Professor von Mises begins section four of his book by stressing the importance of a market economy and private property rights to the development of a prosperous and happy society.
The liberal doctrine sees in the market economy the best, even the only possible, system of economic organization of society. Private ownership of the means of production tends to shift control of production to the hands of those best fitted for this job and thus to secure for all members of society the fullest possible satisfaction of their needs.
It makes nations and their citizens free and provides ample sustenance for a steadily-increasing population.He then acknowledges that in order to protect the contracts and the property of those citizens who are going about, participating in the market economy, from criminals within and enemies without, governments must be formed. In order to be able to enforce the laws which protect citizens, governments must be able to use force to punish aggression and deter attacks. But then there is a danger. How to keep those who are entrusted with the functions of government from turning their weapons, their instruments of compulsion and deterrence, against their own citizens. That, says Ludwig von Mises, is the essential theme of Western civilization.
Defence of the individual's liberty against the encroachments of tyrannical governments is the essential theme of the history of Western civilization. The characteristic feature of the Occident is its peoples' pursuit of liberty... All the marvellous achievements of Western civilization are fruits grown on the tree of liberty.Economic organization based on private property and a free market may indeed "secure for all members of society the fullest possible satisfaction of their needs", but it will not provide everyone with everything. Every person, to varying degrees according to their wealth, must still make choices about which needs they choose to fulfill. This is the very nature of the science of economics, which the aforementioned Lionel Robbins defined this way: Economics is the study of the use of scarce resources which have alternative uses. The reality of life is that there has never been enough to satisfy everyone completely. The place where every person is completely satisfied is not the Earth that we know, it is the Garden of Eden, where bad stuff went down despite the heavenly abundance. It is this essential aspect of life that governments, through their monetary policies, have attempted to suspend, at first, I will be charitable, out of concern for their fellow human beings, but lately out of concern only for the perpetuation and growth of their power over others. This is what Professor von Mises warned about. How does this relate to the gold standard? von Mises puts it this way:
It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.
The excellence of the gold standard is to be seen in the fact that it renders the determination of the monetary unit's purchasing power independent of the policies of governments and political parties. Furthermore, it prevents rulers from eluding the financial and budgetary prerogatives of the representative assemblies. Parliamentary control of finances works only if the government is not in a position to provide for unauthorized expenditures by increasing the circulating amount of fiat money Viewed in this light, the gold standard appears as an indispensable implement of the body of constitutional guarantees that make the system of representative government function.I would say it this way. The efforts and programs advanced by the progressive movement to improve society (so they say) and ameliorate suffering (so they say) have grown steadily since their first stirrings in the mid-1800s. Eventually they grew so large and costly that the financial restrictions imposed by the gold standard could no longer be tolerated, and so the gold standard was abandoned in order to pave the way for the inflation, credit expansion, and fiat money that would be used to pay for the programs that would not be supported by the citizens if they knew about, and were forced to pay their full cost. In the words of Professor von Mises:
It is not just an accident that in our age inflation has become the accepted method of monetary management. Inflation is the fiscal complement of statism and arbitrary government. It is a cog in the complex of policies and institutions which gradually lead towards totalitarianism.I'll go further. Over and over again we are bludgeoned with the message that greed and unfettered consumerism are the logical result of a capitalist system that rewards individual effort and self-interest. Greed and consumerism are not the fault of capitalism. Rather, it is the largely successful efforts of the progressive movement, funded by inflation and credit expansion, to prevent the citizens, rich, middle-class, and poor alike, from ever having to engage in that most necessary, most natural, most real of all human activities--making a choice. It is the suspension of hard choices--a big house or a small house, a big car or a small car, an iPhone or a flip phone, to earn food or go hungry--that has led to the greed and consumerism we are saddled with. The progressives have largely succeeded in their quest; they have borrowed and printed enough money to suspend want; they have given us our Garden of Eden. But just like the biblical version, this garden has its serpents, and so we must either leave of our own accord, or, like the citizens of bankrupt Greece, be cast out by forces beyond our control.