LIBERTY AND PROPERTY by Ludwig von Mises
8 min readSep 15, 2019
Liberty and Property
Ludwig von MisesT he pre-capitalistic system of production was [based on]
military conquest. The victorious kings had given the
land to their paladins. These aristocrats were lords in the lit-
eral sense of the word, as they did not depend on the patron-
age of consumers buying or abstaining from buying on the
market. On the other hand, they themselves were the main
customers of the processing industries which under the guild
system were organized on a cooperative basis.
This scheme was opposed to innovation. It forbade devia-
tion from the traditional methods of production. The num-
ber of people for whom there were jobs even in agriculture or
in the arts and crafts was strictly limited. Under these condi-
tions, many a man, to use the words of Malthus, had to dis-
cover that at “nature’s mighty feast there is no vacant cover
for him,” and that “she tells him to be gone.” But some of
these outcasts nevertheless managed to survive, begot chil-
dren, and made the number of the destitute grow hopelessly
more and more.
But then came capitalism.
It is customary to see the radical innovations that capital-
ism brought about as substitution of the mechanical factory
for the more primitive and less efficient methods of artists
and shops. This is a rather superficial view. The characteristic
feature of capitalism, that distinguishes it from pre-capitalistic
methods of production, was its new principle of marketing. [MISES, 57]Capitalism is not simply mass production, but mass pro-
duction to satisfy the needs of the masses. The arts and crafts
of the good old days had catered almost exclusively to the
wants of the well-to-do. But the factories produced cheap
goods for the many. All that the early factories turned out
was designed to serve the masses, the same strata that worked
in the factories. They served them either by supplying them
directly, or indirectly by exporting, and providing for them
foreign food and foreign raw materials.
This principle of marketing was the signature of early cap-
italism as it is of present day capitalism. These employees
themselves are the customers consuming the much greater
part of all goods produced. They are the sovereign customers
who are always right. Their buying or abstention from buy-
ing determines what has to be produced, in what quantity,
and of what quality. In buying what suits best they made
some enterprises profit and expand and made other enterprises
lose money and shrink. Thereby they are continually shifting
control of the factors of production into the hands of those
businessmen who are most successful in filling their wants.
Under capitalism, private property of the factors of pro-
duction is a social function. The entrepreneurs, capitalists,
and land owners are mandatories, as it were, of the consum-
ers, and their mandate is revocable. In order to be rich it is
not sufficient to have once saved and accumulated capital. It
is necessary to invest it again and again in those lines in
which it best fills the wants of the consumers. The market
process is a daily repeated plebiscite, and it ejects inevitably
from the ranks of profitable people, those who do not employ
their property according to the orders given by the public.
Big business, the target of fanatical hatred on the part of
all contemporary governments and self-styled intellectuals,
acquires and preserves bigness only because it works for the
masses. The plans that cater to the luxuries of the few, never
attain big size. [MISES, 58]The shortcoming of 19th-century historians and politicians was that they failed to realize that the workers were the
main consumers of the products of industry. In their view, the
wage earner was a man toiling for the sole benefit of a para-
sitic leisure class. They labored under the delusion that the
factories had impaired the lot of the manual workers. If they
had paid any attention to statistics, they would have easily
discovered the fallaciousness of their opinion. Infant mortal-
ity dropped. The average length of life was prolonged. The
population multiplied, and the average common man en-
joyed amenities of which even the well-to-do of earlier ages
did not dream.
However this unprecedented enrichment of the masses
was merely a by-product of the industrial revolution. Its main
achievement was the transfer of economic supremacy from
the owners of land to the totality of the population. The
common man was no longer a drudge, who had to be satis-
fied with the crumbs that fell from the tables of the rich. The
three pariah castes which were characteristic of the precapi-
talistic ages— the slaves, the serfs, and those people whom
patristic and scholastic orders, as well as British legislation
from the 16th through the 19th century, referred to as the
poor— disappeared. Their scions became, in this new setting
of business, not only free workers, but also customers. This
radical change was reflected in the emphasis laid by business
on markets. What business needs first of all, they repeated
again and again, is markets and again markets. This was the
watchword of capitalistic enterprise.
Markets mean patrons, buyers, consumers. There is
under capitalism one way to wealth: to serve the consumers
better and cheaper than other people do. But in the shop and
factory, the owner— or in the corporations, the representative
of the shareholders, the president— is the boss. The master-
ship is merely apparent and conditional. He is subject to the
supremacy of the consumer. The consumer is king — the real boss— and the manufacturer is done for if he does not out-
strip his competitors in best serving the consumers. It was
this great economic transformation that changed the face of
the world. . . .
What vitiates entirely the socialist economic critique of
capitalism is its failure to grasp the sovereignty of the con-
sumers in the market economy. They see only hierarchical
organization of various enterprises and plans, and are at a
loss to realize that the profit system forces business to serve
the consumers.
In their dealings with their employers, the unions proceed
as if malice and greed prevent what they call management
from paying higher wage rates. Their shortsightedness does
not see anything beyond the doors of the factory. They and
their henchmen talk about the concentration of economic
power, and do not realize that economic power is ultimately
vested in the hands of the buying public, of which the em-
ployees themselves form the immense majority. Their inabil-
ity to comprehend things as they are, is reflected in such
inappropriate metaphors as industrial kingdoms and duke-
doms. They are too dull to see the difference between a sover-
eign king or duke who could be dispossessed only by a more
powerful conqueror, and the chocolate king who forfeits his
kingdom as soon as the customers prefer to patronize
another supplier.
This distortion is at the bottom of all socialist plans. If any
of the socialist chiefs had tried to earn his living by selling
hot dogs, he would have learned something about the sover-
eignty of the consumers. . . .
Socialism substitutes the sovereignty of the dictator, or
committee of dictators, for the sovereignty of the consumers.
. . . Freedom is indivisible. He who has not the faculty to
choose among various brands of canned food or soap, is also
deprived of the power to choose between various political
parties and programs and to elect the office-holders. He is no longer a man; he becomes a form in the hands of the supreme
social engineer. . . .
The socialists have engineered a semantic revolution in
converting the meaning of terms into their opposite. . . .
Freedom implies the right to choose between assent and dis-
sent. But in Newspeak it means the duty to assent uncondi-
tionally, and the strict interdiction of dissent. This reversal of
the traditional connotation of all words of the political ter-
minology, is not merely a peculiarity of the language of the
Russian communists, and their fascist and Nazi disciples. The
social order that in abolishing private property deprives the
consumers of their autonomy and independence, and there-
by subjects every man to the arbitrary discretion of the cen-
tral planning board, could not win the support of the masses
if it were not to camouflage its main character.
The socialists would have never duped the voters if they
had openly told them that their ultimate end is to cast them
into bondage. For exoteric use, they were forced to pay lip-
service to the traditional appreciation of liberty. It was differ-
ent in the esoteric discussions among the inner circles of the
great conspiracy. There the initiated did not dissemble their
intentions concerning liberty. . . .
Freedom is to be found only in the sphere in which govern-
ment does not interfere. Liberty is always freedom from the
government. ... In a free country nobody is prevented from
acquiring riches by serving the consumers better than they are
served already. What he needs is only brains and hard work.
. . . Economic power, in the market economy, is in the hands
of the consumers. . . . But the politicians and other would-be
reformers see only the structure of industry as it exists today.
They think that they are clever enough to snatch from busi-
ness control of the plans as they are today, and to manage
them by sticking to already established routine. But the ambi-
tious newcomer, who will be the tycoon of tomorrow, is
already preparing plans for things unheard of before. All they
have in mind is to conduct affairs along tracks already beaten.
There’s no record of an industrial innovation contrived
and put into practice by bureaucrats. If one does not want to
plunge into stagnation, a free hand must be left to those, the
unknown men, who have the ingenuity to lead mankind for-
ward on the way to more and more satisfactory conditions.
. . . Private property of the material factors of production is
not a restriction of the freedom of all other people to choose
what suits them best. It is, on the contrary, the means that
assigns to the common man, in his capacity as a buyer,
supremacy in all economic affairs. It is the means to stimulate
a nation’s most enterprising men to exert themselves to the
best of their abilities in the service of all of the people. . . .
It is a gratuitous pastime to belittle the material achieve-
ments of capitalism by observing that there are things that
are more essential for mankind than bigger and speedier motor-
cars, and homes equipped with central heating, air condi-
tioning, refrigerators, washing machines, and television sets.
. . . It is not the fault of capitalism that the masses prefer a
boxing match to a performance of Sophocles’s Antigone, jazz
music to Beethoven symphonies, and comics to poetry. But it
is certain that by precapitalistic conditions, as they still prevail
in the much greater part of the world, makes these goods things
accessible only to a small minority of people. Capitalism gives
to the many a favorable chance of striving after them. . . .
We are inaugurating tonight the ninth meeting of the
Mont Pelerin Society. It is fitting to remember on this occa-
sion that meetings of this kind in which opinions opposed to
those of the majority of our contemporaries and to those of
their governments are advanced, are possible only in the
climate of liberty and freedom that is the most precious mark
of Western civilization. Let us hope that this right to dissent
will never disappear.*
*The Institute thanks Margit von Mises for her gracious permission to print ex-
cerpts from this 1957 talk. ed.
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