Capitalism as the Only Way

Capitalism as the Only Way
Profile photo of Ludwig von Mises
[This article is excerpted from Liberalism, Chapter 2]
6. Capitalism: The Only Possible System of Social Organization

Every examination of the different conceivable possibilities of organizing society on the basis of the division of labor must always come to the same result: there is only the choice between communal ownership and private ownership of the means of production. All intermediate forms of social organization are unavailing and, in practice, must prove self-defeating. If one further realizes that socialism too is unworkable, then one cannot avoid acknowledging that capitalism is the only feasible system of social organization based on the division of labor. This result of theoretical investigation will not come as a surprise to the historian or the philosopher of history. If capitalism has succeeded in maintaining itself in spite of the enmity it has always encountered from both governments and the masses, if it has not been obliged to make way for other forms of social cooperation that have enjoyed to a much greater extent the sympathies of theoreticians and of practical men of affairs, this is to be attributed only to the fact that no other system of social organization is feasible.

Nor is there any further need to explain why it is impossible for us to return to the forms of social and economic organization characteristic of the Middle Ages. Over the whole area now inhabited by the modern nations of Europe the medieval economic system was able to support only a fraction of the number of people who now dwell in that region, and it placed much less in the way of material goods at the disposal of each individual for the provision of his needs than the capitalist form of production supplies men with today. A return to the Middle Ages is out of the question if one is not prepared to reduce the population to a tenth or a twentieth part of its present number and, even further, to oblige every individual to be satisfied with a modicum so small as to be beyond the imagination of modern man.

All the writers who represent the return to the Middle Ages, or, as they put it, to the “new” Middle Ages, as the only social ideal worth striving for reproach the capitalist era above all for its materialistic attitude and mentality. Yet they themselves are much more deeply committed to materialistic views than they believe. For it is nothing, but the crassest materialism to think, as many of these writers do, that after reverting to the forms of political and economic organization characteristic of the Middle Ages, society could still retain all the technological improvements in production created by capitalism and thus preserve the high degree of productivity of human labor that it has attained in the capitalist era. The productivity of the capitalist mode of production is the outcome of the capitalist mentality and of the capitalist approach to man and to the satisfaction of man’s wants; it is a result of modern technology only in so far as the development of technology must, of necessity, follow from the capitalist mentality. There is scarcely anything so absurd as the fundamental principle of Marx’s materialist interpretation of history: “The hand mill made feudal society; the steam mill, capitalist society.” It was precisely capitalist society that was needed to create the necessary conditions for the original conception of the steam mill to be developed and put into effect. It was capitalism that created the technology, and not the other way round. But no less absurd is the notion that the technological and material appurtenances of our economy could be preserved even if the intellectual foundations on which they are based were destroyed. Economic activity can no longer be carried on rationally once the prevailing mentality has reverted to traditionalism and faith in authority. The entrepreneur, the catalytic agent, as it were, of the capitalist economy and, concomitantly, also of modern technology, is inconceivable in an environment in which everyone is intent solely on the contemplative life.

If one characterizes as unfeasible every system other than that based on private ownership of the means of production, it follows necessarily that private property must be maintained as the basis of social cooperation and association and that every attempt to abolish it must be vigorously combated. It is for this reason that liberalism defends the institution of private property against every attempt to destroy it. When, therefore, people call the liberals apologists for private property, they are completely justified, for the Greek word from which “apologist” is derived means the same as “defender.” Of course, it would be better to avoid using the foreign word and to be content to express oneself in plain English. For to many people the expressions “apology” and “apologist” convey the connotation that what is being, defended is unjust.

Much more important, however, than the rejection of any pejorative suggestion that may be involved in the use of these expressions is the observation that the institution of private property requires no defense, justification, support, or explanation. The continued existence of society depends upon private property, and since men have need of society, they must hold fast to the institution of private property to avoid injuring their own interests as well as the interests of everyone else. For society can continue to exist only on the foundation of private property. Whoever champions the latter champions by the same token the preservation of the social bond that unites mankind, the preservation of culture and civilization. He is an apologist and defender of society, culture, and civilization, and because he desires them as ends, he must also desire and defend the one means that leads to them, namely, private property.

To advocate private ownership of the means of production is by no means to maintain that the capitalist social system, based on private property, is perfect. There is no such thing as earthly perfection. Even in the capitalist system something or other, many things, or even everything, may not be exactly to the liking of this or that individual. But it is the only possible social system. One may undertake to modify one or another of its features as long as in doing so one does not affect the essence and foundation of the whole social order, viz., private property. But by and large we must reconcile ourselves to this system because there simply cannot be any other.

In Nature too, much may exist that we do not like. But we cannot change the essential character of natural events. If, for example, someone thinks?and there are some who have maintained as much?that the way in which man ingests his food, digests it, and incorporates it into his body is disgusting, one cannot argue the point with him. One must say to him: There is only this way or starvation. There is no third way. The same is true of property: either-or?either private ownership of the means of production, or hunger and misery for everyone.

The opponents of liberalism are wont to call its economic doctrine “optimistic.” They intend this epithet either as a reproach or as a derisive characterization of the liberal way of thinking.

If by calling the liberal doctrine “optimistic” one means that liberalism considers the capitalist world as the best of all worlds, then this is nothing but pure nonsense. For an ideology based, like that of liberalism, entirely on scientific grounds, such questions as whether the capitalist system is good or bad, whether or not a better one is conceivable, and whether it ought to be rejected on certain philosophic or metaphysical grounds are entirely irrelevant. Liberalism is derived from the pure sciences of economics and sociology, which make no value judgments within their own spheres and say nothing about what ought to be or about what is good and what is bad, but, on the contrary, only ascertain what is and how it comes to be. When these sciences show us that of all the conceivable alternative ways of organizing society only one, viz., the system based on private ownership of the means of production, is capable of being realized, because all other conceivable systems of social organization are unworkable, there is absolutely nothing in this that can justify the designation “optimistic.” That capitalism is practicable and workable is a conclusion that has nothing to do with optimism.

To be sure, the opponents of liberalism are of the opinion that this society is very bad. As far as this assertion contains a value judgment, it is naturally not open to any discussion that intends to go beyond highly subjective and therefore unscientific opinions. As far, however, as it is founded on an incorrect understanding of what takes place within the capitalist system, economics and sociology can rectify it. This too is not optimism. Entirely aside from everything else, even the discovery of a great many deficiencies in the capitalist system would not have the slightest significance for the problems of social policy as long as it has not been shown, not that a different social system would be better, but that it would be capable of being realized at all. But this has not been done. Science has succeeded in showing that every system of social organization that could be conceived as a substitute for the capitalist system is self-contradictory and unavailing, so that it could not bring about the results aimed at by its proponents.

How little one is justified in speaking in this connection of “optimism” and “pessimism” and how much the characterization of liberalism as “optimistic” aims at surrounding it with an unfavorable aura by bringing in extrascientific, emotional considerations is best shown by the fact that one can, with as much justice, call those people “optimists” who are convinced that the construction of a socialist or of an interventionist commonwealth would be practicable.

Most of the writers who concern themselves with economic questions never miss an opportunity to heap senseless and childish abuse on the capitalist system and to praise in enthusiastic terms either socialism or interventionism, or even agrarian socialism and syndicalism, as excellent institutions. On the other hand, there have been a few writers who, even if in much milder terms, have sung the praises of the capitalist system. One may, if one wishes, call these writers “optimists.” But if one does so, then one would be a thousand times more justified in calling the antiliberal writers “hyperoptimists” of socialism, interventionism, agrarian socialism, and syndicalism. The fact that this does not happen, but that, instead, only liberal writers like Bastiat are called “optimists,” shows clearly that in these cases what we are dealing with is not an attempt at a truly scientific classification, but nothing more than a partisan caricature.

What liberalism maintains is, we repeat, by no means that capitalism is good when considered from some particular point of view. What it says is simply that for the attainment of the ends that men have in mind only the capitalist system is suitable and that every attempt to realize a socialist, interventionist, agrarian socialist, or syndicalist society must necessarily prove unsuccessful. Neurotics who could not bear this truth have called economics a dismal science. But economics and sociology are no more dismal because they show us the world as it really is than the other sciences are?mechanics, for instance, because it teaches the impracticability of perpetual motion, or biology because it teaches us the mortality of all living things.

Profile photo of Ludwig von Mises

Ludwig von Mises was one of the most notable economists and social philosophers of the twentieth century. In the course of a long and highly productive life, developed an integrated, deduct­ive science of economics based on the fundamental axiom that in­dividual human beings act purposively to achieve desired goals. Even though his economic analysis itself was "value-free" — in the sense of being irrelevant to values held by economists — Mises concluded that the only viable economic policy for the human race was a policy of unrestricted laissez-faire, of free markets and the unhampered exercise of the right of private property, with government strictly limited to the defense of person and property within its territorial area.

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