FOREWORD TO THE LIBERTY FUND EDITION

      Ludwig von Mises, eminent economist, was the leading spokesman for the Austrian School of economics throughout half of the twentieth century. Born in pre–World War I Austria-Hungary, he spent most of his working life in Vienna, teaching at the University of Vienna and advising the Austrian government on economic affairs. He came to the United States in 1940 as a refugee and, at age 59, began a new career writing, lecturing, and teaching in the English language. He was a visiting professor at the New York University Graduate School of Business Administration for twenty-four years. In the course of his long life he made major contributions to man’s understanding of economic theory, money, free markets, business cycles, interventionism, socialism, and the role of government.

      Published in 1944, during World War II, Omnipotent Government was Mises’s first book written and published after he arrived in the United States. Several chapters in this book were written by Mises in German between 1938 and 1940, when he was living and teaching in Geneva, Switzerland, and were published later in German as In Namen des Staates (Stuttgart: Bonn Aktuell, 1978). However, Mises wrote Omnipotent Government for an American audience and greatly expanded the book beyond the early German-language manuscript.

      The tone of this book reflects a serious Mises, the analytical scientific theoretician we know from his other works. Mises provides in economic terms an explanation of the international conflicts that caused both world wars. Free government at home and peaceful collaboration abroad are impossible when economies and ideas are restricted. Free trade and the freedom of ideas create the only possibility for true liberty. Ideas determine how men act, and history is composed of the actions of men. Furthermore, he holds that ideas cannot be changed by the force of weapons, bayonets, or wars. In the chapter entitled “Nazism as a World Problem,” Mises calls on the Allies to “smash Nazism,” to “fight desperately until the Nazi power is completely broken” (p. 264). By calling on the Allies to “smash Nazism,” he meant that Nazi ideas must be stopped. The minds of the German people must be changed.

      Readers of this book should keep in mind that Mises uses “liberal” and “progressive” to refer to liberalism in the classical sense—the philosophy of liberty, free markets, limited government, democracy, and parliamentarianism. And Mises refers throughout to the World War II coalition of Allies, who fought the Axis Powers (Germany, Italy, and Japan), as the “United Nations,” the term they chose for themselves in 1942.

      Although written more than a half century ago, Mises’s main theme still stands. Ideas determine history. Etatism, i.e., government interference with the economy, leads to conflicts and wars. The last, best hope for peace is liberalism. And the only hope for liberalism depends on changing the minds of the people. “Etatism is the occupational disease of rulers, warriors, and civil servants. Governments become liberal only when forced to by the citizens” (p. 69).

      Bettina Bien Greaves

      February 2007

PREFACE

      In dealing with the problems of social and economic policies, the social sciences consider only one question: whether the measures suggested are really suited to bringing about the effects sought by their authors, or whether they result in a state of affairs which—from the viewpoint of their supporters—is even more undesirable than the previous state which it was intended to alter. The economist does not substitute his own judgment about the desirability of ultimate ends for that of his fellow citizens. He merely asks whether the ends sought by nations, governments, political parties, and pressure groups can indeed be attained by the methods actually chosen for their realization.

      It is, to be sure, a thankless task. Most people are intolerant of any criticism of their social and economic tenets. They do not understand that the objections raised refer only to unsuitable methods and do not dispute the ultimate ends of their efforts. They are not prepared to admit the possibility that they might attain their ends more easily by following the economists’ advice than by disregarding it. They call an enemy of their nation, race, or group anyone who ventures to criticize their cherished policies.

      This stubborn dogmatism is pernicious and one of the root causes of the present state of world affairs. An economist who asserts that minimum wage rates are not the appropriate means of raising the wage earners’ standard of living is neither a “labor baiter” nor an enemy of the workers. On the contrary, in suggesting more suitable methods for the improvement of the wage earners’ material well-being, he contributes as much as he can to a genuine promotion of their prosperity.

      To point out the advantages which everybody derives from the working of capitalism is not tantamount to defending the vested interests of the capitalists. An economist who forty or fifty years ago advocated the preservation of the system of private property and free enterprise did not fight for the selfish class interests of the then rich. He wanted a free hand left to those unknown among his penniless contemporaries who had the ingenuity to develop all those new industries which today render the life of the common man more pleasant. Many pioneers of these industrial changes, it is true, became rich. But they acquired their wealth by supplying the public with motor cars, airplanes, radio sets, refrigerators, moving and talking pictures, and a variety of less spectacular but no less useful innovations. These new products were certainly not an achievement of offices and bureaucrats. Not a single technical improvement can be credited to the Soviets. The best that the Russians have achieved was to copy some of the improvements of the capitalists whom they continue to disparage. Mankind has not reached the stage of ultimate technological perfection. There is ample room for further progress and for further improvement of the standards of living. The creative and inventive spirit subsists notwithstanding all assertions to the contrary. But it flourishes only where there is economic freedom.

      Neither is an economist who demonstrates that a nation (let us call it Thule) hurts its own essential interests in its conduct of foreign-trade policies and in its dealing with domestic minority groups a foe of Thule and its people.

      It is futile to call the critics of inappropriate policies names and to cast suspicion upon their motives. That might silence the voice of truth, but it cannot render inappropriate policies appropriate.

      The advocates of totalitarian control call the attitudes of their opponents negativism. They pretend that while they themselves are demanding the improvement of unsatisfactory conditions, the others are intent upon letting the evils endure. This is to judge all social questions from the viewpoint of narrow-minded bureaucrats. Only to bureaucrats can the idea occur that establishing new offices, promulgating new decrees, and increasing the number of government employees alone can be described as positive and beneficial measures, whereas everything else is passivity and quietism.

      The program of economic freedom is not negativistic. It aims positively at the establishment and preservation of the system of market economy based on private ownership of the means of production and free enterprise. It aims at free competition and at the sovereignty of the consumers. As the logical outcome of these demands the true liberals are opposed to all endeavors to substitute government control for the operation of an unhampered market economy. Laissez faire, laissez passer does not mean: let the evils last. On the contrary, it means: do not interfere with the operation of the market because such interference must necessarily restrict output and make people poorer. It means furthermore: do not abolish or cripple the capitalist system which, in spite of all obstacles put in its way by governments and politicians, has raised the standard of living of the masses in