This file is a short economic essay by Ludwig von Mises, reprinted from a 1966 periodical issue. Its scope is polemical and diagnostic: Mises moves from nineteenth-century foreign investment to twentieth-century nationalism, socialism, union wage doctrine, and taxation, arguing that modern policy increasingly destroys the incentives required for saving and capital formation.
The central thesis is that rising living standards depend on voluntary saving, accumulation of capital, and investment. Mises frames the modern era as one in which foreign capital helped overcome local scarcity and integrate world markets, but he argues that anti-capitalist ideology recast investment as exploitation.
An unprecedented improvement in the average standard of living resulted.
Against theories of “imperialism,” Mises insists that foreign investment was not conquest but the transfer of capital to places unable to generate it internally. The decisive historical distinction is therefore not between exploiter and exploited nations, but between institutional orders that make accumulation possible and those that do not.
Every account of the history of modern culture must first of all distinguish between two groups of nations, viz. those that have developed a system which made domestic saving and the large-scale accumulation of capital possible and those that did not.
The essay’s first major section, “Foreign Investment,” argues that socialist and nationalist doctrines have made capital politically insecure. Expropriation is rhetorically transformed into emancipation, and the predictable result is the disappearance of private willingness to invest abroad.
The expropriation of foreign investments is styled "liberation."
Mises’s next conceptual move is to connect this hostility to foreign capital with domestic attacks on capital returns. In “The ‘Productivity of Labor,’” he criticizes the official and union use of productivity statistics. Output per worker, he argues, reflects not merely labor effort but the quantity and quality of capital equipment available to labor. To credit all productivity gains to workers is, in his account, to erase the role of savers and investors.
If the worker is to get all the "increase in productivity" brought about by the investment of additional capital, nothing is left for the people whose saving created this capital and made its investment possible.
The final section extends the same argument to taxation. Progressive taxes on income, corporations, and inheritance are interpreted as tending toward confiscation of “unearned” returns. Mises’s conclusion is deliberately stark: once wage policy and fiscal policy remove the rewards of saving, capital formation ceases.
Saving, capital accumulation and investment will no longer pay and will come to an end.
The essay remains relevant as a compact statement of Mises’s late liberal-capitalist theory of development. Its core claim is not simply that capitalists deserve profits, but that profits are the institutional signal and reward that keep future-oriented investment possible. The final problem, for him, is practical and civilizational: without protected returns to saving, societies lose the mechanism by which productivity and living standards advance.
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