Now it is only appropriate at this occasion to begin
with a few observations on our intellectual master,
Ludwig von Mises and his idea of a free society.
The program of liberalism wrote Mises,
if condensed into a single word,
would have to read property, that is private property
of the means of production.
Based on private property, Mises explained then
that the emergence of society, of human cooperation, was a result of the natural diversity of men
and the recognition that work performed under division of labor is more productive than
work performed in self-sufficient isolation. And he explains this in the following words,
if and as far as labor under the division of labor is more productive than isolated
Labor and if and as far as men is able to recognize this fact, human action itself tends
toward cooperation and association. Experience teaches that this condition, that is the higher
productivity achieved under division of labor, is present because its cause, the inborn inequality
of men and the inequality in the geographical distribution of the natural factors of production
is Real. Thus, we are in a position to comprehend the course of social evolution. This is Mises's
quote. If the emergence of society or human cooperation
under the division of labor can be explained as a result of self-interested action, it
is also true, however, that mankind being what it is, there will always exist murderers,
Robbers, thieves, thugs, con artists, and so on, and life in society will be impossible
if they are not threatened with physical punishment.
Let me quote Mises again, he said,
The liberal understands quite well that without resort to compulsion the existence of society
would be endangered and that behind the rules of conduct whose observance is necessary to
To assure peaceful human cooperation must stand the threat of force if the whole edifice
of society is not to be continually at the mercy of any one of its members.
One must be in a position to compel the person who will not respect the life's health, personal
freedom or private property of others to acquiesce in the rules of life in society.
This is the function that the liberal doctrine assigns to the state, the protection of property,
liberty and peace.
End of quote.
Now if this is accepted, how is the government to be organized so as to assure that it will
indeed do what it is supposed to do, that is to protect pre-existing private property
rights?
Now in view of what I shall later on say in relative favor of the institution of monarchical
rule, it is worth to point out here Mises' liberal opposition to the ancien regime of
absolute kings and princes. Kings and princes were privileged persons and they stood almost
And they stood almost by definition opposed to the liberal idea of the unity and universality of law.
Thus, Mises stated, and I quote,
The liberal theory of the state is hostile to princes.
The princely state has no natural boundaries.
To be an increase of his family estate is the ideal of the prince.
He strives to leave his successor more land than he inherited from his father.
To keep on acquiring new possessions until one encounters an equally strong adversary, that is the striving of kings.
Princes regard countries no differently from the way an estate owner regards his forests, meadows and fields.
They sell them, they exchange them, and each time rule over the inhabitants is transferred also.
Also, lands and people are, in the eyes of princes, nothing but objects of princely ownership.
The former form the basis of sovereignty, and the latter the appurtenances of land ownership.
From the people who live on his land, the prince demands obedience and loyalty. He regards
them almost as his property. So much Mises's quote. Now if Mises rejected a princely state
as incompatible with the protection of private property rights, what was supposed to be substituted
for it?
Now, Mises' answer was democracy and democratic government, yet Mises' definition of democratic
government is fundamentally different from the current meaning of this term.
Mises had grown up in a multinational state, and he was painfully aware of the anti-liberal
results of majority rule, especially in ethnically mixed populations and territories. Instead
of majority rule, to Mises, democracy meant literally self-determination, self-government
and self-rule. And accordingly, a democratic government for Mises was an essentially voluntary
A voluntary membership organization, insofar as this organization recognized each of its constituents unrestricted right to the session.
Let me quote from Mises.
Liberalism, explained Mises, forces no one against his will into the structure of the state.
Whoever wants to emigrate is not held back.
When a part of the people of a state wants to drop out of the Union, liberalism does not hinder it from doing so. Colonies that want to become independent need only do so.
The nation as an organic entity can be neither increased nor reduced by changes in states. The world as a whole can neither win nor lose from them.
The right of self-determination in regard to the question of membership in a state thus
means whenever the inhabitants of a particular territory, whether it be a single village,
a whole district or a series of adjacent districts make it known by a freely conducted plebiscite
that they no longer wish to remain united to the state to which they belong at the time,
where wishes are to be respected and complied with. This is the only feasible and effective
way of preventing revolutions and international wars. If it were in any way possible to grant
this right of self-determination to every individual person, it would have to be done.
Mises' answer, then, as to how to assure that a government will in fact protect property
Property Rights is by the threat of unlimited secession and its own voluntary membership
character. Now I do not want to further investigate Mises' idea of democratic government here,
but turn instead to the modern definition of democracy and the question whether the
modern form of democracy is in any way compatible with the basic idea of liberalism that is
of Private Property and its Protection. Mises' definition of democratic government, one could
argue, was applicable, maybe, to the United States until 1861. Until then, it was generally
held that a right to secession existed and that the Union was nothing but a voluntary
association of essentially independent states. But after the crushing defeat and the devastation
of the Secessionist Confederacy by Lincoln and the Union, there could be no longer any
doubt that the right to secede had effectively ceased to exist, and that democracy meant
absolute and unlimited majority rule. Nor does it appear that any other state ever since
1861 ever fulfilled Mises' requirement of democracy. Instead, all modern democracies
The more surprising is that Mises never subjected this modern model of democracy to the same
systematic analysis that he had applied to princely government.
To be sure, no one was more farsighted regarding the destructive effects of modern government
and Social Economic Policies and Mises, and no one recognized more clearly the dramatic
increase of state power in the course of the 20th century. But Mises never brought these
phenomena in a systematic connection with modern compulsory democracy. Nowhere did he
suggest that the decline of liberalism, classical liberalism, and the dominance of anti-capitalist
Political Ideologies in the 20th Century of Socialism, Social Democracy, Democratic Capitalism,
Social Market Economics or whatever other term people have come up with to define socialism,
that all of this can find its systematic explanation in the fact of majoritarian democracy.
Now this is precisely what I propose to do here to fill the gap that Mises left and provide
and Brief, an analysis of the logic of majoritarian democracy and thereby try to make modern history intelligible and predictable, so to speak.
Absent the right to the session, a democratic government is economically speaking a compulsory territorial monopolist of protection and jurisdiction,
or of ultimate decision-making, and in this respect, of course, it is completely indistinguishable from princely government, as princes did not allow this session, so it is outlawed under democracy.
Moreover, as implied in the position of a compulsory monopolist, both democratic government as well as princely government possess the right to tax.
That is, both are permitted to determine unilaterally, without consent of the protected, the sum of money that the protected must pay for their protection.
Now from this joint classification as compulsory monopolies, first a basic similarity of both
princely and democratic government can be deduced. Under monopolistic auspices, the
price of justice and of protection will continually rise and the quantity and quality of justice
Taxes and Protection will continually fall. A tax-funded protection agency is a contradiction
in terms. That is, an expropriating property protector. And such an organization will inevitably
lead to more taxes and to less protection. Even if, as classical liberals advocated,
For instance, a government limited its activities exclusively to the protection of pre-existing
private property rights, the further question would arise of how much protection to produce.
Motivated like everyone else by self-interest and by the disutility of labor, but with the
unique power to tax, a government agent's answer will invariably be exactly the same.
It is to say to maximize expenditures on protection and almost all of a nation's wealth can of
course in principle be consumed by the cost of production, by the cost of protection and
at the same time to minimize the actual production of protection. That is the more money one
can spend and the less one must work to produce anything, the better off one will be. In addition,
A judicial monopoly will inevitably lead to steady deterioration in the quality of protection.
If no one can appeal for justice except to government, justice will be perverted in favor
of government, constitutions and appeals courts notwithstanding.
Constitutions and appeals courts, after all, are government constitutions and government
agencies and whatever limitations to government action they might contain or find is invariably
decided by agents of the very institution under consideration. Predictably, then, the
definition of property and protection will continually be altered and the range of jurisdiction
will be expanded to the government's advantage. Now, apart from this commonality of being
Being both incompatible with the protection of life and property, princely and democratic
governments also differ in one fundamental respect.
The decisive difference lies in the fact that whereas entry into a princely government is
systematically restricted by the prince's personal discretion, under democracy, entry
into and participation in government is open to everyone on equal terms. Everyone, not
only a hereditary class of nobles, is permitted to become a government official and exercise
every government function all the way up to that of prime minister or president. Now,
this distinction between restricted versus free entry into government and the transition
Interpretation from princely to democratic government has been typically interpreted
as an advance toward liberalism, from a society of status and privilege to one of equality
before the law. However, this interpretation rests on a fundamental mis-comprehension.
From a classical liberal point of view, democratic government must be considered worse than and
and a regression from princely government. Free and equal entry into government, that
is democratic equality, is something entirely different from and completely incompatible
with the classical liberal notion of one universal law equally applicable to everyone everywhere
and at all times. Liberalism, Mises noted, strives for the greatest possible unification
of law in the last analysis for world unity of law. Yet free entry into government does
not accomplish this goal at all. To the contrary, the objectionable separation and inequality
The separation and inequality of the higher law of princes versus the lower and subordinate law of ordinary subjects is completely preserved under democracy in the separation between public law on the one hand and private law on the other and the supremacy of public law as compared to private law.
Under democracy, it is true, everyone is equal in so far as entry into government is open to all, but this does not, but in a democracy, to put it differently, in a democracy there exists no personal privileges or no privileged persons, but under democracy there exists nonetheless functional privileges and privileged functions, as long as they act in an
and judicial capacity, for instance, democratic government agents are governed and protected by public law and occupy thereby a privileged position vis-a-vis persons acting under the mere authority of private law, most fundamentally, of course, in being permitted to support their own activities by taxes that they can impose on private law subjects.
To put it differently, privileges, legal discrimination and protectionism do not disappear under democracy to the contrary.
Rather than being restricted to princes and nobles, privileges, discrimination and protectionism can be now exercised and accorded to everyone.
Predictably then, under democratic conditions, the tendency of every compulsory monopoly,
that is to increase prices and to decrease quality will be only strengthened.
As an hereditary monopolist, a prince regarded the territory and people under his jurisdiction as his personal property
and engaged in the monopolistic exploitation of his property.
Under democracy, monopolistic exploitation does not disappear.
Even if everyone is permitted to enter government, this does not eliminate the distinction between the rulers and the ruled.
Government and the governed are not one and the same person.
Instead of a prince who regards the country as his private property, a temporary and interchangeable caretaker is put in monopolistic charge.
The caretaker does not own the country, but as long as he is in office, he is permitted
to use the country to his own personal advantage. He owns its current use, or usufruct, but
he does not own the capital stock. This will not eliminate exploitation. To the contrary,
It will make exploitation less calculating and carried out with little or no regard to
the capital stock, the value of the country. It will make exploitation extremely short-sighted.
Let me just mention a few points here. The first thing that we will be able to observe
under democratic conditions is that taxation, for instance, in absolute terms as well as
as a proportion of national product will increase far beyond anything we have ever seen under
princely rule as soon as democracy is in place. The second point is that government debt will
increase far more under democratic conditions than it will under princely conditions, and
the third one is inflationary pressure will also be far greater under democratic government
than under princely government, but I do not want to concentrate on these elements, on
these differences, but rather on a different one. With free entry into and participation
in government, the perversion of justice, the content of justice and protection will
proceed faster under democratic conditions and under princely ones. Instead of only redistributing
income and wealth from civil society onto government by means of taxation, deficit financing
and inflation. Both hereditary princes and democratic caretakers can use their judicial
monopoly also for the redistribution of income and wealth within civil society. But the incentives
faced in this respect by princes and by democratic caretakers are distinctly different. It is
It is instructive to take first another look at princely government.
As regards redistribution within society, princes face two decisive disincentives.
The first disincentive is a logical one.
Even if a prince ranks above everyone else, his rights, too, are private rights, if of
a somewhat elevated kind.
If a prince, for instance, takes the property of one person and distributes it to another,
he undermines the very principle on which his own position and security vis-a-vis other
princes rests.
And secondly, from an economic point of view, every income and wealth redistribution from
the halves of something to the have-nots is counterproductive and reduces the overall
This is not to say that princes will abstain from redistributive policies entirely, but
that their policies will take a characteristically different form. On the one hand, their redistribution
must appear in accordance with the idea of private property rights, and on the other
On the other hand, they should help to increase instead of decrease the future productivity and hence the country's present value.
Accordingly, rather than awarding group rights, princes typically grant personal privileges.
Instead of advantaging have-nots at the expense of haves, princes award privileges typically to haves.
And instead of engaging in the redistribution of income and wealth, princes address the
so-called social problems by a reallocation of labor, that is, by colonization efforts,
by cultivation and acculturation policies.
In contrast, a democratic caretaker faces no logical obstacle to the redistribution
of Private Property, and economically, instead of being interested in the preservation and
enhancement of capital values, democratic caretakers will be concerned mostly with the protection
and advancement of their own position against the competition of new entrants into government.
Let me explain these two points. First, the legitimacy of a caretaker, of a democratic
A democratic politician does not rest on the legitimacy of private property. It rests instead
on the legitimacy of social or public property. Accordingly, if a democratic caretaker takes
property from one person and gives it to another, a caretaker does not act in contradiction
to his own ideological foundation. Instead, he affirms the supremacy of an entirely different
and the principle of social ownership. Accordingly, under democratic conditions, private law, that is, the law of property and contract which underlies civil society, will essentially vanish as an independent domain of law and be completely absorbed by an all-encompassing public law.
Ultimately, under democracy, all property becomes public property. Every established private property right is only provisionally valid and may be altered in accordance with a caretaker's unilateral determination of the needs of public safety and social security.
Security. Second, and more specifically, because democratic caretakers do not own the country's
capital stock, the counterproductive effects of income and wealth redistribution are of
no concern to them. However, while the long-term repercussions of redistributive measures is
is unimportant to them. Their immediate and short-term effects are not. A caretaker is
subject to steady political competition by others seeking to replace him in his position.
Given the rules of democratic government, that is, of one man, one vote, and of majority
Rule, a caretaker, whether to secure his present position or to aspire to a new one,
cannot but award or promise to award privileges to groups instead of particular individuals.
And given that there exists always more have-nots than haves of everything that is worth having,
This redistribution will be egalitarian instead of elitist. Consequently, as a result of democratic
competition, the social character of an entire society will be deformed. First, all redistribution,
regardless of the criteria on which it is based, involves that one takes from an original
The original owner or producer of something or the heaver of something and gives to another
a non-owner, a non-producer or the non-heaver of something. Now the incentive then to be
an original owner or producer of the thing in question is reduced and the incentive to
be a non-owner and non-producer is raised. Accordingly the number of heavers and producers
and that of non-havers and non-producers will increase and since it is presumably something good of which the haver has too much and the non-havers have too little that is being redistributed, this change in the composition of the population implies quite literally that the relative number of bad or not so good people and of bad or not so good personal characteristics
The logistics and habits will continually rise and life in society will become increasingly less pleasant.
Instead of cultivation and acculturation, democracy produces corruption, decay and degeneration.
Moreover, free competition is not always good.
Free competition in the production of goods is good, but free competition in the production of bad is not.
Free competition in torturing and killing innocents, or free competition in counterfeiting and swindling, for instance, is not good, but it is worse than bad.
And as I already explained, that government as a compulsory membership organization endowed with the power to tax and ultimate decision making is bad,
In fact, at least from a liberal point of view, it requires still another look at democratic
government to recognize that democratic competition is in fact worse than bad.
In every society, as long as mankind is what it is, people exist who desire other men's
property.
Some people are more afflicted by this sentiment than others, but almost everyone is at least
is occasionally affected by envy towards others.
Yet normally, and in most cases, people learn not to act on such feelings
and even feel ashamed for having entertained such feelings.
Only a few individuals generally are unable to suppress their desire for other people's property
And these individuals are everywhere treated as criminals and suppressed by physical punishment by their fellowmen.
Under princely rule, one person only, that is, the prince, may act on his desire for another man's property.
And it is this that makes him a potential danger and his function a permanent bad.
However, besides the difficulties that I already mentioned, the logical problems if he engages
in redistribution and the economic problem, he being the owner of the capital stock and
redistribution of income leading to a drop in the value of the country, apart from these
disincentives, Prince also, whenever he engages in redistributive measures, faces the difficulty
that he knows that all other people in society will watch him very carefully and regard the
taking of the property of one man and giving it to another as a shameful and immoral act
and accordingly he will be very reluctant to engage in this.
In distinct contrast, however, in freeing up entry into government, everyone is not only
is openly permitted now to feel but to openly express his desire for other men's property.
What was formerly considered immoral and accordingly suppressed is now regarded as a legitimate sentiment.
Everyone may openly desire another man's property if only he appeals to democracy.
democracy, and everyone can act on this immoral desire for another man's property provided
only that he gains entrance into democratic government.
Accordingly, under democracy, everyone becomes a potentially dangerous person.
Consequently, the popular, if immoral and anti-social desire for other men's property
will be systematically strengthened. Quickly, not even the seemingly most secure private
property right will remain exempt from redistributive demands from one quarter or another. Worse,
subject to popular elections, those very members of society which have the least moral inhibition
against taking another man's property, that is, habitual immoralists, and those who are
most efficient in assembling majorities from a disparate multitude of morally uninhibited
popular demands, that is, demagogues, those will tend to gain entrance into government
and rise to the top of government. And that is why a bad situation is made even worse.
The selection of a prince was by accident of his birth and his only personal qualification
was typically his upbringing as a future prince and preserver of the dynasty and its possessions.
This did of course not assure that a prince would not be a bad and dangerous individual.
It is worth to remember, however, that every prince who failed in his primary obligation
of Preserving the Dynasty, a prince who wrecked, for instance, or ruined the country, who stirred civil unrest, turmoil and strife, or otherwise endangered the position of the dynasty, such a prince would face the immediate and direct risk of being either neutralized or, not at all rarely in history, to be assassinated by another member of his own family concerned about preserving the family
and Fortune. Yet in any case, even if the accident of a noble birth and a princely education
could not preclude that a prince might be bad and dangerous, the accident of his birth
and his upbringing also did not preclude that a prince might actually be a harmless dilettante
or even a good and moral person. In contrast, the selection of government rulers by means
by means of popular election makes it effectively impossible that any good or harmless person
could ever rise to the top of government. To the contrary, prime ministers and presidents
are selected for and chosen on account of their proven effectiveness as morally uninhibited
Demagogues. Accordingly, democracy virtually assures that nothing and no one else but bad
and dangerous men will ever reach the government top. And yet, that regardless of their character
as being bad and immoral people, as temporary and interchangeable caretakers, they will
only be rarely assassinated. Now, after somewhat more than 100 years of compulsory democracy,
the theoretically predictable results are before our very eyes. Taxes and government
debt have risen to astronomical heights, while the value of money has been continually falling.
The idea of universal and immutable human rights has essentially disappeared and been replaced by that of law as government-made legislation.
In the name of public safety and social security, group rights instead of individual rights have proliferated, and the meaning of protection has been completely altered and perverted.
Nowadays, we protect the environment, the ozone layer, dolphins and mosquitoes.
We are protected from homophobia, sexism, racism, from smokers and, of course, from
Hitler's all over the globe, except we are not protected from criminals and we are not
are not protected at all from government that can rip us off any way they wish.
Inescapably, then, the question arises, what is the future of liberalism as Mises understood this term?
A few remarks will have to suffice here.
And I will return to Mises in order to at least formulate a brief answer to it.
Mises recognized, like David Hume before him, that all governments rest essentially on public
opinion.
If the majority of the public does not endorse or at least silently support government, no
government is able to last.
What needs to occur in order to increase the chances of liberalism is, of course, first,
that we have to withdraw our ideological support to the idea of democracy.
We must recognize that democracy is a system that is incompatible with private property
and its protection, and we must regard the central government as illegitimate, and by
withdrawing our ideological support for government, we might be able to bring about a situation
as it existed before 1861, where people again have the right to the seat from the federal
government. Thank you.
Thank you very much.