Drakopoulos, Pan: Hayek and Wittgenstein
Moreover, Mises made a clean sweep of Hayek’s socialism. He was the one who taught him that the contrast between capitalism and socialism was a fake; the real contrast was between government intervention and the free market ; besides, it was central planning, both in socialist and capitalist regimes, which in general creates social backwardness. Mises also taught him that wherever there was a free market there were free people and truly democratic institutions.
Hayek’s apostolic zeal did not stem from passing of his socialism; Mises, however, was the first who noticed it. Relying on this young Doctor’s evangelist gift, Mises founded an Austrian Institute for Economic Research. At first, his protégé was his main collaborator and later on, in 1927, he promoted him to the rank of director.
The Institute was the institutional expression of the so-called `Austrian School of Economics’. This School was founded in 1871, when Carl von Menger published his book Principles on Economics putting forward new theories on value and prices and founding a new economic theory which advocated the deductive laws of social science. Eugen von Bohm-Bawerk was the second great figure of that School; he developed a pioneer model of relations between the rate of interest and the period of turnover of capital –a contributing factor in the well being of the people. He also produced exemplary criticism on Marx’s theories on capital and exploitation. And Bohm -Bawerk’s best student was Ludwig von Mises who established his reputation as a libertarian economist immediately after he published his first work in 1912.
I have noticed something that might have a certain meaning: all the members of that School, which was based on the principles of The Free Market and unhindered creative individualism, were all people of the nobility. It is also worth adding that in 1946 when Mises and Hayek decided to found an international organization which would promote their libertarian ideas, they collected many scientists from different countries in a castle near Montreux in Switzerland. They suggested that the organization be called the `Tocqueville-Acton Society’ honoring the two great libertarians: Alexis de Tocqueville and John Emerich Edward Acton, 1st Baron. But an American Professor rose to his full republican stature and threatened: “If the name of this Society is going to remind us of two aristocrats I am leaving in protest!
The two Viennese missionaries gave way with a flexibility that even a most enlightened Jesuit would envy and they promptly accepted the grotesque title `Mont Pelerin Society’ that someone present had proposed ( the name of the mountain where the castle in which they had been gathered stood).
They shoot horses, don’t they?’ Hayek was the director of the Institute at the time of the great economic crash of 1929. The world economy experienced an unprecedented collapse: yesterday’s substantial properties scattered to the winds, shares crashed breathtakingly, stock holders jumped out of windows, bank bills incinerated in a volcanic inflation, long queues of unemployed and starving people desperately asking politicians to do something . Government interventionism seemed to be the only hope of salvation for people who were not only losing their money, but their dignity as well.
Mises and Hayek saw clearly that now it was not going to be at all easy to speak of the free market; besides, they could not both be spending their energies and talents in Austria (which in any case had become marginalized after the fall of the Hapsburgs), fighting against a cataclysmic stream. They had not for a moment wavered in their convictions, but they realized that the days of the Institute were numbered.