Monday, November 17, 2008

Why interventionism is futile - at best (amv)

Since we are marching towards more and more interventionism - ignoring the lessons of the past - it may be time to remember those, who had to go through the consequences:

In the Interventionist State it is no longer of crucial importance for the success of an enterprise that the business should be managed in a way that it satisfies the demands of consumers in the best and least costly manner. It is far more important that one has “good relationships” with the political authorities so that the interventions work to the advantage and not the disadvantage of the enterprise.

A few marks more tariff protection for the products of the enterprise and a few marks less tariff for the raw materials used in the manufacturing process can be of far more benefit to the enterprise than the greatest care in managing the business.

No matter how well an enterprise may be managed, it will fail if it does not know how to protect its interests in the drawing up of the customs rates, in the negotiations before the arbitration boards, and with the cartel authorities. To have “connections” becomes more important than to produce well and cheaply.

So the leadership positions within enterprises are no longer achieved by men who understand how to organize companies and to direct production in the way the market situation demands, but by men who are well thought of 'above' and 'below,' men who understand how to get along well with the press and all the political parties, especially with the radicals, so that they and their company give no offense.

It is that class of general directors that negotiate far more often with state functionaries and party leaders than with those from whom they buy or to whom they sell.

Since it is a question of obtaining political favors for these enterprises, their directors must repay the politicians with favors. In recent years, there have been relatively few large enterprises that have not had to spend very considerable sums for various undertakings in spite of it being clear from the start that they would yield no profit. But in spite of the expected loss it had to be done for political reasons. Let us not even mention contributions for purposes unrelated to business-for campaign funds, public welfare organizations, and the like.

Ludwig von Mises (1932), “The Myth of the Failure of Capitalism” translated and published in “Selected Writings of Ludwig von Mises, Vol. 2: Between the Two World Wars: Monetary Disorder, Interventionism, Socialism and the Great Depression” (Liberty Fund, 2002).

HT Richard Ebeling