The End of the Golden Age of Security

He was born in 1881 in the old Austro-Hungarian Empire into a bourgeois Jewish family. He developed his extraordinary scholarship in a Vienna gymnasium (high school) and then attended the University of Vienna, eventually attaining a PhD. His great intellectual potential began to flower before World War I, but was put on hold during the war. When peace returned, despite the great hardships and problems in his native Austria, he became an internationally known and respected intellectual. But by 1934, in anticipation of the coming violence of National Socialism, he left Austria and eventually Europe for the rest of his life.

LRC readers will likely recognize this brief biographical description of Ludwig von Mises. But it also applies to the writer Stefan Zweig. These similarities, and the important differences, make Zweig’s memoirs, The World of Yesterday: Memoirs of a European, interesting for a follower of the Austrian School of Economics. In this essay, quoting profusely, I present the aspects from Zweig’s The World of Yesterday that I think might illuminate the environment that nurtured Mises and introduce Zweig’s libertarian thought. The World of Yesterday Zweig, Stefan Best Price: $11.36 Buy New $14.98 (as of 10:25 EST - Details)

Zweig and Mises lived in a wonderful place at a wonderful time, Vienna before the Great War.

The Romans had laid the foundation stones of that city as a castrum, a far-flung outpost to protect Latin civilization from the barbarians, and over a thousand years later the Ottoman attack on the West was repelled outside the walls of Vienna. The Nibelungs had come here, the immortal Pleiades of music shone down on the world from this city, Gluck, Haydn and Mozart, Beethoven, Schubert, Brahms and Johann Strauss, all the currents of European culture had merged in this place. At court and among the nobility and the common people alike, German elements were linked with Slavonic, Hungarian, Spanish, Italian, French and Flemish. It was the peculiar genius of Vienna, the city of music, to resolve all these contrasts harmoniously in something new and unique, specifically Austrian and Viennese. Open-minded and particularly receptive, the city attracted the most disparate of forces, relaxed their tensions, eased and placated them. It was pleasant to live here, in this atmosphere of intellectual tolerance, and unconsciously every citizen of Vienna also became a supranational, cosmopolitan citizen of the world. This art of adaptation, of gentle and musical transitions, was evident even in the outward appearance of the city. Growing slowly over the centuries, developing organically from its centre, with its two million inhabitants Vienna had a large enough population to offer all the luxury and diversity of a metropolis, and yet it was not so vast that it was cut off from nature, like London or New York. The buildings on the edge of the city were reflected in the mighty waters of the Danube and looked out over the wide plain, merged with gardens and fields or climbed the last gently undulating green and wooded foothills of the Alps. You hardly noticed where nature ended and the city began, they made way for one another without resistance or contradiction. At the centre, in turn, you felt that the city had grown like a tree, forming ring after ring, and instead of the old ramparts of the fortifications, the Ringstrasse enclosed the precious core with its grand houses. In that core, the old palaces of the court and the nobility spoke the language of history in stone; here Beethoven had played for the Lichnowskys; there Haydn had stayed with the Esterházys; the premiere of his Creation was given in the old university; the Hofburg saw generations of emperors, Napoleon took up residence at Schönbrunn Palace; the united rulers of Christendom met in St Stephen’s Cathedral to give thanks for their salvation from the Turks, the university saw countless luminaries of scholarship and science in its walls.

Stefan Zweig (standing) with his brother (1900).

Vienna, as everyone knew, was an epicurean city—however, what does culture mean but taking the raw material of life and enticing from it its finest, most delicate and subtle aspects by means of art and love? The people of Vienna were gourmets who appreciated good food and good wine, fresh and astringent beer, lavish desserts and tortes, but they also demanded subtler pleasures. To make music, dance, produce plays, converse well, behave pleasingly and show good taste were arts much cultivated here. Neither military, political nor commercial matters held first place in the lives of individuals or society as a whole; when the average Viennese citizen looked at his morning paper, his eye generally went first not to parliamentary debates or foreign affairs but to the theatrical repertory, which assumed an importance in public life hardly comprehensible in other cities.

Mises had made the explicit connection between freedom and civilization.  Zweig briefly describes the sources for what he called a “Golden Age of security”.

In hardly any other European city was the urge towards culture as passionate as in Vienna. For the very reason that for centuries Austria and its monarchy had been neither politically ambitious nor particularly successful in its military ventures, native pride had focused most strongly on distinction in artistic achievement.

… the state had no plans to take more than a few percent of even the largest incomes in taxes, while state and industrial securities brought in good rates of interest, so that making money was quite a passive process for the well-to-do. And it was worth it; the savings of the thrifty were not stolen, as they are during times of inflation; no pressure was put on sound businesses, and even those who were particularly patient and refrained from any kind of speculation made good profits.

…  it was a mere matter of decades before they finally saw an end to evil and violence, and in those days this faith in uninterrupted, inexorable ‘progress’ truly had the force of a religion. People believed in ‘progress’ more than in the Bible, and its gospel message seemed incontestably proven by the new miracles of science and technology that were revealed daily. In fact a general upward development became more and more evident, and at the end of that peaceful century it was swift and multifarious. Electric lights brightly lit the streets by night, replacing the dim lamps of the past; shops displayed their seductive new brilliance from the main streets of cities all the way to the suburbs; thanks to the telephone, people who were far apart could speak to each other; they were already racing along at new speeds in horseless carriages, and fulfilling the dream of Icarus by rising in the air. The comfort of upper-class dwellings now reached the homes of the middle classes; water no longer had to be drawn from wells or waterways; fires no longer had to be laboriously kindled in the hearth; hygiene was widespread, dirt was disappearing.

“You were not truly Viennese without a love for culture, a bent for both enjoying and assessing the prodigality of life as something sacred.”  In other words, civilization is the dividend of peace and sound money!

Vienna was especially a thriving place for its Jewish community, “nine-tenths of what the world of the nineteenth century celebrated as Viennese culture was in fact culture promoted and nurtured or even created by the Jews of Vienna.”

Through their passionate love of the city and their adaptability they had become entirely assimilated, and were happy to serve the reputation of Austria; they felt that the assertion of their Austrian identity was their vocation. In fact, it must be said in all honesty that a good part, if not the greater part, of all that is admired today in Europe and America as the expression of a newly revived Austrian culture in music, literature, the theatre, the art trade, was the work of the Jews of Vienna, whose intellectual drive, dating back for thousands of years, brought them to a peak of achievement. Here intellectual energy that had lost its sense of direction through the centuries found a tradition that was already a little weary, nurtured it, revived and refined it, and with tireless activity injected new strength into it. Only the following decades would show what a crime it was when an attempt was made to force Vienna—a place combining the most heterogeneous elements in its atmosphere and culture, reaching out intellectually beyond national borders—into the new mould of a nationalist and thus a provincial city.

The everyday beauty of life in Vienna during this period can be viewed in this documentary on Zweig (sorry, it is only in French). For me there is the example set by my brother-in-law who has a passion for objects from Austria and Germany from this period. On the income of a school teacher he has filled his apartment with everyday items designed for beauty, though not always complete functionality.

Beautiful pieces in my brother-in-law’s apartment.

Zweig describes two negative aspects to this culture, education and sexuality.  He detested his time in the gymnasium and according to him, learned only in spite of his rigid teachers. Zweig laments the sexual repression of the bourgeoisie in The World of Yesterday.  But I think Zweig is somewhat naive about sexual liberation. I wonder what would he think of today’s post 60s sexual relations and the #MeToo movement.

During World War I Mises served as an artillery officer. Zweig was much more of a pacifist. He had an official job in the war archive, for which he toured the front as a noncombatant much like the character Pierre Bezukhov did in Tolstoy’s War and Peace. He developed a correspondence with the French anti-war activist and Nobel prize winner, the writer Romain Rolland (“The moment when that letter arrived was one of the happiest in my life. It was like a white dove flying to me out of an ark full of roaring, trampling, raging animals.)” During the war he wrote the pacifist play called Jeremiah.

The price inflation in Austria (and later Germany) after the war had an indelible effect on Zweig and he writes eloquently about the cultural corrosion it caused.

The chaos grew worse by the week, and the population more and more agitated, for financial devaluation was more obvious every day. The neighbour states had replaced the old Austrian banknotes with their own currencies, leaving tiny Austria with almost the entire burden of redeeming the old crown. As the first sign of distrust among the people, coinage disappeared, for a small copper or nickel coin still represented something more real than mere printed paper. The state might crank up the printing presses to create as much artificial money as possible, in line with the precepts of Mephistopheles but it could not keep pace with inflation, and so every town and city and finally every village began printing its own ‘emergency currency’, which would not be accepted in the neighbouring village, and later on, when it was recognised, correctly, that it had no intrinsic value at all, was usually just thrown away. An economist with a gift for the graphic description of all the phases of the inflation that began in Austria and then spread to Germany would, I think, have been able to write a book far more exciting than any novel, for the chaos took increasingly fantastic forms. Soon no one knew what anything cost. Prices shot up at random; a box of matches could cost twenty times more in a shop that had raised the price early than in another, where a less grasping shopkeeper was still selling his wares at yesterday’s prices. His reward for honesty was to see his shop cleared out within the hour, for one customer would tell another, and they all came to buy whatever there was to be bought, regardless of whether they needed it or not. Even a goldfish or an old telescope represented ‘real value’, and everyone wanted real value rather than paper. Most grotesque of all was the discrepancy between other expenses and rents. The government banned any rise in rents in order to protect tenants—who were the majority—but to the detriment of landlords. Soon the rent of a medium-sized apartment in Austria for a whole year cost its tenant less than a single midday meal. In effect, the whole of the country lived more or less rent-free for five to ten years—since even later landlords were not allowed to give their tenants notice. This crazy state of chaos made the situation more absurd and illogical from week to week. A man who had saved for forty years and had also patriotically put money into the war loan became a beggar, while a man who used to be in debt was free of it. Those who had observed propriety in the allocation of food went hungry, those who cheerfully ignored the rules were well fed. If you knew how to hand out bribes you got on well, if you speculated you could make a profit.

Those who sold in line with cost price were robbed; those who calculated carefully still lost out. There were no standards or values as money flowed away and evaporated; the only virtue was to be clever, adaptable and unscrupulous, leaping on the back of the runaway horse instead of letting it trample you.

What a wild, anarchic, improbable time were those years when, with the dwindling value of money, all other values in Austria and Germany began to slide! An era of frenzied ecstasy and chaotic deception, a unique mixture of impatience and fanaticism. This was the golden age of all that was extravagant and uncontrolled—theosophy, occultism, spiritualism, somnambulism, anthroposophy, palm-reading, graphology, the teachings of Indian yoga and Paracelsian mysticism. Everything that promised an extreme, unheard-of experience, every form of narcotic—morphine, cocaine, heroin—sold like hot cakes, in the theatre incest and patricide featured in plays, the extremes of communism and fascism were the only subjects of conversation in politics. Any kind of normality and moderation was rejected.

The mark dropped sharply, and there was no stopping it until it fell to fantastic, crazy numbers running into billions. Only now did a real witches’ sabbath of inflation begin, and by comparison our Austrian figures of fifteen thousand crowns falling to the value of one looked like a mere children’s game. I would need a whole book to describe it in all its incredible detail, and that book would sound like a fairy tale to modern readers. There were days when I had to pay fifty thousand marks for a newspaper in the morning and a hundred thousand in the evening; anyone who had to exchange foreign currency did it piecemeal, by the hour, because at four o’clock he would get many more marks than at three, and at five o’clock many more again than sixty minutes earlier. I sent my publisher a manuscript that I had been working on for a year, and I thought I could safely request an immediate advance payment for what ten thousand copies of the book would earn me.

Once the sum was transferred to my account, it hardly covered the postage for the parcel a week before. You paid your tram fare in millions of marks, trucks carted paper money from the central Reichsbank to the commercial banks, and two weeks later you could find banknotes to the value of a hundred thousand marks lying in the gutter, contemptuously tossed aside by a beggar. A shoelace cost more than a shoe in the past, more than a luxury shop with a stock of two thousand pairs of shoes; repairing a broken window was more expensive than building the whole house had once been, while a book cost more than a printing works with hundred of presses before inflation. You could buy whole rows of six-storey buildings on the Kurfürstendamm for a hundred dollars. Convert the sums of money, and factories cost the same as a wheelbarrow in the past. Teenage boys who had found a crate of bars of soap forgotten on the docks drove around in cars and lived like princes for months on end by

Mises: The Last Knight... Ju00f6rg Guido Hu00fcl... Best Price: $14.80 Buy New $48.96 (as of 07:55 EST - Details) I think I have a fairly good knowledge of history, and never, so far as I know, has madness of such gigantic dimensions been seen. All values were changed, and not just material values; state decrees were laughed out of court, manners and morals were thrown overboard, Berlin was the worst sink of iniquity in the world. Bars, amusement arcades and shady dives sprang up like mushrooms.

Nothing, as we have to keep reminding ourselves, made the German people so bitter, so mad with hatred, so ripe for Hitler as the inflation.

The British were not in the same state of agitation, there was a greater degree of decent, law-abiding behaviour in public life than in our Continental countries, where morality itself had been impaired by the great fraud practised on us by inflation.

However, he apparently had no fundamental knowledge of why the inflation occured. I doubt he knew the key role Mises played in ending the inflationary period in Austria (see Hulsmann’s Mises: The Last Knight of Liberalism).

Zweig aged gracefully (1904,1912,1936).

All-in-all, Zweig had a largely libertarian worldview that was anti-state and anti-war, if not Austrian School pro-market.

The Russians, the Germans, the Spanish, none of them know how much freedom and joy that heartless, voracious ogre the State has sucked from the marrow of their souls. The people of all nations feel only that an alien shadow, broad and heavy, looms over their lives. But we who knew the world of individual liberties in our time can bear witness that a carefree Europe once rejoiced in a kaleidoscopic play of variegated colours.

We saw individual freedom as the greatest good, and to us this urge for aggression, combined with a tendency towards servility en masse, was only too clearly evidence of the worst and most dangerous aspects of the German mind.

Goethe’s Faust, Part II, the demonic figure of Mephistopheles advises an emperor of the Middle Ages to extricate himself from his difficulties by printing paper money.

After two days of job-hunting I had, in theory, found five posts with which I could have earnt [sic] my living, so I had convinced myself better than by merely strolling around of how much space and how many possibilities this young country held for everyone willing to work. That impressed me. In my wanderings from agency to agency, imagining myself working in the various businesses, I had also gained an insight into the country’s wonderful freedom. No one asked about my nationality, my religion, my origin, and what was more—an amazing thing to imagine in our modern world of fingerprints, visas and police permits—I had travelled without a passport. But there was work waiting for people to do it, and that was all that counted. Fabulous as it now seems, a contract could be instantly agreed without today’s inhibiting intervention of state formalities and trade unions. Thanks to my job-hunting, I learnt more about America in those first few days than in later weeks, when travelling in comfort as a tourist…

Everything was over-organised and so failed to work properly. The new bureaucracy, which was supposed to impose order, was still enjoying itself writing memos and making out permits, and everything was delayed (observation on a visit to the Soviet Union).

In 1939, on the other hand, this almost religious faith in the honesty or at least the ability of your own government had disappeared throughout the whole of Europe.

But the generation of 1939 knew about war. They no longer deceived themselves. They knew that war was barbaric, not romantic. They knew it would last for years and years, a part of their lifespan that they would never get back. They knew that you did not set out adorned with oak leaves and coloured ribbons to attack the enemy; instead, thirsty and infested with lice, you vegetated for weeks on end in trenches and military quarters waiting to be smashed to pieces or mutilated from a distance, without ever having set eyes on your adversary. You knew in advance from the newspapers and cinema newsreels about the new and terrible arts of technological destruction, you knew that huge tanks crushed the wounded in their path and aircraft blew women and children to pieces in their beds, you knew that a world war in 1939, thanks to its soulless mechanisation, would be a thousand times worse, more bestial and inhuman than any earlier war mankind had seen. None of the generation of 1939 believed in a just war with God on their side any longer, and yet worse, they did not even believe in the just and lasting peace that it was supposed to usher in. They still remembered only too clearly all the disappointments the last war had brought—poverty instead of prosperity, bitterness instead of satisfaction, famine, hyperinflation, riots, the loss of civil liberties, enslavement to the state, nerve-racking insecurity and the mutual suspicion of all and sundry. That was the difference. The war of 1939 had intellectual ideas behind it—it was about freedom and the preservation of moral values, and fighting for ideas makes men hard and determined. In contrast, the war of 1914 was ignorant of the realities; it was still serving a delusion, the dream of a better world, a world that would be just and peaceful. And only delusion, not knowledge, brings happiness.

We have constantly had to subordinate ourselves to the demands of the state, a prey to the most stupid of policies, we have had to adjust to the most fantastic of vicissitudes, we have always been chained to a common fate, bitterly as we might resent it; it swept us irresistibly away.

Zweig’s exile from Austria and the growing tension that erupted into World War II left him nostalgic and depressed.

How we all loved our time, a time that carried us forward on its wings; how we all loved Europe! But that overconfident faith in the future which, we were sure, would avert madness at the last minute, was also our own fault. We had certainly failed to look at the writing on the wall with enough distrust, but should not right-minded young people be trusting rather than suspicious? We trusted Jaurès and the Socialist International, we thought railway workers would blow up the tracks rather than let their comrades be loaded into trains to be sent to the front as cannon fodder; we relied on women to refuse to see their children and husbands sacrificed to the idol Moloch; we were convinced that the intellectual and moral power of Europe would assert itself triumphantly at the critical last moment. Our common idealism, the optimism that had come from progress, meant that we failed to see and speak out strongly enough against our common danger.

Human Action: The Scho... Ludwig von Mises Best Price: $6.75 Buy New $15.36 (as of 05:45 EST - Details) “There was more freedom as well as more beauty in the world.” But now (written in 1941) “all the bridges are broken between today, yesterday and the day before yesterday.” I am reminded of Carl Menger’s extreme pessimism for the future of Austria, Europe, and Western civilization in general before the first war. On the 21st of February, 1942 he wrote to his ex-wife “ … I suffered so much that I could not concentrate any more … I send you these lines in the last hours, you cannot imagine how glad I feel since I have taken the decision.” The decision he made was to commit suicide with his current wife on the 22nd. In his suicide letter, Zweig wrote:

Every day I learned to love this country more, and I would not have asked to rebuild my life in any other place after the world of my own language sank and was lost to me and my spiritual homeland, Europe, destroyed itself.

But to start everything anew after a man’s 60th year requires special powers, and my own power has been expended after years of wandering homeless. I thus prefer to end my life at the right time, upright, as a man for whom cultural work has always been his purest happiness and personal freedom – the most precious of possessions on this earth.

I send greetings to all of my friends: May they live to see the dawn after this long night. I, who am most impatient, go before them.

After his suicide with his wife in Brazil (1942). He is still dressed as an elegant Viennese gentleman.

Perhaps it is not fair because I have great admiration for Zweig, but I cannot help but compare his despair and resignation to the bravery of Mises, who at the very same moment of the double-suicide was learning English in New York so as to write his magnum opus (Human Action) in a language more conducive to freedom. Quoting Mises: “How one carries on in the face of unavoidable catastrophe is a matter of temperament. In high school, as was custom, I had chosen a verse by Virgil to be my motto: Tu ne cede malis sed contra audentior ito. Do not give in to evil, but proceed ever more boldly against it.”

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