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#1) On February 06, 2010 at 7:29 AM, whereaminow (75.43) wrote:

Bolshevism and Inflation from Socialism: An Economic and Sociological Analysis by Ludwig Von Mises:

Inflation

Inflation is the last word in destructionism. The Bolshevists, with their inimitable gift for rationalizing their resentments and interpreting defeats as victories, have represented their financial policy as an effort to abolish Capitalism by destroying the institution of money. But although inflation does indeed destroy Capitalism, it does not do away with private property. It effects great changes of fortune and income, it destroys the whole finely organized mechanism of production based on division of labour, it can cause a relapse into an economy without trade if the use of metal money or at least of barter trade is not maintained. But it cannot create anything, not even a socialist order of society.

By destroying the basis of reckoning values—the possibility of calculating with a general denominator of prices which, for short periods at least, does not fluctuate too wildly—inflation shakes the system of calculations in terms of money, the most important aid to economic action which thought has evolved. As long as it is kept within certain limits, inflation is an excellent psychological support of an economic policy which lives on the consumption of capital. In the usual, and indeed the only possible, kind of capitalist book-keeping, inflation creates an illusion of profit where in reality there are only losses. As people start off from the nominal sum of the erstwhile cost price, they allow too little for depreciation on fixed capital, and since they take into account the apparent increases in the value of circulating capital as if these increases were real increases of value, they show profits where accounts in a stable currency would reveal losses.[19] This is certainly not a means of abolishing the effects of an evil etatistic policy, of war and revolution; it merely hides them from the eye of the multitude. People talk of profits, they think they are living in a period of economic progress, and finally they even applaud the wise policy which apparently makes everyone richer.

But the moment inflation passes a certain point the picture changes. It begins to promote destructionism, not merely indirectly by disguising the effects of destructionist policy; it becomes in itself one of the most important tools of destructionism. It leads everyone to consume his fortune; it discourages saving, and thereby prevents the formation of fresh capital. It encourages the confiscatory policy of taxation. The depreciation of money raises the monetary expression of commodity values and this, reacting on the book values of changes in capital—which the tax administration regards as increases in income and capital—becomes a new legal justification for confiscation of part of the owners' fortune. References to the apparently high profits which entrepreneurs can be shown to be making, on a calculation assuming that the value of money remains stable, offers an excellent means of stimulating popular frenzy. In this way, one can easily represent all entrepreneurial activity as profiteering, swindling, and parasitism. And the chaos which follows, the money system collapsing under the avalanche of continuous issues of additional notes, gives a favourable opportunity for completing the work of destruction.

The destructionist policy of interventionism and Socialism has plunged the world into great misery. Politicians are helpless in the face of the crisis they have conjured up. They cannot recommend any way out except more inflation or, as they call it now, reflation. Economic life is to be "cranked up again" by new bank credits (that is, by additional "circulation" credit) as the moderates demand, or by the issue of fresh government paper money, which is the more radical programme.

But increases in the quantity of money and fiduciary media will not enrich the world or build up what destructionism has torn down. Expansion of credit does lead to a boom at first, it is true, but sooner or later this boom is bound to crash and bring about a new depression. Only apparent and temporary relief can be won by tricks of banking and currency. In the long run they must land the nation in profounder catastrophe. For the damage such methods inflict on national well-being is all the heavier, the longer people have managed to deceive themselves with the illusion of prosperity which the continuous creation of credit has conjured up.[20]

Marxism and Destructionism

Socialism has not consciously willed the destruction of society. It believed it was creating a higher form of society. But since a socialist society is not a possibility every step towards it must harm society.

It is the history of Marxian Socialism which shows most clearly that every socialist policy must turn into destructionism. Marxism described Capitalism as the inevitable preliminary to Socialism, and looked forward to the new society only as the result of Capitalism's fruition. If we take our stand on this part of Marx's theory—it is true that he has put forward other theories with which this is completely incompatible—then the policy of all the parties that claim Marx's authority is quite non-Marxian. The Marxians ought to have combated everything that could in any way hinder the development of Capitalism. They should have protested against the trade unions and their methods, against laws protecting labour, against compulsory social insurance, against the taxation of property; they should have fought laws hindering the full working of the stock and produce exchanges, the fixation of prices, the policy which proceeds against cartels and trusts; they should have resisted inflationism. But they have done the reverse of all this, have been content to repeat Marx's condemnation of the "petty bourgeois" policy, without however drawing the inevitable conclusions. The Marxians who, in the beginning, wished to dissociate themselves definitely from the policy of all parties looking to the pre-capitalist economic idea, arrived in the end at exactly the same point of view.

The fight between Marxists and the parties calling themselves emphatically anti-Marxists is carried on by both sides with such a violence of expression that one might easily be led into supposing them irreconcilable. But this is by no means the case. Both parties, Marxism and National Socialism, agree in opposing Liberalism and rejecting the capitalist social order. Both desire a socialist order of society. The only difference in their programme lies in slight variations in their respective pictures of the future socialist State; nonessential variations, as we could easily show. The foremost demands of the National Socialist agitation are different from those of the Marxists. While the Marxists speak of abolishing the commodity character of labour, the National Socialists speak of breaking the slavery of interest (Brechung der Zinsknechtschaft). While the Marxists hold the "capitalists" responsible for every evil, the National Socialists think to express themselves more concretely by shouting "Death to the Jews" (Juda verrecke).[21]

Marxism, National Socialism, and other anti-capitalist parties are indeed separated, not only by clique enmities, and personal resentments, but also by problems of metaphysics and the conduct of life. But they all agree on the decisive problem of reshaping the social order: they reject private ownership in the means of production and desire a socialist order of society. It is true that the paths by which they hope to reach the common goal run parallel only for short stretches, but even where they diverge they remain on adjacent territories.

It is not surprising that in spite of this close relationship they fight out their feud with consuming bitterness. In a socialist community the fate of the political minorities would necessarily become unbearable. How would National Socialists fare under a Bolshevist rule or Bolshevists under National Socialism?

The results of the destructionist policy are not affected by the different slogans and banners employed. Whether the protagonists of the "right" or of the "left" happen to be in power, "tomorrow" is always unhesitatingly sacrificed to "today." The supporters of the system continue to feed it on capital—as long as a crumb is left.[22]

Notes

[19]See my Nation, Staat und Wirtschaft, pp. 129 ff.

[20]See my Theory of Money and Credit (London, 1934), pp. 339 ff.; also my Geldwertstabilisierung und Konjunkturpolitik (Jena, 1928), pp. 43 ff.

[21]For a criticism of National Socialist doctrine see my Kritik des Interventionismus (Jena, 1929), pp. 91 ff.; also Karl Wagner, "Brechung der Zinsknechtschaft?" in Jahrbücher für Nationalökonomie und Statistik, Third Series, Vol. LXXIX, pp. 790 ff.

[22]The best characterization of destructionism is in the words with which Stourm tried to describe the financial policy of the Jacobins: "L'esprit financier des jacobins consista exclusivement en ceci: epuiser à outrance le présent, en sacrifiant l'avenir. Le lendemain ne compta jamais pour eux: les affaires furent menées chaque jour comme s'il s'agissait du dernier: tel fut le caractère distinctif de tous les actes de la Révolution. Tel est aussi le secret de son étonnante durée: la déprédation quotidienne des réserves accumulées chez une nation riche et puissante fit surgir des ressources inattendues, dépassant toute prévision." (The financial spirit of the Jacobins consisted exclusively of this: Consume in the present to the utmost at the expense of the future. Tomorrow never counted for them: Activities were conducted each day as if that day were the last: Such was the distinctive spirit of all the actions of the Revolution. Such is also the secret of its surprising duration: The daily plundering of the accumulated reserves of a rich and powerful nation brought forth resources beyond all expectations.) And it applies word for word to the German inflation policy of 1923 when Stourm goes on: "Les assignats, tant qu'ils valurent quelque chose, si peu que ce fût, inondèrent le pays en quantités sans cesse progressives. La perspective de la faillite n'arrêta pas un seul instant les émissions. Elles ne cessèrent que sur le refus absolu du public d'accepter, même à vil prix, n'importe quelle sorte de papier-monnaie." (The assignats, so long as they were worth anything, as little as that might be, flooded the country in ever-increasing quantities. The prospect of their collapse did not stop the emissions for a single instant; they stopped issuing them only when the public absolutely refused to accept, even when dirt cheap, any kind of paper money.) Stourm, Les Finances de l'Ancien Régime et de la Révolution (Paris, 1885), Vol. II, p. 388.

 

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