The majority of us, and all of us the majority of the time, deal with the marketplace economy as a certain type of economic order, a sort of “financial technique” rather than the socialist “strategy.” For this view, it is substantial that we call its constructional concept the “rate system.” Here we move in the world of prices, of markets, of supply and need, of competition, of wage rates, of rate of interest, of currency exchange rate, and whatnot.
That is, of course, right and appropriate– as far as it goes. But there is a terrific risk of neglecting a crucial fact: the market economy as an economic order need to be correlated to a specific structure of society, and to a certain psychological climate which is suitable to it.
The success of the market economy wherever it has been restored in our time– most conspicuously in western Germany– has resulted, even in some socialist circles, in a tendency to appropriate the marketplace economy as a technical device capable of being built into a society which, in all other respects, is socialist.
The marketplace economy then looks like part of an extensive social and political system which, in its conception, is a highly central colossal equipment. In that sense, there has actually constantly been a sector of market economy also in the Soviet system, however all of us understand that this sector is a simple gadget, a technical gadget, not a living thing. Why? Because the marketplace economy as a field of liberty, spontaneity, and free coordination can not thrive in a social system which is the extremely opposite.
That causes my very first main proposal: the marketplace economy rests on two essential pillars, not on one alone. It assumes not just the freedom of rates and competitors (whose virtues the new socialist adepts of the marketplace economy now hesitantly acknowledge), however rests equally on the institution of personal home. This residential or commercial property needs to be authentic. It should make up all the rights of complimentary disposal without which– as formerly in Nationalist Socialist Germany and today in Norway– it becomes an empty legal shell. To these rights need to be included the right to bestow residential or commercial property.
Residential or commercial property in a totally free society has a double function. It indicates not just that the private sphere of choice and responsibility is, as we have actually learned as attorneys, demarcated against other individuals, however it likewise means that property secures the private sphere versus the federal government and its ever-present tendency toward omnipotence. It is both a horizontal and a vertical limit. And it is in this double function that property need to be comprehended as the indispensable condition of liberty.
It wonders and saddening to see how blind the average type of socialist is vis-à-vis the economic, ethical, and sociological functions of property, and a lot more that specific social approach in which home need to be rooted. In this propensity to ignore the significance of home, socialism has actually made massive development in our time. Traces of this might be found even in modern discussion on the problems of enterprise and management, which sometimes offer the impression that the homeowner is the “forgotten male” of our age.
The Function of Personal Property
The intellectual constructions of “market socialism” are a fine example of how the most serious misconceptions take place if we ignore the functions of private property. These fallacies can already be demonstrated on the level of ordinary financial analysis. But I want to recommend that it is the whole social climate, the kind of life, and the habits of planning for life which matter.
There is a guaranteed “leftist” ideology, influenced by excessive social rationalism, rather than a “rightist,” conservative one, appreciating specific things we can not touch, weigh, or procedure but which are of sovereign importance. The real role of residential or commercial property can not be comprehended unless we see it as one of the most important examples of something of much wider significance.
It illustrates the truth that the marketplace economy is a type of economic order that is correlated to a principle of life and a socio-moral pattern which, for desire of a suitable English or French term, we may call buergerliche in the wide sense of this German word, which is mostly without the disparaging associations of the adjective “bourgeois.”
This buergerliche structure of the marketplace economy must be honestly acknowledged. All the more so because a century of Marxist propaganda and intellectualist romanticism has actually been amazingly and alarmingly effective in spreading a parody of this principle. In reality, the market economy can grow just as part of and surrounded by a buergerliche social order.
Its place remains in a society where specific primary things are appreciated and are coloring the entire life of the neighborhood: private duty; regard of particular unassailable standards; the individual’s honest and serious battle to get ahead and develop his professors; independence anchored in property; responsible planning of one’s own life which of one’s family; thriftiness; enterprise; presuming well determined dangers; the sense of craftsmanship; the best relation to nature and the community; the sense of connection and custom; the nerve to brave the unpredictabilities of life on one’s own account; the sense of the natural order of things.
Those who discover all this contemptible and reeking of narrow-mindedness and “reaction” must be seriously asked to expose their own scale of values and to tell us what type of worths they want to prevent communism without obtaining concepts from it.
That is only another method of saying that the marketplace economy expects a society which is the opposite of a “proletarianized” one, the opposite of a mass society– with its lack of a solid and necessarily hierarchical structure, and its corresponding sense of being rooted out. Independence, home, individual reserves, natural anchors of life, saving, thrift, obligation, sensible preparation of life, all these are alien to such a society. They are destroyed by it, at least to that degree that they stop to provide the tone to society. However we should realize that these are specifically the conditions of a durable complimentary society.
The moment has actually concerned see plainly that this is the genuine watershed of social viewpoints. Here the ultimate parting of ways takes place, and there is no navigating the fact that the principles and patterns of life which clash against each other in this field are decisive for the fate of society, and that they are irreconcilable.
When we admit this, we must be prepared to see its significance in every field and to draw the corresponding conclusions. It is certainly exceptional to see how far we all are already drawn into the routines of thinking about a basically unbuergerliche world. That is a truth which the economists likewise should take to heart, for they are among the worst sinners.
Bewitched by the sophistication of a particular type of analysis, how typically we talk about the issues of aggregate savings and financial investments, the hydraulics of earnings flows, the destinations of vast schemes of economic stabilization and of social security, the appeals of advertising or installation credits, the benefits of “functional” public financing, the progress of huge business and whatnot, without recognizing that, in doing so, we consider given a society which is currently largely denied of those buergerliche conditions and practices which I explained.
It is shocking to believe how far our minds are already relocating regards to a proletarianized, mechanized, centralized mass society. It has become nearly impossible for us to factor aside from, in terms of earnings and expense, of input and output, having actually forgotten to think in terms of home. That is, by the method, the deepest reason for my own fundamental and insurmountable wonder about in Keynesian and post-Keynesian economics.
It is, indeed, extremely substantial that Keynes attained popularity primarily for his trite and cynical remark that “in the long run, we are all dead.” And it is even more considerable that many modern financial experts have found this dictum especially spiritual and progressive. However let us keep in mind that it just echoes the motto of the Ancien Program in the 18th century: Apres nous le deluge. And let us ask why this is so considerable. Since it reveals the distinctly unbuergerliche, the Bohemian spirit of this contemporary pattern in economics and in economic policy. It betrays the brand-new hardboiled happy-go-luckiness, the tendency to live from hand to mouth, and to make the style of the Bohemian the brand-new watchword for a more enlightened generation.
To incur financial obligations ends up being a positive virtue; to save, a capital sin. To live beyond one’s ways, as individuals and as nations, is the logical consequence. But what else is this than Entbuergerlichung, deracination, proletarianization, nomadization? And is not this the really opposite of our principle of civilization which is originated from civis, the Buerger?
Muddling through from day to day and from one expedient to another, to boast that “money does not matter”– that is, certainly, the opposite of a sincere, disciplined, and organized idea and strategy of life. The earnings of individuals living on these lines may have become buergerliche, but their design of life is still proletarian.
A Growing Concept
It is clearly difficult in the area of a brief post to study the effect of all this in all the crucial fields. I have actually discussed it in concerns to personal property. It is further extremely disquieting to see how this concept has actually penetrated a growing number of the economic and social policies of our time. One significant example is the Mitbestimmungsrecht (codetermination– the right of employees and trade-union agents to participate in the administration of commercial business and hence to take control of some functions of correct ownership) in West Germany.
To give an illustration: the director of a big power plant in Germany informs me how silly he felt a few days ago when, in wage settlements with trade-union authorities, he needed to deal with the exact same guys who, at the exact same time, sit next to him at conferences of trustees of the power plants themselves. He includes that the structure of business in West Germany approaches increasingly more that which Tito seems to want. And that is occurring in the very country which is thought about today the design of an effective repair of the free-market economy!
Another example of this progressive dissolution of the meaning of residential or commercial property, and of the matching norms, which can be observed in numerous countries, is the softening of the responsibility of the debtor. By lax legal procedure with regard to execution and bankruptcy, this, usually, amounts– in the name of social justice– to the expropriation of the creditor. It is hardly essential to recall, in this connection, the expropriation of the hapless class of home owners by rent control, and the impacts of progressive tax.
Let us apply our reflections to another crucial field: cash. Let us recognize that regard for cash as something intangible is, like property, an important part of the social order and of the mentality which are the requirements of the marketplace economy.
To illustrate my case, I want to tell two stories which I take from the monetary history of France. At the end of 1870, Gambetta, the leader of the French Resistance after the defeat of the 2nd Empire, left the besieged capital in a balloon for Tours to produce the new republican army. In his desperate need for money, he remembered that his appreciated predecessors of the Transformation had actually funded their wars by printing and assignats. He asked the representative of the Banque de France to print for him a few hundred million notes. However he met with a flat and mad rejection. At that time, such a demand was considered so monstrous that Gambetta did not insist. The Jacobin firebrand and all-powerful totalitarian accepted the identified no of the representative of the reserve bank who would decline even a supreme nationwide emergency situation as an excuse for the criminal offense of inflation.
A few months later, the socialist revolt known as the Commune happened in Paris. The gold reserves and the plates of the notes of the Banque de France were at the grace of the revolutionaries. However, badly in requirement of cash and politically dishonest as they were, they strongly resisted the temptation to lay their hands on them. In the really middle of the flames of civil war, the reserve bank and its money were sacrosanct to them.
The significance of these two stories will not leave anyone. It would, indeed, be harsh to ask what has become of this respect for cash in our time, not least of all in France. To restore this respect and the corresponding discipline in money and credit policy is one of the most crucial conditions for the resilient success of all our efforts to restore and maintain a totally free economy and, therewith, a totally free society.
This article was initially published in The Freeman, January 11, 1954.