This file is a single-author lecture pamphlet: a compact 1931 address in eight sections, moving from market theory to business cycles, unemployment, price supports, taxation, gold, and the question of escape from crisis. Its central thesis is that the depression is not a failure of capitalism as such, but the consequence of repeated attempts to suspend the market’s coordinating function through credit expansion, wage policy, price controls, subsidies, tariffs, and taxation.
Mises begins by rejecting the Marxist charge that capitalism is “anarchic.” His first conceptual move is to redescribe the market as an order in which private property and profit-seeking are disciplined by consumer demand:
Die Verbraucher sind es, die als letzte Instanz darüber entscheiden, was und wie produziert werden soll.
English translation: It is the consumers who, as the final authority, decide what and how is to be produced.
Profit is therefore not treated as antisocial arbitrariness, but as the mechanism by which entrepreneurs are compelled to serve consumers cheaply and effectively. Mises’s famous democratic metaphor condenses the point:
Die kapitalistische Marktwirtschaft ist eine Demokratie, in der jeder Groschen eine Wahlstimme gibt.
English translation: The capitalist market economy is a democracy in which every penny casts a vote.
The lecture’s structure follows from this premise. If the price system coordinates production, crisis appears when political action prevents prices, wages, and interest rates from performing that function. Hence the transition from market theory to crisis theory is abrupt but deliberate:
Diese Störungen sind die Wirtschaftskrisen.
English translation: These disturbances are the economic crises.
The second section presents the Austrian monetary theory of the cycle. Mises attributes recurring booms and busts to bank credit expansion that pushes the loan rate below the “natural” market rate. Artificially cheap credit makes projects appear profitable though the real savings and capital goods needed to complete them do not exist. The boom is therefore a distortion of production, not genuine prosperity:
Früher oder später muß es zutage treten, daß die Konjunktur auf Sand gebaut war.
English translation: Sooner or later it must become evident that the boom was built on sand.
The present crisis, however, is said to exceed an ordinary cyclical downturn. Mises argues that postwar intervention has made unemployment and unprofitability chronic. His analysis of labor markets applies the same price-theoretic logic to wages:
Auch der Arbeitslohn ist eine Markterscheinung wie der Kapitalzins und wie die Preise der Güter.
English translation: Wages, too, are a market phenomenon, just like the interest on capital and the prices of goods.
Mass unemployment, in his account, arises when unions, backed or tolerated by the state, keep wages above market-clearing levels, while unemployment relief sustains the disequilibrium. He therefore rejects public works, shorter hours, and disguised subsidies as evasions. The needed remedy is not an administrative wage cut but the restoration of wage formation itself:
Die Lohnbildung muß wieder frei werden, sie darf weder durch den Zwangsapparat des Staates noch durch den Knüppel des Streikpostens behindert werden.
English translation: Wage formation must become free again; it must be hindered neither by the coercive apparatus of the state nor by the club of the picket.
The same argument governs the sections on falling prices and price supports. Mises treats lower commodity prices as signals that capital and labor should move elsewhere. Government efforts to maintain coffee, wheat, coal, or iron prices preserve marginal producers, delay adaptation, and convert abundance into burden. Protective tariffs and autarkic industrial policy similarly misallocate capital into plants for which no economic demand exists.
The taxation section extends the indictment: public finance worsens the crisis when it consumes capital, subsidizes unprofitable enterprises, and taxes production while politicians call for lower costs. The gold section rejects the claim that insufficient gold production caused the depression. A falling price level may require adjustment, but it is not identical with crisis; inflationary remedies would merely restart the credit cycle and postpone necessary corrections.
The closing section synthesizes the lecture’s polemic against interventionism. Mises’s relevance lies in the way he unifies apparently separate problems—credit booms, unemployment, agricultural distress, tariffs, fiscal burdens, and inflationist proposals—under one theory of obstructed market adjustment. His answer is uncompromising:
Es gibt nur einen Ausweg aus der Krise: man muß alle Versuche, die Auswirkung der Marktpreise auf die Produktion zu unterbinden, unterlassen.
English translation: There is only one way out of the crisis: one must abandon all attempts to prevent the effect of market prices on production.
The lecture is thus both an Austrian business-cycle diagnosis of the Great Depression and a broader liberal critique of the interventionist state. Its core move is to shift blame from “capitalism” to policies that retain private property while disabling the market signals that make private production coherent.
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