Under socialism the means of production come under control of the state. De jure ownership resides with the government, de facto ownership resides with the public officials who control access. The reality of economic life under state socialism is one of attenuated property rights, where control rights are in the hands of state officials, but above ground cash flow rights are cut off. What we saw in operation under such a system is that those who possessed control rights used that position to their best ability to generate cash flow rights which were hidden from official view. This is one of the reasons why post-communist privatization was more difficult in practice than on paper --- the existing status quo of "ownership" rights was rarely taken into account in the grand designs.
During our current crisis we are not yet moving in a full blown socialist direction as traditionally understood. Instead, we are moving toward some sort of mixed ownership form, where resources are retained in some private hands, but also the public hand is deep in control. Such is the fate of our banking industry. Washington Post headline today reads: US Clears Path to Bank Takeovers -- Obama's revised plan for industry aid could result in nationalization. Listening to CNN this morning, I heard how this is really our only way out of the mess we are in. Supposedly, those watching are told, the Bush team pursued the "let the market correct the problem" approach and that has resulted in our current mess. Then we tried to recapitalize the banks and that didn't work. So here we are. BTW, during this same stretch of "logical analysis" we also were told that we are in this problem because of government spent too much and had a debt problem, but that the only way to get out of it is to spend even more and go deeper into debt. The newwoman turned to the camera and said something along the lines of: I know that sounds strange, but it is the truth. Followed by two talking heads explaining how our relations with China are critical to the success of Obama's rescue.
We are in trouble but it is a crisis of ideas that is most troubling. We are marching toward corporatist system as fast as the votes will take us. Who will say NO to this?
I know this sounds dramatic, and I don't know the full story behind the history, but in watching all of this unfold before my eyes these past several months I was reminded of the White Rose student led resistence movement in Nazi Germany. A group of students from the University of Munich, inspired by an activist theologian and a philosophy professor, took pen to paper and challenged Hitler's regime, exposed its crimes, and challenged the German people to wake from their fear induced stupor. Sophie Scholl was one of the leaders of this group and she along with others were executed by beheading in 1943. But her words are an indictment of complacency in the face of encroachment on human freedom and human decency. Sophie Scholl wrote the following about teh damage to the German people caused by fascism: “The real damage is done by those millions who want to ’survive.’ The honest men who just want to be left in peace. Those who don’t want their little lives disturbed by anything bigger than themselves. Those with no sides and no causes. Those who won’t take measure of their own strength, for fear of antagonizing their own weakness. Those who don’t like to make waves or enemies. Those for whom freedom, honour, truth, and principles are only literature. Those who live small, mate small, die small. It’s the reductionist approach to life: if you keep it small, you’ll keep it under control. If you don’t make any noise, the bogeyman won’t find you. But it’s all an illusion, because they die too, those people who roll up their spirits into tiny little balls so as to be safe. Safe?! From what? Life is always on the edge of death; narrow streets lead to the same place as wide avenues, and a little candle burns itself out just like a flaming torch does. I choose my own way to burn.”
Let me be straight, I am NOT saying we are not currently lining people up in our own country for extermination and thus threatening any conception of human decency as the fascist regime in Germany did. The US is a warfare state and a welfare state, and our economic woes are a consequence of this condition. Whatever military adventures we are currently engaged in overseas and the damage they are causing the societies outside our borders, we haven't yet brought back the draft to enslave our young -- though Obama's community service plans is a step in that direction. The renewed military commitment in Afghanistan was very disturbing to hear from a President that seemingly promised to bring the soliders home. We have a lot of problems associated with our warfare state that challenge our self-conception as a free and peaceful nation. Many of these issues are the subject of severe debate.
But there can be little doubt that we are turning over control of our economic life to the state as they did in Nazi Germany in the 1930s, and we must remember that the loss of our economic freedoms does entail an effective loss of political freedoms. F. A. Hayek 's The Road to Serfdom warned a free people how quickly they can lose their political freedom due to the pursuit even of well intentioned but poorly thought out ideas related to economic policy. Hayek's warning was directed at the Western allies, namely the UK and US, and he used Germany and Russia as his examples. At the time he wrote, intellectuals in the UK and US thought they could avoid the political pitfals of Germany and Russia while benefiting from the presumed 'superiority' of the economic model of government planning. Hayek's classic warning challenged that belief in the workability of democratic socialism.
Perhaps a more timely book to read than even Hayek would be Mises's Omnipotent Government and in particular the sections on the German economic model of national socialist policy. Our current policy path seems more along those lines, then outright expropriation of private property by the government. In the German model, Mises argued, private ownership was nominally maintained and the appearance of normal prices, wages and markets was kept. But in reality entrepeneurs were replaced by government appointed shop managers and the government dictated how the "capitalist" must use his funds and what wages workers must work for. Government effectively controlled production and distribution. "This is," as Mises put it, "socialism in the outward guise of capitalism. Some labels of capitalistic market economy are retained but they mean something entirely different from what they mean in a genuine market economy." (1944, p. 56)
This may very well be the direction we are heading. Slippery slopes, unintended consequences, regime uncertainty, etc., these are the concepts you need to understand in order to make sense of our current economic problems. Bad economic ideas have produced bad economic policies which in turn has resulted in bad economic consequences. The "solution" is not to be found in more bad ideas and bad public policies even if promoted by an eloquent and charismatic political leader.