Ludwig von Mises, Kapitalbildung und die Lehre vom Wachstum

Ludwig von Mises’s essay, originally published in 1961 and supplied here in a German republication of undocumented date, argues that higher living standards depend on capital formation and the effective use of capital goods. Its six sections criticize economic “growth” as a metaphor that obscures purposeful investment, encourages misleading statistical comparisons, and legitimizes policies that impede saving.

Section I distinguishes economic progress as a historical and political judgment from the concepts of economic theory. Mises treats greater material provision as a broadly shared preference while denying that progress itself admits of measurement. He identifies the means of deliberate improvement:

Das einzige Mittel, wirtschaftlichen Fortschritt bewußt herbeizuführen, ist Erhöhung der Ergiebigkeit der menschlichen Arbeit.

English translation: The only means of deliberately bringing about economic progress is an increase in the productivity of human labor.

Drawing on Böhm-Bawerk’s account of time-consuming, roundabout production, he specifies the conditions of that improvement:

Wirtschaftlicher Fortschritt verlangt reichlichere Ausstattung mit Kapitalgütern und deren zweckmäßigste Verwendung.

English translation: Economic progress demands a more ample endowment with capital goods and their most expedient employment.

The distinction between possessing more equipment and employing it appropriately informs his criticism of American wage bargaining. Dividing output’s monetary value by the number of workers, he argues, does not isolate labor’s contribution. Allocating the entire measured increase to wages neglects additional investment and better equipment use. His objection concerns incentives as well as attribution: absorbing the additional return into wages would weaken the inducement to invest.

Section II interprets this bargaining practice as a renewed demand for labor’s full product and connects it to a misleading explanatory vocabulary:

Man hat der Biologie den Begriff des Wachstums entlehnt und wendet ihn metaphorisch auf wirtschaftliche Probleme an.

English translation: The concept of growth has been borrowed from biology and is applied metaphorically to economic problems.

For Mises, the metaphor makes economic improvement appear autonomous, displacing explanation through human decisions. Population increase illustrates the problem: it may accompany prosperity, but if population outpaces capital accumulation, living conditions deteriorate. The decisive relationship is capital relative to population, not expansion in the abstract. His appeal to classical political economy emphasizes workers’ interest in capital formation; developing countries’ pursuit of foreign investment likewise indicates practical recognition of capital scarcity.

Section III turns this conceptual objection into a political accusation. Mises associates Tugan-Baranovsky, Lederer, Foster and Catchings, and Keynes with doctrines hostile to saving, which he claims have lost acceptance. Governments nevertheless maintain tax and social policies that obstruct accumulation or consume existing capital. In his account, growth theory supplies a replacement justification: treating capital as merely one factor among others implies that expansion elsewhere can compensate for damage to capital formation. The essay thus attacks the political function of an explanatory framework as much as its terminology.

Section IV applies the argument to Soviet claims of economic superiority. Mises contrasts promises of higher mass living standards with comparisons of the working time required to purchase goods. Although these inadequately capture differences in quality, he regards them as more revealing than national-product growth rates. Monetary valuations become problematic when purchasing power changes, while percentage comparisons obscure unequal starting levels. The same absolute production increase generates a larger percentage gain in a poorer economy; a higher rate therefore establishes neither a superior living standard nor a reliable prediction of overtaking a richer economy. His analogy with the differing weight gains of infants and older children turns biological language against its economic users.

Section V extends the argument to international economic history. Mises attributes the diffusion of Western material achievements to foreign capital financing transport infrastructure and resource development. This claim supports a polemical defense of overseas investment against interpretations centered on imperialism and colonial exploitation. He treats accounts of expropriation as liberation as further concealments of capital’s contribution. His presentation also carries a pronounced civilizational hierarchy, casting Western investment as the enabling force of modernization.

Section VI closes with an alleged contradiction: growth is portrayed as independent of individual action yet adjustable at will by government. Mises argues that American debates over growth targets, social measures, and monetary expansion evade new capital formation while retaining taxes that impede it. The essay’s unifying concern is the distinction between aggregate expansion and improved living standards. Against metaphor, percentage comparisons, and political promises, it insists on saving, investment, and purposeful capital use as the causal basis of economic progress.