Friday, March 28, 2014

A Social Philosophy - Two Kinds of Progressives

We were done with our summaries of chapter 1 of "Anti-Capitalistic Mentality" here and here. Now as we proceed to chapter 2 where Ludwig von Mises presented the social philosophy of an ordinary man, I just want to share six themes: the unfortunate state of economic ignorance, the continuous evolution of "material productive forces," three progressive classes, misrepresentation of capitalism, the three old powers, and the influence of socialism. 

The Unfortunate State of Economic Ignorance

Interest in the study of economics was short-lived. It lasted only on the "first decades of 19th century" (p. 35). Even during the most influential period of the free market, both the masses and businessmen failed to understand its basic qualities. Sound knowledge of economics is very rare. 

The reason for this unfortunate state is not only due to the inherent difficulty of the subject that requires unusual and demanding intellectual exertion, but also due to general impressions that the study of the subject is considered "strange," "repulsive," "nonsensical," and often "viewed with suspicion" (p. 35). 

Such lamentable situation has debilitating consequences. Not only that the common man failed to see the important contribution of the free-market to mankind's economic well-being, but also he has been left defenseless and susceptible to Marxist ideas. Instead of being grateful for the role of sound economic policies due to "classical liberalism, free trade, laissez faire and capitalism" that resulted into "unprecedented technological improvements of the last two hundred years," (p. 36) he thinks big businesses as exploiters of the productivity of the working class. 

Material Productive Forces' Continuous Evolution 

Corollary to the failure to account for the real cause of economic progress, our common man improperly ascribed all economic development to "natural sciences and technology" (p. 36) and he saw them as "self-acting" toward continuous development regardless of "political and economic organization of society" (ibid.). Marx followed this "popular interpretation of events and clothed it with a pseudophilosophical veil that made it gratifying both to Hegelian spiritualism and to crude materialism" (ibid.) and developed the concept of a "self-acting" "material productive forces," which continuous evolution is considered inevitable. This doctrine was well-received. 

In Marx's scheme, "the 'material productive forces' are a superhuman entity independent of the will and the actions of men" (ibid.) and operate on the basis of "inscrutable and inevitable laws of a higher power" (ibid.). These forces constantly evolve in a mysterious way, which makes mankind follow them, and restructure a suitable social organization. Out of this central motif, a philosophy of history had been developed, which is one of struggle of material productive forces for freedom from social chains. Let us read Mises' narration of Marx's tale: 
"Once upon a time, teaches Marx, the material productive forces were embodied in the shape of the hand mill, and then they arranged human affairs according to the pattern of feudalism. When, later, the unfathomable laws that determine the evolution of the material productive forces substituted the steam mill for the hand mill, feudalism had to give way to capitalism. Since then the material productive forces have developed further, and their present shape imperatively requires the substitution of socialism for capitalism. Those who try to check the socialist revolution are committed to a hopeless task. It is impossible to stem the tide of historical progress" (p. 37).
Three Progressive Classes

"Leftist parties differ from one another in many ways" (ibid.) says Mises, but they unanimously agree that "progressing material improvement" is "a self-acting process" (ibid.). I think popular progressivism has been shaped by this idea together with the foregoing concept about the unstoppable nature of "historical progress" towards "socialist revolution." Henceforth, the name "progressive" is used to describe this school of thought. 

However, in correcting a faulty understanding of the free market system, Mises introduced his own concept of the progressive character of the capitalist system. Unlike, the first kind of progressivism, Mises' kind of progressivism has been concretely demonstrated through the economic contribution of "the entrepreneurs, the capitalists, and the technologists" (p. 43). Mises described them as the "three progressive classes" (p. 40) in a capitalist society. 

Let us see the role of these progressives to economic well-being. For Mises', increase in productivity is not due to labor per se but the use of better tools and machines, which made possible through "the accumulation and investment of more capital" (p. 38) through saving. In fact, "Every step forward on the way toward prosperity is the effect of saving" (p. 39). Entrepreneurs "employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not yet satisfied wants of the consumers" (ibid.). Saving and the accumulation of capital when they surpass population growth have two advantageous results, increase of marginal productivity of labor and reduction in the price of goods. It is exactly the availability of the supply of capital that distinguishes "progressive" (which the mainstream describes as developed countries) from backward countries. 

Based on the above observation, we can evaluate the soundess of any economic policy. Any act on the part of the state or advocacy coming from interest groups that prevent these progressive classes to function freely is not really progressive, but regressive despite of the "progressive" rhetoric. Viewing from this lens, people can come up to the conclusion that interventionist and statist policies inspired by "progressive" ideas are actually anti-progressive. 

Misrepresentation of Capitalism

Under a capitalist society, anyone can "join the ranks of the three progressive classes" (p. 40). "What is needed to become a capitalist, an entrepreneur or a deviser of new technological methods is brains and will power" (ibid.). 

Unfortunately, the progressive character of capitalism has been denied and widely misrepresented. "Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity" (p. 41). Our ordinary guy prefers to believe that all the goods and services he has been enjoying "came into being by some mythical agency called progress" (ibid.). If there is any class that deserves credit with the increase in the productivity of labor, there is none other but the working class.

Exploitation is the common word to describe big business. It "skims the cream, and leaves" the crumbs "to the manual worker" (ibid.). "Consequently, 'the modern worker, instead of rising with the progress of industry, sinks deeper and deeper. . . . He becomes a pauper' " (ibid.).

Those who propagate this anti-capitalistic mentality "are praised at universities as the greatest philosophers and benefactors of mankind and their teachings are accepted with reverential awe by the millions whose homes, besides other gadgets, are equipped with radio and television sets" (p. 42). Unanimously, they proclaim: "The worst exploitation, say professors, 'labor' leaders and politicians, is effected by big business" (ibid.).

Our common man thinks that the wealth of the wealthy is the primary cause for poverty. He failed to see that the mark of big business is mass production aimed towards mass consumption, which the workers are the main consumers. He could not understand that "the entrepreneurs, the capitalists and the technologists prosper as far as they succeed in best supplying the consumers" (p. 43). 

The Three Old Powers

The pioneers of classical liberalism, free market, and representative government "did not suggest the annihilation of the three old powers: the monarchy, the aristocracy and the churches" (pp. 43-44). Instead, they aimed to substitute monarchical absolutism with "parliamentary monarchy," "to abolish the privileges of the aristocrats, but not to deprive them of their titles, their escutcheons and their estates," and "to grant to everybody freedom of conscience and to put an end to the persecution of dissenters and heretics, but they were anxious to give to all churches and denominations perfect freedom in the pursuit of their spiritual objectives" (p.44). However, this vision of society did not sink well into the minds of princes, aristocrats and clergyman. Inspite of the admission of the forerunners of socialism "that under socialist totalitarianism no room would be left for what they called the remnants of tyranny, privilege and superstition," and the fact that under socialism property will be confiscated and no religious freedom will be allowed, still these three powers did not "oppose the socialist attack upon the essentials of Western civilization," and instead "virtually joined hands with" them (ibid.). Mises gave us an overview of how these three powers combine their forces against classical liberalism and capitalism: 
"The Hohenzollern in Germany inaugurated a policy that an American observer called monarchical socialism. The autocratic Romanoffs of Russia toyed with labor unionism as a weapon to fight the "bourgeois" endeavors to establish representative government.· In every European country the aristocrats were virtually cooperating with the enemies of capitalism. Everywhere eminent theologians tried to discredit the free enterprise system and thus, by implication, to support either socialism or radical interventionism. Some of the outstanding leaders of present-day Protestantism-Barth and Brunner in Switzerland, Niebuhr and Tillich in the United States, and the late Archbishop of Canterbury, William Temple-openly condemn capitalism and even charge the alleged failures of capitalism with the responsibility for all the excesses of Russian Bolshevism" (pp. 44-45).
The Influence of Socialism

And so today, we find ourselves that "governments, political parties, teachers and writers, militant antitheists as well as Christian theologians are almost unanimous in passionately rejecting the market economy and praising the alleged benefits of state omnipotence" (p. 45). Only few people are able to see the danger of the marriage of these three powers with socialism. As a result, "the rising generation is brought up in an environment that is engrossed in socialist ideas" (ibid.).

Most people are blinded by ignorance, envy, and hatred, and that's why they failed to analyze "the fundamental socialist idea that the economic interests of the masses are hurt by the operation of capitalism for the sole benefit of the 'exploiters' and that socialism will improve the common man's standard of living" (p. 46). Mises argued that "people do not ask for socialism because they know that socialism will improve their conditions, and they do not reject capitalism because they know that it is a system prejudicial to their interests. They are socialists because they believe that socialism will improve their conditions, and they hate capitalism because they believe that it harms them" (ibid.). Mises added: "They are socialists because they are blinded by envy and ignorance. They stubbornly refuse to study economics and spurn the economists' devastating critique of the socialist plans because, in their eyes, economics, being an abstract theory, is simply nonsense. They pretend to trust only in experience. But they no less stubbornly refuse to take cognizance of the undeniable facts of experience" (ibid.), that the ordinary man's standard of living is higher under free market than under socialism. 

Similar erroneous conclusion is observed among under-developed countries. What is anomalous is that poor countries want to get out of poverty, and yet their chosen means is contrary to their goal. They want to achieve economic freedom, but they hamper the operation of the free market. And this is a clear indication of present success of anti-capitalistic mentality. 

I like how Mises ended this chapter. It hurts, but I think his words are accurate: 
"People may disagree on the question of whether everybody ought to study economics seriously. But one thing is certain. A man who publicly talks or writes about the opposition between capitalism and socialism without having fully familiarized himself with all that economics has to say about these issues is an irresponsible babbler" (p. 47).