Saturday, August 2, 2014

Sacrificing Liberty through Bureaucracy

Mises, L. (1944). Bureaucracy. New Haven: Yale University Press. 135 pages. 

Those of us who advocate personal and economic freedom should remind ourselves occasionally not to be surprised anymore if most people we know take the expanding power of the government for granted. To expect otherwise is unrealistic simply because the progressive propaganda has been successful and has already conquered mainstream education and media for so long. Inflation, deficit spending, and bigger welfare package are just few examples of the activities of bigger government that people consider normal. I think this is not only confined in the Philippines; it is a global trend. And the most effective tool that has brought this economic disaster is the growth of bureaucracy. 

In Bureaucracy, Ludwig von Mises argues throughout the book that economic and personal freedom has been consistently coerced by the State through the gradual expansion of bureaucratic management. Though citizens feel this coercion through the subtle squeezing of their pockets, it is very rare to find someone who knows the details how it is being done. I think the book will give us such ability to distinguish the voice of freedom from the counterfeit ones.

Content and Outline of the Book

The book has seven chapters. Chapter 1 introduces the concept of profit management. Chapters 2 to 4 deal with bureaucratic management: the second chapter explains bureaucratic management in general; the third, bureaucratic management of publicly owned enterprises, and; the fourth, bureaucratic management of private enterprises. The following two chapters elaborate about implications and consequences of bureaucratization. The fifth chapter focuses on social and political implications, and the sixth, on psychological consequences. The last chapter is about the remedy to reduce the size of the government

The concept of profit management is explained under four sections: the basic operation of the market, economic calculation, its nature, and the nature of managing personnel. Under basic operation of the market, Mises brings to light two important themes: consumer sovereignty and economic democracy. In explaining economic calculation, Mises identified two additional components, price and profit, which can only be found under free market. Again, about the nature of profit management, two important records are emphasized, profit-and-loss account and the balance sheet. These records serve as the basis in evaluating the performance of personnel.

In chapter 2, Mises discussed the general character of bureaucratic management in relation to five sub-topics: bureaucracy under despotic government, bureaucracy within a democracy, its essential features, the crux of bureaucratic management, and its own unique feature of personnel management. Despotic government, unavoidably kills the eagerness of its personnel through strict compliance to regulations. As a result, the quality of service deteriorates. Within democracy, bureaucracy functions in relation to the rule of law and the budget. And due to the growth of bureaucratic management, in time, judicial arbitrariness threatens the rule of law, and public officers utilize public fund for their own ends. The essential features of bureaucratic management include the limitation of the discretion of subordinates, inability to verify the objectives in monetary terms, disconnection between revenue and expenses, and the absence of market price. This last feature is the crux of bureaucratic management, which is to say that the kind of service provided by the government has no market value. And because of this, poor performance is inevitable. Three additional mechanisms that contribute to the deterioration of government personnnel consist of increasing regulation to protect clerks from their superiors, the existence of superficial machinery for application and promotion, and the role of senior bureaucrats. 

Bureaucratic management of publicly owned enterprises is the subject of Chapter 3. It discusses about the impracticability of government all-round control, and public enterprise within a market economy. Other terms for government all-round control are central planning and socialism. Again, the primary reason why such system did not and will never work is due to the absence of market price that makes economic calculation impossible. Public enterprise within a market economy has numerous flaws such as the goal to provide service ignoring the market price, the transfer of the financial burden to the taxpayers, the absence of criterion to assess the usefulness of government services, and the wasteful expenditures of public fund. 

The focus of Chapter 4 is bureaucratic management of private enterprises. Here, we will find how government intervention created bureaucratization of private enterprises in the first place. This is done in two ways: interfering in company profit and in the choice of personnel. The chapter ends identifying the unfortunate results of this type of bureaucratization. 

Chapter 5 enumerates the social and political implication of bureaucratization. They include contempt for human laws, complacency, increase in government spending, bureaucratization of the mind, and the supremacy of the tyrant's will. 

Chapter 6 is all about psychological consequences. These are the misdirection of the youth, the crisis of progress and civilization, the emergence of elite paternal government, perpetual violence leading to endless civil war, and the disappearance of the critical sense.

The last Chapter shows us the way to reduce the size of the government. The way is not easy due to the popularity of government interference and the intimidation by the professionals. However, Ludwig von Mises was calling the average citizens of the nations of the world to seriously take the responsibility to personally educate themselves how the economy works. This is the only way to stop the bureaucratic invasion of liberty. This is "the first duty of a citizen of a democratic community. . ." (p. 111) for without it, "democracy becomes impracticable" (p. 120). Democracy is not "a good that people can enjoy without trouble", but "a treasure that must be daily defended and conquered anew by strenuous effort" (p. 121). 

Reasons for Writing the Book

Why Ludwig von Mises said all of these? Was his description unique only in his time? Is the message of Bureaucracy no longer applicable in the 21st century? Reading Bureaucracy for yourself will help you find out the answers to these questions.

For Mises, the reason he investigated the growth of bureaucracy in US, France, Germany, and Russia is that he thinks that this is the best way to study the conflict betwen socialism and capitalism. Through this study, one can see whether human society is heading towards "freedom, private initiative, and individual responsibility" (p. iii) or towards a coercive and interventionist state or in other words, towards "individualism and democracy" or "authoritarian totalitarianism" (ibid.). Again in page 10, Mises elaborates more about the nature of this conflict:
"The main issue in present-day political struggles is whether society should be organized on the basis of private ownership of the means of production (capitalism, the market system) or on the basis of public control of the means of production (socialism, communism, planned economy). Capitalism means free enterprise, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means full government control of every sphere of the individual's life and the unrestricted supremacy of the government in its capacity as central board of production management. There is no compromise possible between these two systems. Contrary to a popular fallacy there is no middle way, no third system possible as a pattern of a permanent social order. The citizens must choose between capitalism and socialism . . . ." 
And so for Mises, socialism utilizes bureaucracy to gradually lead society to totalitarianism. Bureaucracy and totalitarianism are interconnected. In our days, though we do not see full-blown government control of everything yet, but the growing expansion of bureaucracy is a sure indication that nations are heading into that direction. In other words, the most and highly bureaucratized society will experience constant suppression of personal and economic liberty. The reason why our time is more dangerous than the previous ones is because majority of the people do not have this realization. They don't see bureaucratization as a threat to liberty. They think that the compromise between socialism and capitalism is the way to go. They do not see that it is actually this "middle way" that is accomplishing this totalitarian goal. Again, see how Mises explains the correlation between bureaucratism and totalitarianism:
"Totalitarianism is much more than mere bureaucracy. It is the subordination of every individual's whole life, work, and leisure, to the orders of those in power and office. . . . It forces the individual to renounce any activity of which the government does not approve. It tolerates no expression of dissent. It is the transformation of society into a strictly disciplined labor army- as the advocates of socialism say-or into a penitentiary- as its opponents say. At any rate it is the radical break from the way of life to which the civilized nations clung in the past. It is not merely the return of mankind to the oriental despotism under which, as Hegel observed, one man alone was free and all the rest slaves, . . . . It is different with modern socialism. It is totalitarian in the strict sense of the term. It holds the individual in tight rein from the womb to the tomb. . . . The State is both his guardian and his employer. The State determines his work, his diet, and his pleasures. The State tells him what to think and what to believe in" (p. 17). 
Reading Chapters 5 and 6 of the book, you will realize that additional reasons exist in the mind of Ludwig von Mises that caused him to write this book. In Chapter 5, he mentioned one alarming social and political implication of bureaucratization, the bureaucratization of the mind. Mises observes that educational institutions no longer provide the necessary training of the mind, to think liberally, that is, the kind of education that protect personal liberty and the market economy. He laments that economic education has already been expelled from mainstream universities and has been replaced with "wirtschaftliche Staatswissenschaften (economic aspects of political science)" (p. 83). Notice how Mises describes the absence of economics in mainstream education and factors that contributed to such condition: 
"The modern trend toward government omnipotence and totalitarianism would have been nipped in the bud if its advocates had not succeeded in indoctrinating youth with their tenets and in preventing them from becoming acquainted with the teachings of economics" (p. 81). 
"The outstanding fact of the intellectual history of the last hundred years is the struggle against economics. The advocates of government omnipotence did not enter into a discussion of the problems involved. They called the economists names, they cast suspicion upon their motives, they ridiculed them and called down curses upon them" (p. 82). 
"In most countries of the European continent the universities are owned and operated by the government. They are subject to the control of the Ministry of Education . . . The teachers are civil servants like patrolmen and customs officers. Nineteenth-century liberalism tried to limit the right of the Ministry of Education to interfere with the freedom of university professors to teach what they considered true and correct. But as the government appointed the professors, it appointed only trustworthy and reliable men, that is, men who shared the government's viewpoint and were ready to disparage economics, and to teach the doctrine of government omnipotence" (ibid.). 
And here is the end result of the bureaucratization of the mind:
"All that the students of the social sciences learned from their teachers was that economics is a spurious science and that the so-called economists are, as Marx said, sycophantic apologists of the unfair class interests of bourgeois exploiters, ready to sell the people to big business and finance capital. The graduates left the universities convinced advocates of totalitarianism either of the Nazi variety or of the Marxian brand" (p. 86). 
Due to the success of the bureaucratization of the mind, Mises is right in saying, "The universities paved the way for the dictators" (p. 87). 

And so I think, Mises wrote Bureaucracy to counter the trend towards the bureaucratization of the mind and shift it towards liberty. 

Again in Chapter 6, we find that through this book, Ludwig von Mises offers direction to the misguided and activist youth. He desires to stop the crisis of progress and civilization. He hopes for a peaceful society where bureaucratic violence and endless civil war have no place. And finally, he dreams to see the critical sense among the citizens of democratic society restored. 

As a whole, this book is the attempt of Ludwig von Mises to provide the basic training of the mind to understand the critical issues of our time. This is his way to inform the average citizens of democratic nations by providing them fundamental understanding how bureaucracy affects personal and economic liberty. 

Is Mises Correct?

Is Mises correct in his assertion that the conflict between socialism and capitalism being decided in favor of the former through bureaucratic expansion? Is his message still relevant that the struggle between private ownership and state or collective ownership of factors of production being advanced in favor of totalitarianism through bureaucracy? Is he correct that the bureaucratization of the mind has been successful in producing university graduates who advocate totalitarianism either the German or Russian brand? Is he correct that the growth of bureaucracy the primary cause of social unrest, violence, and civil wars? 

Obviously, the answer to the above questions is affirmative. And only basic economic education is the remaining antidote to stop all this insanity. Many other writers agree with this. 

In September 29, 2012, Art Carden of Forbes wrote "The Greatest Thinker You've Never Read: Ludwig von Mises". For Carden, Mises "was the greatest social thinker of the twentieth century." Carden sees that Mises' greatest contribution was the "demonstration that socialism cannot function as a rational economic system and that private ownership of the means of production is necessary if value is going to be maximized and waste is going to be minimized in the production process." And so Carden agrees that Mises "ended the debate over whether an economic system based on common or social ownership of the means of production could function" with the essay Economic Calculation in the Socialist Commonwealth. Carden ends his article with a solemn warning taken from Human Action:
“The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.”
Carden is not alone. Mises' wife and other reputable authors and leaders in the not so recent past confirmed the greatness of Mises and his ideas. 

Margit von Mises shared her two aspirations. One, that all presidents of the United States on their inauguration should get "a complete set of Lu's books", and; two, "that every university or college where economics and political science are taught would. . . add a course on freedom of the market to their curriculum" (My Years with Ludwig von Mises, 1976, p. 181). Margit thinks that Mises' "books should be marked for special recommended readings concerning government interference, socialism, and inflation" (ibid.). Doing this, Margit believes that the knowledge of Mises' works "would help to preserve freedom in the United States" (ibid.). 

Sylvester Petro, former professor of labor law at New York University describes Mises' writings as a different kind "from anything I had ever read before" (p. 157). He said this in spite of his wide reading "in the classics, in logic, in philosophy, in epistemology, in law, in economics, in social theory, in politics and all the rest" (ibid.). 

Leonard Read, "the founder of the Foundation for Economic Education" said of Mises' ideas as "a fountain source of new students for generations to come" (p.133). 

And finally Lawrence Fertig, "an American advertising executive and a libertarian journalist and economic commentator" compared Mises with mainstream economists: 
"Great honors were showered on economists whose major accomplishments had been to promote a major inflation which, by the end of the 20th Century, was acknowledged to be the source of tremendous social unrest and economic crises. These were the fashionable economists who were sponsored by wealthy Foundations and indeed by most of the intellectuals of Academe. But when economic historians of the future came to evaluate precisely who had made the most significant contributions to economic theory-to those broad and fundamental principles which explain human actions in the practical world people must live in-their puzzlement increased. For they could find only a meager record of academic honors or monetary prizes by leading ivy-league universities accorded to the one economist who had discovered and formulated some of the most brilliant economic theories of that century. His name was Ludwig von Mises" (p.178).
If Mises and his ideas are really great as the above men described, how come his books are not studied in the universities? Isn't this relegation of Mises' books to the shadow the fulfillment of his foresight, that socialism has been advancing for so long though not easily recognized due to bureaucratic means? I wonder why I never encountered Ludwig von Mises' books during my bachelor and master's degree, and not even when I took some units in my doctoral course in educational leadership. It was only in 2009 through the books of Robert Kiyosaki, the least expected person to arouse my interest to examine the Austrian school. 

If you are still not convinced about the relevance of Mises' ideas, try now to read a newspaper or any article on current economic and political issues anywhere in the world and see how problems are explained. You will always find one common theme: the government has to do something due to market failure. It is as if the government always knows how to solve the problem. It never enters in the mind of most people to question how the problem originates in the first place. If you are curious enough to pick up a particular problem such as income inequality and massive unemployment and dig into the source of the problem, you will always find the State through its bureaucratic agents. In short, the State claims to solve the problem that it created in the first place. 

In the Philippines, we have yet to see a public figure, whether a politician, a political and economic commentator or a journalist who advocates personal responsibility, economic liberty, and limited government. So far, the political and economic stance of most public figures we know are statist, socialist, nationalist, interventionist, and progressive. Filipino citizens do not have to wait for the emergence of a libertarian leader. Why not begin studying the books of Ludwig von Mises? Besides short books like Bureaucracy, Anti-Capitalistic Mentality, and Economic Policy: Thoughts for today and Tomorrow, Mises also wrote The Theory of Money and Credit, Socialism: An Economic And Sociological Analysis, Human Action, and Theory and History. Mises.org offers all these books to anyone for free.