Markets And Freedom

“The arts and crafts of the good old days had catered almost exclusively to the wants of the well-to-do. But the factories produced cheap goods for the many. All the early factories turned out was designed to serve the masses, the strata that worked in the factories. They served them either by supplying them directly or indirectly by exporting and thus providing for them foreign food and raw materials. This principle of marketing was the signature of early capitalism as it is of present-day capitalism. The employees themselves are the customers consuming the much greater part of all goods produced. They are the sovereign customers who are “always right.” Their buying or abstention from buying determines what has to be produced, in what quantity, and of what quality. In buying what suits them best they make some enterprises profit and expand and make other enterprises lose money and shrink. Thereby they are continually shifting control of the factors of production into the hands of those businessmen who are most successful in filling their wants. Under capitalism private property of the factors of production is a social function. The entrepreneurs, and land owners are mandataries, as it were, of the consumers, and their mandate is revocable. In order to be rich, it is not sufficient to have once saved and accumulated capital. It is necessary to invest it again and again in those lines in which it best fills the wants of the consumers. The market process is a daily repeated plebiscite, and it ejects inevitably from the ranks of the profitable people those who do not employ their property according to the orders given by the public. But business, the target of fanatical hatred of the part of all contemporary governments and self-styled intellectuals, acquires and preserves bigness only because it works for the masses. The plants that cater to the luxuries of the few never attain big size. the shortcoming of the nineteenth-century historians and politicians was that they failed to realize that the workers were the main consumers of the products of the industry. In their view, the wage earner was a man toiling for the sole benefit of a parasitic leisure class. They laboured under the delusion that the factories had impaired the lot of the manual workers. If they had paid any attention to statistics they would easily have discovered the fallaciousness of their opinion. Infant mortality dropped, the average length of life was prolonged, the population multiplied, and the average common man enjoyed amenities of which even the well-to-do of earlier ages did not dream.

However this unprecedented enrichment of the masses were merely a byproduct of the Industrial Revolution. Its main achievement was the transfer of economic supremacy from the owners of land to the totality of the population. The common man was no longer a drudge who had to be satisfied with the crumbs that fell from the tables of the rich. The three pariah castes which were characteristic of the pre-capitalistic ages- the slaves, the serfs, and those people whom patristic and scholastic authors as well as British legislation from the sixteenth to the nineteenth centuries referred to as the poor–disappeared. Their scions  became, in this new setting of business, not only free workers, but also customers. This radical change was reflected in the emphasis laid by business on markets. What business needs first of all is markets. This was the watch-word of capitalistic enterprise. Markets, that means patrons, buyers, consumers.There is under capitalism one way to wealth: to serve the consumers better and cheaper than other people do.

Within the shop and factory the owner –or in the corporations, the representative of the shareholders, the president– is the boss. But this mastership is merely apparent and conditional. It is subject to the supremacy of the consumers. The consumer is the king, is the real boss, and the manufacturer is done for if he does not outstrip his competitors in best serving consumers.

It was this great economic transformation that changed the face of the world.”

Above is excerpted from the book Liberty & Property by Ludwig von Mises. This is a thin, but one of the greatest books on economics of Freedom. Amazon describes the book as under:

“In 1956, the Mont Pelerin Society was entering a difficult period in which its intellectual lights were drifting away from liberalism of the old school. Ludwig von Mises used his speech that year to explain why this was a terrible trend. He didn’t rebuke anyone. What he did was back away from the events of the day to provide a sweeping reconstruction of economic history from the ancient world to the present. He provided a model of how to think outside one’s own generation to understand the really big issues and the moral and practical urgency of embracing total freedom. The result is an essay for the ages. It is profound, visionary, and compelling beyond belief. Would that every undergraduate, or even citizen, read this piece. In here, Mises describes the revolutionary meaning of capitalism in human history, and how it was responsible for the most spectacular increases in the standard of living of the common man ever. It was mass production that lead people to live longer, healthier, and happier lives. Contemporary reports from the event in which he delivered this paper suggest that the people there were uninterested in Mises’s point of view, but this is much to their shame. For what he left us with remains one of the most dazzling presentations of the case for economic liberty ever written. It is the perfect combination of high intelligence, vast historical understanding, and moral passion.”

To buy the book, go here.