My article “The Education of the Modern Socialist” deserves a follow-up. The first part showed that a change has occurred in the definition of “socialism”—a necessary change in view of the failures of this ideology during the last century. Socialism today is based on the ideology of “statism”—the conviction that the state must play a fundamental role in society. Ludwig von Mises’s wider definition of socialism as state intervention implies a modern social state that is involved in most if not all of the activities of society, whether commercial or not.
Unlike under traditional socialism, according to this new definition, very few people are not socialists. There are no political parties, then, that are not socialist, although many would never accept that label. This widespread statism largely explains much of the difficulty that Western Europe has been going through—a mostly self-inflicted political, economic, and social period of stagnation.
Thus, before addressing would-be negative effects of globalization on local communities, it is important to recognize the social consequences of the advent of the modern state. Education in the ideas of liberalism, as in the article noted above, must therefore consider this strong support that modern socialism enjoys today.
In fact, socialism as statism is arguably a better definition than the traditional one, according to which all means of production belong to the state. This latter historical socialism is so contrary to human nature, notwithstanding the existence of the former Soviet Union, that it could only be at most a temporary episode in a developed capitalist society.
Where historical socialism advocated an Orwellian society in which equality of outcome would be perfect among individuals, today’s socialism desires perfect equality of opportunity. But both types of equality imply serious violations of individual freedom. Modern socialism is more insidious; it does not prohibit private property and does not strangle the economy completely, but it often severely restricts the economy’s development.
Today’s socialism is aptly named because it means—and presupposes—“socialization.” But this socialization is artificial; indeed, statism is a system of forced socialization over and above the natural social relationships that exist in a free society. At the individual economic level, this forced socialization can be progressive (income taxes), regressive (value-added taxes), or generally redistributive.
Societal Tensions Due to Socialism
When a significant portion of wealth is redistributed, polarization of society is inevitable, even in contemporary societies that widely support modern socialism. By absorbing and reallocating much of the wealth produced by the market, the state and its dependent financial system create social tensions. This conflicts with the “economic harmonies” of the free market which Frédéric Bastiat described.
These tensions are linked to the fundamental injustice of redistribution and the obvious impediments to wealth creation under a statist regime. These tensions are also connected to the unjustified growth of a privileged but underperforming class of civil servants, which hinders the private sector and deprives it of human resources.
But the financial and economic impacts of modern socialism go much further. This forced socialization transforms the natural social relations that are inherent in each society. Statism creates a new social reality when compared with the organically evolving free society. In The Ethics of Money Production, Professor Jörg Guido Hülsmann described the harmful cultural and social consequences of state money production (i.e., inflation), which is another, hidden, form of confiscation of private property.
Attitudes toward saving are transformed by the devaluation of money in a fiat money system with fractional reserve banking, forcing members of society to spend more and spend it more quickly than they would in a free society. Such a socialist policy changes time preferences, which form the natural interest rates in a free market. Society under the yoke of statism thus becomes more present oriented and less future oriented, as Professor Hans-Hermann Hoppe explained in his major work, Democracy: The God That Failed.
Inflation (i.e., money creation) escalates tensions in society through the regressive nature of the Cantillon effect. The artificially inflationary monetary policy of modern states has allowed wars as destructive as they are costly, destabilizing and harming many societies around the world.
This increased importance of the present, coupled with strong fiscal and regulatory pressures, discourages both business investment and individual motivation. The state is responsible for artificial unemployment and thus contributes doubly to the general feeling of stagnation. The idea of a “generous” welfare state also drives immigration, generating challenges around cultural integration and social division.
Thus, statism coerces society into a vicious circle of forced socialization, in which the various economic and social failures reinforce each other, to the point where a rupture or crisis becomes inevitable. This is the current situation in many Western countries, as must be obvious to any keen observer of current affairs. The solution is libertarianism, which lets society benefit from the virtuous circle of true capitalism—fully open markets where investment and innovation constantly improve quality of life.
The current political, economic, and cultural decline in the West is largely explained by the phenomena described above. Until Western populations start grasping the benefits of freedom, not so much for Western nations as for each individual, it is not possible to hope for a change of direction. Education around political and economic liberty must therefore continue.