Founder of the Austrian School of economics, Carl Menger, some of his most famous intellectual descendants like Ludwig von Mises, 1974 Nobel Laureate in Economics F.A. Hayek, and author of the best-selling Economics in One Lesson Henry Hazlitt could be said to have literally saved civilization via their educational efforts on multiple occasions.
Until the late 1700s, most people lived in small, nearly self-sufficient farming towns. As technology improved (engines and factories) the rate at which mankind could transform raw materials into wealth was rapidly increasing in cities. A growing class of businessmen-entrepreneurs-capitalists were constantly innovating and due to people’s ‘freedom to trade’ their private property only for things they deemed superior alternatives, entrepreneurs also had to copy the innovations of competitors thus inadvertently creating and spreading superior information, turning cities and eventually the entire planet into supercomputers that were constantly reordering mankind in increasingly productive and technologically advanced states.
Entrepreneurs also had to copy the innovations of competitors, thus inadvertently creating and spreading superior information, turning cities, and eventually, the entire planet, into supercomputers that were constantly reordering mankind in increasingly-productive and technologically-advanced states. Competition between increasingly wealthy and productive factories and entrepreneurs motivated them to pay increasing amounts of wealth for labor relative to what people could earn in farms causing people to move to cities, quickly leading to massively complex metropolises and steadily increasing living standards for everyone.
These changes—what we could refer to as the emergence or evolution of modern capitalism—were not the deliberate design of people, they were, as Carl Menger writes: “the unintended result of individual human efforts (pursuing individual interests) without a common will directed toward their establishment,” or, in the words of Adam Ferguson: “indeed the result of human action, but not the execution of any human design.”
Since these changes were unintended, their benefits were not widely understood. Ignorance of how competing private sector companies were the creators and spreaders of superior information and subsequent social order led to some common errors. Erroneously and resentfully seeing the growing fortunes of some entrepreneurs and investors as exploitation of laborers—among numerous other fallacies led to the rapid spread of a new erroneous ideology-mythology—socialism.
Misguided ideologues and resentful masses increasingly thought that private companies led to unfair differences in wealth and exploitation, and that abolishing them or having them managed by a competition-immune coercive bureaucracy of experts, in other words, the state or government or the “public sector” would be better for society. Naive intellectuals would describe these increasingly popular fallacies-myths in a manner that was bound to go viral and that is what sort of happened with Karl Marx and his bite-sized ‘Communist Manifesto’ where he famously writes: “the theory of the Communists may be summed up in the single sentence: Abolition of private property.”
Without private property there are no competing—and thus, information-creating-and-spreading private sector—companies managed by entrepreneurs. Entrepreneurs are incentivized to be wealthy by producing more (revenue) than they consume (costs), and thus being profitable and increasing the overall economic pie. Competing companies would be replaced by a single, competition-immune state bureaucracy, led by appointed “experts” whose “central plans” can’t work if people are free not to fund or go along with them. Therefore, they inevitably require massive compulsion. Few would eventually understand the situation and do as much to save civilization as Ludwig von Mises, who explains:
By 1900 practically everyone in the German-speaking countries was either a statist [interventionist] or a state socialist. Capitalism was seen as a bad episode which fortunately had ended forever. The future belonged to the “State.” All enterprises suitable for expropriation were to be taken over by the state. All others were to be regulated in a way that would prevent businessmen from exploiting workers and consumers….
When I entered the university, I, too, was a thorough statist [interventionist]....
During the Christmas holidays of 1903, while a student at the University of Vienna, Mises read Carl Menger’s seminal Principles of Economics and, in his own words, “It was through this book that I became an economist.” Although few knew it at the time, by 1919, Mises was already one of the greatest economists of all time and was working at the Vienna Chamber of Commerce where he had become the principal economic adviser to the Austrian government. At this time Lenin’s Bolshevik-Socialist revolution was rapidly moving East and about to engulf Austria, yet Mises managed to stop the falling of this domino, saving civilization. He recalls:
There were few who recognized the state of affairs clearly. People were so convinced of the inevitability of Bolshevism that their main concern was securing a favorable place for themselves in the new order. The Catholic Church and its followers, the Christian Social Party, were prepared to befriend the Bolshevists with the same eagerness with which the bishops and archbishops would embrace National Socialism twenty years later….
I knew what was at stake. Bolshevism would lead Vienna to starvation and terror within a few days. Plundering hordes would take to the streets and a second blood bath would destroy what was left of Viennese culture. After discussing these problems with the Bauers [leading political figures] over the course of many evenings, I was finally able to persuade them of my view. Bauer’s resulting moderation was a determining factor in Vienna’s fate….
The most important task I undertook...was the forestalling of a Bolshevist takeover. The fact that events did not lead to such a regime in Vienna was my success and mine alone. Few supported me in my efforts… I alone convinced Bauer to abandon the idea of seeking union with Moscow.
Just three years later, in 1922, Mises published Socialism: An Economic and Sociological Analysis, a book whose wisdom and clarity is still lightyears ahead of what today’s “leading intellectuals” are babbling about. Hayek, who was working under Mises at the time, elaborates:
When Socialism first appeared in 1922, its impact was profound. It…altered the outlook of many of the young idealists returning to their studies after World War I. I know, for I was one of them.
Mises’s writings and professional help catapulted Hayek to prominence at the London School of Economics in the 1930s where he played a leading role fighting socialist myths in the English-speaking world. Hayek humbly acknowledges this intellectual debt to Mises in a letter:
I am aware, for the first time, that I owe to you virtually everything that gives me an advantage as compared to my colleagues here and to most economists… If I do not deceive too many expectations of the people here at LSE, it is not to my credit but to yours…. I must tell you this because I here feel more indebted to you than anytime before.
In September 1944, as WWII was still raging, Hayek published a book in England where he showed how the same fallacies that led to Socialism of the Nazi and Soviet style, also increasingly dominated the thinking of the freer democracies like England, and would inevitably lead to, as his book was entitled, “The Road To Serfdom.”
Properly identifying socialist ideology-mythology as an understandable error, he dedicated the book “to the socialists of all schools.” Fellow disciple of Mises, Henry Hazlitt—working at the New York Times—loved Hayek’s book, and wrote a glowing review: “In ‘The Road to Serfdom’ Friedrich A. Hayek has written one of the most important books of our generation.”
Hazlitt helped get the review placed in the front page of the Times’ book review section which created an explosion of interest. By the time Hayek came to the US in April 1945 to go on a speaking tour, instead of giving small talks at university departments, his first event “drew an overflow crowd of more than 3,000 listeners and was broadcast over the radio.” However, at over 250 pages, its wisdom remained less accessible to a mass audience. Enter Max Eastman.
Max had been one of America’s most prominent socialists. He had traveled to the Soviet Union, befriended leading Socialists-Bolsheviks like Leon Trotsky and even translated several of his works into English. But eventually the inevitable economic chaos and tyranny of socialism led him to stumble upon the writings of Mises and Hayek. He made an intellectual 180 and became a passionate defender of freedom and capitalism. Eastman’s great contribution came when he created a brilliantly written “condensed” version of Hayek’s book which was less than 40 pages, which with the help of The Reader’s Digest magazine where he worked was eventually sold to over one million American homes.
Hayek’s book and Eastman’s condensed version were a great antidote to Marx’s short and viral “Communist Manifesto” and may qualify as having saved civilization. Instead of inspiring socialist ideologues, it inspired freedom ones, like Margaret Thatcher, who read the book while an 18-year-old undergraduate at Oxford, and countless others like three-time presidential candidate Dr. Ron Paul, who writes:
My introduction to Austrian economics came when I was studying medicine at Duke University and came across a copy of Hayek’s The Road to Serfdom. After devouring this, I was determined to read whatever I could find on what I thought was this new school of economic thought—especially the works of Mises.
