Europe had not experienced a prolonged and massively destructive war since the defeat of Napoleon one hundred years earlier. To be sure, there had been some wars and civil wars, especially in central and eastern Europe during the nineteenth century. But they were relatively short and, compared to what were experienced in the twentieth century, rather limited in their destruction of life and property. “Rules of warfare” recognized the rights of neutrals and noncombatants in Europe, though not in the colonial areas of Asia and Africa.

But in the last decades of the nineteenth century, beneath the appearance of a classical-liberal utopia of freedom, peace, and prosperity, new ideological forces had been winning the hearts and minds of a growing number of people. These forces were socialism, nationalism, and imperialism—in a word, philosophical, political, and economic collectivism.

The air was filled with calls to arms in the name of national greatness and glory, talk of a higher social good more important than the “mere” interests of individuals, and the notion that peoples discovered their “destinies” not in peaceful industry, but on battlefields amid the thrust of bayonets.

Four years after the war began, by the autumn of 1918, more than 20 million Frenchmen, Englishmen, Germans, Austrians, Hungarians Italians, Russians, Greeks, Turks, Armenians, Serbs, Poles, Romanians, Bulgarians, and many others were dead. European industry and agriculture were ruined, and a good part of the accumulated wealth of a century had been consumed.

Jim Powell, in his book Wilson’s War, tells the story of how this came about, what the consequences were, and the role Woodrow Wilson played in making this entire catastrophe worse than it might have been.

While not ignoring Imperial German militarism, aggressiveness, and bellicosity in the decades before World War I, Powell emphasizes the various nationalist ambitions and secret alliances among all the major belligerents that kept the war from being simply “Germany’s fault.” Battlefield incompetence by generals and political arrogance and stubbornness by national leaders on both sides dragged the war on and on in the face of mounting casualties and growing economic hardship unknown in living memory.

At first, Powell explains, Wilson—a vain and often vengeful man—claimed the role of impartial arbiter to bring the war to a negotiated conclusion. But soon both he and his circle of cabinet members and advisers decided that victory should belong to Great Britain and France. Finally, after winning reelection in 1916 on the slogan “He kept us out of war,” Wilson had Congress declare war on Germany in April 1917, although neither Germany nor any of its allies had attacked or threatened the United States. At the peace conference that followed the November 1918 armistice, Wilson’s idealistic rhetoric was drowned out by the imperial and territorial ambitions of the British and French that left Germany and the former Austro-Hungarian and Russian Empires in a shambles.

Powell persuasively suggests that if America had stayed out of the war the belligerents, exhausted and with no hope of a clear battlefield victory, might have accepted the need to end the conflict without any winner. Had that happened, there might well have been no Bolshevik revolution in Russia and therefore no deadly 75-year “experiment” in Soviet communism under Lenin, Stalin, and those who followed them. If Germany had not been humiliated, stripped of 13 percent of its territory, burdened with “war guilt” and heavy reparations, and left in political and economic chaos, a demagogue like Hitler, with his Nazi ideology of racism and blood lust for revenge and conquest through a new war, might not have come to power.

Had America not taken the path of foreign intervention in 1917, it might not have set the precedent of assuming the mantle of global policeman throughout the remainder of the twentieth century and now into the 21st century. In the world Woodrow Wilson did so much to create, the United States suffered not only hundreds of thousands of casualties in two global wars, but also over a hundred thousand additional deaths in the Korean and Vietnam wars.

Nor should it be forgotten that this U.S. role has cost Americans dearly in other ways: hundreds of billions of dollars in tax money; the growth and increased intrusiveness of the federal government; and their placement in harm’s way throughout the world. This has been a heavy price to pay for Woodrow Wilson’s war ambitions.

When the masterful and detailed study of twentieth-century communist regimes, The Black Book of Communism, was first published in France in the 1990s, for instance, one French leftist tried to rationalize the human cost of socialist tyranny by arguing: “Agreed, both Nazis and communists killed. But while the Nazis killed from hatred of humanity, the communists killed from love.”

Nazis, it seems, had bad intentions and used bad methods. Communists, on the other hand, had good intentions–they loved their fellow man and wanted to create a utopia for him–they just made an unfortunate error in selecting less-than-desirable means. Oh, well, back to the drawing board!

Richard Overy’s recent work, The Dictators: Hitler’s Germany, Stalin’s Russia, is the most detailed and methodical study, so far, of what the two totalitarian regimes shared in common and in what ways they differed. Indeed, there are few aspects of political, economic, social, and cultural life in Nazi Germany and the Soviet Union that do not receive meticulous analysis from the author.

It is in the concluding chapter of the book that one discovers what Overy considers the most fundamental premises of the two regimes. Both the Nazis and the communists, he argues, were guided by the spirit of scientism: the misplaced application of the methods of the natural sciences to the arena of human life. Marxian socialists were convinced that they could deduce the “laws” of historical development that necessitated the inevitable triumph of “the workers” over their capitalist exploiters. In addition, they believed that once the revolution had been orchestrated, the “dictatorship of the proletariat” had the ability to remake man and transform society into a collectivist paradise.

The Nazis also believed in the power of science, but in their case it was a “racial science” that defined different human groups and their hierarchical relationships to each other. Through application of eugenics, a purified “master race” could be socially engineered, with “the Germans” being the superior breed meant to rule the world.

Communism and Nazism, therefore, were variations on the same collectivist theme, in which the individual and his identity as a person were determined by either his “class” or “race.” Both were paranoid in their outlook on life. Nazis saw racial threats everywhere, in the form of inferior groups that could defile Germany’s blood purity. Communists saw class enemies surrounding and threatening the existence of the Soviet workers’ state. Vigilance at the borders and secret-police terror internally were essential for the regimes to preserve either the master race or the proletarian paradise.

Hitler and Stalin were convinced of their unique and irreplaceable roles in making history. Hitler believed that just as there is a master race among humanity, so there is a master leader within the master race, who through intuition, insight, and will power knows what is needed to assure the rightful place and destiny of the German people. Fate had called him to that task. Following in Lenin’s footsteps, Stalin believed that socialist victory was impossible without professional revolutionaries who served as the vanguard of the proletariat. Among the vanguard there was the necessity for one determined leader to head the movement, with “history” having assigned Stalin this momentous duty.

For Hitler and Stalin, their ruthlessness and disregard of human life were essential to fulfill their role as leaders of the Nazi and communist causes. What was, perhaps, most dangerous in both men was that they believed in what they were doing to bring their versions of utopia into existence. Hitler and Stalin were “true believers.”

The power of “scientific” social engineering was present in everything that they commanded for the reconstruction of German and Soviet society. Stalin introduced five-year central plans in 1929; Hitler imposed four-year central plans in 1936. Nothing was outside the orbit of control and command, from the most mundane consumer goods to the redesigning of whole cities and the wider countryside. Art, literature, music, sports, and leisure were all used to mold the tens of millions of subjects under their power into the desired shape for a beautiful tomorrow.

As Overy carefully recounts, there was little that was random in the Nazi and Soviet use of terror and imprisonment. Those, too, were planned with a purpose in mind. They targeted the designated “enemies of the people” to isolate and destroy all who opposed “the brave new world” in the making. But those arrested and sent off to concentration camps in Nazi Germany and the Soviet Union were also viewed as forced labor for building the Nazi and Soviet societies. The victims were all part of the same central plan, whether for work or extermination.

Overy also highlights the degree of popularity that both the Nazis and communists achieved in German and Soviet society. The secret police were tiny fractions of those populations. With little prodding people willingly spied and informed on their friends, relatives, and neighbors. Both regimes promised and seemed to deliver a new ideal of “equality” in which devotion and hard work in the service of “the cause” assured that even the lowly could find status, position, and reward, now that the old class distinctions were swept away. The state monopoly over news and information succeeded in persuading millions of the truth and justice of the regimes under which they lived. The “masses” in both countries passively or actively worked for the system, with little resistance or opposition.

The Nazi and Soviet regimes have passed away, their cruelties fading in memory. Yet one wonders–if such ideologies could once before mesmerize so many, could they not do so again? Under the right circumstance, could not the appeal of utopia drag humanity once more into a vortex of destruction?

Take the standard account of the Great Depression and the New Deal. In many ways the New Deal itself was one result of another historical myth: the widely received account of what had happened to the German economy in the first half of the twentieth century, particularly during World War I and the Third Reich. That myth probably did more harm than almost any other in that century.

In the case of the Third Reich, the widely held perception even now is that whatever else may be said about his regime, Hitler managed to bring about a dramatic revival of the German economy. After 1933 Hitler and his finance minister Hjalmar Schacht stabilized the economy and managed to solve the huge unemployment crisis that had destroyed the Weimar Republic’s legitimacy. This was partly due to Schacht’s imaginative monetary policy and partly to massive public works programs, such as the autobahnen. There was a sharp move away from free markets to a much more interventionist economy that worked better than what had gone before. During World War II this economy was able to achieve great success in terms of war production, notably under Hitler’s armaments minister, Albert Speer.

Obviously there is some truth in this account, or else it would not be credible. There was indeed a sharp move in the direction of a more state-controlled economy. In fact few people realize just how interventionist—even socialist—the policies of the Nazi state were (although the full name of the party should give some indication of this). However, the picture overall is mostly wrong. Adam Tooze conclusively debunked this account in his masterful work, The Wages of Destruction: The Making and Breaking of the Nazi Economy. Tooze shows that the public works programs had little effect on unemployment and wasted resources; that the 1930s saw constant financial and foreign-exchange crises for the Reich; that by 1939 the condition of the German economy was desperate and that this was in fact a major factor in Hitler’s increasingly aggressive policy; that the supposed success of Speer simply did not happen; and that overall the regime was so crippled by its economic incompetence that it is nothing short of a miracle that it had as much military success as it did.

Fortunately, while Nazi Germany’s economic policy and its supposed success had some influence in the 1930s (not least among some New Dealers), it had none after 1945. However, an earlier episode in German economic history had much greater consequences and influence—both entirely malign. When war broke out in July 1914 the German government and High Command planned and hoped for a short and decisive war. Things of course did not work out that way and by the fall of 1916 it was clear that this strategy had failed, while the British blockade grew ever more stringent. In the face of impending defeat, the German Empire’s government was effectively taken over by the military in the person of the army’s quartermaster general (and effective chief of staff) Erich Ludendorf. His thinking and policy were set out in his 1935 work and apologia, Der Totale Krieg (The Total War).

Ludendorf argued, first, that all the human and physical resources of a nation made up its military capacity, or Wehrkraft. To ensure victory and survival in the zero-sum game of nations, all these resources had to be controlled and directed to a single purpose. Who was to do this? The answer for him was simple: Since the goal was victory in conflict, it had to be the military. What this meant in practice was a form of planned economy in which all economic activity was directed by the general staff through a series of planning boards and detailed regulations and targets.

The main point was to remove the profit motive—Ludendorf never tired of ranting against unpatriotic profit seekers and selfish individualists—and replace it with structured command relations. In one sense the aim was to transform the entire economy and society into an army, with the typical command-and-control structure of the modern military. In another sense the goal was to turn German industry into one giant corporation by a process of planning and cartelization. One important aspect of the regime created by Ludendorf, just as for Nazi Germany, was a close alliance between the military, the political and bureaucratic classes, and the managerial elite of large corporations, or at least some of them.

Ludendorf’s policy was a disaster. Production actually declined or was wasted, and the financial methods led to severe inflation, which of course became even worse after the war. The policy also led to increasing resistance from the population, as his ever-more-furious outbursts revealed. Eventually the increasingly desperate situation led to the gamble of the huge spring offensive of 1918. Its failure meant the war was definitively lost.

However, the policy of Germany after 1916 was not seen at the time or for long after as the enormous mistake that it was, even from the High Command’s point of view. Instead it was thought to have been a huge success. Strangely this view became even more widespread after 1918—not least among the victorious powers. A myth took hold: that the organization of the economy under Ludendorf was a model for other nations in peacetime.

This belief had disastrous consequences. It certainly did in Germany itself since it provided much of the basis for the economic policies of the Third Reich, as well as providing yet another justification for slave labor and the systematic plunder of subject populations. In milder form this received view had a major impact in both Great Britain and the United States during the interwar years.

However, its most significant effect was felt in the east. When the Bolsheviks came to power in 1917 they had no real idea of what socialism would look like. Their initial effort, so-called war communism, proved utterly catastrophic and was reversed with the introduction of the New Economic Policy in 1921. What followed was a huge debate as to what kind of model to adopt. The “center” argument that eventually triumphed under Stalin was to adopt the supposedly successful model of the World War I German war economy. So the Soviet economy was in many ways the product of a mistaken idea about Germany’s war economy and how it had worked.

Misunderstandings of what is actually happening in economic affairs do not only have immediate consequences. When they shape the politicians’ and public’s view of history, their effects can be immense, sometimes comically, but more often tragically.

Churchill, however, never waited idly for the world to construct his legend. From the 1890s onward, he strove to put himself in the places, especially the wars, where he would be best situated to advance his fame and realize his ambitions, and as he made his way through a series of adventures, he promptly wrote articles and books about each of them, thus shaping in large degree how others would view his actions. Moreover, he was an excellent writer; his articles and books sold very well, and in 1953 he was awarded the Nobel Prize in Literature. His sharp wit and dazzling rhetoric enhanced his reputation.

In Churchill, Hitler, and “The Unnecessary War,” Patrick J. Buchanan seeks to demolish the Churchill myth, along with several related ones, which he does with surprising success. I say “surprising,” not because the myth itself was ever unassailable—excellent historians, including Ralph Raico, long ago pounded Churchill’s feet of clay into dust—but because Buchanan is known primarily as an ideological polemicist. Yet in this book he presents respectably balanced and well-documented arguments for his theses. If he is not himself a professional historian, he has absorbed the works of scores of well-reputed historians, and he carefully assesses a number of counterarguments against his position. Although Buchanan presents no previously unreported facts, he offers abundant evidence expressed in clear, forceful prose. All in all, he makes a persuasive case.

Buchanan correctly views the two world wars as “two phases of a Thirty Years’ War.” He argues that both phases were unnecessary and that Great Britain “turned both European wars into world wars.”

For World War I, he maintains: “Had Britain not declared war on Germany in 1914, Canada, Australia, South Africa, New Zealand, and India would not have followed the Mother Country in. Nor would Britain’s ally Japan. Nor would Italy, which London lured in with secret bribes of territory from the Habsburg and Ottoman empires. Nor would America have gone to war had Britain stayed out. Germany would have been victorious, perhaps in months. There would have been no Lenin, no Stalin, no Versailles, no Hitler, no Holocaust.”

For World War II, he maintains: “Had Britain not given a war guarantee to Poland in March 1939, then declared war on September 3, bringing in South Africa, Canada, Australia, India, New Zealand, and the United States, a German-Polish war might never have become a six-year war in which fifty million would perish.”

He argues that the decisive event in the run-up to World War II was not the infamous 1938 appeasement at Munich—because the Germans had good reason to reabsorb the Sudetenland from Czechoslovakia—but the 1939 guarantee, which was foolish of the British to make and foolish of the Poles to rely on. It was foolish because Britain had no means of defending Poland. When Hitler attacked in 1939, after Polish leaders refused to return Danzig to Germany, the British could only watch helplessly.

Buchanan begins his narrative at the end of the nineteenth century and ends it at the conclusion of World War II. Churchill occupies center stage in this extended drama because he “was the most bellicose champion of British entry into the European war of 1914 and the German-Polish war of 1939.” Along the way, Buchanan adduces evidence that Kaiser Wilhelm II, a grandson of Queen Victoria and nephew of King Edward VII, did not seek war with Great Britain (in 1910, he “marched in Edward’s funeral—in the uniform of a British field marshal”). Likewise, 30 years later, Hitler wished to avoid war with Great Britain, whose people and empire he admired: “His dream was of an alliance with the British Empire, not its ruin.”

The Lebensraum he sought lay to the east of Germany, not to the west. The Germans did not seek to “conquer the world,” despite frequent claims to that effect, and in any event, they lacked the means to achieve such a conquest.

No short review can depict the breadth, the depth, and the many fascinating details of Buchanan’s book. Read it and see for yourself. It may well challenge your most cherished beliefs about Winston Churchill and the world-shattering Thirty Years’ War of 1914–45.

by Robert Gellately

Alfred A. Knopf • 2007 • 696 pages • $35

Reviewed by Richard M. Ebeling

In his recent book, Lenin, Stalin, and Hitler, Florida State University historian Robert Gellately tries to explain the nature and the power of the Nazi and Soviet regimes in the first half of the twentieth century and how they were able to bring about so much death and destruction.

Gellately argues that Hitler’s was a “dictatorship by consent.” After the failure of his putsch in Munich in November 1923, Hitler decided that the only successful means to power was to use the democratic institutions of the Weimar Republic to end Germany’s decadent bourgeois “Jewish” democracy. He appealed to and came to embody all the desires and frustrations of the German people. When Hitler spoke, he mesmerized huge crowds who heard him express their humiliation by the Treaty of Versailles, which had branded Germany as solely guilty for World War I and then burdened them with reparations to the victorious allies. He captured their yearning for restored national greatness and power and their fears of unemployment and poverty during the Great Depression.

Millions of Germans saw Hitler not as the imposer of a “new order” but the provider and guarantor of a bright and beautiful future after he came to power in January 1933. In the 1930s, before the outbreak of the war in 1939, Nazi thugs or state executioners killed hundreds of Germans and sent thousands more to concentration camps. The remainder of the population either passively or actively supported the new Germany. The Nazi meat grinder was set in motion to kill millions of “non-Aryans” after the war began—Jews, Gypsies, Poles, Russians, and “impure” Germans who were either mentally or physically handicapped or “irredeemable” enemies of the state.

Gellately explains that there was nothing similarly consensual about the establishment and maintenance of the Soviet regime in the Old Russian Empire. Yes, there were many revolutionary idealists who willingly fought and killed to create a socialist utopia. Also, propaganda and indoctrination turned millions of Soviet subjects into supporters of the system. And there were countless Soviet sympathizers and fellow-travelers around the world who served as apologists and agents for the regime.

But Lenin and Stalin approached their task with a totally different mindset from Hitler’s. Being good Marxists, they believed that while the end of capitalism was “inevitable,” the masses were the victim of a bourgeois “false consciousness” imposed by the capitalist ruling class. The workers needed to be led and “reeducated” into being new socialist men. This required a revolutionary vanguard that would be ruthless in destroying the old order and creating the socialist utopia.

Gellately emphasizes that the Soviet nightmare was not the result of a “bad” Stalin who perverted the intentions of a “good” Lenin, which is how many historians have attempted to explain the Soviet experiment gone wrong. Gellately documents that the ideas of domestic terrorism, public executions, torture, and enslavement in what became the Gulag labor camp system were all Lenin’s. He ordered the crushing of all opponents, including those on the “left,” immediately ended any freedom of speech and the press, and nationalized the economy. He only stepped back from the totalitarian state in 1922 with his “New Economic Policy,” which reprivatized small and medium-size industry and trade and allowed a limited market in agriculture, when he realized that he was faced with so many rebellions among peasants and workers that his government might be overthrown.

Stalin was the great intriguer and manipulator within the Communist Party after Lenin’s death in 1924 and came to full power after 1928. But then he merely reinstituted Lenin’s radical vision with the collectivization of the land, the destruction of small private enterprise, and the imposition of five-year plans in 1929. Stalin also imposed with a vengeance the totalitarian terror state Lenin had first implemented after the revolution of November 1917.

Gellately emphasizes aspects of Stalin’s policies during World War II that have usually been ignored or only given limited attention. As the German army approached in October 1941, anti-Soviet graffiti began appearing on buildings, with workers grumbling that soon KGB agents would be getting what they had been meting out to them. Stalin ordered any citizens who fled the city without written orders to be stopped and if necessary shot—and dozens of men and women were killed for fleeing.

Stalin also ordered a scorched-earth policy as the German army advanced. But rather than just mandating the destruction of all facilities or supplies that the Germans might use after local residents had left, the order was to destroy everything and not allow the population to retreat. That policy left millions of people with nothing in the face of German occupation.

Furthermore, as the Soviets reoccupied territory in 1943 and 1944, Stalin commanded that close to a million people of various ethnic groups who were suspected of collaborating with the Germans be rounded up and sent to Siberia or Central Asia. Thousands died in transit or in exile. Most of these groups were not allowed to return home for more than ten years, until after Stalin’s death.

Unfortunately, the collectivist tragedy of the twentieth century did not end with Hitler’s and Stalin’s deaths. It has continued, now, into the twenty-first century.

Richard Ebeling is the president of FEE.

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Depression, War, and Cold War

by Robert Higgs

Independent Institute/Oxford University Press • 2006 • 219 pages • $35

Reviewed by Burton Folsom, Jr.

In Depression, War, and Cold War, Robert Higgs has written a brief but superb account of the Great Depression, the economic effects of World War II, and America’s proclivity for unnecessary military spending in the postwar period.

This iconoclastic book is a coherent collection of ten essays on the political economy of the federal government’s welfare and warfare policies spanning the crucial decades of the twentieth century. When Higgs’s essays are put side by side, they send a persuasive message that military spending, whatever its international political effects, did not rescue the country from the Great Depression, did not increase standards of living during World War II, and did not provide weapons at competitive prices after the war. Quite to the contrary, Higgs strongly advances the thesis that the federal government only managed to delay economic recovery and to squander wealth with its economic and military meddling.

Higgs writes that “the New Deal prolonged the Great Depression by creating an extraordinarily high degree of regime uncertainty in the minds of investors.” That is to say, investors would have jump-started our stalled economy in the 1930s had it not been for the uncertainty caused by the policy spasms emanating from Washington. And in an attack on a durable myth, Higgs concludes that the war “itself did not get the economy out of the Depression,” because real private investment and real personal consumption sharply declined during the war. Stock market prices, for example, in 1944 were still below those of 1939 in real dollars.

What the war did do, Higgs argues, was to improve “economic expectations” that business would be allowed to invest freely after the war and that jobs would then be available. In part those higher expectations among businessmen reflected their relief that President Franklin Roosevelt had shifted from his attacks on property rights during the 1930s to his all-too-eager willingness to let big business monopolize war contracts.

Meanwhile, the making of weapons created inefficiencies during and after the war. Higgs describes the rise of “cost-plus contracts,” which allowed large corporations to win risk-free contracts that guaranteed profits regardless of efficiency. Such contracts were rare before 1940, but then became common. Senator Harry Truman, chairman of the Senate’s Special Committee to Investigate the National Defense Program, wrote, “Huge fixed fees were offered by the government in much the same way that Santa Claus passes out gifts at a church Christmas party.”

After the war, vote-hungry congressmen worked with “pork hawks” to win military contracts—whether the country needed them or not. In several essays Higgs attacks the notion that the high military spending in the Cold War era was undertaken just as a defense against the Soviet threat.

To cite one instance, politicians in Pennsylvania persuaded the Department of Defense to buy 300,000 tons of costly anthracite coal to ship to military bases in Europe. At one point, since most of the coal was not needed, it was stockpiled locally—20 feet deep and covering 45 acres. As Rep. Dan Flood of Wilkes-Barre said, “I use all of these opportunities, advantages, seniority, and all this stuff for the purpose of helping whatever is left of the goddamn anthracite coal industry.”

Higgs has other painful stories. In the 1970s and 1980s, for example, Congress continued to fund the A-7 subsonic attack plane even though it had been surpassed by the F/A-18 and F-16 planes. The A-7 plane, however, was produced by a Dallas company and the delegation insisted that funding to their Dallas friends be perpetuated.

Part of what makes Higgs’s book so valuable is that he tackles crucial economics topics that most economists and historians either neglect or do not understand.

Almost all historians, for example, take it for granted that federal spending in World War II lifted the submerged American economy out of the Depression tank. Few analyze that conclusion; they assert it as fact. And once such an alleged fact is established, the next step is to look at other ways the federal government, by various kinds of subsidies and tinkering, can improve economic development. Higgs, however, by persuasively challenging the effects of military spending, calls into question the ability of federal spending to promote real growth in the U.S. economy.

In challenging the “military-industrial-congressional complex,” Higgs urges readers to focus not just on any benefits accruing to Dallas for making obsolescent planes or to Wilkes-Barre for stockpiling coal, but to focus on the flow of dollars out of the hands of hard-working taxpayers all over the country—all of whom could have invested or spent their money more wisely and beneficially.

Burton Folsom is the Charles F. Kline Professor of History and Management at Hillsdale College. He is the author of The Myth of the Robber Barons, now in its fifth edition.

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Cornerstone of Liberty: Property Rights in 21st-Century America

by Timothy Sandefur

Cato Institute • 2006 • 126 pages • $19.95 hardcover; $11.95 paperback

Reviewed by George C. Leef

Property rights are under constant and often successful attack in the United States.In 2007 the idea that an individual is entitled to own property and do with it as he pleases is fast becoming a relic of our quaint, long-forgotten past. One reason for that unhappy circumstance is that the general population has a dwindling understanding of the importance of property rights. The enemies of private property, who maintain that its use should be controlled for “the public good,” have made great inroads into the only ultimate defense that institution has—the belief in its essential rightness.

Timothy Sandefur, an attorney with the Pacific Legal Foundation who has fought in the trenches against the anti-property onslaught, sees the danger we face. To combat it he has written this excellent book. The Cornerstone of Liberty is a primer covering four crucial topics: why private property is important and must be defended; the place of property rights under our Constitution; the weakened state of property rights today; and the author’s views on the course of action we need to follow if property rights are to be restored. This is an important project, and Sandefur is to be congratulated for his good work.

His chapter “Why Property Rights Are Important” gets the book off to a blazing start. If readers don’t understand the moral and economic reasons for insisting that the rights of individuals to acquire, use, and sell property as they choose must be protected, they certainly won’t get much out of the book. Sandefur wants to see that they do. “Private property,” he writes, “is one of humanity’s great discoveries, like fire, DNA, or the scientific method. Like fire, property has the ability to release a kind of unseen power from nature. . . .” That is why societies that have defended property rights have rising standards of living and both social and technological progress. Conversely, the easier it becomes for people to deprive owners of their property, the less energy people put into productive work.

When societies regard private property with hostility, far from reaching some communitarian utopia, they not only get poorer but their people also lose the ability to live the lives they choose. Unless individuals can say, “This is mine and no one may take it,” they’re left at the mercy of those who are in control. Sandefur reminds us that people with the power to take property are usually anything but merciful—and not just in dictatorships, but also in “free” countries like the United States. Collectivists say that private ownership is based on greed, but what truly unleashes greed is the ability of some to take things from others.

To brilliant effect Sandefur quotes Frederick Douglass, who, after escaping from slavery, utterly delighted in his ability to earn money. Nothing contrasted so completely with the life he had known in slavery as to be able to call something his own.

In his next chapter, Sandefur demonstrates that the Constitution was meant to offer property owners a high degree of protection against the depredations of government. He quotes James Madison, who said that the proper role of government is the protection of property since “that alone is a just government which impartially secures to every man whatever is his own.” Unfortunately, legislators and judges have not been faithful to Madison’s vision. Sandefur recounts the dismal history of the erosion of constitutional protection for property rights.

Next, Sandefur gives us the really bad news—the current state of the law. It is no exaggeration to say that every American has only a tenuous hold on his property (real estate and personal property) because the law is sympathetic to eminent domain and other forms of takings, such as civil asset forfeiture. The author’s analysis of the recent Kelo decision on eminent domain is exemplary.

Can anything be done, or is the United States going to continue drifting away from property-rights protections? Sandefur is not a pessimist. He is a fighter and argues that it’s possible that the American people could come to take property rights as seriously as they did two centuries ago. “Only learning, understanding, and teaching others about the principles of property rights and their importance . . . can solve the problems posed by eminent domain abuse, land-use regulations, and civil asset forfeiture laws,” he writes.

Americans have been dozing while special-interest groups and their political lapdogs have done their dirty work in undermining private property, but there is hope that they are awakening. The outcry over the Kelo decision indicates that many Americans, for all the socialistic rhetoric they have heard, still believe that it’s fundamentally wrong for government to take away private property.

George Leef is book review editor of The Freeman.

* * *

Elements of Justice

by David Schmidtz

Cambridge University Press • 2006 • 243 pages • $70.00 hardcover; $24.99 paperback

Reviewed by Aeon J. Skoble

There’s a style of philosophical writing that is obscure, jargon-laden, and essentially inaccessible to nonspecialists. Happily, one of the most talented contemporary philosophers, David Schmidtz, is not a practitioner of that style. His newest book, Elements of Justice, is the kind of philosophy book that treats a serious topic in a thorough and well-organized way, while remaining entirely accessible to the intelligent lay reader. Schmidtz’s topic is justice, something everyone ought to take an interest in, and his rigorous yet readable treatment of it will be of value for academics and non-academics alike.

Some say that justice is a matter of giving each person his due. But that isn’t as helpful as it seems. It simply pushes the question back: how do we figure out what people are due? Schmidtz, who teaches philosophy at the University of Arizona, argues that while justice is primarily about what people are due, we cannot figure this out in an abstract way. Rather, we must look to the practical context in which the people are operating. Schmidtz breaks this down further, examining principles of desert, reciprocity, equality, and need. He sees those principles as the components of justice, and argues that if we can come to a better understanding of how they work, we will thereby come to a better understanding of what justice is.

“Different principles apply in different contexts,” Schmidtz tells us. That simple yet frequently overlooked point is the key to parsing the sorts of conflicts that typically emerge in discussions about justice. For instance, some believe that need is the overriding principle, while others regard equality as paramount. On Schmidtz’s view, this isn’t the best way to think about it. Neither of these component principles, he says, can be the entirety of justice, although in particular contexts one may predominate. For example, need might be the predominant principle in a child-parent context, determining what the children are due, whereas equality (in the sense of equality before the law) is what adult citizens are due. And even then, the context offers further refinements to our understanding.

Schmidtz makes an analogy between philosophical theories and maps: they’re abstractions, first of all, but can nevertheless be accurate. Qualities like detail and scope are means to an end, not ends in themselves. Maps are only useful in context. (A map of the earth won’t show you how to get to the train station in your town.) Similarly, a theory of justice can only apply its subsidiary principles in a context. Thus the way we talk about desert or reciprocity or need will depend on a consideration of that context. That is why, for instance, we might need to differentiate between a parent giving equal shares of his estate to his children and citizens in a republic being entitled to equal protection of the law, but not to equal shares of the total wealth in the society.

As he clarifies these principles and shows how justice depends on them (and on their being properly understood), Schmidtz defends several theses that speak to common myths and misconceptions. For example, he shows how liberalism isn’t about atomistic isolation, a frequent canard of the communitarian left. And he shows how pluralism does not entail moral relativism, a perennial concern on the right. He devotes separate chapters to close examination of two of the best-known modern philosophers, John Rawls and Robert Nozick—the former chiefly associated with the welfare state and the latter a proponent of the minimal state.

Readers of The Freeman will be particularly interested in Schmidtz’s arguments to the effect that the mere fact of income inequality does not necessitate forced redistribution by the state. He argues that the badness of poverty does not justify the disruption of a thriving economy. Rather, he maintains, to eliminate poverty we need a thriving economy coupled with a firm commitment to equality under law.

Of special note is the book’s structure. It is divided into six major parts: What Is Justice?; How to Deserve; How to Reciprocate; Equal Respect and Equal Shares; Meditations on Need; and The Right to Distribute. Each begins with an overview of a set of philosophical concerns, usually with a humorous anecdote to set the stage. The anecdotes are mostly little vignettes the humor of which derives from a misapplication of some ethical principle—for example, a judge issuing a ruling in which he lets someone off on a serious charge, on the grounds that he owes the person a favor: the virtue of reciprocity in action!

Within those parts are five or more chapters dealing with particular topics. For example, under “Equal Respect and Equal Shares,” Schmidtz examines the hot “equal pay for equal work” controversy. Each chapter opens with a thesis statement, followed by a careful elaboration and ending with a set of puzzles for further reflection. These “further reflection” opportunities are doubly valuable: the active participation they require not only involves the reader in philosophical practice, but also demonstrates that even when a satisfactory answer to a problem is reached, there may be further questions. By combining clear argumentation with the asking of probing questions, Schmidtz embodies philosophy at its best.

Aeon J. Skoble is an associate professor and chair of the philosophy department at Bridgewater State College in Massachusetts.

by Goetz Aly

Metropolitan Books • 2007 • 431 pages • $32.50

Reviewed by Richard M. Ebeling

In Hitler’s Beneficiaries, German historian Goetz Aly “focus[es] on the socialist aspect of National Socialism” so as to better understand “the Nazi regime as a kind of racist-totalitarian welfare state.”

Since the 1930s many historians on the left have tried to portray Nazism as an extreme right-wing system meant to preserve and serve the German capitalist order. The use of the word “socialist” in the full name of the Nazi movement—the National Socialist German Workers Party—has been interpreted as a ruse meant to manipulate and deceive the people of Germany.

Aly emphasizes that the ideology and practice of the Nazi regime were in fact deeply socialist. Within Germany, among the German people of “pure Aryan blood,” the ideal was an egalitarian social order in which every German would be freed from traditional class barriers so that he might have the opportunity to rise to any level of success in serving the fatherland. The welfare-state policies begun by Bismarck in late nineteenth-century imperial Germany were viewed by the Nazis as a prelude to a complete guarantee of a quality standard of living for all “real” Germans that would be paternalistically provided by the National Socialist state.

The problem was that the promises of the welfare state could not be fulfilled within Germany’s 1933 borders. If the German people were to have this material paradise on earth, someone would have to supply the manpower and the resources to provide the means for this massive redistribution of wealth.

Aly points out that before and during World War II, the German “capitalist class” was made to pay its “fair share” for the benefit of the rest of the German people. Taxes were proportionally far higher on the “rich” in Germany than the rest of the population. During the war the government established mandatory overtime pay in all industries and imposed wage increases to keep “the masses” loyal to the regime—all at the expense of German business. At the same time, German industry worked under government-commanded four-year plans from 1936 until the end of the war in 1945.

But it was only after the war started that the machine of redistributive plunder was really set into motion. Every country overrun by the German army not only had to pay the costs of the occupation, but also was systematically looted for the benefit of the German population as a whole.

Aly’s book is remarkable because, rare among histories of the period, it explains how the Germans used inflation to loot the occupied countries. After most of France was occupied in June 1940, German soldiers were issued scrip that by mandate had to be accepted by French businesses. Retailers willingly accepted the scrip because the Nazis also mandated French banks to redeem it in francs; the banks in turn could redeem it for francs it at the Bank of France. The only way for the French central bank to meet this obligation was to print more money. With some variation Germany did this in every country it conquered.

German servicemen stationed in occupied Europe were regularly given scrip bonuses at holiday times so they could buy up virtually anything and ship it to family and friends. Thus along with the soldiers, tens of millions of Germans back home benefited from the inflationary plunder of Europe.

On top of this the German government imposed taxes and surcharges on the governments in the occupied countries—their contribution to Germany’s establishment of the “new order” for the “benefit” of all the people of Europe. In many cases the redistributive tax burden was larger than the nation’s annual prewar budget.

Both within Germany and around the rest of Europe, the great “enemy” that the Nazis were determined to eliminate was the Jews. Before the war the regime had attempted to pressure German Jews to leave the country. After the war began the government was determined to expel all Jews in western and central Europe to “the East.” Finally, the “solution” to the “Jewish problem” was found in the concentration and death camps.

But beginning in 1941 and 1942 the expelling of Jews from Germany and the rest of occupied Europe was accelerated as part of the Nazi welfare state. When Britain began to bomb German cities, first thousands and then tens of thousands of Germans found themselves homeless, with all their belongings destroyed. Municipal governments, with the approval of the Nazi leadership in Berlin, began to confiscate the Jews’ houses and apartments, including the contents, to make room for racially pure Germans needing new places to live.

In every occupied country the Nazis initiated similar confiscatory policies with local accomplices with whom they shared looted Jewish property. (Only in Belgium and Denmark did large segments of the population and the bureaucracy resist participating in this plunder of the Jews.) The Nazis first nationalized Jewish property and then distributed it to those deemed worthy among the German or occupied populations.

Hundreds of trainloads of stolen Jewish property were either given away or sold at discounted prices in German cities, large and small, throughout the war. Aly estimates that because of this looted property and the goods sent back to Germany by soldiers, many, if not most, Germans enjoyed a more comfortable standard of living throughout most of the war than the civilian population in Great Britain.

What also fed a large part of this Nazi plunderland was the invasion of the Soviet Union in June 1941. In the East, Hitler wished to show none of the minimal “niceties” with which the people of western Europe were treated. The vast and rich lands of Russia and Ukraine were to become the economic Promised Land in the Nazi dreams of the future. Under the plan at least 20 million Russian peasants would be worked and starved to death in the countryside after a German victory to make room for a huge German resettlement that would provide the living room for the Aryan race. The cities of Moscow and Leningrad were to be razed, their populations left to die.

Besides the official plundering of the Soviet cities and countryside, there was a vast black market at work in the East that left those under German occupation with almost nothing.

The vast majority of German families continued to feast, even under the allied bombings, thanks to the locust-like seizure of anything and everything across occupied Europe. Aly estimates that during the five-and-a-half years of war, the Nazis plundered $2 trillion worth of property, goods, and wealth from the peoples of Europe—a large sum by any standard, but truly huge considering the much lower levels of output and income in Europe 70 years ago.

Of course, the German people finally paid dearly for their adventure into international welfare redistribution through war. When Germany finally surrendered in May 1945, millions of Germans had been killed in the conflict, all the major cities of the country were in ruins, capital accumulated over decades was destroyed, and Germany was occupied and divided by the victorious Allies for more than half a century. It was high price for pursuing the ideal of National Socialism.

* * *

The Big Ripoff: How Big Business and Big Government Steal Your Money

by Timothy P. Carney

Wiley • 2006 • 241 pages • $24.95

Reviewed by Sheldon Richman

Timothy Carney has written a refreshing book. There is no shortage of books critical of big business, but almost without exception their authors are hostile to free markets. Carney is an avowed fan of free markets and a critic of big business’s collusion with government—collusion that enables businessmen to gain profits they could never obtain under free, open, and unprivileged competition.

The Big Ripoff is a myth smasher. Leftists and rightists alike tend to think that business people favor laissez faire, which is well defined as the political-economic system that lacks any government-sponsored privilege. But it is a rare business person who wants the government out of the picture. Free competition is nerve-wracking. It respects no vested interests or historical market share. As Frank Sinatra sang, “You’re ridin’ high in April, shot down in May.” Those darn consumers are fickle. So business people (including agribusiness people) have lobbied for regulations, licensing, price floors, price ceilings, codes, inspection, tariffs, import quotas, subsidies, loan guarantees, taxes, tax exemptions, eminent domain, and more. It is easy to assume that no big company would want new taxes and regulations, until one realizes that those things burden smaller and yet-to-be-started companies more heavily. Government impositions are de facto subsidies and barriers to entry.

Big companies have had no trouble getting such things from Congress and the various state legislatures—because another myth is that government tends to be hostile to business. In a mercantile society such as the United States, business people are highly influential. Politicians see them as indispensable to economic stability, jobs for constituents, even labor peace, and hence want to keep them happy. Business has always had political clout in America, both nationally and locally. The period usually regarded as the most hostile to business, the Progressive Era, was nothing of the sort, as historian Gabriel Kolko documented in The Triumph of Conservatism. To his credit, Carney appreciates Kolko’s research and helps to dispose of the fairy tale that statism in the early twentieth century was the product of Marxism and other foreign left-wing imports. While “progressive” intellectuals saw opportunities for power and prestige in the rise of American-style corporatism, they were riding the coattails of the Morgans, Rockefellers, Carnegies, and others who turned to the state to tame unruly (read: competitive) markets. (This is not to overlook the relatively few true entrepreneurs described by Burton Folsom in The Myth of the Robber Barons.)

Things haven’t changed much since the Progressive Era. In our time business people are as influential as ever, perhaps more so. And the influence is rarely in the direction of more economic freedom. Carney documents the quest for corporate welfare (which, curiously, gets much less attention from the right wing than that other kind of welfare), regulation, taxes, and environmental—yes, environmental—controls.

Do you want to know why Phillip Morris joined the “war on tobacco,” why General Motors pushed for clean-air legislation, why Boeing supports the Export-Import Bank, why Archer Daniels Midland likes ethanol, and why the Chamber of Commerce often supports higher taxes? Do you think Enron was a creation of the market and supported general deregulation? Read Carney’s book to find out.

The Enron story is valuable because misunderstanding about that company has provided an abundance of ammunition against the deregulation of energy markets. “Most analysts use the term deregulation to describe the setting in which Enron thrived, deceived, and then collapsed. But in nearly every corner of the Enron tale, we can find the fingerprints of big government,” Carney writes. If Enron’s CEO, the late Ken Lay, was what a New York Times reporter called him—“an evangelical believ[er] in free markets”—then Britney Spears is up for Mother of the Year.

Would a free-marketeer have called for a government bailout when his company began to collapse? (Fortunately, Lay didn’t get it.) While running the company, would he have supported export subsidies, energy regulations and price controls that favored Enron’s interests, and the Kyoto Protocol limiting carbon emissions? Obviously not. So why did Lay do it? Because he had no principled objection to using government power—physical force—to advance his company’s fortunes (not to mention his own).

Carney’s reporting clarifies our understanding of political economy. Regulation and taxation are anti-competitive. Incumbent firms don’t like competition, so they like intervention. But competition is good for worker-consumers because their welfare is enhanced by unhampered bidding for their business and services. Thus they constitute the real natural constituency for the free-market movement.

* * *

Income and Wealth

by Alan Reynolds

Greenwood Press • 2006 • 223 pages • $55.00

Reviewed by George C. Leef

Writing in the Wall Street Journal shortly after the 2006 election, Jim Webb, the victorious U.S. Senate candidate in Virginia, argued that the American economy has become a rigid class system. The rich are getting richer while the poor are getting poorer. Top business executives used to earn about 20 times as much as average workers, but now they’re raking in more than 400 times as much, Webb complained. The United States, he said, was “literally a different country” from the one in which he grew up. Webb viewed his election and the Democratic takeover of Congress as proof that people want the government to do something about this horribly unfair situation.

Many other politicians and writers have repeated this economic indictment, which has political “traction” both with the envious poor and the guilt-ridden wealthy. As Alan Reynolds shows in Income and Wealth, however, the indictment should be summarily dismissed since it is based on misleading statistics and tendentious rhetoric. H. L. Mencken once wrote that politics is just about frightening people with “an endless series of hobgoblins” to keep them clamoring for politicians to protect them. After reading Income and Wealth, it’s clear that the campaign to convince Americans that we face disaster unless the government does something about “the income gap” is another of those hobgoblins.

The first point Reynolds, a senior fellow at the Cato Institute, makes is that the current frenzy over inequality has nothing to do with poverty. Back in the 1960s and 1970s, “liberals” worried about the poor and there was a national debate on how best to improve the lives of people at the bottom of the income scale. That changed in the early 1990s. “Starting around 1992,” Reynolds writes, “inequality began to be redefined in such a way that nearly all the attention shifted away from the troubles of the bottom quintile to the high incomes of the increasingly tiny number of people at the top.” (He doesn’t speculate on the reasons for that shift. My surmise is that the leftists knew they had gotten all the mileage they could out of the plight of the really poor—after all, the government had been running all sorts of antipoverty programs for decades without much success—so they decided to fashion a new “issue” out of the enormous wealth of a few.)

Creating this new issue called for resourcefulness to make people think that dark, momentous changes were occurring in the economy. There have always been some super-rich; the trick was to get people up in arms by suggesting that those people were profiting unconscionably at the expense of the disappearing middle class. Reynolds easily refutes that idea. The middle class isn’t disappearing, although quite a few people who used to earn “middle class” incomes now earn significantly more—scarcely a problem.

Furthermore, it’s not true that the earnings of middle-income workers have been “stagnant” since the 1970s. That illusion, Reynolds shows, is based largely on the fact that due to tax-law changes in 1986, increasing amounts of investment income common to middle-class people no longer show up in income-tax data—401(k) and college savings plans, for example. Other changes in tax law tend to have the opposite effect on the reported income of the wealthy. If instead of looking at income-tax data, you look at data on consumption spending, the whole “crisis” vanishes.

Another major component of the “income gap” mania is supposedly excessive compensation paid to business executives. Is it really the case that the average CEO now makes more than 400 times as much as the average worker? No. Reynolds handily demolishes the notion that greedy CEOs are robbing workers (or, more plausibly, stockholders) of money that should be theirs.

What’s really going on here is an elaborate cover for a host of interventionist policies desired by various special-interest groups. “Nobody who uses income distribution figures as an argument for adopting their pet government policies would advocate different policies even if they could be persuaded their statistics are wrong,” Reynolds observes. Those who are against free trade, for example, cite the “shrinking middle class” as an excuse for protectionism. For union advocates, the same myth serves to justify their desire for new pro-union laws.

Not only is there no “income gap” problem, but the remedies offered would be economically harmful. In his concluding chapter, Reynolds makes the case that laissez-faire policies to reduce the size and meddlesomeness of the government will continue the real trend in our economy: the rich get richer and the poor get richer, too. If, however, we adopt the policies of the egalitarians and interest groups, we actually will “improve” the income gap. Everyone would be poorer, but the wealthy would lose proportionally more.

Reynolds has given us an important and timely book, a refutation of the economic equivalent of the global-warming scare.

* * *

The Sarbanes-Oxley Debacle What We’ve Learned; How to Fix It

AEI Press • 2006 • 135 pages •
$25.00 paperback

The Joy of SOX: Why Sarbanes-Oxley and Service-Oriented Architecture May Be the Best Thing That Ever Happened to You

by Hugh Taylor

Wiley • 2006 • 283 pages • $50.00

Reviewed by Barbara Hunter

These two books cannot really be considered two analyses of the Sarbanes-Oxley Act, which was signed into law in 2002 following several high-profile corporate scandals. The first book examines the law, its effects on the conduct of publicly traded businesses, and its failure to accomplish its purported purposes of preventing fraud and restoring investor confidence. The second simply adopts the thesis that Sarbanes-Oxley is a beneficent and effective law and that all that is required is to learn the best methods for compliance.

The Sarbanes-Oxley Debacle raises an issue rarely so much as mentioned in the voluminous literature on this law: the return on investment resulting from time, money, and talent expended on behalf of the law’s many requirements. This is no small matter when considering a law whose annual direct compliance costs on business run into the billions.

The cost figures bandied about in the popular financial press ignore the manner in which the law now influences the minutiae of individual corporate decision-making when the shadow of bureaucratic enforcement hangs over every decision, from internal production methods to mergers and acquisitions. This must inevitably produce a significant opportunity cost that will, to some extent, deter risk-taking in business. Professors Butler and Ribstein make that point very clearly.

Another unique point in this book, and one that has been virtually ignored by other writers, is that no combination of laws and penalties can produce total protection from fraud at every possible level within a company. Thus shareholders may understandably accept the possibility of some level of fraud if, on the one hand, its influence on the company’s bottom line is considered insignificant and, on the other hand, the cost (in time and money) of ferreting out every such conceivable instance is exorbitant.

The book further notes that Sarbanes-Oxley circumvents and in effect nullifies existing state laws that may have been more effective than the new law, and federalizes yet another field that historically has been within the purview of the states.

For such a slim volume, The Sarbanes-Oxley Debacle manages to include a startling number of significant arguments relating to the deleterious effects of this ill-considered law.

A review of The Joy of SOX needs to be tempered by the fact that its author is an officer of one of the ever-growing number of companies dealing in computer programs devoted largely to compliance with the Sarbanes-Oxley Act. In light of this, it may not surprise the reader that Sarbanes-Oxley’s negatives, especially its compliance costs, are never mentioned. Even within this perspective, however, its exuberant embrace of the law occasionally borders on the absurd. The author goes so far as to dismiss those who contend that the costs of the law exceed its benefits as “whiners.”

Taylor assumes that Sarbanes-Oxley places everyone on the same compliance basis and thus is not a problem. Sadly, experience has demonstrated that the cost of compliance is far from equal; in fact, its burden on small companies, as a percent of sales, is far higher than on large companies. Regulation tilts the playing field.

On occasion, the author’s acceptance of the near-axiom that government regulation is beneficial and therefore desirable leads him to use examples that are badly at variance with the truth. In his introduction Taylor writes, “In the last century, American businesses resisted labor organizations and workplace entitlements, only to discover that modern labor practices and diversity programs created long-term loyalty among employees and helped build strong brands.” Many businesses, of course, have found just the opposite—that the effects of dictatorial federal labor regulation have been very harmful—and in any event it does not follow that Sarbanes-Oxley is beneficial just because some other federal laws allegedly are.

The structure of the book is a theoretical discussion by the department heads of an imaginary company that, on the one hand, must comply with Sarbanes-Oxley and, on the other hand, must be able to make quick decisions in order to meet customer needs and competitive pressures. The book’s pervasive themes are two: “agile compliance” and “compliant agility.” It soon becomes evident, however, that compliance comes first and the firm’s well-being comes second, as is the case with every regulatory compliance regime.

Those who expect any insight into the effects of Sarbanes-Oxley will find this volume a disappointment, and those who have read The Sarbanes-Oxley Debacle will laugh at the idea that this law could be “the best thing that ever happened”—unless you’re in the business of selling compliance software.

During World War II the United States took on the role of the “Arsenal of Democracy,” supplying its allies the wherewithal to battle Nazi Germany and Imperial Japan, as well as assuming global leadership in opposing those aggressive fascist regimes that threatened world peace. It is often forgotten, however, that in the 1930s many American and European commentators focused on the many similarities between Franklin Roosevelt’s New Deal and the planned economies in fascist Italy and Nazi Germany.

Historian Wolfgang Schivelbusch takes a fresh look at these similarities in Three New Deals. He is quick to point out that he is not saying that FDR’s New Deal was the same as the Nazi regime. Hitler rapidly established an absolute dictatorship that suppressed all political opposition. In America civil liberties and freedom of the press were never abridged by the Roosevelt administration, however much political and economic power was increasingly concentrated in Washington during the 1930s.

But nonetheless the methods of controlling the economy and influencing public opinion were closely parallel, as Schivelbusch shows. World War I had ushered in a new politicization of society and captured the spirit of many intellectuals and policy advocates in the 1920s and 1930s. Government architecture in Soviet Russia, Nazi Germany, fascist Italy, and FDR’s America were all bigger than life, creating an imagery of power and awe transcending the mundane efforts and achievements of private individuals.

What Schivelbusch brings out is the change in the role and conception of political leadership. Gone was the notion that those in political office were executors of constitutionally limited responsibilities. Now the “leader” spoke and led outside the ordinary restraints of the political process. Both Hitler and Roosevelt appealed to “the people” directly, with the claim that unusual circumstances required extraordinary authority. With his fireside chats FDR took advantage of a popular new technology, radio, to create the impression that he was addressing every American’s hopes and fears; the President thus became a member of every family.

In Germany radios were far less widely used. So Hitler took advantage of that other means of mass communication—giant rallies and ceremonies at which thousands could directly see and hear their Fuehrer. But even in the United States rallies and parades were used to arouse support for the New Deal recovery programs, especially the National Recovery Administration, which tried to impose the same type of fascist planning on business that Mussolini and soon Hitler established in their countries.

Grand government projects were all part of the projection of state power and authority. In Italy Mussolini cleared the Pontine Marshes outside Rome and designed model communities for resettlement of the unemployed. In Germany Hitler oversaw the construction of the autobahn system even though the number of privately owned cars was a fraction of that in the United States. In America the power of government was symbolized by the Tennessee Valley Authority, through which Washington changed the course of rivers, built massive dams, and electrified an entire region of the country. Of course in every one of those projects, the people whose lives were disrupted or uprooted counted for little compared to the task of remaking society according to the central plans of the “leaders.”

Military power was an essential imagery in the rhetoric. Hitler glorified uniformed legions in torch-lit parades. Roosevelt emphasized military imagery in his speeches, such as his 1933 inaugural address, in which he spoke of the Depression as if it were a foreign foe. If Americans did not voluntarily comply with his proposed recovery programs, he would not hesitate to use the full coercive powers of the state to win the “war” against unemployment. He spoke of the Blue Eagle, the symbol of the NRA, as a badge that all patriotic businesses should proudly display to prove they were doing their part and to distinguish them from “enemies” of recovery who refused to go along with the government’s plans.

American and European commentators in the 1930s also pointed out Hitler’s and Roosevelt’s centralization of power. Dictatorship was never imposed in the United States in the same way it was in Nazi Germany, but thoughtful writers wondered if such centralization did not run the risk of undermining the constitutional separation of powers. Unchecked power could easily extinguish freedom in the United States.

Finally, Schivelbusch reminds his readers of a book by John T. Flynn, As We Go Marching, that was published in 1944. Flynn had been a long-time critic of the New Deal. In the book he pointed out the many similarities among the three fascisms. Italian and German fascism were the “bad” kind. But the American brand was dangerously seen as the “good fascism,” Flynn warned. Wrapped in the stars and stripes and presented as a new dawn of American economic vitality and global leadership, complete with unrestrained presidential power, the American brand of fascism threatened to destroy all that the Founding Fathers had built for a country of liberty.

Regulation and planning at home, political and military adventures abroad, and greater power in the hands of the head of state meant a different type of America from what had existed in the past, Flynn feared. Six decades later those dangers seem in many ways even more real than in 1944. Wolfgang Schivelbusch has reminded us that the danger of concentrated political power was understood back in the 1930s. We should pay attention today.

Indeed, as Nobel laureate and Austrian economist  F. A. Hayek famously explained in The Road to Serfdom, the worst tend to rise to the top of all regimes—yet another reason to keep government small in the first place, as if we needed another reason. “The unscrupulous and uninhibited,” wrote Hayek, “are likely to be more successful” in any society in which government dominates life and the economy. That’s precisely the kind of circumstance that elevates power over persuasion, force over cooperation, arrogance over humility. 

So I take special note when I encounter instances of good people working around, in spite of, in opposition to, or simply without a helping hand from government of any kind. Some might say this betrays an unwarranted bias. But in today’s dominant culture as represented by media elites, university bon vivants, and public-school mandarins, it is not government that gets shortchanged. By their thinking, the capacity of government to meet our needs is virtually limitless. It’s private initiative that gets the shaft. It’s the nonpolitician that is deemed unreliably compassionate, incorrigibly greedy, or hopelessly unorganized. 

I offer here two stories of very good people I’ve met on opposite corners of the earth. If either story kindles anyone’s faith in what private initiative can accomplish, it’ll make my day as well as my point. 

A man named Nicholas Winton is the centerpiece of the first story. He was a young London stockbroker as war clouds gathered across Europe in 1938-39. A friend convinced him to forgo a Christmas vacation in Switzerland and come to Czechoslovakia instead. Near Prague in December 1938 he was shocked to see Jewish refugees freezing in makeshift camps. Most had been driven from their homes by Nazi occupation of the Sudetenland , the part of Czechoslovakia handed over to Hitler at Munich the previous September. 

Winton could have resumed his Swiss vacation, stepping back into the comfortable life he left behind. What could a lone foreigner do to assist so many trapped families? Despite the talk of “peace in our time,” Winton knew that Europe was sliding toward war and time was running out for these desperate people. The next steps he took ultimately saved 669 children from death in Nazi camps. 

Victims of a socialist government’s persecution being helped by a stockbroker. Sort of makes mincemeat of Marx’s “class consciousness,” doesn’t it? 

The parents were anxious to get their children to safety, even though it would mean sending them off alone. Getting the children to a country that would accept them seemed an impossible challenge. Nicholas Winton didn’t waste a minute. He wrote to governments around the world, pleading for an open door, only to be rejected by every one but two: Sweden and Great Britain . He assembled a small group of volunteers to assist with the effort. Even his mother pitched in. 

With 5,000 children on his list, Winton searched for foster homes across Britain . British newspapers published his advertisements to highlight the urgent need for foster parents. When enough homes could be found for a group of children, he submitted the necessary paperwork to the Home Office and assisted his team of volunteers in organizing the rail and ship transportation needed to get the children to Britain . He took the lead in raising the funds to pay for the operation. 

The first 20 of “Winton’s children” left Prague on March 14, 1939. Hitler’s troops devoured all of Czechoslovakia the very next day, but Winton’s team kept working, sometimes forging documents to slip the children past the Germans. By the time World War II broke out on September 1 the rescue effort had taken 669 children out of the country in eight separate groups by rail. The last batch of 250 would have been the largest of all, but war prompted the Nazis to stop all departures. Sadly, none of those children lived to see the Allied victory less than six years later. Pitifully few of the parents did either. 

Why did Nicholas Winton take on a challenge ignored by almost everyone else? My colleague Ben Stafford and I asked him that very question at his home in Maidenhead, England , this past July. He’s now 97, but looks and speaks with the vigor of someone years younger. “Because it was the thing to do and I thought I could help,” he told us. Today, the “Winton children” plus their children and grandchildren number about 5,000 people. You can learn more about Winton at www.mackinac.org/7872. 

Good Samaritan 

I do not have a name for the person who figures at the center of my second story. I met him in war-ravaged Cambodia in August 1989. 

In advance of my trip to southeast Asia, considerable local press attention focused on area doctors who donated medical supplies for me to take to a hospital in the Cambodian capital, Phnom Penh. A woman from a local church who saw the news stories called and explained that a few years before, her church had helped Cambodian families who had escaped from the Khmer Rouge communists and resettled in my town of Midland, Michigan. The families had moved on to other locations in the United States but stayed in touch with the woman who called me and other friends they had made in Midland. 

The caller said she had told her Cambodian friends about my pending visit. Each family asked if I would take letters with cash enclosed to their desperately poor relatives in Cambodia . I said yes. Three of the families were in Phnom Penh and easy to find, but one was many miles away in Battambang. That would involve a train ride, some personal risk, and a lot of time it turned out I didn’t have. If I couldn’t locate any of the families, I was to give the cash to any needy Cambodian I could find. 

When I realized I wasn’t going to make it to Battambang, I approached a man in tattered clothes in the hotel lobby. I had seen him there a few times before. He always smiled and said hello, and spoke enough English to carry on some short conversations. I told him I had an envelope with a letter and $200 in it, intended for a family in Battambang. I asked him if he could get it to them. “Keep $50 of it if you find them,” I instructed. We said goodbye. I assumed I would never hear anything of what had become of either him or the money. 

Several months later I got an excited call from the woman who had originally called me about taking those letters. She said she had just received a letter from the Cambodians in Virginia whose family in Battambang that envelope was intended for. A line in the letter read, “Thank you for the two hundred dollars!” 

That poor man found his way to Battambang all right. And he not only didn’t keep the $50 I offered, he somehow found a way to pay for the $10 train ride himself. I doubt that he applied for a federal grant. 

The next time somebody tells me we can put our faith in politicians who spend other people’s money, I will tell them about what these two people did with their own.

The human weakness for watching false economic scoreboards reminds me of an astute observation by a man who was reviewing the state of affairs in the nation he governed. He said to a subordinate:

It gives us also a special, secret pleasure to see how the people about us are unaware of what is really happening to them. They gaze fascinated at one or two familiar superficialities, such as possessions and income and rank and other outworn conceptions. As long as these are kept intact, they are quite satisfied. But in the meantime they have entered a new relation; a powerful social force has caught them up. They themselves are changed. What are ownership and income to that? Why need we trouble to socialize banks and factories? We socialize human beings.¹

Was he right? Are people fooled that easily?

The man who made that statement apparently knew well the game of attaining personal power by playing on the weaknesses of human ignorance. He was Adolf Hitler, and he was speaking to Hermann Rauschning in 1934. The tragedy that befell the German people and later engulfed much of the rest of the world attests to the consequences of economic ignorance. It illustrates how the fruits of welfare will surely be lost when Mammon is worshipped to the exclusion of economic and moral principles. For Mammon—grasping for material welfare by any means—is a tricky idol. If given a dominant role, it will rule conduct to the exclusion of morals.

Economics has been defined as the dismal science, and most people avoid its study if possible. Yet it is something which touches the life of each of us, closely and continuously. In fact, we become so involved in economic affairs at so early an age that we come to take it for granted like the air we breathe and the ground we walk on.

One is reminded in this respect of the history of the development in other spheres of human interest. From the time human life began, air and ground were here more or less as they are now. Our distant ancestors took them for granted just as most people do economics. Not until the discovery of elements in chemistry and of laws of the physical universe did matter come to be thought of consciously and meaningfully. Only then did principles evolve that were worth studying. Only then did our physical environment come to have a useful meaning unknown to our earlier ancestors. Before that, chemicals were just something to stand on, swim in, or for filling one’s lungs.

So it is with economics. We could go on, after a fashion, swimming around in economic ignorance as the caveman did with the chemicals. Or economics could be raised to the level of a science and comprehended in terms of cause and consequence. This would put meaning into our daily affairs and afford us the protection of understanding in our hazardous economic existence. From the dismal science for the few, economics could become the common knowledge of the many.

Though I am not now trying to outline the content of economics in detail it seems necessary to pinpoint to some extent what we mean by economic understanding. What is this thing we need to offer educationally? What is economics?

The study of economics is the study of all matters pertaining to things that are desired but scarce, which exist for trade or can be produced. Those are the things we sometimes speak of as “economic goods and services.” Those are the things which comprise economic activity in its entirety, which are being produced and owned and traded.

A thing must first be desired before it comes within the orbit of economics. You can’t sell the measles, for instance. If it is to be economic, somebody must want it. Without want for it, nobody would work to produce it or sacrifice to buy it. And even if it already existed in nature—obtainable merely for the asking—without requiring any work to produce it, nobody would care enough to own it. Since nobody would care to own it, there would be no buying and selling of it—no exchange. No economics.

To be within the economic domain a thing must also be scarce. Otherwise, if one can have all he wants without turning his hand to get it, it is not worth even a scrap of paper to represent one’s title to it even though people want it strongly. So without scarcity there will be neither ownership nor exchange of it at any price. The air we breathe as an essential to life, for instance, is not usually scarce enough to command a price.

So unless a thing is both desired and scarce, no bargain basement is low enough to attract any customers. But there is a third feature, too, that is required of things before they are economic. A thing may be both scarce and desired, yet not enter into these economic processes. Faith, dreams, and imagination often focus on things which are difficult to put in a form that can be traded. Heaven, for instance, is not listed for sale—as such—in the mail-order catalogs.

So measles and fresh air and heaven are not generally for sale over the counters, yet the reasons for their absence differ. Each of them has certain qualities requisite to economic things—each is desired, or scarce, or producible and available for trade—but not every requisite is present. Lack of any one of the three keeps an item out of the economic arena of human affairs.

Even in infancy the child is a budding economist. We do not know precisely when he first ponders problems of value and distribution, and the law of diminishing returns. Probably the age when this first appears varies widely from child to child. But I suspect there is economic consciousness in most of them at a very young age, and long before we as parents realize that it is there. Some child psychologists assert, for instance, that when the infant clings to his bottle of milk, he is asserting a rudimentary sense of economic perception—a consciousness of something which is desired by him and also scarce.

I wonder, in fact, if an economic sense doesn’t really arise before the infant treats his bottle of milk as something desired and scarce. I wonder if the beginnings of economic consciousness may not be at the time when the child first attains his vague sense of the self-conscious. For if we apply the economic test, self-consciousness itself seems to qualify as a matter of economic consciousness. Let me explain why I think so in terms of the three tests of economic affairs already listed.

Are you desired? You certainly are. You are desired by yourself to whatever extent you have any pride and conscience. And, in addition, you are desired by others, by your family and your friends, for both economic and other reasons.

Are you scarce? Exceedingly so. There is only one of you, and there can never be any more. In the sense of being reproducible by exact duplicate, you are as scarce as the Hope diamond.²

Are you exchangeable or capable of being traded? Yes. In our society, of course, we do not allow one person to own or to buy or sell another. But the person who owns himself as a free man may offer to serve another; he may offer his time and effort in exchange for a wage. Or, instead of offering his services for hire, a person may work for himself and offer for sale whatever he has produced.

So in making yourself available for trade in the form of little pieces of your time, your effort and your life, the third and final requirement that marks you as an item of economic concern has been fulfilled. You are not only desired and scarce, but you are capable of being traded as well. The difference between you and a bushel of wheat in this respect is that you own yourself and control your own sale whereas the wheat does not. And this difference has to do only with how you are involved in economic matters, not whether you are involved in them.

That is why it seems to me that the most elemental form of economic consciousness originates in the remote recesses of early life when one first becomes self-conscious. This must be at a very tender age. Psychologists tell us that the first vocal effusions of the baby, which keep his parents awake at night and disturb the peaceful quietude of the community, is in part an expression of self-consciousness as he loudly proclaims in his own way: “Here I am.” From some such beginning, he will go on to increase in economic consciousness until finally it takes on quite tangible forms in his mind and life.

When a baby clings to his bottle of milk, he is evidencing a sense of possession more advanced than that of mere self-consciousness. He has then taken another important step in economic comprehension. Something specific other than himself has become desired and scarce. And only by realizing this is he ready to begin to act wisely from an economic standpoint.

This sense of worth as applied to overt economic objects appears in strange ways at first. The infant may scramble to retain possession of a toy. It may be only some old can or perhaps some crude block of wood that fell from father’s carpentry. But he wants it. And in laboring to retain possession of something he deems to be his, he is acting like the farmer who will labor to protect a bushel of potatoes he has grown. Oldsters may ridicule his selection and scorn his judgment of value, but they should not scorn the child’s growing sense of valuation because it is a necessary early step in this budding economist.

This new sense of possession should be nurtured while the infant is advancing in economic understanding beyond his earlier elemental sense of self-consciousness. If you quell it by economic diseducation, such as by grasping away from him things that are his to appease his squealing brother, you will in my opinion be preparing the little hopeful for blind devotion to communist-socialist doctrine—or perhaps to some other brand of Jekyll-Hydeism which will cause him to live in hopeless economic frustration.

Then, a little later in the child’s life he comes to acquire a sense of exchange. This sense of exchange can come to him only after he has first acquired the sense of possession. Things to be exchanged must obviously first be had. They must first be possessed before they can be traded. So the sense of exchange follows the sense of possession, the private property concept.

As a child develops his desires, he expands, from his bottle of milk or an old can or a block of wood toward caviar and fancy cars and yachts. His sense of possession expands, in other words, as his taste and desires expand. He also grows in strength and dexterity with which to get things in one way or another.

If this expanding urge to possess things, together with increasing strength and cunning to acquire them, is devoted exclusively to a sense of possession with no consideration for the rights of others, the young hopeful will become the lowest form of thief. Such a person will have acquired a sense of grasping but not a sense of exchange, because he lacks restraint. He will be bent on scheming to grasp everything he can, by any means whatsoever. He will devote himself to the theft of whatever strikes his fancy, which totally disqualifies him for participation in an exchange society. He is then a representative of the ultimate in economic illiteracy as well as the worst in moral turpitude. Such a person will have become a master at breaking the commandments, as one can see by thinking of them in the light of an unrestrained sense of possession.³

The Jesse Jameses? The Al Capones? The Dillingers? Did they have a sense of possession? Most assuredly they did. But they evidenced little sense of restraint. Theirs was an arrested sense of possession which turned them into moral corpses plying their trade of plunder. We would have to grade them low in economic understanding, because they had only the rudimentary disposition to possess things, without the sense of restraint which must underlie the idea of exchange.

The sense of restraint which the chronic thief lacks is founded in the right to own things—the right of ownership, of private property. There is far more to the sense of ownership than the mere disposition to possess things. This economic sense of rights to private property, which leads to restraint from theft, is clearly a moral concept in harmony with the eighth commandment, among others. You would not steal except as you covet what belongs to another—unless you refuse to recognize it as his private property.

Back of the belief in private property, in turn, lies the concept of personal freedom. You can have private property only as you are free—free to work, free to produce, free to keep whatever you have produced. Without freedom there could be no private property at all.

And so we have completed the economic circle of logic, beginning with a sense of self and ending in private property. The infant’s sense of self-consciousness can be traced onward to private property rights and exchange to freedom itself—as concepts which underlie and pervade both economics and morals.

At the outset it was said that in the United States the scoreboard showed a serious lack of economic understanding. Why? These are tests that may be used:

1. To what extent is a person free to use his own life and time in whatever pursuits he may choose, so long as in doing so he does not trespass upon the same right of each and every other person?
2. To what extent is a person free to keep whatever he has produced with his own time and effort, and to use it or dispose of it in whatever way and whenever whenever he wishes, so long as in its disposition he does not infringe upon the same rights of others?

It should be clear from these tests why I reject figures on national income per person, or the number of chickens in dinner pots, or the number of fancy cars on the road as valid evidence for the economic scoreboard. These are merely illusions of economic victory. They are pleasant fruits that grow best on a sound economic tree, to be sure; but the yield of those things may be high for a time after the tree has become infected with a mortal disease.

By these tests the home team has been losing since the turn of the century. Less and less of a person’s time is truly his own. Ever smaller is the portion he may use as he chooses, in ways that do not infringe upon the same rights of others. If you are an average person in the United States, for instance, you have to work from New Year’s Day until late in April before you have satisfied the prior tax claims upon your productive effort—taxes that are taken from you by force and applied to uses of which you may or may not approve. Furthermore, your period of servitude probably is extended in that you pay tribute in one way or another to some non-governmental persons or organizations in ways which a thoroughly free society would not countenance. Only thereafter, for the remainder of the year, are you free to work for yourself.

We are losing the economic game because a third of your income each year, if you are an average person, is taken from you in this manner. Some is taken direct from your employer, who takes it out of your pay before it ever gets into your hands. Some is taken in the form of a tax on manufacturers or distributors, and is part of the purchase price you pay for things you buy. Some is taken in the form of direct taxes, which are billed to you personally as an attachment on your income or your property. Some is taken from you posthumously as the hearse moves down the street, in the form of a bill sent to your widow and children. The third of your income taken from you in these ways is a greater proportion of the national income, mind you, than the amounts that were being taken in 1929–30 in countries which subsequently were overcome by the tragedy of authoritarian governments, in one degree or another.⁴

We are losing the economic game because we have increasingly adopted as the law of the land specific measures advocated by Karl Marx and his ideological successors as the means by which world communism could be established.⁵

We seem blind to these danger signals as we move about amidst so much material splendor, which is only possible because of past thrift and productive accumulations of individuals. We are blinded by economic and political ignorance in the manner Hitler explained so well to Hermann Rauschning in 1934. We are blinded by the confused intellectual leadership of “economists” who are trying to be politicians, while politicians are trying to be economists.

Lest we ignore or forget, here are a few passages from the record of history given us by Lactantius, the famous Roman professor of literature and philosophy, appointed to his chair by none other than Diocletian himself. Lactantius felt compelled to give us these facts, “lest the memory of events so important should perish, and lest any future historian of the [Roman] persecutors should corrupt the truth.”

Diocletian, an inventive criminal and a creator of evil, brought ruin to all and dared tamper even with the Divinity. In part because he was greedy, in part out of fear, he turned the whole world topsyturvy. He brought three associates into his government, and divided up the Empire into four parts, with the result that armies were multiplied, for each of the four men tried to muster a far greater force than earlier emperors had had when they governed individually. More than that, tax collectors began to outnumber taxpayers, and, after exorbitant taxation sapped their initiative, farmers abandoned their farms and plowed fields grew up into woods. In a policy of terrorization the provinces were cut up into scraps, a multitude of governors and hordes of directors oppressed every region—almost every city; and to these were added countless collectors and secretaries and assistants to the directors. Judges seldom had civil cases before them: they tried (not frequently, but incessantly) condemnations, confiscations, and requisitions of every kind of property, and unbearable inequities in the imposition of taxes. Even the measures designed to provide salaries for the soldiers were beyond endurance. Diocletian’s boundless greed would never allow his own treasury to be tapped, so he constantly piled on new taxes and contributions in order to keep his personal hoard intact. When by his general mismanagement he caused stupendous inflation, he attempted to fix prices by law. Blood was shed over common, cheap articles, panic caused shortages in the market, and the net result was that the scarcity was worsened….

He became a raving lunatic in his efforts to make Nicomedia the rival of imperial Rome. I shall not state here how many perished for the sake of their estates or their wealth (for this practice had become common and indeed practically legal), but he made a special point of it in that no matter where he saw a farm more carefully kept or a house more elegantly furnished than usual, he immediately brought charges against the owner and inflicted the death sentence—it seemed as if he could not steal his neighbor’s property without also taking his life.⁶

When can we begin to teach economics to the young? And how? Without attempting to go into that here, I might cite two incidents to suggest the solution as I see it:

In the eastern university where I taught years ago, our graduate seminar invited outside speakers. One day I invited a renowned economist, the editor of a learned journal. We had agreed that he would try to instill an enthusiasm for economic theory into those graduate students of an applied area of economics by giving us evidence as to its practical usefulness. My notes of his talk attest to the fact that few of these students grasped hardly a thing of what he said, except his self-demonstrated assertion that economic theory is a luxury which only the most advanced students can afford.

Then, one evening years later, while members of my family were sitting at dinner discussing something, a five-year old boy asked, out of the clear and without any apparent connection with the discussion that had been going on: “Why do we have to pay for things?”

Well, there you have it. We are losing the game to economic ignorance year after year, while being lulled into complacency by watching false scoreboards and basking in false economic glories. Yet youngsters are itching to go out for economic spring practice, so to speak. What are we going to tell them? Are we going to say: “Wait fifteen or twenty years, Bud, and if you become an outstanding student, you may be ready to find out why we have to pay for things”? Or shall we train them in sound economic practices from the day they are born?

It is later than we think, I fear, in this economic game. Fifteen or twenty years could bring economic and moral disaster beyond our worst fears. The records of history attest to this threat. My final admonition is that every aspiring leader review the records of history, especially as interpreted by such authorities as Liddell Hart on learning from history,⁷ Lord Acton on the history of freedom,⁸ Draper on the background for European culture,⁹ Weaver on some high spots of history,¹⁰ Mees on the helix of history,¹¹ Burckhardt on the ancient Grecian civilization and later comparisons,¹² and Hayek on more contemporary debacles from economic ignorance. From these and other excellent sources one can come to see clearly what lies at the end of the road of economic ignorance on which we have been traveling here in the United States.¹³

Notes

1. Hermann Rauschning, The Voice of Destruction (New York: G. P. Putnam’s Sons, 1940), pp. 192–95.
2. Roger J. Williams, Free and Unequal (Austin, Tex.: University of Texas Press, 1953).
3. Exodus 20.
4. F. A. Harper, Liberty: A Path to Its Recovery (Irvington-on-Hudson, N. Y.: Foundation for Economic Education, 1949), p. 110.
5. Essays on Liberty, Volumes I and II (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, Inc., 1952 & 1954); “The Communist Idea,” Vol. I, pp. 96–99; “To Communism via Majority Vote” by Ben Moreell, Vol. II, pp. 218–248.
6. Translated by Professor Casper J. Kraemer, Jr. from Lactantius’ “On the Death of the Persecutors.”
7. B. H. Liddell Hart, Why Don’t We Learn from History? (London: G. Allen & Unwin, Ltd., 1944).
8. J. E. E. D. Acton, The History of Freedom and Other Essays (London: Macmillan and Company, Ltd., 1907).
9. John William Draper, History of the Intellectual Development of Europe (New York and London: Harper & Brothers, 1904).
10. Henry Grady Weaver, The Mainspring of Human Progress (Irvington-on-Hudson, N. Y.: Foundation for Economic Education. Inc., 1953).
11. C. E. K. Mees, The Path of Science (New York: John Wiley & Sons, Inc.; London: Chapman & Hall, Ltd., 1946).
12. Jakob Christoph Burckhardt, Force and Freedom (New York: Pantheon Books, Inc., 1943).
13. Friedrich August Hayek, The Road to Serfdom (Chicago: University of Chicago Press, 1944).

This may seem like a strange statement to anyone familiar with Mises’s writings. In his memoirs, Notes and Recollections, he never once mentions the faith of his ancestors.² Nor does he speak in favor of Judaism–indeed, in his treatise on Socialism, he refers to Judaism as one of the stagnant and backward religions.³ And only in Omnipotent Government, written during World War II from his exile in America, does he discuss and criticize anti-Semitism in Germany in particular and in Europe in general.⁴ Yet, F. A. Hayek once commented that Mises considered himself to have been a victim of anti-Semitism in having never been awarded the academic position at the University of Vienna for which he considered himself rightfully qualified.⁵

Still, in many ways Mises’s life from his birth in Lemberg in the old Austro-Hungarian Empire to his departure from the Austria of the interwar period reflects and parallels the triumphs and tragedies of the Jews of Austria. Mises was born September 29, 1881, in Austrian Poland, or Galicia, as it was called. In the last decades of the nineteenth century, 50 percent of the population of some parts of Galicia was Jewish, with the center of Jewish life and culture being in the province’s capital, Mises’s birthplace.⁶

The documents that Ludwig von Mises’s great-grandfather, Mayer Rachmiel Mises, prepared as background for his ennoblement by the Austrian Emperor Franz Joseph in June 1881 (just a few months before Ludwig was born) record the history of the Mises family in Lemberg going back to the 1700s. Mayer’s father, Fischel Mises, had been a wholesaler and real estate owner who had received permission to live and conduct business in the so-called “restricted district” reserved for non-Jews. At the age of 18, Mayer married a daughter of Hirsch Halberstamm, the leading Russian-German export trader in the Galician city of Brody.

Mayer took over the family business following his father’s death and also served for 25 years as a commissioner in the commercial court of Lemberg. For a time he also was on the city council and served as a full member of the Lemberg Chamber of Commerce. He also was a cofounder of the Lemberg Savings Bank, and later was a member of the board of the Lemberg branch of the Austrian National Bank. In addition, he was a founder of a Jewish orphanage, a reform school, a secondary school, a charitable institution for infant orphans, and a library in the Jewish community. Some of these charities were begun with funds provided by Mayer for their endowment. Indeed, it was for his service to the Emperor as a leader of the Jewish community in Lemberg that Mayer Mises, great-grandfather of Ludwig von Mises, was ennobled.

Mayer’s oldest son, Abraham Oscar Mises, ran the Vienna office of the family business until 1860, when he was appointed director of the Lemberg branch of the Creditanstalt bank. Abraham also was the director of the Galician Carl-Ludwig Railroad. It is perhaps because of Abraham’s connection with this railroad that his own son, Arthur Edler Mises, took up civil engineering with a degree from the Zurich Polytechnic in Switzerland, and then worked for the Lemberg-Czernowitz Railroad Company. Arthur married Adele Landau, the granddaughter of Moses Kallir and the grandniece of Mayer Kallir, a prominent Jewish merchant family in Brody. Arthur and Adele had three sons, of whom Ludwig was the oldest. His brother, Richard, became an internationally renowned mathematician who later taught at Harvard University. The third child died at an early age.

Members of the Mises family also were devout practitioners of their Jewish faith. The vast majority of the Galician Jews were Hasidic, with all the religious customs and rituals that entailed.⁷ As a small boy, Ludwig would have heard and spoken Yiddish, Polish, and German, and studied Hebrew in preparation for his bar mitzvah.

Ludwig’s father, Arthur, like many of his generation, chose to leave Galicia and make his life and career in the secular and German cultural world of Vienna. But from the documents among Ludwig von Mises’s “lost papers” in the Moscow archives,⁸ it is clear that his mother maintained ties to her birthplace, contributing money to several charities in Brody, including a Jewish orphanage.⁹ In Vienna in the 1890s, Arthur was an active member of the Israelite Community’s Board, a focal point for Jewish cultural and political life in the Austrian capital.¹⁰

Denied Civil Liberties

Until the early and middle decades of the nineteenth century, Jews throughout many parts of Europe were denied civil liberties, often being severely restricted in their economic freedom and, especially in Eastern Europe, confined to certain geographical areas. In the 1820s Jews were still not permitted to live and work freely in Vienna; special permission from the Emperor was required.¹¹ Commercial and civil liberation of the Austrian Jews only occurred in the aftermath of the Revolution of 1848, most especially with the new Constitution of 1867, which created the Austro-Hungarian Dual Monarchy following Austria’s defeat in its 1866 war with Prussia.¹² The spirit and content of the 1867 constitution, which remained the fundamental law of the Empire until the collapse of Austria-Hungary in 1918, reflected the classical liberal ideas of the time.¹³ Every subject of the Emperor was secure in his life and private property; freedom of speech and the press was guaranteed; freedom of occupation and enterprise was permitted; all religious faiths were respected and allowed to be practiced; freedom of movement and residence within the Empire was a guaranteed right; and all national groups were declared to have equal status before the law.¹⁴

No group within the Austro-Hungarian Empire took as much advantage of the new liberal environment as the Jews. In the early decades of the nineteenth century a transformation had begun among the Jewish community in Galicia. Reformers arose arguing for a revision in the practices and customs of orthodox Jewry. Jews needed to enter the modern world and to secularize in terms of dress, manner, attitudes, and culture. The faith had to be stripped of its medieval characteristics and ritualism. Jews should immerse themselves in the German language and German culture. All things “German” were distinguished as representing freedom and progress.¹⁵

With the freedoms of the 1867 constitution, Austrian and especially Galician Jews began a cultural as well as a geographical migration. In 1869 Jews made up about 6 percent of the population of Vienna. By the 1890s, when the young Ludwig von Mises moved to Vienna with his family, Jews made up 12 percent of the city’s population. In District I, the center of the city where the Mises family lived, Jews made up over 20 percent of the population. In the neighboring District II, the portion was over 30 percent.¹⁶

But in the late-nineteenth and early-twentieth centuries, there was a stark contrast between these two districts of the city. In District I the vast majority of the Jewish population had attempted to assimilate with their non-Jewish neighbors in dress, manners, and cultural outlook. On the other hand, in District II, bordering on the Danube, the Jewish residents were more likely to have retained their Hasidic practices and orthodox manners, including their traditional dress. It was the visible difference of these Jews, who often had more recently arrived from Galicia, which so revolted the young Adolf Hitler–who was shocked and wondered how people acting and appearing as they did could ever be considered “real Germans.” They seemed such an obviously alien element in Hitler’s eyes.¹⁷

The characteristic mark of most of the Jews who migrated to Vienna (and other large cities of the Empire, such as Budapest and Prague) was their desire and drive for assimilation; in many ways they tried to be more German than the German-Austrians. The Czechs, Hungarians, and Slavs, on the other hand, often were still focused on their traditional ways; the Hungarians in particular were suspicious of the Enlightenment, civil liberties, and equality–these threatened their dominance over the subject peoples in their portions of the Empire. To constrain the Hungarians, the Emperor increasingly put the Czechs, Poles, and Slavs under direct imperial administration on an equal legal footing with the German-Austrians.¹⁸ For the Jews, Austrian imperial policy meant the end of official prejudice and legal restrictions, and the advent of civil rights and educational opportunities.¹⁹ Their continuing and generally steadfast loyalty to the Habsburgs, however, led many of the other nationalities to be suspicious and anti-Semitic as the years went by. The Jews were viewed as apologists and blind supporters of the Habsburg Emperor, without whose indulgence and protection the Jews might have been kept within the ghetto walls.²⁰

Civil liberties and practically unrestrained commercial and professional opportunity soon saw the Jews rise to prominence in a wide array of areas of Viennese life.²¹ By the beginning of the twentieth century more than 50 percent of the lawyers and medical doctors in Vienna were Jewish. The leading liberal and socialist newspapers in the capital were either owned or edited by those of Jewish descent, including the New Free Press, the Viennese newspaper for which Mises often wrote in the 1920s and 1930s. The membership of the journalists’ association in Vienna was more than 50 percent Jewish. At the University of Vienna in 1910, professors of Jewish descent constituted 37 percent of the law faculty, 51 percent of the medical faculty, and 21 percent of the philosophical faculty. At the time Mises attended the university in the first decade of the twentieth century, almost 21 percent of the student body was Jewish. The high proportion of Jews in literature, theatre, music and the arts was equally pronounced.²²

German High-School System

The main avenue for social and professional advancement was education in the gymnasium system—the high-school system in the German-speaking world. The gymnasium education not only offered the path to higher education and a university degree for many Jews, but it also was an avenue for acculturation and assimilation into European and especially German culture. For example, Mises and his fellow student Hans Kelsen (who later became an internationally renowned philosopher of law and the author of the 1920 constitution of the Republic of Austria) attended the Akademisches Gymnasium in the center of Vienna. It was meant for students preparing for the university and professional careers. Here a wide liberal-arts education was acquired with mandatory courses in Latin, Greek, German language and literature, history, geography, mathematics, physics, and religion, with electives in either French or English–Mises selected French. At the core of the curriculum also was the study of the ancient Greek and Roman classics. Mises and other Jewish students at the Akademisches Gymnasium, as a part of their religion training, had courses in Hebrew.²³

According to memoirs written by people who attended the Akademisches Gymnasium in the 1880s and 1890s, most of the students ridiculed the religion classes as “superstition.” The Greek and Roman classics were considered literary avenues to the mainstream of modern European and Western culture. And while contemporary writings in history, social criticism, literature, and the sciences were not assigned, the students absorbed these works on their own as a way to integrate themselves into modern and “progressive” society.²⁴

In the 1890s, during Mises’s time at the school, 44 percent of the student body was Jewish. But there were some gymnasiums at which Jewish admission was informally restricted. For example, the Maria Theresa Academy of Knights in Vienna was reserved for the children of the nobility and senior officials. Joseph Schumpeter attended it in the 1890s, but only because his stepfather was a lieutenant field-marshal. No matter what his academic qualification, Mises would have had virtually no chance of having been accepted there. There were clusters of these gymnasiums that were clearly closed to Jews, even if they were converts to Christianity, while other clusters represented the high schools where middle-class Jewish businessmen, professionals, and civil servants sent their children.²⁵

But for all their assimilationist strivings–their conscious attempts to be German-Austrians in thought, philosophy, outlook, and manner–they remained distinct and separate. Not only was this because they belonged to schools, professions, and occupations in which they as Jews were concentrated, but because non-Jewish German-Austrians viewed them as separate and distinct. However eloquent and perfect the Jews’ German in literature and the spoken word, no matter how valuable their contributions to Viennese society and culture, most non-Jewish Viennese considered these to be Jewish contributions to and influences on German-Austrian cultural life.

In the Habsburg domains, part of this anti-Semitism was fed by conservative and reactionary forces in society that often resented the Emperor’s diminishment or abolition of the privileges, favors, and status of the Catholic Church and the traditional landed aristocracy. The high proportion of Austrian Jews involved in liberal or socialist politics made them targets of the conservatives who said they were carriers of modernity, with its presumption of civil equality, unrestrained market competition, and a secularization that was said to be anti-Christian and therefore immoral and decadent. Preservation and restoration of traditional and Christian society, it was claimed, required opposition to and elimination of the Jewish influence on society. Jews were the rootless “peddlers” who undermined traditional occupations and ways of earning a living, as well as the established social order of things. They pursued profit. Honor, custom, and faith were willingly traded away by them for a few pieces of gold, it was said. Craft associations became leading voices of anti-Semitism, especially when economic hard times required small craftsmen and businessmen to go hat in hand to Jewish bankers for the borrowed sums to tide them over these times of economic trouble.²⁷

Anti-Jewish Sentiment

German nationalism also was a vehicle for growing anti-Jewish sentiment. The paradox here is that in the 1860s and 1870s a sizable number of Jewish intellectuals were founders and leaders in the Austrian and German nationalist movements. German culture and society were viewed as representing the universal values of reason, science, justice, and openness in both thought and deed. German culture and political predominance within the Austro-Hungarian Empire restrained the backward-looking forces of darkness, that is, the Hungarian, Czech, and Slavic threats. At the same time, German influence in Central Europe offered rays of enlightenment in Eastern Europe.

Mises estimated that before World War II, Jews made up 50 percent of the business community in Central Europe and 90 percent of the business community in Eastern Europe.²⁸ Indeed, in Omnipotent Government he asserted that in Eastern Europe “modern civilization was predominantly an achievement of Jews.”²⁹ What the Jews in these parts of Europe introduced and represented, at least in their own view, was the enlightened German mind, with its culture and institutions. But to the nationalities being introduced to and “threatened” by this German cultural influence, it was perceived as Jewish as much as German–a dominating, imperial, and “foreign” culture.

At the same time, in both Germany and German-Austria, many of the Christian German nationalists viewed the Jews in the forefront of the Pan-German nationalist movements as interlopers. As a consequence, in the second half of the nineteenth century, rationalizations emerged to justify the rejection of Jewish participation in the cause of German nationalism and culture. It was said that only Christians and the Christian faith were consistent with true German life and culture. But when a significant number of German and Austrian Jews converted to Christianity, it still was found not to be enough. Now it was claimed that to be a true German it was not sufficient to be a convert to Christianity. “Germanness” was a culture, an attitude toward life and a certain sense of belonging to the Volk community.

As a growing number of Jews immersed themselves in all things German–language, philosophy, literature, dress, and manner–it was found, again, not to be enough. Really to be a German was to share a common ancestry, a heritage of a common blood lineage.³⁰ This was one barrier the German and Austrian Jews could not overcome. In the emergence of racial anti-Semitism in the 1880s and 1890s were the seeds of the “final solution.”

In Vienna the spirit of anti-Semitism was represented by Karl Lueger, who was mayor of the capital city in the first decade of the twentieth century and a leader of the Christian Social Party. He insisted that only “fat Jews” could weather the storm of capitalist competition. Anti-Semitism, Lueger said, “is not an explosion of brutality, but the cry of oppressed Christian people for help from church and state.”³¹ He blended anti- Semitism with social-left reforms, which included civil-service and municipal-government restrictions on Jewish access to city jobs or contracts. On the other hand, when Lueger was challenged on why he had Jewish friends and political associates, he replied, “I decide who is a Jew.”³²

But in spite of the presence and growth of anti-Semitic attitudes in the late-nineteenth and early- twentieth centuries in Austria in general and Vienna in particular, Mises’s lack of attention to his own Jewish family background or any hint of the impact of anti-Semitism around him–there were anti-Jewish student riots at the University of Vienna during the years when he was a student there around the turn of the century–was in fact not uncommon. One can read Stefan Zweig’s fascinating account of everyday life in the Vienna of this time and have the distinct impression that anti-Semitic attitudes and municipal government policy were virtually nonexistent.³³

Invisible Walls

Yet the circles in which people moved in Viennese society both before and after World War I existed with many invisible walls. Traditional or orthodox Jews lived and worked within a world of their own in the city.³⁴ Secular and assimilated Jews, like Ludwig von Mises and Hans Kelsen, moved in circles of both Jews and non-Jews; but even the nonreligious and German-acculturated Jews clustered together. A review of the list of participants in Mises’s famous private seminar in Vienna, for example, shows a high proportion of Jews.³⁵ And even after Mises had moved to Geneva, Switzerland, in 1934, his agenda books for this time show that many of his social engagements were with other Jews residing in that country.

The end of the nineteenth and the beginning of the twentieth century saw the eclipse of liberalism in Austria and the rise of socialism in its place, centered in the political ascendancy of the Social Democratic Party. A sizable number of Jews were prominent in the Austrian socialist movement; they were anti-capitalist and viewed the entrepreneurial segment of the society as exploiters and economic oppressors. The capitalist class would be swept away in the transformation to socialism, including the Jewish capitalists in the “ruling class.” Most of the Jews in the socialist movement were not only secular and considered themselves harbingers of the worker’s world to come; they were also contemptuously opposed to cultural and religious Judaism as well.³⁶

These three political movements in Austria and Vienna when Mises was a young man–conservatism, German nationalism, and radical socialism–were, each for its own reasons, enemies of liberal society, opponents of free-market capitalism, and therefore threats to the ideas and occupations of those middle-class, or “bourgeois,” walks of life heavily populated by the Jews of Austria and Vienna.

The history of Austrian Jewry during this time is a story of triumph and tragedy. The winds of nineteenth-century liberalism freed the Austrian Jewish community, both internally and externally. Internally, the liberal idea pried open orthodox Jewish society in places such as Austrian Galicia. It heralded reason over ritual; greater individualism over religious collectivism; open-minded modernity over the strictures of traditionalism. Externally, it freed the Jewish community from legal and political restrictions. The rights of freedom of trade, occupation, and profession opened wide many opportunities for social improvement, economic betterment, and political acceptance.³⁷

Within two generations this transformed Austrian Jewish society. And within that same span of time it saw the rise of many Jews to social and economic prominence, with greater political tolerance than ever known before. If these two liberating forces had not been at work, there would not have been Ludwig von Mises–the economist, the political and social philosopher, and the notable public figure in the Austria between the two world wars.³⁸

At the same time these two liberating forces set the stage for the tragedy of the German and Austrian Jews. Their very successes in the arts and the sciences, in academia, and in commerce fostered the animosity and resentment of those less successful in the arenas of intellectual, cultural, and commercial competition. It set loose the emotion of envy, the terror of failure, and the psychological search for excuses and scapegoats. It ended at the gates to the Nazi death camps.³⁹

Notes

1. On the general meaning of liberalism among many of the Austrian Jews in the late nineteenth and early twentieth centuries as representing a belief in the importance and role of reason in human affairs, a universal or cosmopolitan philosophy of individual rights and equality before the law, an advocacy of voluntary association outside of state regulation and control, and a loyalty to a multinational political authority (the Habsburg emperor) as a defender and protector of these ideas, see Pieter M. Judson, “Rethinking the Liberal Legacy” and Malachi Haim Hacohen, “Popper’s Cosmopolitanism” in Steven Beller, ed., Rethinking Vienna, 1900 (New York: Berghahn Books, 2001), pp. 57–79 and 171–94; and Marsha L. Rozenblit, Reconstructing a National Identity: The Jews of Habsburg Austria During World War I (Oxford
University Press, 2001), pp. 14–38.
2. Ludwig von Mises, Notes and Recollections [1940] (South Holland, Ill.: Libertarian Press, 1978); these memoirs were written in the autumn of 1940 shortly after Mises and his wife, Margit, had arrived in the United States from war-torn Europe.
3. Ludwig von Mises, Socialism: An Economic and Sociological Analysis [1922; revised ed., 1932] (Indianapolis: Liberty Classics,1981), p. 370: “Today the Islamic and Jewish religions are dead. They offer their adherents nothing more than ritual. They know how to prescribe prayers and fasts, certain foods, circumcision and the rest; but that is all. They offer nothing to the mind. Completely despiritualized, all they teach and preach are legal forms and external rule. They lock their follower into a cage of traditional usages, in which he is often hardly able to breathe; but for his inner soul they have no message. They suppress the soul, instead of elevating and saving it. . . . Today the religion of the Jews is just as it was when the Talmud was drawn up. The religion of Islam has not changed since the days of the Arab conquests. . . . But it is otherwise in the living [Christian] Church of the West. Here, where faith is not yet extinct, where it is not merely external form that conceals nothing but the priest’s meaningless ritual, where, in a word, it grips the whole man, there is a continuous striving after a social ethic. Again and again do its members go back to the Gospels to renew their life in the Lord and His message.”
4. Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War (New Haven, Conn.: Yale University Press, 1944), pp. 169–92, a chapter on “Anti-Semitism and Racism.”
5. F. A. Hayek, “Ludwig von Mises (1881–1973)” in Peter G. Klein, ed., The Collected Works of F. A. Hayek, Vol. 4: The Fortunes of Liberalism: Essays on Austrian Economics and the Ideal of Freedom (Chicago: University of Chicago Press, 1992), p. 128.
6. See William O. McCagg, Jr., A History of Habsburg Jews, 1670–1918 (Bloomington, Ind.: Indiana University Press, 1989), pp. 105–122 and 181–200.
7. But it is clear that Mayer Mises’s family were active in the Jewish reform movement in Galicia, including the assimilation into German culture through the learning and use of the German language, as well as a desire to politically and socially cooperate with the ethnic Poles in the neighboring Galician community. See McCagg, A History of Habsburg Jews, pp. 114–17.
8. See Richard M. Ebeling, “Mission to Moscow: The Mystery of the ‘Lost Papers’ of Ludwig von Mises,” Notes from FEE (July 2004).
9. In the late 1920s, Adele Mises dictated her memoirs about her life in Galicia and Vienna. She refers to the emphasis on charitable work within her family in Brody, saying that “the memories of my youth all relate to charitable activities. They occupied our parents’ lives so completely that we children naturally became involved with them as well from an early age.” And she recalled “my aunt Halberstamm angrily remarking to her sister (my dear mother-in-law): ‘You heartless Lembergers’ (there was always an antagonism between Brody and Lemberg) ‘you sit behind closed doors and care about nothing at all!’ Actually, my mother-in-law also came from Brody and was compassionate and charitable. The accusation was most unjust. Of course, in Lemberg people had bells and locked their front doors, but the back door to the kitchen remained open just as in Brody” to the poor and orphaned who needed charitable assistance.
10. Robert S. Wistrich, The Jews of Vienna in the Age of Franz Joseph (New York: Oxford University Press, 1990), p. 165.
11. On the history of the Jews in the Austro-Hungarian Empire, see Wistrich, The Jews of Vienna in the Age of Franz Joseph; McCagg, A History of Habsburg Jews, 1670–1918; Steven Beller, Vienna and the Jews, 1867–1938: A Cultural History (Cambridge, Mass.: Cambridge University Press, 1989).; George E. Berkley, Vienna and Its Jews: The Tragedy of Success, 1880–1980s (Lanham, Md.: Madison Books, 1988); and Max Grunwald, History of the Jews in Vienna (Philadelphia: Jewish Publication Society of America, 1936).
12. Full legal and economic rights were extended to Jews in Germany only in 1871, following the Franco-Prussian War and the unification of the German Empire under Prussian leadership.
13. In 1867, the Lower Austrian Chamber of Commerce located in Vienna (where Ludwig von Mises was to work as an economic analyst from 1909 until he left Austria in 1934) declared that “The state has fulfilled its task if it removes all obstacles to the free, orderly activity of its citizens. Everything else is achieved by the considerateness and benevolence of the factory owners and above all by the personal efforts and thriftiness of the workers.” See Robin Okey, The Habsburg Monarchy: From Enlightenment to Eclipse (New York: St. Martin’s Press, 2001), p. 206.
14. The Fundamental Law Concerning the General Rights of Citizens from the Austrian Constitution of 1867 may be found at: www.h-net.org/~habsweb/sourcetexts.auscon.htm.
15. This transformation of the Jewish communities in Central and Eastern Europe, especially in the German-speaking lands, is usually associated with the influence of Moses Mendelssohn beginning in the middle of the eighteenth century. See Marvin Lowenthal, The Jews of Germany: A Story of 16 Centuries (Philadelphia: The Jewish Publication Society of America, 1938), pp. 197–216; Ruth Gay, The Jews of Germany: A Historical Portrait (New Haven, Conn.: Yale University Press, 1992), pp. 98–117; Nachum T. Gidal, Jews in Germany: From Roman Times to the Weimar Republic (Köln, Germany: Konemann Verlagsgesellschaft mbH, 1998), pp. 118–23; Amos Elon, The Pity of It All: A History of the Jews in Germany, 1743-1933 (New York: Metropolitan Books, 2002), pp. 1–64.
16. On the demographics of the Jewish community in Vienna, see Marsha L. Rozenblit, The Jews of Vienna, 1867-1914: Assimilation and Identity (Albany, N.Y.: State University of New York Press, 1983).
17. Adolf Hitler, Mein Kampf [1925] (Boston: Houghton Mifflin, 1943), p. 56: “Once as I was walking through the Inner City [of Vienna before the First World War] I suddenly encountered an apparition in a black caftan and black hair locks. Is this a Jew? was my first thought. For, to be sure, they had not looked like that in Linz. I observed the man furtively and cautiously, but the longer I stared at this foreign face, scrutinizing feature after feature,the more the first question assumed a new form: Is this a German?”
18. On the “nationalities problem” and its respective goals and perspectives, see Robert A. Kann, The Multinational Empire: Nationalism and National Reform in the Habsburg Monarchy, 1848–1918, 2 Vols. (New York: Columbia University Press, 1964); and Oscar Jaszi, The Dissolution of the Habsburg Monarchy (Chicago: University of Chicago Press, 1928).
19. Habsburg enlightenment was more advanced in many ways over that of the German government. For example, before the First World War it was virtually impossible for a Jew to be commissioned as an officer in the German Army, no matter his qualifications and merit. On the other hand, Jews were accepted as officers in the Austrian Army with no similar prejudice, which enabled Ludwig von Mises to be commissioned as a reserve officer in the Austrian Army as a young man, and serve with distinction in the First World War on the Russian front. See Wistrich, The Jews of Vienna in the Age of Franz Joseph, pp. 174–75: “In striking contrast to the Prussian regiments, there was no deliberate exclusion of Jewish officers and anti-Semitism was not officially tolerated. Indeed, anti-Semitism appears to have been notably weaker in the army than in many other sectors of Austrian society in spite of persistent nationalist agitation and the fact that most officers were Roman Catholic Germans. . . . In this supranational institution par excellence which was loyal to the Emperor and the dynasty alone, Jews were by and large treated on equal terms with other ethnic and religious groups. The army could simply not tolerate open racial or religious discrimination which would only undermine morale and patriotic motivation.”
20. On the perception of the Jews before the First World War by the various nationalities of the Austro-Hungarian Empire, including the Austrian-Germans, see Henry W. Steed, The Hapsburg Monarchy [1913] (New York: Howard Fertig, 1969), pp. 145–94.
21. See Jerry Z. Muller, The Mind and the Market: Capitalism in Modern European Thought (New York: Alfred A. Knopf, 2002), pp. 350–52.
22. On the occupational demographics, see Rozenblit, The Jews of Vienna, 1867–1914, pp. 47–70; Beller, Vienna and the Jews, 1867–1938, pp. 165–87.
23. On the Vienna gymnasiums, and Jewish assimilation and social and economic advancement, see Rozenblit, The Jews of Vienna, 1867–1914, pp. 99–126; Beller, Vienna and the Jews, 1867–1938, pp. 49–70.
24. See Arthur Schnitzler, My Youth in Vienna (New York: Holt, Rinehart and Winston, 1970), for a rich memoir on the Akademisches Gymnasium in Vienna a few years before Mises attended as a student. Also, see the fascinating account of Viennese gymnasium life during this time in, Stefan Zweig, The World of Yesterday (New York: Viking Press, 1943), pp. 28–66.
25. On the Maria Theresa Academy of Knights in Vienna during the time when Schumpeter attended, see Robert Loring Allen, Opening Doors: The Life and Work of Joseph Schumpeter, Vol. 1 (Brunswick, N.J.: Transaction Books, 1991), pp. 18–22; and, Richard Swedberg, Schumpeter: A Biography (Princeton, N.J.: Princeton University Press, 1991), pp. 10–12.
26. On the nature and evolution of anti-Semitism in Germany and Austria, see Peter G. J. Pulzer, The Rise of Political Anti-Semitism in Germany and Austria (New York: John Wiley, 1964); and Bruce F. Pauley, From Prejudice to Persecution: A History of Austrian Anti-Semitism (Chapel Hill: University of North Carolina Press, 1992).
27. That the real target behind much of the anti-Semitism in Germany and Austria was economic liberalism has been suggested by Frederick Hertz, Nationality in History and Politics (New York: Oxford University Press, 1944), p. 403: “It was rightly felt by many that the real object of [anti-Semitic attacks such as those by the Germany historian Heinrich von Treitschke, who coined the phrase, ‘The Jews are our misfortune’] was not the Jews, but liberalism, and that the Jews were only used as a means for working up public opinion against its fundamental principles.” See also F.A. Hayek, The Road to Serfdom (London: George Routledge and Sons, 1944), p. 104: “In Germany and Austria the Jew had come to be regarded as the representative of capitalism because a traditional dislike of large classes of the population for commercial pursuits had left these more readily accessible to a group that was practically excluded from the more highly esteemed occupations. It is the old story of the alien race being admitted only to the less respected trades, and then being hated still more for practicing them. The fact that German anti-semitism and anti-capitalism spring from the same root is of great importance for the understanding of what has happened there, but this is rarely grasped by foreign observers.”
28. Ludwig von Mises, “Postwar Economic Reconstruction of Europe” [1940] in Richard M. Ebeling, ed., Selected Writings of Ludwig von Mises, Vol. 3: The Political Economy of International Reform and Reconstruction (Indianapolis: Liberty Fund, 2000), p. 27.
29. Mises, Omnipotent Government: The Rise of the Total State and Total War, p. 185.
30. This attitude was expressed, as one example, during the 1930s by the ardent National Socialist Adolf Bertels, who said about Heinrich Heine, possibly the greatest German writer of the nineteenth century, that “however well he handles the German language and German poetical forms, however much he knows the German way of life, it is impossible for a Jew to be a German.” Quoted in Alistair Hamilton, The Appeal of Fascism: A Study of Intellectuals and Fascism, 1919–1945 (London: Anthony Blond, 1971), p. 109.
31. Quoted in, J. Sydney Jones, Hitler in Vienna, 1907–1913: Clues to the Future (New York: Cooper Square Press, 2002), p. 155.
32. Ibid., p. 157; also, Berkley, Vienna and Its Jews, pp. 103–111; on the history of the Christian Socialist movement and Lueger’s role and participation in it, see John W. Boyer, Political Radicalism in Late Imperial Vienna: Origins of the Christian Social Movement, 1848–1897 (Chicago: University of Chicago Press, 1981), and John W. Boyer, Culture and Political Crisis in Vienna: Christian Socialism in Power, 1897–1918 (Chicago: University of Chicago Press, 1995).
33. Stefan Zweig, The World of Yesterday. Zweig was born the same year as Mises, 1881, and was forced to leave Vienna with the rise of Nazi power in Austria. He went into exile in Brazil, where he committed suicide in 1942.
34. Harriet Pass Freidenreich, Jewish Politics in Vienna, 1918–1938 (Bloomington, Ind.: Indiana University Press, 1991), p. 138.
35. Mises, Notes and Recollections, p. 100.
36. See Robert S. Wistrich, Socialism and the Jews (East Brunswick, N.J.: Associated University Presses, 1982).
37. And many of the Jews in Germany and Austria understood that connection between economic liberalism and individual opportunity that had enabled so many in the Jewish community to prosper in spite of anti-Semitic sentiments. Thus, for example, in 1897, Emil Lehmann, head of the Dresden Jewish community argued against the Social Democrats, “In the Mosaic teaching the ideals of justice and equality before the law find their substantiation just as envy and hatred–which the Social Democracy share with the anti-Semites–receive the sharpest condemnation. Thou shalt not covet! Other demands contrary to civilization such as the abolition of the family, State education of children, etc. etc, which are desired by the Social Democrats, are firmly rejected in the Ten Commandments.” Quoted in Wistrich, Socialism and the Jews, p. 69.
38. On Mises’s role and prominence in the Austria of the interwar period, see Richard M. Ebeling, “The Economist as the Historian of Decline: Ludwig von Mises and Austria between the Two World Wars,” in Richard M. Ebeling, ed., Globalization: Will Freedom or World Government Dominate the International Marketplace? (Hillsdale, Mich.: Hillsdale College Press, 2002), pp. 1–68.
39. That the loss due to anti-Semitism did not only fall upon the Jews who were robbed of their property, exiled, imprisoned, or murdered in the concentration and death camps was pointed out by Hugo Bettauer in his fictional account The City Without Jews: A Novel of Our Time (New York: Bloch Publishing, 1926). Originally published in German in Vienna in 1923, it imagines a complete expelling of the Jews from Vienna at some future point in the city’s history. And with the Jews goes much of the city’s cultural, social, and economic achievement and potential. Indeed, the city decays in cultural and economic poverty without the contribution of Vienna’s former Jewish citizens.