Section 4 of Chapter 15 of Mises’s Human Action is called “The Sovereignty of the Consumers.” Mises talks about the unhampered market economy and how that democracy, in which “every penny gives a right to cast a ballot,” might be more democratic than any government could ever hope to be. This passage got me thinking about these concepts, and how the state impedes them.
In the free market, Mises is right! Every dollar earned is done by free exchange of goods or labor. Each party to every transaction agrees voluntarily to the deal. Those dollars are a proof of service, a measure of the value one has provided to his fellow man. He who serves best, earns the most, to invest in his own or other businesses or to consume whatever goods he pleases.
Enter the state. In a world of hard money, the state uses its organized potential for violence to extort money from hardworking people. It spends the money (ostensibly) on the defense of its subjects, but, as a monopoly, it has no way to judge whether the way it is spending its loot is efficient or not–assuming it cares.
However, as far as the subjects are able to keep their hard-earned cash, they still have the right to cast votes on the market and direct production. The state can only get away with stealing a small amount of their wealth, so its footprint is limited, but now it’s growing.
The state, in its great beneficence, decides to outlaw the production or sale of certain goods or labor contracts. Now the consumers are far less sovereign. Men use guns to enforce a veto on certain types of production. The rest of the people now spend their money on things they enjoy less, but at least they still get to direct production in its limited possible directions.
Now, enter the fiat money standard. It is not shameful for the average man to neglect his studies of economics. Economics is a technical and specialized field. So the average man does not understand what it means to give the state the power to create paper money. The state prints more and more, and the average man finds that some goods he wants are now overpriced because of the blizzard of printed paper and the state’s desire to purchase certain items in huge quantities.
Not only that, but the state cultivates learned helplessness among the people and an intellectual class that gets paid from these recklessly printed bills. Now the people forget that they once educated themselves, that doctors were once free, and not wards of the state. They forget that these services were once provided by a market, and, even worse, there is a group of intelligent-sounding charlatans telling them that the improvements brought about by capital accumulation and technological progress are actually the result of state control.
Now, we have massive groups of people calling themselves economists and simultaneously demanding that the state print more and spend more to fund their pet projects. Each penny’s vote counts for less and less, and a whole class of professional jesters tells the people that that’s a good thing! More and more producers look to their friends in the state for orders on what to produce and how to produce it. And more and more goods land on prohibited lists.
Large companies use the levers of state to oppose the directives of consumers and produce things nobody wants. The state buys the unwanted goods or services in the name of “bailouts” and distributes them to other friends or to a public that finds them unsatisfying.
The average consumer believes the state’s lies and has practically no power to direct production. Many of the things he wants are illegal or monopolized by the state and its cronies.
Is he still sovereign?