WEBVTT

NOTE 19. Birth of a Movement

1
00:00:00.000 --> 00:00:07.640
19. Birth of a Movement If Mises ever had any illusions about the state

2
00:00:07.640 --> 00:00:13.480
of the American mind before he came to the United States in 1940, he had certainly lost

3
00:00:13.480 --> 00:00:19.600
them by the end of the war. American public opinion was under the sway of statism, and

4
00:00:19.600 --> 00:00:25.560
the old American liberties were at an all-time low. As Mises wrote to a German correspondent,

5
00:00:25.560 --> 00:00:29.640
Unfortunately, one can become acquainted with the fruits of the planned economy here in

6
00:00:29.640 --> 00:00:35.440
the USA too. Similarly to a promising young economist in Austria, he wrote that the American

7
00:00:35.440 --> 00:00:39.400
literature on economics was, if anything, worse than the European.

8
00:00:39.400 --> 00:00:44.960
There is a great enthusiasm for unbalanced budgets, deficit spending, low interest rates

9
00:00:44.960 --> 00:00:50.240
and all sorts of regimentation. Those who dare to disagree are simply brushed aside

10
00:00:50.240 --> 00:00:57.480
as Orthodox and Reactionary, Mises to Einhard Kamitz in a letter dated October 18th, 1946.

11
00:00:57.480 --> 00:01:01.800
Kamitz eventually became Minister of Finance and then President of the Österreichische

12
00:01:01.800 --> 00:01:07.160
Nationalbank. Mises respected him very much and paid him the following tribute about his

13
00:01:07.160 --> 00:01:09.000
time as a Minister of Finance.

14
00:01:09.000 --> 00:01:14.040
Under the most adverse circumstances, you have proved yourself to be a worthy successor

15
00:01:14.040 --> 00:01:20.000
of the Two Cleaners and to Boehm-Bawerk. And on the same theme, the intellectual ravages

16
00:01:20.000 --> 00:01:25.920
caused by Keynianism are very bad. For example, everyone here is delighted that national income

17
00:01:25.920 --> 00:01:36.360
has increased from $77.6 billion in 1940 to $161 billion in 1945. But the forces of resistance

18
00:01:36.360 --> 00:01:42.240
were slowly emerging. There was a seedbed of libertarian opposition, a network of leaders,

19
00:01:42.240 --> 00:01:48.000
thinkers and organisers, some alone, others in small groups, who were preparing the counter-attack.

20
00:01:48.000 --> 00:01:53.360
One historian has called these years the nadir of individualistic Jeffersonian thought in

21
00:01:53.360 --> 00:01:57.900
the United States. Yet the nadir was only in political practice. The thinking was no

22
00:01:57.900 --> 00:02:03.520
longer in disarray but in the initial phase of a long-term resurgence. It is true that

23
00:02:03.520 --> 00:02:09.640
these thinkers and organisers were still scattered. They had only to find one another.

24
00:02:09.640 --> 00:02:15.240
There were journalists like Henry Hazlitt, Lawrence Furtick, Frank Chodoroff, Suzanne

25
00:02:15.240 --> 00:02:21.160
Lafollette, Garrett Garrett, John T. Flynn and John Chamberlain. There were writers like

26
00:02:21.160 --> 00:02:28.080
Albert J. Nock, Isobel Patterson, Rose Wilder Lane, Ayn Rand and Felix Morley. There were

27
00:02:28.080 --> 00:02:32.680
organisers such as Leonard Reid, Frederic Neimeier and Lauren Miller.

28
00:02:32.680 --> 00:02:37.440
There were businessmen ready to sponsor educational ventures to promote laissez-faire policies

29
00:02:37.440 --> 00:02:44.200
such as Jasper Crane, Harry Earhart, Adolf Kolberg, Howard Pugh, Claude Robinson, Pierre

30
00:02:44.200 --> 00:02:50.000
Goodridge and William Volcker. And there were academics such as Benjamin Anderson, H.J.

31
00:02:50.000 --> 00:02:56.400
Defenport, Fred Fairchild, Leo Wallman, Frank Knight, Henry Simons and Ludwig von Mises.

32
00:02:56.400 --> 00:03:01.400
These men and women reversed the course of events in a mere 15 years. They were not strong

33
00:03:01.400 --> 00:03:06.500
enough to rid America of its creeping statism, but they succeeded in slamming on the brakes

34
00:03:06.500 --> 00:03:12.280
and Reorienting Public Debate. By the beginning of the 1960s, classical liberalism had risen

35
00:03:12.280 --> 00:03:17.260
from the ashes and it had done so under the decisive impact and intellectual leadership

36
00:03:17.260 --> 00:03:23.260
of Mises. These 15 years of his life saw a last great blossoming of his creative powers

37
00:03:23.260 --> 00:03:29.000
which paved the way for a new liberty in the western world. During this period, Mises's

38
00:03:29.000 --> 00:03:33.720
impact was amplified and deepened through several new organisations that rallied a

39
00:03:33.720 --> 00:03:41.580
and for the first time in his life, Mises worked on a permanent basis with a group of

40
00:03:41.580 --> 00:03:47.100
students who had learned economic science through his writings. These first Misesians

41
00:03:47.100 --> 00:03:51.580
soon became even more coherent and radical advocates of laissez-faire than the master

42
00:03:51.580 --> 00:03:57.380
himself, something unprecedented for Mises. In his Vienna seminars, he had been in the

43
00:03:57.380 --> 00:04:02.660
awkward position of being more radical than his students.

44
00:04:02.660 --> 00:04:05.020
and Seedbeds

45
00:04:05.020 --> 00:04:09.660
Many Americans had grown weary of the New Deal during the second term of President Roosevelt's

46
00:04:09.660 --> 00:04:14.540
administration. More and more people realized that their president had brought about a revolution

47
00:04:14.540 --> 00:04:21.220
in the American system of government, but the majority gave FDR a third term. The president

48
00:04:21.220 --> 00:04:25.660
promised to keep America out of the new European war that would eventually turn into the Second

49
00:04:25.660 --> 00:04:32.640
World War. When Roosevelt went back on his word, the majority started to wane. The population

50
00:04:32.640 --> 00:04:36.040
Elizabeth Paterson still stood behind the Commander-in-Chief in a time of war, but

51
00:04:36.040 --> 00:04:40.960
the disenchantment with New Deal policies became ever more manifest. People started

52
00:04:40.960 --> 00:04:47.000
listening to critical voices, and these voices could now be heard everywhere.

53
00:04:47.000 --> 00:04:51.860
Isabel Paterson in The God of the Machine, 1943, and Rose Wilder Lane in The Discovery

54
00:04:51.860 --> 00:04:57.640
of Freedom, 1942, had delivered passionate and widely noticed indictments of the omnipotent

55
00:04:57.640 --> 00:05:03.300
and State and the Mining Individual Liberty. John T. Flynn had exposed the socialist agenda

56
00:05:03.300 --> 00:05:09.720
and impact of the federal government's interventions in the Roosevelt Myth, 1948, and As We Go Marching,

57
00:05:09.720 --> 00:05:16.800
1945. In early 1944, Felix Morley, John Chamberlain and Frank Hannigan founded the weekly journal

58
00:05:16.800 --> 00:05:21.580
Human Events. Their mission was to educate the American public about the uncomfortable

59
00:05:21.580 --> 00:05:27.480
fact that their federal government had been taken hostage by socialist and communist ideologues.

60
00:05:27.480 --> 00:05:32.060
The public also listened for the first time to the voice of two Austrian immigrants. Mises

61
00:05:32.060 --> 00:05:37.420
came out with two books in 1944, Omnipotent Government and Bureaucracy, both of which

62
00:05:37.420 --> 00:05:43.180
were calculated to diminish the faith in the necessity and expediency of solving social

63
00:05:43.180 --> 00:05:48.820
problems with the brutal force of state power. And in the same year, Friedrich August Hayek

64
00:05:48.820 --> 00:05:54.500
published The Road to Serfdom, the book that made him famous.

65
00:05:54.500 --> 00:05:58.660
Once held no monopoly on critical inquiry into the nature and scope of the Roosevelt

66
00:05:58.660 --> 00:06:03.180
government, ordinary citizens without any scientific pretensions now rediscovered the

67
00:06:03.180 --> 00:06:08.420
old American virtue of distrusting their government. Wherever they looked, they found their worst

68
00:06:08.420 --> 00:06:14.700
fears confirmed, and now they not only noticed but also recorded and spread their discoveries.

69
00:06:14.700 --> 00:06:19.020
One example illustrates the situation. An entrepreneur from Houston running a small

70
00:06:19.020 --> 00:06:23.780
printing company had started wondering just how many federal agencies had actually been

71
00:06:23.780 --> 00:06:28.220
have been created under the New Deal. There was no ready reference for the information

72
00:06:28.220 --> 00:06:34.220
so he decided to create one himself. He produced an alphabetical listing of all the agencies,

73
00:06:34.220 --> 00:06:39.540
the length of which must have been breathtaking at least in those days. At first he had just

74
00:06:39.540 --> 00:06:44.220
printed a small number of flyers for his friends, acquaintances and people on his local mailing

75
00:06:44.220 --> 00:06:51.700
list. The response was overwhelming. After a few months he had sold almost 200,000 copies

76
00:06:51.700 --> 00:06:55.940
and in each case it was the buyer who approached him.

77
00:06:55.940 --> 00:07:00.300
The most visible turning point for the fortunes of classical liberalism came on September

78
00:07:00.300 --> 00:07:06.220
18th, 1944. On this day, F.R. Hayek's book, The Road to Serfdom, appeared in the United

79
00:07:06.220 --> 00:07:12.540
States and met with huge and immediate success. Readers dieted, condensed the book and had

80
00:07:12.540 --> 00:07:17.500
more than one million copies distributed by the Book of the Month Club. Overnight, Hayek

81
00:07:17.500 --> 00:07:22.780
Hayek became an international celebrity. Nobody was more surprised by these events than Hayek

82
00:07:22.780 --> 00:07:28.420
and his publisher. There were four major factors to his unexpected success. First, Hayek did

83
00:07:28.420 --> 00:07:33.180
not come up with any new argument, but just gave a particularly eloquent and sophisticated

84
00:07:33.180 --> 00:07:37.420
presentation of a position that, before the war, had already found wide acclaim among

85
00:07:37.420 --> 00:07:42.060
the American public. The central argument of the road to serve them was, in fact, that

86
00:07:42.060 --> 00:07:47.260
increased powers for government were tantamount to reduced sovereignty for the individual

87
00:07:47.260 --> 00:07:53.140
for Citizens and that Total Government Control turned the citizen into slaves, regardless

88
00:07:53.140 --> 00:07:56.980
of whether the totalitarian state was fascist or communist.

89
00:07:56.980 --> 00:08:02.580
Second, the war years had dramatically accelerated this increase of powers of the US Federal

90
00:08:02.580 --> 00:08:08.020
Government and thus raised awareness of and misgivings about this fact among the greater

91
00:08:08.020 --> 00:08:09.420
number of people.

92
00:08:09.420 --> 00:08:15.820
Third, again echoing other neoliberals, Hayek defended what seemed to be a pragmatic middle-of-the-road

93
00:08:15.820 --> 00:08:28.500
Fourth and finally, Hayek weighed in with the full authority of an academic economist

94
00:08:28.500 --> 00:08:33.420
who was well-known and respected in the United Kingdom, a fact that to the present day can

95
00:08:33.420 --> 00:08:38.820
arouse Americans' intellectual inferiority complex. For staunch defenders of liberty,

96
00:08:38.820 --> 00:08:44.380
Hayek's neoliberalism was of course far too soft on government. The positive program of

97
00:08:44.380 --> 00:08:48.940
The road to serve them left the government in control of economic life. The economy was

98
00:08:48.940 --> 00:08:54.040
still to be a planned one with the government in charge of all the planning. Hayek merely

99
00:08:54.040 --> 00:08:59.380
suggested that this planning be for competition rather than the detailed control of all market

100
00:08:59.380 --> 00:09:04.580
participants. This was a naive approach from any realistic political point of view and

101
00:09:04.580 --> 00:09:09.300
some thought it was indefensible from an intellectual point of view as well.

102
00:09:09.300 --> 00:09:14.140
Commenting on Hayek's programme, Frank Chodorow explained, how silly, and made it clear that

103
00:09:14.140 --> 00:09:18.380
and what he thought the program verged on intellectual caladis.

104
00:09:18.380 --> 00:09:22.660
Mises was very happy about the success of the book. However, he too thought that Hayek

105
00:09:22.660 --> 00:09:27.560
had made his case in misleading terms. Hayek had singled out economic planning as the root

106
00:09:27.560 --> 00:09:32.100
cause of the various policies that threatened political and economic freedom. But there

107
00:09:32.100 --> 00:09:37.020
is no danger in planning per se. The real question is who should do the planning and

108
00:09:37.020 --> 00:09:42.620
how should the plans be applied? Should there be only one plan imposed by the power of the

109
00:09:42.620 --> 00:09:49.260
on All Citizens, or should there be many different plans made by each individual or head of household?

110
00:09:49.260 --> 00:09:53.900
Mises emphasized this crucial distinction in his speech delivered on March 30th, 1945

111
00:09:53.900 --> 00:09:59.860
to the American Academy of Political Science. He left implicit the fact that his speech was

112
00:09:59.860 --> 00:10:04.660
a critical review of Hayek's book. Mises's speech was first published as Planning for

113
00:10:04.660 --> 00:10:08.980
Freedom together with a speech by Rufus S. Tucker delivered before the same audience

114
00:10:08.980 --> 00:10:13.700
in a 24-page pamphlet, Economic Planning. Later, the essay was reprinted in Mises'

115
00:10:13.700 --> 00:10:19.540
book Planning for Freedom. In correspondence with Adolphe Ménier, a professor in Paris,

116
00:10:19.540 --> 00:10:24.500
Mises mentioned that he disliked the title and subtitles of the printed version of his talk.

117
00:10:24.500 --> 00:10:30.260
The French translation was published in 1947 in the Revue de l'Économie Contemporaine

118
00:10:30.260 --> 00:10:35.300
under the title L'Interventionisme et le Salaire. In a letter to Selma Fuller,

119
00:10:35.300 --> 00:10:39.820
Fuller Mises praises the virtues of Road to Serve Them, but concedes the appropriateness

120
00:10:39.820 --> 00:10:44.820
of Fuller's critical stance on the book. The positive program developed by Hayek matters

121
00:10:44.820 --> 00:10:49.820
little when compared with these virtues of his book. However, it is a very comforting

122
00:10:49.820 --> 00:10:55.220
fact that your friends were shrewd enough to see the contradictions in his program.

123
00:10:55.220 --> 00:10:59.940
A few days later, on April 3rd, Hayek arrived in New York to start a Road to Serve Them

124
00:10:59.940 --> 00:11:05.300
Lecture Tour. It was the first time he saw his old mentor in America.

125
00:11:05.300 --> 00:11:10.060
The book and the lecture tour trumpeted the dawn of a new era. The sale of thousands of

126
00:11:10.060 --> 00:11:14.820
copies signalled to everyone that the American population still harboured strong affections

127
00:11:14.820 --> 00:11:20.860
for liberal ideas and that these feelings had huge political potential. The most momentous

128
00:11:20.860 --> 00:11:25.600
initiative to exploit this potential was, we can see in retrospect, the decision of

129
00:11:25.600 --> 00:11:30.440
Leonard Reed quit his lucrative position at the Los Angeles Chamber of Commerce at the

130
00:11:30.440 --> 00:11:36.760
end of 1945 and to move to New York as an executive vice president of the National Industrial

131
00:11:36.760 --> 00:11:42.580
Conference Board. Reed sensed the potential for a huge interest in laissez-faire liberalism

132
00:11:42.580 --> 00:11:46.880
and its underpinnings in economic science à la Mises, and he understood that liberty

133
00:11:46.880 --> 00:11:53.160
had to be defended as an integrated whole, not in a piecemeal fashion with many concessions.

134
00:11:53.160 --> 00:11:58.400
But looking around in 1945, he was amazed to discover that there was not one institution

135
00:11:58.400 --> 00:12:03.680
to satisfy this demand for information, and certainly none ready to support or promote

136
00:12:03.680 --> 00:12:08.600
classical liberal scholars and students. Many years later, he summarized his discoveries

137
00:12:08.600 --> 00:12:13.160
in four points. 1. The freedom philosophy wasn't issuing

138
00:12:13.160 --> 00:12:18.160
from any place on the face of the earth. 2. There wasn't a magazine in the country

139
00:12:18.160 --> 00:12:22.440
that would take one of our articles. 3. There wasn't a book publisher that would

140
00:12:22.440 --> 00:12:28.680
Take one of our books, number four, just 26 years ago in 1945, there did not exist a consistent

141
00:12:28.680 --> 00:12:33.240
literature of this philosophy written in modern American idiom. That's how far down the drain

142
00:12:33.240 --> 00:12:38.800
this philosophy was. The National Industrial Conference Board was an educational institution,

143
00:12:38.800 --> 00:12:42.640
the purpose of which was to provide information about economic science and the functioning

144
00:12:42.640 --> 00:12:47.160
of the American economy to classroom teachers all over the country. Reid had been hired

145
00:12:47.160 --> 00:12:52.920
along with Garrett Garrett and others to establish a new nationwide educational programme. The

146
00:12:52.920 --> 00:12:58.040
express purpose of the new programme was to inform teachers, journalists and intellectuals,

147
00:12:58.040 --> 00:13:02.560
the second-hand dealers in ideas, as Hayek called them, about the importance of individual

148
00:13:02.560 --> 00:13:07.680
liberty for economic prosperity and society at large. Reed's mission was to raise the

149
00:13:07.680 --> 00:13:14.360
necessary funds. Mises was aware of Reed's effort. When, in May 1945, he received a request

150
00:13:14.360 --> 00:13:19.140
from Mr. Allman, the Vice President of the Fruehauf Trader Company, inquiring what could

151
00:13:19.140 --> 00:13:23.740
be done in terms of organizational work to give the individual private enterprise way

152
00:13:23.740 --> 00:13:29.260
of living and doing business political leverage. Mises replied that friends of his were elaborating

153
00:13:29.260 --> 00:13:34.840
a plan for imminent action. He had probably talked again with Reed about his pet project,

154
00:13:34.840 --> 00:13:39.420
the establishment of a libertarian journal of opinion. Human Events had been launched

155
00:13:39.420 --> 00:13:44.540
The year before, but Mises was not happy with its one-sided focus on anti-communism. The

156
00:13:44.540 --> 00:13:49.340
problem was not just the increase of government interventionism in the name of communist ideals.

157
00:13:49.340 --> 00:13:54.700
The problem was that the government intervened at all. A libertarian journal of opinion would

158
00:13:54.700 --> 00:13:59.780
have to educate the public about basic economic laws.

159
00:13:59.780 --> 00:14:04.980
The Long Visit at New York University One great limitation to Mises's effectiveness

160
00:14:04.980 --> 00:14:10.620
in spreading the gospel of liberty was that he lacked an academic base. Like most other

161
00:14:10.620 --> 00:14:15.180
champions of the free market, he frequently lectured to businessmen and other civic leaders,

162
00:14:15.180 --> 00:14:20.820
but he had no direct impact on future intellectuals who studied at the university. It was quite

163
00:14:20.820 --> 00:14:25.420
often a frustrating experience for him in the letter to Machloub, he wrote. Again and

164
00:14:25.420 --> 00:14:30.500
again various organizations invite me to refute Marxism and to the Union Doctrine, which are

165
00:14:30.500 --> 00:14:35.820
are held to be identical, and as an aside also Keynes and Hansen, in a short paper that

166
00:14:35.820 --> 00:14:40.260
can be read in not more than thirty minutes, and which every high school graduate can easily

167
00:14:40.260 --> 00:14:46.500
understand, refute Marx, but don't use high-brow terms such as value, dialectical materialism,

168
00:14:46.500 --> 00:14:52.340
average rate of profit, etc., refute Keynes, but do not speak of the multiplier, of liquidity

169
00:14:52.340 --> 00:14:54.420
preference, etc.

170
00:14:54.420 --> 00:14:59.580
Unlike many of his former students and associates, Mises had been unable to obtain a suitable

171
00:14:59.580 --> 00:15:07.740
Hebert von Beckenrath, Götz Brieffs, Gottfried von Habeler, Georg Halm and Josef Schrumpeter

172
00:15:07.740 --> 00:15:09.940
had obtained positions at Harvard.

173
00:15:09.940 --> 00:15:15.300
Machloub was at the new Rockefeller-funded University of Buffalo and Morgenstern at Princeton.

174
00:15:15.300 --> 00:15:20.900
Apparently, they were all unwilling or unable to get Mises into their departments.

175
00:15:20.900 --> 00:15:25.720
He had offers from smaller schools, such as the University of Rochester, but would not

176
00:15:25.720 --> 00:15:28.220
settle for second-rate institutions.

177
00:15:28.220 --> 00:15:32.800
At some point in 1944, some of his friends and admirers in New York took the initiative

178
00:15:32.800 --> 00:15:38.680
to provide him a visiting professorship at New York University. Led by Lawrence Furtick,

179
00:15:38.680 --> 00:15:43.340
an NYU trustee, these men eventually came to an agreement with NYU's Graduate School

180
00:15:43.340 --> 00:15:48.720
of Business Administration. The school would invite Mises to give an economics seminar,

181
00:15:48.720 --> 00:15:54.680
and Mises' salary would be from private funds. Nash mentions that Hazlitt and Reed were among

182
00:15:54.680 --> 00:15:59.480
Among those involved, Nash also mentions that Hayek's position at the University of Chicago

183
00:15:59.480 --> 00:16:05.800
was similarly subsidized out of private funds. It is not clear who, apart from Fertig, contributed

184
00:16:05.800 --> 00:16:10.560
to paying Mises a salary. It is, however, most likely that a major part of the money

185
00:16:10.560 --> 00:16:15.280
came from the Volcker Fund. Other potential donors were among the men who had later backed

186
00:16:15.280 --> 00:16:21.880
the Freemen, in particular Alfred Kohlberg, importer, Jasper Crane, Howard Pugh, son-oil,

187
00:16:21.880 --> 00:16:29.360
Herbert Hoover, former US President, W. Prentiss, Armstrong Cork, W. F. Peter, Chicago, Rock

188
00:16:29.360 --> 00:16:35.180
Island and Pacific Railroad. This arrangement continued on a regular basis. Mises started

189
00:16:35.180 --> 00:16:43.560
his classes in February 1945. He was a visiting professor at NYU for more than 20 years. When

190
00:16:43.560 --> 00:16:47.680
he was looking for a job right after his arrival in the United States, Machloop had brought

191
00:16:47.680 --> 00:16:56.440
In November 1940, the department head, Spa, invited Mises to give a talk on his contributions

192
00:16:56.440 --> 00:17:02.060
to economic theory. Spa was slow or unwilling to follow up with a job offer, and Mises then

193
00:17:02.060 --> 00:17:07.640
accepted the position at NBER. Despite the humiliating circumstances, the seminar proved

194
00:17:07.640 --> 00:17:13.280
to be an enormous success. From the outset, it was not only attended by NYU business students,

195
00:17:13.280 --> 00:17:18.740
It also attracted a colourful group of personalities from outside, journalists, businessmen, writers

196
00:17:18.740 --> 00:17:23.680
and students from other universities. In a manner reminiscent of Mises' seminars in Vienna,

197
00:17:23.680 --> 00:17:29.080
it became a rallying point for New York-based intellectuals interested in the scientific

198
00:17:29.080 --> 00:17:34.240
case for laissez-faire, as well as a point of attraction for visitors from abroad. In

199
00:17:34.240 --> 00:17:39.920
Vienna, the Mises circle would move from Mises' cummer offices to Ancora Verde for dinner,

200
00:17:39.920 --> 00:17:44.380
and then to the Café Künstler to continue the conversation late into the night.

201
00:17:44.380 --> 00:17:48.800
In New York, the participants in Mises' NYU seminar could follow the classroom session

202
00:17:48.800 --> 00:17:53.960
by joining their professor in Child's Restaurant, followed by the Café Lafayette.

203
00:17:53.960 --> 00:17:59.280
Seminar students such as Hans Zenholz, William Peterson, George Reisman, Israel Kirzner,

204
00:17:59.280 --> 00:18:04.940
and Ralph Reiko eventually formed, together with Murray Rothbard, the solid core of Misesians

205
00:18:04.940 --> 00:18:10.440
to hold out through the long libertarian winter of the 1960s and 1970s, thus enabling the

206
00:18:10.440 --> 00:18:16.000
breakthrough of Misesian ideas of the 1980s and 1990s.

207
00:18:16.000 --> 00:18:20.460
Mises inspired them to contribute to the great project of hammering out a systematic and

208
00:18:20.460 --> 00:18:25.740
encompassing libertarian philosophy, a project that had attracted courageous and innovative

209
00:18:25.740 --> 00:18:31.100
thinkers from the time of the 16th century Spanish late scholastics to the time of the

210
00:18:31.100 --> 00:18:32.860
Manchester School.

211
00:18:32.860 --> 00:18:36.780
In retrospect, the results can only be called amazing.

212
00:18:36.780 --> 00:18:41.420
It is one thing indeed for students to follow the example of a passionate and encouraging

213
00:18:41.420 --> 00:18:42.500
teacher.

214
00:18:42.500 --> 00:18:45.860
It is quite another thing to actually produce anything of value.

215
00:18:45.860 --> 00:18:51.700
A surprising number of Mises' NYU students later became important scholars and even pioneers

216
00:18:51.700 --> 00:18:54.940
in economics, history and philosophy.

217
00:18:54.940 --> 00:18:59.100
One example of the international significance of the seminar was the case of the Japanese

218
00:18:59.100 --> 00:19:06.540
Mises' pre-war work had been favorably received in Japan and several professors from this

219
00:19:06.540 --> 00:19:12.340
far eastern country had taken part in his Vienna seminar. After the war, a correspondent

220
00:19:12.340 --> 00:19:17.140
from the Yasuda Bank wrote Mises that his theory of money and credit had made a very

221
00:19:17.140 --> 00:19:21.980
strong impression in Japanese financial circles and is regarded most highly.

222
00:19:21.980 --> 00:19:28.900
Azuma was a student of Mitsutaro Araki to whom Mises had already, in 1925, granted permission

223
00:19:28.900 --> 00:19:31.940
To Translate and Publish, Theory of Money and Credit

224
00:19:31.940 --> 00:19:36.260
Araki never completed the translation, but his student finished it in the early years

225
00:19:36.260 --> 00:19:42.340
of the war. When he wrote to Mises in 1948, the manuscript of the translation had survived

226
00:19:42.340 --> 00:19:47.820
the war years in a vault of the publisher. Azuma also kept Mises informed about intellectual

227
00:19:47.820 --> 00:19:52.860
developments in Japanese economics. The impact would increase when a Japanese edition appeared

228
00:19:52.860 --> 00:19:59.040
in May 1949, just in time to provide intellectual ammunition against the wave of Keynesianism

229
00:19:59.040 --> 00:20:02.720
that swept the country with the American occupation forces.

230
00:20:02.720 --> 00:20:07.040
Mahrup reported a few years later from a meeting with Japanese colleagues in Tokyo,

231
00:20:07.040 --> 00:20:11.700
There was a discussion of whether certain parts of Your Theory of Money were already

232
00:20:11.700 --> 00:20:16.760
in the first edition or only added in the second edition. There were several present

233
00:20:16.760 --> 00:20:22.020
who were able to discuss this question. One classical liberal from Japan later recalled

234
00:20:22.020 --> 00:20:28.380
the chain of events in his country. The names of von Mises and Hayek are well-known in Japan.

235
00:20:28.380 --> 00:20:32.780
The latter's Road to Serfdom was published during the war about the time when Japan started

236
00:20:32.780 --> 00:20:39.020
experimenting in state socialism. My own experience confirms completely the exactness

237
00:20:39.020 --> 00:20:43.780
of the professor's prognostications. When the war was over, we had to throw everything

238
00:20:43.780 --> 00:20:48.860
overboard and I expected a return to free enterprise. Then a curious thing happened.

239
00:20:48.860 --> 00:20:52.980
The Americans arriving in Japan in the wake of the landing forces started putting into

240
00:20:52.980 --> 00:20:58.660
effect policies which were hardly distinguishable from state socialism.

241
00:20:58.660 --> 00:21:01.340
Leonard Reed and FEE

242
00:21:01.340 --> 00:21:05.440
About a year after the inception of Mises' NYU lectures, another institution would be

243
00:21:05.440 --> 00:21:10.340
established that would prove to be a pillar of the classical liberal renaissance and give

244
00:21:10.340 --> 00:21:13.460
further leverage to Mises' ideas.

245
00:21:13.460 --> 00:21:17.840
Leonard Reed had come to the conclusion that his engagement with the National Industrial

246
00:21:17.840 --> 00:21:22.720
Conference Board was a waste of time and money. One of the main reasons for his ineffectiveness

247
00:21:22.720 --> 00:21:27.920
was that the board was committed to a policy of hearing both sides. In practice this meant,

248
00:21:27.920 --> 00:21:32.000
for example, that at the bi-monthly public conferences that the board sponsored at the

249
00:21:32.000 --> 00:21:37.600
Waldorf Astoria, both the champions of the free market and the advocates of government intervention

250
00:21:37.600 --> 00:21:42.240
were granted equal time to present their cases. Leonard Reid believed this policy was based on a

251
00:21:42.240 --> 00:21:46.960
severe misunderstanding of a hearing both sides truly meant in the present context.

252
00:21:46.960 --> 00:22:11.960
How do you present both sides when one side is all around you, pre-empting the public discussion and the other side is barely audible in the deafening noise of the former?

253
00:22:11.960 --> 00:22:21.960
Reed thought any funds spent on yet another presentation of the statist view was money down the drain and he felt he could not in good conscience justify this expenditure.

254
00:22:21.960 --> 00:22:27.960
At the end of 1945 he resigned his position and started visiting the donors to apologize.

255
00:22:27.960 --> 00:22:38.960
Mises continued to be invited to other NICB conferences, for example on May 16th, 1946 he discussed the subject of post-war interest rates with Woodleaf Thomas,

256
00:22:38.960 --> 00:22:46.400
a Federal Reserve economist, Friedrich Lutz and Paul Samuelson, and on January 22, 1948, he took

257
00:22:46.400 --> 00:22:51.840
part in a symposium that dealt with the question, should we return to a gold standard? Here he met

258
00:22:51.840 --> 00:22:58.080
Philip Courtney, among the other contributors were Albert Hahn and Michael Halperin. He was probably

259
00:22:58.080 --> 00:23:05.280
also instrumental in providing his friend Walter Sulzbach with a job at NICB in 1946 or 1947.

260
00:23:05.280 --> 00:23:11.140
One of them, New York City businessman Pierre Goodrich, encouraged Reid to think about setting

261
00:23:11.140 --> 00:23:16.480
up his own organisation. Two months later, Reid established the Foundation for Economic

262
00:23:16.480 --> 00:23:22.520
Education, FEE, which, in July 1946, would move to the pastoral premises in Irvington

263
00:23:22.520 --> 00:23:28.680
and Hudson, several miles north of Manhattan, where it is still located. Reid mobilised

264
00:23:28.680 --> 00:23:33.380
substantial corporate backing for this venture. He had a full address book and was personally

265
00:23:33.380 --> 00:23:45.980
The main activity of FEE was to send out pamphlets and letters explaining the freedom thesis

266
00:23:45.980 --> 00:23:53.540
to some 30,000 households. The number of 30,000 was attained by early 1949. Reed himself gave

267
00:23:53.540 --> 00:23:58.140
a great number of public lectures and together with his other staff he would soon start offering

268
00:23:58.140 --> 00:24:03.060
During weekend seminars and other educational programs, the pamphlets and conferences brought

269
00:24:03.060 --> 00:24:07.220
students throughout the country in touch with the writings of Mises and other champions

270
00:24:07.220 --> 00:24:12.540
of classical liberalism. Mises himself was one of the first economists hired for lectures

271
00:24:12.540 --> 00:24:17.820
and seminars on FEE's premises and would eventually become its intellectual centre

272
00:24:17.820 --> 00:24:23.020
for more than two decades. He was paid a uniform amount at regular intervals and therefore

273
00:24:23.020 --> 00:24:29.380
What we came for technical reasons, tax laws, an employee of FEE in October 1946.

274
00:24:29.380 --> 00:24:34.620
It would be hard to overstate the significance of the appearance of FEE, though its activities

275
00:24:34.620 --> 00:24:39.860
were not noticed by a large national audience, the very existence of this organization gave

276
00:24:39.860 --> 00:24:44.260
the scattered classical liberal forces focus and orientation.

277
00:24:44.260 --> 00:24:50.020
It gave them what they had not had since the heyday of 19th century liberalism, a home.

278
00:24:50.020 --> 00:24:54.980
FEE provided the material and infrastructure for an enthusiastic return to the ideals of

279
00:24:54.980 --> 00:24:59.940
the 19th century laissez-faire liberals. To the key question about the proper functions

280
00:24:59.940 --> 00:25:05.380
of government, FEE's Manchesterian answer was that government should be strictly limited

281
00:25:05.380 --> 00:25:10.660
to the prevention of aggressive force or physical violence. More importantly, it attracted young

282
00:25:10.660 --> 00:25:15.100
people interested in the intellectual case for liberty and ultimately brought Mises in

283
00:25:15.100 --> 00:25:19.780
touch with a self-selected group of students who were much more receptive to the political

284
00:25:19.780 --> 00:25:39.220
Last but not least, FEE provided some intellectual counterweight to the neo-liberal orthodoxy

285
00:25:39.220 --> 00:25:45.620
that was about to emerge from the University of Chicago's economics department. In 1947

286
00:25:45.620 --> 00:25:51.260
1948 respectively, Frank Knight and Henry Simons posthumously had published collections

287
00:25:51.260 --> 00:25:57.820
of articles making their case for a libertarianism that was so watered down as to be indistinguishable

288
00:25:57.820 --> 00:26:03.700
from social democracy. Other members of the Chicago School were Aaron Director and Milton

289
00:26:03.700 --> 00:26:10.820
Friedman. FEE's impact was of course comparatively minor, but without it the Chicago School would

290
00:26:10.820 --> 00:26:15.580
have totally dominated the American free market scene.

291
00:26:15.580 --> 00:26:19.740
Frederic Neimeier At about the same time Reed was setting up

292
00:26:19.740 --> 00:26:24.480
FEE in Irvington, New York, Mises made another acquaintance who would eventually turn into

293
00:26:24.480 --> 00:26:31.580
a long-term ally. In May 1946, Chicago businessman Frederic Neimeier had finished reading Mises'

294
00:26:31.580 --> 00:26:36.140
Theory of Money and Credit, which prompted him to write to the author and inquire about

295
00:26:36.140 --> 00:26:40.780
any further writings of his on the subject. During the following months, Neimeier read

296
00:26:40.780 --> 00:26:44.800
omnipotent government and other available English language writings of the Austrian

297
00:26:44.800 --> 00:26:51.000
professor. He was the ideal reader for Mises. He had received his economics education in

298
00:26:51.000 --> 00:26:55.560
the early 1920s, then worked for a while as a field representative of the Harvard Business

299
00:26:55.560 --> 00:27:00.040
Cycle Index. He was well acquainted with the monetary thought that prevailed in the United

300
00:27:00.040 --> 00:27:04.600
States. The theory of money and credit, he found, was a radically different approach

301
00:27:04.600 --> 00:27:09.720
than the mechanical quantity theory, and he therefore had some difficulty to adjust all

302
00:27:09.720 --> 00:27:12.600
Follow my thinking to your exposition.

303
00:27:12.600 --> 00:27:16.760
Part of the difficulty seemed to be the different use of terms, and Neumeier then went on to

304
00:27:16.760 --> 00:27:22.160
raise questions about one of the crucial concepts of the theory, the demand for money.

305
00:27:22.160 --> 00:27:26.220
Mises agreed that the way he had put it, the demand for money being the demand for purchasing

306
00:27:26.220 --> 00:27:31.860
power, was ambiguous, and that a better way of putting it was to say that the market participants

307
00:27:31.860 --> 00:27:34.240
had a demand for cash holdings.

308
00:27:34.240 --> 00:27:38.700
He promised to revise his writings accordingly and to consider this point in his forthcoming

309
00:27:38.700 --> 00:27:41.140
and Treatise on Economics.

310
00:27:41.140 --> 00:27:45.420
This exchange was the beginning of a long-lasting alliance, though never really more than a

311
00:27:45.420 --> 00:27:46.620
personal friendship.

312
00:27:46.620 --> 00:27:51.020
Neimeyer soon commenced to read other Austrian works available in English, in particular

313
00:27:51.020 --> 00:27:53.860
Boehm-Bawerk's Capital and Interest.

314
00:27:53.860 --> 00:27:57.460
Slowly he became a dedicated admirer of the Austrian School.

315
00:27:57.460 --> 00:28:00.620
He was also a dedicated Calvinist and claimed,

316
00:28:00.620 --> 00:28:05.780
Boehm-Bawerk has gone as far beyond Adam Smith as Calvin did beyond Luther.

317
00:28:05.780 --> 00:28:11.640
Mises's agnosticism did not diminish Nijmijer's admiration for the Austrian economist, and

318
00:28:11.640 --> 00:28:17.020
it did not prevent Mises himself from cooperating openly and productively with Christian libertarians

319
00:28:17.020 --> 00:28:18.580
in America.

320
00:28:18.580 --> 00:28:22.900
In Austria such cooperation was almost out of the question because the Christian Socialist

321
00:28:22.900 --> 00:28:27.060
had pushed the Catholic Church into an intellectual dead end.

322
00:28:27.060 --> 00:28:32.380
Only outstanding personalities, such as Monsieur Zeipel, could overcome the Socialist resentments

323
00:28:32.380 --> 00:28:37.340
against the liberal Mises, but in the States things were different. A great number of the

324
00:28:37.340 --> 00:28:42.220
Protestant clergymen in America loved individual liberty and the free market and considered

325
00:28:42.220 --> 00:28:47.380
this love to result quite naturally from their Christian religion. Many of these men felt

326
00:28:47.380 --> 00:28:52.260
that Mises' theories were complementary to their faith. In correspondence with a high

327
00:28:52.260 --> 00:28:56.700
clergyman of the Church of England in Canada who had read Human Action, Mises wrote, I

328
00:28:56.700 --> 00:29:01.820
fully agree with your statement that the Gospels do not advocate anti-capitalistic policies.

329
00:29:01.820 --> 00:29:06.540
I dealt with this problem years ago in my book Socialism. I furthermore fully agree with

330
00:29:06.540 --> 00:29:11.400
your proposition that one does not find in Human Action one word which is in opposition

331
00:29:11.400 --> 00:29:13.300
to the Christian faith.

332
00:29:13.300 --> 00:29:18.140
Mises enthusiastically welcomed the publication of the monthly periodical Faith and Freedom

333
00:29:18.140 --> 00:29:23.980
by Spiritual Mobilization, a Los Angeles-based organisation in December 1949. Of course,

334
00:29:23.980 --> 00:29:29.380
he knew very well that the majority of Protestant leaders championed some form of socialism

335
00:29:29.380 --> 00:29:34.760
or Interventionism, and that while the Catholic Church valiantly fights Communism, it did

336
00:29:34.760 --> 00:29:40.140
not oppose Socialism. But these problems were outside of his field. I think that only theologians

337
00:29:40.140 --> 00:29:45.620
are called to deal with the issue. This was also the opinion of Frederic Neimeier.

338
00:29:45.620 --> 00:29:50.380
One of the main springs of his motivation for spreading Mises's writings was precisely

339
00:29:50.380 --> 00:29:56.820
the complementary relation he perceived between laissez-faire capitalism and Christianity.

340
00:29:56.820 --> 00:30:02.540
Mises and Nijmijer probably met for the first time in late January 1948. Nijmijer then started

341
00:30:02.540 --> 00:30:06.420
thinking about why the Austrian School of Economics was not prevalent in the United

342
00:30:06.420 --> 00:30:10.900
States, and he came to the conclusion that Austrian works were not sufficiently well

343
00:30:10.900 --> 00:30:15.620
known. In the fall of that year he was ready to take action, relying in particular on his

344
00:30:15.620 --> 00:30:20.140
voluminous address book. I know several of the outstanding entrepreneurs in this country.

345
00:30:20.140 --> 00:30:26.120
I sit on some important board of directors. And at the end of January 1949, after several

346
00:30:26.120 --> 00:30:31.920
For more encounters with Mises, Nymeyer came up with a plan. The idea was to set up a liberal

347
00:30:31.920 --> 00:30:37.440
institute under Mises' leadership at the University of Chicago. Nymeyer was a friend

348
00:30:37.440 --> 00:30:43.280
of the Dean of the Business School or at some other suitable university in the Chicago area.

349
00:30:43.280 --> 00:30:48.480
Nymeyer had already won over his associate Robert W. Baird and his friend John T. Brown,

350
00:30:48.480 --> 00:30:54.320
Vice President of the J.I. Case Company. By May 1949, they had talked to several other

351
00:30:54.320 --> 00:31:08.320
at the end of April, the University had told Neumeier that they would favour unrestricted gifts to be used with academic freedom, which meant that the University would select the staff of the proposed Liberal Institute.

352
00:31:08.320 --> 00:31:21.320
Mises commented, based on this slogan, academic freedom, the Universities are boycotting all those economists who dare to raise objections against interventionism from another point of view than that of socialism.

353
00:31:21.320 --> 00:31:31.820
The question of academic freedom is today not, should communist teachers be tolerated, it is rather, should only communists, socialists or interventionists be appointed.

354
00:31:31.820 --> 00:31:41.320
But the resistance did not come only from within the universities. A few years later, and that much the wiser, Mises acknowledged the existence of another factor.

355
00:31:41.320 --> 00:31:46.320
One of the worst features of the present state of affairs is the misplaced loyalty of the alumni.

356
00:31:46.320 --> 00:32:04.320
As soon as somebody dares to criticize something concerning a university, all alumni come to the rescue of their alma mater, then we have the spectacle of big business, defending the boycott launched by the faculties against all those who do not sympathize with interventionism, planning and socialism.

357
00:32:04.320 --> 00:32:22.320
In any case, the plan for a Chicago-based liberal institute under Mises's leadership did not materialize, but Neumeier and his friends probably had some influence in bringing Hayek to Chicago, and in the early 1950s he played a significant role in raising funds for Montpelerin Society meetings.

358
00:32:22.320 --> 00:32:30.240
Mises Debates American Libertarians With the NYU seminar, FEE and individual organizers

359
00:32:30.240 --> 00:32:34.580
and publishers such as Neumeier, Mises enjoyed for the very first time in his entire life

360
00:32:34.580 --> 00:32:39.760
a truly congenial network of students and supporters. He had always been a respected

361
00:32:39.760 --> 00:32:45.080
scholar but few of his readers and associates really appreciated the radical anti-statist

362
00:32:45.080 --> 00:32:50.440
gist of his theories. This held true in particular in the case of the neo-liberals who prided

363
00:32:50.440 --> 00:33:04.400
These men accused Mises of exaggerated logical argument in the intellectual battle for liberty.

364
00:33:04.400 --> 00:33:08.920
If this is a valid charge, then Mises was surely guilty.

365
00:33:08.920 --> 00:33:13.400
As one historian put it, he fought with a supreme logical rigor that even his friends

366
00:33:13.400 --> 00:33:16.100
sometimes considered excessive.

367
00:33:16.100 --> 00:33:20.420
An example of such a friend was Chicago professor of economics Henry C. Simons, who praised

368
00:33:20.420 --> 00:33:25.740
Mises as the greatest living teacher of economics and the toughest old liberal or Manchesterite

369
00:33:25.740 --> 00:33:30.820
of his time, but alas, he added, he is also perhaps the worst enemy of his own libertarian

370
00:33:30.820 --> 00:33:32.180
cause.

371
00:33:32.180 --> 00:33:35.380
Things were completely different in the circle of his new friends.

372
00:33:35.380 --> 00:33:40.820
Many of the new people who came to Mises through his NYU seminar and FEE were even more libertarian

373
00:33:40.820 --> 00:33:42.500
than he was.

374
00:33:42.500 --> 00:33:46.740
Suddenly it was Mises who on several occasions turned out to represent the most stictest

375
00:33:46.740 --> 00:33:48.740
position in his seminar.

376
00:33:48.740 --> 00:33:54.020
American libertarians such as Leonard Reed and R.C. Hoyles placed great emphasis on

377
00:33:54.020 --> 00:33:58.380
the definition of political liberty in terms of non-initiation of force.

378
00:33:58.380 --> 00:34:02.380
After the publication of Human Action, for example, Hoyles criticised Mises in private

379
00:34:02.380 --> 00:34:07.540
correspondence for having admitted that public education can work very well in monolingual

380
00:34:07.540 --> 00:34:12.020
countries if it is limited to reading, writing and arithmetic.

381
00:34:12.020 --> 00:34:15.220
Hoyles saw this as an unnecessary concession.

382
00:34:15.220 --> 00:34:19.980
Make education even if limited to the case under discussion was unjustifiable.

383
00:34:19.980 --> 00:34:24.060
The fact that some people were compelled to pay who did not want to have their children

384
00:34:24.060 --> 00:34:29.540
taught or who had no children was teaching by example that the majority had a right to

385
00:34:29.540 --> 00:34:33.260
coerce the minority to pay for anything the majority wanted.

386
00:34:33.260 --> 00:34:37.060
If that is not the worst kind of government intervention, I do not know what intervention

387
00:34:37.060 --> 00:34:38.060
means.

388
00:34:38.060 --> 00:34:41.860
When you make this one concession, you are denying that our government is limited in

389
00:34:41.860 --> 00:34:43.900
what it has a right to do.

390
00:34:43.900 --> 00:34:48.980
It seems to me that intervention by the government is just the same thing as initiating force.

391
00:34:48.980 --> 00:34:53.940
Understand, I'm not opposed to the use of force to stop someone from initiating force,

392
00:34:53.940 --> 00:34:57.180
but the government has no right to initiate force.

393
00:34:57.180 --> 00:35:01.900
The only purpose of a government is to stop people from intervening in an unhampered market

394
00:35:01.900 --> 00:35:06.180
and to stop people from initiating force, to make someone pay for anything he doesn't

395
00:35:06.180 --> 00:35:08.020
want to pay for.

396
00:35:08.020 --> 00:35:13.700
This perspective was entirely outside Mises's utilitarian approach to political problems.

397
00:35:13.700 --> 00:35:18.280
He believed that the question of who initiated force was politically irrelevant because one

398
00:35:18.280 --> 00:35:23.220
could hardly ever reach agreement on it. The only relevant question was whether the initiation

399
00:35:23.220 --> 00:35:28.520
of force was suitable to attain the end of the acting person, even if his action was

400
00:35:28.520 --> 00:35:33.840
somehow wrong from an ethical point of view. A two-sentence letter he sent some ten years

401
00:35:33.840 --> 00:35:38.260
later to an American correspondent, a publisher in Wisconsin, speaks volumes.

402
00:35:38.260 --> 00:35:51.260
I read your stimulating letter with great interest. As I see it, the main argument in favour of the capitalist system is that it has raised the standard of living of the common man in an unprecedented way.

403
00:35:51.260 --> 00:35:59.260
Another even more substantial point of disagreement between Mises and many American libertarians was the question of democracy.

404
00:35:59.260 --> 00:36:05.260
A few months after FEE's set-up shop, F.A. Baldy Harper saw the need to write a four-page

405
00:36:05.260 --> 00:36:10.520
confidential memorandum defending Mises's views on democracy against the criticisms

406
00:36:10.520 --> 00:36:16.500
of Orville Watts, who had pitted democracy against American-style liberalism. Mises would

407
00:36:16.500 --> 00:36:22.560
also come to taste a particular American flavour of hostility to democracy in a 1947 exchange

408
00:36:22.560 --> 00:36:28.400
of letters with Rose Wilder Lane. Apparently they had met for lunch with Hoyles and others

409
00:36:28.400 --> 00:36:34.400
Mises and Lane had the impression that Mises believed they shared the same outlook on fundamentals.

410
00:36:34.400 --> 00:36:37.820
At the meeting she did not feel it was the right moment to start a discussion on the

411
00:36:37.820 --> 00:36:41.240
subject but later wrote to him to set the record straight.

412
00:36:41.240 --> 00:36:46.300
As an American I am of course fundamentally opposed to democracy and to anyone advocating

413
00:36:46.300 --> 00:36:51.420
or defending democracy which in theory and practice is the basis of socialism. It is

414
00:36:51.420 --> 00:36:56.460
precisely democracy which is destroying the American political structure, American law

415
00:36:56.460 --> 00:37:02.060
and the American Economy, as Madison said it would, and as Macaulay prophesied that

416
00:37:02.060 --> 00:37:07.820
it would do, in fact, in the twentieth century. Mises did not even bother to address the issue,

417
00:37:07.820 --> 00:37:12.420
but observed that he never addressed people who called his writings stuff and nonsense,

418
00:37:12.420 --> 00:37:18.020
as Lane had done in a book review. According to Lane, Mises had fallen prey to the confusion

419
00:37:18.020 --> 00:37:23.320
of eagle Italianism. She quoted Mises, It is obvious that every constitutional system

420
00:37:23.320 --> 00:37:28.520
can be made to work satisfactorily when the rulers are equal to their task. Thereupon

421
00:37:28.520 --> 00:37:34.400
she comments, Stuff and nonsense! The basic fallacy of Germany was in the lack of a rational

422
00:37:34.400 --> 00:37:40.040
political thought, and this book admirably displays that lack. And that was that for

423
00:37:40.040 --> 00:37:44.160
more than two years, after which the debate resumed on more civilised terms, probably

424
00:37:44.160 --> 00:37:49.320
because of Lane's friendship with Howard Pugh. Mises' basic objection to Lane was

425
00:37:49.320 --> 00:37:54.360
Because that she had misunderstood him. He had never advocated any concrete regime of

426
00:37:54.360 --> 00:37:59.360
parliamentary democracy. He merely stressed the fact that all political systems ultimately

427
00:37:59.360 --> 00:38:05.280
hinge on mass opinion. Mises's American friends disagreed, and the discussions and

428
00:38:05.280 --> 00:38:09.960
correspondence between them remained without conclusion. But the confrontation between

429
00:38:09.960 --> 00:38:14.660
the Austrian scholar and his American readers and disciples would be a driving force in

430
00:38:14.660 --> 00:38:19.620
and the development of libertarian theory. Mises' student Murray Rothbard would eventually

431
00:38:19.620 --> 00:38:25.660
work out the radical implications of Misesian economics with great care, combining the non-initiation

432
00:38:25.660 --> 00:38:31.580
of force criterion with the typical Misesian focus on private property rights. Rothbard

433
00:38:31.580 --> 00:38:37.160
thus created the blend of libertarian economics and natural law ethics that continues to attract

434
00:38:37.160 --> 00:38:42.860
many intellectuals to this day. The new radical environment contrasted sharply

435
00:38:42.860 --> 00:38:48.200
with the mentality of Mises' old associates, who had been libertarians by central European

436
00:38:48.200 --> 00:38:53.740
standards but were moderate interventionists in an American context. A case in point was

437
00:38:53.740 --> 00:38:59.920
Fritz Machlup. In a 1946 letter to Mises, he asked his old master to bless his evasive

438
00:38:59.920 --> 00:39:03.660
way of addressing pro-Labour union audiences. He wrote,

439
00:39:03.660 --> 00:39:09.420
I would like your advice. I must soon give a lecture for the US Chamber of Commerce on

440
00:39:09.420 --> 00:39:14.180
Monopolistic wage determination is part of the general problem of monopoly. The lecture

441
00:39:14.180 --> 00:39:19.020
is to be published and will probably receive more attention than suits my liking. If the

442
00:39:19.020 --> 00:39:23.340
lecture were to be presented in a scientific forum, I could go into the history of ideas

443
00:39:23.340 --> 00:39:29.380
and a particular mill and so forth, but for the Chamber I must be practical and political.

444
00:39:29.380 --> 00:39:34.020
I will have no choice but to say that monopoly wages are the only purpose of labour unions

445
00:39:34.020 --> 00:39:38.620
and that strong labour unions mean unemployment and inflation and lead to an authoritarian

446
00:39:38.620 --> 00:39:45.220
and State. Can an honest man avoid such statements? Are there any alternatives? If it is politically

447
00:39:45.220 --> 00:39:50.820
unthinkable to outlaw labour unions, and I assume this is the case today, can one consider

448
00:39:50.820 --> 00:39:56.500
government limitations on private wage increases? I'm not thinking, of course, of a fixing

449
00:39:56.500 --> 00:40:01.920
of wages through the state, but of a general interdiction to increase wages by more than

450
00:40:01.920 --> 00:40:07.800
ten percent in three years, or something of this sort. Of course, this is entirely fantastic.

451
00:40:07.800 --> 00:40:12.880
Could it be smarter not to mention such makeshift solutions at all? They have no prospect of

452
00:40:12.880 --> 00:40:19.220
being accepted. Mises replied that he would tell the chamber, first of all, liberate yourself

453
00:40:19.220 --> 00:40:25.200
from false ideas, study economics, then go on to convince others. Anti-emphasised, I

454
00:40:25.200 --> 00:40:30.240
reject any outlawing or limitation of the liberty of association. No liberties shall

455
00:40:30.240 --> 00:40:35.580
be abolished, only coercion. Correspondence between the two men had already become quite

456
00:40:35.580 --> 00:40:51.560
Planned Chaos Montes de Oca had already talked to Mises

457
00:40:51.560 --> 00:40:57.120
in 1943 about writing an epilogue to the Spanish edition of socialism, but Mises probably did

458
00:40:57.120 --> 00:41:03.080
not turn to the task before 1945. Until then the rate of progress on the translation was

459
00:41:03.080 --> 00:41:09.320
was unclear, and Mises may well have been wary of engaging in another task for Montes de Oca,

460
00:41:09.320 --> 00:41:14.740
who so far had not completed any of the projects they had discussed in 1942. Mises had not

461
00:41:14.740 --> 00:41:20.540
even received agreed-upon payment for a study of Mexico. The prospective Mexican publishers

462
00:41:20.540 --> 00:41:25.180
of socialism asked for an epilogue dealing with the Soviet experiment, both because dealing

463
00:41:25.180 --> 00:41:29.260
with the question was interesting in its own right, and since it would bring the book up

464
00:41:29.260 --> 00:41:35.420
to date. Mises replied evasively, suggesting that the best solution would be to write a

465
00:41:35.420 --> 00:41:41.660
special introduction for the Spanish edition. In early January 1946, Mises finally received

466
00:41:41.660 --> 00:41:48.300
payment for the study on Mexico he had written in 1943. He also worked rapidly on the completion

467
00:41:48.300 --> 00:41:53.140
of the epilogue his Mexican partners had asked for. The typewritten manuscript was probably

468
00:41:53.140 --> 00:41:59.180
finished at the end of the month. Mises received $590 for the study. He finished the

469
00:41:59.180 --> 00:42:05.440
The Epilogue at the end of December 1945 In July and August 1946, Mises lectured again

470
00:42:05.440 --> 00:42:11.180
in Mexico City. In the last days of July, Hayek joined him. They also toured the Central

471
00:42:11.180 --> 00:42:17.940
Plateau and spent some days on Lake Chapala. On the tour, he also gave a talk in Valdelajara

472
00:42:17.940 --> 00:42:24.700
August 27. Montes de Oca acted as a translator to attract a larger audience. One purpose

473
00:42:24.700 --> 00:42:29.060
of Mises' visit was to discuss the long-standing project of the Institute for the Social

474
00:42:29.060 --> 00:42:34.340
for Sciences. This prospect must have been put to rest on that occasion. The subject did

475
00:42:34.340 --> 00:42:39.580
not come up again in any subsequent correspondence. But another project now took on ever more

476
00:42:39.580 --> 00:42:44.460
concrete shape. Hayek was trying to rally classical liberal scholars on both sides of

477
00:42:44.460 --> 00:42:49.840
the Atlantic to establish an international scholarly society devoted to the promotion

478
00:42:49.840 --> 00:42:54.520
of individual liberty. He planned to set up a meeting during the next year and sought

479
00:42:54.520 --> 00:42:59.960
to secure Mises's participation. At the end of the year, Montes de Oca was appointed

480
00:42:59.960 --> 00:43:05.160
as the Director General of the Mexican Central Bank, the Banco de Mexico. His group later

481
00:43:05.160 --> 00:43:11.080
invited Hazlitt, early January 1947, as well as Hansen and Habler for lectures, January

482
00:43:11.080 --> 00:43:17.720
1947. Mises himself was invited again for August 1947 to give a series of lectures critically

483
00:43:17.720 --> 00:43:22.840
Analyzing Marxism Upon his return to New York, Mises learned

484
00:43:22.840 --> 00:43:28.040
that Henry Hazlitt had had to leave the New York Times. This was not the first time Hazlitt's

485
00:43:28.040 --> 00:43:33.520
politics forced him out of a job. In 1933, he had quit his position as literary editor

486
00:43:33.520 --> 00:43:39.440
of The Nation, which did not welcome his hostility to the New Deal. Leaving the New York Times

487
00:43:39.440 --> 00:43:44.540
was a serious setback, but Hazlitt immediately found a new position at Newsweek, where he

488
00:43:44.540 --> 00:43:49.660
He enjoyed the same liberty of opinion he once had enjoyed at the times. He would write his

489
00:43:49.660 --> 00:43:55.460
Newsweek column for exactly twenty years, until he had to leave once again for ideological

490
00:43:55.460 --> 00:44:01.900
reasons. Mises himself fared much better and continued his visit at NYU, where he taught

491
00:44:01.900 --> 00:44:07.900
a course on currency reform in the spring of 1947. In the fall of 1946, Mises also met

492
00:44:07.900 --> 00:44:13.380
a substantial number of European economists, such as Jacques Grif, François Pierrot, Tric

493
00:44:13.380 --> 00:44:18.260
Mayhoff and others who had travelled to the United States and were lecturing at FEE and

494
00:44:18.260 --> 00:44:23.900
other institutions. One likely subject of discussion was Hayek's plan for an international

495
00:44:23.900 --> 00:44:27.420
society of classical liberal scholars.

496
00:44:27.420 --> 00:44:32.280
A conference at Montpilerin. Exactly one year after the establishment of the Foundation

497
00:44:32.280 --> 00:44:36.940
for Economic Education in New York, another organisation was brought into existence to

498
00:44:36.940 --> 00:44:43.300
provide a forum for the exchange and development of ideas from a classical liberal perspective.

499
00:44:43.300 --> 00:44:47.940
Unlike FEE, this organisation did not have any permanent headquarters. It was conceived

500
00:44:47.940 --> 00:44:53.660
as a society of academic scholars and it mainly consisted of annual meetings which have subsequently

501
00:44:53.660 --> 00:44:58.540
taken place at different cities throughout the world. Most importantly, however, this

502
00:44:58.540 --> 00:45:04.400
society was founded in the spirit of neoliberalism and ever since, neoliberal scholars, politicians

503
00:45:04.400 --> 00:45:08.260
and journalists have represented the bulk of its members.

504
00:45:08.260 --> 00:45:13.220
The Society was a follow-up to the 1938 Lippmann Colloquium that Louis Roger had organized

505
00:45:13.220 --> 00:45:14.220
in Paris.

506
00:45:14.220 --> 00:45:19.720
This time, the initiative fell quite naturally into the hands of Hayek, who was well known

507
00:45:19.720 --> 00:45:24.740
on both sides of the Atlantic due to the success of the road to serfdom and also because he

508
00:45:24.740 --> 00:45:29.740
was among the first Western intellectuals to renew contact with his continental counterparts

509
00:45:29.740 --> 00:45:31.460
after the war.

510
00:45:31.460 --> 00:45:38.240
For example, by January 1949, Hayek had already paid several visits to Austria.

511
00:45:38.240 --> 00:45:43.440
In these meetings, the idea of a libertarian association slowly emerged. Hayek certainly

512
00:45:43.440 --> 00:45:48.640
discussed the issue when he met Mises at the end of July 1946 in Mexico, but at that point

513
00:45:48.640 --> 00:45:54.980
there was not yet any concrete plan. From Mexico City, he flew to Oslo, where Trig Weyhoff

514
00:45:54.980 --> 00:45:59.340
organized a preparatory meeting to discuss rather vague plans for the establishment of

515
00:45:59.340 --> 00:46:05.540
a neoliberal association of European intellectuals. There, the plan for an Acton-Tocqueville society

516
00:46:05.540 --> 00:46:13.820
Mises had been in touch with Hoff prior to June 28, 1946. Hoff had written a libertarian

517
00:46:13.820 --> 00:46:18.860
manifesto during the war. He sent the manuscript to Sweden, from where an American diplomat

518
00:46:18.860 --> 00:46:24.300
was supposed to send it to Alfred E. Knopf in New York, but the diplomat never did so.

519
00:46:24.300 --> 00:46:29.340
Hoff learned after the war that this was because the diplomat found the manuscript undemocratic,

520
00:46:29.340 --> 00:46:33.660
which probably meant that it was too critical of the fundamental dogmas of America's war

521
00:46:33.660 --> 00:46:34.660
of Life.

522
00:46:34.660 --> 00:46:39.660
Hof had also come to an independent discovery of the impossibility of economic calculation

523
00:46:39.660 --> 00:46:41.300
in socialism.

524
00:46:41.300 --> 00:46:44.380
Mises had the highest opinion of the Norwegian economist.

525
00:46:44.380 --> 00:46:49.520
Hof was one of the few contemporaries whose judgment of the problems dealt with in human

526
00:46:49.520 --> 00:46:52.220
action is of consequence.

527
00:46:52.220 --> 00:46:57.180
By the end of the year, he had found the necessary funds to sponsor the event from Swiss, through

528
00:46:57.180 --> 00:47:01.980
Hunald, and American Volker Fund sources, and he wrote a letter of invitation to some

529
00:47:01.980 --> 00:47:14.060
Hayek was probably anticipating trouble with Mises on the invitation letter to him Hayek

530
00:47:14.060 --> 00:47:18.460
added a handwritten apology that he had not had the time to discuss his plan with him

531
00:47:18.460 --> 00:47:24.940
in any detail. His apprehension turned out to be correct. Mises went through the roof

532
00:47:24.940 --> 00:47:30.660
writing to Hayek that he could not leave NYU in April and that he abhorred the idea of

533
00:47:30.660 --> 00:47:39.060
At Hazlitt's request, he had written a four-page memorandum containing his observations on

534
00:47:39.060 --> 00:47:45.220
Professor Hayek's plan. Here he stated that many similar plans to stem the tide of totalitarianism

535
00:47:45.220 --> 00:47:49.900
had been pursued in the past several decades. He himself had been involved in some of these

536
00:47:49.900 --> 00:47:54.820
projects and each time the plan failed because these friends of liberty had themselves already

537
00:47:54.820 --> 00:47:59.700
been infected by the statist virus. They did not realise that freedom is inextricably

538
00:47:59.700 --> 00:48:14.060
At the end of the memorandum, he stated his main objection.

539
00:48:14.060 --> 00:48:18.280
The weak point in Professor Hayek's plan is that it relies upon the cooperation of many

540
00:48:18.280 --> 00:48:23.900
men who are known for their endorsement of interventionism. It is necessary to clarify

541
00:48:23.900 --> 00:48:28.820
this point before the meeting starts. As I understand the plan, it is not the task of

542
00:48:28.820 --> 00:48:33.260
Roth is meeting to discuss anew whether or not a government decree or a union dictate

543
00:48:33.260 --> 00:48:37.340
has the power to raise the standard of living of the masses. If somebody wants to discuss

544
00:48:37.340 --> 00:48:42.520
these problems, there is no need for him to make a pilgrimage to the Montpelerin. He can

545
00:48:42.520 --> 00:48:47.660
find in his neighborhood ample opportunity to do so. In his letter to Hayek he was more

546
00:48:47.660 --> 00:48:48.660
specific.

547
00:48:48.660 --> 00:48:54.380
I am primarily concerned about the participation of Röpke, who is an outspoken interventionist.

548
00:48:54.380 --> 00:49:00.340
I think the same holds true for Brandt, Gideonze and Eastman, all three of the marked contributors

549
00:49:00.340 --> 00:49:06.760
to the purely socialist, even though decidedly anti-Soviet, new leader. Mises suggested that

550
00:49:06.760 --> 00:49:12.140
Hayek invite Montes de Orca and Velasco from Mexico, Maestri from Cuba and Highton from

551
00:49:12.140 --> 00:49:17.820
Australia. Still Mises did not rule out his participation, but he did suggest a postponement

552
00:49:17.820 --> 00:49:23.060
of the conference until September. This turned out to be impracticable though and Hayek undertook

553
00:49:23.060 --> 00:49:33.220
Brandt, Gideons, and Eastman's connections to the new leader, mentioning that he himself

554
00:49:33.220 --> 00:49:38.380
had written for this magazine. But more importantly, he argued that the programme of the conference

555
00:49:38.380 --> 00:49:42.900
was still quite open and that the main purpose of the meeting on Lake Geneva and of subsequent

556
00:49:42.900 --> 00:49:47.900
meetings would be to win over especially those historians and political scientists who still

557
00:49:47.900 --> 00:50:11.760
It was probably the first time Mises personally got in touch with Harold W. Lunow and the

558
00:50:11.760 --> 00:50:15.860
well-endowed Volcker Fund. The contact would prove to be highly beneficial in the course

559
00:50:15.860 --> 00:50:21.420
of the next 15 years until the fund was liquidated in the early 1960s.

560
00:50:21.420 --> 00:50:27.460
German-born William Volker, 1859-1947, had made a fortune with a home furnishing business

561
00:50:27.460 --> 00:50:33.260
he had established in 1882 in Kansas City. In 1911, after finally marrying at the age

562
00:50:33.260 --> 00:50:39.820
of 52, he became a philanthropist. He eventually established in 1932 a private fund to protect

563
00:50:39.820 --> 00:50:44.420
his capital against the encroachments of the tax code, especially the new income tax of

564
00:50:44.420 --> 00:50:49.340
in 1916. There may have been Volcker himself who approved the support of the Montpelerin

565
00:50:49.340 --> 00:50:54.900
Society meeting, which took place some seven months before he died. But it is more likely

566
00:50:54.900 --> 00:50:59.380
that this was already the decision of his nephew, Harold Luno, who became the director

567
00:50:59.380 --> 00:51:05.940
of the fund in 1944 and turned it into the principal sponsor of libertarian scholarship.

568
00:51:05.940 --> 00:51:10.800
Shortly after Volcker's death, the fund moved from Kansas City to Birmingham, California.

569
00:51:10.800 --> 00:51:17.580
must have been between April 1949 and June 1951. Apparently, Aluno's main source of

570
00:51:17.580 --> 00:51:23.820
libertarian inspiration had been Lauren Miller, who from 1942 to 1944 had been an executive

571
00:51:23.820 --> 00:51:29.400
of the Kansas City Civic Research Institute, a Volcker Fund outfit, before he departed for

572
00:51:29.400 --> 00:51:35.760
the Detroit Bureau of Governmental Research, another source of funding of post-war libertarianism.

573
00:51:35.760 --> 00:51:40.920
The influence of the Volcker Fund radiated far beyond the United States. By the end of

574
00:51:40.920 --> 00:51:47.960
1953, it paid the membership fees for virtually all non-US members of the Mont-Pilerin society.

575
00:51:47.960 --> 00:51:52.160
The Fund's cooperation with Mises was very close, especially after Luno hired former

576
00:51:52.160 --> 00:51:57.920
FEE employees Herbert and Richard Conwell. Liaison's offices were Richard Conwell and

577
00:51:57.920 --> 00:52:03.480
Kenneth Templeton. Herbert Conwell left the Fund in November 1953 for a business job in

578
00:52:03.480 --> 00:52:09.160
in Honolulu. Most other libertarian think-thanks and funds have been perverted over time,

579
00:52:09.160 --> 00:52:13.880
turning away from their initial principles. The Volcker Fund escaped this fate. It was

580
00:52:13.880 --> 00:52:19.040
liquidated in the early 1960s when its directorship fell into the hands of those who could not

581
00:52:19.040 --> 00:52:23.600
identify with the libertarian orientation of its founder.

582
00:52:23.600 --> 00:52:29.320
The Montpillerin Conference started on April 1st, 1947 and lasted for 10 days. Mises left

583
00:52:29.320 --> 00:52:35.200
New York on March 25, curious to see Europe again after almost seven years.

584
00:52:35.200 --> 00:52:39.480
The meeting had only a minimal agenda and left a great deal of leeway for the participants

585
00:52:39.480 --> 00:52:44.280
to determine the subjects they wished to discuss in the course of the next days.

586
00:52:44.280 --> 00:52:48.960
Mises and Reid, Harper and Watts from FEE, as well as Hazlitt and Davenport, Fortune

587
00:52:48.960 --> 00:52:53.840
magazine, represented the Manchester-right fringe of the meeting. Hayek, Friedman and

588
00:52:53.840 --> 00:53:23.360
In his opening address, Hayek set the agenda for the post-war ideological reconstruction

589
00:53:23.360 --> 00:53:28.240
of the Classical Liberal Movement. It involved, Hayek explained, on the one hand, purging

590
00:53:28.240 --> 00:53:32.440
traditional liberal theory of certain accidental accretions which have become attached to it

591
00:53:32.440 --> 00:53:38.180
in the course of time, and, on the other hand, facing up to some real problems which an oversimplified

592
00:53:38.180 --> 00:53:43.120
liberalism has shirked or which have become apparent only since it has turned into a somewhat

593
00:53:43.120 --> 00:53:48.680
stationary and rigid creed. As later developments would show, the concrete meaning of this programme

594
00:53:48.680 --> 00:54:09.200
Some of the other scheduled talks, however, were more neo and less liberal. For example,

595
00:54:09.200 --> 00:54:14.480
the German economist Walter Euken explained that anti-monopoly legislation was not sufficient

596
00:54:14.480 --> 00:54:19.540
to Combat Monopolies. Further legislative interference was needed in the field of corporate

597
00:54:19.540 --> 00:54:25.260
law, patent law and trademark law. He championed two maxims of economic policy.

598
00:54:25.260 --> 00:54:30.180
First, although there was to be freedom of contract, this freedom was not to be allowed

599
00:54:30.180 --> 00:54:35.680
to limit in any way the freedom of contract of others. Second, monopolistic market participants

600
00:54:35.680 --> 00:54:40.840
should be forced to behave as if they were in competition, produce the same quantities

601
00:54:40.840 --> 00:54:45.120
and sell them at the same prices that would prevail under competition.

602
00:54:45.120 --> 00:54:49.420
In short, Eugen dished up the same interventionist agenda that had already dominated the Lipman

603
00:54:49.420 --> 00:54:55.300
colloquium in 1938. At that time, Mises had been on his honeymoon in Paris, which might

604
00:54:55.300 --> 00:55:01.020
explain why his contributions to the discussions had been unusually tame. Nine years later,

605
00:55:01.020 --> 00:55:05.960
the honeymoon was over. He reacted with great determination and defended his laissez-faire

606
00:55:05.960 --> 00:55:13.960
in a position so vigorously that many years later his friend Lawrence Furtick still recalled the debate. Milton Friedman eventually concurred.

607
00:55:13.960 --> 00:55:22.960
Our sessions were marked by vigorous controversy over such issues as the role of religion and moral values in making possible and preserving a free society,

608
00:55:22.960 --> 00:55:28.960
the role of trade unions and the appropriateness of government action to affect the distribution of income.

609
00:55:28.960 --> 00:55:34.240
I particularly recall a discussion of this issue in the middle of which Ludwig von Mises stood up,

610
00:55:34.240 --> 00:55:40.160
announced to the assembly, you're all a bunch of socialists, and stomped out of the room,

611
00:55:40.160 --> 00:55:44.480
an assembly that contained not a single person who, by even the lowest standards,

612
00:55:44.480 --> 00:55:50.080
could be called a socialist. Friedman did not specify what he meant by the lowest standards.

613
00:55:50.880 --> 00:55:55.600
In any case, while Mises was able to hold socialists in high esteem, the incident showed

614
00:55:55.600 --> 00:56:16.600
Wilhelm Röpke would later pay a friendly tribute to Mises, even though the latter made sarcastic comments upon the unenlightened spirit of so many of its members, including Röpke himself.

615
00:56:16.600 --> 00:56:24.600
Although the libertarians around Mises were a small minority, it was they who had the financial backing of the main American sponsors, such as the Volcker Fund.

616
00:56:24.600 --> 00:56:28.720
such as the Volcker Fund, without which the society would quickly have died out in those

617
00:56:28.720 --> 00:56:29.720
years.

618
00:56:29.720 --> 00:56:33.440
As long as Mises took an active part in the meetings, therefore, it was impossible to

619
00:56:33.440 --> 00:56:37.760
move on to discussing the technical details of an approved government interventionism.

620
00:56:37.760 --> 00:56:40.240
Laissez-faire had made a comeback.

621
00:56:40.240 --> 00:56:45.080
It was not the majority opinion, but it was a debatable and debated political option,

622
00:56:45.080 --> 00:56:49.740
too much for some initial members, such as Maurice Allais, who soon left the society

623
00:56:49.740 --> 00:56:52.100
for precisely this reason.

624
00:56:52.100 --> 00:56:59.120
in October 1947 reinforced his concerns that the American libertarians were far too radical

625
00:56:59.120 --> 00:57:05.820
for his taste. Despite fundamental disagreements, the meeting was a success. On April 9th, some

626
00:57:05.820 --> 00:57:11.660
40 participants established the Mont-Bélerin Society and elected Hayek as their president.

627
00:57:11.660 --> 00:57:16.620
Eventually Honnold from Zurich and Aaron Director became secretaries. Eugen, Dukes, Knight,

628
00:57:16.620 --> 00:57:21.220
Bapard and Rolf were elected vice presidents and Hardy became the treasurer. Mises, Antony,

629
00:57:21.220 --> 00:57:25.300
Germany, Gideon, Sir Iverson, Robbins and Röpke became members of the council. On the

630
00:57:25.300 --> 00:57:29.740
summer 10th, Albert Hoonholt announced that Mises would soon receive a photo album with

631
00:57:29.740 --> 00:57:34.300
some 70 pictures of the conference as a Christmas present.

632
00:57:34.300 --> 00:57:39.540
Preparing the Counter-Revolution By March 1945, Yale University Press had

633
00:57:39.540 --> 00:57:45.080
decided to publish an American edition of Nationale Economie. The idea of a simple translation

634
00:57:45.080 --> 00:57:51.880
was never really an option. All sides agreed to publish a revised edition. In June 1945,

635
00:57:51.880 --> 00:57:56.760
Mises still said the book was to be published in an American edition next year.

636
00:57:56.760 --> 00:58:01.960
For the next three and a half years, Mises worked busily on this project. The revisions

637
00:58:01.960 --> 00:58:06.540
were not to be substantive. Their primary purpose was to adapt the work to the intellectual

638
00:58:06.540 --> 00:58:11.800
background of his American readers. In this task, Mises benefited enormously from the experience

639
00:58:11.800 --> 00:58:18.240
of Henry Hazlitt and Yale editor Eugene Davidson, both of whom suggested many areas of improvement.

640
00:58:18.240 --> 00:58:23.620
For example, Mises now dealt with doctrines and policy proposals that had specific importance

641
00:58:23.620 --> 00:58:28.900
in the United States, such as the Georgist theory of land taxation. But he especially

642
00:58:28.900 --> 00:58:33.740
modified his discussion of the fundamental philosophical problems of the science of human

643
00:58:33.740 --> 00:58:39.460
action. For example, in his German book, Mises felt he had to refute Otmar Spahn's Universalist

644
00:58:39.460 --> 00:58:44.080
Economics in great detail. He now dropped this discussion almost entirely and focused

645
00:58:44.080 --> 00:58:48.920
instead on the refutation of positivism and the use of quantitative methods in economic

646
00:58:48.920 --> 00:58:54.520
theory. He added an entirely new chapter, the only chapter with no counterpart in nationale

647
00:58:54.520 --> 00:58:59.520
économie, to discuss the basic problems of probability theory, which was at the heart

648
00:58:59.520 --> 00:59:05.080
of the quantitative approach that dominated economic analysis in the Anglo-Saxon countries.

649
00:59:05.080 --> 00:59:09.720
In this chapter, Mises seized the opportunity to build on and elaborate the works of his

650
00:59:09.720 --> 00:59:14.840
brother Richard, who had pioneered the so-called relative frequency theory of probability.

651
00:59:14.840 --> 00:59:20.200
Mises considerably simplified the axiomatic exposition of the theory and argued, without

652
00:59:20.200 --> 00:59:25.940
mentioning his brother by name, that the standard account was redundant. Beyond the scholarly

653
00:59:25.940 --> 00:59:30.580
aspect of this contribution, the correction of his brother was a sequence in a typical

654
00:59:30.580 --> 00:59:34.820
Austrian Literary Squabble. Twelve years earlier Richard had ventured into the field

655
00:59:34.820 --> 00:59:39.140
of his elder sibling and claimed in one of his books that laissez-faire policies had

656
00:59:39.140 --> 00:59:45.280
no scientific merit. Now Ludwig struck back by demonstrating what an elegant exposition

657
00:59:45.280 --> 00:59:50.820
of the relative frequency theory looked like. Human Action almost became Mises's first

658
00:59:50.820 --> 00:59:57.140
posthumous publication. In October 1948 he and Margit had a very serious car accident.

659
00:59:57.140 --> 01:00:01.940
The couple survived and Ludwig put the finishing touches on the book by the spring of 1949.

660
01:00:02.580 --> 01:00:07.620
He sent copies of the manuscript to receptive publishers and friends, among them Jasper Crane,

661
01:00:07.620 --> 01:00:12.020
who ran the Van Nostrand publishing company and whom he knew well through FEE.

662
01:00:13.460 --> 01:00:15.300
A neoliberal coup in Germany

663
01:00:16.180 --> 01:00:22.260
The 1947 Mont Pelerin Society meeting was enough to satisfy Mises' curiosity about Europe and

664
01:00:22.260 --> 01:00:28.740
European scholars for quite some time. Europe lay in shambles. Even Paris was in rags. He did not

665
01:00:28.740 --> 01:00:33.540
even wish to think about travelling to Austria. All that was good and memorable about Europe was

666
01:00:33.540 --> 01:00:38.820
in the past. No need for him to return to the old continent just to witness the misery induced by

667
01:00:38.820 --> 01:00:43.380
those very statist follies he had spent a lifetime fighting. When he was invited to the

668
01:00:43.380 --> 01:00:48.580
next Montpellierin Society meeting, scheduled for July 1949 in the Swiss town of Selisberg,

669
01:00:48.580 --> 01:00:54.180
He declined. Apparently, he also declined an invitation to lecture at the University of Vienna

670
01:00:54.180 --> 01:01:00.020
in a US-sponsored programme in 1948. Fritz Machlup took part. But his American friends

671
01:01:00.020 --> 01:01:05.060
at the Volker Fund thought it was crucial to have him on board, lest the interventionists

672
01:01:05.060 --> 01:01:10.660
have a free hand. The Montpillarin Society provided American libertarians not only with

673
01:01:10.660 --> 01:01:15.620
some cosmopolitan flair, but had also put them in touch with a mass of intellectuals close to

674
01:01:15.620 --> 01:01:19.700
to their cause that could not be found at home. Moreover, in one of the great ironies

675
01:01:19.700 --> 01:01:24.540
of history, liberal principles had just been applied with overwhelming success in Germany

676
01:01:24.540 --> 01:01:28.540
and a thorough acquaintance with Ludwig Earhart and the intellectual leaders of the German

677
01:01:28.540 --> 01:01:33.580
reforms promised to be helpful for American libertarians in their struggle at home. Nobody

678
01:01:33.580 --> 01:01:38.780
in the States knew the reformers and curiosity was great. There was no similar curiosity

679
01:01:38.780 --> 01:01:44.020
for Italy, where Luigi and Audi, after leading three years to country central bank, had just

680
01:01:44.020 --> 01:01:54.860
The only fact I know about Professor Earhart is that he is the chairman of the Economic

681
01:01:54.860 --> 01:01:59.260
Advisory Board. This council is moderately interventionist and opposes the radical New

682
01:01:59.260 --> 01:02:03.700
Dealism of the German political parties and of the outright socialist British military

683
01:02:03.700 --> 01:02:08.060
government. It is possible that the Board's firmness in this matter is an achievement

684
01:02:08.060 --> 01:02:12.800
of Earhart's uncompromising attitude and the persuasiveness of his exposition of the

685
01:02:12.800 --> 01:02:15.120
and the principles of true liberalism.

686
01:02:15.120 --> 01:02:20.080
The only way to find out, however, was to go to Europe and meet the man and his supporters.

687
01:02:20.080 --> 01:02:24.960
But from Luno's point of view, this would only be worthwhile if men like Mises could

688
01:02:24.960 --> 01:02:28.720
be brought along to give the meetings the right orientation.

689
01:02:28.720 --> 01:02:33.400
Through the intermediation of Herbert Cornwell and Lauren Miller, Luno urged Mises to attend

690
01:02:33.400 --> 01:02:35.280
the Syrisberg meeting.

691
01:02:35.280 --> 01:02:36.760
Mises seceded.

692
01:02:36.760 --> 01:02:39.920
It would be his second return to Europe after immigration.

693
01:02:39.920 --> 01:02:45.280
In March 1950 he said that he had been to Europe twice, but not to Austria. He left

694
01:02:45.280 --> 01:02:50.440
New York at some point in June and then went to Seeliesberg from July 3rd to the 10th.

695
01:02:50.440 --> 01:02:54.240
The meeting was supposed to deal in particular with questions relating to the labour market,

696
01:02:54.240 --> 01:02:58.880
but as was to be expected, it was entirely overshadowed by the discussion of recent events

697
01:02:58.880 --> 01:03:04.520
in West Germany. In March 1948 Ludwig Earhart had been appointed the Director of the Economic

698
01:03:04.520 --> 01:03:10.600
Administration of the British American Occupation Zone. A disciple of the social liberal sociologist

699
01:03:10.600 --> 01:03:14.940
Franz Oppenheimer, Erhard was unknown in the world of libertarianism, which was probably

700
01:03:14.940 --> 01:03:19.760
why he got the job in the first place. During the Nazi era, Erhard had worked for two economic

701
01:03:19.760 --> 01:03:24.440
research institutes. After the war, he became the Bavarian Minister of the Economy and also

702
01:03:24.440 --> 01:03:29.220
attended the private seminar of Mises's friend Adolf Weber, who in those days was probably

703
01:03:29.220 --> 01:03:33.600
the most Austrian professor of economics. Weber championed the theory of the market

704
01:03:33.600 --> 01:03:39.360
process and of consumer sovereignty that was virtually indistinguishable from Mises' views.

705
01:03:39.360 --> 01:03:44.280
It was probably under the impact of the discussions in the Weber Circle that Earhart received

706
01:03:44.280 --> 01:03:50.720
the vision and inspiration for his reforms of June 1948. But the virtually unknown Earhart

707
01:03:50.720 --> 01:03:55.600
lost no time in setting out a liberal coup. Three months after his appointment he made

708
01:03:55.600 --> 01:04:01.000
too bold a decision. Against the regulations of the British military government he 1. abolished

709
01:04:01.000 --> 01:04:06.720
Virtually all price controls and two introduced a new currency, the German Mark. The very

710
01:04:06.720 --> 01:04:11.780
next day the stores and shops were filled with merchandise. Businessmen had cut back

711
01:04:11.780 --> 01:04:16.560
production during the post-war years and retailers held back commodities, reserving them for

712
01:04:16.560 --> 01:04:21.320
sales on the black market where higher prices could be obtained. This lamentable state of

713
01:04:21.320 --> 01:04:25.640
affairs had resulted from the Nazi system of price controls, which had made profitable

714
01:04:25.640 --> 01:04:31.760
Production Impossible, and turned the open market into a black market. The Allied Occupation

715
01:04:31.760 --> 01:04:40.560
Forces had maintained it at the behest of a small group of influential left-wing economic

716
01:04:40.560 --> 01:04:45.960
advisors, for whom central planning and government controls were state of the art. In those days

717
01:04:45.960 --> 01:04:50.720
Walter Oiken, one of the intellectual leaders behind the Earhart reforms, wrote to Mises

718
01:04:50.720 --> 01:04:52.720
about the need for further deregulation.

719
01:04:52.720 --> 01:04:57.400
The German authorities with whom I am in constant touch try everything to this effect, but American

720
01:04:57.400 --> 01:05:02.480
economic policies in Germany are still essentially based on central planning. Earhart overthrew

721
01:05:02.480 --> 01:05:07.400
this system, thus creating the economic foundations of the Western Federal Republic of Germany,

722
01:05:07.400 --> 01:05:12.400
which came to be established in the fall of 1949. More than that, he had put into practice

723
01:05:12.400 --> 01:05:18.160
a classical liberal alternative to the Marshall Plan for post-war reconstruction. A few years

724
01:05:18.160 --> 01:05:23.180
Years later, the banking theorist Heinrich von Rittershausen speculated in private correspondence

725
01:05:23.180 --> 01:05:28.080
with Mises that Gemeinwirtschaft had laid a foundation for Irhats success because all

726
01:05:28.080 --> 01:05:32.880
of the significant young people read it carefully during the twelve bookless years.

727
01:05:32.880 --> 01:05:38.640
A year before the Irhats reforms, on June 5, 1947, US Secretary of State George Marshall

728
01:05:38.640 --> 01:05:42.760
had presented his proposal for the economic reconstruction of Europe through the large-scale

729
01:05:42.760 --> 01:05:44.940
spending of US tax money.

730
01:05:44.940 --> 01:05:49.340
In subsequent years and decades the story of the Marshall Plan has been told and retold

731
01:05:49.340 --> 01:05:54.180
from the point of view of its sponsors, thus becoming part of modern welfare state mythology.

732
01:05:54.180 --> 01:05:58.260
High school students in all western countries learn that Marshall Plan funded government

733
01:05:58.260 --> 01:06:03.380
spending initiated a new phase of economic growth after the Second World War.

734
01:06:03.380 --> 01:06:08.460
In the cold light of economic reasoning, however, we can see that the Marshall Plan was in essence

735
01:06:08.460 --> 01:06:13.140
a scheme for postponing the bankruptcy of socialism and the welfare state.

736
01:06:13.140 --> 01:06:18.020
In private correspondence, Mises pointed out that the European countries had already nationalised

737
01:06:18.020 --> 01:06:24.100
railroads, telegraph, electric power, telephone, mines and many factories, that he went on

738
01:06:24.100 --> 01:06:29.340
to add, they have already expropriated by taxation all higher incomes and cannot expect

739
01:06:29.340 --> 01:06:34.540
any additional revenue from pushing further the policy of soaking the rich. Thus they

740
01:06:34.540 --> 01:06:38.940
want the American taxpayer to foot the bill for the deficits incurred by their glorified

741
01:06:38.940 --> 01:06:45.460
Socialization Policy, they call this scheme their Marshall Plan. In December 1948, when

742
01:06:45.460 --> 01:06:50.700
Leonard Reed asked him for his opinion of Earhart, Mises did not know the man. In the

743
01:06:50.700 --> 01:06:55.060
following years, however, he familiarized himself with the writings of Earhart and found

744
01:06:55.060 --> 01:06:59.540
that they closely reflected the opinions of his advisors, Cologne Professor of Economics

745
01:06:59.540 --> 01:07:06.220
Alfred Müller-Armack, as well as Wilhelm Röpke and Walter Eugen. During the 1950s Mises realized

746
01:07:06.220 --> 01:07:11.000
that the very success of Earhart's free market reforms was liable to be used against the

747
01:07:11.000 --> 01:07:16.860
market economy because the reforms were sold in terms of interventionist rhetoric. He therefore

748
01:07:16.860 --> 01:07:22.020
honoured the German reformers with a lengthy comment in his most prominent book.

749
01:07:22.020 --> 01:07:28.220
The supporters of the most recent variety of interventionism, the German Sozialen Marktwirtschaft,

750
01:07:28.220 --> 01:07:32.620
stress that they consider the market economy to be the best possible and most desirable

751
01:07:32.620 --> 01:07:37.020
Social System of Society's Economic Organization, and that they are opposed to the government

752
01:07:37.020 --> 01:07:41.940
omnipotence of socialism, but of course all these advocates of a middle-of-the-road policy

753
01:07:41.940 --> 01:07:48.140
emphasise with the same vigour that they reject Manchesterism and laissez-faire liberalism.

754
01:07:48.140 --> 01:07:53.100
It is necessary, they say, that the state interfere with the market phenomena whenever

755
01:07:53.100 --> 01:07:58.060
and wherever the free play of the economic forces results in conditions that appear as

756
01:07:58.060 --> 01:08:04.380
socially undesirable. In making this assertion, they take it for granted that it is the Government

757
01:08:04.380 --> 01:08:09.020
that is called upon to determine in every single case whether or not a definite economic fact is

758
01:08:09.020 --> 01:08:15.420
to be considered as reprehensible from the social point of view, and consequently whether or not the

759
01:08:15.420 --> 01:08:20.700
state of the market requires a special act of Government interference. All these champions

760
01:08:20.700 --> 01:08:25.100
of interventionism fail to realise that their programme thus implies the establishment of

761
01:08:25.100 --> 01:08:29.820
of full government supremacy in all economic matters and ultimately brings about a state

762
01:08:29.820 --> 01:08:34.620
of affairs that does not differ from what is called the German or the Hindenburg pattern

763
01:08:34.620 --> 01:08:35.620
of socialism.

764
01:08:35.620 --> 01:08:39.500
If it is the jurisdiction of the government to decide whether or not definite conditions

765
01:08:39.500 --> 01:08:45.640
of the economy justify its intervention, no sphere of operation is left to the market.

766
01:08:45.640 --> 01:08:49.780
Then it is no longer the consumers who ultimately determine what should be produced, in what

767
01:08:49.780 --> 01:08:55.580
What quantity, of what quality, by whom, where and how, but it is the government. For as

768
01:08:55.580 --> 01:09:00.380
soon as the outcome brought about by the operation of the unhampered market differs from what

769
01:09:00.380 --> 01:09:05.860
the authorities consider socially desirable, the government interferes. That means the

770
01:09:05.860 --> 01:09:10.460
market is free as long as it does precisely what the government wants it to do. It is

771
01:09:10.460 --> 01:09:16.020
free to do what the authorities consider to be the right things, but not to do what they

772
01:09:16.020 --> 01:09:20.780
may consider the wrong things. The decision concerning what is right and what is wrong

773
01:09:20.780 --> 01:09:26.300
rests with the government. Thus the doctrine and the practice of interventionism ultimately

774
01:09:26.300 --> 01:09:31.540
tend to abandon what originally distinguished them from outright socialism and to adopt

775
01:09:31.540 --> 01:09:35.940
entirely the principles of totalitarian all-round planning.

776
01:09:35.940 --> 01:09:40.840
Until the mid-1950s Mises was apparently reluctant to even meet with Earhart. Röpke thought

777
01:09:40.840 --> 01:09:45.500
this was because Mises was under the influence of his closest German intellectual ally Volkmar

778
01:09:45.500 --> 01:09:50.860
from Mutesius, a sharp and relentless critic of Irhat's economic policies.

779
01:09:50.860 --> 01:09:54.660
Mises's reservations did not grow weaker through personal contact with representatives

780
01:09:54.660 --> 01:09:59.900
of the German Ordo School of Neoliberalism. Quite the contrary, in private correspondence

781
01:09:59.900 --> 01:10:04.940
from the mid-1950s, he stated, I have more and more doubts whether it is possible to

782
01:10:04.940 --> 01:10:09.420
cooperate with Ordo interventionism in the Montpellier Society.

783
01:10:09.420 --> 01:10:14.460
The site of the 1949 Montpellier Society meeting was one of the legendary places of European

784
01:10:14.460 --> 01:10:19.340
and Libertarianism, the town of Zillisberg, located at the foot of a mountain of the same

785
01:10:19.340 --> 01:10:25.340
name. It was in the Rudliwiese, one of the adjacent meadows, that in early August 1291

786
01:10:25.340 --> 01:10:29.780
Swiss patriots deliberated in secret meetings to prepare the overthrow of the regime of

787
01:10:29.780 --> 01:10:35.660
Emperor Rudolf, who had imposed a wide variety of new laws and taxes. The Montpellier Society

788
01:10:35.660 --> 01:10:40.940
convened more comfortably in hotel facilities and not all of its participants were eager

789
01:10:40.940 --> 01:10:45.320
To overthrow the burgeoning new welfare state, Wilhelm Röpke, for example, was more concerned

790
01:10:45.320 --> 01:10:50.940
about defining a role for government in fighting against proletarianization. Carl Popper tried

791
01:10:50.940 --> 01:10:55.420
to do the same thing for the field of education and research.

792
01:10:55.420 --> 01:10:58.820
A New Yorker After a brief return to Manhattan, Mises went

793
01:10:58.820 --> 01:11:03.660
to Mexico City for the month of August to lecture at the Asociación Mexicana de Cultura.

794
01:11:03.660 --> 01:11:08.860
He and Margit arrived on the night of July 29th, and he soon started his 12-session course

795
01:11:08.860 --> 01:11:13.100
and also on economic theory, seasoned with a survey of the past 200 years of European

796
01:11:13.100 --> 01:11:17.900
history and excursions into the history of thought. Among other things, he explained

797
01:11:17.900 --> 01:11:22.580
how Keynes was influenced by the German socialists of the chair and how he outdipped them in

798
01:11:22.580 --> 01:11:27.000
many points. The seminar participants enjoyed the privilege of receiving advance copies

799
01:11:27.000 --> 01:11:32.860
of Human Action. They stayed at the Ritz and he received $1500 for the seminar. During

800
01:11:32.860 --> 01:11:36.980
this trip, Montes de Oca delicately raised the question again of whether Mises would

801
01:11:36.980 --> 01:11:42.460
State Permanently in Mexico. Mises apparently replied that he now desired to stay in New

802
01:11:42.460 --> 01:11:48.180
York City because it has become the intellectual centre of the present day. Montes de Ocaa

803
01:11:48.180 --> 01:11:52.820
would have left it at that, but a few months later he felt the need to raise the question

804
01:11:52.820 --> 01:11:57.380
yet again in writing. There has been what might be termed a movement among Mexican businessmen

805
01:11:57.380 --> 01:12:01.540
to invite you to become advisor for various business organisations, more or less in the

806
01:12:01.540 --> 01:12:06.360
capacity you performed this function in the Vienna Chamber of Commerce. After serious reflection

807
01:12:06.360 --> 01:12:11.440
Mises again declined, referring this time to his advanced age, which would prevent him

808
01:12:11.440 --> 01:12:15.640
from acquiring a sufficient command of the Spanish language, but he emphasized that if

809
01:12:15.640 --> 01:12:20.520
he were twenty years younger, I would not refuse your kind proposition, and he also

810
01:12:20.520 --> 01:12:25.120
said that the invitation was very tempting from another point of view. My three visits

811
01:12:25.120 --> 01:12:30.040
to your country have shown me that the climate of opinion is today in Mexico more favourable

812
01:12:30.040 --> 01:12:35.260
to the acceptance of sound economic ideas than in any other country. But this did not

813
01:12:35.260 --> 01:12:40.700
alter his decision. Not only had Mises become an American, he was now a New Yorker.