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Source link: http://archive.mises.org/5965/middle-of-the-road-policy-leads-to-socialism/

Middle-of-the-Road Policy Leads to Socialism

December 1, 2006 by

Mises’s classic essay on the interventionists who emphasize that they plan to retain private ownership of the means of production, entrepreneurship and market exchange. But, they go on to say, it is peremptory to prevent these capitalist institutions from spreading havoc and unfairly exploiting the majority of people. It is the duty of government to restrain, by orders and prohibitions, the greed of the propertied classes lest their acquisitiveness harm the poorer classes. Unhampered or laissez-faire capitalism is an evil. But in order to eliminate its evils, there is no need to abolish capitalism entirely. It is possible to improve the capitalist system by government interference with the actions of the capitalists and entrepreneurs. Such government regulation and regimentation of business is the only method to keep off totalitarian socialism and to salvage those features of capitalism which are worth preserving. On the ground of this philosophy, the interventionists advocate a galaxy of various measures.

FULL ARTICLE

{ 30 comments }

Jack Maturin December 1, 2006 at 7:30 pm

Delivered 56 years ago? As we say here in England, in the words of one of our famous sons, Ray Winstone, Von Mises really is the Daddy.

averros December 1, 2006 at 9:28 pm

Just like a parasite, the interventionism (and interventionists) can live off the capitalism for a very long time.

It is actually an arms race – the host (the entrepreneurs) constantly has to develop defenses and tricks to stay ahead of the parasitic government which always keeps coming with new ways to pillage more.

George Gaskell December 1, 2006 at 9:56 pm

1950???

Amazing! The quoted portion, about how all they want is regulated capitalism ,could be lifted from any one of about ten thousand of today’s so-called fiscal centrists.

Take a look at Molly Ivins (a popular Clintonista writer), earlier this year, on what she called the “Suicide of Capitalism” —

Because hedge funds make high-risk bets, Long Term Capital got itself in so much trouble its collapse actually threatened to wreck world markets, and regulators had to step in to negotiate a $3.6 billion bailout. A similar fiasco at this point probably would break world markets.

The number of errors in this one passage is astounding. No single hedge fund can “wreck” a “world market.” She obviously has NO IDEA about the general economic benefits of having speculators around who make such bets, including when they lose. Regulators did not HAVE to step in to bail anyone out; letting investors fail when they choose the wrong investments serves a beneficial social purpose. Etc.

The middle-of-the-road mentality that Mises described in 1950 is alive and well.

Kenneth R Gregg December 1, 2006 at 10:13 pm

I still remember the amazement that I felt when I first read this essay as a teenager. I had casually picked up “Planning For Freedom” at a little bookstore at Knott’s Berry Farm in Orange County, CA. The title looked interesting and I had some spare change. There were no science fiction novels handy and I was in the mood to read something.

It was one of those “Wow!” moments and I became a Misesian laying on the lawn of an amusement park! The roller coaster nearby held screaming locals and tourists. The families milling about waiting to get into the resaurant were conversing with each other and trying to keep their kids under some modicum of control. The essay’s logic was irrefutable. The style was clear and the ideas shocked me into a realization that laissez-faire capitalism was the only reasonable position.

M E Hoffer December 2, 2006 at 7:27 am

1950???

Amazing! The quoted portion, about how all they want is regulated capitalism ,could be lifted from any one of about ten thousand of today’s so-called fiscal centrists.

Yes. Quite.

SarbOx is a good example, foaled from the “Enron blow-up”, of the type of Trojan Horse designed to bring “Realpolitik”-stasis=predictability- to the Financial Markets.

These malingering Mountebanks will not stop, in their Journey, until they succeeded in putting us all under foot.

Past that, anyone care to check this definition of Economics- a Coin: with, Finance on its Face(obverse), Politics found on its Re-verse. ??

Brett Celinski December 2, 2006 at 4:25 pm

The new totalitarians have finally taken over the subtlety and ‘pragmatism’ of Anglo-American political discourse. Our new therapeutic statism we find in the media, ‘left and right’, has discarded the old stark polarized politics of old world style ‘leftism’. We now have indistinguishable appeals to ‘democracy’ and ‘freedom’ from our politicians. The only reason the neocons are faring poorly these days is that their rhetoric was too stark and overt. They should have learned a thing or two from Clinton, except his personal moral gaffes, and milked the ‘family values’ teat dry.

RogerM December 3, 2006 at 8:42 am

I wish I had read Mises 40 years ago. It took me a long time to come to similar conclusions.

The problem of intervention by the state is the main reason I argue that capitalism didn’t begin before the Dutch Republic, because such intervention was the norm before that, even in Venice.

The Calvinists in the Dutch Republic were appalled by the economic, social and religious freedoms that the Erasmian Protestants allowed in the Republic and fought them vigorously. As those freedoms spread to England and the rest of Europe, the Church of England and the Catholic Church fought against them. Today, the religious left and right find inspiration in those earlier opponents of freedom. The Catholic Church has always maintained that it promoted a third way.

David White December 3, 2006 at 10:13 am

To me, the overarching point is that insofar as the state exists, it is uncontainable, “limited government” being the equivalent of “a little bit pregnant.” One need only look at our own “constituional government” to know that this is true. The Articles of Confederation having been considered too loose a construct (by the ruling elite, not the people), a more centralized arrangement was forged, yet one that went out of its way to protect the rights of the individual. All for nought, however, as the “chains of the Constitution” that Jefferson mistakenly put his faith in quickly turned out to be no more than tissue paper. For as Franklin rightly warned, “When the people find that they can vote themselves money, that will herald the end of the republic,” the establishment of the Federal Reserve having done just that.

Botton line: Being inherently antisocial and thus morally unjustifable, the state must be eradicated through a process of relentless decentralization. And since a return to constitutionalism is a pipe dream, it must be bypassed via a return to state sovereignty, thereby setting the stage for the emergence of stateless governance.

It’s that or the realization of the statists’ dream — world government — and the ulitmate subjugation of all mankind.

Eric December 3, 2006 at 7:41 pm

David:

I agree with your sentiments, but what if the state doesn’t want to be eradicated, and there are lots of criminal politicians that will do anything to keep the state going as it gives them an awfully nice lifestyle, what with immunity, perks, power to get rich and destroy their enemies. And as long as they control the agencies of force, how will this eradication come about?

I think it will have to get a lot worse before it can get better. And then the odds of it getting better, rather than worse still are slim to none.

One miracle is all a country gets. Our’s lasted about 1/2 a century and began going downhill after the civil war.

I see us having not one world government, but more like Orwells perpetual warring between various large groups. That way they can control us through fear.

Jeb December 3, 2006 at 8:48 pm

Sorry for the naieve question, but;

what happens if, instead of spreading price controls from milk onto the things milk producers consume, the government decides to subsidise milk production? that would break the causal connection and where would we end up then? the costs of a subsidy for milk production are so spread out over the entire tax base that no one is likely to be thrown out of business. Do not get the idea that I am supporting subsidies, but does anyone know if that is a “permenant” form of middle-of-the-roadism? thanks

Jeb December 3, 2006 at 8:48 pm

Sorry for the naieve question, but;

what happens if, instead of spreading price controls from milk onto the things milk producers consume, the government decides to subsidise milk production? that would break the causal connection and where would we end up then? the costs of a subsidy for milk production are so spread out over the entire tax base that no one is likely to be thrown out of business. Do not get the idea that I am supporting subsidies, but does anyone know if that is a “permenant” form of middle-of-the-roadism? thanks

Sam December 4, 2006 at 6:56 am

I was just wondering about the idea of taxation in its Progressive form. Namely the idea of the ‘haves’ paying more to support services that are supposed to go the ‘have-nots’ who pay less-to-no tax.

The idea that tax is theft would then be decried by the ‘haves’ as paying for goods and services that the ‘haves-nots’ are consuming. Whereas capitalism works on the concept of user pays – if you want the goods and/or services then YOU pay for them. And of course like dubious charities, politicians also use the same money to fund projects that have nothing to do with ‘have-nots’, such as imperialism, which wouldn’t help the ‘have-nots’ much at all. But at least with with a exposed corrupt charity one could stop donating but you can’t stop paying taxes.

Yet the ‘have-nots’ and/or their advocates would then say such transfers, from the top down, are still good because it would go to socialised goods such as education, healthcare, retirement, etc. . .

Standard Libertarian complaints so far, right?

But . . .

What then about the concept of Regressive Taxes instead? You know, the poor get the highest rates and the rich get to pay little to no taxes. It could be then argued that those who would benefitted the most from the socialised institutions, that is the ‘have-nots’, would pretty much pay for them. And those who don’t want such programs and would prefer their own private education, private healthcare, private retirement, etc., would buy the better, efficient capitalist-driven goods and services.

The ‘have-nots’ and their advocates would then say that this amounts to no more than a glorified Insurance Benefit Scheme, but then so what? At least then the true Capitalists whose system is truer as such people would get increasing wealthier over time would pay increasing less tax and have some greater control over their fanancial destinies.

Then when the regressive system starts cracking up because the ‘have-nots’ and their advocates complain that the services are underfunded especially as politicians prefer to pay themselves and play their wargames. Would not then the would-be-socialists want to abandon the tax system when they realise how heavy the burden is and start advocating no taxes and personal financial independence?

You know tax the poor the most and see how THEY like it? Betcha they wouldn’t like taxes too much for long . . .

Dan Coleman December 4, 2006 at 7:04 am

Jeb wrote:

what happens if, instead of spreading price controls from milk onto the things milk producers consume, the government decides to subsidise milk production? that would break the causal connection and where would we end up then? the costs of a subsidy for milk production are so spread out over the entire tax base that no one is likely to be thrown out of business.

The subsidizing of milk production, as you suggest, would have two main effects:

(1) It taxes someone to pay for the subsidies, and
(2) It creates distortions in the milk production industry.

In the first case, money is taken from urgent needs and coercively applied to less efficient uses. The result is that everyone has less net wealth than they otherwise would have.

In the second case, milk producers and potential milk producers will now make choices based on a distorted perception of reality. That is to say, the government money in the milk business allows for all kinds of inefficiencies and bad practices to subsist that would otherwise be crushed through the forces of a free market.

Inefficiencies — whatever they may be — always produce visible effects. In the free market, people work to smooth out these problems because there is always money to be made in providing better service at lower costs to the consumer. However, in our model, since these inefficiencies are being promoted through government dollars, they are immune (or, at least, highly resistant) to the forces of competition.

As these distortions become problematic, it becomes clear that there are two ways to attempt to resolve the malinvested resources: either get the government out of the way, or try to subsidize or penalize someone else to smooth things over.

We are back to Mises’ original formulation. I do not think that it really matters whether we push price controls to the things milk producers consume or whether we subsidize their business — this is merely a medium and a way of making “intervention” concrete rather than an abstract idea. The point is that distortions breed trouble, and trouble can only be resolved (or “resolved”) through deregulation or more intervention. Hence, there is no ‘third way’ but only directions: freedom and slavery.

Sam December 4, 2006 at 8:22 am

To Dan Coleman and his wacko conclusion to his otherwise decent argument:

>> Hence, there is no ‘third way’ but only directions: freedom and slavery.

That is a really daft black-and-white statment to make. To take such extremes as their word could be construed as:

Freedom – do what you want whatever you want without regard to yourself or to the harm you would inflict upon others.

Slavery – everyone lives for nothing except to serve a few brutal, ruthless masters.

The real world one would think means we can make choices where we all can along with others at a moral level and then we can all be wealthier and happier for it.

David White December 4, 2006 at 8:24 am

Eric:

“I think it will have to get a lot worse before it can get better. And then the odds of it getting better, rather than worse still are slim to none.”

I agree with the first sentence but not with the second, which is not to say that you won’t be proved right. Rather, it is to say that as the American empire teeters on the brink, grasping evermore desperately at a rope of increasingly worthless dollars to prevent its fall into the abyss, the question is not if, but how long, martial law will last amid the forced transtion to an EU-style North American Union, complete with a euro-style “Amero.” (You can google both to find out more.)

In other words, how long before one or more American states decides that enough is enough and walks away (e.g., http://www.vtcommons.org ), secure in the knowledge that the central government (the NAU’s “governing body”) will not have the moral authority to prevent what would become a mass exodus, ushering in a new era of political decentralization.

Simply put, this is what we must prepare for, and sooner rather than later, as establishment players (e.g., Volker, Rubin, Paulson) are now openly admitting that a financial crisis is imminent.

RogerM December 4, 2006 at 9:03 am

Jeb:”what happens if, instead of spreading price controls from milk onto the things milk producers consume, the government decides to subsidise milk production?”

That’s actually a good point. Subsidies destroy less wealth than do price controls, and so are preferable. The main reason that we haven’t used them in the US is that they seem like welfare payments to people who can’t make it on their own, which they are, so producers don’t like them. They prefer to focus on the “unfairness” of the system and demand justice. It seems more noble to them.

As for the effects of subsidies, as others have mentioned it causes an over consumption of the subsidized item and increasing government expenditures. You can see the effects in lots of countries, but especially Iran and Venezuela where they subsidize gasoline. Their cars are inefficient and they waste a lot.

If you want to help the poor, the best way is private charity going directly to the poor. Government intervention always makes everyone poorer overall.

Francisco Torres December 4, 2006 at 9:28 am

Freedom – do what you want whatever you want without regard to yourself or to the harm you would inflict upon others.

Bad definition. Inflicting harm upon others would be a restriction to their freedom – which in that case would not be “freedom” but tyranny. Freedom could be better defined as: do whatever you want with or without regard for yourself, without inflicting harm on others.

There is nothing intrinsically unethical about acting without regard for your safety or well being.

Dan Coleman December 4, 2006 at 9:53 am

Sam wrote:

To Dan Coleman and his wacko conclusion to his otherwise decent argument:

>> Hence, there is no ‘third way’ but only directions: freedom and slavery.

That is a really daft black-and-white statment to make. To take such extremes as their word could be construed as:

Freedom – do what you want whatever you want without regard to yourself or to the harm you would inflict upon others.

Slavery – everyone lives for nothing except to serve a few brutal, ruthless masters.

The real world one would think means we can make choices where we all can along with others at a moral level and then we can all be wealthier and happier for it.

Sam, I notice two things happening in your criticism: (a) you use definitions that I never used, and which happen to be rather incompatible with what I think, and (b) you ignored my use of the word “direction.”

I won’t bother with definition too much other than to say that I subscribe to Rothbard’s notion of freedom and slavery, as outlined in his work “For a New Liberty.” That should clear up my use of the words.

As for the second point. . .Now, in the “real world,” you can either be free or unfree to do as you like. That isn’t daft overgeneralization; it’s simply the way things are. However, to judge a given nation by that standard (i.e. that they are either entirely “free” or entirely “unfree”) would ignore the reality that we live in: a world full of societies that, to varying degrees, honor freedom or use aggression against their own members.

With respect to economic structure there is no stability in this world, and nothing seems static. Hence, governments must move in directions, and the direction that they take will always involve either a step in the direction of liberty (in my first post ‘freedom’) or restricted liberty (in my first post ‘slavery’).

It is true that both ends are extremes of human experience. But logic and history show that there is no true middle way.

Dan Coleman December 4, 2006 at 9:56 am

My apologies for any confusions in the post above. My HTML italic skills are less than admirable.

Here is what was supposed to be the “quoted” section from Sam:

“To Dan Coleman and his wacko conclusion to his otherwise decent argument:

>> Hence, there is no ‘third way’ but only directions: freedom and slavery.

That is a really daft black-and-white statment to make. To take such extremes as their word could be construed as:

Freedom – do what you want whatever you want without regard to yourself or to the harm you would inflict upon others.

Slavery – everyone lives for nothing except to serve a few brutal, ruthless masters.

The real world one would think means we can make choices where we all can along with others at a moral level and then we can all be wealthier and happier for it.”

Everything after it is my response.

M E Hoffer December 4, 2006 at 11:58 am

Dan Coleman is hardly the one being ‘daft’. With this observation: “and the direction that they take will always involve either a step in the direction of liberty (in my first post ‘freedom’) or restricted liberty (in my first post ‘slavery’).” He is re-stating, quite, the Fact of the matter.

As per usual, Patrick Henry taught us all the political triangulation we need to know. There are, but, two outcomes.

“The Third Way”, ranks with “Need of an Elastic Money Supply”, and “Need of a Strong Central Government”(in reverse chronology of their nascency) among the Pantheon of Political Frauds that have been perpetrated upon the American Public.

Far from ‘daft’, DC has shown the courage to plainly state the Truth about the State. Far, indeed, from what we get from W.D.C..

Yancey Ward December 4, 2006 at 12:19 pm

Dan Coleman is essentially correct- there is only a continuum between slavery and “complete freedom”. Now some regard “complete freedom” as the ideal, but I know many disagree, as I do, and I don’t think “complete freedom”, which I define as true anarchy, is really possible for rational humans. However, I think Mises was correct in the sense that the pull towards slavery is, ultimately, irresistable. Eventually it happens, continues for awhile, then the entire system falls apart, and a new order, with more freedom, is formed. This cycles endlessly throughout human history because we lack the cultural memory of the past failures. Should we ever become essentially immortal, then I think the process of collapse/rebirth can be stopped.

Eric December 4, 2006 at 1:43 pm

David:

When you speak of a financial crisis, what is the cause of the crisis? Rampant money creation, i.e. money inflation? I don’t see that causing much more of a crisis than the post viet nam war inflation effects, and we muddled though that. Yes, it causes much financial hardship, but not enough to bring down the empire.

As to a state seceding from the union, I don’t see that as a possiblility. Lincoln eliminated that. The issue is lost taxes, as it was in Lincolns time. Perhaps the feds would let them go, but I wager they’d still make them pay taxes – to pay for security costs. Did the Roman Empire let any of it’s taxpayers go? Then what about the entire welfare system. The feds might say, you don’t get your social security, and you will have to pay a 50% tarrif to trade with your neighboring states. They might even set a ransom where the state would have to return trillions in supposed benefits. Who knows? It’s like the free state movement, neva happen! Of course we can hope. But I doubt I’ll see any changes like that in my lifetime. The Valley out here in Los Angles, couldn’t even secede from the city. You can bet the fear mongers would never let a state secede even if the people got to vote on it.

Dennis Sperduto December 4, 2006 at 2:07 pm

Regarding the issue of subsidies, while they do not distort the price system and are not counter-to-purpose as are price controls, they have their own significant negative consequences. Government produces nothing; what it spends it must take from the taxpayer or obtain from inflation (another form of taxation). And obviously, in order to give a subsidy to one individual, the government must first have had to tax the funds away from someone else. The person who has been taxed has been injured, and his standard of living has been reduced.

A possible reason that subsidies are not more widely utilized is that they are comparatively transparent; one person is taxed to shore-up someone else. With price controls, the negative effects, while real and unavoidable, are harder for the average person, and evidently some economists, to understand.

Francisco Torres December 4, 2006 at 3:27 pm

Regarding the issue of subsidies, while they do not distort the price system and are not counter-to-purpose as are price controls, they have their own significant negative consequences

Actually, Dennis, subsidies do affect the price system by distorting the profit/loss test. If the producer receives a subsidy, he or she will not be able to receive the proper signals from the market regarding price and will not know if he or she is applying the resources correctly. A subsidized industry will tend to purchase raw materials and capital goods at a rate much greater than it should, raising the price on such goods in a way as to make them less accessible to other industries. Subsidies, then, generate this ripple effect upon the whole market.

M E Hoffer December 4, 2006 at 3:51 pm

“Ethanol”- the ‘grow your own solution’ to our ‘addiction to Oil’ (thanks W.D.C.), might be a good market to view while weighing the competing suppositions of Sperduto y Torres.

Dennis Sperduto December 4, 2006 at 6:23 pm

Francisco,

I stand corrected; mistakes such as this happen when you try to post something quickly at work. The entire first sentence was not written as I intended.

The sentence should have read: “Regarding the issue of subsidies, while they are not counter-to-purpose as are price controls, they do distort the price system and have their own significant negative consequences.”

Also, I lost control of the first sentence since I was trying to emphasize the relative transparency of subsidies compared to price controls. I believe how government spending is funded is a good analogy: taxation, the comparatively direct and transparent method, versus inflation.

Thanks again for pointing out my mistake.

Sam December 4, 2006 at 11:57 pm

Sam here again replying to Dan Colemen’s comeback.

I think I now know what you were getting at. You were making a relative statment that changes make us MORE free or MORE enslaved. I thought you meant that a society was either TOTALLY free or TOTALLY enslaved. Oops. I confused your concept of movement with my incorrect assumption that you were referring to simple static extremes. Sorry.

By the way to Fransisco Torres, I still stand by my definition of freedom as meaning unqualified individual capacity for choice. One person can have greater freedoms by imposing restrictions on others – a possible zero-sum rights game. Perhaps the word ‘liberty’ on the other hand may have morals associated with it, which means freedoms attained without affecting others.

P.S. Does anyone have anything thoughts about my other blog on Regressive Taxation?

David White December 6, 2006 at 8:01 am

Eric:

By financial crisis I mean the bursting of the Mother of All Bubbles — specifically, the collapsing of the global fiat currency regime that began in 1913, came to fruition in 1971, and has now all but exhausted itself. Only smoke and mirrors keep it afloat, and as an “orderly” devaluation of the dollar is attempted, one can be sure that one or another in the den of thieves that is the world’s central banks will eventually (and could at any moment) “cut and run,” in which case a stampede to the exits would be on.

Among the growing numbers of excellent articles on the collapse of the dollar, here are two of my favorites:

http://www.commondreams.org/views06/0705-30.htm

http://www.safehaven.com/article-5205.htm

As for secession, Lincoln succeeded only in proving once again that might makes right, “preserving the Union” at the expense of the principle upon which it was created. But because the American welfare-warfare state — the American empire — would not exist without the above corruption of money (as a youthful Greenspan well knew: http://www.usagold.com/gildedopinion/Greenspan.html ), the demise of the latter will usher in the demise of the former, the only question being whether we will have to endure an equally ill-fated North American Union in the interim.

Sadly, I expect that we will, and sadder still, will not be surprised to see Bill Clinton head up its “governing body.”

Miklos Hollender February 5, 2008 at 9:38 am

“Thus it resorts to a price ceiling and fixes the price of milk at a lower rate than that prevailing on the free market. The result is that the marginal producers of milk, those producing at the highest cost, now incur losses. As no individual farmer or businessman can go on producing at a loss, these marginal producers stop producing and selling milk on the market.”

An important thing to point out, I believe, is that it will usually be the smallest producers who are the marginal ones, as they can’t employ the economies of scale as efficiently as the big ones. Thus price controls tend to create corporate oligopolies. This can be “fixed”, to some extent, with subsidies, but then you have a whole another class of problems…

Pippin October 6, 2008 at 5:37 am

A Russian translation of this article is now available here

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