Recent polls indicate that many people under 30 view socialism and communism favorably. (For Marx, those words were synonyms.) It seems that socialism and communism are “in.” What’s going on?
A self-described “democratic socialist,” Zohran Mamdani, won the Democratic nomination in the New York City mayoralty primary. He promises to set up city-owned nonprofit grocery stores and plans other giveaways. He favors a $30 minimum wage. He also says billionaires should not exist. Will he set up camps?
Members of Congress, such as Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez, also call themselves “democratic socialists,” but it’s unclear what they mean by the term. When Sanders was asked what he meant by socialism, he said it was the realization that “we’re all in this together.” That’s helpful.
Sanders, Ocasio-Cortez, and their ilk do not call for expropriating and nationalizing the means of production. (I’m not sure about Mamdani.) Instead, they want an even bigger welfare state, for instance, “Medicare for all.” That’s bad—the welfare state makes people poorer—but it’s not socialism. They further illustrate their confusion by claiming that the Scandinavian countries are socialist, which they’re not. They score high on rankings of economic freedom. That would be a strange sort of socialism, no?
This tilt toward a murkily defined socialism and communism suggests cultural and ethical considerations, not social science, are at work. These days, it’s edgy and romantic to declare oneself a socialist, especially if you wear a Che Guevara T-shirt. I suppose the word democratic is intended to make socialism, the record of which is horrendous, sound humane. It does no such thing, no more than the word national makes socialism sound sweet.
At any rate, as the Cato Institute’s Michael Chapman wrote this year:
A recent survey by the Cato Institute and YouGov paints a troubling picture: 62 percent of Americans aged 18–29 say they hold a “favorable view” of socialism, and 34 percent say the same of communism. This is shocking given that communism is responsible for 100 million deaths worldwide and is rooted in socialism, the same philosophy that spawned both Mussolini’s fascism and Hitler’s National Socialism. To favor socialism is to flirt with tyranny.
That is stunning, considering that free-market capitalism, however imperfectly practiced —that is, profit-motivated global investment and trade—has increased per-capita wealth and lengthened life spans worldwide by an astonishing degree over the last few hundred years. What used to be called the “Third World” got wealthier to the extent it had economic dealings with the developed world. If young people don’t understand what economist and historian Deirdre McCloskey calls “the Great Enrichment,” what does that say about government-run education?
What do fans of liberty and prosperity do about this? We can become better promoters of capitalism and bourgeois culture, which have enabled so many people to achieve such high living standards. In 1947 economist Ludwig von Mises, writing in Planned Chaos, said, “Nothing is more unpopular today than the free market economy, i.e., capitalism.” That was shortly after World War II. Despite a few bright spots, how little things have changed! (Trump’s devotion to global trade restrictions at least has brought out latent free-trade impulses in some people.)
Mises noticed something that is still true today, despite differences in detail:
Everything that is considered unsatisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its “bourgeois” pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the “progressives” blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether.
How convenient to have such a scapegoat for your problems. Unhappy? Blame capitalism. Too few people will speak up for it.
Although capitalism is the economic system of modern Western civilization, [Mises wrote,] the policies of all Western nations are guided by utterly anti-capitalistic ideas. The aim of these interventionist policies is not to preserve capitalism, but to substitute a mixed economy for it. It is assumed that this mixed economy is neither capitalism nor socialism. It is described as a third system, as far from capitalism as it is from socialism. It is alleged that it stands midway between socialism and capitalism, retaining the advantages of both and avoiding the disadvantages inherent in each.
Mises rejected the equation of interventionism with socialism.
There are many supporters of interventionism who consider it the most appropriate method of realizing—step by step—full socialism. But there are also many interventionists who are not outright socialists; they aim at the establishment of the mixed economy as a permanent system of economic management. They endeavour to restrain, to regulate and to “improve” capitalism by government interference with business and by labour unionism.
For the market to work to the advantage of all people, it is not enough that property be owned in the strict legal sense. Legal title must be accompanied by real control. When private parties nominally own property while government authorities control property, that is fascism, even if people vote now and then. (Economist Charlotte Twight has coined the term participatory fascism.)
Mises made an important point about interventionism.
If within a society based on private ownership of the means of production some of these means [such as grocery stores] are owned and operated by the government or by municipalities, this still does not make for a mixed system which would combine socialism and private ownership. As long as only certain individual enterprises are publicly controlled, the characteristics of the market economy determining economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods and labour, and as sellers of goods and services, must fit into the mechanism of the market economy. They are subject to the law of the market; they have to strive after profits or, at least, to avoid losses.
Mamdani promises that his city stores will forgo profit and charge only wholesale prices. How then will they pay their expenses, such as wages? Mises addressed that issue:
When it is attempted to mitigate or to eliminate this dependence [on the market] by covering the losses of such enterprises with subsidies out of public funds, the only result is a shifting of this dependence somewhere else. This is because the means for the subsidies have to be raised somewhere. They may be raised by collecting taxes. But the burden of such taxes has its effects on the public, not on the government collecting the tax. [Emphasis added.]
Well, Mamdani may say, he’ll tax the rich. It’s not that simple, Mises noted:
It is the market, and not the revenue department, which decides upon whom the burden of the tax falls and how it affects production and consumption. The market and its inescapable law are supreme.
If you tax the rich, they will produce less and take more leisure. Or they will move—harming the nonrich, who will have fewer goods, services, and amenities. And more taxes to pay. Do politicians never learn?
But, bad as that is, it is still not socialism.
The system of the hampered market economy, or interventionism, differs from socialism by the very fact that it is still market economy. The authority seeks to influence the market by the intervention of its coercive power, but it does not want to eliminate the market altogether. It desires that production and consumption should develop along lines different from those prescribed by the unhindered market, and it wants to achieve its aim by injecting into the working of the market orders, commands and prohibitions for whose enforcement the police power and its apparatus of coercion and compulsion stand ready. [Emphasis added.]
Ah yes. Behind every progressive interventionist lurks the police force. We should be little comforted that our so-called democratic socialists are not true socialists, but only interventionists on steroids.
However, all the methods of interventionism are doomed to failure. This means: the interventionist measures must needs result in conditions which from the point of view of their own advocates are more unsatisfactory than the previous state of affairs they were designed to alter.
They might hope to produce abundance at low prices, but they will fail, as theory and history have consistently demonstrated.
Minimum wage rates, whether enforced by government decree or by labour union pressure and compulsion, are useless if they fix wage rates at the market level. But if they try to raise wage rates above the level which the unhampered labour market would have determined, they result in permanent unemployment of a great part of the potential labour force.
Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such an inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling….
No less than the socialists, the interventionists despise consensual profit-driven market activity as unsightly and exploitative. This aversion is as much aesthetic as moral, but on both counts it is wrong. That Adam Smith’s “system of natural liberty” has improved the lot of mankind, and will continue to do so if left unmolested, is a beautiful thing. Self-made blindness explains why so many people do not appreciate it. Workers and consumers are not victims. They are beneficiaries. The world is increasingly divided into haves and have-a-bit-mores. The have-nots have been moving on up, especially if they work at it.
Mises reminded us that capitalism is not about profits only. It’s also about losses, which shines a whole different light on the matter.
In the eyes of the interventionists the mere existence of profits is objectionable. They speak of profit without dealing with its corollary, loss. They do not comprehend that profit and loss are the instruments by means of which the consumers keep a tight rein on all entrepreneurial activities. It is profit and loss that make the consumers supreme in the direction of business. It is absurd to contrast production for profit and production for use. On the unhampered market a man can earn profits only by supplying the consumers in the best and cheapest way with the goods they want to use. Profit and loss withdraw the material factors of production from the hands of the inefficient and place them in the hands of the more efficient. It is their social function to make a man the more influential in the conduct of business the better he succeeds in producing commodities for which people scramble. The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities. What made some enterprises develop into “big business” was precisely their success in filling best the demand of the masses.
Who loses when interventionists get their way? Regular people do.
