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Life and Liberty
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Economic Myths #11 - The Mixed Economy

[First published on Free Life]
The world’s political systems today are, generally, neither fully despotic on the one hand nor completely free on the other. Instead, most of us languish under so-called “social democracy”, a curious mixture in which a degree of sovereignty in the form of voting rights reside in the citizenry while political leadership and control remains distinct in the form of various functionaries such as Presidents, Prime Ministers, Congressmen and Members of Parliament.
A libertarian might contend, of course, that such a social democratic system ends up being worse for individual liberty than a dictatorship or monarchy. The important point, however, is that the ideological extremes have been blended into some kind of soup which, at least from the de jure point of view, represent neither total freedom on the one hand nor total despotism on the other.
In exactly the same way, neither do our economic systems represent any ideological purity. We are neither fully capitalist nor are we completely socialised. Instead we have to put up with some kind of “mixed” economy that contains both capitalistic and socialistic elements.
Although the relationship between economic and political systems is one joined at the hip, the justification of social democracy on the one hand and of the mixed economy on the other appears to come from different directions.
Democracy, rightly or wrongly, is believed to a good and noble thing in its own right – a positive and independently justifiable improvement over any other option. The mixed economy, however, appears to be based on little more than the intellectually slothful adage that “the truth lies somewhere in the middle”.
Capitalism will bring us massive economic prosperity and improvement in the standard of living – but, so it is alleged, it leads also to unstable business cycles and encourages greed, selfishness and extensive inequalities in wealth and income. Socialism, on the other hand, may make things “fairer” and more equal; yet, in the face of a hundred years’ worth of evidence, it is difficult not to conclude that it decimates the productive capacity of a nation and the standard of living stagnates or even reverses. The “correct” system “must”, so the argument goes, lie in between these two points so that we can take the best of both systems while avoiding the alleged pitfalls. Hence we end up with the mixed economy.
The first question we might as well ask when tackling this fallacy is that if we adopt a position somewhere in between the two “extremes” then what argument is there to suggest that we will end up with the best aspects of each system rather than the worst? In spite of the socialistic element of our economy income inequality and wealth concentration in the hands of a few elites seems to be worsening, not getting better; and in spite of the capitalistic element we have failed to have any meaningful growth since at least the onset of the global financial crisis ten years ago. May be it is the alleged good parts of each system that are cancelling each other out rather than the bad?
The fundamental flaw, however, is that the assessment of capitalist and socialist economies that identifies their good and bad characteristics is partly wrong. These wrongly diagnosed parts are then exaggerated in making the case for a mixed economic system.
The good aspects of capitalism, private property and free exchange – such as economic progress and marked increases in the standard of living – are, as we know from “Austrian” economics, entirely true; the bad aspects, on the other hand – selfishness, inequality, greed, the business cycle, and so on – are largely false or misstated.
Capitalism does not encourage anyone to be greedy or selfish at all – it just gives you the freedom to be either as greedy or as altruistic as you like, provided that you fulfil those ends through voluntary trade and do not engage in outright theft or fraud. The aspect of capitalism that its opponents do not like is that people, when set free, usually choose to pursue their material welfare as the first priority. However, the resulting increase in productivity confers upon people the wherewithal to be more charitable out of choice. Thus we should not be surprised to learn that many of the great charitable or humanitarian institutions – such as the Salvation Army, the YMCA, the Scout Movement and the Rotary Club – were founded in the nineteenth or early twentieth centuries, the relatively most capitalistic period in history.
Moreover, the business cycle, as we know, is not an inherent feature of a free market economy, but is caused instead by the artificial creation of credit, something that is only sustainable with state central bank sponsorship.
However, in spite of these truths, whenever some justification is made for the “mixed” economy, we will still hear “greed”, “selfishness”, “inequality” and “boom and bust” being cited and emphasised in an attempt to cajole people into accepting a blended economic system.
Turning to socialism, we know that such a system would obliterate all productivity and the standard of living would sink far below that to which we are now accustomed. Its bad aspects are, therefore, all true. Yet the good aspects – greater equality, fairness, and anything that can be categorised under the current, in-vogue term of “social justice” – are all patently false.
Socialism does not create any equality at all; it does not result in every portion of wealth in existence being carved up into equal shares for everyone to then enjoy. Instead, it transfers the power over whole resources from private producers (who must maintain their ability to satisfy consumers in order to retain that privilege) to politicians and bureaucrats. Nationalising an industry does not give you, the average citizen, any greater access to the goods and services tied up in that industry. Rather you are pushed further to the bottom of the heap than before as the political lords and masters decide what that industry will produce, what prices you will pay and what level of service you will receive. You are stuck with whatever they decide to give you – providing that the inefficiency and waste of state run industries has anything left to give.
Nor will you have any greater ability to control how resources are used in a socialised economy compared to in a capitalist economy. The very reason why property rights and exclusive ownership exist is precisely because there is no agreement on how resources should be used. This problem exists under socialism as it does under capitalism and one person’s decision must, at some point, overrule all others. If you are to have any influence in this regard in a socialised system then it will be restricted to a handful of catch-all elections every four or five years or so. In the meantime you have to suffer whatever it is that the electoral victors throw down from their table.
Under capitalism, however, your voting influence is felt all the time in a highly specific manner through your spending habits. If a producer fails to produce what you want at a price that you can pay then he loses you there and then, while resources at his disposal are transferred to other producers who can meet your needs. Not so under socialism where you have to put up with whatever the upper elite, controlling all resources, decides will be produced.
Furthermore, providing social safety nets and welfare states in pursuit of some kind of “social justice” does not result in a society that is more caring and sharing. If anything, the adage “from each according to his means to each according to his needs” completely disintegrates any moral fervour. By separating individual productivity from individual reward, wealth creation is no longer an endeavour in which each person tries to better his own life and the lives of his friends and family. Instead, it becomes an exercise in “stockpiling” – the digging of a communal trough to which a person contributes that which he is able according to his “means” and from which he slurps out according to his “needs”. Unsurprisingly, every person seeks to minimise the amount he has to put in through toil and sweat while maximising that which he can take out in goods and services that he can enjoy in return for minimal effort.
The result of this is a population that fails to cultivate its talents towards increasing wealth such as hard work, responsibility and self-reliance and replaces them with characteristics that make them needy and pitiful, with an added layer of laziness, corruption and freeloading. This is precisely the problem faced by our bloated welfare states today and why they are completely bankrupt – demand has swollen to such an extent while supply has been hopelessly dwindled. None of this is exactly the antidote to “greed” and “selfishness” that advocates of the mixed economy might expect.
Moreover, the resulting shortages in a socialist system usually spawn black markets and underground trade, increasing the scope of legally defined criminality and, in worst case scenarios, penalising the population for attempting to acquire what should be every day goods and services – as has happened in the social democratic paradise of Venezuela.
A further fallacy that is often used to justify the mixed economy is the assertion that private enterprise does some things “better” than the state while the state does other things “better” than private enterprise. Thus we are encouraged to look at the “evidence” to decide who can do what better.
The obvious retort to this is by what standard do you conclude that something is being done “better” by either the state or by private enterprise – and, moreover, by what standard do we judge whether a certain activity should be carried on at all?
Private enterprises make this judgment through the profit and loss test; the quantity and quality of resources devoted to production of a good and service is rationed by its ability to make a profit, indicating the relative height of its demand by consumers. If a service is of low quality or unavailable to certain sections of the population it is simply because consumers are not willing to support a more extensive level of production in that particular industry.
For example, the fact that broadband internet was not, in the UK, extended to all rural communities leads our evidence-obsessed policymaker to conclude that this is a case of “market failure” – an instance where the private enterprise has rendered itself unable to provide something that it “should” provide, and so the state must step in.
This is utter nonsense. If the “free market” has failed to provide broadband internet to rural areas then it simply means that the more extensive resources necessary to do so compared to urban areas were required more urgently to produce other goods and services that people wanted to buy. Any “evaluator” who determines from the “evidence” that the state is needed for rural broadband cabling is necessarily substituting his own value judgments for everyone else’s, denying them the goods that they really demand and giving them those that they do not (or, more accurately, denying resources to one set of people who are willing to pay for them in favour of another set who are not).
Nor can we fall back on the assertion that the state should run “essential” industries for there is no such thing as an “essential” industry. Humans do not evaluate goods and services in whole, homogenous concepts such as “fire services”, “health services”, “electricity”, and so on. Rather, each good or service is demanded in specific quantities in specific times and places.
For instance, while we may think of “medicine” as “important” we can easily imagine ourselves in a situation where we would prefer to do something “unimportant” like watching television rather than produce another bottle of penicillin. Moreover, some people may not want penicillin at all if they maintain their health. The difficult task is not, therefore, determining whether penicillin is generally more “important” than television – it is identifying the precise point at which we stop devoting resources to the production of penicillin (and, thus, the point at which continuing to do so would be a waste) and move them instead towards producing television sets. This is something that can be done only by the profit and loss test of the free market. Any other judgment is necessarily arbitrary and at variance with the demands of consumers.
In any case, as libertarians, we might also ask if an industry is really critical then why on earth would you want it in the hands of the state where it can be royally screwed up? And why would it even need to be under state control? If the good or service produced is heavily in demand then profit opportunities will abound and private entities will have no problem in meeting that demand. It is, in fact, the unessential industries with low demand that struggle to stay afloat without state support.
The real reason why we have ended up with the mixed economy is, in fact, pragmatic rather than principled. Capitalism is the goose that has laid the golden egg and any decimation of capitalism would very quickly destroy the standard of living of the citizenry, prompting a swift revolution. Yet the state yearns for power and control and cannot be content with letting things be; it therefore has to paint capitalism as this necessary evil that must be stewarded and supervised – like a dangerous pet which, if managed “correctly”, will cuddle and comfort us instead of biting us on the backside.
Ironically, of course, it is state interference attempting to inject a socialistic element to the economy that brings about the chaos and injustice that is blamed on capitalism. We have boom and bust precisely because of state-sponsored credit creation, while the rich are getting richer and the poor poorer because the government bails out these cronies from the resulting disarray at the expense of the rest of us. Indeed, having a “safety net” against the alleged “sink or swim” nature of capitalism has turned out very well if you are an investment banker. None of this would happen in a genuine, capitalist economy.
The mixed economy is therefore nothing but an unjustifiable charade, built upon alleged weaknesses of capitalism and supposed strengths of socialism that simply do not exist.  Genuine economic prosperity for everyone in a fair and just society populated by morally healthy individuals can come about only through unfettered private property and free exchange – not through the state’s attempt to meddle with it.
Next week’s myth: The Deflation Danger
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Life and Liberty
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The Ministerial Merry-Go-Round

How Britain's Wars at the Top Could Sow Distrust in the State

2022 has seen the upper echelons of the British state locked in a game of musical chairs – and we still have two months left to go. This has been the year of two monarchs, three prime ministers, four chancellors and three/four home secretaries (depending on how one counts Suella Braverman’s non-contiguous terms).
When comparing the US with the UK (and, more broadly, with Europe) it is often remarked that the latter is more social democratic or "left-leaning" than the former, which seems to have preserved something, at least, of the spirit of free enterprise and self-reliance.
This isn’t entirely true, of course. For one thing, it is difficult to argue that fiscal and financial debauchery is qualitatively better or worse on either side of the Atlantic. Domestically, it may seem like Britain has been more crippled by the weight of excessive governance than its transatlantic ally. But many of the more extensive horrors of statism – war-mongering imperialism, a permanent spying, security and warfare industry – either have their contemporary origins within, or are otherwise at their worst, in the US. Additionally, it is likely that the culture war is more intense over the pond, with cultural leftists in the UK struggling to ignite the same kind of racial narratives that dog our American cousins.
Nevertheless, if I was a betting man, I would probably count on the population of the US to resist more forcefully the impetus for any kind of “reset” into a form of globalised, digital socialism – if only because they are blessed with the tradition of states’ rights, secession and decentralisation (as well as the corresponding, regionalised political infrastructure) that can, at least in principle, serve as a credible counterbalance to the accumulating insanity in Washington DC.
However, there is one aspect of the British attitude that seems more conducive to liberty than that of the Americans: that the British have very little love for politicians of any creed or colour.
This is not to imply, of course, that certain sections of the British electorate have no enthusiasm for one political candidate over the another. Nor that Americans fail to display outright hatred and disgust for some of theirs. But while Conservative Boris Johnson – one of this year’s several prime ministers – achieved a modicum of populist enthusiasm by breaking through the so-called “Red Wall” of working class voters in the 2019 election, it seems unlikely that any British politician could stage a rally attracting the kinds of crowds that accumulate for American presidential candidates. In fact, I would say that British politicians generally are viewed as lying, self-serving crooks, an opinion which emanates from all sides of the political spectrum.
This may not amount to much, of course, and perhaps I am misjudging attitudes on either side of the Atlantic. Optimistically, however, it might well be the start of a clearer recognition of the fact that political tax eaters are little more than a parasitic class of spongers, scroungers and plunderers leeching off the blood of the rest of us.
This year’s ministerial musical chairs may help to emphasise this. Many libertarians have always been in tune with the fact that democracy has presented the people with very little, real choice. Rather, we are normally treated to a parade of pre-screened candidates, all of whom are agreed on most of the fundamentals. Relatively minor or trivial differences are exaggerated into deep gulfs so as to instil the illusion of choice. Certainly today, there is very little difference, for instance, between the major UK political parties; everyone is committed to high taxes and high spending while all are content to swing the economic wrecking ball of so-called climate change policy. One might as well be asked to choose between the noose and the electric chair.
Occasionally, however, the electorate does manage to exercise a genuine choice which sails against the prevailing winds of elite preference – as we saw, for instance, with the vote for Brexit in 2016 and, in the US, for Donald Trump in the same year.
Subsequent UK elections have hardly been as dramatic. Boris Johnson, for all of his promise, was a sore disappointment to anyone counting on his apparent libertarian fervour. He imposed COVID lockdowns while wholeheartedly supporting the vaccine programme. He is a net-zero zealot while he went above and beyond the call of duty in lending his (quite considerable) weight to perpetuating the Russia-Ukraine conflict. In fact, he is officially regarded as something of a hero in the latter. In every relevant way, he is an obedient little statist. 
But the establishment (or fighting factions within it) are now so desperate to maintain their grip on power that not even this was good enough for Johnson to be assured of tenure. As such, he was ousted for largely unimportant reasons. But even more perversely, Johnson’s successor, Liz Truss was booted out after a mere six weeks following her announcement of an economic programme that was, at least, pointing in the direction of something resembling a smaller state. It now seems that exactly the right, reliable people have to be in place in the upper echelons of government if the powers that be are to be satisfied.
Consequently, the coronation of Rishi Sunak as our latest prime minister – with no say on the appointment having been granted to either the whole electorate or to his party members – is likely to infuriate not only anti-Tories but also the Tory base, especially as the latter had earlier rejected Sunak in favour of Truss. If candidates can simply be shuffled out in favour of options more preferable to forces operating behind the scenes, then precisely who is the state actually serving?
Asking questions of this nature is vital if people are to ever understand the true nature of the state and its participants: that, far from representing the people, it is an institution that seeks only to benefit itself. Weakening the state’s grip over our freedom cannot be achieved unless and until it is firmly identified as being, like oil and water, separate and apart from the populace, not a part of it. The idea that "we are all the government" or that the government somehow belongs to “us” must be firmly rejected.
Unfortunately, it also seems to be the case that people still, generally, perceive that the problem with the state is with the specific people in charge rather than with the institution itself – that only if we elect the “right” leaders then everything will be OK. Not until there is a realisation that whoever populates the state is irrelevant, and that they will all (with one or two exceptions that tend to confirm the rule) behave in more or less the same way, will there be much hope of wresting the UK free from the power of its centralised government.
Pro-liberty minded UK citizens should concentrate their efforts in this direction.
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Life and Liberty
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Freedom – the Law of the Jungle?

It is often asserted that a system of free market capitalism reduces everyone to the level of animals, subject to the "law of the jungle". Similar emotive epithets accuse capitalism of being little more than a "dog eat dog" or "winner takes all" economic system. However, as we shall see now, nothing could be farther from the truth.
Under a capitalist system all property is privately owned, and all legal exchanges must be voluntary, not coerced. However, for a voluntary exchange to occur both parties must expect to benefit from the exchange. If they did not expect to be better off then neither would have made the exchange. The exchange is therefore productive as it is designed to leave each party with something that they deem to be better than what they had before.
Once you extrapolate this to an entire economy, we can see that the very reason why capitalism is able to lift whole populations out of the slum of poverty is because people invest in the production of goods that other people want to buy. They then trade these goods for other goods that they themselves want. Everyone's lives are better off - it is a plus-sum operation that creates more for everybody.
Contrast this, however, with state intervention. Such interventions, such as taxation, are involuntary, i.e. the taxed individual has no choice as to whether the exchange occurs. But if he would not have made the exchange voluntarily then it follows that he does not regard the exchange as being to his benefit compared to an alternative. Instead of having his tax money taken to be spent on the salaries of bureaucrats, he might have preferred instead to buy a new suit or car. Hence, while the state benefits, the forced giver manifestly does not. Further, as it is not possible to measure utilities between individuals we cannot say that the eventual recipient of the funds gains "more" than the tax-payer loses.
In contrast to the productive nature of capitalism, taxation and other forms of coerced exchange are, therefore, fights over existing goods; the state wades into an extant process of production and decides that someone other than the productive party should possess those goods. In contrast to capitalism, this is manifestly a zero-sum game, with one party reaping what another loses.
What could be closer to the law of the jungle than this? Animals in the jungle are not productive; they fight with other animals for the restricted goods that nature has offered them so that they may survive. What one animal gains another animal loses. "Dog eat dog" is therefore a more appropriate description of political fights for taxpayers' money rather than for free exchange.
Finally, "winner takes all" would be a more apt description for democracy than for capitalism. With private property and free exchange, the minority does not have to restrict itself to purchasing the products and services that the majority wants. Most people might decide to shop at the mall, but that does not force others to do so; they are quite free to continue spending their pounds or dollars at a boutique. In a government election, however, the minority – the losers – always has to put up with the successful candidate, even though they may have wanted neither him nor his policies. Such a system benefits only the majority – the winners, who take all – at the expense of the hapless losers.
Criticising capitalism as a “winner takes all” system is usually the effort of those who - on account of their own inability to serve the needs of others - believe that they have failed to benefit sufficiently from free exchange. To remedy this, they want to take what other people have to fulfil their demands for "fairness" or "equality". As we can see, however, it is the resulting squabble over existing resources which would truly reduce human civilisation to the law of the jungle.
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Freedom – The Real Third Way

The economic history of the twentieth century is often summarised as some kind of big battle between unfettered capitalism on the one hand (as supposedly demonstrated by the United States) and full blown socialism/communism on the other (as the Soviet Union was supposed to have been).
Each extreme is touted to have its unique, positive aspects while being weighed down by equally unique disadvantages. Capitalism, for instance, is able to raise the standard of living by several-fold in a person’s lifetime, showering us with more goods at more affordable prices than previous generations could possibly imagine. On the other hand, it supposedly promotes a consumerist, materialist, “sink or swim” society that has no regard for the unfortunate and less well off. Hence the vision of the US as the kind of place where – if you are lucky enough to have money – you can buy whatever you want; but should you be struck down by poverty or illness then you are on your own.
Socialism, for its part, stagnates and reverses the standard of living, destroying capital and productivity so as to drive the population down to a level of permanent poverty. On the other hand, everyone is apparently more equal, benefiting from a “fair” system of distribution of any goods that are actually produced. (Of course, there is also the small matter of the tyrannous nature of socialism which, in the Soviet Union, resulted in the deaths of tens of millions of people. One might have thought that such a negative feature, being so completely off the scale, would warrant the summary dismissal of socialism as a serious proposition. But we will leave that to one side.)
Thus, if one accepts the nature of these two extremes as we have described them, a better society is seemingly reliant upon combining the economic growth of capitalism on the one hand with the supposed equality and fairness of socialism on the other. Such a path would allow us to discard the negative aspects of each those two systems in order to arrive at we have today: a social democracy, a “third way”, an economic order that is somewhere in the middle between greed and need.
The first problem with this type of thinking is that neither of the two polar opposites of capitalism and socialism have ever really existed, or at least not in the manner that their proponents imagine them. Capitalism – by which we mean here the private ownership of property, voluntary trade and exchange, and the complete absence of state privilege from any economic relations – has never blossomed in this idyllic format. State interference in the economy has always been present, just in lesser or greater quantities at different points in history. Often the interferences at lesser points have provided the catalyst for more intense state activity in later periods. For instance, the booms, busts and stop-start flirtation with centralised banking in the last half of the nineteenth century paved the way for the Federal Reserve System that dawned in 1913, just in time to print enough money to pay for World War One. Pure socialism, on the other hand, has never existed either because – as Ludwig von Mises told us so convincingly a century ago – it is, quite literally, impossible to build a socialist commonwealth without economic calculation, which, in turn, relies upon market prices for capital goods. The Soviet Union always had the benefit of being able to refer to international markets for the prices of factors of production. This enabled the Soviets to provide at least some kind of functioning economy for the seven decades of its existence, albeit at a vastly reduced rate of output compared to the rest of the world. Indeed, a joke at the time told of communism aiming for total world domination, but with the exception of one, single country whose market economy would generate the prices that everyone else could use.
A more accurate description of the two systems we have endured in recent centuries is not unfettered capitalism and unfettered socialism but, rather, state corporatism on the one hand and state socialism on the other.
State corporatism – the alignment between government and private business – has its epitome in economies such as those of Nazi Germany and Fascist Italy. However, it describes also the imperialism of nineteenth century Britain and the evolution of the United States, which received corporatist boosts during the War between the States, World War I and the New Deal, the latter of which was modelled on Fascist Italy. The combination of these has served to seal the fate of the US as a permanent “corp-tocracy”.
State socialism, on the other hand, is not public ownership of productive assets for the common good. Rather, it is ownership by the state and the bureaucracy, with productive capacity devoted to their ends (such as missile parades in Red Square) rather than the ends desired by the people. The latter, far from benefiting from equality and social justice, end up as expendable public slaves whose disobedience warrants a one way trip to the gulag.
As I have explained before, the historical development of these systems has, in fact, served to distort or misrepresent the extremes of “capitalism” and “socialism”. All of the positive aspects of capitalism are generally true; its negative aspects, however, owe themselves to state interference in the capitalist system, not to the capitalist system itself. In particular, the magnification of greed, inequality, and the general trend of the rich getting richer while the poor get poorer are consequences of state control over money. With socialism, it is the other way round: all of the negative aspects are true while the positive are completely false. If the poorest and least well off in society achieve a higher standard of living under socialism, this must always be in spite of the degree of socialisation of the economy, not because of it.
In light of this, the second problem with the “mixed economy” is that the actual blend that has been achieved by modern, social democracies is not one of capitalism on the one hand with socialism on the other. Rather, it is a mixture of state corporatism and a democratised form of state socialism. On the state corporatist side, we have central banks printing massive quantities of money, lining the pockets of the financiers in the midst of creating artificial booms and busts. At the same time, large swathes of industry are subject to state patronage and privilege to the extent that in sectors such as energy, transportation, finance, healthcare, and so on there is no genuine competition. To top it all off, armaments manufacturers profit from the continued proliferation of invented and unjustified foreign wars. On the state socialist side, however, we have politicians bribing voters with other people’s money, with demands for social justice, fairness, equality, and anti-discrimination met through the forced redistribution of wealth, income and political privilege.

The attempted synthesis between these two systems hasn’t produced any kind of successful mixed economy that selects the “best” aspects of each. In fact, the result is the complete opposite. With the lion’s share of state welfare lavished upon the very top, wealth and power is concentrated in an ever dwindling number of elites. Those clamouring for state corporatism, fake privatisations and state support for business simply want to keep their profits flowing through state protection. Rising stock prices and GDP figures – which are really just consequences of monetary inflation – can be trumpeted as proof that the system “works” to produce “sustainable” growth, but it results in very real resentment from those it leaves behind. The crumbs of welfare thrown to the very bottom, however, tend to perpetuate poverty by trapping people in the limbo of welfare dependency. But the response to this is often a clamour for more state socialism. Noting that state corporatism (which they think is “capitalism”) seems to do nothing except make the rich richer and the poor poorer, its advocates want to end the anti-democratic structure of state corporatism so as to return key industries to “public ownership”. If there has been any reconciliation at all, then it is evident in corporate obeisance to “woke” priorities and the left wing bias of “big tech”. Left out of everything is the productive middle classes, who tend to shoulder every bill.
If the two, dominant social systems have been state corporatism and state socialism (with the postulated “third way” of blending the two having failed), then what, we might ask, is the real third way? There are only three possibilities. First, unfettered socialism; second, unfettered capitalism; and third, a mixed economy of genuine socialism and genuine capitalism (what we might call “interventionism”).
The first option, socialism, is a non-starter for the reason we mentioned earlier: its inability to perform economic calculations mean that it is suitable only for creating chaos out of order. Indeed, a socialist economic order is no order at all; it is a disaster that would quickly relegate the human race to the Stone Age.
The third option, interventionism, is also a no-go, as it produces distortions that must lead either to further interventions or to a complete abandonment of the intervention altogether. For example, if the state intervenes to set a price ceiling on a certain good that is below the market price, the result – all else being equal – will be a shortage of that good. In response to this, the state has one of two options in order to restore supply: to intervene further by taking over the entire supply chain, or to abandon the price control. If it takes the first option, this requires further interventions in other industries which will create similar distortions and disarrays which will, in turn, breed even more interventions ad infinitum. If this process continues then we end up with full state control over everything - i.e. socialism. Socialism, however, is impossible, and so will collapse almost immediately. If, however, the state takes the second option of abandoning the price control, then capitalism and freedom are restored.
It’s worth mentioning in this regard that, in our contemporary societies, we are reaching the apex of state interventionism. Decades of excessive money printing and perpetuated malinvestment through the resulting credit expansion have driven financial markets to a zombie-like existence bathing in a sea of insolvency. We are now close to the point where states will either have to completely socialise financial markets – probably through touted “Central Bank Digital Currencies” – or abandon their policy of cheap credit and restore sound money.
This leaves, then, capitalism, the genuine free market, as the only prospective and sustainable economic order. Only capitalism, based upon voluntary trade resulting from each individual peacefully pursuing his purposes, is able to avoid the pitfalls of socialism, of the pseudo-capitalism of state corporatism, and of the pseudo-equality and fairness of state socialism. All of these latter systems – being nothing more than the attempts of some people to live at the expense of everyone else – are based on force, fraud, antagonism, and are ultimately responsible for all of the alleged pitfalls that are ascribed to too much freedom: inequality, greed, selfishness, and so on. Only the restoration of a genuine free market capitalism can therefore lead to a peaceful and prosperous society.
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