This Isn't Socialism We Are Heading To, But It May Very Well Be the Other 20th Century "ism"

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.

Comments

[Michael]

When I saw you invoke the "White Rose," I thought you were going to cite their specific economic argument that the German state was parasitic in the most malignant sort of way. They declared the fact that Germany was running out of troops, land to annex, capitalists to exploit, and everything else that they could consume from the productive resources of society. The end-game was clear to both sister and brother, the brother who had seen the worst at the eastern front. It was a short-term denial of economics that was leading Germany into an impossible situation. I think the deontological considerations about fascism are important; but these practical considerations are relevant in our times. The similarity is striking.

[Steve Horwitz]

The point about debt solving a supposed debt crisis is great. But it's not nearly as funny as Obama spending almost $800b on a "stimulus" package then turning around and, with a straight face!, telling us how we have to cut the deficit in half.

Hey Barry, the deficit would be half of what it's going to be if you hadn't signed the stimulus package!

[liberty]

Great post. I agree with everything you say except your description of socialism in your first paragraph. If I understand you there correctly, you are making the socialism as rent-seeking argument. For some evidence that this was not how it worked in the Soviet Union, see my forthcoming paper in Critical Review (I can send you a copy).

I would also point you to The Soviet Economic System: A Legal Analysis, for a detailed study of the actual de jure and de facto ownership structure in the Soviet Union. The conclusion Ioffe comes to is that indeed the state is the de facto owner for all state enterprises, and even for collective farms.

[Dave Prychitko]

Pete:

Three cheers. You've calmly written your best post yet. I fully agree with everything you say. Thanks.

[Rafe Champion]

A truly inspirational post Pete, thanks!

There are a couple of nice pieces in the Koch newsletter - how to respond to the crisis and the CEO's take on intervention.
http://www.kochind.com/

In fairness to the Germans who did not speak out, by the time Hitler was in power anyone who spoke out would have quickly disappeared, no trial, no news report, and if the person was a breadwinner the family would have starved. Same in the USSR. The White Rose saga can be read as an inspirational story but it also showed the futility of resistance once things have got to that point. Compare with the free world where people can make careers spreading ideas that undermine the very freedom and prosperity that they enjoy!

[James]

Ditto. Fantastic, thoughtful post.

It's uncanny, but last night I was trying to imagine what kind of future my kids would have under what was becoming an essentially fascist regime. And today, just before I read your post, I was trying to sort out in my own mind how I might explain these fears to any of my colleagues (in the humanities). Mind you, I haven't attempted this yet, but after reading this post I think I will.

[liberty]

I dreamed, last night, that it had just been decided that my town's Olympic Stadium not be returned to its original use (for sporting events) but instead remain as an "exhibition hall" and I took this as the first major sign of the coming totalitarian regime.

[Lane Conaway]

@Rafe Champion - I appreciate your Koch links, but your understanding of WWII history is a little bit off, and leads one to the wrong conclusion about dissent.

While Nazi Germany was allowed to commit its many atrocities with surprisingly little internal outcry, that was not because of fear stemming from any real threat from the Gestapo to most German citizens. The historical record is clear that while taking overt action against the regime (through political attempts to overthrow the government or aid Germany's enemies, or through outright physical sabotage) was brutally repressed, voicing opinions against the policies of the regime, or refusing to take part in said policies, was often perfectly safe.

As late as 1941, years after Hitler came to power, public protests forced the cession of the notorious T4 euthanasia program, and the leader of the protest survived the war just fine (http://en.wikipedia.org/wiki/Clemens_August_Graf_von_Galen#Protests_against_German_euthanasia). Holocaust scholars encounter the same pattern - while soldiers claimed to have a variety of reasons for not protesting such horrific acts, the record is almost totally absent of punishment for those few who did protest or refuse to take part.

The great lesson of Nazi Germany was that so FEW mainstream Germans were punished for dissent, and yet so few dissented. Overstating the dangers of speaking out against the regime risks sympathizing with the complacency and willingness to quietly submit to authority that were so prevalent in Germany before and during the war years. I think it's dangerous to re-write history in such a way that suggests we likewise may be justified in silence against a government that begins acting oppressively.

[Derek]

They can talk about nationalizing the banks all they want. They CAN'T do it. We can't afford the treasury rate hike that would accompany taking over the banks' liabilities and worthless assets. They could do FDIC cram-downs, which is very far from nationalization and may actually do some good.

[Rafe Champion]

Thanks for that correction Lane, that appears to signal a fundamental difference between the Nazi and communist regimes - see how dissent was monitored in East Germany postwar!
Of course there are many ways to control dissent, check out the policing of political correctness on campus in the US.

[Michael]

I have to ask Lane what exactly the members of the white rose were executed for if protest was so tolerated in Germany in 1943.

[Chris]

@ Lane

Your idea that political opponents of the National Socialists went unpunished is a bit off the mark. I think your term "mainstream German" already excludes by definition the non-Jewish Germans who did dissent or who simply held rival political views (social democrat, communist, anarchist, etc.) to those of the Nazi regime and were interned and/or murdered as a result. Pacifists were also interned and/or murdered.

And the execution of the Scholl siblings and their friend hardly confirms your theory. They were executed two years before the end of the war simply for distributing leaflets. "Mainstream" Germans could end up in a concentration camp or even be executed for much more trivial things than this. Everyone knew this.

Hundreds were killed in the aftermath of the July 20 plot in 1944, and 10 years earlier hundreds of SA members, including Ernst Roehm - one of the few people with whom Hitler was on familiar "Du" terms -, were also executed, something that was not hidden from the German people and that set the tone for the rest of the Nazi period.

There were some other obvious reasons why Germans - "mainstream" or otherwise - should fear the violence of the state.

[Lane Conaway]

@Michael - I admit we're talking of matters of degree here. The White Rose members were encouraging active, physical resistance of the government, leading to its eventual overthrow. History has vindicated them, but at the time they were being more outspoken then the authorities were willing to accept.

Speaking out against specific policies however, or refusing to participate in barbaric acts, was generally something a German could get away with. And indeed this was a distinction between Stalinist Russia and Nazi Germany - although a madman, Hitler had many moments where he was very sensitive to public opinion, and unless those who opposed his policies could be segregated on racial or religious grounds, or were openly siding with Germany's enemies, they were often left alone.

The lesson I take home is that while there may come a time for dissenters to make the ultimate sacrifice for their ideals, the great majority of the citizenry can't claim fear of reprisals as the reason for not offering up at least a degree of resistance.

[RickC]

Great post Dr. Boettke.

Rafe and Lane interesting comments.

It saddens me to say that we humans exhibit glaring weaknesses in our psychological make-up. We did after all evolve to fit into certain ecological and behavioral/sociological niches. A friend of mine, who is master of understanding human behavior, especially humans under stress (he's a recognized expert in interrogation), calls us shaved apes. He doesn't mean that pejoratively, he just recognizes that humans respond to given situations in predictable ways. With that knowledge, he can manipulate a person being interrogated to achieve his ends.

Hitler, Stalin and Mao understood this about humans and they fashioned their movements to play to those weaknesses. The vast majority of people went with them willingly. Hell, there were surveys conducted in Russia recently which showed that huge numbers of Russians still consider Stalin the greatest leader in their history.

The following experiments, conducted here in the U.S. over the last few decades reveal a side of human behavior that is both ugly and frightening:

Milgram's Obedience to Authority Experiment (1961)
Zimbardo's Stanford Prison Experiment (1971)
Asch's Conformity Experiment (1951)

And, we are all susceptible. It's not a matter of intelligence.

Eric Hoffer's little classic "The True Believer" is a must read in this regard.

My point is that this knowledge of ourselves informs us as to why we must remain eternally vigilante for when our liberties are being threatened. Even small encroachments are dangerous because they can snowball so easily. I think we are facing perilous circumstances today and the time to start pointing out the dangers is now. Yesterday.

I'm glad you are one of the people doing the pointing, Dr. Boettke. I would expect no less from admirers of Mises and Hayek.

By the way, Robert Higgs has been calling this slide into what he calls "participatory" fascism for some time. Here's a couple of links.

http://www.independent.org/blog/?p=1192
http://www.independent.org/blog/?p=1249

[Chris]

@ Lane

You write that, "The White Rose members were encouraging active, physical resistance of the government."

This is incorrect.

In their first and third leaflets they explicitly called for passive resistance. In the third leaflet they wrote that it is the only available course of action:

"We have no great number of choices as to these means. The only one available is passive resistance."

They were executed for calling for non-violent resistance. And as early as in the first leaflet they alluded to the fact that they knew the risks of what they were doing:

"Only a few recognized the threat of ruin, and the reward for their heroic warning was death."

In short, we're not "talking matters of degree" here.

The leaflets are here, if you're interested:

http://www.holocaustresearchproject.org/revolt/wrleaflets.html

[Lane Conaway]

@Chris - Thanks for the link. I stand behind what I posted. The White Rose members certainly used the term "passive resistance," but they also advocated sabotage of armament plants and scientific laboratories. To me, those are overt "active" acts. I agree they were non-violent, but didn't claim otherwise.

Anyways, without wanting to further hijack the thread, I think my point stands. There was a level of resistance - open and public opposition to the policies of the state and refusal to participate in them - that stopped short of calling for the overthrow of the government (as the White Rose did) that citizens could pursue in Nazi Germany with some degree of safety.

[Rafe Champion]

Supposing that certain kinds of dissent but not ACTIONS were posssible in Germany, maybe this reflects the way that the Russian revolution was driven by intellectuals who undertood the power of ideas (hence the need for ruthless thought control)compared with the German revolution which was essentially anti-intellectual. Consequenlty there are millions of left/socialist intellectuals but only a very small number of intellectuals who ever defended fascism in its politically incorrect German form. Of course it is essential to remind people that both communism and Nazism were forms of socialist and to note the parallels between the New Deal and fascism (sans concentration camps).

[Jessi]

The new question in regard to banks is:
Nationalization or necessity?

This question was raised just earlier today on newsy.com. The video pulled from numerous sources to give people perspective on this new debate.
http://www.newsy.com/videos/debate_over_u_s_banks/

[Chris]

@ Rafe

> Supposing that certain kinds of dissent but not ACTIONS were possible in Germany...

Meaningful dissent was not possible in Nazi Germany. Von Galen was a count, a bishop and a cardinal, and he was for a while even considered sympathetic to Nazism, welcoming the German invasion of the Soviet Union, for example. Yet even he was scheduled to be executed after the war or, according to Ian Kershaw's biography of Hitler, when Goebbels deemed that a favorable turn in the eastern campaign provided an opportunity to deal with him without having an adverse effect on public morale. The Wikipedia page Lane linked to alludes to this postponed reckoning.

It should also be noted that the idea that Germans could have easily voiced dissent is most notably associated with the work of Daniel Goldhagen, whose book on the extent of German public complicity has been near universally written off as plain wrong on so many levels by fellow academics and holocaust scholars. Raul Hilbert said, for example, that, "Goldhagen is part of an academic group that in my kind of research is a disaster... [He] was totally wrong about everything. Totally wrong. Exceptionally wrong."

Unfortunately this kind of inaccurate revisionism can lead to a false understanding of the Nazi dictatorship as less malevolent than it actually was, as I believe has been demonstrated by some views presented in this comment thread.

[Lane Conaway]

The fact that Goebbels would only risk killing Von Galen after the war seems consistent with my point. I'm not trying to suggest Nazi Germany was a liberal state with full-proof free speech laws, but rather that Nazi fear of public opinion meant that during the war years a certain amount of dissent or non-compliance was begrudgingly tolerated.

The T4 dissenters were by no means all Bishops. Robert Jay Lifton's "The Nazi Doctors" refers to "crowds of townspeople" protesting the program.

The Rosenstrasse protest saw literally thousands of women protest the arrests of their Jewish husbands, and not only were the women not arrested, but many of the men were returned. This is in 1943!

As for Goldhagen, his intellectual rival Christopher Browning states "In the past forty-five years no defense attorney or defendant in any of the hundreds of post-war trials has been able to document a single case in which refusal to an order to kill unarmed civilians resulted in the allegedly inevitable dire punishment."

Deborah Lipstadt adds "Although many perpetrators claimed they had no choice, there is no record of anyone being punished for refusing to participate in the killings."

We can go back and forth on what conclusions should be drawn all day, but the fact remains that individuals dissented both publicity and directly to government officials and were not arrested. Likewise individuals choose not to participate in the most horrific acts of the holocaust and were not punished. I'm not familiar enough with contemporary Soviet history to know whether Russian circumstances were different, but the notion that individuals were unable to stand against the German state without suffering certain arrest is not correct.

[Chris]

An astounding number of Germans were complicit and participated in Nazi crimes. Refusal to participate in e.g. killings was often tolerated, and there are examples of this. But the issue here is whether dissent was possible. It was not. Here is Christopher Browning, in fact, on the subject of the line between refusal and dissent:

"The ubiquitous bickering about prices and shortages and other minor dissatisfactions, even the successful protest against the removal of crucifixes from classrooms, ought not be taken as evidence that anything could be freely said, as Goldhagen implies. Repression was real. Bishop Galen, by virtue of his visibility and status, barely survived his condemnation of euthanasia. But students of the White Rose, who passed out leaflets condemning the mass murders of the regime, were arrested, tortured, and beheaded. Members of the killing units could individually abstain from shooting, but those who encouraged others not to shoot were courtmartialed for defeatism and subversion of morale. The Third Reich was not a benign dictatorship, and there were lines that could not be crossed."

www.ushmm.org/research/center/publications/occasional/1996-01/paper.pdf (p. 23/33)

You selectively quoted Browning above in support of a position he clearly does not hold. He clearly does not believe that "individuals dissented both publicity and directly to government officials and were not arrested." I know of no credible historians who would agree with you that dissent in Nazi Germany was possible, even easy.

And you must understand that intellectual rivalry has nothing to do with the condemnation of Goldhagen's book, although I'm not sure if you meant to imply this. A lot of the exasperation regarding his book relates to the fact that it is so important to uphold the highest standards of scholarship when dealing with the holocaust, for obvious reasons. Many believe Goldhagen did not do this.

Had more and more townspeople protested, eventually the Nazis would have come down on them. If it chose to give in to their demands, this was not because it respected their views. You're drawing sweeping inferences from a couple of episodes of spontaneous protests in reaction to specific events and ignoring the mass of evidence of Nazi brutality against those who dissented. There is no way that any form of considered, meaningful protest - that is to say, political protest - against the Nazi regime would have been tolerated. Ditto any attempt to disseminate dissenting ideas.

I am not trying to deny widespread public approval in Germany of the Nazi regime or offer any form of apology for the crimes of so many Germans. I am just trying to point out that regardless of any approval and/or complicity on the part of its citizens and soldiers, the Nazi regime was much more intolerant of dissent and much more potentially (and actually) violent toward its own people in reaction to dissent than you have suggested and/or implied.

[joseph a canzoneri jr]

outstanding article and i agree with quite a bit of it but....1. america is already a socialist state. anytime you public assistance, social security , unemployment, welfare, public schools and a standing military, guess what ???? like it or not you have socialism. 2. Hitler(he so needs historical rewrite)was up against numerous enemies from abroad and internal which affected his decision making processes. a Massive communist movement supported from outside the country,an economy in depression with a worthless currency and a world war thrown in for good measure due to short sightness of all countries involved in the first world war. socialism was literally the only way at the time to rescue germany. no one there knew what the heck "democracy" was as the country was comming from a constitutional monarchy as its prior form of government. 3. at the end of the war when all was lot Hitler left germany with a modern state to rebuild rather than prewar fuedel germany and HE appointed admiral doenitz as "PRESIDENT" of the nation. guess he learned his lesson about socialism and the underlings he was forced to put in positions of power and authority. the same ones who left him holding the bag for every bad thing and decision that happend in the space of twelve years.

[Rob]

"3. at the end of the war when all was lot Hitler left germany with a modern state to rebuild rather than prewar fuedel germany"

All it took was a few million dead jews and other innocent groups.

"Hitler(he so needs historical rewrite)was up against numerous enemies from abroad and internal which affected his decision making processes. a Massive communist movement supported from outside the country"

Most of Hitler's "enemies" didn't challenge him, most were guilty because of who they were, independent of any action or thought they had.

Did you know that Hitler planned to institute a nation-wide screening for heart and lung conditions in Germany and those found to have conditions would be separated from the public? Also on the outbreak of the invasion of Poland, Hitler ordered the murder of all those with incurable diseases. Hitler doesn't need a rewrite. He's depicted just as he should be.

[Brad]

This will be even more telling when read in 2012. Great job Pete.

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[Dan]

HI,

The early years of the Cold War saw the United States facing a hostile Soviet Union, the "loss" of China to communism, and war in Korea. In this politically charged atmosphere, fears of Communist influence over American institutions spread easily.

On February 9, 1950, Joseph McCarthy, a Republican senator from Wisconsin, claimed that he had a list of 205 State Department employees who were Communists.

I wonder if Joe was about 60 years to early? How many "Socialist Commie" Czars are in the WH in 2010? Go Figure....

Peace!
Dan
http://josephmccarthy.org

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[ClubPenguinCheats]

They CAN'T do it. We can't afford the treasury rate hike that would accompany taking over the banks' liabilities and worthless assets.