WEBVTT NOTE XXXVI. The Crisis of Interventionism 1 00:00:00.000 --> 00:00:05.000 Chapter 36. The Crisis of Interventionism 2 00:00:05.000 --> 00:00:10.000 1. The Harvest of Interventionism 3 00:00:10.000 --> 00:00:17.000 The interventionist policies, as practiced for many decades by all governments of the capitalistic West, 4 00:00:17.000 --> 00:00:22.000 have brought about all those effects which the economists predicted. 5 00:00:22.000 --> 00:00:37.000 There are wars and civil wars, ruthless oppression of the masses by clusters of self-appointed dictators, economic depressions, mass unemployment, capital consumption, famines. 6 00:00:37.000 --> 00:00:43.000 However, it is not these catastrophic events which have led to the crisis of interventionism. 7 00:00:43.000 --> 00:00:50.160 The interventionist doctrinaires and their followers explain all these undesired consequences 8 00:00:50.160 --> 00:00:53.880 as the unavoidable features of capitalism. 9 00:00:53.880 --> 00:00:59.940 As they see it, it is precisely these disasters that clearly demonstrate the necessity of 10 00:00:59.940 --> 00:01:03.040 intensifying interventionism. 11 00:01:03.040 --> 00:01:08.160 The failures of the interventionist policies do not in the least impair the popularity 12 00:01:08.160 --> 00:01:10.560 of the implied doctrine. 13 00:01:10.560 --> 00:01:17.600 They are so interpreted as to strengthen, not to lessen, the prestige of these teachings. 14 00:01:17.600 --> 00:01:24.200 As a vicious economic theory cannot be simply refuted by historical experience, the interventionist 15 00:01:24.200 --> 00:01:31.120 propagandists have been able to go on in spite of all the havoc they have spread. 16 00:01:31.120 --> 00:01:35.720 Yet the age of interventionism is reaching its end. 17 00:01:35.720 --> 00:01:41.720 The system has exhausted all its potentialities, and must disappear. 18 00:01:43.720 --> 00:01:47.720 2. The Exhaustion of the Reserve Fund 19 00:01:48.720 --> 00:02:04.720 The idea underlying all interventionist policies is that the higher income and wealth of the more affluent part of the population is a fund which can be freely used for the improvement of the conditions of the less prosperous. 20 00:02:04.720 --> 00:02:11.240 The essence of the interventionist policy is to take from one group to give to another. 21 00:02:11.240 --> 00:02:14.880 It is confiscation and distribution. 22 00:02:14.880 --> 00:02:21.320 Every measure is ultimately justified by declaring that it is fair to curb the rich for the benefit 23 00:02:21.320 --> 00:02:23.440 of the poor. 24 00:02:23.440 --> 00:02:29.160 In the field of public finance, progressive taxation of incomes and estates is the most 25 00:02:29.160 --> 00:02:33.200 characteristic manifestation of this doctrine. 26 00:02:33.200 --> 00:02:38.640 Purchase the rich and spend the revenue for the improvement of the condition of the poor, 27 00:02:38.640 --> 00:02:41.920 is the principle of contemporary budgets. 28 00:02:41.920 --> 00:02:48.100 In the field of industrial relations, shortening the hours of work, raising wages and a thousand 29 00:02:48.100 --> 00:02:54.680 other measures are recommended under the assumption that they favor the employee and burden the 30 00:02:54.680 --> 00:02:56.280 employer. 31 00:02:56.280 --> 00:03:01.680 Every issue of government and community affairs is dealt with exclusively from the point of 32 00:03:01.680 --> 00:03:10.320 An illustrative example is provided by the methods applied in the operation of nationalized 33 00:03:10.320 --> 00:03:13.680 and municipalized enterprises. 34 00:03:13.680 --> 00:03:17.880 These enterprises very often result in financial failure. 35 00:03:17.880 --> 00:03:23.960 Their accounts regularly show losses burdening the state or the city treasury. 36 00:03:23.960 --> 00:03:29.360 It is of no use to investigate whether the deficits are due to the notorious inefficiency 37 00:03:29.360 --> 00:03:36.200 of the Public Conduct of Business Enterprises, or at least partly to the inadequacy of the 38 00:03:36.200 --> 00:03:41.900 prices at which the commodities or services are sold to the customers. 39 00:03:41.900 --> 00:03:47.840 What matters more is the fact that the taxpayers must cover these deficits. 40 00:03:47.840 --> 00:03:51.560 The interventionists fully approve of this arrangement. 41 00:03:51.560 --> 00:03:56.480 They passionately reject the two other possible solutions. 42 00:03:56.480 --> 00:04:02.820 Raising the enterprises to private entrepreneurs, or raising the prices charged to the customers 43 00:04:02.820 --> 00:04:07.260 to such a height that no further deficit remains. 44 00:04:07.260 --> 00:04:12.620 The first of these proposals is, in their eyes, manifestly reactionary, because the 45 00:04:12.620 --> 00:04:18.460 inevitable trend of history is toward more and more socialization. 46 00:04:18.460 --> 00:04:24.640 The second is deemed anti-social, because it places a heavier load upon the consuming 47 00:04:24.640 --> 00:04:26.360 masses. 48 00:04:26.360 --> 00:04:32.880 It is fairer to make the taxpayers, that is, the wealthy citizens, bear the burden. 49 00:04:32.880 --> 00:04:38.400 Their ability to pay is greater than that of the average people riding the nationalized 50 00:04:38.400 --> 00:04:44.120 railroads and the municipalized subways, trolleys and buses. 51 00:04:44.120 --> 00:04:50.120 To ask that such public utilities should be self-supporting is, say the interventionists, 52 00:04:50.120 --> 00:04:55.060 a relic of the old-fashioned ideas of orthodox finance. 53 00:04:55.060 --> 00:05:01.340 One might as well aim at making the roads and the public schools self-supporting. 54 00:05:01.340 --> 00:05:06.400 It is not necessary to argue with the advocates of this deficit policy. 55 00:05:06.400 --> 00:05:12.320 It is obvious that the recourse to this ability to pay principle depends on the existence 56 00:05:12.320 --> 00:05:17.520 of such incomes and fortunes as can still be taxed away. 57 00:05:17.520 --> 00:05:24.040 It can no longer be resorted to once these extra funds have been exhausted by taxes and 58 00:05:24.040 --> 00:05:27.200 and other interventionist measures. 59 00:05:27.200 --> 00:05:32.320 This is precisely the present state of affairs in most of the European countries. 60 00:05:32.320 --> 00:05:38.580 The United States has not yet gone so far, but if the actual trend of its economic policies 61 00:05:38.580 --> 00:05:45.660 is not radically altered very soon, it will be in the same condition in a few years. 62 00:05:45.660 --> 00:05:50.560 For the sake of argument, we may disregard all the other consequences which the full 63 00:05:50.560 --> 00:05:56.700 The triumph of the ability-to-pay principle must bring about, and concentrate upon its 64 00:05:56.700 --> 00:05:59.320 financial aspects. 65 00:05:59.320 --> 00:06:05.300 The interventionist in advocating additional public expenditure is not aware of the fact 66 00:06:05.300 --> 00:06:08.360 that the funds available are limited. 67 00:06:08.360 --> 00:06:14.800 He does not realize that increasing expenditure in one department enjoins restricting it in 68 00:06:14.800 --> 00:06:16.560 other departments. 69 00:06:16.560 --> 00:06:19.920 In his opinion, there is plenty of money available. 70 00:06:19.920 --> 00:06:24.280 The income and wealth of the rich can be freely tapped. 71 00:06:24.280 --> 00:06:29.100 In recommending a greater allowance for the schools, he simply stresses the point that 72 00:06:29.100 --> 00:06:33.220 it would be a good thing to spend more for education. 73 00:06:33.220 --> 00:06:38.720 He does not venture to prove that to raise the budgetary allowance for schools is more 74 00:06:38.720 --> 00:06:44.940 expedient than to raise that of another department, for example, that of health. 75 00:06:44.940 --> 00:06:51.100 It never occurs to him that grave arguments could be advanced in favor of restricting public 76 00:06:51.100 --> 00:06:55.300 spending and lowering the burden of taxation. 77 00:06:55.300 --> 00:07:01.480 The champions of cuts in the budget are, in his eyes, merely the defenders of the manifestly 78 00:07:01.480 --> 00:07:05.860 unfair class interests of the rich. 79 00:07:05.860 --> 00:07:11.740 With the present height of income and inheritance tax rates, this reserve fund out of which 80 00:07:11.740 --> 00:07:18.260 which the interventionists seek to cover all public expenditure is rapidly shrinking. 81 00:07:18.260 --> 00:07:23.260 It has practically disappeared altogether in most European countries. 82 00:07:23.260 --> 00:07:28.740 In the United States, the recent advances in tax rates produced only negligible revenue 83 00:07:28.740 --> 00:07:36.100 results beyond what would be produced by a progression which stopped at much lower rates. 84 00:07:36.100 --> 00:07:42.960 High surtax rates for the rich are very popular with interventionist dilettantes and demagogues, 85 00:07:42.960 --> 00:07:47.500 but they secure only modest additions to the revenue. 86 00:07:47.500 --> 00:07:53.480 From day to day it becomes more obvious that large-scale additions to the amount of public 87 00:07:53.480 --> 00:08:00.380 expenditure cannot be financed by soaking the rich, but that the burden must be carried 88 00:08:00.380 --> 00:08:02.080 by the masses. 89 00:08:02.080 --> 00:08:09.560 The traditional tax policy of the age of interventionism, its glorified devices of progressive taxation 90 00:08:09.560 --> 00:08:15.240 and lavish spending, have been carried to a point at which their absurdity can no longer 91 00:08:15.240 --> 00:08:17.280 be concealed. 92 00:08:17.280 --> 00:08:23.480 The notorious principle that whereas private expenditures depend on the size of income 93 00:08:23.480 --> 00:08:31.320 available, public revenues must be regulated according to expenditures, refutes itself. 94 00:08:31.320 --> 00:08:37.920 Henceforth, governments will have to realize that one dollar cannot be spent twice, and 95 00:08:37.920 --> 00:08:44.120 that the various items of government expenditure are in conflict with one another. 96 00:08:44.120 --> 00:08:49.640 Every penny of additional government spending will have to be collected from precisely those 97 00:08:49.640 --> 00:08:57.400 people who hitherto have been intent upon shifting the main burden to other groups. 98 00:08:57.400 --> 00:09:03.320 Those anxious to get subsidies will have to foot the bill themselves for the subsidies. 99 00:09:03.320 --> 00:09:08.960 The deficits of publicly owned and operated enterprises will be charged to the bulk of 100 00:09:08.960 --> 00:09:11.200 the population. 101 00:09:11.200 --> 00:09:16.280 The situation in the employer-employee nexus will be analogous. 102 00:09:16.280 --> 00:09:22.960 The popular doctrine contends that wage earners are reaping social gains at the expense of 103 00:09:22.960 --> 00:09:27.040 the unearned income of the exploiting classes. 104 00:09:27.040 --> 00:09:34.000 The strikers, it is said, do not strike against the consumers, but against management. 105 00:09:34.000 --> 00:09:39.600 There is no reason to raise the prices of products when labor costs are increased. 106 00:09:39.600 --> 00:09:43.040 The difference must be borne by employers. 107 00:09:43.040 --> 00:09:48.360 But when more and more of the share of the entrepreneurs and capitalists is absorbed 108 00:09:48.360 --> 00:09:56.240 by taxes, higher wage rates and other social gains of employees, and by price ceilings, 109 00:09:56.240 --> 00:09:59.920 Nothing remains for such a buffer function. 110 00:09:59.920 --> 00:10:06.540 Then it becomes evident that every wage raise, with its whole momentum, must affect the prices 111 00:10:06.540 --> 00:10:12.540 of the products, and that the social gains of each group fully correspond to the social 112 00:10:12.540 --> 00:10:15.680 losses of the other groups. 113 00:10:15.680 --> 00:10:21.840 Every strike becomes, even in the short run, and not only in the long run, a strike against 114 00:10:21.840 --> 00:10:24.400 the rest of the people. 115 00:10:24.400 --> 00:10:29.300 An essential point in the social philosophy of interventionism is the existence of an 116 00:10:29.300 --> 00:10:33.960 inexhaustible fund which can be squeezed forever. 117 00:10:33.960 --> 00:10:40.200 The whole doctrine of interventionism collapses when this fountain is drained off. 118 00:10:40.200 --> 00:10:44.600 The Santa Claus principle liquidates itself. 119 00:10:44.600 --> 00:10:46.540 3. 120 00:10:46.540 --> 00:10:49.680 The End of Interventionism 121 00:10:49.680 --> 00:10:55.480 The interventionist interlude must come to an end because interventionism cannot lead 122 00:10:55.480 --> 00:10:59.280 to a permanent system of social organization. 123 00:10:59.280 --> 00:11:01.600 The reasons are threefold. 124 00:11:01.600 --> 00:11:08.440 First, restrictive measures always restrict output and the amount of goods available for 125 00:11:08.440 --> 00:11:10.160 consumption. 126 00:11:10.160 --> 00:11:15.880 Whatever arguments may be advanced in favor of definite restrictions and prohibitions, 127 00:11:15.880 --> 00:11:22.320 Such measures in themselves can never constitute a system of social production. 128 00:11:22.320 --> 00:11:29.340 Second, all varieties of interference with the market phenomena not only fail to achieve 129 00:11:29.340 --> 00:11:35.840 the ends aimed at by their authors and supporters, but bring about a state of affairs which, 130 00:11:35.840 --> 00:11:41.520 from the point of view of their authors and advocates' valuations, is less desirable 131 00:11:41.520 --> 00:11:46.920 are more valuable than the previous state of affairs which they were designed to alter. 132 00:11:46.920 --> 00:11:53.220 If one wants to correct their manifest unsuitableness and preposterousness by supplementing the 133 00:11:53.220 --> 00:12:00.480 first acts of intervention with more and more of such acts, one must go farther and farther 134 00:12:00.480 --> 00:12:06.820 until the market economy has been entirely destroyed and socialism has been substituted 135 00:12:06.820 --> 00:12:08.520 for it. 136 00:12:08.520 --> 00:12:18.520 Third, interventionism aims at confiscating the surplus of one part of the population and at giving it to the other part. 137 00:12:18.520 --> 00:12:27.520 Once this surplus is exhausted by total confiscation, a further continuation of this policy is impossible. 138 00:12:27.520 --> 00:12:31.520 Marching ever further on the way of interventionism, 139 00:12:31.520 --> 00:12:41.520 First Germany, then Great Britain and many other European countries have adopted Central Planning, the Hindenburg pattern of socialism. 140 00:12:41.520 --> 00:12:55.520 It is noteworthy that in Germany the deciding measures were not resorted to by the Nazis, but some time before Hitler seized power by Brüning, the Catholic Chancellor of the Weimar Republic, 141 00:12:55.520 --> 00:13:03.080 and, in Great Britain, not by the Labour Party, but by the Tory Prime Minister, Mr Churchill. 142 00:13:03.080 --> 00:13:08.760 The fact has been purposely obscured by the great sensation made in Great Britain about 143 00:13:08.760 --> 00:13:14.480 the nationalization of the Bank of England, the coal mines and other enterprises. 144 00:13:14.480 --> 00:13:19.720 However, these seizures were of subordinate importance only. 145 00:13:19.720 --> 00:13:25.000 Great Britain is to be called a socialist country, not because certain enterprises have 146 00:13:25.000 --> 00:13:31.560 have been formally expropriated and nationalized, but because all the economic activities of 147 00:13:31.560 --> 00:13:38.440 all citizens are subject to full control by the government and its agencies. 148 00:13:38.440 --> 00:13:44.280 The authorities direct the allocation of capital and of manpower to the various branches of 149 00:13:44.280 --> 00:13:45.440 business. 150 00:13:45.440 --> 00:13:51.200 They determine what should be produced and in what quality and quantity, and they assign 151 00:13:51.200 --> 00:13:55.600 and to each consumer a definite ration. 152 00:13:55.600 --> 00:14:01.420 Supremacy in all economic matters is exclusively vested in the government. 153 00:14:01.420 --> 00:14:05.560 The people are reduced to the status of wards. 154 00:14:05.560 --> 00:14:13.160 To the businessmen, the former entrepreneurs, merely quasi-managerial functions are left. 155 00:14:13.160 --> 00:14:18.960 All that they are free to do is to carry into effect the entrepreneurial decisions of the 156 00:14:18.960 --> 00:14:30.560 It has been shown that the managerial system, that is, the assignment of ancillary tasks 157 00:14:30.560 --> 00:14:36.340 in the conduct of business to responsible helpers to whom a certain amount of discretion 158 00:14:36.340 --> 00:14:43.020 can be granted, is possible only within the frame of the profit system. 159 00:14:43.020 --> 00:14:48.820 What characterizes the manager as such, and imparts to him a condition different from 160 00:14:48.820 --> 00:14:55.620 from that of the mere technician is that within the sphere of his assignment he himself determines 161 00:14:55.620 --> 00:15:01.380 the methods by which his actions should conform to the profit principle. 162 00:15:01.380 --> 00:15:07.940 In a socialist system in which there is neither economic calculation nor capital accounting 163 00:15:07.940 --> 00:15:15.020 nor profit computation, there is no room left for managerial activities either. 164 00:15:15.020 --> 00:15:20.460 But as long as a socialist commonwealth is still in a position to calculate on the ground 165 00:15:20.460 --> 00:15:27.820 of prices determined on foreign markets, it can also utilize a quasi-managerial hierarchy 166 00:15:27.820 --> 00:15:30.380 to some extent. 167 00:15:30.380 --> 00:15:35.920 It is a poor makeshift to call any age an age of transition. 168 00:15:35.920 --> 00:15:39.880 In the living world, there is always change. 169 00:15:39.880 --> 00:15:43.400 Every age is an age of transition. 170 00:15:43.400 --> 00:15:50.340 We may distinguish between social systems that can last and such as are inevitably transitory 171 00:15:50.340 --> 00:15:53.200 because they are self-destructive. 172 00:15:53.200 --> 00:15:59.120 It has already been pointed out in what sense interventionism liquidates itself and must 173 00:15:59.120 --> 00:16:02.920 lead to socialism of the German pattern. 174 00:16:02.920 --> 00:16:07.920 Most of the European countries have already reached this phase and nobody knows whether 175 00:16:07.920 --> 00:16:11.440 or not the United States will follow suit. 176 00:16:11.440 --> 00:16:16.600 But as long as the United States clings to the market economy and does not adopt the 177 00:16:16.600 --> 00:16:22.480 system of full government control of business, the socialist economies of Western Europe 178 00:16:22.480 --> 00:16:26.000 will still be in a position to calculate. 179 00:16:26.000 --> 00:16:32.080 Their conduct of business still lacks the characteristic feature of socialist conduct. 180 00:16:32.080 --> 00:16:36.140 It is still based on economic calculation. 181 00:16:36.140 --> 00:16:42.620 It is, therefore, in every respect, very different from what it would become if all the world 182 00:16:42.620 --> 00:16:45.780 were to turn toward socialism. 183 00:16:45.780 --> 00:16:51.920 It is often said that one half of the world cannot remain committed to the market economy 184 00:16:51.920 --> 00:16:55.580 when the other half is socialist, and vice versa. 185 00:16:55.580 --> 00:17:01.700 However, there is no reason to assume that such a partition of the earth and the coexistence 186 00:17:01.700 --> 00:17:04.980 of the two systems is impossible. 187 00:17:04.980 --> 00:17:10.120 If this is really the case, then the present economic system of the countries that have 188 00:17:10.120 --> 00:17:16.080 discarded capitalism may go on for an indefinite period of time. 189 00:17:16.080 --> 00:17:22.480 Its operation may result in social disintegration, chaos and misery for the peoples. 190 00:17:22.480 --> 00:17:28.820 But neither a low standard of living nor progressive impoverishment automatically liquidates an 191 00:17:28.820 --> 00:17:30.980 economic system. 192 00:17:30.980 --> 00:17:36.780 It gives way to a more efficient system only if people themselves are intelligent enough 193 00:17:36.780 --> 00:17:41.820 to comprehend the advantages such a change might bring them. 194 00:17:41.820 --> 00:17:47.400 Or it may be destroyed by foreign invaders provided with better military equipment by 195 00:17:47.400 --> 00:17:52.820 the greater efficiency of their own economic system. 196 00:17:52.820 --> 00:17:57.980 Optimists hope that at least those nations which have in the past developed the capitalist 197 00:17:57.980 --> 00:18:05.120 Market Economy and its Civilization will cling to this system in the future too. 198 00:18:05.120 --> 00:18:11.480 There are certainly as many signs to confirm as to disprove such an expectation. 199 00:18:11.480 --> 00:18:16.880 It is vain to speculate about the outcome of the great ideological conflict between 200 00:18:16.880 --> 00:18:24.400 the principles of private ownership and public ownership, of individualism and totalitarianism, 201 00:18:24.400 --> 00:18:30.760 of Freedom and Authoritarian Regimentation. All that we can know beforehand about the 202 00:18:30.760 --> 00:18:36.440 results of this struggle can be condensed in the following three statements. 203 00:18:36.440 --> 00:18:43.280 1. We have no knowledge whatever about the existence and operation of agencies which 204 00:18:43.280 --> 00:18:49.960 would bestow final victory in this clash on those ideologies whose application will secure 205 00:18:49.960 --> 00:18:57.160 for the Preservation and Further Intensification of Societal Bonds and the Improvement of Mankind's 206 00:18:57.160 --> 00:19:00.200 Material Well-Being. 207 00:19:00.200 --> 00:19:06.520 Nothing suggests the belief that progress toward more satisfactory conditions is inevitable 208 00:19:06.520 --> 00:19:12.280 or a relapse into very unsatisfactory conditions impossible. 209 00:19:12.280 --> 00:19:14.120 2. 210 00:19:14.120 --> 00:19:18.680 Men must choose between the market economy and socialism. 211 00:19:18.680 --> 00:19:25.760 They cannot evade deciding between these alternatives by adopting a middle-of-the-road position, 212 00:19:25.760 --> 00:19:28.720 whatever name they may give to it. 213 00:19:28.720 --> 00:19:30.360 3. 214 00:19:30.360 --> 00:19:37.000 In abolishing economic calculation, the general adoption of socialism would result in complete 215 00:19:37.000 --> 00:19:42.680 Chaos and the Disintegration of Social Cooperation under the Division of Labor.