https://mises.org/library/why-nazism-was-socialism-and-why-socialism-totalitarian
Why Nazism Was Socialism and Why Socialism Is Totalitarian
Nazism is Socialism
My purpose today is to make just two main points: (1) To show why Nazi
Germany was a socialist state, not a capitalist one. And (2) to show
why socialism, understood as an economic system based on government
ownership of the means of production, positively requires a
totalitarian dictatorship.
The identification of Nazi Germany as a socialist state was one of the
many great contributions of Ludwig von Mises.
When one remembers that the word "Nazi" was an abbreviation for "der
Nationalsozialistische Deutsche Arbeiters Partei — in English
translation: the National Socialist German Workers' Party — Mises's
identification might not appear all that noteworthy. For what should
one expect the economic system of a country ruled by a party with
"socialist" in its name to be but socialism?
Nevertheless, apart from Mises and his readers, practically no one
thinks of Nazi Germany as a socialist state. It is far more common to
believe that it represented a form of capitalism, which is what the
Communists and all other Marxists have claimed.
The basis of the claim that Nazi Germany was capitalist was the fact
that most industries in Nazi Germany appeared to be left in private
hands.
What Mises identified was that private ownership of the means of
production existed in name only under the Nazis and that the actual
substance of ownership of the means of production resided in the
German government. For it was the German government and not the
nominal private owners that exercised all of the substantive powers of
ownership: it, not the nominal private owners, decided what was to be
produced, in what quantity, by what methods, and to whom it was to be
distributed, as well as what prices would be charged and what wages
would be paid, and what dividends or other income the nominal private
owners would be permitted to receive. The position of the alleged
private owners, Mises showed, was reduced essentially to that of
government pensioners.
De facto government ownership of the means of production, as Mises
termed it, was logically implied by such fundamental collectivist
principles embraced by the Nazis as that the common good comes before
the private good and the individual exists as a means to the ends of
the State. If the individual is a means to the ends of the State, so
too, of course, is his property. Just as he is owned by the State, his
property is also owned by the State.
But what specifically established de facto socialism in Nazi Germany
was the introduction of price and wage controls in 1936. These were
imposed in response to the inflation of the money supply carried out
by the regime from the time of its coming to power in early 1933. The
Nazi regime inflated the money supply as the means of financing the
vast increase in government spending required by its programs of
public works, subsidies, and rearmament. The price and wage controls
were imposed in response to the rise in prices that began to result
from the inflation.
The effect of the combination of inflation and price and wage controls
is shortages, that is, a situation in which the quantities of goods
people attempt to buy exceed the quantities available for sale.
Shortages, in turn, result in economic chaos. It's not only that
consumers who show up in stores early in the day are in a position to
buy up all the stocks of goods and leave customers who arrive later,
with nothing — a situation to which governments typically respond by
imposing rationing. Shortages result in chaos throughout the economic
system. They introduce randomness in the distribution of supplies
between geographical areas, in the allocation of a factor of
production among its different products, in the allocation of labor
and capital among the different branches of the economic system.
In the face of the combination of price controls and shortages, the
effect of a decrease in the supply of an item is not, as it would be
in a free market, to raise its price and increase its profitability,
thereby operating to stop the decrease in supply, or reverse it if it
has gone too far. Price control prohibits the rise in price and thus
the increase in profitability. At the same time, the shortages caused
by price controls prevent increases in supply from reducing price and
profitability. When there is a shortage, the effect of an increase in
supply is merely a reduction in the severity of the shortage. Only
when the shortage is totally eliminated does an increase in supply
necessitate a decrease in price and bring about a decrease in
profitability.
As a result, the combination of price controls and shortages makes
possible random movements of supply without any effect on price and
profitability. In this situation, the production of the most trivial
and unimportant goods, even pet rocks, can be expanded at the expense
of the production of the most urgently needed and important goods,
such as life-saving medicines, with no effect on the price or
profitability of either good. Price controls would prevent the
production of the medicines from becoming more profitable as their
supply decreased, while a shortage even of pet rocks prevented their
production from becoming less profitable as their supply increased.
As Mises showed, to cope with such unintended effects of its price
controls, the government must either abolish the price controls or add
further measures, namely, precisely the control over what is produced,
in what quantity, by what methods, and to whom it is distributed,
which I referred to earlier. The combination of price controls with
this further set of controls constitutes the de facto socialization of
the economic system. For it means that the government then exercises
all of the substantive powers of ownership.
This was the socialism instituted by the Nazis. And Mises calls it
socialism on the German or Nazi pattern, in contrast to the more
obvious socialism of the Soviets, which he calls socialism on the
Russian or Bolshevik pattern.
Of course, socialism does not end the chaos caused by the destruction
of the price system. It perpetuates it. And if it is introduced
without the prior existence of price controls, its effect is to
inaugurate that very chaos. This is because socialism is not actually
a positive economic system. It is merely the negation of capitalism
and its price system. As such, the essential nature of socialism is
one and the same as the economic chaos resulting from the destruction
of the price system by price and wage controls. (I want to point out
that Bolshevik-style socialism's imposition of a system of production
quotas, with incentives everywhere to exceed the quotas, is a sure
formula for universal shortages, just as exist under all around price
and wage controls.)
At most, socialism merely changes the direction of the chaos. The
government's control over production may make possible a greater
production of some goods of special importance to itself, but it does
so only at the expense of wreaking havoc throughout the rest of the
economic system. This is because the government has no way of knowing
the effects on the rest of the economic system of its securing the
production of the goods to which it attaches special importance.
The requirements of enforcing a system of price and wage controls shed
major light on the totalitarian nature of socialism — most obviously,
of course, on that of the German or Nazi variant of socialism, but
also on that of Soviet-style socialism as well.
We can start with the fact that the financial self-interest of sellers
operating under price controls is to evade the price controls and
raise their prices. Buyers otherwise unable to obtain goods are
willing, indeed, eager to pay these higher prices as the means of
securing the goods they want. In these circumstances, what is to stop
prices from rising and a massive black market from developing?
The answer is a combination of severe penalties combined with a great
likelihood of being caught and then actually suffering those
penalties. Mere fines are not likely to provide much of a deterrent.
They will be regarded simply as an additional business expense. If the
government is serious about its price controls, it is necessary for it
to impose penalties comparable to those for a major felony.
But the mere existence of such penalties is not enough. The government
has to make it actually dangerous to conduct black-market
transactions. It has to make people fear that in conducting such a
transaction they might somehow be discovered by the police, and
actually end up in jail. In order to create such fear, the government
must develop an army of spies and secret informers. For example, the
government must make a storekeeper and his customer fearful that if
they engage in a black-market transaction, some other customer in the
store will report them.
Because of the privacy and secrecy in which many black-market
transactions can be conducted, the government must also make anyone
contemplating a black-market transaction fearful that the other party
might turn out to be a police agent trying to entrap him. The
government must make people fearful even of their long-time
associates, even of their friends and relatives, lest even they turn
out to be informers.
And, finally, in order to obtain convictions, the government must
place the decision about innocence or guilt in the case of
black-market transactions in the hands of an administrative tribunal
or its police agents on the spot. It cannot rely on jury trials,
because it is unlikely that many juries can be found willing to bring
in guilty verdicts in cases in which a man might have to go to jail
for several years for the crime of selling a few pounds of meat or a
pair of shoes above the ceiling price.
In sum, therefore, the requirements merely of enforcing price-control
regulations is the adoption of essential features of a totalitarian
state, namely, the establishment of the category of "economic crimes,"
in which the peaceful pursuit of material self-interest is treated as
a criminal offense, and the establishment of a totalitarian police
apparatus replete with spies and informers and the power of arbitrary
arrest and imprisonment.
Clearly, the enforcement of price controls requires a government
similar to that of Hitler's Germany or Stalin's Russia, in which
practically anyone might turn out to be a police spy and in which a
secret police exists and has the power to arrest and imprison people.
If the government is unwilling to go to such lengths, then, to that
extent, its price controls prove unenforceable and simply break down.
The black market then assumes major proportions. (Incidentally, none
of this is to suggest that price controls were the cause of the reign
of terror instituted by the Nazis. The Nazis began their reign of
terror well before the enactment of price controls. As a result, they
enacted price controls in an environment ready made for their
enforcement.)
Black market activity entails the commission of further crimes. Under
de facto socialism, the production and sale of goods in the black
market entails the defiance of the government's regulations concerning
production and distribution, as well as the defiance of its price
controls. For example, the goods themselves that are sold in the black
market are intended by the government to be distributed in accordance
with its plan, and not in the black market. The factors of production
used to produce those goods are likewise intended by the government to
be used in accordance with its plan, and not for the purpose of
supplying the black market.
Under a system of de jure socialism, such as existed in Soviet Russia,
in which the legal code of the country openly and explicitly makes the
government the owner of the means of production, all black-market
activity necessarily entails the misappropriation or theft of state
property. For example, the factory workers or managers in Soviet
Russia who turned out products that they sold in the black market were
considered as stealing the raw materials supplied by the state.
Furthermore, in any type of socialist state, Nazi or Communist, the
government's economic plan is part of the supreme law of the land. We
all have a good idea of how chaotic the so-called planning process of
socialism is. Its further disruption by workers and managers siphoning
off materials and supplies to produce for the black market, is
something which a socialist state is logically entitled to regard as
an act of sabotage of its national economic plan. And sabotage is how
the legal code of a socialist state does regard it. Consistent with
this fact, black-market activity in a socialist country often carries
the death penalty.
Now I think that a fundamental fact that explains the all-round reign
of terror found under socialism is the incredible dilemma in which a
socialist state places itself in relation to the masses of its
citizens. On the one hand, it assumes full responsibility for the
individual's economic well-being. Russian or Bolshevik-style socialism
openly avows this responsibility — this is the main source of its
popular appeal. On the other hand, in all of the ways one can imagine,
a socialist state makes an unbelievable botch of the job. It makes the
individual's life a nightmare.
Every day of his life, the citizen of a socialist state must spend
time in endless waiting lines. For him, the problems Americans
experienced in the gasoline shortages of the 1970s are normal; only he
does not experience them in relation to gasoline — for he does not own
a car and has no hope of ever owning one — but in relation to simple
items of clothing, to vegetables, even to bread. Even worse he is
frequently forced to work at a job that is not of his choice and which
he therefore must certainly hate. (For under shortages, the government
comes to decide the allocation of labor just as it does the allocation
of the material factors of production.) And he lives in a condition of
unbelievable overcrowding, with hardly ever a chance for privacy. (In
the face of housing shortages, boarders are assigned to homes;
families are compelled to share apartments. And a system of internal
passports and visas is adopted to limit the severity of housing
shortages in the more desirable areas of the country.) To put it
mildly, a person forced to live in such conditions must seethe with
resentment and hostility.
Now against whom would it be more logical for the citizens of a
socialist state to direct their resentment and hostility than against
that very socialist state itself? The same socialist state which has
proclaimed its responsibility for their life, has promised them a life
of bliss, and which in fact is responsible for giving them a life of
hell. Indeed, the leaders of a socialist state live in a further
dilemma, in that they daily encourage the people to believe that
socialism is a perfect system whose bad results can only be the work
of evil men. If that were true, who in reason could those evil men be
but the rulers themselves, who have not only made life a hell, but
have perverted an allegedly perfect system to do it?
It follows that the rulers of a socialist state must live in terror of
the people. By the logic of their actions and their teachings, the
boiling, seething resentment of the people should well up and swallow
them in an orgy of bloody vengeance. The rulers sense this, even if
they do not admit it openly; and thus their major concern is always to
keep the lid on the citizenry.
Consequently, it is true but very inadequate merely to say such things
as that socialism lacks freedom of the press and freedom of speech. Of
course, it lacks these freedoms. If the government owns all the
newspapers and publishing houses, if it decides for what purposes
newsprint and paper are to be made available, then obviously nothing
can be printed which the government does not want printed. If it owns
all the meeting halls, no public speech or lecture can be delivered
which the government does not want delivered. But socialism goes far
beyond the mere lack of freedom of press and speech.
A socialist government totally annihilates these freedoms. It turns
the press and every public forum into a vehicle of hysterical
propaganda in its own behalf, and it engages in the relentless
persecution of everyone who dares to deviate by so much as an inch
from its official party line.
The reason for these facts is the socialist rulers' terror of the
people. To protect themselves, they must order the propaganda ministry
and the secret police to work 'round the clock. The one, to constantly
divert the people's attention from the responsibility of socialism,
and of the rulers of socialism, for the people's misery. The other, to
spirit away and silence anyone who might even remotely suggest the
responsibility of socialism or its rulers — to spirit away anyone who
begins to show signs of thinking for himself. It is because of the
rulers' terror, and their desperate need to find scapegoats for the
failures of socialism, that the press of a socialist country is always
full of stories about foreign plots and sabotage, and about corruption
and mismanagement on the part of subordinate officials, and why,
periodically, it is necessary to unmask large-scale domestic plots and
to sacrifice major officials and entire factions in giant purges.
It is because of their terror, and their desperate need to crush every
breath even of potential opposition, that the rulers of socialism do
not dare to allow even purely cultural activities that are not under
the control of the state. For if people so much as assemble for an art
show or poetry reading that is not controlled by the state, the rulers
must fear the dissemination of dangerous ideas. Any unauthorized ideas
are dangerous ideas, because they can lead people to begin thinking
for themselves and thus to begin thinking about the nature of
socialism and its rulers. The rulers must fear the spontaneous
assembly of a handful of people in a room, and use the secret police
and its apparatus of spies, informers, and terror either to stop such
meetings or to make sure that their content is entirely innocuous from
the point of view of the state.
Socialism cannot be ruled for very long except by terror. As soon as
the terror is relaxed, resentment and hostility logically begin to
well up against the rulers. The stage is thus set for a revolution or
civil war. In fact, in the absence of terror, or, more correctly, a
sufficient degree of terror, socialism would be characterized by an
endless series of revolutions and civil wars, as each new group of
rulers proved as incapable of making socialism function successfully
as its predecessors before it. The inescapable inference to be drawn
is that the terror actually experienced in the socialist countries was
not simply the work of evil men, such as Stalin, but springs from the
nature of the socialist system. Stalin could come to the fore because
his unusual willingness and cunning in the use of terror were the
specific characteristics most required by a ruler of socialism in
order to remain in power. He rose to the top by a process of socialist
natural selection: the selection of the worst.
I need to anticipate a possible misunderstanding concerning my thesis
that socialism is totalitarian by its nature. This concerns the
allegedly socialist countries run by Social Democrats, such as Sweden
and the other Scandinavian countries, which are clearly not
totalitarian dictatorships.
In such cases, it is necessary to realize that along with these
countries not being totalitarian, they are also not socialist. Their
governing parties may espouse socialism as their philosophy and their
ultimate goal, but socialism is not what they have implemented as
their economic system. Their actual economic system is that of a
hampered market economy, as Mises termed it. While more hampered than
our own in important respects, their economic system is essentially
similar to our own, in that the characteristic driving force of
production and economic activity is not government decree but the
initiative of private owners motivated by the prospect of private
profit.
The reason that Social Democrats do not establish socialism when they
come to power, is that they are unwilling to do what would be
required. The establishment of socialism as an economic system
requires a massive act of theft — the means of production must be
seized from their owners and turned over to the state. Such seizure is
virtually certain to provoke substantial resistance on the part of the
owners, resistance which can be overcome only by use of massive force.
The Communists were and are willing to apply such force, as evidenced
in Soviet Russia. Their character is that of armed robbers prepared to
commit murder if that is what is necessary to carry out their robbery.
The character of the Social Democrats in contrast is more like that of
pickpockets, who may talk of pulling the big job someday, but who in
fact are unwilling to do the killing that would be required, and so
give up at the slightest sign of serious resistance.
As for the Nazis, they generally did not have to kill in order to
seize the property of Germans other than Jews. This was because, as we
have seen, they established socialism by stealth, through price
controls, which served to maintain the outward guise and appearance of
private ownership. The private owners were thus deprived of their
property without knowing it and thus felt no need to defend it by
force.
I think I have shown that socialism — actual socialism — is
totalitarian by its very nature.
In the United States at the present time, we do not have socialism in
any form. And we do not have a dictatorship, let alone a totalitarian
dictatorship.
We also do not yet have Fascism, though we are moving towards it.
Among the essential elements that are still lacking are one-party rule
and censorship. We still have freedom of speech and press and free
elections, though both have been undermined and their continued
existence cannot be guaranteed.
What we have is a hampered market economy that is growing ever more
hampered by ever more government intervention, and that is
characterized by a growing loss of individual freedom. The growth of
the government's economic intervention is synonymous with a loss of
individual freedom because it means increasingly initiating the use of
physical force to make people do what they do not voluntarily choose
to do or prevent them from doing what they do voluntarily choose to
do.
Since the individual is the best judge of his own interests, and at
least as a rule seeks to do what it is in his interest to do and to
avoid doing what harms his interest, it follows that the greater the
extent of government intervention, the greater the extent to which
individuals are prevented from doing what benefits them and are
instead compelled to do what causes them loss.
Today, in the United States, government spending, federal, state, and
local, amounts to almost half of the monetary incomes of the portion
of the citizenry that does not work for the government. Fifteen
federal cabinet departments, and a much larger number of federal
regulatory agencies, together, in most instances with counterparts at
the state and local level, routinely intrude into virtually every area
of the individual citizen's life. In countless ways he is taxed,
compelled, and prohibited.
The effect of such massive government interference is unemployment,
rising prices, falling real wages, a need to work longer and harder,
and growing economic insecurity. The further effect is growing anger
and resentment.
Though the government's policy of interventionism is their logical
target, the anger and resentment people feel are typically directed at
businessmen and the rich instead. This is a mistake which is fueled
for the most part by an ignorant and envious intellectual
establishment and media.
And in conformity with this attitude, since the collapse of the stock
market bubble, which was in fact created by the Federal Reserve's
policy of credit expansion and then pricked by its temporary
abandonment of that policy, government prosecutors have adopted what
appears to be a particularly vengeful policy toward executives guilty
of financial dishonesty, as though their actions were responsible for
the widespread losses resulting from the collapse of the bubble. Thus
the former head of a major telecommunications company was recently
given a twenty-five year prison sentence. Other top executives have
suffered similarly.
Even more ominously, the government's power to obtain mere criminal
indictments has become equivalent to the power to destroy a firm, as
occurred in the case of Arthur Andersen, the major accounting firm.
The threatened use of this power was then sufficient to force major
insurance brokerage firms in the United States to change their
managements to the satisfaction of New York State's Attorney General.
There is no way to describe such developments other than as conviction
and punishment without trial and as extortion by the government. These
are major steps along a very dangerous path.
Fortunately, there is still sufficient freedom in the United States to
undo all the damage that has been done. There is first of all the
freedom to publicly name it and denounce it.
More fundamentally, there is the freedom to analyze and refute the
ideas that underlie the destructive policies that have been adopted or
that may be adopted. And that is what is critical. For the fundamental
factor underlying interventionism and, of course, socialism as well,
whether Nazi or Communist, is nothing but wrong ideas, above all,
wrong ideas about economics and philosophy.
There is now an extensive and growing body of literature that presents
sound ideas in these two vital fields. In my judgment, the two most
important authors of this literature are Ludwig von Mises and Ayn
Rand. An extensive knowledge of their writings is an indispensable
prerequisite for success in the defense of individual freedom and the
free market.
George Reisman, Ph.D., is Pepperdine University Professor Emeritus of
Economics and the author of Capitalism: A Treatise on Economics
(Ottawa, Illinois: Jameson Books, 1996; Kindle Edition, 2012). See his
Amazon.com author's page for additional titles by him. His website is
Capitalism.net and his blog is
GeorgeReismansBlog.blogspot.com.
__
"Poor widdle Wudy...mentally ill, lies constantly, doesnt know who he is, or even what gender "he" is.
No more pathetic creature has ever walked the earth. But...he is locked into a mental hospital for the safety of the public.
Which is a very good thing."
Asun rauhassa, valmistaudun sotaan.