WEBVTT

NOTE XXXV. The Welfare Principle versus the Market Principle (continued)

1
00:00:00.000 --> 00:00:04.360
3. Inequality.

2
00:00:04.360 --> 00:00:10.580
The inequality of incomes and wealth is an inherent feature of the market economy. Its

3
00:00:10.580 --> 00:00:16.240
elimination would entirely destroy the market economy.

4
00:00:16.240 --> 00:00:22.000
What those people who ask for equality have in mind is always an increase in their own

5
00:00:22.000 --> 00:00:29.220
power to consume. In endorsing the principle of equality as a political postulate, nobody

6
00:00:29.220 --> 00:00:34.080
He wants to share his own income with those who have less.

7
00:00:34.080 --> 00:00:40.620
When the American wage earner refers to equality, he means that the dividends of the stockholders

8
00:00:40.620 --> 00:00:42.860
should be given to him.

9
00:00:42.860 --> 00:00:49.100
He does not suggest a curtailment of his own income for the benefit of those 95 percent

10
00:00:49.100 --> 00:00:54.460
of the earth's population whose income is lower than his.

11
00:00:54.460 --> 00:01:00.680
The role that income inequality plays in the market society must not be confused with the

12
00:01:00.680 --> 00:01:07.540
role it plays in a feudal society or in other types of non-capitalistic societies.

13
00:01:07.540 --> 00:01:15.180
Yet, in the course of historical evolution, this pre-capitalistic inequality was of momentous

14
00:01:15.180 --> 00:01:17.100
importance.

15
00:01:17.100 --> 00:01:21.740
Let us compare the history of China with that of England.

16
00:01:21.740 --> 00:01:28.820
China has developed a very high civilization. 2000 years ago, it was far ahead of England.

17
00:01:28.820 --> 00:01:34.500
But at the end of the 19th century, England was a rich and civilized country, while China

18
00:01:34.500 --> 00:01:40.740
was poor. Its civilization did not differ much from the stage it had already reached

19
00:01:40.740 --> 00:01:49.340
ages before. It was an arrested civilization. China had tried to realize the principle of

20
00:01:49.340 --> 00:01:54.820
Income Equality to a greater extent than did England.

21
00:01:54.820 --> 00:01:58.300
Land holdings were divided and subdivided.

22
00:01:58.300 --> 00:02:02.260
There was no class of landless proletarians.

23
00:02:02.260 --> 00:02:06.680
But in 18th century England this class was very numerous.

24
00:02:06.680 --> 00:02:12.940
For a very long time the restrictive practices of non-agricultural business, sanctified by

25
00:02:12.940 --> 00:02:19.460
by traditional ideologies delayed the emergence of modern entrepreneurship.

26
00:02:19.460 --> 00:02:25.140
But when the laissez-faire philosophy had opened the way for capitalism by utterly destroying

27
00:02:25.140 --> 00:02:31.860
the fallacies of restrictionism, the evolution of industrialism could proceed at an accelerated

28
00:02:31.860 --> 00:02:37.660
pace because the labor force needed was already available.

29
00:02:37.660 --> 00:02:44.200
What generated the machine age was not, as Zombard imagined, a specific mentality of

30
00:02:44.200 --> 00:02:50.440
acquisitiveness which one day mysteriously got hold of the minds of some people and turned

31
00:02:50.440 --> 00:02:53.820
them into capitalistic men.

32
00:02:53.820 --> 00:02:59.800
There have always been people ready to profit from better adjusting production to the satisfaction

33
00:02:59.800 --> 00:03:06.300
of the needs of the public, but they were paralyzed by the ideology that branded acquisitiveness

34
00:03:06.300 --> 00:03:11.760
as immoral and erected institutional barriers to check it.

35
00:03:11.760 --> 00:03:17.300
The substitution of the laissez-faire philosophy for the doctrines that approved of the traditional

36
00:03:17.300 --> 00:03:24.100
system of restrictions removed these obstacles to material improvement and thus inaugurated

37
00:03:24.100 --> 00:03:26.560
the new age.

38
00:03:26.560 --> 00:03:32.380
The liberal philosophy attacked the traditional caste system because its preservation was

39
00:03:32.380 --> 00:03:36.920
Incompatible with the operation of the market economy.

40
00:03:36.920 --> 00:03:42.380
It advocated the abolition of privileges, because it wanted to give a free hand to those

41
00:03:42.380 --> 00:03:49.240
men who had the ingenuity to produce in the cheapest way the greatest quantity of products

42
00:03:49.240 --> 00:03:51.920
of the best quality.

43
00:03:51.920 --> 00:03:57.800
In this negative aspect of their program, the utilitarians and economists agreed with

44
00:03:57.800 --> 00:04:03.520
with the ideas of those who attacked the status privileges from the point of view of an alleged

45
00:04:03.520 --> 00:04:09.000
right of nature and the doctrine of the equality of all men.

46
00:04:09.000 --> 00:04:14.400
Both these groups were unanimous in the support of the principle of the equality of all men

47
00:04:14.400 --> 00:04:20.680
under the law, but this unanimity did not eradicate the fundamental opposition between

48
00:04:20.680 --> 00:04:23.320
the two lines of thought.

49
00:04:23.320 --> 00:04:29.720
In the opinion of the natural law school, all men are biologically equal, and therefore

50
00:04:29.720 --> 00:04:35.080
have the inalienable right to an equal share in all things.

51
00:04:35.080 --> 00:04:39.400
The first theorem is manifestly contrary to fact.

52
00:04:39.400 --> 00:04:44.880
The second theorem leads, when consistently interpreted, to such absurdities that its

53
00:04:44.880 --> 00:04:52.840
supporters abandon logical consistency altogether, and ultimately come to consider every institution,

54
00:04:52.840 --> 00:05:00.720
However discriminating and iniquitous as compatible with the inalienable equality of all men.

55
00:05:00.720 --> 00:05:06.240
The eminent Virginians, whose ideas animated the American Revolution, acquiesced in the

56
00:05:06.240 --> 00:05:09.300
preservation of Negro slavery.

57
00:05:09.300 --> 00:05:15.140
The most despotic system of government that history has ever known, Bolshevism, parades

58
00:05:15.140 --> 00:05:22.240
as the very incarnation of the principle of equality and liberty of all men.

59
00:05:22.240 --> 00:05:27.600
The liberal champions of equality under the law were fully aware of the fact that men

60
00:05:27.600 --> 00:05:34.920
are born unequal, and that it is precisely their inequality that generates social cooperation

61
00:05:34.920 --> 00:05:37.760
and civilization.

62
00:05:37.760 --> 00:05:43.760
Equality under the law was, in their opinion, not designed to correct the inexorable facts

63
00:05:43.760 --> 00:05:48.960
of the universe, and to make natural inequality disappear.

64
00:05:48.960 --> 00:05:55.880
It was, on the contrary, the device to secure for the whole of mankind the maximum of benefits

65
00:05:55.880 --> 00:05:58.240
it can derive from it.

66
00:05:58.240 --> 00:06:04.660
Hence, no man-made institution should prevent a man from attaining that station in which

67
00:06:04.660 --> 00:06:08.360
he can best serve his fellow citizens.

68
00:06:08.360 --> 00:06:13.940
The liberals approached the problem not from the point of view of alleged inalienable rights

69
00:06:13.940 --> 00:06:25.160
Equality under the law is, in their eyes, good, because it best serves the interests

70
00:06:25.160 --> 00:06:26.660
of all.

71
00:06:26.660 --> 00:06:32.260
It leaves it to the voters to decide who should hold public office, and to the consumers to

72
00:06:32.260 --> 00:06:36.260
decide who should direct production activities.

73
00:06:36.260 --> 00:06:42.660
It thus eliminates the causes of violent conflict, and secures a steady progress toward a more

74
00:06:42.660 --> 00:06:46.900
or Satisfactory State of Human Affairs.

75
00:06:46.900 --> 00:06:53.540
The triumph of this liberal philosophy produced all those phenomena which, in their totality,

76
00:06:53.540 --> 00:06:56.660
are called modern Western civilization.

77
00:06:56.660 --> 00:07:03.320
However, this new ideology could triumph only within an environment in which the ideal of

78
00:07:03.320 --> 00:07:06.980
income equality was very weak.

79
00:07:06.980 --> 00:07:12.300
If the Englishmen of the 18th century had been preoccupied with the chimera of income

80
00:07:12.300 --> 00:07:18.520
equality, laissez-faire philosophy would not have appealed to them, just as it does not

81
00:07:18.520 --> 00:07:22.980
appeal today to the Chinese or the Mohammedans.

82
00:07:22.980 --> 00:07:28.980
In this sense, the historian must acknowledge that the ideological heritage of feudalism

83
00:07:28.980 --> 00:07:35.260
and the manorial system contributed to the rise of our modern civilization, however different

84
00:07:35.260 --> 00:07:37.300
it is.

85
00:07:37.300 --> 00:07:43.540
Those 18th century philosophers who were foreign to the ideas of the new utilitarian theory

86
00:07:43.540 --> 00:07:50.580
could still speak of a superiority of conditions in China and in the Mohammedan countries.

87
00:07:50.580 --> 00:07:56.540
They knew it is true very little about the social structure of the oriental world.

88
00:07:56.540 --> 00:08:02.600
What they found praiseworthy in the dim reports they had obtained was the absence of a hereditary

89
00:08:02.600 --> 00:08:06.480
and of big land holdings.

90
00:08:06.480 --> 00:08:15.200
As they fancied it, these nations had succeeded better in establishing equality than their own nations.

91
00:08:15.200 --> 00:08:22.360
Then later in the 19th century, these claims were renewed by the nationalists of the nations concerned.

92
00:08:22.360 --> 00:08:28.560
The cavalcade was headed by pan-Slavism, whose champions exalted the eminence of communal

93
00:08:28.560 --> 00:08:37.440
Social Land Tenure as realized in the Russian Mir and Artel and in the Zadruga of the Yugoslavs.

94
00:08:37.440 --> 00:08:42.400
With the progress of the semantic confusion which has converted the meaning of political

95
00:08:42.400 --> 00:08:49.800
terms into their very opposite, the epithet democratic is now lavishly spent.

96
00:08:49.800 --> 00:08:56.560
The Moslem peoples, which never knew any form of government other than unlimited absolutism,

97
00:08:56.560 --> 00:09:04.560
are called democratic. Indian nationalists take pleasure in speaking of traditional Hindu democracy.

98
00:09:04.560 --> 00:09:12.560
Economists and historians are indifferent with regard to all such emotional effusions.

99
00:09:12.560 --> 00:09:20.560
In describing the civilizations of the Asiatics as inferior civilizations, they do not express any value judgments.

100
00:09:20.560 --> 00:09:27.160
They merely establish the fact that these peoples did not bring forth those ideological

101
00:09:27.160 --> 00:09:33.720
and institutional conditions which in the West produced that capitalist civilization,

102
00:09:33.720 --> 00:09:40.640
the superiority of which the Asiatics today implicitly accept, in clamoring at least for

103
00:09:40.640 --> 00:09:46.400
its technological and therapeutical implements and paraphernalia.

104
00:09:46.400 --> 00:09:53.000
It is precisely when one recognizes the fact that in the past the culture of many Asiatic

105
00:09:53.000 --> 00:09:59.240
peoples was far ahead of that of their Western contemporaries, that the question is raised

106
00:09:59.240 --> 00:10:04.300
as to what causes stopped progress in the East.

107
00:10:04.300 --> 00:10:08.500
In the case of the Hindu civilization, the answer is obvious.

108
00:10:08.500 --> 00:10:15.180
Here the iron grip of the inflexible caste system stunted individual initiative and nipped

109
00:10:15.180 --> 00:10:20.620
in the Bud every attempt to deviate from traditional standards.

110
00:10:20.620 --> 00:10:25.980
But China and the Mohammedan countries were, apart from the slavery of a comparatively

111
00:10:25.980 --> 00:10:30.660
small number of people, free from caste rigidity.

112
00:10:30.660 --> 00:10:38.080
They were ruled by autocrats, but the individual subjects were equal under the autocrat.

113
00:10:38.080 --> 00:10:43.860
Even slaves and eunuchs were not barred from access to the highest dignities.

114
00:10:43.860 --> 00:10:50.580
It is this equality before the ruler to which people refer today in speaking of the supposed

115
00:10:50.580 --> 00:10:55.080
democratic customs of these orientals.

116
00:10:55.080 --> 00:11:00.020
The notion of the economic equality of the subjects to which these peoples and their

117
00:11:00.020 --> 00:11:05.000
rulers were committed was not well defined, but vague.

118
00:11:05.000 --> 00:11:11.700
But it was very distinct in one respect, namely in utterly condemning the accumulation of

119
00:11:11.700 --> 00:11:15.840
of a large fortune by any private individual.

120
00:11:15.840 --> 00:11:22.060
The rulers considered wealthy subjects a threat to their political supremacy.

121
00:11:22.060 --> 00:11:28.660
All people, the rulers as well as the ruled, were convinced that no man can amass abundant

122
00:11:28.660 --> 00:11:35.820
means otherwise than by depriving others of what by rights should belong to them, and

123
00:11:35.820 --> 00:11:41.460
that the riches of the wealthy few are the cause of the poverty of the many.

124
00:11:41.460 --> 00:11:48.340
The position of wealthy businessmen was in all oriental countries extremely precarious.

125
00:11:48.340 --> 00:11:51.380
They were at the mercy of the officeholders.

126
00:11:51.380 --> 00:11:56.340
Even lavish bribes failed to protect them against confiscation.

127
00:11:56.340 --> 00:12:02.620
The whole people rejoiced whenever a prosperous businessmen fell victim to the envy and hatred

128
00:12:02.620 --> 00:12:05.420
of the administrators.

129
00:12:05.420 --> 00:12:11.220
This anti-crematistic spirit arrested the progress of civilization in the East, and

130
00:12:11.220 --> 00:12:14.860
kept the masses on the verge of starvation.

131
00:12:14.860 --> 00:12:22.420
As capital accumulation was checked, there could be no question of technological improvement.

132
00:12:22.420 --> 00:12:28.580
Capitalism came to the East as an imported alien ideology, imposed by foreign armies

133
00:12:28.580 --> 00:12:34.420
Studies and Navies in the shape either of colonial domination or of extraterritorial

134
00:12:34.420 --> 00:12:36.460
jurisdiction.

135
00:12:36.460 --> 00:12:41.820
These violent methods were certainly not the appropriate means to change the traditionalist

136
00:12:41.820 --> 00:12:44.620
mentality of the Orientals.

137
00:12:44.620 --> 00:12:50.340
But acknowledgement of this fact does not invalidate the statement that it was the abhorrence

138
00:12:50.340 --> 00:12:57.900
of capital accumulation that doomed many hundreds of millions of Asiatics to poverty and starvation.

139
00:12:58.580 --> 00:13:04.580
The notion of equality which our contemporary welfare propagandists have in mind

140
00:13:04.580 --> 00:13:08.580
is the replica of the Asiatic idea of equality.

141
00:13:08.580 --> 00:13:15.580
While vague in every other respect, it is very clear in its abomination of large fortunes.

142
00:13:15.580 --> 00:13:19.580
It objects to big business and great riches.

143
00:13:19.580 --> 00:13:24.580
It advocates various measures to stunt the growth of individual enterprises

144
00:13:24.580 --> 00:13:32.740
Enterprises and to bring about more equality by confiscatory taxation of incomes and estates,

145
00:13:32.740 --> 00:13:37.620
and it appeals to the envy of the injudicious masses.

146
00:13:37.620 --> 00:13:44.260
The immediate economic consequences of confiscatory policies have been dealt with already.

147
00:13:44.260 --> 00:13:51.400
It is obvious that in the long run such policies must result not only in slowing down or totally

148
00:13:51.400 --> 00:13:58.320
be checking the further accumulation of capital, but also in the consumption of capital accumulated

149
00:13:58.320 --> 00:14:00.720
in previous days.

150
00:14:00.720 --> 00:14:06.640
They would not only arrest further progress toward more material prosperity, but even

151
00:14:06.640 --> 00:14:12.200
reverse the trend and bring about a tendency toward progressing poverty.

152
00:14:12.200 --> 00:14:18.860
The ideals of Asia would triumph, and finally East and West would meet on an equal level

153
00:14:18.860 --> 00:14:21.460
School of Distress.

154
00:14:21.460 --> 00:14:27.460
The welfare school pretends not only to stand for the interests of the whole of society

155
00:14:27.460 --> 00:14:34.060
as against the selfish interests of profit-seeking business, it contends moreover that it takes

156
00:14:34.060 --> 00:14:40.580
into account the lasting secular interests of the nation as against the short-term concerns

157
00:14:40.580 --> 00:14:47.260
of speculators, promoters and capitalists who are exclusively committed to profiteering

158
00:14:47.260 --> 00:14:52.300
and do not bother about the future of the whole of society.

159
00:14:52.300 --> 00:14:58.420
This second claim is, of course, irreconcilable with the emphasis laid by the school upon

160
00:14:58.420 --> 00:15:03.020
short-run policies as against long-run concerns.

161
00:15:03.020 --> 00:15:08.920
However, consistency is not one of the virtues of the welfare doctrinaires.

162
00:15:08.920 --> 00:15:14.060
Let us, for the sake of argument, disregard this contradiction in their statements and

163
00:15:14.060 --> 00:15:17.900
examine them without reference to their inconsistency.

164
00:15:17.900 --> 00:15:25.020
Saving, capital accumulation and investment withhold the amount concerned from current

165
00:15:25.020 --> 00:15:30.660
consumption and dedicate it to the improvement of future conditions.

166
00:15:30.660 --> 00:15:37.500
The saver forgoes the increase in present satisfaction in order to improve his own well-being

167
00:15:37.500 --> 00:15:41.460
and that of his family in the more distant future.

168
00:15:41.460 --> 00:15:46.980
His intentions are certainly selfish in the popular connotation of the term.

169
00:15:46.980 --> 00:15:52.680
But the effects of his selfish conduct are beneficial to the lasting secular interests

170
00:15:52.680 --> 00:15:57.740
of the whole of society, as well as of all its members.

171
00:15:57.740 --> 00:16:04.460
His conduct produces all those phenomena to which even the most bigoted welfare propagandist

172
00:16:04.460 --> 00:16:10.460
attributes the epithets economic improvement and progress.

173
00:16:10.460 --> 00:16:16.420
The policies advocated by the welfare school remove the incentive to saving on the part

174
00:16:16.420 --> 00:16:18.620
of private citizens.

175
00:16:18.620 --> 00:16:24.380
On one hand, the measures directed toward a curtailment of big incomes and fortunes

176
00:16:24.380 --> 00:16:31.120
seriously reduce or destroy entirely the wealthier people's power to save.

177
00:16:31.120 --> 00:16:36.640
On the other hand, the sums which people with moderate incomes previously contributed to

178
00:16:36.640 --> 00:16:42.680
to Capital Accumulation are manipulated in such a way as to channel them into the lines

179
00:16:42.680 --> 00:16:50.680
of consumption. When in the past a man saved by entrusting money to a savings bank or by

180
00:16:50.680 --> 00:16:58.200
taking out an insurance policy, the bank or the insurance company invested the equivalent.

181
00:16:58.200 --> 00:17:04.680
Even if the saver at a later date consumed the sum saved, no disinvestment and capital

182
00:17:04.680 --> 00:17:11.080
Social Consumption Resulted. The total investments of the savings banks and the insurance companies

183
00:17:11.080 --> 00:17:18.800
steadily increased in spite of these withdrawals. Today there prevails a tendency to push the

184
00:17:18.800 --> 00:17:25.560
banks and the insurance companies more and more toward investment in government bonds.

185
00:17:25.560 --> 00:17:31.260
The funds of the social security institutions completely consist in titles to the public

186
00:17:31.260 --> 00:17:32.880
Debt.

187
00:17:32.880 --> 00:17:38.940
As far as public indebtedness was incurred by spending for current expenditure, the saving

188
00:17:38.940 --> 00:17:44.300
of the individual does not result in capital accumulation.

189
00:17:44.300 --> 00:17:51.740
While in the unhampered market economy, saving, capital accumulation and investment coincide.

190
00:17:51.740 --> 00:17:57.420
In the interventionist economy, the individual citizen's savings can be dissipated by the

191
00:17:57.420 --> 00:17:59.140
government.

192
00:17:59.140 --> 00:18:06.100
The individual citizen restricts his current consumption in order to provide for his own future.

193
00:18:06.100 --> 00:18:12.340
In doing this, he contributes his share to the further economic advancement of society

194
00:18:12.340 --> 00:18:17.300
and to an improvement of his fellow men's standard of living.

195
00:18:17.300 --> 00:18:23.180
But the government steps in and removes the socially beneficial effects of the individual's

196
00:18:23.180 --> 00:18:24.780
conduct.

197
00:18:24.780 --> 00:18:31.100
Everything explodes better than this example, the welfare cliché that contrasts the selfish

198
00:18:31.100 --> 00:18:36.660
and narrow-minded individual, exclusively committed to the enjoyment of the pleasures

199
00:18:36.660 --> 00:18:42.820
of the moment, and having no regard for the well-being of his fellow men and for the perennial

200
00:18:42.820 --> 00:18:50.380
concerns of society, and the far-sighted benevolent government, unflaggingly devoted to the promotion

201
00:18:50.380 --> 00:18:54.980
of the Lasting Welfare of the Whole of Society.

202
00:18:54.980 --> 00:18:59.660
The welfare propagandist, it is true, raises two objections.

203
00:18:59.660 --> 00:19:07.580
First, that the individual's motive is selfishness, while the government is imbued with good intentions.

204
00:19:07.580 --> 00:19:13.760
Let us admit, for the sake of argument, that individuals are devilish and rulers angelic.

205
00:19:13.760 --> 00:19:21.240
But what counts in life and reality is, whatever Kant may have said, not good intentions, but

206
00:19:21.240 --> 00:19:23.120
accomplishments.

207
00:19:23.120 --> 00:19:29.080
What makes the existence and the evolution of society possible is precisely the fact

208
00:19:29.080 --> 00:19:35.880
that peaceful cooperation under the social division of labor, in the long run, best serves

209
00:19:35.880 --> 00:19:39.660
the selfish concerns of all individuals.

210
00:19:39.660 --> 00:19:45.340
The eminence of the market society is that its whole functioning and operation is the

211
00:19:45.340 --> 00:19:48.380
consummation of this principle.

212
00:19:48.380 --> 00:19:53.880
The second objection points out that under the welfare system, capital accumulation by

213
00:19:53.880 --> 00:20:00.300
the government and public investment are to be substituted for private accumulation and

214
00:20:00.300 --> 00:20:02.020
investment.

215
00:20:02.020 --> 00:20:07.480
It refers to the fact that not all the funds which governments borrowed in the past were

216
00:20:07.480 --> 00:20:10.320
were spent for current expenditure.

217
00:20:10.320 --> 00:20:17.320
A considerable part was invested in the construction of roads, railroads, harbors, airports, power

218
00:20:17.320 --> 00:20:20.880
stations and other public works.

219
00:20:20.880 --> 00:20:26.720
Another no less conspicuous part was spent for waging wars of defense, which admittedly

220
00:20:26.720 --> 00:20:30.280
could not be financed by other methods.

221
00:20:30.280 --> 00:20:33.640
The objection, however, misses the point.

222
00:20:33.640 --> 00:20:39.360
What matters is that a part of the individual's saving is employed by government for current

223
00:20:39.360 --> 00:20:45.520
consumption, and that nothing hinders the government from so increasing this part that

224
00:20:45.520 --> 00:20:49.080
it in fact absorbs the whole.

225
00:20:49.080 --> 00:20:54.440
It is obvious that if governments make it impossible for their subjects to accumulate

226
00:20:54.440 --> 00:21:01.120
and to invest additional capital, responsibility for the formation of new capital, if there

227
00:21:01.120 --> 00:21:05.320
There is to be any, devolves upon government.

228
00:21:05.320 --> 00:21:10.920
The welfare propagandist, in whose opinion government control is a synonym for God's

229
00:21:10.920 --> 00:21:19.040
providential care that wisely and imperceptibly leads mankind to higher and more perfect stages

230
00:21:19.040 --> 00:21:26.080
of an inescapable evolutionary progress, fails to see the intricacy of the problem and its

231
00:21:26.080 --> 00:21:28.400
ramifications.

232
00:21:28.400 --> 00:21:34.920
Not only further saving and accumulation of additional capital, but no less, the maintenance

233
00:21:34.920 --> 00:21:42.560
of capital at its present level, require curtailing today's consumption in order to be more amply

234
00:21:42.560 --> 00:21:44.840
supplied later.

235
00:21:44.840 --> 00:21:52.080
It is abstinence, a refraining from satisfactions which could be reaped instantly.

236
00:21:52.080 --> 00:21:57.720
The market economy brings about an environment in which such abstinence is practiced to a

237
00:21:57.720 --> 00:22:04.400
to a certain extent, and in which its product, the accumulated capital, is invested in those

238
00:22:04.400 --> 00:22:10.320
lines in which it best satisfies the most urgent needs of the consumers.

239
00:22:10.320 --> 00:22:16.680
The questions arise whether government accumulation of capital can be substituted for private

240
00:22:16.680 --> 00:22:24.180
accumulation, and in what way a government would invest additional capital accumulated.

241
00:22:24.180 --> 00:22:28.920
These problems do not refer only to a socialist commonwealth.

242
00:22:28.920 --> 00:22:35.060
They are no less urgent in an interventionist scheme that has either totally or almost totally

243
00:22:35.060 --> 00:22:40.540
removed the conditions making for private capital formation.

244
00:22:40.540 --> 00:22:47.620
Even the United States is manifestly more and more approaching such a state of affairs.

245
00:22:47.620 --> 00:22:53.240
Let us consider the case of a government that has got control of the employment of a considerable

246
00:22:53.240 --> 00:22:56.200
Capital Part of the Citizen's Savings.

247
00:22:56.200 --> 00:23:02.000
The investments of the social security system, of the private insurance companies, of savings

248
00:23:02.000 --> 00:23:08.920
banks and of commercial banks, are to a great extent determined by the authorities and channeled

249
00:23:08.920 --> 00:23:11.360
into the public debt.

250
00:23:11.360 --> 00:23:14.480
The private citizens are still savers.

251
00:23:14.480 --> 00:23:20.140
But whether or not their savings bring about capital accumulation and thus increase the

252
00:23:20.140 --> 00:23:26.300
The quantity of capital goods available for an improvement of the apparatus of production

253
00:23:26.300 --> 00:23:31.360
depends on the employment of the funds borrowed by the government.

254
00:23:31.360 --> 00:23:37.220
If the government squanders these sums either by spending them for current expenditure or

255
00:23:37.220 --> 00:23:44.620
by malinvestment, the process of capital accumulation as inaugurated by the saving of individuals

256
00:23:44.620 --> 00:23:50.300
and continued by the investment operations of the banks and insurance enterprises is

257
00:23:50.300 --> 00:23:56.940
cut off. A contrast between the two ways may clarify the matter.

258
00:23:56.940 --> 00:24:04.420
In the process of the unhampered market economy, Bill saves $100 and deposits it with a savings

259
00:24:04.420 --> 00:24:11.740
bank. If he is wise in choosing a bank which is wise in its lending and investing business,

260
00:24:11.740 --> 00:24:18.580
An increment in capital results and brings about a rise in the productivity of labor.

261
00:24:18.580 --> 00:24:24.700
Out of the surplus thus produced, a part goes to Bill in the shape of interest.

262
00:24:24.700 --> 00:24:30.900
If Bill blunders in the choice of his bank and entrusts his $100 to a bank that fails,

263
00:24:30.900 --> 00:24:33.620
he goes empty-handed.

264
00:24:33.620 --> 00:24:39.260
In the process of government interference with saving and investment, Paul, in the year

265
00:24:39.260 --> 00:24:47.740
1940 saves by paying $100 to the National Social Security Institution. He receives in

266
00:24:47.740 --> 00:24:55.740
exchange a claim which is virtually an unconditional government IOU. If the government spends the

267
00:24:55.740 --> 00:25:03.020
$100 for current expenditure, no additional capital comes into existence and no increase

268
00:25:03.020 --> 00:25:06.540
in the Productivity of Labor Results.

269
00:25:06.540 --> 00:25:12.560
The government's IOU is a check drawn upon the future taxpayers.

270
00:25:12.560 --> 00:25:19.440
In 1970, a certain Peter may have to fulfill the government's promise, although he himself

271
00:25:19.440 --> 00:25:26.780
does not derive any benefit from the fact that Paul, in 1940, saved $100.

272
00:25:26.780 --> 00:25:34.240
Thus it becomes obvious that there is no need to look at Soviet Russia in order to comprehend

273
00:25:34.240 --> 00:25:38.540
the role that public finance plays in our day.

274
00:25:38.540 --> 00:25:44.640
The trumpery argument that the public debt is no burden because we owe it to ourselves

275
00:25:44.640 --> 00:25:46.440
is delusive.

276
00:25:46.440 --> 00:25:51.060
The Pauls of 1940 do not owe it to themselves.

277
00:25:51.060 --> 00:25:57.220
It is the Peters of 1970 who owe it to the Pauls of 1940.

278
00:25:57.220 --> 00:26:01.840
The whole system is the acme of the short-run principle.

279
00:26:01.840 --> 00:26:09.200
The statesmen of 1940 solve their problems by shifting them to the statesmen of 1970.

280
00:26:09.200 --> 00:26:15.660
On that date, the statesmen of 1940 will be either dead or elder statesmen, glorying in

281
00:26:15.660 --> 00:26:20.020
their wonderful achievement, Social Security.

282
00:26:20.020 --> 00:26:26.060
The Santa Claus fables of the welfare school are characterized by their complete failure

283
00:26:26.060 --> 00:26:29.460
to grasp the problems of capital.

284
00:26:29.460 --> 00:26:36.300
It is precisely this defect that makes it imperative to deny them the appellation welfare

285
00:26:36.300 --> 00:26:40.860
economics, with which they describe their doctrines.

286
00:26:40.860 --> 00:26:47.140
He who does not take into consideration the scarcity of capital goods available is not

287
00:26:47.140 --> 00:26:49.900
an economist, but a fabulist.

288
00:26:49.900 --> 00:26:55.340
He does not deal with reality, but with a fabulous world of plenty.

289
00:26:55.340 --> 00:27:01.660
All the effusions of the contemporary welfare school are, like those of the socialist authors,

290
00:27:01.660 --> 00:27:07.700
based on the implicit assumption that there is an abundant supply of capital goods.

291
00:27:07.700 --> 00:27:14.560
Then, of course, it seems easy to find a remedy for all ills, to give to everybody according

292
00:27:14.560 --> 00:27:19.460
to his needs, and to make everyone perfectly happy.

293
00:27:19.460 --> 00:27:25.100
It is true that some of the champions of the welfare school feel troubled by a dim notion

294
00:27:25.100 --> 00:27:27.460
of the problems involved.

295
00:27:27.460 --> 00:27:33.820
They realize that capital must be maintained intact if the future productivity of labor

296
00:27:33.820 --> 00:27:36.020
is not to be impaired.

297
00:27:36.020 --> 00:27:43.180
However, these authors, too, fail to comprehend that even the mere maintenance of capital

298
00:27:43.180 --> 00:27:48.000
depends on the skillful handling of the problems of investment.

299
00:27:48.000 --> 00:27:55.520
that it is always the fruit of successful speculation and that endeavors to maintain capital intact

300
00:27:55.520 --> 00:28:02.840
presuppose economic calculation and thereby the operation of the market economy.

301
00:28:02.840 --> 00:28:07.560
The other welfare propagandists ignore the issue completely.

302
00:28:07.560 --> 00:28:13.780
It does not matter whether or not they endorse in this respect the Marxian scheme or resort

303
00:28:13.780 --> 00:28:19.620
to the invention of new chimerical notions such as the self-perpetuating character of

304
00:28:19.620 --> 00:28:21.820
useful things.

305
00:28:21.820 --> 00:28:27.460
In any event, their teachings are designed to provide a justification for the doctrine

306
00:28:27.460 --> 00:28:34.780
which blames over-saving and under-consumption for all that is unsatisfactory and recommends

307
00:28:34.780 --> 00:28:38.340
spending as a panacea.

308
00:28:38.340 --> 00:28:45.380
When pushed hard by economists, some welfare propagandists and socialists admit that impairment

309
00:28:45.380 --> 00:28:51.420
of the average standard of living can only be avoided by the maintenance of capital already

310
00:28:51.420 --> 00:28:59.420
accumulated, and that economic improvement depends on accumulation of additional capital.

311
00:28:59.420 --> 00:29:04.300
Maintenance of capital and accumulation of new capital, they say, will henceforth be

312
00:29:04.300 --> 00:29:06.560
a task of government.

313
00:29:06.560 --> 00:29:11.880
They will no longer be left to the selfishness of individuals exclusively concerned with

314
00:29:11.880 --> 00:29:15.360
their own enrichment and that of their families.

315
00:29:15.360 --> 00:29:21.080
The authorities will deal with them from the point of view of the common wheel.

316
00:29:21.080 --> 00:29:27.120
The crux of the issue lies precisely in the operation of selfishness.

317
00:29:27.120 --> 00:29:33.760
Under the system of inequality, this selfishness impels a man to save and always to invest

318
00:29:33.760 --> 00:29:40.480
his savings in such a way as to fill best the most urgent needs of the consumers.

319
00:29:40.480 --> 00:29:44.300
Under the system of equality, this motive fades.

320
00:29:44.300 --> 00:29:50.200
The curtailment of consumption in the immediate future is a perceptible privation, a blow

321
00:29:50.200 --> 00:29:53.420
to the individual's selfish aims.

322
00:29:53.420 --> 00:29:59.440
The increment in the supply available in more distant periods of the future, which is expected

323
00:29:59.440 --> 00:30:05.520
from this immediate privation is less recognizable for the average intellect.

324
00:30:05.520 --> 00:30:12.240
Moreover, its beneficial effects are, under a system of public accumulation, so thinly

325
00:30:12.240 --> 00:30:17.920
spread out that they hardly appear to a man as an appropriate compensation for what he

326
00:30:17.920 --> 00:30:20.560
forgoes today.

327
00:30:20.560 --> 00:30:26.800
The welfare school blithely assumes that the expectation that the fruits of today's saving

328
00:30:26.800 --> 00:30:32.980
will be reaped equally by the whole of the future generation will turn everybody's selfishness

329
00:30:32.980 --> 00:30:35.580
toward more saving.

330
00:30:35.580 --> 00:30:41.580
Thus they fall prey to a corollary of Plato's illusion that preventing people from knowing

331
00:30:41.580 --> 00:30:47.560
which children's parents they are will inspire them with parental feelings toward all younger

332
00:30:47.560 --> 00:30:49.280
people.

333
00:30:49.280 --> 00:30:54.680
It would have been wise if the welfare school had been mindful of Aristotle's observation

334
00:30:54.680 --> 00:31:01.800
that the result will rather be that all parents will be equally indifferent to all children.

335
00:31:01.800 --> 00:31:08.080
The problem of maintaining and increasing capital is insoluble for a socialist system

336
00:31:08.080 --> 00:31:12.280
which cannot resort to economic calculation.

337
00:31:12.280 --> 00:31:18.200
Such a socialist commonwealth lacks any method of ascertaining whether its capital equipment

338
00:31:18.200 --> 00:31:21.120
is decreasing or increasing.

339
00:31:21.120 --> 00:31:26.880
But under interventionism, and under a socialist system which is still in a position to resort

340
00:31:26.880 --> 00:31:34.680
to economic calculation on the basis of prices established abroad, things are not so bad.

341
00:31:34.680 --> 00:31:40.340
Here it is at least possible to comprehend what is going on.

342
00:31:40.340 --> 00:31:46.800
If such a country is under a democratic government, the problems of capital preservation and accumulation

343
00:31:46.800 --> 00:31:52.520
and the creation of additional capital become the main issue of political antagonisms.

344
00:31:52.520 --> 00:31:58.360
There will be demagogues to contend that more could be dedicated to current consumption

345
00:31:58.360 --> 00:32:04.500
than those who happen to be in power or the other parties are disposed to allow.

346
00:32:04.500 --> 00:32:10.120
They will always be ready to declare that, in the present emergency, there cannot be

347
00:32:10.120 --> 00:32:17.240
be any question of piling up capital for later days, and that, on the contrary, consumption

348
00:32:17.240 --> 00:32:22.780
of a part of the capital already available is fully justified.

349
00:32:22.780 --> 00:32:28.920
The various parties will outbid one another in promising the voters more government spending,

350
00:32:28.920 --> 00:32:36.200
and at the same time a reduction of all taxes which do not exclusively burden the rich.

351
00:32:36.200 --> 00:32:41.640
In the days of laissez-faire, people looked upon government as an institution whose operation

352
00:32:41.640 --> 00:32:49.220
required an expenditure of money which must be defrayed by taxes paid by the citizens.

353
00:32:49.220 --> 00:32:54.280
In the individual citizens' budgets, the state was an item of expenditure.

354
00:32:54.280 --> 00:33:01.640
Today, the majority of the citizens look upon government as an agency dispensing benefits.

355
00:33:01.640 --> 00:33:07.360
The wage earners and the farmers expect to receive from the Treasury more than they contribute

356
00:33:07.360 --> 00:33:09.200
to its revenues.

357
00:33:09.200 --> 00:33:14.080
The State is in their eyes a spender, not a taker.

358
00:33:14.080 --> 00:33:20.480
These popular tenets were rationalized and elevated to the rank of a quasi-economic doctrine

359
00:33:20.480 --> 00:33:24.260
by Lord Keynes and his disciples.

360
00:33:24.260 --> 00:33:30.160
Spending and unbalanced budgets are merely synonyms for capital consumption.

361
00:33:30.160 --> 00:33:36.180
If current expenditure, however beneficial it may be considered, is financed by taxing

362
00:33:36.180 --> 00:33:42.800
away those parts of higher incomes which would have been employed for investment, by inheritance

363
00:33:42.800 --> 00:33:50.240
taxes or by borrowing, the government becomes a factor making for capital consumption.

364
00:33:50.240 --> 00:33:56.080
The fact that in present-day America there is probably still a surplus of annual capital

365
00:33:56.080 --> 00:34:02.600
Capital Accumulation over Annual Capital Consumption does not invalidate the statement that the

366
00:34:02.600 --> 00:34:08.180
total complex of the financial policies of the Federal Government, the states and the

367
00:34:08.180 --> 00:34:13.240
municipalities tends toward capital consumption.

368
00:34:13.240 --> 00:34:19.380
Many who are aware of the undesirable consequences of capital consumption are prone to believe

369
00:34:19.380 --> 00:34:24.900
that popular government is incompatible with sound financial policies.

370
00:34:24.900 --> 00:34:31.100
They fail to realize that not democracy as such is to be indicted, but the doctrines

371
00:34:31.100 --> 00:34:36.860
which aim at substituting the Santa Claus conception of government for the Night Watchman

372
00:34:36.860 --> 00:34:40.720
conception derided by LaSalle.

373
00:34:40.720 --> 00:34:47.100
What determines the course of a nation's economic policies is always the economic ideas held

374
00:34:47.100 --> 00:34:49.340
by public opinion.

375
00:34:49.340 --> 00:34:55.580
No government, whether democratic or dictatorial, can free itself from the sway of the generally

376
00:34:55.580 --> 00:34:58.860
accepted ideology.

377
00:34:58.860 --> 00:35:05.220
Those advocating a restriction of the Parliament's prerogatives in budgeting and taxation issues,

378
00:35:05.220 --> 00:35:11.140
or even a complete substitution of authoritarian government for representative government,

379
00:35:11.140 --> 00:35:16.420
are blinded by the chimerical image of a perfect chief of state.

380
00:35:16.420 --> 00:35:22.420
This man, no less benevolent than wise, would be sincerely dedicated to the promotion of

381
00:35:22.420 --> 00:35:25.420
his subject's lasting welfare.

382
00:35:25.420 --> 00:35:32.460
The real furor, however, turns out to be a mortal man, who first of all aims at the perpetuation

383
00:35:32.460 --> 00:35:38.420
of his own supremacy and that of his kin, his friends and his party.

384
00:35:38.420 --> 00:35:44.980
As far as he may resort to unpopular measures, he does so for the sake of these objectives.

385
00:35:44.980 --> 00:35:52.580
He does not invest and accumulate capital, he constructs fortresses and equips armies.

386
00:35:52.580 --> 00:35:58.460
The much-talked-about plans of the Soviet and Nazi dictators involved restriction of

387
00:35:58.460 --> 00:36:02.640
current consumption for the sake of investment.

388
00:36:02.640 --> 00:36:08.440
The Nazis never tried to suppress the truth that all these investments were designed as

389
00:36:08.440 --> 00:36:12.980
a preparation for the wars of aggression that they planned.

390
00:36:12.980 --> 00:36:19.180
The Soviets were less outspoken at the beginning, but today they proudly declare that all their

391
00:36:19.180 --> 00:36:24.700
planning was directed by considerations of war preparedness.

392
00:36:24.700 --> 00:36:31.620
History does not provide any example of capital accumulation brought about by a government.

393
00:36:31.620 --> 00:36:37.740
As far as governments invested in the construction of roads, railroads and other useful public

394
00:36:37.740 --> 00:36:44.280
Works, the capital needed was provided by the savings of individual citizens and borrowed

395
00:36:44.280 --> 00:36:46.240
by the government.

396
00:36:46.240 --> 00:36:51.640
But the greater part of the public debts was spent for current expenditure.

397
00:36:51.640 --> 00:36:56.980
What individuals had saved was dissipated by the government.

398
00:36:56.980 --> 00:37:03.320
Even those who look upon the inequality of wealth and incomes as a deplorable thing cannot

399
00:37:03.320 --> 00:37:10.080
deny that it makes for progressing capital accumulation, and it is additional capital

400
00:37:10.080 --> 00:37:17.520
accumulation alone that brings about technological improvement, rising wage rates and a higher

401
00:37:17.520 --> 00:37:20.560
standard of living.

402
00:37:20.560 --> 00:37:22.920
4.

403
00:37:22.920 --> 00:37:27.720
Insecurity The vague notion of security, which the welfare

404
00:37:27.720 --> 00:37:34.120
Secure Doctrineers have in mind, when complaining about insecurity, refers to something like

405
00:37:34.120 --> 00:37:41.360
a warrant, by means of which society guarantees to everybody, irrespective of his achievements,

406
00:37:41.360 --> 00:37:46.600
a standard of living which he considers satisfactory.

407
00:37:46.600 --> 00:37:52.760
Security in this sense, contend the eulogists of times gone by, was provided under the social

408
00:37:52.760 --> 00:37:55.680
regime of the Middle Ages.

409
00:37:55.680 --> 00:38:00.800
There is, however, no need to enter into an examination of these claims.

410
00:38:00.800 --> 00:38:05.840
Real conditions, even in the much glorified thirteenth century, were different from the

411
00:38:05.840 --> 00:38:10.160
ideal picture painted by scholastic philosophy.

412
00:38:10.160 --> 00:38:15.400
These schemes were meant as a description of conditions not as they were, but as they

413
00:38:15.400 --> 00:38:17.140
ought to be.

414
00:38:17.140 --> 00:38:22.840
But even these utopias of the philosophers and theologians allow for the existence of

415
00:38:22.840 --> 00:38:30.640
of a Numerous Class of Destitute Beggars, Entirely Dependent on Alms Given by the Wealthy.

416
00:38:30.640 --> 00:38:37.720
This is not precisely the idea of security which the modern usage of the term suggests.

417
00:38:37.720 --> 00:38:43.960
The concept of security is the wage earners and small farmers pendant to the concept of

418
00:38:43.960 --> 00:38:47.520
stability held by the capitalists.

419
00:38:47.520 --> 00:38:53.120
In the same way in which capitalists want to enjoy permanently an income which is not

420
00:38:53.120 --> 00:38:59.520
subject to the vicissitudes of changing human conditions, wage earners and small farmers

421
00:38:59.520 --> 00:39:03.720
want to make their revenues independent of the market.

422
00:39:03.720 --> 00:39:08.940
Both groups are eager to withdraw from the flux of historical events.

423
00:39:08.940 --> 00:39:13.160
No further occurrence should impair their own position.

424
00:39:13.160 --> 00:39:17.860
On the other hand, of course, they do not expressly object to an improvement of their

425
00:39:17.860 --> 00:39:20.540
material well-being.

426
00:39:20.540 --> 00:39:25.660
That structure of the market to which they have in the past adjusted their activities

427
00:39:25.660 --> 00:39:31.480
should never be altered in such a way as to force them to a new adjustment.

428
00:39:31.480 --> 00:39:37.420
The farmer in a European mountain valley waxes indignant upon encountering the competition

429
00:39:37.420 --> 00:39:41.620
of Canadian farmers producing at lower costs.

430
00:39:41.620 --> 00:39:47.260
The house painter boils over with rage when the introduction of a new appliance effects

431
00:39:47.260 --> 00:39:51.060
conditions in his sector of the labor market.

432
00:39:51.060 --> 00:39:57.020
It is obvious that the wishes of these people could be fulfilled only in a perfectly stagnant

433
00:39:57.020 --> 00:39:58.900
world.

434
00:39:58.900 --> 00:40:04.980
A characteristic feature of the unhampered market society is that it is no respecter

435
00:40:04.980 --> 00:40:07.460
of vested interests.

436
00:40:07.460 --> 00:40:12.740
Most achievements do not count if they are obstacles to further improvement.

437
00:40:12.740 --> 00:40:19.980
The advocates of security are therefore quite correct in blaming capitalism for insecurity.

438
00:40:19.980 --> 00:40:26.260
But they distort the facts in implying that the selfish interests of capitalists and entrepreneurs

439
00:40:26.260 --> 00:40:28.540
are responsible.

440
00:40:28.540 --> 00:40:34.900
What harms the vested interests is the urge of the consumers for the best possible satisfaction

441
00:40:34.900 --> 00:40:36.940
of their needs.

442
00:40:36.940 --> 00:40:42.980
Not the greed of the wealthy few, but the propensity of everyone to take advantage of

443
00:40:42.980 --> 00:40:51.260
any opportunity offered for an improvement of his own well-being makes for producer insecurity.

444
00:40:51.260 --> 00:40:56.500
What makes the house painter indignant is the fact that his fellow citizens prefer cheaper

445
00:40:56.500 --> 00:40:59.480
houses to more expensive ones.

446
00:40:59.480 --> 00:41:05.320
And the house painter himself, in preferring cheaper commodities to dearer ones, contributes

447
00:41:05.320 --> 00:41:12.040
presents his share to the emergence of insecurity in other sectors of the labor market.

448
00:41:12.040 --> 00:41:17.780
It is certainly true that the necessity to adjust oneself again and again to changing

449
00:41:17.780 --> 00:41:20.440
conditions is onerous.

450
00:41:20.440 --> 00:41:23.720
But change is the essence of life.

451
00:41:23.720 --> 00:41:30.400
In an unhampered market economy, the absence of security, that is, the absence of protection

452
00:41:30.400 --> 00:41:36.360
for Vested Interests is the principle that makes for a steady improvement in material

453
00:41:36.360 --> 00:41:37.960
well-being.

454
00:41:37.960 --> 00:41:43.280
There is no need to argue with the bucolic dreams of Virgil and of eighteenth century

455
00:41:43.280 --> 00:41:45.320
poets and painters.

456
00:41:45.320 --> 00:41:51.180
There is no need to examine the kind of security which the real shepherds enjoyed.

457
00:41:51.180 --> 00:41:55.400
No one really wishes to change places with them.

458
00:41:55.400 --> 00:42:00.720
The longing for security became especially intense in the Great Depression that started

459
00:42:00.720 --> 00:42:03.100
in 1929.

460
00:42:03.100 --> 00:42:07.600
It met with an enthusiastic response from the millions of unemployed.

461
00:42:07.600 --> 00:42:13.380
"'That is capitalism for you,' shouted the leaders of the pressure groups of the farmers

462
00:42:13.380 --> 00:42:15.340
and the wage earners.

463
00:42:15.340 --> 00:42:21.400
Yet the evils were not created by capitalism, but, on the contrary, by the endeavors to

464
00:42:21.400 --> 00:42:28.640
to reform and to improve the operation of the market economy by interventionism.

465
00:42:28.640 --> 00:42:36.120
The crash was the necessary outcome of the attempts to lower the rate of interest by credit expansion.

466
00:42:36.120 --> 00:42:44.040
Institutional unemployment was the inevitable result of the policy of minimum wage rates.

467
00:42:44.040 --> 00:42:48.280
5. Social Justice

468
00:42:48.280 --> 00:42:54.400
In one respect, at least, present-day welfare propagandists are superior to most of the

469
00:42:54.400 --> 00:42:58.080
older schools of socialists and reformers.

470
00:42:58.080 --> 00:43:04.440
They no longer stress a concept of social justice with whose arbitrary precepts men

471
00:43:04.440 --> 00:43:09.700
should comply, however disastrous the consequences may be.

472
00:43:09.700 --> 00:43:13.040
They endorse the utilitarian point of view.

473
00:43:13.040 --> 00:43:18.640
They do not oppose the principle that the only standard for appreciating social systems

474
00:43:18.640 --> 00:43:25.600
is judging them with regard to their ability to realize the ends sought by acting men.

475
00:43:25.600 --> 00:43:32.080
However, as soon as they embark upon an examination of the operation of the market economy, they

476
00:43:32.080 --> 00:43:34.840
forget their sound intentions.

477
00:43:34.840 --> 00:43:40.640
They hold up a set of metaphysical principles and condemn the market economy beforehand

478
00:43:40.640 --> 00:43:43.720
because it does not conform to them.

479
00:43:43.720 --> 00:43:49.760
They smuggle in through a back door the idea of an absolute standard of morality which

480
00:43:49.760 --> 00:43:52.820
they had barred from the main entrance.

481
00:43:52.820 --> 00:43:58.720
In searching for remedies against poverty, inequality and insecurity, they come step

482
00:43:58.720 --> 00:44:05.880
by step to endorse all the fallacies of the older schools of socialism and interventionism.

483
00:44:05.880 --> 00:44:10.840
They become more and more entangled in contradictions and absurdities.

484
00:44:10.840 --> 00:44:18.080
Finally, they cannot help catching at the straw at which all earlier unorthodox reformers

485
00:44:18.080 --> 00:44:23.480
tried to grasp the superior wisdom of perfect rulers.

486
00:44:23.480 --> 00:44:31.140
Their last word is always state, government, society, or other cleverly designed synonyms

487
00:44:31.140 --> 00:44:34.300
for the superhuman dictator.

488
00:44:34.300 --> 00:44:40.380
The welfare school, foremost among them the German Katheter Sozialisten and their adepts,

489
00:44:40.380 --> 00:44:46.920
the American institutionalists, have published many thousands of volumes stuffed with punctiliously

490
00:44:46.920 --> 00:44:52.060
documented information about unsatisfactory conditions.

491
00:44:52.060 --> 00:44:58.780
In their opinion, the collected materials clearly illustrate the shortcomings of capitalism.

492
00:44:58.780 --> 00:45:04.820
In truth, they merely illustrate the fact that human wants are practically unlimited,

493
00:45:04.820 --> 00:45:09.420
and that there is an immense field open for further improvements.

494
00:45:09.420 --> 00:45:15.260
They certainly do not prove any of the statements of the welfare doctrine.

495
00:45:15.260 --> 00:45:20.780
There is no need to tell us that an amplifier supply of various commodities would be welcome

496
00:45:20.780 --> 00:45:22.620
to all people.

497
00:45:22.620 --> 00:45:28.380
The question is whether there is any means of achieving a greater supply other than by

498
00:45:28.380 --> 00:45:34.900
by Increasing the Productivity of Labor by the Investment of Additional Capital.

499
00:45:34.900 --> 00:45:42.020
All the babble of the welfare propagandists aims only at one end, namely obscuring this

500
00:45:42.020 --> 00:45:46.180
point, the point that alone matters.

501
00:45:46.180 --> 00:45:51.980
While the accumulation of additional capital is the indispensable means for any further

502
00:45:51.980 --> 00:45:59.620
or Economic Progress, these people speak of over-saving and over-investment, of the necessity

503
00:45:59.620 --> 00:46:03.300
of spending more and of restricting output.

504
00:46:03.300 --> 00:46:10.340
Thus, they are the harbingers of economic retrogression, preaching a philosophy of decay

505
00:46:10.340 --> 00:46:12.900
and social disintegration.

506
00:46:12.900 --> 00:46:19.220
A society arranged according to their precepts may appear to some people as fair from the

507
00:46:19.220 --> 00:46:24.500
for the point of view of an arbitrary standard of social justice, but it will certainly be

508
00:46:24.500 --> 00:46:29.860
a society of progressing poverty for all its members.

509
00:46:29.860 --> 00:46:34.860
For a century at least, public opinion in western countries has been diluted by the

510
00:46:34.860 --> 00:46:41.940
idea that there is such a thing as the social question, or the labor problem.

511
00:46:41.940 --> 00:46:48.260
The meaning implied was that the very existence of capitalism hurts the vital interests of

512
00:46:48.260 --> 00:46:53.740
of the masses, especially those of the wage earners and the small farmers.

513
00:46:53.740 --> 00:46:59.620
The preservation of this manifestly unfair system cannot be tolerated.

514
00:46:59.620 --> 00:47:03.060
Radical reforms are indispensable.

515
00:47:03.060 --> 00:47:09.160
The truth is that capitalism has not only multiplied population figures, but at the

516
00:47:09.160 --> 00:47:15.740
same time improved the people's standard of living in an unprecedented way.

517
00:47:15.740 --> 00:47:22.500
Neither economic thinking nor historical experience suggests that any other social system could

518
00:47:22.500 --> 00:47:26.860
be more beneficial to the masses than capitalism.

519
00:47:26.860 --> 00:47:29.580
The results speak for themselves.

520
00:47:29.580 --> 00:47:33.940
The market economy needs no apologists and propagandists.

521
00:47:33.940 --> 00:47:40.100
It can apply to itself the words of Sir Christopher Wren's epitaph in St. Paul's.

522
00:47:40.100 --> 00:47:43.020
If you seek his monument, look around.