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An Anti-Socialist Journey

Mises Daily: Monday, April 04, 2011 by

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Socialism by Ludwig von Mises

During my spring break from the University of Iowa, where I am teaching free-market economics, I made a trip to Europe to speak about the current financial situation. Godfrey Bloom, a member of the European Parliament (MEP), sponsored my trip. Godfrey, who has been following my blog for some time, is a noted free-market economist himself. He is a member of the United Kingdom Independent Party (UKIP), composed of "Euroskeptics," who believe that the United Kingdom should withdraw from the European Union. UKIP is critical of the consequences of increased EU regulation on the UK economy and the loss of national sovereignty and the freedoms of it citizens. UKIP has 15 of the roughly 60 UK members in the EU Parliament.

I started my trip in London, where I attended a briefing at the Royal College of Defense Studies, roughly equivalent to our military command and staff colleges. It runs year-long courses for the Commonwealth's professional military leaders and elected officials. (Godfrey is currently taking a course.) Afterward I was invited to a private luncheon with some professional investment-fund managers. We finished the day by taking the Eurostar high-speed train through the Channel Tunnel to Brussels. (This was my first trip through the "Chunnel," and it is quite an experience. One boards the train in London and travels nonstop to points on the Continent. The trip through the actual tunnel under the English Channel takes 21 minutes. I timed it!)

The following day, I attended a committee meeting with Godfrey at the massive European Parliament building, where he was allowed to question Belgian Peter Praet, who aspires to become a member of the board of the European Central Bank. The UK is not yet a member of the European Monetary Union — the official name for those members of the European Union who are using the euro — and it is becoming less likely that the UK will join, although there are many advocates in the UK for doing so.

After this committee meeting, I delivered my first address — to an invited group of MEP's and their staff — about the cause of the current financial crisis in Europe and what should be done. I will not repeat here what I said, because the full text of my speech is already posted on my blog.

Tragedy of the Euro

After my speaking engagement, which included some interesting questions, Godfrey and I reboarded the Eurostar for London, where we transferred to an English train to York. The next day I addressed a group of investment specialists at the Mount Sterling Investment Seminar. I was the first of two speakers. My speech was directed at the importance of understanding the special risks involved with investing in the current economic environment. It was very well received and, again, the Q&A period was very lively. The full text of my speech is posted on my blog.

The seminar ended in midafternoon and I took a local train up to Durham to address some students attending Durham University who have established a free-market group. We met in the back room of a cozy pub on St. Patrick's Day, which goes to show how dedicated some students are when it comes to learning the truth about the economy. The topic of my talk was "The Continuing Struggle between Capitalism and Socialism." I explained that government control of money is a socialist enterprise and that it will fail due to the inherent flaws of socialism.

In his second great book, Socialism, Ludwig von Mises explained that socialism will fail due to the lack of economic calculation. There are two socialist paths: that of the German model and that of the Russian model. Under the German model the façade of capitalism is maintained, but all important (and some very unimportant) decisions are made by the state, such as wages, production quotas, prices, hiring, etc. Under the Russian model the façade of capitalism is removed, and it is clear that every citizen is nothing more than an employee of the state, taking orders from a bureaucratic elite.

The problem with both models, which are merely two sides of the same coin, is that there is no entrepreneurial class and no means to decide the best method for accomplishing some goal. In fact there is no way to determine what goals to pursue. So society deteriorates into chaos.

By its control of money, government maintains control of the economy much along the lines of the German socialist model. More and more decisions originate outside the free market so that the state can buy off key constituencies and maintain control. But this will fail, because the state has no way to know how to use resources most efficiently to meet the true preferences of the people.

So we wind up with 3 million unsold homes (many of which will be bulldozed into the ground), gasoline that is tainted by the addition of corn-based ethanol, and the specter of unsustainable welfare payments.

The students asked very good questions — actually better ones than those asked by the politicians and the investors. I believe this is so because they are less concerned about how to maintain some specific policy goal (politicians) or investment strategy (investor group) and more interested in what can be done to make their future brighter.

All in all, I believe it was a successful trip. I may not have changed everyone's mind, but I defended the free market, which is as much a requirement for the defense of our liberties as bills of rights and constitutions.