The Limitations of Economic Laws

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Wanjiru Njoya
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A quotation from Die Transvaler in 1958, cited by Walter E. Williams in his book “South Africa’s War Against Capitalism,” illustrates a widespread misunderstanding about the nature and purpose of the laws of economics. The political choice to be made by Afrikaner nationalists during the apartheid years was whether to pay a price in terms of economic progress by rejecting free markets, freedom of association and contractual freedom as a trade-off necessary to safeguard white civilization as they saw it: “It is fortunate that under a Nationalist government these worshippers of economic laws have never had their way but that a higher and nobler goal has been strived after — the maintenance of white civilization.”

This reference to “worshippers of economic laws” misunderstands the nature and scope of economics as a value-free science. Economic laws, properly understood, cannot be the subject of worship. Economics cannot tell anyone what value to place on nationhood, racial identity or civilization. All economic laws can do is explain the function of factors such as division of labor, specialization and trade, all of which are essential to civilization. But it is no more possible to “worship” these laws than it would be to “worship” the law of gravity or Isaac Newton’s laws of motion. One can, of course, imagine a trade-off between further material progress and the desire to safeguard a people from extinction, which is implicit in the Afrikaner nationalist position described above. But where that balance should be struck, if at all, cannot be decided by reference to the laws of economics. This principle does not just apply to Afrikaners or to white people, but applies equally to any who may value their culture, as the economist Peter Bauer often explained. Anthony Daniels, who knew Peter Bauer, explains:

“That Peter’s thought was not unidimensional, let me mention here that he did not think of economic development as necessarily an unequivocal good, that people the world over ought to aim at single-mindedly. This is because there is rarely gain without loss, and people may, with reason, care more about their losses than for their gains. It is conceivable that attachment to the holy cow in India has at times retarded economic development, but only a monomaniac would be prepared to violate the sentiments of the great mass of the Indian population in increasing the GDP by a point or two: that is, on the doubtful assumption that there would be no political consequences of mass slaughter of the holy cow that would not retard economic life. If one were to learn that the construction of skyscrapers in the Vatican would promote Italian economic growth, who, other than a barbarian, would advocate it?”

The threat posed to peace and stability by nationalist fervor is always a concern in debates about Western civilization. The implications of economics as a value-free science are particularly pertinent in the context of political debates on border defense and immigration control because those who defend open borders and mass immigration often claim to be supporting free markets and economic productivity. Yet the laws of economics do not dictate the price that people must be willing to pay in their pursuit of economic growth. That is a matter of subjective or political opinion and cannot be found in any economic laws. All economic laws can do is tell us “whether the means chosen are fit for the attainment of the ends aimed at,” as Ludwig von Mises puts it in “Human Action.”

In “Liberalism,” Ludwig von Mises mentions nationalist fears — nowadays often referred to as “the great replacement” — as one reason why people might be opposed to free markets. This is because free markets and open trade imply the need for a further raft of economic policies that leave racial minorities under threat of losing their national identity and of having their race replaced by invading races. In such situations, as Mises explains:

“The entire nation, however, is unanimous in fearing inundation by foreigners. The present inhabitants of these favored lands fear that some day they could be reduced to a minority in their own country and that they would then have to suffer all the horrors of national persecution. ...

“… It is frightful to live in a state in which at every turn one is exposed to persecution — masquerading under the guise of justice — by a ruling majority. It is dreadful to be handicapped even as a child in school on account of one’s nationality and to be in the wrong before every judicial and administrative authority because one belongs to a national minority.”

The solution proposed by Mises is individual liberty and the limited state. Individual liberty ensures that people can uphold their moral or religious values within their own community, should they wish. Nobody would be entitled to force them to comply with “diversity, equity and inclusiveness.” They could school their children in whichever language and cultural values they wished. They could limit their community only to members of their own heritage, language, religion and culture, as did the Afrikaner founders of Orania — albeit that in the case of Orania, the emphasis is on cultural heritage and not race or skin color. The limited state would not interfere with such liberties. This is precisely the liberty for which many ancestors of the Afrikaners, such as the French Huguenot refugees who arrived at the Cape in 1671, fled Europe in the first place. Only such liberty would be compatible with upholding economic laws, namely as wide a scope as possible for the operation of free markets.

The reason why nationalists are suspicious of liberals, and often deeply hostile to them, is the determination of modern liberals to wield state force in coercing everyone to uphold what they see as liberal values, such as DEI. If the state is enforcing DEI as “our shared values,” then it seems to nationalists that the only solution is to seize control of the state through the democratic process and abolish DEI. This solution is of course not available to racial minorities, who have little to no chance of ever acquiring control of the state in a democracy. They are compelled to suffer the oppression to which Mises refers, and in these circumstances, it is easy to see why the nationalist government in apartheid South Africa would view it as essential for Afrikaners to retain control of the state even if this came at a cost to the economy. For example, the nationalist government regarded paying higher wages for white labor than it would have to pay for black labor as a price worth paying for “the maintenance of white civilization.”

In “Liberalism,” Mises explains that liberals who coerce the populace through democratic control are wrong. They have failed to understand the meaning of liberalism. Despite having commandeered the term “liberal” to their cause, they have failed to grasp the fact that liberalism does not seek to create an ideal society (ideal in the opinion of self-styled liberals) and force everyone to live what liberals have identified as the “good life.” As Mises explains, liberalism “does not promise men happiness and contentment, but only the most abundant possible satisfaction of all those desires that can be satisfied by the things of the outer world.” This is accomplished through a defense of private property, not by dictating people’s moral or cultural values.

The notion of leaving everyone free to associate or not associate with whom they will is considered by progressives to be a weakness of liberalism. Progressives consider it important to nudge everyone toward “doing better.” They look to socialist ideals for insight into eradicating inequality and making life more meaningful for everyone through state enforcement. The banner of “liberalism” is now borne aloft by those who claim to offer succor to the mind and soul by building a utopia in which everyone will feel “welcome and included” and in which everyone can aspire to “deeper and nobler” ideals such as cosmic justice and communing with Mother Earth. Liberals today, like all devout socialists, promise utopia and nirvana, as Mises explained:

“Socialist authors promise not only wealth for all, but also happiness in love for everybody, the full physical and spiritual development of each individual, the unfolding of great artistic and scientific talents in all men, etc. Only recently Trotsky stated in one of his writings that in the socialist society ‘the average human type will rise to the heights of an Aristotle, a Goethe, or a Marx. And above this ridge new peaks will rise.’ The socialist paradise will be the kingdom of perfection, populated by completely happy supermen. All socialist literature is full of such nonsense. But it is just this nonsense that wins it the most supporters.”

Mises cautions that on that basis, progressives offer nothing less than a secular form of mortal salvation:

“Just as the devout Christian could more easily endure the misfortune that befell him on earth because he hoped for a continuation of personal existence in another, better world, where those who on earth had been first would be last and the last would be first; so, for modern man, socialism has become an elixir against earthly adversity.”

Mises insists that these fake liberals are misguided on both the nature of liberalism as well as the function of economics. In his view, “One cannot understand liberalism without a knowledge of economics. For liberalism is applied economics; it is social and political policy based on a scientific foundation.” No surprise, therefore, that those who fail to understand liberalism also fail to understand what they can expect from economic laws. They seek from economic policy what economic science cannot yield. As Mises insists, social and economic policy “can never succeed in making them happy or in satisfying their inmost yearnings. ... All that social policy can do is to remove the outer causes of pain and suffering.” Economic policy can only promote the material well-being of society through productivity by showing the path to greater productivity: “As against the isolated action of individuals, cooperative action on the basis of the principle of the division of labor has the advantage of greater productivity.”

Progressives dismiss value-free economic laws as too materialistic. They regard it as a failing of economics, as indeed of liberalism, that it does not concern itself with the goals to which we ought to aspire but simply with the appropriate means to adopt in pursuit of material well-being. They regard any social policy that does not make fine promises to create inner happiness as inadequate. As Mises explains:

“Liberalism has often been reproached for this purely external and materialistic attitude toward what is earthly and transitory. The life of man, it is said, does not consist in eating and drinking. There are higher and more important needs than food and drink, shelter and clothing. Even the greatest earthly riches cannot give man happiness; they leave his inner self, his soul, unsatisfied and empty. The most serious error of liberalism has been that it has had nothing to offer man’s deeper and nobler aspirations.”

Mises’ point is that inner happiness, by its very nature, cannot be created through social or economic policy as modern liberals promise. This is why liberalism confines itself to material well-being and desists from making false promises about spiritual redemption. Mises writes:

“It is not from a disdain of spiritual goods that liberalism concerns itself exclusively with man’s material well-being, but from a conviction that what is highest and deepest in man cannot be touched by any outward regulation. It seeks to produce only outer well-being because it knows that inner, spiritual riches cannot come to man from without, but only from within his own heart.”

Mises also addresses the strategic and terminological debate about using the term “liberalism,” as it is not much use clinging to a term that now means the precise opposite of its true meaning, but abandoning the term altogether risks losing a whole intellectual tradition and heritage. Moreover, endlessly screaming “that’s not true liberalism!” at socialists is rather pointless, as socialists cannot be banned from using whichever labels they want. Moreover, as Mises clearly reveals in his critique of John Stuart Mill, a large part of the corruption of liberalism is inherent in liberalism itself — a point that has also been made by scholars such as Paul Gottfried. The debate on whether liberalism is to blame for socialism is not easy to resolve, but what is clear is that liberalism, in the sense explained by Mises, does not purport to dictate one’s opinions on nationalism or racial identity. Moreover, as Murray Rothbard discusses in “Nations by Consent,” support for free markets does not require support for open borders. People can debate whether to open their borders or not, but should they choose to abandon border defense and suffer their national identity to be erased, they cannot blame free markets or free trade for that.