WEBVTT NOTE Mises in 1919 1 00:00:00.000 --> 00:00:07.760 Mises in 1919, 1919 was a catastrophic year, not only for Austria, but for many countries in Europe, but for Austria in particular. 2 00:00:07.760 --> 00:00:19.840 Austria had just been through four years of a devastating war, and then at the end of this war, in October 1918, November 1918, 3 00:00:19.840 --> 00:00:28.760 most provinces of the country seceded for various reasons that we do not need to consider tonight. 4 00:00:28.760 --> 00:00:43.760 But the result was that what we today call Austria, the little country essentially spread out on the eastern part of the Alps, was suddenly all that was left of the former Austria-Hungary. 5 00:00:43.760 --> 00:00:55.760 And the Austrians at the time did not perceive themselves as Austrians, because Austria was commonly traditionally the name that referred to the territorial possessions of the Habsburg family 6 00:00:55.760 --> 00:01:07.760 in the eastern part of the former Roman Empire, the Holy Roman Empire of the German Nation, so Austria, the Eastern Empire. 7 00:01:07.760 --> 00:01:16.760 So they called their country German Austria, Deutsch Österreich, which already expressed a lack of identity. 8 00:01:16.760 --> 00:01:28.760 And this country was so suddenly left by former provinces, the provinces from which before they received footstuff and various raw materials. 9 00:01:28.760 --> 00:01:36.760 Now the new governments of the Sicilian countries had no more urgent business than to impose restrictions on foreign trade. 10 00:01:36.760 --> 00:01:41.560 trade. Okay, so for various reasons that some of which Professor Murphy discussed 11 00:01:41.560 --> 00:01:47.080 this afternoon. So they had been fallen prey to various errors but it was not 12 00:01:47.080 --> 00:01:53.800 only erroneous but especially they were often inspired by feelings of revenge 13 00:01:53.800 --> 00:02:02.800 and resentment against the Austrians and so blocked exports to what is today 14 00:02:02.800 --> 00:02:11.440 The result was, of course, a catastrophic year of 1919. The winter of 1918-19 brought deprivation, 15 00:02:11.440 --> 00:02:22.880 famines in Austria, and it brought, of course, the rise of socialist regimes in all of Central 16 00:02:22.880 --> 00:02:29.680 Europe. The communists had won power in Russia in 1917, and now at the end of World War I, 17 00:02:29.680 --> 00:02:35.680 In 1991, socialist governments came to power in almost all countries of Central Europe. 18 00:02:35.680 --> 00:02:44.680 So the socialists ruled democratically in Germany and in Austria, and they ruled dictatorially in Hungary and Bavaria. 19 00:02:44.680 --> 00:02:47.680 This was the situation in 1919. 20 00:02:47.680 --> 00:02:56.680 In Austria, the democratically ruling socialists established a commission for the socialization of the economy, 21 00:02:56.680 --> 00:03:11.680 more precisely for the nationalization of the economy, its foremost activist, the party leader Otto Bauer, published a book with the title The Road to Socialism in early 1919. 22 00:03:11.680 --> 00:03:18.680 So we can imagine that Frederic von Hayek reacted some 25 years later when he wrote The Road to Serfdom. 23 00:03:18.680 --> 00:03:24.680 The Road to Socialism is not a nice road, it's a road to serfdom. 24 00:03:24.680 --> 00:03:37.680 Socialism went in hand with inflation, with huge unemployment in Austria, and with the rebellion of the provinces, social disintegration. 25 00:03:37.680 --> 00:03:45.680 This was the context in which Mises wrote, thought, spoke and acted. 26 00:03:45.680 --> 00:04:06.180 And what we'll deal with today is therefore, well, what precisely he did and what I'll try to show to you is that Mises in many ways was, well, as usual, a role model, a very inspiring man who, by whatever he did, was truly a model. 27 00:04:06.180 --> 00:04:14.180 So we'll first go through his analysis of the situation as it prevailed in 1919. How did we come to this mess? 28 00:04:14.180 --> 00:04:21.180 And what are the causes, what were the consequences, and then finally we'll talk a little bit about the actions, 29 00:04:21.180 --> 00:04:25.180 what Mises actually did apart from analyzing the situation. 30 00:04:25.180 --> 00:04:31.180 The analysis that Mises proposed of the mass in which Austria found itself in 1919, 31 00:04:31.180 --> 00:04:36.180 can be essentially derived from his book, Nation, State and Economy, 32 00:04:36.180 --> 00:04:41.180 that was published, well, in German in that year, 1919, in the summer of 1919, 33 00:04:41.180 --> 00:04:47.180 and which was translated and published in 1983 with a translation from Professor Leland Jäger 34 00:04:47.180 --> 00:04:53.180 by New York University and which was just this year republished by Liberty Fund. 35 00:04:53.180 --> 00:04:57.180 The book had the working title, Imperialism. 36 00:04:57.180 --> 00:05:02.180 Okay, so it's a nice connection with our conference this weekend. 37 00:05:02.180 --> 00:05:08.180 And well, there's a reason why Mises eventually changed the title, now we'll come to talk about this. 38 00:05:08.180 --> 00:05:14.300 but what is important of course is that he well how does he define imperialism 39 00:05:14.300 --> 00:05:18.140 he doesn't give an explicit definition but it is clear that he means by the 40 00:05:18.140 --> 00:05:25.580 opposite of liberty okay it's the suppression or the coercion of foreign 41 00:05:25.580 --> 00:05:31.220 political groups that are weaker than our national government so it's a 42 00:05:31.220 --> 00:05:35.780 coercion of weaker groups by stronger groups and in particular the case of 43 00:05:35.780 --> 00:05:38.780 Weaker Foreign Groups 44 00:05:38.780 --> 00:05:50.780 So this offers me a nice opportunity to thank Professor Reiko for his great service in clarifying the meaning of the Statue of Liberty in New York. 45 00:05:50.780 --> 00:06:01.780 Madame Liberty holds, in fact, a torch. It's not a flamethrower. 46 00:06:01.780 --> 00:06:16.780 And unfortunately, it's necessary to stress this again today, because I wonder how many Iraqis and other Afghans or other nationals would have this spontaneously, this interpretation. 47 00:06:16.780 --> 00:06:36.780 Okay, so what does Mises do in his book? Well, yes, the book has three chapters. In the first one, he offers a very original analysis of the rise, development, origin, development, and decline of nations with the help of what economists call methodological individualism. 48 00:06:36.780 --> 00:06:44.780 And he analyzes the impact of government interventionism on the flourishment of nations, and he shows, well, there's not a positive impact. 49 00:06:44.780 --> 00:06:54.780 The second chapter deals with war socialism, in particular the theoretical analysis of what had been going on from 1914 to 1918. 50 00:06:54.780 --> 00:07:04.780 And in the third chapter he deals with the history and the politics of the social democratic parties, in particular in Austria but also in Germany. 51 00:07:04.780 --> 00:07:18.780 Mises analyzes the situation under five titles. First of all, he explains that imperialism is a reaction to classical liberalism. 52 00:07:18.780 --> 00:07:31.780 Then he goes on to stress the first casualty of imperialism. Then he stresses that there is an interdependence, in fact, between foreign government interventionism, so imperialism, and domestic coercion. 53 00:07:31.780 --> 00:07:39.780 Fourth, he goes on to highlight the intricate relationship that exists between imperialism and inflation. 54 00:07:39.780 --> 00:07:49.780 And finally, he offers some practical conclusions for public policy, how to deal with this situation. 55 00:07:49.780 --> 00:07:57.780 Okay, so first, and that is his most important point, he stresses that imperialism was a reaction to classical liberalism. 56 00:07:57.780 --> 00:08:10.780 The classical liberal program can be summarized under two headings. First of all, reduction of all obstructions to private property, abolition of all restraints on private property. 57 00:08:10.780 --> 00:08:16.780 The second point is self-determination for all national groups. 58 00:08:16.780 --> 00:08:25.780 Now, in practice this meant then, the classical liberals meant by this, the establishment of a democratic regime. 59 00:08:25.780 --> 00:08:37.780 And the question was then, how do we define a nation? What is the nation that should decide about its own fate in the way of, by democratic means? 60 00:08:37.780 --> 00:08:41.780 And commonly, nation was defined as a language community. 61 00:08:41.780 --> 00:08:50.780 This was least problematic in the case of the Western nations such as France and England or also the United States which shared a common language. 62 00:08:50.780 --> 00:09:00.780 It was somewhat problematic in the case of the states of Central Europe and Eastern Europe which harbored different language communities. 63 00:09:00.780 --> 00:09:10.780 So what Mises then pointed out is that in this case because we had mixed populations, mixed nations in fact in Central and Eastern Europe, 64 00:09:10.780 --> 00:09:19.780 in Europe, the application of the classical liberal program led to very different results than it led in the West. 65 00:09:19.780 --> 00:09:27.780 Because we had mixed populations, it now meant that the program of democracy meant that the majority nation, 66 00:09:27.780 --> 00:09:39.780 so the conditionals of which were the numerical majority, could rule over the numerically inferior other nations, other language communities. 67 00:09:39.780 --> 00:09:51.780 Now, in the case of Germany and Austria, this led to the following conflict of interest for the ruling nations, which were the Germans, so German language communities. 68 00:09:51.780 --> 00:10:04.780 They had in the entire state, they had the power in their hands, but if they were now to set out to apply the classical liberal program of self-determination on a local level, 69 00:10:04.780 --> 00:10:12.660 that would have implied that their co-nationals in the East would have lost the power of self-determination. 70 00:10:12.660 --> 00:10:17.420 So they would have come under the rule of other nations. 71 00:10:17.420 --> 00:10:22.260 So here we have then a particular situation that did not exist in the West. 72 00:10:22.260 --> 00:10:28.860 And as a consequence of this conflict, Mises explained, the Germans and the Austrians turned imperialist. 73 00:10:28.860 --> 00:10:34.700 So faced with the choice of either abandoning their co-nationals to rule of other nations 74 00:10:34.700 --> 00:10:39.820 or ruling centrally over these other nations, although they prefer the latter alternative. 75 00:10:42.300 --> 00:10:47.660 But he also points out in this book, Nation, State and Economy, that the same was later applied also 76 00:10:47.660 --> 00:10:54.620 on an international level after the western allies won World War I. They created the Treaty of 77 00:10:55.980 --> 00:11:01.660 the League of Versailles and they imposed certain peace conditions on Austria and Germany in the 78 00:11:01.660 --> 00:11:07.660 and the Treaties of Versailles and of Saint-Germain, the case of Austria, Saint-Germain. 79 00:11:07.660 --> 00:11:17.660 And here is how Mises interpreted this. He said, well, clearly the principle of national self-determination is no longer admitted. 80 00:11:17.660 --> 00:11:22.660 It is squarely contradicted by the conditions of these peace treaties. 81 00:11:22.660 --> 00:11:25.660 So I quote him here from the book. He says, 82 00:11:25.660 --> 00:11:33.660 The chief point remains that nations are being punished and that the four feature theory comes to life again. 83 00:11:33.660 --> 00:11:41.660 If one admits exceptions to the right of self-determination of nations, to the disadvantage of evil nations, 84 00:11:41.660 --> 00:11:47.660 as today we would say rogue nations, one has overturned the first principle of the free community of nations. 85 00:11:47.660 --> 00:12:10.660 So Mises' analysis seems to apply to the particular case, or he formulated it in the light of consideration to the special case of language communities, but there are of course more general relations that we can derive from his analysis. 86 00:12:10.660 --> 00:12:19.660 What he stresses is the relationship between the greater mobility that has been created by the classical liberal program. 87 00:12:19.660 --> 00:12:26.660 If you abolish restraints on private property rights, you will allow people to move from one place to another freely. 88 00:12:26.660 --> 00:12:31.660 And you will also allow to move up the social ladder. 89 00:12:31.660 --> 00:12:39.660 So whenever this mobility sets in, spatial mobility and social mobility, local power balances invariably shift. 90 00:12:39.660 --> 00:12:50.660 Okay, that's the necessary consequence. And here we have then the problem. Formally dominant political constituencies then can become minorities. 91 00:12:50.660 --> 00:13:02.660 And the problem emerges again and again. How do we react face to this situation? Do we now start to coerce the majority, keep them under our thumb? 92 00:13:02.660 --> 00:13:07.660 Or do we permit the transition of power to the new groups? 93 00:13:07.660 --> 00:13:15.660 A second point that can be generalized from Mises' analysis is that national frontiers are secondary. 94 00:13:15.660 --> 00:13:26.660 So the imperialist relation between politically stronger groups and politically weaker groups can obtain even within a nation-state, even within the political frontiers of a nation. 95 00:13:26.660 --> 00:13:32.660 Then Mises goes on to point out, secondly, what is the first casualty of imperialism? 96 00:13:32.660 --> 00:13:36.660 Well, it's that the commitment to liberty declines. 97 00:13:36.660 --> 00:13:51.660 And here again, I can refer to what Professor Reiko said an hour ago about William Graham Sumner and his essay on the conquest of the United States by Spain, which also applies in this case. 98 00:13:51.660 --> 00:13:59.660 And Mises again, without quoting Sumner, whom we probably hadn't read at the time, comes essentially to share the same point. I quote him. 99 00:13:59.660 --> 00:14:22.660 To fight imperialism, the peaceful must employ all its means. If they then triumph in the struggle, they may indeed have crushed their opponent. Yet, they themselves have been conquered by his methods and his way of thinking. They then do not lay down their weapons again. They themselves remain imperialists. 100 00:14:22.660 --> 00:14:38.660 And the application was of course that he had in mind was the League of Nations. Western allies had prevailed in the military conflict over the Central Powers, but the spirit of the Central Powers had conquered these Western Nations. 101 00:14:38.660 --> 00:14:49.660 And the concrete proof of this, the manifestation was the peace dictates of Versailles and Saint-Germain. 102 00:14:49.660 --> 00:14:58.660 Mises was directly concerned by this. He was in fact at the time a consultant of the trade department in the Austrian Foreign Ministry. 103 00:14:58.660 --> 00:15:26.660 The third point that Mises stresses is the interdependence between foreign and domestic coercion. War, the attempt to overthrow foreign power, served as a pretext for domestic coercion as well. 104 00:15:26.660 --> 00:15:31.660 And the result was, in the Great War, what was called war socialism. 105 00:15:31.660 --> 00:15:39.660 At the beginning, war socialism was not, during the first two years it did not exist, 106 00:15:39.660 --> 00:15:49.660 but starting in 1916, early 1916, the government financed part of its activities with the printing press, 107 00:15:49.660 --> 00:15:54.660 now tried to avoid the inevitable consequence of using inflation for war finance, 108 00:15:54.660 --> 00:15:58.660 namely rising prices, and so it established a regime of price controls. 109 00:15:58.660 --> 00:16:03.660 And as we know from the economic analysis of price controls, once you start with controlling one price, 110 00:16:03.660 --> 00:16:07.660 you cannot stop there, okay? You need to go on. 111 00:16:07.660 --> 00:16:14.660 Because if you control just one price, then, well, you create trouble for those companies who have to sell at this price. 112 00:16:14.660 --> 00:16:19.660 Some of these companies will become unprofitable, so they need to go out of business. 113 00:16:19.660 --> 00:16:30.660 So there's now the temptation for the government to repair its first intervention by establishing a price control also on the buying prices of these companies and so on. 114 00:16:30.660 --> 00:16:35.660 And that was exactly how things went on during the First World War. 115 00:16:35.660 --> 00:16:44.660 And after a few months, virtually the entire economy was covered by a system of price controls. 116 00:16:44.660 --> 00:16:51.660 And it now became necessary to establish some mechanism for the central direction of the economic process. 117 00:16:51.660 --> 00:17:02.660 That is for the centrally directed decision making process that allocates the different resources, workers, raw materials and so on to the different branches of industry. 118 00:17:02.660 --> 00:17:05.660 And again, that was exactly what happened. 119 00:17:05.660 --> 00:17:17.660 and this new centralized economic dictatorship was concentrated on the German side. 120 00:17:17.660 --> 00:17:26.660 So the Germans under General Ludendorff in particular organized war socialism for both Germany and Austria. 121 00:17:26.660 --> 00:17:56.660 Now as Mises points out, again, the justification of this is the war and we need to fight the foreign enemy as a consequence we now really we can no longer leave business to private entrepreneurs we now must become finally serious because before we could let them let the entrepreneurs play a little bit market and so on but now we have no more time for these games we need to really create an efficient economic regime so we need to create 122 00:17:56.660 --> 00:17:58.660 or Socialism. 123 00:17:58.660 --> 00:18:03.780 And Mises then showed that this whole analysis was fallacious. 124 00:18:03.780 --> 00:18:07.460 The war was a false pretext for creating coercion at home, 125 00:18:07.460 --> 00:18:09.700 for creating a socialism at home. 126 00:18:09.700 --> 00:18:16.700 The crucial question is, is a socialistic economic regime 127 00:18:16.700 --> 00:18:20.820 more likely to serve the ends of the war that 128 00:18:20.820 --> 00:18:24.380 is overthrowing the enemy than a free market? 129 00:18:24.380 --> 00:18:27.780 And here, Mises answers, well, that is not the case. 130 00:18:27.780 --> 00:18:31.180 Even if you have a war abroad, and if you have the application 131 00:18:31.180 --> 00:18:35.540 of violence to wrestle down an enemy, precisely then, 132 00:18:35.540 --> 00:18:40.500 you need to have an economy that adjusts as flexibly and therefore 133 00:18:40.500 --> 00:18:45.100 also as quickly as possible to the changing conditions 134 00:18:45.100 --> 00:18:48.420 as they evolved during the war. 135 00:18:48.420 --> 00:18:52.100 And the only economic system that can do this, 136 00:18:52.100 --> 00:18:59.100 The economic system that can do this in the most flexible and quick way is the market economy. 137 00:18:59.100 --> 00:19:07.100 So precisely in the war, precisely when you are in a great emergency situation, you cannot let the government hamper production. 138 00:19:07.100 --> 00:19:12.100 Precisely then you need to free the market, you need to have a free market economy. 139 00:19:12.100 --> 00:19:19.100 So Mises created what we might call the discipline of war economics, 140 00:19:19.100 --> 00:19:26.860 with a completely free market approach which inspired in the interwar period many young economists 141 00:19:26.860 --> 00:19:32.860 such as Lionel Robbins in England and also in Germany a few authors the names of whom do not 142 00:19:32.860 --> 00:19:36.780 tell you anything but for example Georg Holzbauer and others. 143 00:19:39.580 --> 00:19:45.420 Stefan Posoni who later emigrated to the United States and which therefore so rethought 144 00:19:45.420 --> 00:20:00.420 Fourth, Mises analyzed the intricate relationship between war and inflation. 145 00:20:00.420 --> 00:20:03.420 The fundamental point is, well, war does not pay. 146 00:20:03.420 --> 00:20:07.420 Or we might say in more general terms, coercion does not pay. 147 00:20:07.420 --> 00:20:16.420 I admit this is an a priori statement, but it is a true a priori statement. 148 00:20:16.420 --> 00:20:22.420 The simple fact is, if it did pay, it would not be necessary to coerce people. 149 00:20:22.420 --> 00:20:27.420 It's very simple. If it does pay, why not go on and just make contracts? 150 00:20:27.420 --> 00:20:30.420 Why force people if your activity is profitable? 151 00:20:30.420 --> 00:20:41.420 So the fact that you have to resort to violence is always a proof that your activity, whatever its justification, is certainly not profitable. 152 00:20:41.420 --> 00:20:46.420 So how do you finance an activity that is not profitable? 153 00:20:46.420 --> 00:20:49.420 Well, government can resort to taxation. 154 00:20:49.420 --> 00:20:57.420 If the governments of Europe during the Great War had resorted exclusively to taxation, the war would have ended pretty soon. 155 00:20:57.420 --> 00:21:11.420 would have ended in 1916 at latest, because if people really have to pay out of their own pockets all the expenses of the government, they're pretty quickly fed up with this whole enterprise. 156 00:21:11.420 --> 00:21:25.420 And so what governments did then was to have recourse to public debt, which already extends the margin of operation, and they had recourse to the printing press, that is to inflation. 157 00:21:25.420 --> 00:21:35.420 So governments, in order to finance their expenditure, had the central bank print additional banknotes, which they then used to pay for their expenses. 158 00:21:35.420 --> 00:21:43.420 And after the war, this policy was then continued by the socialists. 159 00:21:43.420 --> 00:21:52.420 They too pursued a policy, while it was not tapping on other people's heads, but it was a social policy, what they called social policy, 160 00:21:52.420 --> 00:21:58.260 Social Policy, which was not profitable by definition. It's not profitable to pay handouts 161 00:21:58.260 --> 00:22:04.720 to unemployed people. It's not profitable to buy agricultural products at higher than 162 00:22:04.720 --> 00:22:12.520 world market prices from farmers and to sell them at lower than world market prices to 163 00:22:12.520 --> 00:22:18.680 the urban population. But that's precisely what the Austrian government did. It announces 164 00:22:18.680 --> 00:22:29.680 Social policy, unemployment relief, food policy prices, it meant imposing maximum work hours, 165 00:22:29.680 --> 00:22:36.680 so at a time when the Austrian economy precisely would have needed as much work as possible to adjust to the new conditions, 166 00:22:36.680 --> 00:22:43.680 the new peace conditions, the government hampered the labor market and imposed a maximum work time on each worker. 167 00:22:43.680 --> 00:22:49.680 So the consequence was then unemployment and it was misery in Austria. 168 00:22:49.680 --> 00:22:56.680 And because all of this was financed out of the printing press, well it also meant increasingly rising prices. 169 00:22:56.680 --> 00:23:02.680 And this rise in prices was only hampered by the regime of price controls that was still in place. 170 00:23:02.680 --> 00:23:09.680 So it showed only for a while in the declining exchange rate of the Austrian currency of the Kroner. 171 00:23:09.680 --> 00:23:24.680 And we know what a regime of inflation ultimately must lead to, well because the money loses its purchasing power more and more, well finally people will start abandoning this currency, so it leads to social disintegration. 172 00:23:24.680 --> 00:23:30.680 People will no longer obey the commands of the government, they will go their own way. 173 00:23:30.680 --> 00:23:34.680 This is also what the Austrian provinces in 1919 did. 174 00:23:34.680 --> 00:23:40.680 At some point they just stopped obeying the orders of the central government 175 00:23:40.680 --> 00:23:44.680 and then they applied their own home-grown socialistic schemes. 176 00:23:44.680 --> 00:23:49.680 Because they were very much inspired by the rhetoric, 177 00:23:49.680 --> 00:23:53.680 they eat the rich rhetoric of the Vienna socialists who ruled the country, 178 00:23:53.680 --> 00:23:58.680 but they say, okay, but the way you redistribute the resources, 179 00:23:58.680 --> 00:24:11.680 So the country was very much very quickly going to complete disintegration. 180 00:24:11.680 --> 00:24:14.680 How to repair the situation? What to do in such a case? 181 00:24:14.680 --> 00:24:21.680 Well, Mises offered a solution that will not surprise us today because we are already acquainted with his work. 182 00:24:21.680 --> 00:24:24.680 He said, well, the government needs to get out of the picture. 183 00:24:24.680 --> 00:24:37.680 It's the government who has created the situation, it's the government who has created class conflict between dominant and political inferior groups. 184 00:24:37.680 --> 00:24:46.680 It is the government that has created, started the war, that has continued the war, that has then extended the war onto the domestic economy. 185 00:24:46.680 --> 00:24:52.680 It was the government who has resulted to inflation to finance all of this. 186 00:24:52.680 --> 00:24:56.680 So we need to reduce the activity of government as far as possible. 187 00:24:56.680 --> 00:24:58.680 What does this mean, as far as possible? 188 00:24:58.680 --> 00:25:02.680 Now, here, Mises gives no absolute limit. 189 00:25:02.680 --> 00:25:04.680 That's a very intriguing aspect. 190 00:25:04.680 --> 00:25:08.680 In this 1919 book, it says, well, as far as possible, 191 00:25:08.680 --> 00:25:12.680 and there are some technological constraints. 192 00:25:12.680 --> 00:25:16.680 For example, if you want to have developed legal judicial system 193 00:25:16.680 --> 00:25:18.680 with courts of appeal and so on, 194 00:25:18.680 --> 00:25:24.680 This might not be financially possible for very small territories. 195 00:25:24.680 --> 00:25:30.680 So in such cases you might need to tie up with other territories. 196 00:25:30.680 --> 00:25:34.680 You cannot decrease the size of government further. 197 00:25:34.680 --> 00:25:37.680 But that was the only consideration at all that he gave. 198 00:25:37.680 --> 00:25:44.680 So by and large his recommendation was in line with what Murray Rothbard later called anarcho-capitalism. 199 00:25:44.680 --> 00:25:49.680 Reduce the size of government, if necessary or if wished, to zero. 200 00:25:52.680 --> 00:25:55.680 So this was his analysis and his recommendation. 201 00:25:55.680 --> 00:25:59.680 Apart from publishing this book, what else did he do? 202 00:25:59.680 --> 00:26:02.680 What was his action in 1919? 203 00:26:02.680 --> 00:26:05.680 We can highlight three different activities. 204 00:26:05.680 --> 00:26:10.680 First of all, he taught a seminar at the university, 205 00:26:10.680 --> 00:26:16.680 of the University and he created a private seminar apart from the group that he taught at the university. 206 00:26:16.680 --> 00:26:25.680 So we have the origin of his later famous private seminar in late 1919. It started in November 1919. 207 00:26:25.680 --> 00:26:34.680 Second, so apart from the general pedagogical effort forming a new intellectual elite, 208 00:26:34.680 --> 00:26:42.680 You also felt not too good to engage in direct one-to-one, one-on-one persuasion. 209 00:26:42.680 --> 00:26:50.680 And the most important case concerned is persuading Otto Bauer, the leader of the socialists in Vienna, 210 00:26:50.680 --> 00:26:57.680 of the Austro-Marxists, as they call themselves, not to introduce a communist regime in Austria. 211 00:26:57.680 --> 00:27:03.680 So when the socialists came to power, especially the young radicals wanted to go the full way. 212 00:27:03.680 --> 00:27:12.680 Why stop halfway? Socialism is the most effective system, communism is wonderful, so let's do it right now. 213 00:27:12.680 --> 00:27:19.680 And then Mises explained to Bauer what the inevitable consequences would be. 214 00:27:19.680 --> 00:27:30.680 Vienna at the time, precisely because Austria did not have the farming necessary to feed the population, was dependent on foreign imports. 215 00:27:30.680 --> 00:27:42.680 It had foodstuff available for nine days maximum, so any period beyond nine days would have to be financed by foreign food imports. 216 00:27:42.680 --> 00:27:52.680 Who would be ready to give them credits for this? Which foreign government would give a credit to a communist regime in Austria? 217 00:27:52.680 --> 00:27:58.680 Not the neighbors around it who before had furnished the foodstuff, not the Hungarians, not the Czechs, 218 00:27:58.680 --> 00:28:09.680 and the Western powers wouldn't give any credits either, had no interest in financing communism. 219 00:28:09.680 --> 00:28:16.680 So all that the system would have created was an economic and political collapse in record time 220 00:28:16.680 --> 00:28:25.680 and as a consequence complete social disintegration, bans roaming the streets of Vienna, violence and anarchy. 221 00:28:25.680 --> 00:28:37.680 and Bauer gave in, so Bauer heeded the voice of reason and well later he resented this very much, he could never forgive Mises that he had turned him before the radicals of his party into a moderate. 222 00:28:37.680 --> 00:28:53.680 Okay, he wanted to be a radical and yeah well he couldn't forgive Mises for this and then third, Mises did something quite extraordinary in preparing monetary reform in Austria 223 00:28:53.680 --> 00:29:03.680 For he had two different plans. One was the official plan that he advocated in two widely noticed publications at the time, 224 00:29:03.680 --> 00:29:07.680 in which he called for monetary union between Austria and Germany. 225 00:29:07.680 --> 00:29:14.680 And the second plan, and that is the fantastic thing, was expressed in a private confidential memorandum, 226 00:29:14.680 --> 00:29:20.680 which was addressed to the industrialists and bankers of Austria, 227 00:29:20.680 --> 00:29:29.680 and calling them to prepare a monetary reform which left the government completely out of the picture. 228 00:29:29.680 --> 00:29:37.680 So he said, forget about these guys, they are completely incapable of reforming anything, they cannot even reform themselves. 229 00:29:37.680 --> 00:29:48.680 So you need to do the job and you need to prepare for the emergency situation that will come if the government continues in its present policies. 230 00:29:48.680 --> 00:29:59.680 I need details and the steps that these people would have to take, take a credit from abroad, prepare a system of payments for the case of emergency. 231 00:29:59.680 --> 00:30:06.680 And, well, I would say that in all of these three actions, Mises is very much inspiring. 232 00:30:06.680 --> 00:30:10.680 It's exactly what we should do in our day as well. 233 00:30:10.680 --> 00:30:16.680 Fortunately, we are not yet in 1919, but we will get there one day, to our 1919, 234 00:30:16.680 --> 00:30:46.680 2019, if we persist in our present policies, in our present orientation. And the only way to stand this tide as well, sound analysis, that's what we are here doing. Teaching, that's again what we are here doing at the Mises Institute. One-on-one persuasion if necessary, so if Paul Krugman wants to repent and show up, we'll take him here. And various others as well. So we are charitable, we would even take 235 00:30:46.680 --> 00:30:55.300 Mr. Bush. And then third also, we should always try to think outside of the box. And that's 236 00:30:55.300 --> 00:30:59.600 also what we are trying to do here at the Mises Institute. Think outside of the box 237 00:30:59.600 --> 00:31:07.520 and think unorthodoxly, preparing, if necessary, reform of the country without the government. 238 00:31:07.520 --> 00:31:08.120 Thank you very much.