19. Birth of a Movement If Mises ever had any illusions about the state
of the American mind before he came to the United States in 1940, he had certainly lost
them by the end of the war. American public opinion was under the sway of statism, and
the old American liberties were at an all-time low. As Mises wrote to a German correspondent,
Unfortunately, one can become acquainted with the fruits of the planned economy here in
the USA too. Similarly to a promising young economist in Austria, he wrote that the American
literature on economics was, if anything, worse than the European.
There is a great enthusiasm for unbalanced budgets, deficit spending, low interest rates
and all sorts of regimentation. Those who dare to disagree are simply brushed aside
as Orthodox and Reactionary, Mises to Einhard Kamitz in a letter dated October 18th, 1946.
Kamitz eventually became Minister of Finance and then President of the Österreichische
Nationalbank. Mises respected him very much and paid him the following tribute about his
time as a Minister of Finance.
Under the most adverse circumstances, you have proved yourself to be a worthy successor
of the Two Cleaners and to Boehm-Bawerk. And on the same theme, the intellectual ravages
caused by Keynianism are very bad. For example, everyone here is delighted that national income
has increased from $77.6 billion in 1940 to $161 billion in 1945. But the forces of resistance
were slowly emerging. There was a seedbed of libertarian opposition, a network of leaders,
thinkers and organisers, some alone, others in small groups, who were preparing the counter-attack.
One historian has called these years the nadir of individualistic Jeffersonian thought in
the United States. Yet the nadir was only in political practice. The thinking was no
longer in disarray but in the initial phase of a long-term resurgence. It is true that
these thinkers and organisers were still scattered. They had only to find one another.
There were journalists like Henry Hazlitt, Lawrence Furtick, Frank Chodoroff, Suzanne
Lafollette, Garrett Garrett, John T. Flynn and John Chamberlain. There were writers like
Albert J. Nock, Isobel Patterson, Rose Wilder Lane, Ayn Rand and Felix Morley. There were
organisers such as Leonard Reid, Frederic Neimeier and Lauren Miller.
There were businessmen ready to sponsor educational ventures to promote laissez-faire policies
such as Jasper Crane, Harry Earhart, Adolf Kolberg, Howard Pugh, Claude Robinson, Pierre
Goodridge and William Volcker. And there were academics such as Benjamin Anderson, H.J.
Defenport, Fred Fairchild, Leo Wallman, Frank Knight, Henry Simons and Ludwig von Mises.
These men and women reversed the course of events in a mere 15 years. They were not strong
enough to rid America of its creeping statism, but they succeeded in slamming on the brakes
and Reorienting Public Debate. By the beginning of the 1960s, classical liberalism had risen
from the ashes and it had done so under the decisive impact and intellectual leadership
of Mises. These 15 years of his life saw a last great blossoming of his creative powers
which paved the way for a new liberty in the western world. During this period, Mises's
impact was amplified and deepened through several new organisations that rallied a
and for the first time in his life, Mises worked on a permanent basis with a group of
students who had learned economic science through his writings. These first Misesians
soon became even more coherent and radical advocates of laissez-faire than the master
himself, something unprecedented for Mises. In his Vienna seminars, he had been in the
awkward position of being more radical than his students.
and Seedbeds
Many Americans had grown weary of the New Deal during the second term of President Roosevelt's
administration. More and more people realized that their president had brought about a revolution
in the American system of government, but the majority gave FDR a third term. The president
promised to keep America out of the new European war that would eventually turn into the Second
World War. When Roosevelt went back on his word, the majority started to wane. The population
Elizabeth Paterson still stood behind the Commander-in-Chief in a time of war, but
the disenchantment with New Deal policies became ever more manifest. People started
listening to critical voices, and these voices could now be heard everywhere.
Isabel Paterson in The God of the Machine, 1943, and Rose Wilder Lane in The Discovery
of Freedom, 1942, had delivered passionate and widely noticed indictments of the omnipotent
and State and the Mining Individual Liberty. John T. Flynn had exposed the socialist agenda
and impact of the federal government's interventions in the Roosevelt Myth, 1948, and As We Go Marching,
1945. In early 1944, Felix Morley, John Chamberlain and Frank Hannigan founded the weekly journal
Human Events. Their mission was to educate the American public about the uncomfortable
fact that their federal government had been taken hostage by socialist and communist ideologues.
The public also listened for the first time to the voice of two Austrian immigrants. Mises
came out with two books in 1944, Omnipotent Government and Bureaucracy, both of which
were calculated to diminish the faith in the necessity and expediency of solving social
problems with the brutal force of state power. And in the same year, Friedrich August Hayek
published The Road to Serfdom, the book that made him famous.
Once held no monopoly on critical inquiry into the nature and scope of the Roosevelt
government, ordinary citizens without any scientific pretensions now rediscovered the
old American virtue of distrusting their government. Wherever they looked, they found their worst
fears confirmed, and now they not only noticed but also recorded and spread their discoveries.
One example illustrates the situation. An entrepreneur from Houston running a small
printing company had started wondering just how many federal agencies had actually been
have been created under the New Deal. There was no ready reference for the information
so he decided to create one himself. He produced an alphabetical listing of all the agencies,
the length of which must have been breathtaking at least in those days. At first he had just
printed a small number of flyers for his friends, acquaintances and people on his local mailing
list. The response was overwhelming. After a few months he had sold almost 200,000 copies
and in each case it was the buyer who approached him.
The most visible turning point for the fortunes of classical liberalism came on September
18th, 1944. On this day, F.R. Hayek's book, The Road to Serfdom, appeared in the United
States and met with huge and immediate success. Readers dieted, condensed the book and had
more than one million copies distributed by the Book of the Month Club. Overnight, Hayek
Hayek became an international celebrity. Nobody was more surprised by these events than Hayek
and his publisher. There were four major factors to his unexpected success. First, Hayek did
not come up with any new argument, but just gave a particularly eloquent and sophisticated
presentation of a position that, before the war, had already found wide acclaim among
the American public. The central argument of the road to serve them was, in fact, that
increased powers for government were tantamount to reduced sovereignty for the individual
for Citizens and that Total Government Control turned the citizen into slaves, regardless
of whether the totalitarian state was fascist or communist.
Second, the war years had dramatically accelerated this increase of powers of the US Federal
Government and thus raised awareness of and misgivings about this fact among the greater
number of people.
Third, again echoing other neoliberals, Hayek defended what seemed to be a pragmatic middle-of-the-road
Fourth and finally, Hayek weighed in with the full authority of an academic economist
who was well-known and respected in the United Kingdom, a fact that to the present day can
arouse Americans' intellectual inferiority complex. For staunch defenders of liberty,
Hayek's neoliberalism was of course far too soft on government. The positive program of
The road to serve them left the government in control of economic life. The economy was
still to be a planned one with the government in charge of all the planning. Hayek merely
suggested that this planning be for competition rather than the detailed control of all market
participants. This was a naive approach from any realistic political point of view and
some thought it was indefensible from an intellectual point of view as well.
Commenting on Hayek's programme, Frank Chodorow explained, how silly, and made it clear that
and what he thought the program verged on intellectual caladis.
Mises was very happy about the success of the book. However, he too thought that Hayek
had made his case in misleading terms. Hayek had singled out economic planning as the root
cause of the various policies that threatened political and economic freedom. But there
is no danger in planning per se. The real question is who should do the planning and
how should the plans be applied? Should there be only one plan imposed by the power of the
on All Citizens, or should there be many different plans made by each individual or head of household?
Mises emphasized this crucial distinction in his speech delivered on March 30th, 1945
to the American Academy of Political Science. He left implicit the fact that his speech was
a critical review of Hayek's book. Mises's speech was first published as Planning for
Freedom together with a speech by Rufus S. Tucker delivered before the same audience
in a 24-page pamphlet, Economic Planning. Later, the essay was reprinted in Mises'
book Planning for Freedom. In correspondence with Adolphe Ménier, a professor in Paris,
Mises mentioned that he disliked the title and subtitles of the printed version of his talk.
The French translation was published in 1947 in the Revue de l'Économie Contemporaine
under the title L'Interventionisme et le Salaire. In a letter to Selma Fuller,
Fuller Mises praises the virtues of Road to Serve Them, but concedes the appropriateness
of Fuller's critical stance on the book. The positive program developed by Hayek matters
little when compared with these virtues of his book. However, it is a very comforting
fact that your friends were shrewd enough to see the contradictions in his program.
A few days later, on April 3rd, Hayek arrived in New York to start a Road to Serve Them
Lecture Tour. It was the first time he saw his old mentor in America.
The book and the lecture tour trumpeted the dawn of a new era. The sale of thousands of
copies signalled to everyone that the American population still harboured strong affections
for liberal ideas and that these feelings had huge political potential. The most momentous
initiative to exploit this potential was, we can see in retrospect, the decision of
Leonard Reed quit his lucrative position at the Los Angeles Chamber of Commerce at the
end of 1945 and to move to New York as an executive vice president of the National Industrial
Conference Board. Reed sensed the potential for a huge interest in laissez-faire liberalism
and its underpinnings in economic science à la Mises, and he understood that liberty
had to be defended as an integrated whole, not in a piecemeal fashion with many concessions.
But looking around in 1945, he was amazed to discover that there was not one institution
to satisfy this demand for information, and certainly none ready to support or promote
classical liberal scholars and students. Many years later, he summarized his discoveries
in four points. 1. The freedom philosophy wasn't issuing
from any place on the face of the earth. 2. There wasn't a magazine in the country
that would take one of our articles. 3. There wasn't a book publisher that would
Take one of our books, number four, just 26 years ago in 1945, there did not exist a consistent
literature of this philosophy written in modern American idiom. That's how far down the drain
this philosophy was. The National Industrial Conference Board was an educational institution,
the purpose of which was to provide information about economic science and the functioning
of the American economy to classroom teachers all over the country. Reid had been hired
along with Garrett Garrett and others to establish a new nationwide educational programme. The
express purpose of the new programme was to inform teachers, journalists and intellectuals,
the second-hand dealers in ideas, as Hayek called them, about the importance of individual
liberty for economic prosperity and society at large. Reed's mission was to raise the
necessary funds. Mises was aware of Reed's effort. When, in May 1945, he received a request
from Mr. Allman, the Vice President of the Fruehauf Trader Company, inquiring what could
be done in terms of organizational work to give the individual private enterprise way
of living and doing business political leverage. Mises replied that friends of his were elaborating
a plan for imminent action. He had probably talked again with Reed about his pet project,
the establishment of a libertarian journal of opinion. Human Events had been launched
The year before, but Mises was not happy with its one-sided focus on anti-communism. The
problem was not just the increase of government interventionism in the name of communist ideals.
The problem was that the government intervened at all. A libertarian journal of opinion would
have to educate the public about basic economic laws.
The Long Visit at New York University One great limitation to Mises's effectiveness
in spreading the gospel of liberty was that he lacked an academic base. Like most other
champions of the free market, he frequently lectured to businessmen and other civic leaders,
but he had no direct impact on future intellectuals who studied at the university. It was quite
often a frustrating experience for him in the letter to Machloub, he wrote. Again and
again various organizations invite me to refute Marxism and to the Union Doctrine, which are
are held to be identical, and as an aside also Keynes and Hansen, in a short paper that
can be read in not more than thirty minutes, and which every high school graduate can easily
understand, refute Marx, but don't use high-brow terms such as value, dialectical materialism,
average rate of profit, etc., refute Keynes, but do not speak of the multiplier, of liquidity
preference, etc.
Unlike many of his former students and associates, Mises had been unable to obtain a suitable
Hebert von Beckenrath, Götz Brieffs, Gottfried von Habeler, Georg Halm and Josef Schrumpeter
had obtained positions at Harvard.
Machloub was at the new Rockefeller-funded University of Buffalo and Morgenstern at Princeton.
Apparently, they were all unwilling or unable to get Mises into their departments.
He had offers from smaller schools, such as the University of Rochester, but would not
settle for second-rate institutions.
At some point in 1944, some of his friends and admirers in New York took the initiative
to provide him a visiting professorship at New York University. Led by Lawrence Furtick,
an NYU trustee, these men eventually came to an agreement with NYU's Graduate School
of Business Administration. The school would invite Mises to give an economics seminar,
and Mises' salary would be from private funds. Nash mentions that Hazlitt and Reed were among
Among those involved, Nash also mentions that Hayek's position at the University of Chicago
was similarly subsidized out of private funds. It is not clear who, apart from Fertig, contributed
to paying Mises a salary. It is, however, most likely that a major part of the money
came from the Volcker Fund. Other potential donors were among the men who had later backed
the Freemen, in particular Alfred Kohlberg, importer, Jasper Crane, Howard Pugh, son-oil,
Herbert Hoover, former US President, W. Prentiss, Armstrong Cork, W. F. Peter, Chicago, Rock
Island and Pacific Railroad. This arrangement continued on a regular basis. Mises started
his classes in February 1945. He was a visiting professor at NYU for more than 20 years. When
he was looking for a job right after his arrival in the United States, Machloop had brought
In November 1940, the department head, Spa, invited Mises to give a talk on his contributions
to economic theory. Spa was slow or unwilling to follow up with a job offer, and Mises then
accepted the position at NBER. Despite the humiliating circumstances, the seminar proved
to be an enormous success. From the outset, it was not only attended by NYU business students,
It also attracted a colourful group of personalities from outside, journalists, businessmen, writers
and students from other universities. In a manner reminiscent of Mises' seminars in Vienna,
it became a rallying point for New York-based intellectuals interested in the scientific
case for laissez-faire, as well as a point of attraction for visitors from abroad. In
Vienna, the Mises circle would move from Mises' cummer offices to Ancora Verde for dinner,
and then to the Café Künstler to continue the conversation late into the night.
In New York, the participants in Mises' NYU seminar could follow the classroom session
by joining their professor in Child's Restaurant, followed by the Café Lafayette.
Seminar students such as Hans Zenholz, William Peterson, George Reisman, Israel Kirzner,
and Ralph Reiko eventually formed, together with Murray Rothbard, the solid core of Misesians
to hold out through the long libertarian winter of the 1960s and 1970s, thus enabling the
breakthrough of Misesian ideas of the 1980s and 1990s.
Mises inspired them to contribute to the great project of hammering out a systematic and
encompassing libertarian philosophy, a project that had attracted courageous and innovative
thinkers from the time of the 16th century Spanish late scholastics to the time of the
Manchester School.
In retrospect, the results can only be called amazing.
It is one thing indeed for students to follow the example of a passionate and encouraging
teacher.
It is quite another thing to actually produce anything of value.
A surprising number of Mises' NYU students later became important scholars and even pioneers
in economics, history and philosophy.
One example of the international significance of the seminar was the case of the Japanese
Mises' pre-war work had been favorably received in Japan and several professors from this
far eastern country had taken part in his Vienna seminar. After the war, a correspondent
from the Yasuda Bank wrote Mises that his theory of money and credit had made a very
strong impression in Japanese financial circles and is regarded most highly.
Azuma was a student of Mitsutaro Araki to whom Mises had already, in 1925, granted permission
To Translate and Publish, Theory of Money and Credit
Araki never completed the translation, but his student finished it in the early years
of the war. When he wrote to Mises in 1948, the manuscript of the translation had survived
the war years in a vault of the publisher. Azuma also kept Mises informed about intellectual
developments in Japanese economics. The impact would increase when a Japanese edition appeared
in May 1949, just in time to provide intellectual ammunition against the wave of Keynesianism
that swept the country with the American occupation forces.
Mahrup reported a few years later from a meeting with Japanese colleagues in Tokyo,
There was a discussion of whether certain parts of Your Theory of Money were already
in the first edition or only added in the second edition. There were several present
who were able to discuss this question. One classical liberal from Japan later recalled
the chain of events in his country. The names of von Mises and Hayek are well-known in Japan.
The latter's Road to Serfdom was published during the war about the time when Japan started
experimenting in state socialism. My own experience confirms completely the exactness
of the professor's prognostications. When the war was over, we had to throw everything
overboard and I expected a return to free enterprise. Then a curious thing happened.
The Americans arriving in Japan in the wake of the landing forces started putting into
effect policies which were hardly distinguishable from state socialism.
Leonard Reed and FEE
About a year after the inception of Mises' NYU lectures, another institution would be
established that would prove to be a pillar of the classical liberal renaissance and give
further leverage to Mises' ideas.
Leonard Reed had come to the conclusion that his engagement with the National Industrial
Conference Board was a waste of time and money. One of the main reasons for his ineffectiveness
was that the board was committed to a policy of hearing both sides. In practice this meant,
for example, that at the bi-monthly public conferences that the board sponsored at the
Waldorf Astoria, both the champions of the free market and the advocates of government intervention
were granted equal time to present their cases. Leonard Reid believed this policy was based on a
severe misunderstanding of a hearing both sides truly meant in the present context.
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?
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.
At the end of 1945 he resigned his position and started visiting the donors to apologize.
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,
a Federal Reserve economist, Friedrich Lutz and Paul Samuelson, and on January 22, 1948, he took
part in a symposium that dealt with the question, should we return to a gold standard? Here he met
Philip Courtney, among the other contributors were Albert Hahn and Michael Halperin. He was probably
also instrumental in providing his friend Walter Sulzbach with a job at NICB in 1946 or 1947.
One of them, New York City businessman Pierre Goodrich, encouraged Reid to think about setting
up his own organisation. Two months later, Reid established the Foundation for Economic
Education, FEE, which, in July 1946, would move to the pastoral premises in Irvington
and Hudson, several miles north of Manhattan, where it is still located. Reid mobilised
substantial corporate backing for this venture. He had a full address book and was personally
The main activity of FEE was to send out pamphlets and letters explaining the freedom thesis
to some 30,000 households. The number of 30,000 was attained by early 1949. Reed himself gave
a great number of public lectures and together with his other staff he would soon start offering
During weekend seminars and other educational programs, the pamphlets and conferences brought
students throughout the country in touch with the writings of Mises and other champions
of classical liberalism. Mises himself was one of the first economists hired for lectures
and seminars on FEE's premises and would eventually become its intellectual centre
for more than two decades. He was paid a uniform amount at regular intervals and therefore
What we came for technical reasons, tax laws, an employee of FEE in October 1946.
It would be hard to overstate the significance of the appearance of FEE, though its activities
were not noticed by a large national audience, the very existence of this organization gave
the scattered classical liberal forces focus and orientation.
It gave them what they had not had since the heyday of 19th century liberalism, a home.
FEE provided the material and infrastructure for an enthusiastic return to the ideals of
the 19th century laissez-faire liberals. To the key question about the proper functions
of government, FEE's Manchesterian answer was that government should be strictly limited
to the prevention of aggressive force or physical violence. More importantly, it attracted young
people interested in the intellectual case for liberty and ultimately brought Mises in
touch with a self-selected group of students who were much more receptive to the political
Last but not least, FEE provided some intellectual counterweight to the neo-liberal orthodoxy
that was about to emerge from the University of Chicago's economics department. In 1947
1948 respectively, Frank Knight and Henry Simons posthumously had published collections
of articles making their case for a libertarianism that was so watered down as to be indistinguishable
from social democracy. Other members of the Chicago School were Aaron Director and Milton
Friedman. FEE's impact was of course comparatively minor, but without it the Chicago School would
have totally dominated the American free market scene.
Frederic Neimeier At about the same time Reed was setting up
FEE in Irvington, New York, Mises made another acquaintance who would eventually turn into
a long-term ally. In May 1946, Chicago businessman Frederic Neimeier had finished reading Mises'
Theory of Money and Credit, which prompted him to write to the author and inquire about
any further writings of his on the subject. During the following months, Neimeier read
omnipotent government and other available English language writings of the Austrian
professor. He was the ideal reader for Mises. He had received his economics education in
the early 1920s, then worked for a while as a field representative of the Harvard Business
Cycle Index. He was well acquainted with the monetary thought that prevailed in the United
States. The theory of money and credit, he found, was a radically different approach
than the mechanical quantity theory, and he therefore had some difficulty to adjust all
Follow my thinking to your exposition.
Part of the difficulty seemed to be the different use of terms, and Neumeier then went on to
raise questions about one of the crucial concepts of the theory, the demand for money.
Mises agreed that the way he had put it, the demand for money being the demand for purchasing
power, was ambiguous, and that a better way of putting it was to say that the market participants
had a demand for cash holdings.
He promised to revise his writings accordingly and to consider this point in his forthcoming
and Treatise on Economics.
This exchange was the beginning of a long-lasting alliance, though never really more than a
personal friendship.
Neimeyer soon commenced to read other Austrian works available in English, in particular
Boehm-Bawerk's Capital and Interest.
Slowly he became a dedicated admirer of the Austrian School.
He was also a dedicated Calvinist and claimed,
Boehm-Bawerk has gone as far beyond Adam Smith as Calvin did beyond Luther.
Mises's agnosticism did not diminish Nijmijer's admiration for the Austrian economist, and
it did not prevent Mises himself from cooperating openly and productively with Christian libertarians
in America.
In Austria such cooperation was almost out of the question because the Christian Socialist
had pushed the Catholic Church into an intellectual dead end.
Only outstanding personalities, such as Monsieur Zeipel, could overcome the Socialist resentments
against the liberal Mises, but in the States things were different. A great number of the
Protestant clergymen in America loved individual liberty and the free market and considered
this love to result quite naturally from their Christian religion. Many of these men felt
that Mises' theories were complementary to their faith. In correspondence with a high
clergyman of the Church of England in Canada who had read Human Action, Mises wrote, I
fully agree with your statement that the Gospels do not advocate anti-capitalistic policies.
I dealt with this problem years ago in my book Socialism. I furthermore fully agree with
your proposition that one does not find in Human Action one word which is in opposition
to the Christian faith.
Mises enthusiastically welcomed the publication of the monthly periodical Faith and Freedom
by Spiritual Mobilization, a Los Angeles-based organisation in December 1949. Of course,
he knew very well that the majority of Protestant leaders championed some form of socialism
or Interventionism, and that while the Catholic Church valiantly fights Communism, it did
not oppose Socialism. But these problems were outside of his field. I think that only theologians
are called to deal with the issue. This was also the opinion of Frederic Neimeier.
One of the main springs of his motivation for spreading Mises's writings was precisely
the complementary relation he perceived between laissez-faire capitalism and Christianity.
Mises and Nijmijer probably met for the first time in late January 1948. Nijmijer then started
thinking about why the Austrian School of Economics was not prevalent in the United
States, and he came to the conclusion that Austrian works were not sufficiently well
known. In the fall of that year he was ready to take action, relying in particular on his
voluminous address book. I know several of the outstanding entrepreneurs in this country.
I sit on some important board of directors. And at the end of January 1949, after several
For more encounters with Mises, Nymeyer came up with a plan. The idea was to set up a liberal
institute under Mises' leadership at the University of Chicago. Nymeyer was a friend
of the Dean of the Business School or at some other suitable university in the Chicago area.
Nymeyer had already won over his associate Robert W. Baird and his friend John T. Brown,
Vice President of the J.I. Case Company. By May 1949, they had talked to several other
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.
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.
The question of academic freedom is today not, should communist teachers be tolerated, it is rather, should only communists, socialists or interventionists be appointed.
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.
One of the worst features of the present state of affairs is the misplaced loyalty of the alumni.
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.
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.
Mises Debates American Libertarians With the NYU seminar, FEE and individual organizers
and publishers such as Neumeier, Mises enjoyed for the very first time in his entire life
a truly congenial network of students and supporters. He had always been a respected
scholar but few of his readers and associates really appreciated the radical anti-statist
gist of his theories. This held true in particular in the case of the neo-liberals who prided
These men accused Mises of exaggerated logical argument in the intellectual battle for liberty.
If this is a valid charge, then Mises was surely guilty.
As one historian put it, he fought with a supreme logical rigor that even his friends
sometimes considered excessive.
An example of such a friend was Chicago professor of economics Henry C. Simons, who praised
Mises as the greatest living teacher of economics and the toughest old liberal or Manchesterite
of his time, but alas, he added, he is also perhaps the worst enemy of his own libertarian
cause.
Things were completely different in the circle of his new friends.
Many of the new people who came to Mises through his NYU seminar and FEE were even more libertarian
than he was.
Suddenly it was Mises who on several occasions turned out to represent the most stictest
position in his seminar.
American libertarians such as Leonard Reed and R.C. Hoyles placed great emphasis on
the definition of political liberty in terms of non-initiation of force.
After the publication of Human Action, for example, Hoyles criticised Mises in private
correspondence for having admitted that public education can work very well in monolingual
countries if it is limited to reading, writing and arithmetic.
Hoyles saw this as an unnecessary concession.
Make education even if limited to the case under discussion was unjustifiable.
The fact that some people were compelled to pay who did not want to have their children
taught or who had no children was teaching by example that the majority had a right to
coerce the minority to pay for anything the majority wanted.
If that is not the worst kind of government intervention, I do not know what intervention
means.
When you make this one concession, you are denying that our government is limited in
what it has a right to do.
It seems to me that intervention by the government is just the same thing as initiating force.
Understand, I'm not opposed to the use of force to stop someone from initiating force,
but the government has no right to initiate force.
The only purpose of a government is to stop people from intervening in an unhampered market
and to stop people from initiating force, to make someone pay for anything he doesn't
want to pay for.
This perspective was entirely outside Mises's utilitarian approach to political problems.
He believed that the question of who initiated force was politically irrelevant because one
could hardly ever reach agreement on it. The only relevant question was whether the initiation
of force was suitable to attain the end of the acting person, even if his action was
somehow wrong from an ethical point of view. A two-sentence letter he sent some ten years
later to an American correspondent, a publisher in Wisconsin, speaks volumes.
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.
Another even more substantial point of disagreement between Mises and many American libertarians was the question of democracy.
A few months after FEE's set-up shop, F.A. Baldy Harper saw the need to write a four-page
confidential memorandum defending Mises's views on democracy against the criticisms
of Orville Watts, who had pitted democracy against American-style liberalism. Mises would
also come to taste a particular American flavour of hostility to democracy in a 1947 exchange
of letters with Rose Wilder Lane. Apparently they had met for lunch with Hoyles and others
Mises and Lane had the impression that Mises believed they shared the same outlook on fundamentals.
At the meeting she did not feel it was the right moment to start a discussion on the
subject but later wrote to him to set the record straight.
As an American I am of course fundamentally opposed to democracy and to anyone advocating
or defending democracy which in theory and practice is the basis of socialism. It is
precisely democracy which is destroying the American political structure, American law
and the American Economy, as Madison said it would, and as Macaulay prophesied that
it would do, in fact, in the twentieth century. Mises did not even bother to address the issue,
but observed that he never addressed people who called his writings stuff and nonsense,
as Lane had done in a book review. According to Lane, Mises had fallen prey to the confusion
of eagle Italianism. She quoted Mises, It is obvious that every constitutional system
can be made to work satisfactorily when the rulers are equal to their task. Thereupon
she comments, Stuff and nonsense! The basic fallacy of Germany was in the lack of a rational
political thought, and this book admirably displays that lack. And that was that for
more than two years, after which the debate resumed on more civilised terms, probably
because of Lane's friendship with Howard Pugh. Mises' basic objection to Lane was
Because that she had misunderstood him. He had never advocated any concrete regime of
parliamentary democracy. He merely stressed the fact that all political systems ultimately
hinge on mass opinion. Mises's American friends disagreed, and the discussions and
correspondence between them remained without conclusion. But the confrontation between
the Austrian scholar and his American readers and disciples would be a driving force in
and the development of libertarian theory. Mises' student Murray Rothbard would eventually
work out the radical implications of Misesian economics with great care, combining the non-initiation
of force criterion with the typical Misesian focus on private property rights. Rothbard
thus created the blend of libertarian economics and natural law ethics that continues to attract
many intellectuals to this day. The new radical environment contrasted sharply
with the mentality of Mises' old associates, who had been libertarians by central European
standards but were moderate interventionists in an American context. A case in point was
Fritz Machlup. In a 1946 letter to Mises, he asked his old master to bless his evasive
way of addressing pro-Labour union audiences. He wrote,
I would like your advice. I must soon give a lecture for the US Chamber of Commerce on
Monopolistic wage determination is part of the general problem of monopoly. The lecture
is to be published and will probably receive more attention than suits my liking. If the
lecture were to be presented in a scientific forum, I could go into the history of ideas
and a particular mill and so forth, but for the Chamber I must be practical and political.
I will have no choice but to say that monopoly wages are the only purpose of labour unions
and that strong labour unions mean unemployment and inflation and lead to an authoritarian
and State. Can an honest man avoid such statements? Are there any alternatives? If it is politically
unthinkable to outlaw labour unions, and I assume this is the case today, can one consider
government limitations on private wage increases? I'm not thinking, of course, of a fixing
of wages through the state, but of a general interdiction to increase wages by more than
ten percent in three years, or something of this sort. Of course, this is entirely fantastic.
Could it be smarter not to mention such makeshift solutions at all? They have no prospect of
being accepted. Mises replied that he would tell the chamber, first of all, liberate yourself
from false ideas, study economics, then go on to convince others. Anti-emphasised, I
reject any outlawing or limitation of the liberty of association. No liberties shall
be abolished, only coercion. Correspondence between the two men had already become quite
Planned Chaos Montes de Oca had already talked to Mises
in 1943 about writing an epilogue to the Spanish edition of socialism, but Mises probably did
not turn to the task before 1945. Until then the rate of progress on the translation was
was unclear, and Mises may well have been wary of engaging in another task for Montes de Oca,
who so far had not completed any of the projects they had discussed in 1942. Mises had not
even received agreed-upon payment for a study of Mexico. The prospective Mexican publishers
of socialism asked for an epilogue dealing with the Soviet experiment, both because dealing
with the question was interesting in its own right, and since it would bring the book up
to date. Mises replied evasively, suggesting that the best solution would be to write a
special introduction for the Spanish edition. In early January 1946, Mises finally received
payment for the study on Mexico he had written in 1943. He also worked rapidly on the completion
of the epilogue his Mexican partners had asked for. The typewritten manuscript was probably
finished at the end of the month. Mises received $590 for the study. He finished the
The Epilogue at the end of December 1945 In July and August 1946, Mises lectured again
in Mexico City. In the last days of July, Hayek joined him. They also toured the Central
Plateau and spent some days on Lake Chapala. On the tour, he also gave a talk in Valdelajara
August 27. Montes de Oca acted as a translator to attract a larger audience. One purpose
of Mises' visit was to discuss the long-standing project of the Institute for the Social
for Sciences. This prospect must have been put to rest on that occasion. The subject did
not come up again in any subsequent correspondence. But another project now took on ever more
concrete shape. Hayek was trying to rally classical liberal scholars on both sides of
the Atlantic to establish an international scholarly society devoted to the promotion
of individual liberty. He planned to set up a meeting during the next year and sought
to secure Mises's participation. At the end of the year, Montes de Oca was appointed
as the Director General of the Mexican Central Bank, the Banco de Mexico. His group later
invited Hazlitt, early January 1947, as well as Hansen and Habler for lectures, January
1947. Mises himself was invited again for August 1947 to give a series of lectures critically
Analyzing Marxism Upon his return to New York, Mises learned
that Henry Hazlitt had had to leave the New York Times. This was not the first time Hazlitt's
politics forced him out of a job. In 1933, he had quit his position as literary editor
of The Nation, which did not welcome his hostility to the New Deal. Leaving the New York Times
was a serious setback, but Hazlitt immediately found a new position at Newsweek, where he
He enjoyed the same liberty of opinion he once had enjoyed at the times. He would write his
Newsweek column for exactly twenty years, until he had to leave once again for ideological
reasons. Mises himself fared much better and continued his visit at NYU, where he taught
a course on currency reform in the spring of 1947. In the fall of 1946, Mises also met
a substantial number of European economists, such as Jacques Grif, François Pierrot, Tric
Mayhoff and others who had travelled to the United States and were lecturing at FEE and
other institutions. One likely subject of discussion was Hayek's plan for an international
society of classical liberal scholars.
A conference at Montpilerin. Exactly one year after the establishment of the Foundation
for Economic Education in New York, another organisation was brought into existence to
provide a forum for the exchange and development of ideas from a classical liberal perspective.
Unlike FEE, this organisation did not have any permanent headquarters. It was conceived
as a society of academic scholars and it mainly consisted of annual meetings which have subsequently
taken place at different cities throughout the world. Most importantly, however, this
society was founded in the spirit of neoliberalism and ever since, neoliberal scholars, politicians
and journalists have represented the bulk of its members.
The Society was a follow-up to the 1938 Lippmann Colloquium that Louis Roger had organized
in Paris.
This time, the initiative fell quite naturally into the hands of Hayek, who was well known
on both sides of the Atlantic due to the success of the road to serfdom and also because he
was among the first Western intellectuals to renew contact with his continental counterparts
after the war.
For example, by January 1949, Hayek had already paid several visits to Austria.
In these meetings, the idea of a libertarian association slowly emerged. Hayek certainly
discussed the issue when he met Mises at the end of July 1946 in Mexico, but at that point
there was not yet any concrete plan. From Mexico City, he flew to Oslo, where Trig Weyhoff
organized a preparatory meeting to discuss rather vague plans for the establishment of
a neoliberal association of European intellectuals. There, the plan for an Acton-Tocqueville society
Mises had been in touch with Hoff prior to June 28, 1946. Hoff had written a libertarian
manifesto during the war. He sent the manuscript to Sweden, from where an American diplomat
was supposed to send it to Alfred E. Knopf in New York, but the diplomat never did so.
Hoff learned after the war that this was because the diplomat found the manuscript undemocratic,
which probably meant that it was too critical of the fundamental dogmas of America's war
of Life.
Hof had also come to an independent discovery of the impossibility of economic calculation
in socialism.
Mises had the highest opinion of the Norwegian economist.
Hof was one of the few contemporaries whose judgment of the problems dealt with in human
action is of consequence.
By the end of the year, he had found the necessary funds to sponsor the event from Swiss, through
Hunald, and American Volker Fund sources, and he wrote a letter of invitation to some
Hayek was probably anticipating trouble with Mises on the invitation letter to him Hayek
added a handwritten apology that he had not had the time to discuss his plan with him
in any detail. His apprehension turned out to be correct. Mises went through the roof
writing to Hayek that he could not leave NYU in April and that he abhorred the idea of
At Hazlitt's request, he had written a four-page memorandum containing his observations on
Professor Hayek's plan. Here he stated that many similar plans to stem the tide of totalitarianism
had been pursued in the past several decades. He himself had been involved in some of these
projects and each time the plan failed because these friends of liberty had themselves already
been infected by the statist virus. They did not realise that freedom is inextricably
At the end of the memorandum, he stated his main objection.
The weak point in Professor Hayek's plan is that it relies upon the cooperation of many
men who are known for their endorsement of interventionism. It is necessary to clarify
this point before the meeting starts. As I understand the plan, it is not the task of
Roth is meeting to discuss anew whether or not a government decree or a union dictate
has the power to raise the standard of living of the masses. If somebody wants to discuss
these problems, there is no need for him to make a pilgrimage to the Montpelerin. He can
find in his neighborhood ample opportunity to do so. In his letter to Hayek he was more
specific.
I am primarily concerned about the participation of Röpke, who is an outspoken interventionist.
I think the same holds true for Brandt, Gideonze and Eastman, all three of the marked contributors
to the purely socialist, even though decidedly anti-Soviet, new leader. Mises suggested that
Hayek invite Montes de Orca and Velasco from Mexico, Maestri from Cuba and Highton from
Australia. Still Mises did not rule out his participation, but he did suggest a postponement
of the conference until September. This turned out to be impracticable though and Hayek undertook
Brandt, Gideons, and Eastman's connections to the new leader, mentioning that he himself
had written for this magazine. But more importantly, he argued that the programme of the conference
was still quite open and that the main purpose of the meeting on Lake Geneva and of subsequent
meetings would be to win over especially those historians and political scientists who still
It was probably the first time Mises personally got in touch with Harold W. Lunow and the
well-endowed Volcker Fund. The contact would prove to be highly beneficial in the course
of the next 15 years until the fund was liquidated in the early 1960s.
German-born William Volker, 1859-1947, had made a fortune with a home furnishing business
he had established in 1882 in Kansas City. In 1911, after finally marrying at the age
of 52, he became a philanthropist. He eventually established in 1932 a private fund to protect
his capital against the encroachments of the tax code, especially the new income tax of
in 1916. There may have been Volcker himself who approved the support of the Montpelerin
Society meeting, which took place some seven months before he died. But it is more likely
that this was already the decision of his nephew, Harold Luno, who became the director
of the fund in 1944 and turned it into the principal sponsor of libertarian scholarship.
Shortly after Volcker's death, the fund moved from Kansas City to Birmingham, California.
must have been between April 1949 and June 1951. Apparently, Aluno's main source of
libertarian inspiration had been Lauren Miller, who from 1942 to 1944 had been an executive
of the Kansas City Civic Research Institute, a Volcker Fund outfit, before he departed for
the Detroit Bureau of Governmental Research, another source of funding of post-war libertarianism.
The influence of the Volcker Fund radiated far beyond the United States. By the end of
1953, it paid the membership fees for virtually all non-US members of the Mont-Pilerin society.
The Fund's cooperation with Mises was very close, especially after Luno hired former
FEE employees Herbert and Richard Conwell. Liaison's offices were Richard Conwell and
Kenneth Templeton. Herbert Conwell left the Fund in November 1953 for a business job in
in Honolulu. Most other libertarian think-thanks and funds have been perverted over time,
turning away from their initial principles. The Volcker Fund escaped this fate. It was
liquidated in the early 1960s when its directorship fell into the hands of those who could not
identify with the libertarian orientation of its founder.
The Montpillerin Conference started on April 1st, 1947 and lasted for 10 days. Mises left
New York on March 25, curious to see Europe again after almost seven years.
The meeting had only a minimal agenda and left a great deal of leeway for the participants
to determine the subjects they wished to discuss in the course of the next days.
Mises and Reid, Harper and Watts from FEE, as well as Hazlitt and Davenport, Fortune
magazine, represented the Manchester-right fringe of the meeting. Hayek, Friedman and
In his opening address, Hayek set the agenda for the post-war ideological reconstruction
of the Classical Liberal Movement. It involved, Hayek explained, on the one hand, purging
traditional liberal theory of certain accidental accretions which have become attached to it
in the course of time, and, on the other hand, facing up to some real problems which an oversimplified
liberalism has shirked or which have become apparent only since it has turned into a somewhat
stationary and rigid creed. As later developments would show, the concrete meaning of this programme
Some of the other scheduled talks, however, were more neo and less liberal. For example,
the German economist Walter Euken explained that anti-monopoly legislation was not sufficient
to Combat Monopolies. Further legislative interference was needed in the field of corporate
law, patent law and trademark law. He championed two maxims of economic policy.
First, although there was to be freedom of contract, this freedom was not to be allowed
to limit in any way the freedom of contract of others. Second, monopolistic market participants
should be forced to behave as if they were in competition, produce the same quantities
and sell them at the same prices that would prevail under competition.
In short, Eugen dished up the same interventionist agenda that had already dominated the Lipman
colloquium in 1938. At that time, Mises had been on his honeymoon in Paris, which might
explain why his contributions to the discussions had been unusually tame. Nine years later,
the honeymoon was over. He reacted with great determination and defended his laissez-faire
in a position so vigorously that many years later his friend Lawrence Furtick still recalled the debate. Milton Friedman eventually concurred.
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,
the role of trade unions and the appropriateness of government action to affect the distribution of income.
I particularly recall a discussion of this issue in the middle of which Ludwig von Mises stood up,
announced to the assembly, you're all a bunch of socialists, and stomped out of the room,
an assembly that contained not a single person who, by even the lowest standards,
could be called a socialist. Friedman did not specify what he meant by the lowest standards.
In any case, while Mises was able to hold socialists in high esteem, the incident showed
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.
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.
such as the Volcker Fund, without which the society would quickly have died out in those
years.
As long as Mises took an active part in the meetings, therefore, it was impossible to
move on to discussing the technical details of an approved government interventionism.
Laissez-faire had made a comeback.
It was not the majority opinion, but it was a debatable and debated political option,
too much for some initial members, such as Maurice Allais, who soon left the society
for precisely this reason.
in October 1947 reinforced his concerns that the American libertarians were far too radical
for his taste. Despite fundamental disagreements, the meeting was a success. On April 9th, some
40 participants established the Mont-Bélerin Society and elected Hayek as their president.
Eventually Honnold from Zurich and Aaron Director became secretaries. Eugen, Dukes, Knight,
Bapard and Rolf were elected vice presidents and Hardy became the treasurer. Mises, Antony,
Germany, Gideon, Sir Iverson, Robbins and Röpke became members of the council. On the
summer 10th, Albert Hoonholt announced that Mises would soon receive a photo album with
some 70 pictures of the conference as a Christmas present.
Preparing the Counter-Revolution By March 1945, Yale University Press had
decided to publish an American edition of Nationale Economie. The idea of a simple translation
was never really an option. All sides agreed to publish a revised edition. In June 1945,
Mises still said the book was to be published in an American edition next year.
For the next three and a half years, Mises worked busily on this project. The revisions
were not to be substantive. Their primary purpose was to adapt the work to the intellectual
background of his American readers. In this task, Mises benefited enormously from the experience
of Henry Hazlitt and Yale editor Eugene Davidson, both of whom suggested many areas of improvement.
For example, Mises now dealt with doctrines and policy proposals that had specific importance
in the United States, such as the Georgist theory of land taxation. But he especially
modified his discussion of the fundamental philosophical problems of the science of human
action. For example, in his German book, Mises felt he had to refute Otmar Spahn's Universalist
Economics in great detail. He now dropped this discussion almost entirely and focused
instead on the refutation of positivism and the use of quantitative methods in economic
theory. He added an entirely new chapter, the only chapter with no counterpart in nationale
économie, to discuss the basic problems of probability theory, which was at the heart
of the quantitative approach that dominated economic analysis in the Anglo-Saxon countries.
In this chapter, Mises seized the opportunity to build on and elaborate the works of his
brother Richard, who had pioneered the so-called relative frequency theory of probability.
Mises considerably simplified the axiomatic exposition of the theory and argued, without
mentioning his brother by name, that the standard account was redundant. Beyond the scholarly
aspect of this contribution, the correction of his brother was a sequence in a typical
Austrian Literary Squabble. Twelve years earlier Richard had ventured into the field
of his elder sibling and claimed in one of his books that laissez-faire policies had
no scientific merit. Now Ludwig struck back by demonstrating what an elegant exposition
of the relative frequency theory looked like. Human Action almost became Mises's first
posthumous publication. In October 1948 he and Margit had a very serious car accident.
The couple survived and Ludwig put the finishing touches on the book by the spring of 1949.
He sent copies of the manuscript to receptive publishers and friends, among them Jasper Crane,
who ran the Van Nostrand publishing company and whom he knew well through FEE.
A neoliberal coup in Germany
The 1947 Mont Pelerin Society meeting was enough to satisfy Mises' curiosity about Europe and
European scholars for quite some time. Europe lay in shambles. Even Paris was in rags. He did not
even wish to think about travelling to Austria. All that was good and memorable about Europe was
in the past. No need for him to return to the old continent just to witness the misery induced by
those very statist follies he had spent a lifetime fighting. When he was invited to the
next Montpellierin Society meeting, scheduled for July 1949 in the Swiss town of Selisberg,
He declined. Apparently, he also declined an invitation to lecture at the University of Vienna
in a US-sponsored programme in 1948. Fritz Machlup took part. But his American friends
at the Volker Fund thought it was crucial to have him on board, lest the interventionists
have a free hand. The Montpillarin Society provided American libertarians not only with
some cosmopolitan flair, but had also put them in touch with a mass of intellectuals close to
to their cause that could not be found at home. Moreover, in one of the great ironies
of history, liberal principles had just been applied with overwhelming success in Germany
and a thorough acquaintance with Ludwig Earhart and the intellectual leaders of the German
reforms promised to be helpful for American libertarians in their struggle at home. Nobody
in the States knew the reformers and curiosity was great. There was no similar curiosity
for Italy, where Luigi and Audi, after leading three years to country central bank, had just
The only fact I know about Professor Earhart is that he is the chairman of the Economic
Advisory Board. This council is moderately interventionist and opposes the radical New
Dealism of the German political parties and of the outright socialist British military
government. It is possible that the Board's firmness in this matter is an achievement
of Earhart's uncompromising attitude and the persuasiveness of his exposition of the
and the principles of true liberalism.
The only way to find out, however, was to go to Europe and meet the man and his supporters.
But from Luno's point of view, this would only be worthwhile if men like Mises could
be brought along to give the meetings the right orientation.
Through the intermediation of Herbert Cornwell and Lauren Miller, Luno urged Mises to attend
the Syrisberg meeting.
Mises seceded.
It would be his second return to Europe after immigration.
In March 1950 he said that he had been to Europe twice, but not to Austria. He left
New York at some point in June and then went to Seeliesberg from July 3rd to the 10th.
The meeting was supposed to deal in particular with questions relating to the labour market,
but as was to be expected, it was entirely overshadowed by the discussion of recent events
in West Germany. In March 1948 Ludwig Earhart had been appointed the Director of the Economic
Administration of the British American Occupation Zone. A disciple of the social liberal sociologist
Franz Oppenheimer, Erhard was unknown in the world of libertarianism, which was probably
why he got the job in the first place. During the Nazi era, Erhard had worked for two economic
research institutes. After the war, he became the Bavarian Minister of the Economy and also
attended the private seminar of Mises's friend Adolf Weber, who in those days was probably
the most Austrian professor of economics. Weber championed the theory of the market
process and of consumer sovereignty that was virtually indistinguishable from Mises' views.
It was probably under the impact of the discussions in the Weber Circle that Earhart received
the vision and inspiration for his reforms of June 1948. But the virtually unknown Earhart
lost no time in setting out a liberal coup. Three months after his appointment he made
too bold a decision. Against the regulations of the British military government he 1. abolished
Virtually all price controls and two introduced a new currency, the German Mark. The very
next day the stores and shops were filled with merchandise. Businessmen had cut back
production during the post-war years and retailers held back commodities, reserving them for
sales on the black market where higher prices could be obtained. This lamentable state of
affairs had resulted from the Nazi system of price controls, which had made profitable
Production Impossible, and turned the open market into a black market. The Allied Occupation
Forces had maintained it at the behest of a small group of influential left-wing economic
advisors, for whom central planning and government controls were state of the art. In those days
Walter Oiken, one of the intellectual leaders behind the Earhart reforms, wrote to Mises
about the need for further deregulation.
The German authorities with whom I am in constant touch try everything to this effect, but American
economic policies in Germany are still essentially based on central planning. Earhart overthrew
this system, thus creating the economic foundations of the Western Federal Republic of Germany,
which came to be established in the fall of 1949. More than that, he had put into practice
a classical liberal alternative to the Marshall Plan for post-war reconstruction. A few years
Years later, the banking theorist Heinrich von Rittershausen speculated in private correspondence
with Mises that Gemeinwirtschaft had laid a foundation for Irhats success because all
of the significant young people read it carefully during the twelve bookless years.
A year before the Irhats reforms, on June 5, 1947, US Secretary of State George Marshall
had presented his proposal for the economic reconstruction of Europe through the large-scale
spending of US tax money.
In subsequent years and decades the story of the Marshall Plan has been told and retold
from the point of view of its sponsors, thus becoming part of modern welfare state mythology.
High school students in all western countries learn that Marshall Plan funded government
spending initiated a new phase of economic growth after the Second World War.
In the cold light of economic reasoning, however, we can see that the Marshall Plan was in essence
a scheme for postponing the bankruptcy of socialism and the welfare state.
In private correspondence, Mises pointed out that the European countries had already nationalised
railroads, telegraph, electric power, telephone, mines and many factories, that he went on
to add, they have already expropriated by taxation all higher incomes and cannot expect
any additional revenue from pushing further the policy of soaking the rich. Thus they
want the American taxpayer to foot the bill for the deficits incurred by their glorified
Socialization Policy, they call this scheme their Marshall Plan. In December 1948, when
Leonard Reed asked him for his opinion of Earhart, Mises did not know the man. In the
following years, however, he familiarized himself with the writings of Earhart and found
that they closely reflected the opinions of his advisors, Cologne Professor of Economics
Alfred Müller-Armack, as well as Wilhelm Röpke and Walter Eugen. During the 1950s Mises realized
that the very success of Earhart's free market reforms was liable to be used against the
market economy because the reforms were sold in terms of interventionist rhetoric. He therefore
honoured the German reformers with a lengthy comment in his most prominent book.
The supporters of the most recent variety of interventionism, the German Sozialen Marktwirtschaft,
stress that they consider the market economy to be the best possible and most desirable
Social System of Society's Economic Organization, and that they are opposed to the government
omnipotence of socialism, but of course all these advocates of a middle-of-the-road policy
emphasise with the same vigour that they reject Manchesterism and laissez-faire liberalism.
It is necessary, they say, that the state interfere with the market phenomena whenever
and wherever the free play of the economic forces results in conditions that appear as
socially undesirable. In making this assertion, they take it for granted that it is the Government
that is called upon to determine in every single case whether or not a definite economic fact is
to be considered as reprehensible from the social point of view, and consequently whether or not the
state of the market requires a special act of Government interference. All these champions
of interventionism fail to realise that their programme thus implies the establishment of
of full government supremacy in all economic matters and ultimately brings about a state
of affairs that does not differ from what is called the German or the Hindenburg pattern
of socialism.
If it is the jurisdiction of the government to decide whether or not definite conditions
of the economy justify its intervention, no sphere of operation is left to the market.
Then it is no longer the consumers who ultimately determine what should be produced, in what
What quantity, of what quality, by whom, where and how, but it is the government. For as
soon as the outcome brought about by the operation of the unhampered market differs from what
the authorities consider socially desirable, the government interferes. That means the
market is free as long as it does precisely what the government wants it to do. It is
free to do what the authorities consider to be the right things, but not to do what they
may consider the wrong things. The decision concerning what is right and what is wrong
rests with the government. Thus the doctrine and the practice of interventionism ultimately
tend to abandon what originally distinguished them from outright socialism and to adopt
entirely the principles of totalitarian all-round planning.
Until the mid-1950s Mises was apparently reluctant to even meet with Earhart. Röpke thought
this was because Mises was under the influence of his closest German intellectual ally Volkmar
from Mutesius, a sharp and relentless critic of Irhat's economic policies.
Mises's reservations did not grow weaker through personal contact with representatives
of the German Ordo School of Neoliberalism. Quite the contrary, in private correspondence
from the mid-1950s, he stated, I have more and more doubts whether it is possible to
cooperate with Ordo interventionism in the Montpellier Society.
The site of the 1949 Montpellier Society meeting was one of the legendary places of European
and Libertarianism, the town of Zillisberg, located at the foot of a mountain of the same
name. It was in the Rudliwiese, one of the adjacent meadows, that in early August 1291
Swiss patriots deliberated in secret meetings to prepare the overthrow of the regime of
Emperor Rudolf, who had imposed a wide variety of new laws and taxes. The Montpellier Society
convened more comfortably in hotel facilities and not all of its participants were eager
To overthrow the burgeoning new welfare state, Wilhelm Röpke, for example, was more concerned
about defining a role for government in fighting against proletarianization. Carl Popper tried
to do the same thing for the field of education and research.
A New Yorker After a brief return to Manhattan, Mises went
to Mexico City for the month of August to lecture at the Asociación Mexicana de Cultura.
He and Margit arrived on the night of July 29th, and he soon started his 12-session course
and also on economic theory, seasoned with a survey of the past 200 years of European
history and excursions into the history of thought. Among other things, he explained
how Keynes was influenced by the German socialists of the chair and how he outdipped them in
many points. The seminar participants enjoyed the privilege of receiving advance copies
of Human Action. They stayed at the Ritz and he received $1500 for the seminar. During
this trip, Montes de Oca delicately raised the question again of whether Mises would
State Permanently in Mexico. Mises apparently replied that he now desired to stay in New
York City because it has become the intellectual centre of the present day. Montes de Ocaa
would have left it at that, but a few months later he felt the need to raise the question
yet again in writing. There has been what might be termed a movement among Mexican businessmen
to invite you to become advisor for various business organisations, more or less in the
capacity you performed this function in the Vienna Chamber of Commerce. After serious reflection
Mises again declined, referring this time to his advanced age, which would prevent him
from acquiring a sufficient command of the Spanish language, but he emphasized that if
he were twenty years younger, I would not refuse your kind proposition, and he also
said that the invitation was very tempting from another point of view. My three visits
to your country have shown me that the climate of opinion is today in Mexico more favourable
to the acceptance of sound economic ideas than in any other country. But this did not
alter his decision. Not only had Mises become an American, he was now a New Yorker.