MISES IN THE USA AND MEXICO
Mises knew that it would be hard for him to find a suitable position in the United States — fortunately he had no idea just how hard. He was thoroughly out of step with positivism or, as he called it, pan-physicalism, which had begun to shape the development of American economics during the past two decades, and which at the very moment he arrived on American shores, was being promoted with large grants from the Rockefeller Foundation, among others. And his political views were of course also highly unfashionable. In the land of the free — the very cradle of radical laissez-faire policies — the philosophy of the founding fathers of the American republic was all but dead in 1940. A few years later, one correspondent summed up the situation:
Dickens, Carlyle, Coleridge, Charles Kingsley, Charlotte Bronte, Byron, Hood (The Song of the Shirt), Elizabeth Barrett Browning and a host of others are still remembered and read today by millions, while the works of Adam Smith, Malthus, Ricardo, McCulloch, and Mill lie undusted except by scholars.[1]
The contemporary American intellectual world was deeply anticapitalistic. How could a man like Mises integrate himself into such an environment?
On August 3, 1940 the ship docked in New York City. Mises had not been there since 1931 when he had attended a conference of the International Chamber of Commerce in the midst of the Great Depression. In that year, he had come as a distinguished representative. Now he arrived almost empty-handed. Fifty-eight years old, he had to start his life anew. The worst year of his life lay ahead.
Friedrich Unger had booked them a room, and Alfred Schütz was waiting for Ludwig and Margit at the dock. Their happiness upon seeing him was short-lived. Schütz had the unpleasant task of delivering a letter from Robert Calkins, the dean of UC Berkeley, who told Mises that the school had no budget to hire him. They could raise some money in the form of a stipend, but this would be modest, and Calkins would therefore understand if Mises chose to accept a more attractive position elsewhere.[2] A few days later, Howard Ellis wrote from Berkeley thanking Mises for sending a copy of Nationalökonomie and wishing him good luck. And that was it for UCLA.
Machlup wrote from California, where he had met Dean Calkins, and recommended that Mises get in touch with the Rockefeller Foundation regarding a position at UCLA. In many other cases, the Foundation had facilitated the transition of émigré scholars by cosponsoring chairs for them. This, Machlup believed, should be no problem in the present case. Mises thus decided not to go to Berkeley and spoke to his friends at the Foundation, and they gave him the green light by August 15. All hope was now on Machlup to work something out. But to Mises's great disappointment, the attempt failed.
| "Fifty-eight years old, he had to start his life anew. The worst year of his life lay ahead." |
What should they do now? Ludwig and Margit decided to stay in New York for the time being, where many of their European friends and acquaintances had also found refuge under similar conditions. They had already found suitable accommodation in a hotel. The next step was incomparably more difficult: finding new sources of income. Without the job at Berkeley and with many of his assets frozen in Europe, Mises could count the days until his money would run out. He hoped to find academic employment in New York or elsewhere, but there was not much of a job market for economists. A few years later, the G.I. Bill would create a panoply of new positions for professors in colleges and universities, but in 1940 there were only a few full-time positions available. It is true that the federal government had started hiring economists for New Deal agencies such as the National Resources Planning Board, and after the United States entered World War II in December 1941, federal employment became a boon for economists.[3] But Mises had already been found unsuitable for government employment in World War I in his native Austria, at a time when he was far less infamous as an opponent of interventionism. Imagine Mises in the U.S. Office of Price Administration, working under the young John Kenneth Galbraith, or with Milton Friedman in Columbia University's Statistical Research Group, working out the technical details of the withholding tax that Friedman had just invented.[4] Many European expatriates — among them many former Mises students and associates such as Fritz Machlup, Oskar Morgenstern, and Abraham Wald — were accepted into wartime government service. But Mises had to go private or he would go nowhere.[5]
To get into the private market for economists would take time, however, and time he did not have. It is true he enjoyed an excellent international reputation as a theoretician, but he lacked demonstrated experience in the American economy and he was about to turn fifty-nine.[6]
Nevertheless he had to find a job. He used his old contacts to arrange talks at various organizations in New York. On November 7, for example, he addressed the Banking Seminar of Columbia University's School of Business on the problem of "Post-War Reconstruction of Europe."[7] Two weeks later, he gave a presentation on his contributions to economic theory before the NYU department of economics. He lectured at Princeton University on December 19 and at the turn of the year attended a meeting of the American Economic Association in New Orleans.[8] And on February 11, 1941, he gave a talk to the exclusive Accountants Club of America in the Perroquet Suite of Manhattan's Waldorf-Astoria hotel. The invitation came from John T. Madden, the dean of NYU's school of commerce, who also told him that for the first time ever, the Club had consented to pay an honorarium ($50). The subject of the talk was postwar economic conditions in Europe. The Club did not seem to be under the spell of academic economists, for it advertised the talk by pointing out that Mises, "although [!] one of the leading economists of the world, is noted for his practical viewpoint and his ability to express himself in terms intelligible to the layman."[9] Mises produced the usual result in his audience. One participant recalled that it was "the clearest, soberest and most thought provoking analysis that I have heard" and arranged a follow-up meeting with Mises to continue the discussion.[10]
His other presentations produced similar results.[11] The vigorous intellectual from Vienna impressed his audiences, but none of these appearances led to anything resembling a contract. The situation was desperate. However, one good side effect of these activities was to make him better known among like-minded intellectuals and businessmen.
 Henry Hazlitt |
Of course Mises also sought direct contact with ideological allies and potential allies. The most important case in point was Henry Hazlitt (1894–1993), who a few years before had written a very favorable book review of Socialism, stating that Mises had "written an economic classic in our time."[12] Hazlitt later recalled how they met in New York:
Sometime in 1940 I got a telephone call. The voice on the other end said "This is Mises speaking." As I've told many of my friends since, it was as if someone had called and said, "This is John Stuart Mill speaking." I had referred to Mises as "a classic," and you don't expect a classic to call you on the telephone! Anyway, that led to our acquaintance.[13]
It was August 1940. Hazlitt had a weekly column in the Times and a few months later he brought Mises onboard.
Hazlitt might well have been Mises's first close American friend. Benjamin Anderson had moved to Berkeley, and Seligman had died in 1939. During the first years in the new world, Mises in his social life could rely largely on friends and acquaintances from the old world. Manhattan had become the nexus of European opposition elites trying to survive the war years on the American side of the Atlantic. Politicians, academics, artists, entrepreneurs, and bankers whose lives were not secure under the Nazi regime had chosen New York as their safe harbor.[14] Naturally, most of these people had a bourgeois or upper-class background, and many were Jews. Ludwig and Margit were certainly amazed when they discovered how many friends, colleagues, students, and even relatives had found their way to Manhattan: the Ungers, the Geiringers, the Schüllers, the Kleins, the Kallirs, the Fürths, the Schuetzes, the Hulas, Eric Voegelin, Felix Kaufmann, Emmanuel Winter, Emmanuel Winternitz, Robert Michels, Engel-Janosi, and many others. In fact, Mises could have resumed his old private seminar: all of its members were in New York City! Even his Vienna family doctor was there.[15]
Many other people, among them his closest friends from Vienna, had not made it. During the coming weeks and months, news of their terrible fates made it to New York. Emil Perels and his wife died in a German concentration camp.[16] Ludwig Bettelheim-Gabillon was first separated from his family and forced to reside in a mass residence in Vienna; he was later deported and never seen again.[17] Viktor Graetz had died after the Anschluss, and only his wife Emmy had managed to emigrate to the States.[18] Ewald Pribram and his wife had committed suicide when they could not leave Belgium.[19]
There was still no news from Margit's daughter, Gitta, and the Miseses went through months of apprehension about her fate. By April 1941, however, they knew that she was secure in the company of Louis Rougier's stepson and on her way to America. By that time, Margit's mother too resided in New York.[20]
Mises established contact with Austrian political expatriates. After about a year in exile, he became more formally involved in the work of various Austrian exile organizations, which mushroomed after the United States entered the war in December 1941. From the beginning, Mises was often asked for help — by friends, acquaintances, and often people who only knew him indirectly. In many cases, these were former students or employees who had no records from Europe. He patiently wrote letters of recommendation and certificates of class attendance, and in some cases, this was instrumental in providing them with a job.[21] He also tirelessly wrote letters of support and made other efforts to help those who had not yet made it to the safe haven of America.[22]
The letters that Machlup and a few others wrote for Mises did not bring the desired result. He must have started to envy Hayek, who wrote from London of business as usual, or almost:
Although the German planes have become a nuisance during the last week or so and there is of course a small chance that one may be hit by a stray bomb, one gets very soon used to this and it does not really affect normal life. We are comfortable and I am carrying on with my work as always and if things do not change very much indeed there is no reason why this should not go on.[23]
Mises too would have had the nerves to live under occasional bombings, but he could not live indefinitely without income, as his funds were running out. He had some money in the United Kingdom, revenue from the sale of his books, which could keep him going for some more weeks or months. Hayek managed his bank account in England, but wartime foreign exchange controls made it impossible to transfer these sums out of Britain, and it was only a matter of time until it would become impossible to withdraw anything from the account. It was however possible to export commodities, and thus Hayek entered the book merchant business. He withdrew the money from Mises's account and started buying precious books — among them a first edition of the Wealth of Nations and two sets of the complete works of Jeremy Bentham — which he then forwarded to Mises through Haberler in Harvard. This would certainly not have been efficient in normal times, but under the circumstances it was the only way to get any money out of the country.[24]
National Bureau of Economic Research
The New School for Social Research had absorbed many social scientists from Central Europe, and even some of Mises's associates such as Richard Schüller. Mises never received an offer. Hayek received one in August 1940, but declined out of loyalty to his colleagues at LSE.[25]
Eventually it would once again be the Rockefeller Foundation that would fund Mises. Joseph H. Willits, who at the time headed the Foundation's social sciences division, signed a $2,500 grant to the National Bureau of Economic Research to put Mises on its payroll for one year starting December 15, 1940.[26] The stipend was less then a third of his salary in Geneva, but given the circumstances Mises would have been satisfied to find anything at all.[27]
Mises's contacts with other NBER economists seem to have been ephemeral. He ran a seminar at NBER's Hillside offices but found it uninspiring. To Hayek he wrote:
My seminar is going on. Last week M. [Machlup?] and L. [Lutz?] took part. I think that their impression was that it is still far below the Stubenring standard. But everything takes time.[28]
It turned out, however, that he did not have the time to build up a group of permanent participants as in Vienna. All of the attending students were quickly absorbed in government jobs — the war years were a strong growth period for the federal government, which hired thousands of young graduates all over the country.[29]
| ||||
During the first year at NBER, Mises continued to write in German, which few or none of his colleagues could read. He must have thought he would one day return to an academic position in Europe. But was there any real chance that this could happen? When he arrived in New York, this might have been his plan and his hope, but the prospect grew ever dimmer over the course of 1941.
His manuscripts were translated into English. The NBER officer responsible for handling publication matters, a certain Martha Anderson, also tried to find a translator for one of his book manuscripts — probably the original German manuscript of what was later published as Omnipotent Government. In November 1941, Anderson proposed Max Eastman for the job. Eastman was a New York journalist who had already translated Das Kapital. Mises replied that he would like to meet Eastman, and might have done so in Eastman's home in March 1942, but no professional relationship would come of it.
The money from the Rockefeller Foundation was not enough to live on, and in 1941 it was almost all the income they had. He had never known such destitution. His family had not been wealthy but they had always been comfortable, had always had help in the household. But now they could barely pay for a restaurant or for tickets to the theater or opera. Margit started training as a secretary.
Even more depressing was the ideological state of affairs in the very countries that were at present the bulwark against international Communism and National Socialism. Things had deteriorated considerably since his last trip to the States in 1931, when "progressive" interventionism was already at a previous high point. In the years of Roosevelt's New Deal, the political gospel preached from the press and the pulpits had shifted yet further to the left. The Soviet Union was now held in high regard and Communistic schemes were discussed seriously, while the free market was derided as an atavism of an unenlightened past. It was only a matter of time before the United Kingdom and the United States would become fascist or Communist or some variant thereof. Was this a future worth dying for? Without hope for the future, was it worth living in the present? Where were the voices of dissent, except for a scattered few like Henry Hazlitt and Lawrence Fertig? Where were the economists with enough backbone to resist the Keynesian temptation — the very embodiment of statist longings? How long could his disciples hold out, insecure as they were in their status as émigrés?
It was at this point that Hayek, to whom he must have confided his desperation, reassured him that he "need have no fear about my becoming converted to Keynesianism" — though for Hayek too the future looked bleak:
I agree entirely with what you say about the horrible state of economic thinking here and in the U.S.A. That at the present time when one can at least have some hope for the immediate future the long run outlook should be so dark is really dreadful.[30]
Mises did not believe he could contribute to turning the tide. His career was in a deep slump. He was completely at odds with the prevailing scientific fashions in the United States and he saw no way to have any impact on public opinion. Ironically, one factor that barred him from reaching an audience through his writings was that U.S. publishers strictly aimed at the mainstream. The greatest champion of capitalism could not make himself heard because in a world dominated by the statist ideology his books did not seem profitable enough to enjoy the support of commercial publishers. He wrote to Hayek:
I have been very busy these last months in writing my posthumous works. I do not believe that it will be possible for me to publish anything other than small articles in periodicals.[31]
Mises reached an absolute low point in April 1941. Margit had been ill since early March — a flu and sinus troubles — to the point that she could not even bring herself to keep up her diary. Mises, usually extremely discreet about his emotions, lamented in a letter to Hayek: "Margit is not yet totally recovered. The thing seems interminable."[32] It was also quite impossible to cheer her up because she was still anxious about the fate of her daughter. Thus he was left alone with his sorrows and apprehensions. He had left Switzerland because he refused to depend entirely on the goodwill of one party, the Swiss government. But in the United States he fared no better. All his money came from the Rockefeller Foundation, which made it clear to Mises what his status was now. While left-wing lunatics and the cranks of the imaginary science of quantitative economics received lucrative contracts with the New School of Social Research, Mises had to live on the equivalent of a post-doctoral stipend. And he was made to understand that even this amount was not meant as compensation for his service to economic science, but as something between a pension and charity for an old man who could not get along otherwise.
Mises was not a man to attach too much importance to material things. He once told Margit that, if she was after riches, she had married the wrong man. But neither was he the type of intellectual that Ayn Rand depicted in her novel Atlas Shrugged: the libertarian philosopher who in dire straits would descend stoically from his chair at the university to work behind the counter of a small-town burger joint. Had Mises ended up flipping hamburgers, his heart would have broken. And what would have happened to economics, the Austrian School, and human liberty if Mises had had to give up intellectual work? He had not yet published a single piece written in English. He had not yet encountered even one of his later-famous American students. He had left the world a revolutionary treatise on economics that nobody could read during the war, and which nobody would care about when the war was over. Mises would have remained an important figure in the history of economic thought, but the laissez-faire Austrian School would never have come into being.
* * *
These darkest days were not without some good news, even though it may have seemed insubstantial at first. Henry Hazlitt had brought Mises in touch with the New York Times, and in March 1941 Mises wrote his first editorial.[33]
| "What would have happened to economics, the Austrian School, and human liberty if Mises had had to give up intellectual work?" |
In May 1941, he took part in the meetings of a group closely associated with the Austrian-American League. The group included Dietrich von Hildebrand, Richard von Schüller, Raoul Auernheimer, Erich Hula, and Otto Kallir (Nirenstein). The front man in the League was von Hildebrand, but the organizational driving force was the secretary, Otto Kallir, who had probably brought his cousin Mises on board. In June 1941, Mises and other members of this group formed the Austrian Committee to promote the independence of Austria after the end of the war. Leadership lay apparently in the hands of Richard von Schüller. Most members of the Committee were at least sympathetic to the prospect of reestablishing a monarchy in Austria. This alone would have been a decisive stumbling block for the cooperation of the Committee with Austrian expatriates of republican convictions, especially with the social democrats.[34] They still could not agree on the fundamental principle of Austrian independence. They still pursued the old Anschluss agenda — this time without Hitler.
Planning for after the war still occupied a prominent place in Mises's work. On May 20, 1941, he reported to Young that he had made good progress on his research project: a study of the social and economic problems of Central and Eastern Europe, which Mises hoped could serve as a basis for postwar reconstruction in this region. He said he would start writing it soon, and he must have finished it by mid-July, when he sent out copies to friends and colleagues. In this 43-page memorandum, Mises restated the political and economic case for the establishment of an East-European Union with a strong central government: growth through free trade and laissez-faire, response to the problems of linguistic minorities, and protection against the three mighty neighbors.[35]
In another paper that he had finished writing by the end of May, he pointed out that his plan for an Eastern Union would complement similar ideas for the establishment of a Western Union. This approach — the formation of political blocs, as they in fact eventually came to be established after World War II (NATO in the West and Warsaw Pact in the East) — was more promising than the approach of the League of Nations in the interwar period, which consisted in providing "for the lack of a peace ideology by the establishment of a bureau and a bureaucracy."[36]
* * *
The late spring of 1941 greeted Mises with a most welcome opportunity. He happened to meet again with Señor Montes de Oca, a high official of the Mexican Treasury and executive president of the Banco Internacional, whom he had known from his days with the International Chamber of Commerce. Luis Montes de Oca was a hard-nosed businessman and a great admirer of Mises's work. As early as 1937 or 1938 he had invited him to visit Mexico City for a series of lectures, but Mises had not accepted the invitation. It must have been a most pleasant surprise for both of them to meet again in good health in Manhattan, and Montes de Oca instantly renewed his invitation: Mises should come for two months to Mexico.[37] It was the first true sign of recognition in eighteen months. Mises was happy, and Margit was happy that her husband was happy.
Mises and Montes de Oca also discussed the project of translating Mises's Socialism into Spanish. Montes de Oca proposed to do the translation himself from the French edition when Mises praised this edition for its accuracy and style. (Montes de Oca did not read German.) He also proposed a concrete price for the rights to the Spanish edition: $200 — a month's salary for Mises at that point. All this was very good news, and as soon as his Mexican friend departed, Mises set out a syllabus for his projected visit to the National University of Mexico. He proposed eight lectures in English on the economics of capitalism, socialism, and interventionism; moreover, one lecture in French on the gold standard and managed currency; and also two seminars, one dealing with money and banking, the other with the "part played by economic and social doctrines in political controversies of today." He sent these proposals to Montes de Oca on June 12.[38]
* * *
 Mises on vacation in the White Mountains |
A few weeks later, Ludwig and Margit left Manhattan for a long vacation in New Hampshire's White Mountains. They traveled by train on July 16 and arrived on the same day at their destination: Glen House in Gorham, New Hampshire, at the base of Mount Washington, the highest peak in northeastern America. Almost every day they hiked in the mountains.[39] Although Mount Washington was a much-visited site, Ludwig and Margit were by themselves as soon as they were far enough away from the roads.[40] The scenery of the White Mountains reminded them of the Alps — just the setting he needed to renew his strength, as in Europe he had needed to spend one month each year in those mountains. In the serenity of defiant rocks, cool air, and wide views, where sky and earth held court in splendid majesty, he could elevate his mind again above the material circumstances into which great events had catapulted him. Here he considered again the big picture, and his place within it. It was probably here that Mises resolved himself to begin a new life in the United States, to become a citizen of the country, and to continue the fight for liberty from American soil.
 Mises's West End apartment in New York City |
Margit must have been extremely pleased to see her husband regaining energy to such an extent that he climbed most of Mount Washington's 6,288 feet.[41] Near the end of their stay at Glen House, more good news came with the publication of the Atlantic Charter on August 14. The U.S. government seemed determined after all to support the United Kingdom in the war and to create a postwar order based on liberty.[42]
The holiday had come just in time. After the United States entered the war, vacationing was seen as unpatriotic and the Miseses abstained from it.
Back in New York, he threw himself into work with new verve. From now on, things would improve in his life, slowly but steadily. In early October, he and Margit moved into the apartment where they would remain for the rest of their lives. (It was subject to rent control laws). Margit had found the three-bedroom apartment at 777 West End Avenue in Manhattan.[43]
Mises continued to work for a few weeks on the proposal for the establishment of an Eastern Democratic Union. By October, he had completed the memorandum, one of the first pieces that he himself had written in English and which contained his political testament for Eastern Europe. Mises's thoughts now turned to America.
To Hayek he wrote:
As I do not want to increase further the collection of my posthumous works I am writing now in English. I hope that I will succeed to finish within a year a volume dealing critically with the whole complex of "anti-orthodox" doctrines and their consequences.
He went on:
Your essays on the Counter-revolution of Science are the most valuable contribution to the history of the decay of western civilization. I hope that you will pretty soon publish the whole book.
I am, however, rather skeptical in regard of the practical results of our endeavors. It seems that the age of reason and common sense is gone forever. Reasoning and thinking have been replaced by empty slogans.
A few days ago, Alvin Hansen delivered a lecture on post-war economic reconstruction. The old stories about full employment, scarcity of foreign exchange, the need for foreign exchange control and planning, more self-sufficiency etc. He did not even mention the problem of capital shortage. He seems to believe that taxing the rich would make it possible to maintain the pre-war standard of living of the masses. Two centuries of economic theory were in vain, as they could not kill the mercantilist prejudices. The audience — many ex-members of the Verein für Sozialpolitik — expressed full agreement with the lecturer.[44]
While they made preparations for the trip to Mexico, another piece of news made Mises's day and gave him hope for the future. On December 8, 1941, the United States declared war on Japan after the Japanese raid on Pearl Harbor. The Americans were finally in business. Nothing could save Hitler now. A few months later, Mises wrote to a friend, a German protestant minister in Massachusetts:
Of course, the war is a very unfortunate thing. But, you are quite right, it was inevitable and it has to be fought to the end. It is necessary to establish a new order where people who break the peace have to be treated like those who resort to violence within each country.[45]
Mises seems to have fallen back into what in more sober moments he called the dictatorship complex. He blithely assumed that the institutions entrusted with the "new order" would use their enormous power only for those purposes of which he, Mises, approved.[46]
The American entry into the war prompted various Austrian personalities to join forces and create more formal organizations to prepare the reconstruction of Austria after the war, which, they were sure, would end with an allied victory. Already in anticipation of the event, and prompted by Roosevelt and Churchill's Atlantic Charter, Richard von Coudenhove-Kalergi, a close ally of Otto von Habsburg, had submitted a petition to the U.S. government for a separate treatment of Austria after the war. Mises signed the petition, along with many other leading Austrian expatriates.[47]
After Pearl Harbor, the Austrian Committee assembled in several meetings during the month of December to discuss how to proceed. After a meeting on December 13, Mises prepared a one-page manifesto that outlined a political postwar order in Austria that would be based on the principle of individual liberty. The paper probably resulted from the discussions of this meeting; Mises wrote it but did not sign his name. In any case, the document enthusiastically welcomed the Atlantic Charter as the "constitution of a new community of all free people," and it expressed the wish for an independent Austria after the war. According to the most important stipulations of the document, the new Austria would be a state of freedom and democracy, even though the question of the concrete form of state (parliamentary democracy, monarchy, etc.) was explicitly left open. Moreover, the new Austria would not insist on the title of a "sovereign" country, because sovereignty was no longer consonant with the spirit of the time, but would instead seek integration into an East-European Union and a new league of nations.
But the Austrian Committee was but one of many similar groups that started popping up, and Mises was also a member of Austrian Action, a group led by Ferdinand Count von Czernin.[48] It was clear that an effective representation of Austrian interests in America was impossible under these conditions, and the leaders of the various groups decided to join forces. In early February 1942, Mises, then in Mexico City, received a telegram with the invitation to join the newly formed Austrian National Committee. The telegram was signed by Walter Schuschnigg (possibly a relative of the last Chancellor of free Austria) and Hans Rott.[49] Mises accepted membership, though he could not personally appear at the founding meeting in Manhattan, where his colleague Erich Hula represented him.[50]
The trip to Mexico (late January to March 1942) by far surpassed their expectations. They were treated with the highest respect — hotel reservations had been made at the local Ritz — and Mises found an audience prepared for and receptive to his message. He started lecturing on January 14 and finished his program by February 20. Besides his course at the School of Economics, which he taught in English, he also gave two lectures in French at the Independent School of Law.[51] The course only attracted some 8–14 students; still Mises thought it was "a great success. The audience was of course small, as the students mostly do not understand foreign languages."[52] Montes de Oca attended each session, but Mises had particularly animated discussions with Señor Eduardo Hornedo.
Margit stayed in and around the hotel, and in the evenings Ludwig joined her and often took her out. They also spent many evenings at the home of Montes de Oca. At these meetings Mises again and again expressed his pessimism about the future, and again and again his Mexican host protested that it was not too late to start a fight for liberty and sound economic policies. Montes de Oca was indeed firmly convinced that the best place to start this fight was Mexico. He had made Mises a job offer by correspondence even before his Austrian guest had left New York. The Bankers' Association and the Chamber of the Mining Industry — two of the three most important Mexican business associations — were interested in hiring Mises for "an extended stay" as an economic advisor.[53] Mises wrote back that the offer was "very flattering and tempting" and that he was "anxious to get more detailed information about the functions which it is expected I would fulfill."[54] Six weeks later, Montes de Oca replied with a firm offer. According to his proposition, Mises would become the head of the economics departments of the two business associations, with sufficient personnel to assist him and at a comfortable monthly salary of 1,000 Mexican pesos (a lunch for one person at the Ritz cost three or four pesos). He would also be teaching courses and seminars at any department he wished at the National University of Mexico and at the Colegio de Mexico, and he would be free to take up other (paid) teaching assignments. The offer was for three years and could become effective any time — Mises would not even have to return to the United States after his upcoming visit.[55]
This was a great temptation. Had the offer come a year earlier, Mises would probably have accepted it on the spot. But he had since made new plans. Was his future not in the United States? Montes de Oca tried to bring Mises to an early commitment by correspondence, but his Austrian friend remained steadfast: he would first pay a visit to each of the two business associations before making a decision.
Upon his arrival in Mexico City, Mises conducted very wide-ranging talks with his Mexican hosts. He even started to write a couple of words in Spanish, and at the request of his hosts began working on a memorandum analyzing Mexico's economic problems. In the course of the next few weeks, he perused the statistical yearbooks of the country and became acquainted with other literature on Mexican conditions. He read the press to the best of his ability and led many discussions with his host and other people. Slowly a more concrete picture of Mexico became clear to him, which he later described in a letter to Hayek:[56]
Mexico is a country without industry and very short of capital. The soil is in the greater part of the country very poor. The result [ … ] is that they have to import wheat and mais [Mises meant what Americans call "corn"], but the rulers — generals, trade union leaders and pink intellectuals — intend to start industrialization by ruthless confiscation of capital. Neither this attitude nor its effects differ from conditions in other countries. But really amazing is the fact that there are some people — of course a small elite only — who have a very keen insight into the problems involved and try to educate the intellectuals.
Then Mises went on to compare this Mexican elite very favorably with the "small group of economists" who, according to Hayek, resisted the trend toward government omnipotence in Great Britain.[57] Speaking of his Mexican hosts, Mises said:
You cannot find such men in other countries. Contrary to your statement in the "Nature" article everybody in this country advocates allround planning. Sir William's ideas (published in the London Times a few days ago) all economists, businessmen and pressure groups sympathize with. They are convinced that current events have demonstrated in an irrefutable way the superiority of the "post office" system. People do not learn anything; they despise theory and they interpret facts from the point of view of their errors and prejudices.[58]
Still the fact remained that Mexico was a very poor country and that the forces of reason were weak. Luis Montes de Oca must have sensed that Mises was not exactly enthusiastic about another Chamber of Commerce career, and brought up the prospect of a research organization under Mises's leadership — a private "Institute of the Social Sciences." This was much more to the liking of his Austrian guest, and when Mises departed he promised that he would write a paper for Cuadernos Americanos — a journal managed by one of Montes de Oca's associates — as well as a short memorandum on the establishment of an Institute of the Social Sciences, as a basis for further deliberation. He complied with this request after his return, and wrote two memoranda — one concerning the general aspects of the venture, the other concerning more concrete institutional aspects of the proposed Institute — in June 1942.[59]
The Austrian National Committee
Ludwig and Margit returned to New York in March. A letter from Machlup had arrived, informing them of another unsuccessful attempt to secure a suitable job for Mises, this time at Rochester. The chairman of the department had told Machlup that he "should be ashamed to approach so distinguished an economist as Professor Mises with the small salaries at our disposal."[60]
Fortunately, the Rockefeller grant to NBER had been extended, though apparently not without resistance. Mises applied for the extension in December 1941, based on a six-page report on his research activities in the previous year. The extension was not confirmed until mid-February, but it is possible that the delay was the result of his trip to Mexico. For the next few months, Mises took an active role in the meetings of the newly constituted Austrian National Committee. As he said on many occasions in private discussions and correspondence, he was extremely pessimistic with regard to Europe's future: "You can't have a reasonable state of affairs with unreasonable people. I do not believe that a member of the Hitler youth or of the equivalent groups in Italy, Hungary or so on can ever turn toward honest work and non-predatory jobs. Beasts cannot be domesticated within one or two generations."[61] But true to his motto, this was no reason for him to step back in resignation. On the contrary, he threw himself into work preparing postwar policies and he encouraged his correspondents to do the same.[62]
 Mises and Otto von Habsburg in 1960 |
The Austrian National Committee was a creation of Otto von Habsburg, who had the ear of the American administration and turned out to be the common denominator for the feuding Austrian expatriate groups. Otto delivered an excellent diplomatic performance during the war years that eventually prompted the allies to reestablish an independent Austrian state after the war (a decision to this effect was made at a conference of the foreign ministers of the United States, Britain, and Russia in October and November 1943 in Moscow). Otto's success also prompted a small renaissance of the monarchical principle. He must have at least toyed with the idea of reestablishing his dynasty after the war, and many devoted followers (as well as the usual careerists, who sensed an opportunity for political windfall profits) encouraged him to pursue this strategy. These circles of Austrian expatriates generally referred to Otto von Habsburg as "His Majesty, Kaiser Otto" and called him "Imperial Highness." Mises himself would continue to use this title in correspondence with Habsburg long after the prospect of a restoration of the Austrian monarchy had faded.[63]
In the heated days of World War II, many Austrian expatriates were betting on a political return of the Habsburg dynasty after the war. Mises's former colleague at the University of Vienna, Heinrich Graf von Degenfeld, was one of the staunch supporters of a monarchical restoration on legitimist grounds. In mid-April 1942, Habsburg asked Mises and a few other men for their detailed opinion on some forty to fifty questions concerning strategic and tactical problems that Habsburg confronted in his double capacity as the leader of the Austrian National Committee and of the House of Habsburg. Mises put this job on the front burner and answered the questionnaire within a week. Only one part of Mises's confidential report survived: the one in which he comments on the conditions under which a restoration could be achieved. Mises wrote that there was no contradiction between national self-determination and a monarchical regime, provided that the monarchy was established by a free referendum.
This point of view reflected the Polish heritage of its author.[64] Poland had in fact had an elective kingdom from 1573 to 1795; the aristocratic parliament (the Sejm) elected the king by unanimous vote. But Mises did not base his argument on historical precedent. Rather, he argued that only an elected monarch enjoyed a secure basis for his reign. Enthronement on the basis of legitimist claims against the will of the people could not last. It was likely to be resisted and eventually overthrown. As an alternative approach, Mises sent along the memorandum containing his proposal for the establishment of an Eastern Democratic Union.[65]
The Austrian National Committee united all Austrian right-wingers and provided them with political representation in Washington, D.C. (in the person of Egon Ranshofen-Wertheimer). One success of this group was the proclamation of "Austrian Day" on July 25, 1942, by twelve state governors. And U.S. Secretary of State Cordell Hull declared that the United States government had never recognized Hitler's annexation of Austria. This dissociation of German villains and Austrian victims would remain the one common position of the various Austrian right-wing expatriate groups throughout the war, and here they achieved a clear success. (The expatriate social democrats never wavered from the agenda of a greater Germany.)
Mises took part in a plenary meeting of the Austrian National Committee on April 22, 1942, and a month later he was elected to a subcommittee on postwar reconstruction. In June 1942, he also took part in a subcommittee on foreign policy, where it appears that he had a major impact. The first sessions discussed and drafted a "Declaration of the United Free Austrians" based on the December 1941 manifesto of the Austrian Committee. In contrast with that document, however, the Declaration asserted that Austria had been coercively taken over by the Nazis and that it was therefore under de facto occupation by a foreign army. The Declaration also deemphasized integration into international political federations and emphasized the concept of sovereignty. Most important, the Declaration avoided the question of which form of government Austria should adopt after the war. According to the earlier manifesto, the form of government should be determined through the deliberation of a national assembly. But the Declaration was mute on this point, because a monarchist faction under the leadership of Mises's former colleague Count Degenfeld wished to maintain the option of a legitimist foundation for a future Austrian constitutional monarchy.[66]
For the time being, the compromise was good enough for Mises and other republicans. The important thing was that some agreement be reached as a basis for the rest of the agenda. Mises outlined this agenda in an "Aktions-Kalender" — a project schedule he seems to have circulated within the Committee. According to this schedule, the next step would be to enter in negotiations with two left-wing groups of Austrian expatriates to support a common declaration. Then the result should be published and further negotiations started, this time with the Czechs and the Poles, and then with other nations that Mises recommended for an East-European Union. Finally, there would have to be negotiations with bankers and businessman to address the issue of financing the first few months and years of the new state.
But it did not come to pass, and apparently Mises gave up active participation in the committees and did not even attend the dinner in honor of Otto von Habsburg's thirtieth birthday on November 20, 1942. Work in the Committee must have convinced him that he had no future in Europe. The old continent was ravaged by war because it had been in the firm grip of statist illusions. The expatriates who were making plans for postwar Austria were entirely under the same spell. It is true that they despised National Socialism, but they did not despise socialism per se. Each of them had his own little scheme, and invariably all of these involved the state running the country. Many years later he wrote in correspondence: "As the Bourbons of the Restoration, many Austrians have learned nothing and forgotten nothing."[67] These must have been his feelings in 1942 as well.
| "Only a 'radical change in political mentalities and social and economic ideologies' toward the classical-liberal position could make the world safe for peace and prosperity." |
The honorarium for the Mexican lectures supplemented their income and things looked far rosier in 1942 than they had in their first year in the new country. But the financial situation was still bleak, with no permanent source of income and Ludwig's retirement fund frozen in Austria. On December 18, 1942 he reported on the activities of the year and applied for another extension of his research grant. He also tried to convince NBER to finance a large-scale research project to elucidate the origins of modern totalitarianism. He planned a comprehensive seminar with people like Rougier, Röpke, Hayek, and others. The project did not materialize, but his research grant was extended in January 1943. Mises even received a two-year extension under the same conditions as before. It was the normal policy of the Rockefeller Foundation to subsidize the integration of European émigré scholars into American universities for about two years. Thus Mises could be happy to obtain twice as much support. However, it was to be the very end of their cooperation. The second year's bonus was a not-so-subtle good-bye. The Rockefeller Foundation's Willits made it clear, and NBER's Carson made it even more stark, that this extension would be the last one.[68]
Fortunately for Mises, he had found a more amenable source of support independent of the Rockefeller Foundation: the National Association of Manufacturers. NAM leadership opposed the New Deal and other statist projects. These men were determined to prepare a counterattack, starting a large-scale campaign to educate the American public about the benefits of what they called the free enterprise system. NAM needed intellectual leadership from people who were conversant both in the world of business and in the world of ideas. By February 1943, they had discovered what they were looking for in the person of Ludwig von Mises. Many years in the Vienna chamber of commerce had accustomed him to dealing with businessmen and to communicating effectively his economic and political insights to this audience. Just when the Rockefeller Foundation made it clear that they were no longer interested in supporting the Austrian economist, NAM immediately stepped in and offered to hire Mises as a consultant — "starting today."[69] Mises became a member of the Economic Policy Advisory Group. He later became a member of NAM's Economic Principles Commission and of its Advisory Group on International Economic Relations. The contract provided for an annual honorarium of $3,000, which was 20% more than what Mises earned at NBER. The contract was extended on an annual basis. In the 1944–1945 period, Mises's honorarium increased to $3,600.[70]
Mises worked closely with NAM secretary Noel Sargent, who in 1943 commissioned a study from him on "international monetary reconstruction" after World War II. By the fall of the year, Mises had written a 68-page memorandum on the subject, in which he advocated a return to the gold standard and criticized reconstruction plans that Harry Dexter White and Keynes had made in preparation for the 1944 Bretton Woods conference. A few months later, he took part in a NAM-sponsored expert meeting to discuss the Keynes and White Proposals. The group included Rufus Tucker from General Motors, Princeton professor Edwin Kemmerer, and Mises's old acquaintance, Albert Hahn, who became a good friend during their years in Manhattan.
By June 1944, Mises had prepared another memorandum, this time on monopoly.[71] A few months later, he addressed two Advisory Committee luncheons on the West Coast. At that point, he had already acquired a solid reputation through the publication of Bureaucracy and Omnipotent Government in the same year by Yale University Press. Accordingly, he was presented as "the most eminent and uncompromising defender of English liberty and the system of free enterprise which has reached its highest development here in the United States."[72] He addressed the local NAM chapters in San Francisco (October 18) and Los Angeles (October 25) and met "such excellent men as Leonard Read, [Orval] Watts and R.C. Hoiles."[73]
The encounter with Leonard Read was a fateful one. They may have met a few years earlier, shortly after his arrival in the United States. Read later recalled such a first meeting in 1940, at which he had been much impressed by the purity of Mises's opposition to any government power beyond the minimum necessary for the preservation of domestic peace and the market. Mises had reportedly attended a party in Read's home.[74] One of the other guests asked Professor Mises:
All of us will agree with you that we are headed for troubled times but, Dr. Mises, let's assume that you were the dictator of these United States and could impose any changes you think appropriate. What would you do?
Read clearly recalled the answer:
Quick as a flash, Mises replied, "I would abdicate!" [75]
Mises had remained in touch with Read through correspondence. He may also have been on Read's mailing list and received one of the 1.5 million copies of Read's four-page pamphlet, "Why Not 1,900?" — a reaction against FDR's proposed legislation to seize all annual salaries in excess of $25,000. Read had argued that there was no objective reason not to seize all salaries in excess of the national average salary, which happened to be $1,900.
 Leonard Read |
Read was a self-made businessman who had spent the greater part of his career as an executive for various West Coast chambers of commerce. He had the good luck to manage the chamber of Palo Alto in 1928, when that city's most prominent resident was elected president of the United States. Read organized a sort of a pilgrimage for 700 Californians to Washington, D.C., and caught the eye of Herbert Hoover's entourage. His career was made. He moved on to ever-higher positions within the larger network of California chambers of commerce and eventually became general manager of the world's largest chamber of commerce, in Los Angeles. By that time, he had become a champion of laissez-faire capitalism, had published his first book — a critique of New Deal economic policies — and had for many years managed the Western School for Commercial Organization Secretaries.
Once in his new position in Los Angeles, he hired V. Orval Watts, a professor of economics who had been a popular instructor at the Western School.[76] Watts thus became the first economist ever hired by a U.S. chamber of commerce on a full-time basis. Together they fought the New Deal rather effectively, organizing many courses and other educational conferences throughout California. Mises's lectures were part of this effort. On the evening of Tuesday, October 17, one day before his NAM luncheon talk, Mises gave a lecture to the Rotary Club on "credit expansion and depression" and that same evening addressed an audience at the Santa Ana High School on the "causes of the war." Mises stayed as a guest at the home of R.C. Hoiles, who published the predecessor of the present-day Orange County Register.[77] Several weeks before the talks, the Los Angeles Chamber of Commerce and the Register started promoting the event through articles and columns, and it turned out to be a success. Read in particular was much impressed by what he had seen and heard. A year later he would move to New York and eventually establish the mother of all libertarian think tanks with Mises as its intellectual leader. The association would last for the rest of Mises's lifetime.
The alliance with NAM, in contrast, did not last long. Mises continued to "advise" NAM, co-authoring a two-volume study on the American Individual Enterprise System, which was published on April 1, 1946. The book was part of a large-scale NAM campaign aiming at the abolition of the wartime Office of Price Administration. The campaign succeeded and the Office expired, but so did Mises's contract. He continued to serve on NAM's Advisory Group on International Economic Relations, but resigned at the end of 1948, when NAM became increasingly agnostic on the question of inflation and its consequences. The final straw for Mises was when NAM started championing the view that increased productivity was the proper antidote to inflation.[78]
* * *
At about the same time he began his work for NAM, Montes de Oca wrote from Mexico City that he had made good progress in the preparation of the International Institute of the Social Sciences. He now asked Mises to submit a list of prospective permanent professors, and some indication of the salaries they would require. Mises replied that Walter Sulzbach, Alfred Schuetz, Louis Rougier, Jacques Rueff and he himself — all European expatriates living in New York without American citizenship — would be available for permanent employment in Mexico City for an annual compensation of some $6,000 per head. This was a fairly generous salary, and proved to be a major stumbling block for the establishment of the Institute. But in early 1943 everything seemed possible: a group of first-rate intellectuals with classical-liberal pedigree was at least potentially available and another group of men was interested in financing the venture. Moreover, there was a plan: Louis Rougier would be invited to the University of Mexico City for a series of lectures; Mises was to prepare a study on Mexican politico-economic conditions (which Montes de Oca had commissioned for his Banco Internacional); and Montes de Oca continued to work on a translation of Socialism.[79]
In planning for the future teaching staff of an institute in Mexico City, Mises had also brought up the names of Plant, Machlup, Rappard, Röpke, and Robbins.[80] He also made one last attempt to win Lionel Robbins over. In early 1943, he invited Robbins to come to New York. Robbins combined his scientific authority and personal network with great organizational skills and an unusual ability at clear and convincing expression in spoken and written language. The fate of Britain, and thus of Europe, depended on where he weighed in. Mises sought to get him out of his Cambridge and London milieu, to breathe the fresh air of liberty. But Robbins never came to New York: instead he became a champion of the British interventionist government.[81]
Mises eventually delivered the study on Mexican economic conditions to his Mexican friend when the latter came to New York in December 1944. Montes de Oca was now eager to have an epilogue for the forthcoming Spanish edition of Socialism.[82] He had still not given up on the Institute of the Social Sciences, although another problem besides the salary question had so far prevented any progress. Most of the prospective permanent and temporary teaching staff — Robbins, Plant, Machlup, Sulzbach, and others — were by then employed in war offices of the French, British, and U.S. governments, and were either unable or unwilling to leave until the war was over.[83] Montes de Oca invited Mises to return to Mexico City as a visiting professor during the year, but Mises declined because he planned to apply for U.S. citizenship in August — five years after his arrival — and sought to avoid any complications that might result from a trip abroad.
* * *
 Mises and Philip Cortney in the 1950s |
Mises's social integration into the cosmopolitan milieu of New York accompanied a more general integration into American society. One sign of adjustment was the change of Mises's manners, which became less formal in his dealings with friends. During 1942, when he wrote a series of editorials for the New York Times and other journals, Henry Hazlitt felt comfortable enough addressing his Austrian friend to leave behind the deferential "Professor Mises" in favor of "Dear Ludwig" (July 1942) and later "Dear Lou" (December 1942).
In April 1945, he made another important and lasting acquaintance, when he started correspondence with Philip Cortney, at the time the vice-chairman and treasurer of Coty, the perfume company. Mises wrote to congratulate Cortney on a paper in which he had criticized Keynesianism. Cortney, who already knew Mises's work, wrote back saying there was "no person in the world whose opinion I value more than yours" and that he hoped to meet him soon at dinner with their mutual friend, André Maurois.[84]
On the professional level, however, Mises's integration proceeded more slowly. The essential reason was his unwillingness to trade away his convictions for social acceptance. By 1944, he was a member of the New York Overseas Rotary Fellowship, which meant nothing to him — he found the meetings extremely boring and after a short while stopped attending them.[85] He also had some access to the national press through Hazlitt at the Times, but quickly ran into confrontations.
A case in point is a letter to the editor of the New York Times published on January 3, 1943. Here Mises explained that mere organizational devices would not make for world peace after the war. In particular, he rejected the idea that some new version of the League of Nations would make international relations better than they had been in the interwar period. Only a "radical change in political mentalities and social and economic ideologies" toward the classical-liberal position could make the world safe for peace and prosperity.[86] The letter provoked the editor of Barron's to solicit similar pieces from Mises.[87] But this cooperation was not fated to last very long. Mises contributed only one article on "Big Business and the Common Man," which was published in February 1944 and only after sharp protestations from some "associate" of Barron's.[88] The essential point under contention was whether or not Mises had exaggerated in claiming that the inventive spirit was absent in Russia. Mises wrote:
As far as I know the best that the Russians have achieved was imitating foreign models. The major attraction of their exhibitions at the World's Fairs in Paris and in New York were imitations of American agricultural implements and of Ford cars and tractors. Their planes and tanks were not original. Today they are fighting almost entirely with lend-lease material.
Incidentally I want to remark that Germany also contributed very little to the improvement of weapons. The iron ship, the armored ship, the torpedo, the submarine, the plane, the machine-gun, the tank came from England, France and America. The German General Staff mistrusted the airplane and the tank and Tirpitz, before the first War, belittled the U-boat. The Zeppelin is a genuine German invention. But it is both commercially and militarily impracticable.[89]
The cooperation with Barron's ended soon after.
Similarly, Mises's integration into professional organizations of American economists suffered a setback. Just when Fritz Machlup joined the AER editorial board in October 1943, Mises felt he had to stop further cooperation with the journal. What had happened? He reviewed books for various journals, focusing on works dealing with postwar reconstruction in Europe. Two of these were invited reviews for the American Economic Review[90] and the AER had published a rejoinder by a certain Alfred Braunthal to the first of the two reviews, without giving Mises the opportunity to respond. To Mises this was a clear sign of discrimination. Writing to Machlup, Mises said that he was "no longer prepared to contribute to a periodical whose editors fail to comply with the principles of literary decency for partisan considerations. They should rather send their books directly to Mr. Braunthal or other comrades."[91]
 Mises’s American passport issued on May 26, 1964 |
Mises had applied for citizenship at the earliest possible date — August 1945 — and on January 14, 1946, he became an American citizen.[92]
One of the first things he did was to get in touch with his old employer to reclaim the retirement funds that he rightfully owned, but which had been denied to him in an August 1938 letter from a Nazi official.[93] He was told he was entitled to a monthly payment of 953.95 schillings, starting May 1, 1945. The money was transferred to his old bank account in Vienna. Foreign exchange controls were still in place, however, and Mises could not transfer the money to an American account unless he provided an authorization from the Nationalbank.
Did he ever think about returning to Vienna? He did not. Mises was still in touch with some prewar acquaintances, for example, with Carl Brockhausen and historian and writer Richard Charmatz. He had Idaho publisher J.H. Gipson send them CARE packages.[94] He also took care of the surviving mother of Ludwig Bettelheim-Gabillon, who had died at the hands of the Nazis.[95] Still Mises did not use the opportunity to visit Germany or Austria. Both countries were still occupation zones and access required special permits.[96] From correspondence with Charmatz he knew that Vienna was in even worse shape than after World War I, and this time lacked the leadership to prevent the rampant socialization of the entire country. As Charmatz wrote, many Austrians had been looking forward to allied victory, from which they expected liberation — quite literally. Instead they got even more government regimentation than before. Even the so-called "liberal" professions were now coerced into state-controlled organizations; and as in the worst years of the war, the population lived on food rations, the only difference being that the rations were smaller and that the food coupons could not always be redeemed.[97]
But Mises's disinclination to visit Vienna also had another source. As he wrote to his friend Carl Brockhausen, a former professor of constitutional and administrative law at the University of Vienna: "I do not yearn for an encounter with the mob who applauded the massacre of excellent men."[98] It is not quite clear whom Mises had in mind. The good-hearted Brockhausen tried to convince Mises that this severe judgment was not borne out by the facts — there had been no lynch mobs in Vienna.[99] But by "mob" Mises probably meant men such as Hans Mayer, Othmar Spann, Srbik, and Nadler, who had actively supported the Nazi takeover of Austria and yet were once again in positions of influence. Mises did eventually make his way back to Vienna, but only to visit.
 |  Mises with Margit's grandson, Chris Honeyman, in 1958 |
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