:15.000 --> 00:30:21.040 market process to employ their property according to the wishes of the consumers. 329 00:30:21.040 --> 00:30:30.040 Today, this theorem must be based on the knowledge that no economic calculation is feasible under Socialism. 330 00:30:32.040 --> 00:30:35.040 4. Private Property 331 00:30:35.040 --> 00:30:42.040 Private ownership of the means of production is the fundamental institution of the market economy. 332 00:30:42.040 --> 00:30:48.040 It is the institution the presence of which characterizes the market economy as such. 333 00:30:48.040 --> 00:30:52.540 Where it is absent, there is no question of a market economy. 334 00:30:52.540 --> 00:30:59.040 Ownership means full control of the services that can be derived from a good. 335 00:30:59.040 --> 00:31:08.540 This catallactic notion of ownership and property rights is not to be confused with the legal definition of ownership and property rights, 336 00:31:08.540 --> 00:31:11.540 as stated in the laws of various countries. 337 00:31:11.540 --> 00:31:29.540 It was the idea of legislators and courts to define the legal concept of property in such a way as to give to the proprietor full protection by the governmental apparatus of coercion and compulsion, and to prevent anybody from encroaching upon his rights. 338 00:31:29.540 --> 00:31:38.540 As far as this purpose was adequately realized, the legal concept of property rights corresponded to the catallactic concept. 339 00:31:38.540 --> 00:31:39.540 Act. 340 00:31:39.540 --> 00:31:45.140 However, nowadays there are tendencies to abolish the institution of private property 341 00:31:45.140 --> 00:31:51.220 by a change in the laws determining the scope of the actions which the proprietor is entitled 342 00:31:51.220 --> 00:31:56.260 to undertake with regard to the things which are his property. 343 00:31:56.260 --> 00:32:02.660 While retaining the term private property, these reforms aim at the substitution of public 344 00:32:02.660 --> 00:32:05.900 ownership for private ownership. 345 00:32:05.900 --> 00:32:10.600 This tendency is the characteristic mark of the plans of various schools of Christian 346 00:32:10.600 --> 00:32:14.580 Socialism and of Nationalist Socialism. 347 00:32:14.580 --> 00:32:19.700 But few of the champions of these schools have been so keen as the Nazi philosopher 348 00:32:19.700 --> 00:32:26.100 Otmar Spahn, who explicitly declared that the realization of his plans would bring about 349 00:32:26.100 --> 00:32:31.480 a state of affairs in which the institution of private property will be preserved only 350 00:32:31.480 --> 00:32:37.480 only in a formal sense, while in fact there will be only public ownership. 351 00:32:37.480 --> 00:32:44.040 There is need to mention these things in order to avoid popular fallacies and confusion. 352 00:32:44.040 --> 00:32:50.680 In dealing with private property, catallactics deals with control, not with legal terms, 353 00:32:50.680 --> 00:32:53.460 concepts and definitions. 354 00:32:53.460 --> 00:32:58.520 Private ownership means that the proprietors determine the employment of the factors of 355 00:32:58.520 --> 00:33:05.880 Production, while public ownership means that the government controls their employment. 356 00:33:05.880 --> 00:33:08.260 Private property is a human device. 357 00:33:08.260 --> 00:33:09.860 It is not sacred. 358 00:33:09.860 --> 00:33:15.920 It came into existence in early ages of history when people with their own power and by their 359 00:33:15.920 --> 00:33:23.640 own authority appropriated to themselves what had previously not been anybody's property. 360 00:33:23.640 --> 00:33:29.560 One and again proprietors were robbed of their property by expropriation. 361 00:33:29.560 --> 00:33:34.960 The history of private property can be traced back to a point at which it originated out 362 00:33:34.960 --> 00:33:38.760 of acts which were certainly not legal. 363 00:33:38.760 --> 00:33:45.120 Virtually every owner is the direct or indirect legal successor of people who acquired ownership 364 00:33:45.120 --> 00:33:52.880 either by arbitrary appropriation of ownerless things or by violent spoliation of their predecessor. 365 00:33:52.880 --> 00:34:07.880 However, the fact that legal formalism can trace back every title either to arbitrary appropriation or to violent expropriation has no significance whatever for the conditions of a market society. 366 00:34:07.880 --> 00:34:14.880 Ownership in the market economy is no longer linked up with the remote origin of private property. 367 00:34:14.880 --> 00:34:24.720 Those events in a far distant past, hidden in the darkness of primitive mankind's history, are no longer of any concern for our day. 368 00:34:24.720 --> 00:34:33.940 For in an unhampered market society, the consumers daily decide anew who should own and how much he should own. 369 00:34:33.940 --> 00:34:44.840 The consumers allot control of the means of production to those who know how to use them best for the satisfaction of the most urgent wants of the consumers. 370 00:34:44.840 --> 00:34:53.340 Only in a legal and formalistic sense can the owners be considered the successors of appropriators and expropriators. 371 00:34:53.340 --> 00:35:01.840 In fact, they are mandataries of the consumers, bound by the operation of the market to serve the consumers best. 372 00:35:01.840 --> 00:35:08.340 Capitalism is the consummation of the self-determination of the consumers. 373 00:35:08.340 --> 00:35:17.340 The meaning of private property and the market society is radically different from what it is under a system of each household's autarky. 374 00:35:17.340 --> 00:35:26.340 Where each household is economically self-sufficient, the privately owned means of production exclusively serve the proprietor. 375 00:35:26.340 --> 00:35:31.340 He alone reaps all the benefits derived from their employment. 376 00:35:31.340 --> 00:35:38.340 In the market society, the proprietors of capital and land can enjoy their property 377 00:35:38.340 --> 00:35:43.540 only by employing it for the satisfaction of other people's wants. 378 00:35:43.540 --> 00:35:49.540 They must serve the consumers in order to have any advantage from what is their own. 379 00:35:49.540 --> 00:35:55.380 The very fact that they own means of production forces them to submit to the wishes of the 380 00:35:55.380 --> 00:35:57.320 public. 381 00:35:57.320 --> 00:36:02.420 Partnership is an asset only for those who know how to employ it in the best possible 382 00:36:02.420 --> 00:36:08.920 way for the benefit of the consumers. It is a social function. 383 00:36:08.920 --> 00:36:17.680 5. The Conflicts of Our Age Popular opinion sees the source of the conflicts 384 00:36:17.680 --> 00:36:23.920 which bring about the civil wars and international wars of our age in the collision of economic 385 00:36:23.920 --> 00:36:34.760 Civil War is the rebellion of the exploited masses against the exploiting classes. 386 00:36:34.760 --> 00:36:40.280 Foreign War is the revolt of the have-not nations against those nations who have appropriated 387 00:36:40.280 --> 00:36:47.240 to themselves an unfair share of the earth's natural resources, and with insatiable greed 388 00:36:47.240 --> 00:36:52.780 want to snatch even more of this wealth destined for the use of all. 389 00:36:52.780 --> 00:36:58.420 He who in face of these facts speaks of the harmony of the rightly understood interests 390 00:36:58.420 --> 00:37:05.340 is either a moron or an infamous apologist of a manifestly unjust social order. 391 00:37:05.340 --> 00:37:11.940 No intelligent and honest man could fail to realize that there prevail today irreconcilable 392 00:37:11.940 --> 00:37:19.340 conflicts of material interests which can be settled only by recourse to arms. 393 00:37:19.340 --> 00:37:24.460 It is certainly true that our age is full of conflicts which generate war. 394 00:37:24.460 --> 00:37:31.620 However, these conflicts do not spring from the operation of the unhampered market society. 395 00:37:31.620 --> 00:37:36.880 It may be permissible to call them economic conflicts because they concern that sphere 396 00:37:36.880 --> 00:37:43.900 of human life, which is, in common speech, known as the sphere of economic activities. 397 00:37:43.900 --> 00:37:49.660 But it is a serious blunder to infer from this appellation that the source of these conflicts 398 00:37:49.660 --> 00:37:54.740 are conditions which develop within the frame of a market society. 399 00:37:54.740 --> 00:38:01.460 It is not capitalism that produces them, but precisely the anti-capitalistic policies designed 400 00:38:01.460 --> 00:38:04.860 to check the functioning of capitalism. 401 00:38:04.860 --> 00:38:10.860 They are an outgrowth of the various governments' interference with business, of trade and migration 402 00:38:10.860 --> 00:38:18.300 and Barriers and Discrimination Against Foreign Labor, Foreign Products and Foreign Capital. 403 00:38:18.300 --> 00:38:24.240 None of these conflicts could have emerged in an unhampered market economy. 404 00:38:24.240 --> 00:38:30.740 Imagine a world in which everybody were free to live and work as entrepreneur or as employee 405 00:38:30.740 --> 00:38:38.440 where he wanted and how he chose, and ask which of these conflicts could still exist. 406 00:38:38.440 --> 00:38:42.980 Imagine a world in which the principle of private ownership of the means of production 407 00:38:42.980 --> 00:38:50.320 is fully realized, in which there are no institutions hindering the mobility of capital, labor, 408 00:38:50.320 --> 00:38:56.860 and commodities, in which the laws, the courts, and the administrative officers do not discriminate 409 00:38:56.860 --> 00:39:03.360 against any individual or group of individuals, whether native or alien. 410 00:39:03.360 --> 00:39:08.420 Imagine a state of affairs in which governments are devoted exclusively to the task of protecting 411 00:39:08.420 --> 00:39:25.420 In such a world, the frontiers are drawn on the maps, but they do not hinder anybody from the pursuit of what he thinks will make him more prosperous. 412 00:39:25.420 --> 00:39:30.940 No individual is interested in the expansion of the size of his nation's territory, as 413 00:39:30.940 --> 00:39:40.940 he cannot derive any gain from such an aggrandizement. Conquest does not pay, and war becomes obsolete. 414 00:39:40.940 --> 00:39:46.760 In the ages preceding the rise of liberalism and the evolution of modern capitalism, people 415 00:39:46.760 --> 00:39:52.100 for the most part consumed only what could be produced out of raw materials available 416 00:39:52.100 --> 00:39:54.660 in their own neighborhood. 417 00:39:54.660 --> 00:39:59.360 The development of the International Division of Labor has radically altered this state 418 00:39:59.360 --> 00:40:01.220 of affairs. 419 00:40:01.220 --> 00:40:07.020 Food and raw materials imported from distant countries are articles of mass consumption. 420 00:40:07.020 --> 00:40:12.460 The most advanced European nations could do without these imports only at the price of 421 00:40:12.460 --> 00:40:16.680 a very considerable lowering of their standard of living. 422 00:40:16.680 --> 00:40:23.920 They must pay for the badly needed purchase of minerals, lumber, oil, cereals, fat, coffee, 423 00:40:23.920 --> 00:40:31.880 tea, cocoa, fruit, wool and cotton by exporting manufacturers, most of them processed out 424 00:40:31.880 --> 00:40:38.600 of imported raw materials. Their vital interests are hurt by the protectionist trade policies 425 00:40:38.600 --> 00:40:42.360 of the countries producing these primary products. 426 00:40:42.360 --> 00:40:48.640 Two hundred years ago, it was of little concern to the Swedes or the Swiss whether or not 427 00:40:48.640 --> 00:40:54.640 a non-European country was efficient in utilizing its natural resources. 428 00:40:54.640 --> 00:41:01.320 But today, economic backwardness in a foreign country endowed by rich natural resources 429 00:41:01.320 --> 00:41:07.160 hurts the interests of all those whose standard of living could be raised if a more appropriate 430 00:41:07.160 --> 00:41:11.560 mode of utilizing this natural wealth were adopted. 431 00:41:11.560 --> 00:41:17.780 The principle of each nation's unrestricted sovereignty is, in a world of government interference 432 00:41:17.780 --> 00:41:22.420 with business, a challenge to all other nations. 433 00:41:22.420 --> 00:41:28.480 The conflict between the have-nots and the haves is a real conflict, but it is present 434 00:41:28.480 --> 00:41:35.440 only in a world in which any sovereign government is free to hurt the interests of all peoples, 435 00:41:35.440 --> 00:41:41.680 its own included, by depriving the consumers of the advantages a better exploitation of 436 00:41:41.680 --> 00:41:44.940 this country's resources would give them. 437 00:41:44.940 --> 00:41:51.740 It is not sovereignty as such that makes for war, but sovereignty of governments not entirely 438 00:41:51.740 --> 00:41:56.640 committed to the principles of the market economy. 439 00:41:56.640 --> 00:42:01.880 Liberalism did not and does not build its hopes upon abolition of the sovereignty of 440 00:42:01.880 --> 00:42:07.840 of the Various National Governments, a venture which would result in endless wars. 441 00:42:07.840 --> 00:42:13.560 It aims at a general recognition of the idea of economic freedom. 442 00:42:13.560 --> 00:42:19.480 If all peoples become liberal and conceive that economic freedom best serves their own 443 00:42:19.480 --> 00:42:25.360 interests, national sovereignty will no longer engender conflict and war. 444 00:42:25.360 --> 00:42:31.080 What is needed to make peace durable is neither international treaties and covenants, nor 445 00:42:31.080 --> 00:42:36.820 or international tribunals and organizations like the defunct League of Nations or its 446 00:42:36.820 --> 00:42:39.760 successor the United Nations. 447 00:42:39.760 --> 00:42:45.160 If the principle of the market economy is universally accepted, such makeshifts are 448 00:42:45.160 --> 00:42:46.600 unnecessary. 449 00:42:46.600 --> 00:42:50.040 If it is not accepted, they are futile. 450 00:42:50.040 --> 00:42:55.200 Durable peace can only be the outgrowth of a change in ideologies. 451 00:42:55.200 --> 00:43:00.840 As long as the peoples cling to the Montaigne dogma and think that they cannot prosper 452 00:43:00.840 --> 00:43:06.600 Economically, except at the expense of other nations, peace will never be anything other 453 00:43:06.600 --> 00:43:11.540 than a period of preparation for the next war. 454 00:43:11.540 --> 00:43:16.040 Economic nationalism is incompatible with durable peace. 455 00:43:16.040 --> 00:43:22.640 Yet economic nationalism is unavoidable, where there is government interference with business. 456 00:43:22.640 --> 00:43:27.660 Protectionism is indispensable, where there is no domestic free trade. 457 00:43:27.660 --> 00:43:32.620 Where there is government interference with business, free trade even in the short run 458 00:43:32.620 --> 00:43:38.220 would frustrate the aims sought by the various interventionist measures. 459 00:43:38.220 --> 00:43:44.420 It is an illusion to believe that a nation would lastingly tolerate other nations' policies 460 00:43:44.420 --> 00:43:48.380 which harm the vital interest of its own citizens. 461 00:43:48.380 --> 00:43:53.340 Let us assume that the United Nations had been established in the year 1600, and that 462 00:43:53.340 --> 00:43:59.500 The Indian tribes of North America had been admitted as members of this organization. 463 00:43:59.500 --> 00:44:04.620 Then the sovereignty of these Indians would have been recognized as inviolable. 464 00:44:04.620 --> 00:44:10.200 They would have been given the right to exclude all aliens from entering their territory and 465 00:44:10.200 --> 00:44:15.620 from exploiting its rich natural resources, which they themselves did not know how to 466 00:44:15.620 --> 00:44:17.140 utilize. 467 00:44:17.140 --> 00:44:23.060 Does anybody really believe that any international covenant or charter could have prevented the 468 00:44:23.060 --> 00:44:27.220 Are the Europeans from invading these countries? 469 00:44:27.220 --> 00:44:33.580 Many of the richest deposits of various mineral substances are located in areas whose inhabitants 470 00:44:33.580 --> 00:44:39.500 are too ignorant, too inert or too dull to take advantage of the riches nature has bestowed 471 00:44:39.500 --> 00:44:41.140 upon them. 472 00:44:41.140 --> 00:44:46.740 If the governments of these countries prevent aliens from exploiting these deposits, or 473 00:44:46.740 --> 00:44:51.960 However if their conduct of public affairs is so arbitrary that no foreign investments 474 00:44:51.960 --> 00:44:59.140 are safe, serious harm is inflicted upon all those foreign peoples whose material well-being 475 00:44:59.140 --> 00:45:05.220 could be improved by a more adequate utilization of the deposits concerned. 476 00:45:05.220 --> 00:45:09.800 It does not matter whether the policies of these governments are the outcome of a general 477 00:45:09.800 --> 00:45:15.860 cultural backwardness or of the adoption of the now fashionable ideas of interventionism 478 00:45:15.860 --> 00:45:18.260 and Economic Nationalism. 479 00:45:18.260 --> 00:45:21.940 The result is the same in both cases. 480 00:45:21.940 --> 00:45:27.460 There is no use in conjuring away these conflicts by wishful thinking. 481 00:45:27.460 --> 00:45:32.520 What is needed to make peace durable is a change in ideologies. 482 00:45:32.520 --> 00:45:39.260 What generates war is the economic philosophy almost universally espoused today by governments 483 00:45:39.260 --> 00:45:41.800 and political parties. 484 00:45:41.800 --> 00:45:48.240 As this philosophy sees it, there prevail within the unhampered market economy irreconcilable 485 00:45:48.240 --> 00:45:52.620 conflicts between the interests of various nations. 486 00:45:52.620 --> 00:45:54.760 Free trade harms a nation. 487 00:45:54.760 --> 00:45:57.260 It brings about impoverishment. 488 00:45:57.260 --> 00:46:03.400 It is the duty of government to prevent the evils of free trade by trade barriers. 489 00:46:03.400 --> 00:46:08.740 We may, for the sake of argument, disregard the fact that protectionism also hurts the 490 00:46:08.740 --> 00:46:11.940 and the interests of the nations which resort to it. 491 00:46:11.940 --> 00:46:17.620 But there can be no doubt that protectionism aims at damaging the interests of foreign 492 00:46:17.620 --> 00:46:21.280 peoples and really does damage them. 493 00:46:21.280 --> 00:46:27.100 It is an illusion to assume that those injured will tolerate other nations' protectionism 494 00:46:27.100 --> 00:46:32.380 if they believe that they are strong enough to brush it away by the use of arms. 495 00:46:32.380 --> 00:46:36.620 The philosophy of protectionism is a philosophy of war. 496 00:46:36.620 --> 00:46:41.940 The wars of our age are not at variance with popular economic doctrines. 497 00:46:41.940 --> 00:46:50.040 They are, on the contrary, the inescapable result of a consistent application of these doctrines. 498 00:46:50.040 --> 00:46:55.400 The League of Nations did not fail because its organization was deficient. 499 00:46:55.400 --> 00:47:00.220 It failed because it lacked the spirit of genuine liberalism. 500 00:47:00.220 --> 00:47:05.600 It was a convention of governments imbued with the spirit of economic nationalism and 501 00:47:05.600 --> 00:47:10.360 and entirely committed to the principles of economic warfare. 502 00:47:10.360 --> 00:47:16.400 While the delegates indulged in mere academic talk about goodwill among the nations, the 503 00:47:16.400 --> 00:47:22.880 governments whom they represented inflicted a good deal of evil upon all other nations. 504 00:47:22.880 --> 00:47:28.200 The two decades of the League's functioning were marked by each nation's adamant economic 505 00:47:28.200 --> 00:47:31.660 warfare against all other nations. 506 00:47:31.660 --> 00:47:38.620 The tariff protectionism of the years before 1914 was mild indeed when compared with what 507 00:47:38.620 --> 00:47:45.340 developed in the twenties and thirties, namely embargoes, quantitative trade control, foreign 508 00:47:45.340 --> 00:47:50.660 exchange control, monetary devaluation and so on. 509 00:47:50.660 --> 00:47:56.220 The prospects for the United Nations are not better, but rather worse. 510 00:47:56.220 --> 00:48:02.360 Every nation looks upon imports, especially upon imports of manufactured goods, as upon 511 00:48:02.360 --> 00:48:04.200 a disaster. 512 00:48:04.200 --> 00:48:11.000 It is the avowed goal of almost all countries to bar foreign manufacturers as much as possible 513 00:48:11.000 --> 00:48:14.640 from access to their domestic markets. 514 00:48:14.640 --> 00:48:21.040 Almost all nations are fighting against the specter of an unfavorable balance of trade. 515 00:48:21.040 --> 00:48:23.840 They do not want to cooperate. 516 00:48:23.840 --> 00:48:29.160 They want to protect themselves against the alleged dangers of cooperation.