Front Page Titles (by Subject) 4.: Socialism - Omnipotent Government: The Rise of the Total State and Total War
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
4.: Socialism - Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War 
Omnipotent Government: The Rise of the Total State and Total War, edited with a Foreword by Bettina Bien Greaves (Indianapolis: Indiana, 2011).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
Socialism aims at a social system based on public ownership of the means of production. In a socialist community all material resources are owned and operated by the government. This implies that the government is the only employer, and that no one can consume more than the government allots to him. The term “state socialism” is pleonastic; socialism is necessarily always state socialism. Planning is nowadays a popular synonym for socialism. Until 1917 communism and socialism were usually used as synonyms. The fundamental document of Marxian socialism, which all socialist parties united in the different International Working Men’s Associations considered and still consider the eternal and unalterable gospel of socialism, is entitled the Communist Manifesto. Since the ascendancy of Russian Bolshevism most people differentiate between communism and socialism. But this differentiation refers only to political tactics. Present-day communists and socialists disagree only in respect to the methods to be applied for the achievement of ends which are common to both.
The German Marxian socialists called their party the Social Democrats. It was believed that socialism was compatible with democratic government—indeed that the program of democracy could be fully realized only within a socialist community. In Western Europe and in America this opinion is still current. In spite of all the experience which events since 1917 have provided, many cling stubbornly to the belief that true democracy and true socialism are identical. Russia, the classical country of dictatorial oppression, is considered democratic because it is socialist.
However, the Marxians’ love of democratic institutions was a stratagem only, a pious fraud for the deception of the masses.* Within a socialist community there is no room left for freedom. There can be no freedom of the press where the government owns every printing office. There can be no free choice of profession or trade where the government is the only employer and assigns everyone the task he must fulfill. There can be no freedom to settle where one chooses when the government has the power to fix one’s place of work. There can be no real freedom of scientific research where the government owns all the libraries, archives, and laboratories and has the right to send anyone to a place where he cannot continue his investigations. There can be no freedom in art and literature where the government determines who shall create them. There can be neither freedom of conscience nor of speech where the government has the power to remove any opponent to a climate which is detrimental to his health, or to assign him duties which surpass his strength and ruin him both physically and intellectually. In a socialist community the individual citizen can have no more freedom than a soldier in the army or an inmate in an orphanage.
But, object the socialists, the socialist commonwealth differs in this essential respect from such organizations: the inhabitants have the right to choose the government. They forget, however, that the right to vote becomes a sham in a socialist state. The citizens have no sources of information but those provided by the government. The press, the radio, and the meeting halls are in the hands of the administration. No party of opposition can be organized or can propagate its ideas. We have only to look to Russia or Germany to discover the true meaning of elections and plebiscites under socialism.
The conduct of economic affairs by a socialist government cannot be checked by the vote of parliamentary bodies or by the control of the citizens. Economic enterprises and investments are designed for long periods. They require many years for preparation and realization; their fruits ripen late. If a penal law has been promulgated in May, it can be repealed without harm or loss in October. If a minister of foreign affairs has been appointed, he can be discharged a few months later. But if industrial investments have been once started, it is necessary to cling to the undertaking until it is achieved and to exploit the plant erected as long as it seems profitable. To change the original plan would be wasteful. This necessarily implies that the personnel of the government cannot be easily disposed of. Those who made the plan must execute it. They must later operate the plants erected, because others cannot take over the responsibility for their proper management. People who once agree to the famous four- and five-year plans virtually abandon their right to change the system and the personnel of government not only for the duration of four or five years but for the following years too, in which the planned investments have to be utilized. Consequently a socialist government must stay in office for an indefinite period. It is no longer the executor of the nation’s will; it cannot be discharged without sensible detriment if its actions no longer suit the people. It has irrevocable powers. It becomes an authority above the people; it thinks and acts for the community in its own right and does not tolerate interference with “its own business” by outsiders.*
The entrepreneur in a capitalist society depends upon the market and upon the consumers. He has to obey the orders which the consumers transmit to him by their buying or failure to buy, and the mandate with which they have charged him can be revoked at any hour. Every entrepreneur and every owner of means of production must daily justify his social function through subservience to the wants of the consumers.
The management of a socialist economy is not under the necessity of adjusting itself to the operation of a market. It has an absolute monopoly. It does not depend on the wants of the consumers. It itself decides what must be done. It does not serve the consumers as the businessman does. It provides for them as the father provides for his children or the headmaster of a school for the students. It is the authority bestowing favors, not a businessman eager to attract customers. The salesman thanks the customer for patronizing his shop and asks him to come again. But the socialists say: Be grateful to Hitler, render thanks to Stalin; be nice and submissive, then the great man will be kind to you later too.
The prime means of democratic control of the administration is the budget. Not a clerk may be appointed, not a pencil bought, if Parliament has not made an allotment. The government must account for every penny spent. It is unlawful to exceed the allotment or to spend it for other purposes than those fixed by Parliament. Such restrictions are impracticable for the management of plants, mines, farms, and transportation systems. Their expenditure must be adjusted to the changing conditions of the moment. You cannot fix in advance how much is to be spent to clear fields of weeds or to remove snow from railroad tracks. This must be decided on the spot according to circumstances. Budget control by the people’s representatives, the most effective weapon of democratic government, disappears in a socialist state.
Thus socialism must lead to the dissolution of democracy. The sovereignty of the consumers and the democracy of the market are the characteristic features of the capitalist system. Their corollary in the realm of politics is the people’s sovereignty and democratic control of government. Pareto, Georges Sorel, Lenin, Hitler, and Mussolini were right in denouncing democracy as a capitalist method. Every step which leads from capitalism toward planning is necessarily a step nearer to absolutism and dictatorship.
The advocates of socialism who are keen enough to realize this tell us that liberty and democracy are worthless for the masses. People, they say, want food and shelter; they are ready to renounce freedom and self-determination to obtain more and better bread by submitting to a competent paternal authority. To this the old liberals used to reply that socialism will not improve but on the contrary will impair the standard of living of the masses. For socialism is a less efficient system of production than capitalism. But this rejoinder also failed to silence the champions of socialism. Granted, many of them replied, that socialism may not result in riches for all but rather in a smaller production of wealth; nevertheless the masses will be happier under socialism, because they will share their worries with all their fellow citizens, and there will not be wealthier classes to be envied by poorer ones. The starving and ragged workers of Soviet Russia, they tell us, are a thousand times more joyful than the workers of the West who live under conditions which are luxurious compared to Russian standards; equality in poverty is a more satisfactory state than well-being where there are people who can flaunt more luxuries than the average man.
Such debates are vain because they miss the central point. It is useless to discuss the alleged advantages of socialist management. Complete socialism is simply impracticable; it is not at all a system of production; it results in chaos and frustration.
The fundamental problem of socialism is the problem of economic calculation. Production within a system of division of labor, and thereby social coöperation, requires methods for the computation of expenditures asked for by different thinkable and possible ways of achieving ends. In capitalist society market prices are the units of this calculation. But within a system where all factors of production are owned by the state there is no market, and consequently there are no prices for these factors. Thus it becomes impossible for the managers of a socialist community to calculate. They cannot know whether what they are planning and achieving is reasonable or not. They have no means of finding out which of the various methods of production under consideration is the most advantageous. They cannot find a genuine basis of comparison between quantities of different material factors of production and of different services; so they cannot compare the outlays necessary with the anticipated outputs. Such comparisons need a common unit; and there is no such unit available but that provided by the price system of the market. The socialist managers cannot know whether the construction of a new railroad line is more advantageous than the construction of a new motor road. And if they have once decided on the construction of a railroad, they cannot know which of many possible routes it should cover. Under a system of private ownership money calculations are used to solve such problems. But no such calculation is possible by comparing various classes of expenditures and incomes in kind. It is out of the question to reduce to a common unit the quantities of various kinds of skilled and unskilled labor, iron, coal, building materials of different types, machinery, and everything else that the building, the upkeep, and the operation of railroads necessitates. But without such a common unit it is impossible to make these plans the subject of economic calculations. Planning requires that all the commodities and services which we have to take into account can be reduced to money. The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation.
Socialism as a universal mode of production is impracticable because it is impossible to make economic calculations within a socialist system. The choice for mankind is not between two economic systems. It is between capitalism and chaos.
[* ]Bukharin, Program of the Communists (Bolshevists), p. 29.
[* ]Hayek, Freedom and the Economic System (Chicago, 1939), pp. 10 ff.