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In the Age of Enlightenment, in the years in which the North Americans
founded their independence, and a few years later, when the Spanish and
Portuguese colonies were transformed into independent nations, the prevailing
mood in Western civilization was optimistic. At that time all philosophers and
statesmen were fully convinced that we were living at the beginning of a new
age of prosperity, progress, and freedom. In those days people expected that
the new political institutions—the constitutional representative
governments established in the free nations of Europe and America—would
work in a very beneficial way, and that economic freedom would continuously
improve the material conditions of mankind. We know very well that some of
these expectations were too optimistic. It is certainly true that we have
experienced, in the nineteenth and twentieth centuries, an unprecedented
improvement in economic conditions, making it possible for a much larger
population to live at a much higher standard of living. But we also know that
many of the hopes of the eighteenth-century philosophers have been badly
shattered—hopes that there would not be any more wars and that revolutions
would become unnecessary. These expectations were not realized. During the
nineteenth century, there was a period when wars decreased in both number and
severity. But the twentieth century brought a resurgence of the warlike spirit,
and we can fairly well say that we may not yet be at the end of the trials
through which mankind will have to go.
I. The constitutional system that began at the end of the eighteenth and the
beginning of the nineteenth century has disappointed mankind. Most
people—also most authors—who have dealt with this problem seem to
think there has been no connection between the economic and the political side
of the problem. Thus, they tend to deal at great length with the decay of
parliamentarianism—government by the representatives of the people—as
if this phenomenon were completely independent of the economic situation and of
the economic ideas that determine the activities of people. But such an
independence does not exist. Man is not a being that, on the one hand, has an
economic side and, on the other hand, a political side, with no connection
between the two. In fact, what is called the decay of freedom, of
constitutional government and representative institutions, is the consequence
of the radical change in economic and political ideas. The political events are
the inevitable consequence of the change in economic policies. The ideas that
guided the statesmen, philosophers, and lawyers who, in the eighteenth century
and in the early nineteenth century, developed the fundamentals of the new
political system started from the assumption that, within a nation, all honest
citizens have the same ultimate goal. This ultimate goal, to which all decent
men should be dedicated, is the welfare of the whole nation, and also the
welfare of other nations—these moral and political leaders being fully
convinced that a free nation is not interested in conquest. They conceived of
party strife as only natural, that it was perfectly normal for there to be
differences of opinion concerning the best way to conduct the affairs of state.
Those people who held similar ideas about a problem cooperated, and this
cooperation was called a party. But a party structure was not permanent. It did
not depend on the position of the individuals within the whole social
structure. It could change if people learned that their original position was
based on erroneous assumptions, on erroneous ideas. From this point of view,
many regarded the discussions in the election campaigns and later in the
legislative assemblies as an important political factor. The speeches of
members of a legislature were not considered to be merely pronouncements
telling the world what a political party wanted. They were regarded as attempts
to convince opposing groups that the speaker’s own ideas were more
correct, more beneficial to the common weal, than those which they had heard
before. Political speeches, editorials in newspapers, pamphlets, and books were
written in order to persuade. There was little reason to believe that one could
not convince the majority that one’s own position was absolutely correct
if one’s ideas were sound. It was from this point of view that the
constitutional rules were written in the legislative bodies of the early
nineteenth century. But this implied that the government would not interfere
with the economic conditions of the market. It implied that all citizens had
only one political aim: the welfare of the whole country and of the whole
nation. And it is precisely this social and economic philosophy that
interventionism has replaced. Interventionism has spawned a very different
philosophy.
II. Under interventionist ideas, it is the duty of the government to support,
to subsidize, to give privileges to special groups. The idea of the
eighteenth-century statesmen was that the legislators had special ideas about
the common good. But what we have today, what we see today in the reality of
political life, practically without any exceptions, in all the countries of the
world where there is not simply communist dictatorship, is a situation where
there are no longer real political parties in the old classical sense, but
merely pressure groups. A pressure group is a group of people who want to
attain for themselves a special privilege at the expense of the rest of the
nation. This privilege may consist in a tariff on competing imports, it may
consist in a subsidy, it may consist in laws that prevent other people from
competing with the members of the pressure group. At any rate, it gives to the
members of the pressure group a special position. It gives them something which
is denied or ought to be denied—according to the ideas of the pressure
group—to other groups. In the United States, the two-party system of the
old days is seemingly still preserved. But this is only a camouflage of the
real situation. In fact, the political life of the United States—as well
as the political life of all other countries—is determined by the struggle
and aspirations of pressure groups. In the United States there is still a
Republican party and a Democratic party, but in each of these parties there are
pressure group representatives. These pressure group representatives are more
interested in cooperation with representatives of the same pressure group in
the opposing party than with the efforts of fellow members in their own party.
To give you an example, if you talk to people in the United States who really
know the business of Congress, they will tell you: “This man, this member
of Congress, represents the interests of the silver groups.” Or they will
tell you another man represents the wheat growers.
Of course each of these pressure groups is necessarily a minority. In a system
based on the division of labor, every special group that aims at privileges has
to be a minority. And minorities never have the chance to attain success if
they do not cooperate with other similar minorities, similar pressure groups.
In the legislative assemblies, they try to bring about a coalition between
various pressure groups, so that they might become the majority. But, after a
time, this coalition may disintegrate, because there are problems on which it
is impossible to reach agreement with other pressure groups, and new pressure
group coalitions are formed. That is what happened in France in 1871, a
situation which historians deemed “the decay of the Third Republic.”
It was not a decay of the Third Republic; it was simply an exemplification of
the fact that the pressure group system is not a system that can be
successfully applied to the government of a big nation. You have, in the
legislatures, representatives of wheat, of meat, of silver, and of oil, but
first of all, of the various unions. Only one thing is not represented in the
legislature: the nation as a whole. There are only a few who take the side of
the nation as a whole. And all problems, even those of foreign policy, are seen
from the point of view of the special pressure group interests. In the United
States, some of the less-populated states are interested in the price of
silver. But not everybody in these states is interested in it. Nevertheless,
the United States, for many decades, has spent a considerable sum of money, at
the expense of the taxpayers, in order to buy silver above its market price.
For another example, in the United States only a small proportion of the
population is employed in agriculture; the remainder of the population is made
up of consumers—but not producers—of agricultural products. The
United States, nevertheless, has a policy of spending billions and billions in
order to keep the prices of agricultural products above the potential market
price.
One cannot say that this is a policy in favor of a small minority, because
these agricultural interests are not uniform. The dairy farmer is not
interested in a high price for cereals; on the contrary, he would prefer a
lower price for this product. A chicken farmer wants a lower price for chicken
feed. There are many incompatible special interests within this group. And yet,
clever diplomacy in congressional politics makes it possible for small minority
groups to get privileges at the expense of the majority. One situation,
especially interesting in the United States, concerns sugar. Perhaps only one
out of 500 Americans is interested in a higher price for sugar. Probably 499
out of 500 want a lower price for sugar. Nevertheless, the policy of the United
States is committed, by tariffs and other special measures, to a higher price
for sugar. This policy is not only detrimental to the interests of those 499
who are consumers of sugar, it also creates a very severe problem of foreign
policy for the United States. The aim of foreign policy is cooperation with all
other American republics, some of which are interested in selling sugar to the
United States. They would like to sell a greater quantity of it. This
illustrates how pressure group interests may determine even the foreign policy
of a nation. For years, people throughout the world have been writing about
democracy—about popular, representative government. They have been
complaining about its inadequacies, but the democracy they criticize is only
that democracy under which interventionism is the governing policy of the
country. Today one might hear people say: “In the early nineteenth
century, in the legislatures of France, England, the United States, and other
nations, there were speeches about the great problems of mankind. They fought
against tyranny, for freedom, for cooperation with all other free nations. But
now we are more practical in the legislature!”
Of course we are more practical; people today do not talk about freedom: they
talk about a higher price for peanuts. If this is practical, then of course the
legislatures have changed considerably, but not improved. These political
changes, brought about by interventionism, have considerably weakened the power
of nations and of representatives to resist the aspirations of dictators and
the operations of tyrants. The legislative representatives whose only concern
is to satisfy the voters who want, for instance, a high price for sugar, milk,
and butter, and a low price for wheat (subsidized by the government) can
represent the people only in a very weak way; they can never represent all
their constituents. The voters who are in favor of such privileges do not
realize that there are also opponents who want the opposite thing and who
prevent their representatives from achieving full success. This system leads
also to a constant increase of public expenditures, on the one hand, and makes
it more difficult, on the other, to levy taxes. These pressure group
representatives want many special privileges for their pressure groups, but
they do not want to burden their supporters with a too-heavy tax load.
III. It was not the idea of the eighteenth-century founders of modern
constitutional government that a legislator should represent, not the whole
nation, but only the special interests of the district in which he was elected;
that was one of the consequences of interventionism. The original idea was that
every member of the legislature should represent the whole nation. He was
elected in a special district only because there he was known and elected by
people who had confidence in him.
But it was not intended that he go into government in order to procure
something special for his constituency, that he ask for a new school or a new
hospital or a new lunatic asylum—thereby causing a considerable rise in
government expenditures within his district. Pressure group politics explains
why it is almost impossible for all governments to stop inflation. As soon as
the elected officials try to restrict expenditures, to limit spending, those
who support special interests, who derive advantages from special items in the
budget, come and declare that this particular project cannot be undertaken, or
that that one must be done. Dictatorship, of course, is no solution to the
problems of economics, just as it is not the answer to the problems of freedom.
A dictator may start out by making promises of every sort but, being a
dictator, he will not keep his promises. He will, instead, suppress free speech
immediately, so that the newspapers and the legislative speech-makers will not
be able to point out—days, months, or years afterwards—that he said
something different on the first day of his dictatorship than he did later on.
The terrible dictatorship which such a big country as Germany had to live
through in the recent past comes to mind, as we look upon the decline of
freedom in so many countries today. As a result, people speak now about the
decay of freedom and about the decline of our civilization. People say that
every civilization must finally fall into ruin and disintegrate. There are
eminent supporters of this idea. One was a German teacher, Spengler, and
another one, much better known, was the English historian Toynbee. They tell us
that our civilization is now old. Spengler compared civilizations to plants
which grow and grow, but whose life finally comes to an end. The same, he says,
is true for civilizations. The metaphorical likening of a civilization to a
plant is completely arbitrary.
First of all, it is within the history of mankind very difficult to distinguish
between different, independent civilizations. Civilizations are not
independent; they are interdependent, they constantly influence each other. One
cannot speak of the decline of a particular civilization, therefore, in the
same way that one can speak of the death of a particular plant.
IV. But even if you refute the doctrines of Spengler and Toynbee, a very
popular comparison still remains: the comparison of decaying civilizations. It
is certainly true that in the second century A.D., the Roman Empire nurtured a
very flourishing civilization, that in those parts of Europe, Asia, and Africa
in which the Roman Empire ruled, there was a very high civilization. There was
also a very high economic civilization, based on a certain degree of division
of labor. Although it appears quite primitive when compared with our conditions
today, it certainly was remarkable. It reached the highest degree of the
division of labor ever attained before modern capitalism. It is no less true
that this civilization disintegrated, especially in the third century. This
disintegration within the Roman Empire made it impossible for the Romans to
resist aggression from without. Although the aggression was no worse than that
which the Romans had resisted again and again in the preceding centuries, they
could withstand it no longer after what had taken place within the Roman
Empire.
What had taken place? What was the problem? What was it that caused the
disintegration of an empire which, in every regard, had attained the highest
civilization ever achieved before the eighteenth century? The truth is that
what destroyed this ancient civilization was something similar, almost
identical to the dangers that threaten our civilization today: on the one hand
it was interventionism, and on the other hand, inflation. The interventionism
of the Roman Empire consisted in the fact that the Roman Empire, following the
preceding Greek policy, did not abstain from price control. This price control
was mild, practically without any consequences, because for centuries it did
not try to reduce prices below the market level. But when inflation began in
the third century, the poor Romans did not yet have our technical means for
inflation. They could not print money; they had to debase the coinage, and this
was a much inferior system of inflation compared to the present system,
which—through the use of the modern printing press—can so easily
destroy the value of money. But it was efficient enough, and it brought about
the same result as price control, for the prices which the authorities
tolerated were now below the potential price to which inflation had brought the
prices of the various commodities. The result, of course, was that the supply
of foodstuffs in the cities declined. The people in the cities were forced to
go back to the country and to return to agricultural life. The Romans never
realized what was happening. They did not understand it. They had not developed
the mental tools to interpret the problems of the division of labor and the
consequences of inflation upon market prices. That this currency inflation,
currency debasement, was bad, this they knew of course very well.
Consequently, the emperors made laws against this movement. There were laws
preventing the city dweller from moving to the country, but such laws were
ineffective. As the people did not have anything to eat in the city, as they
were starving, no law could keep them from leaving the city and going back into
agriculture. The city dweller could no longer work in the processing industries
of the cities as an artisan. And, with the loss of the markets in the cities,
no one could buy anything there anymore. Thus we see that, from the third
century on, the cities of the Roman Empire were declining and that the division
of labor became less intensive than it had been before. Finally, the medieval
system of the self-sufficient household, of the “villa,” as it was
called in later laws, emerged. Therefore, if people compare our conditions with
those of the Roman Empire and say: “We will go the same way,” they
have some reasons for saying so. They can find some facts which are similar.
But there are also enormous differences. These differences are not in the
political structure which prevailed in the second part of the third century.
Then, on the average of every three years, an emperor was assassinated, and the
man who killed him or had caused his death became his successor. After three
years, on the average, the same happened to the new emperor. When Diocletian,
in the year 284, became emperor, he tried for some time to oppose the decay,
but without success.
V. There are enormous differences between present-day conditions and those that
prevailed in Rome, in that the measures that caused the disintegration of the
Roman Empire were not premeditated. They were not, I would say, the result of
reprehensible formalized doctrines. In contrast, however, the interventionist
ideas, the socialist ideas, the inflationist ideas of our time, have been
concocted and formalized by writers and professors. And they are taught at
colleges and universities. You may say: “Today’s situation is much
worse.” I will answer: “No, it is not worse.” It is better, in
my opinion, because ideas can be defeated by other ideas. Nobody doubted, in
the age of the Roman emperors, that the government had the right and that it
was a good policy to determine maximum prices. Nobody disputed this. But now
that we have schools and professors and books that recommend this, we know very
well that this is a problem for discussion. All these bad ideas from which we
suffer today, which have made our policies so harmful, were developed by
academic theorists. A famous Spanish author 1 spoke about “the revolt of
the masses.” We have to be very cautious in using this term, because this
revolt was not made by the masses: it was made by the intellectuals. And those
intellectuals who developed these doctrines were not men from the masses. The
Marxian doctrine pretends that it is only the proletarians that have the good
ideas and that only the proletarian mind created socialism, but all the
socialist authors, without exception, were bourgeois in the sense in which the
socialists use this term.
Karl Marx was not a man from the proletariat. He was the son of a lawyer. He
did not have to work to go to the university. He studied at the university in
the same way as do the sons of well-to-do people today. Later, and for the rest
of his life, he was supported by his friend Friedrich Engels, who—being a
manufacturer—was the worst type of “bourgeois,” according to
socialist ideas. In the language of Marxism, he was an exploiter. Everything
that happens in the social world in our time is the result of ideas. Good
things and bad things. What is needed is to fight bad ideas. We must fight all
that we dislike in public life. We must substitute better ideas for wrong
ideas. We must refute the doctrines that promote union violence. We must oppose
the confiscation of property, the control of prices, inflation, and all those
evils from which we suffer. Ideas and only ideas can light the darkness. These
ideas must be brought to the public in such a way that they persuade people. We
must convince them that these ideas are the right ideas and not the wrong ones.
The great age of the nineteenth century, the great achievements of capitalism,
were the result of the ideas of the classical economists, of Adam Smith and
David Ricardo, of [Claude-Frédéric] Bastiat, and others. What we
need is nothing else than to substitute better ideas for bad ideas. This, I
hope and am confident, will be done by the rising generation. Our civilization
is not doomed, as Spengler and Toynbee tell us. Our civilization will not be
conquered by the spirit of Moscow. Our civilization will and must survive. And
it will survive through better ideas than those which now govern most of the
world today, and these better ideas will be developed by the rising generation.
I consider it as a very good sign that, while fifty years ago, practically
nobody in the world had the courage to say anything in favor of a free economy,
we have now, at least in some of the advanced countries of the world,
institutions that are centers for the propagation of a free economy, such as,
for example, the “Centro” in your country which invited me to come to
Buenos Aires to say a few words in this great city.
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