'..Therefore, the meaning of private ownership in the capitalistic system is entirely different from the meaning of private ownership in the feudal system.
Critics of private ownership are still living mentally in the Middle Ages (like critics of interest and creditors). They don’t realize that the market determines every day who should own what and how much he should own. The market gives ownership to those people who are best fitted to use the means of production for the best possible satisfaction of the needs of the consumers..'<blockquote>'Past profits shift the ownership of the means of production from the hands of those who were less efficient in using them in the eyes of the public into the hands of those who are expected to be more efficient. Therefore, the meaning of ownership of the means of production is very different in a system based on the division of labor from its meaning in a feudal system. In a feudal system, private ownership was acquired by conquest or by the arbitrary appropriation of pieces of land. The proprietor was the conqueror; the supreme conqueror was the head of the army, the king, the “Führer.” Other people acquired private property as gifts from the supreme lord. There was a whole hierarchy—kings, dukes, knights, and so on, and at the bottom were the people with no property. The dukes and knights could lose their property by being deprived of their “gift” by the higher authority—the king—revoking his gift; or they might be defeated by a successful conqueror. This system prevailed until capitalism replaced it to varying degrees in many countries.
If you study the history of private ownership in land you can, of course, go back either to conquest or to appropriation of ownerless property by somebody. From this point of view, the older critics of private ownership said property does not have a legal origin; it was acquired by might, by conquest, without any legal basis. Hence, they say they want to take it away from the current private owners and give it to everybody. Whether the origin described here is right or wrong is one question. Another question is what to do now that property is privately owned.
The socialists took over this critique of the origin of property without realizing the enormous difference that existed between then and now. If you say that in the old days the owners of land did not depend on the market, that is true; there was no market; there was only an insignificant amount of trade.The feudal lord had only one real way to spend his great income in the products of the earth—to retain a great retinue of armed men in order to fight his battles.The court of a feudal lord consisted of an enormous household in which many people lived (boarders I would say), supported by the great estate. In Brandenburg in Berlin, for instance, there was one case of a councilor in the sixteenth century who was living in the king’s household. This is very different from the conditions in the market economy.
In the market economy, private ownership is, as it were, a social function because it can be retained and enlarged only by serving customers in the cheapest and best possible way. Those who do not know how to serve consumers in the cheapest and best possible way suffer losses. If they do not change their methods of production in time they are thrown out of their positions as owners, entrepreneurs, capitalists, and shifted to positions in which they no longer have entrepreneurial and capitalistic functions. Therefore, the meaning of private ownership in the capitalistic system is entirely different from the meaning of private ownership in the feudal system.
Critics of private ownership are still living mentally in the Middle Ages (like critics of interest and creditors). They don’t realize that the market determines every day who should own what and how much he should own. The market gives ownership to those people who are best fitted to use the means of production for the best possible satisfaction of the needs of the consumers.Therefore it is not correct to criticize the institutions of private property by citing conditions as they existed in the early days under feudal conditions, under absolute kings.
As President Franklin Roosevelt [1882–1945] said, capitalism has never been really tried.1 There always remains something from the old days. But it is absolutely useless to tell us today, “Look how the wealth of many aristocratic families originated in the seventeenth century.” Some modern wealthy people may be descendants of wealthy aristocratic families, but what has that to do with the situation today? The Prussian Junkers were still privileged in the nineteenth century and early twentieth century; they could retain their property only because the whole apparatus of the imperial government was glad to preserve them, to protect them, and to prevent consumers from putting persons in their places who were better equipped to serve consumers.
We must realize that every governmental measure that lowers the amount of profit successful enterprises can make or which taxes away their profits is a measure that weakens the influence of the consumers over producers. For example, the great industrial fortunes of the nineteenth century were acquired by successful innovators in their business. Henry Ford [1863–1947] started with almost nothing; he made enormous profits which were plowed back in his enterprise; in this way over a comparatively short time he developed one of the biggest fortunes of the United States. The result was that something quite new happened, mass production of utomobiles for the masses. At the beginning of the twentieth century there were some successful motor cars. The French Renault cost about $10,000 in gold; it was a luxury car for a few very rich men. The activities of Ford and of some other people made the motor car something for everybody. In this way great fortunes were developed. The great department stores and the great factories developed in this way. But now this cannot happen. If a man starts a small enterprise and makes huge profits, the greater part of this profit is absorbed by taxes. However, there are still some loopholes. If you have a good accountant you may avoid being expropriated 90 percent and may be expropriated only 70 percent. But the greater part of the profits which would have been reinvested are taken by the government and spent for current expenses.
In the case of department stores, formerly an old store had to compete for potential new consumers with new competitors. Today this is no longer the case. The small man will never develop into a big store because his profits are taken away by the government. It is true that the old and new stores operate under the same laws; the large old store also has to pay high income taxes. But the old store has already accumulated the capital needed for a big business, while the new man is prevented from accumulating the capital needed to expand into a big-scale enterprise. The consequence, therefore, is that the competitive spirit could easily disappear from the management of the big store. Without any danger to the old store in the conduct of its affairs, the old store may sometimes become “lazy.”
There are people who say capitalism is dying because the spirit of competition no longer exists as it used to and because great enterprises become bureaucratic. But capitalism is not dying; people are murdering it. There is a difference between dying by a disease that finally results in death and dying as a result of assault and assassination. It is fantastic to use as an argument against capitalism the fact that the competitive spirit in business is weakening and that businesses sometimes become bureaucratic. This is precisely due to the fact that people are fighting against the capitalistic system and don’t want to tolerate the institutions that are essential for its existence.Therefore, I must say something about the difference between profit and loss under business management on the one hand, and bureaucratic management on the other hand.'
- Ludwig von Mises,
Marxism Unmasked, page(s), 97, 98, 99
1 [“A program whose basic thesis is, not that the system of free enterprise for profit has
failed in this generation, but that it has not yet been tried.” F. D. Roosevelt, as quoted in
Chapter 1, Friedrich A. Hayek,
The Road to Serfdom (Chicago: University of Chicago
Press, 1944), p. 10.—Ed.]</blockquote>