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The Historian of Decline: Ludwig von Mises’s Relevance Today

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[This piece was commissioned by Hillsdale College and presented on campus October 27, 2023] 

It’s an impossible task to explain the full relevance of Ludwig von Mises, who wrote 25 major works over 70 years of research and teaching. We shall attempt a reduction based on his major literary output. With such huge figures such as Mises, there is a temptation to treat their ideas as abstracted from the life of the scholar and the influence of their times. This is an enormous error. To understand his biography is to gain a much richer insight into his ideas. 

1. The problem of central banking and fiat money. This was Mises’s first major work from 1912: The Theory of Money and Credit. Even now, it holds up as a tremendous work on money, its origins and value, its management by banks, and the problems with central banking. This book came out at the very beginning of a grand experiment in central banking, first in Germany but then only a year after publication in the US. He made three incredibly prescient observations: 1) a central bank chartered by government will serve that government with deference to the political demand for low interest rates, which pushes the bank toward a regime of money creation, 2) these low rates will distort the production structure, diverting scarce resources toward unsustainable investment in longer-term capital investment that is otherwise unsustainable with underlying savings, and 3) it will create inflation. 

2. The problem of nationalism. Having been drafted to serve in the Great War, Mises discovered the fullness and absurdity of government in action, which prepared him for the next period of more openly political works. His first postwar book was Nation, State, and Economy (1919), which came out the same year as John Maynard Keynes’s Economic Consequences of the Peace. Mises dealt directly with the most pressing issue of the time, which was how to redraw the map of Europe following the collapse of multinational monarchies and the inauguration of the full age of democracy. His solution was to point to language groups as the basis of nationhood, which would make for much smaller nations sustained by free trade. In this book, he went after the idea of socialism, which he said would be unviable and inconsistent with the people’s liberties. Mises’s solution here was not followed. He further warned Germany against any acts of vengeance and against national resentment, much less new attempts to rebuild a Prussia-style state. He issued an overt warning against another world war should Germany attempt a comeback to a prewar state. 

3. The problem of socialism. With 1920 came a major moment in Mises’s early career: a realization that socialism makes no sense as an economic system. If you think of economics as a system of rationally allocating resources, it requires prices that accurately reflect conditions of supply and demand. That requires markets not just of consumer goods but capital too, which in turn requires trade which hinges on private property. Collective ownership, then, destroys the very possibility of economics. His argument was never answered in a way that was satisfactory, thus upending his professional and personal relationships with the dominant part of Viennese intellectual culture. He made his argument in 1920 and expanded it in a book two years later. That book covered history, economics, psychology, the family, sexuality, politics, religion, health, life and death, and so much more. By the end of it, there was simply nothing remaining of the entire system called socialism (whether Bolshevist, nationalist, feudalist, syndicalist, Christian, or whatever). One might have supposed that he would have been rewarded for his achievement. The opposite happened: he secured his permanent exclusion from Viennese academia.  

4. The problem of interventionism. To underscore the point that rational economics required freedom above all else, he set out in 1925 and after to show that there was no stable system called a mixed economy. Every intervention creates problems that seem to cry out for other interventions. Price controls are a good example. But the point applies across the board. In our own times, we need only consider the pandemic response, which achieve nothing in terms of virus control but did unleash vast learning losses, economic dislocation, labor market disruption, inflation, censorship, government expansion, and loss of public trust in just about everything. 

Mises later (1944) expanded this to a full critique of bureaucracy, showing that though perhaps necessary, they simply cannot pass the test of economic rationality. 

5. The meaning of liberalism. Having thoroughly smashed both socialism and interventionism, he set out to explain in more detail what the pro-freedom alternative would be. The result was his mighty 1927 treatise called Liberalism. It was the first book in the liberal tradition to prove that property ownership is not an optional in the free society but rather the foundation of freedom itself. He explained that from that follows all civil liberties and rights, peace and trade, flourishing and prosperity, and the freedom of movement. All civil liberties of the people trace to clear lines of demarcating ownership titles. He further explained that a genuine liberal movement is not related to a particular political party but rather extends from a broad cultural commitment to rationality, serious thinking and study, and a sincere commitment to the common good. 

6. The problem of corporatism and fascist ideology. With the turn of the 1930s, other problems presented themselves. Mises had been working on the deeper problems of the method of science, writing books that were only much later translated to English, but as the Great Depression worsened, he turned his attention back to money and capital. Working with F.A. Hayek, he established a business cycle institute that hoped to explain that credit cycles are not baked into the fabric of market economies but rather extend from manipulative central bank policy. Also throughout the 1930s, the world saw exactly what he feared the most: the rise of authoritarian politics in the US, the UK, and Europe. In Vienna, the rise of anti-Semitism and Nazi ideology forced another turning point. In 1934, he left for Geneva, Switzerland, to assure his personal safety and freedom to write. He got to work on his master treatise coming in at 900 pages. It was published in 1940 but reached a very limited audience. After six years in Geneva, he left for the US where he found an academic position with New York University but only because it was privately funded. When he immigrated, he was 60 years old, had no money, no papers, and no books. It was at this period when he wrote his memoir, regretting that he had sought to be a reformer but only became a historian of decline. 

7. The problems of modeling and treating the social sciences as physical sciences. His writing career came alive again once in the US, as he developed a good relationship with Yale University Press and found a champion in economist Henry Hazlitt, who worked for the New York Times. Three books came out in quick succession: Bureaucracy, The Anti-Capitalistic Mentality, and Omnipotent Government: The Rise of Total State and Total War. The latter came out the same year as Hayek’s The Road to Serfdom (1944), and provides an even more brutal attack on the Nazi system of racialism and corporatism. He was persuaded to translate his 1940 masterwork, and that appeared in 1949 as Human Action, which became one of the greatest books of economics ever written. The first 200 pages revisited his case for why the social sciences (like economics) had to be examined and understood differently from the physical sciences. It was not so much a new point but one developed further out of a view of the classical economists. Mises deployed all the tools from Continental philosophy at the time to defend the classical view against the mechanization of economics in the 20th century. To his way of thinking, liberalism required economic clarity, which in turn required a sound methodological sense of how economies actually function, not as machines but as expressions of human choice. 

8. The impulse toward destructionism. At this point in history, Mises had forecast the unfolding of the century’s economics and politics with nearly perfect accuracy: inflation, war, depression, bureaucratization, protectionism, the rise of the state, and the decline of freedom. What he now saw unfolded before his eyes was what he had previously called destructionism. This is the ideology that lashes out at the reality of the world because it fails to conform to crazed ideological visions of left and right. Instead of admitting error, Mises saw that intellectuals double down on their theories, and begin the process of dismantling the basis of civilization itself. With these observations, he foresaw the rise of anti-industrial thinking and even the Great Reset itself with its valorization of degrowth, environmentalist, and even hunter/gatherer philosophies and depopulationism. Here we see a very mature Mises recognizing that while he had lost most if not all his battles, he would still embrace the moral responsibility to tell the truth about where we were headed. 

9. The structure of history. Mises had never been persuaded by Hegel, Marx, or Hitler that the course of society and civilization was predetermined by laws of the universe. He saw history as an outgrowth of human choices. We can choose tyranny. We can choose freedom. It is really up to us, depending on our values. His tremendous 1956 book Theory and History makes the core point that there is no determined course of history, despite what countless cranks claim. In this sense, he was a methodological dualist: theory is fixed and universal but history is formed by choice. 

10. The role of ideas. Herea we get to Mises’s core conviction and the theme of all of his works: history is a result of the unfolding of the ideas we hold about ourselves, others, the world, and the philosophies we hold about human life. Ideas are the desiderata of all events, good and evil. For this reason, we have every reason to be bold in the work we do as students, scholars, researchers, and teachers. Indeed, this work is essential. He held to this conviction all the way to his death in 1973.

Having marched through the main points of his biography and ideas, permit me some reflections. 

“From time to time I entertained the hope that my writings would bear practical fruit and point policy in the right direction,” wrote Ludwig von Mises in 1940, in an autobiographical manuscript not published until after his death. “I have always looked for evidence of a change in ideology. But I never actually deceived myself; my theories explain, but cannot slow the decline of a great civilization. I set out to be a reformer, but only became the historian of decline.”

Those words hit me very hard when I first read them in the late 1980s. These memoirs were written as he was arriving in New York City following a long journey from Geneva, Switzerland, where he had lived since 1934 when he fled Vienna with the rise of Nazism. Jewish and liberal in a classical sense, a dedicated opponent of statism of all kinds, he knew that he was on a list and had no future in Viennese intellectual circles. Indeed, his life was in danger and he found sanctuary at the Geneva Institute for Graduate Studies.

He spent six years writing his magnum opus, a summary of all his work until that point in his life – a treatise on economics that combined philosophical and methodological concerns with price and capital theory, plus money and business cycles, and his famed analysis of the instability of statism and the unworkability of socialism – and this book appeared in 1940. The language was German. The market for a massive treatise with a classical liberal bent was rather limited at that point in history. 

The announcement came that he needed to leave Geneva. He found a position in New York City, as funded by some industrialists who had become fans because the New York Times had reviewed his books so favorably (if you can believe it). By the time he arrived in New York, he was 60 years old. He had no money. His books and papers were long gone, boxed up by invading German armies and put in storage. Incredibly, these papers were later transferred to Moscow after the war. 

Thanks to other benefactors, he was put in touch with Yale University Press who commissioned three books, and the eventual translation of his mighty treatise into English. The result was Human Action, one of the most influential works of economics of the second half of the 20th century. By the time the book could be classified as a bestseller, however, it had been 32 years since he had begun the book, and the writing included times of political disaster, professional upheaval, and war. 

Mises was born in 1881, at the very height of the Belle Époque, before the Great War shattered Europe. He served in that war and it certainly had a massive effect on his thinking. Just before the war, he had written a monetary treatise that was widely celebrated. It warned of the proliferation of central banks and predicted that they would lead to inflation and business cycles. But he had not yet come up with a comprehensive political orientation. That changed after the war with his 1919 book Nation, State, and Economy, which advocated the devolution of multinational states into language territories. 

This was a turning point in his career. The idyllic and emancipationist ideas of his youth had been shredded by the onset of a ghastly war which in turn led to the triumph of various forms of totalitarianism in the 20th century. Mises explained the contrast between the old and new worlds in his 1940 memoir: 

“Liberals of the eighteenth century were filled with a boundless optimism that said, Mankind is rational, and therefore right ideas will triumph in the end. Light will replace darkness; the efforts of bigots to keep people in a state of ignorance in order to rule them more easily cannot prevent progress. Enlightened by reason, mankind is moving toward ever-greater perfection. 

“Democracy, with its freedom of thought, speech, and of the press guarantees the success of the right doctrine: let the masses decide; they will make the most appropriate choice.

“We no longer share this optimism. The conflict of economic doctrines makes far greater demands on our ability to make judgments than did the conflicts encountered during the period of enlightenment: superstition and natural science, tyranny and freedom, privilege and equality before the law. The people must decide. It is indeed the duty of economists to inform their fellow citizens.”

Therein we see the essence of his indefatigable spirit. Like G.K. Chesterton, he came to reject both optimism and pessimism, and instead embraced the view that history is built from ideas. Those he could affect and could do no other. 

He wrote:

“How one carries on in the face of unavoidable catastrophe is a matter of temperament. In high school, as was custom, I had chosen a verse by Virgil to be my motto: Tu ne cede malis sed contra audentior ito (“Do not give in to evil, but proceed ever more boldly against it”). I recalled these words during the darkest hours of the war. Again and again I had met with situations from which rational deliberation found no means of escape; but then the unexpected intervened, and with it came salvation. I would not lose courage even now. I wanted to do everything an economist could do. I would not tire in saying what I knew to be true. I thus decided to write a book about socialism. I had considered the plan before the beginning of the war; now I wanted to carry it out.”

I can recall only wishing that Mises had lived to see the demise of the Soviet Union and the collapse of really existing socialism in Eastern Europe. Then he would have seen that his ideas had a massive effect on civilization. The sense of despair that he felt in 1940 would have turned to a brighter optimism. Perhaps he would have felt vindicated. Surely he would have felt gratified to have lived through those years. 

For those who did not live through the days of 1989-90, it’s impossible to characterize the sense of elation. We had dealt with the Cold War for decades of our lives, and were raised with an ominous sense of the “Evil Empire” and its reach throughout the world. Its fingerprints seemed everywhere from Europe to Central America to any local college in the US. Even US mainline religions were affected, as “liberation theology” became a stalking horse for Marxian theory expressed in Christian terms. 

In what seemed like the blink of an eye, the Soviet empire unraveled. It followed a peace made between the US and Soviet presidents, and a seeming exhaustion that swept through the old empire. In a matter of months, states all over Eastern Europe fell: Poland, East Germany, what was then called Czechoslovakia, Romania, and Hungary, even as states absorbed into Russia’s borders broke off and became independent. And, yes, and most dramatically, the Berlin Wall fell. 

The Cold War was framed in ideological terms, a great debate between capitalism and socialism, which easily became a competition between freedom and tyranny. This was the debate that enraptured my generation. 

When the debate seemed settled, my whole generation had a sense that the great parentheses of communist tyranny was over, so that civilization as a whole – indeed the entire world – could get back on track with the job of human progress and ennoblement. The West had discovered the perfect mix to create the best-possible system for prosperity and peace; all that remained was for everyone else in the world to adopt it as their own. 

Strangely in those days, I actually briefly wondered what I would do with the rest of my life. I had studied economics and wrote about the subject with growing fervor. Mises had been proven correct: really existing socialism was nothing but a decrepit form of fascism while the ideal type had proven impossible. Now it was all in shambles. Humanity watched it all happen in real time. Surely the lesson would impart to the globe. 

If the great debate had been settled, did I really have anything else to say? All essential questions had been answered once and for all. 

Still, all that seemed to remain in the world was a mop-up operation. Free trade with everyone, constitutions for everyone, human rights for everyone, progress for everyone, peace evermore, and we are done. This thesis, this cultural ethos, was beautifully captured in Francis Fukuyama’s thrilling book called The End of History and the Last Man

His idea was essentially Hegelian in that he posited that history was constructed by large philosophical waves which could be discerned and nudged along by intellectuals. The spectacular failure of totalitarian ideologies and the triumph of freedom should serve as a signal that these systems do not serve to ennoble the human spirit. What survived and what has proven to be right, true, and workable is a special combination of democracy, free enterprise, and states that serve the people through generous and effective health and welfare programs. This is the mix that works. Now the whole world would adopt this system. History has ended, he said. 

I was surrounded by some pretty smart people who doubted the whole thesis. I too was critical of it simply because I knew that the welfare state as presently constituted was unstable and probably headed for financial ruin. One of the tragic aspects of the economic reforms in Russia, its former client state, and Eastern Europe was its failure to touch education, health care, and pensions. They had settled into a model of not capitalism but social democracy. 

Social democracy, not classical liberalism, is exactly what Fukuyama was advocating. To that extent I was a critic. However, in ways I did not entirely understand at the time, the truth is that I accepted the larger historiographic model. I really did believe in my heart that history as we had known it had ended. Humankind had learned. For the duration, everyone understood that freedom was always and everywhere better than slavery. I never doubted it. 

Keep in mind, this was 30 years ago. In the meantime, we have been surrounded by evidence that history did not end, that freedom is not the world’s norm or even the US norm, that democracy and equality are not exalted principles of world order, and that every form of barbarism of humankind’s past is dwelling in our midst.

We can see it in the Middle East. We can see it in China. We see it in mass shootings in the US, in political corruption, and knock-down-drag-out political machinations. The evidence is even at our local drug stores that are having to lock up even the toothpaste to keep it from being stolen.

The thesis of 1992, the alleged inevitability of progress and freedom, today lies in tatters all over the world. The grand forces have not only failed to take care of us; they have fundamentally betrayed us. And more so every day. Indeed, as some writers have said, it feels like 1914 all over again. Like Mises and his generation, we too are being introduced into the wiles of the unpredictable narrative of history, and faced with the great question of how we will deal with it philosophically, psychologically, and spiritually. 

This shift has been the single most decisive turn in world events in the last decades. It was hard to deny that it had already happened after 9-11 but life was good in the US and the wars abroad we could observe like spectators watching a wartime flick on TV. Mostly we stayed in a state of ideological stupor as anti-freedom forces at home grew and grew and the depotisms we once despised abroad multiplied in power within our shores. 

Looking back, it does seem like the “end of history” framework inspired some millenarian thinking on the part of US elites: the belief that democracy and quasi-capitalism could be brought to every country on the planet by force. They certainly tried, and the evidence for their failure is everywhere in Iraq, Iran, Libya, Afghanistan, and elsewhere in the region. This instability bled into Europe, which has been dealing with a refugee and immigration crisis ever since. 

The year 2020 put a fine point on it as the war for control came home. Domestic bureaucracies ran roughshod over the Bill of Rights which we had previously believed to be the parchment on which we could rely to protect us. It did not protect us. Neither were the courts there for us because, like everything else, their functioning was either throttled or disabled for fear of Covid. The freedoms that we had been promised melted away, and all the elites in media, tech, and public health celebrated. 

We’ve come a very long way from those confident days of 1989 through 1992, when aspiring intellectuals like me cheered the seeming death of tyranny abroad. Confident in our belief that humankind had a marvelous capacity for looking at evidence and learning from history, we cultivated a conviction that all was well and there was little else for us to do but tweak a few policies here and there. 

The first time I read Oswald Spengler’s 1916 book The Decline of the West, I was mortified by the vision of a world torn into trading blocs and warring tribes, as the Western ideals of the Enlightenment got trampled by various forms of passionate barbarism from around the world, where people had no interest in our much vaunted ideas about human rights and democracy. In fact, I dismissed the whole treatise as fascist propaganda. Now I’m asking myself the question: was Spengler advocating or merely predicting? It makes a huge difference. I’ve not revisited the book to find out. I almost don’t want to know. 

No, history did not end, and there should be a lesson for all of us in this. Never take a certain path for granted. Doing so feeds complacency and willful ignorance. Freedom and rights are rare, and perhaps they and not despotism are the great parentheses. It just so happened that they were themes that formed us in an unusual moment in time. 

The mistake we made was in believing that there is logic to history. There isn’t. There is only the march of good ideas and bad, and the forever competition between the two. And this is a central message of Mises’s 1954 overlooked masterwork Theory and History. Here he offers a devastating rebuttal to determinism of all sorts, whether from old liberals or Hegel or Fukuyama. 

“One of the fundamental conditions of man’s existence and action is the fact that he does not know what will happen in the future,” wrote Mises. “The exponent of a philosophy of history, arrogating to himself the omniscience of God, claims that an inner voice has revealed to him knowledge of things to come.”

So what does determine the historical narrative? Mises’s view is both idealistic and realistic. 

“History deals with human action, that is, the actions performed by individuals and groups of individuals. It describes the conditions under which people lived and the way they reacted to these conditions. Its subject are human judgments of value and the ends men aimed at guided by these judgments, the means men resorted to in order to attain the ends sought, and the outcome of their actions. History deals with man’s conscious reaction to the state of his environment, both the natural environment and the social environment as determined by the actions of preceding generations as well as by those of his contemporaries.”

“There is for history nothing beyond people’s ideas and the ends they were aiming at motivated by these ideas. If the historian refers to the meaning of a fact, he always refers either to the interpretation acting men gave to the situation in which they had to live and to act, and to the outcome of their ensuing actions, or to the interpretation which other people gave to the result of these actions. The final causes to which history refers are always the ends individuals and groups of individuals are aiming at. History does not recognize in the course of events any other meaning and sense than those attributed to them by acting men, judging from the point of view of their own human concerns.”

As students of Hillsdale College, you have chosen a path that is deeply embedded in the world of ideas. You take them seriously. You spend countless hours studying them. Over the course of your life, you will refine and develop, and change your mind according to the exigencies of time, place, and the unfolding narrative. The great challenge of our times is to understand the power of these ideas to shape your life and the world around you. 

As Mises concludes this work: “Up to now in the West none of the apostles of stabilization and petrification has succeeded in wiping out the individual’s innate disposition to think and to apply to all problems the yardstick of reason.”

So long as that remains true, there is always hope, even in the darkest times. Nor should we be tempted to believe that the best times are destined to define our lives and those of our children. Dark times can return. 

In 1922, Mises wrote the following words: 

“The great social discussion cannot proceed otherwise than by means of the thought, will, and action of individuals. Society lives and acts only in individuals; it is nothing more than a certain attitude on their part. Everyone carries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping towards destruction. Therefore everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result. Whether he chooses or not, every man is drawn into the great historical struggle, the decisive battle into which our epoch has plunged us.”

And even when there is no evidence to justify hope, remember Virgil’s dictum: Tu ne cede malis sed contra audentior ito.



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  • Jeffrey A. Tucker

    Jeffrey Tucker is Founder, Author, and President at Brownstone Institute. He is also Senior Economics Columnist for Epoch Times, author of 10 books, including Liberty or Lockdown, and thousands of articles in the scholarly and popular press. He speaks widely on topics of economics, technology, social philosophy, and culture.

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