February 1, 2023

Authoritarianism Is Not Compatible with Economic Progress

The belief that a free market economy needs a good authoritarian state to support it is mistaken

Is it possible, or even desirable, for economic freedom and progress to be compatible with authoritarianism?

Although some may believe therefore , this is a fallacy. Freedom is indivisible. Political and economic freedom cannot be separated.

This is the position associated with Ludwig von Mises themselves. In  Planning Freedom , he says ,   “ Tyranny is the political corollary of socialism, as consultant government is the political corollary of the market economy . ” Regarding a citizen’s reaction to such tyranny, he writes in  Planned Chaos   that   “ If one master plan shall be substituted for the plans of every citizen, endless fighting must emerge. Those who disagree with the dictator’s plan have no other means to carry on than to defeat the despot by power of arms. ” Mises contrasts the tyranny associated with socialism with capitalism in  Bureaucracy   when he writes,

Capitalism means free business, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means complete government control of every sphere of the individual’s life as well as the unrestricted supremacy of the authorities in its capacity as main board of production administration. There is no compromise possible among these two systems.

Some may challenge Mises’s assertion. After all, recommendation to authority, even to one as great as Mises, does not prove that he is right. Some may say that economic progress surely depends upon the safety of one’s person and one’s property. “ Could it be not clear, ” they say, “ that authoritarian regimes offer better internal security, however harsh punishments may be, than their more permissive democratic neighbors? ” Some severe countries, such as China and several Arab countries, validate that premise. As long as one obeys the rules, business can prosper. Or so it is claimed. Instead of simply throwing Mises’s statements against the claims of others, allow us to look at some other issues with authoritarianism.

One of the main issues with authoritarian rule is choosing who gets to choose the dictator. Western society has transferred beyond the “ divine right” of kings; although noble succession still dominates in some Middle Eastern nations. Most authoritarians base their own right to rule on the violent overthrow of the preexisting routine. China, Cuba, Iran, and North Korea come to mind. Yet this hardly provides a strong intellectual foundation for either current or future rule. Mises claims that democracy is the best form of government since it allows peaceful transitions between administrations. The people decide whom rules via periodic polls. When society seems to be moving in the wrong direction, a tranquil change of leadership is superior to attempting a coup.

Dynamism is the substance of a progressing economy. It involves adopting new ways of meeting the demands of consumers and discarding the old ways. Frederick Schumpeter called this process “ creative destruction . ” This is anathema in order to authoritarian societies. Authoritarian communities are supported by inexperienced sycophants who were placed in favorable positions by the dictator himself. However , where there is no innovative destruction there is no progress. The trip to the Soviet Marriage in the early 1970’s, while an officer in the air pressure, confirmed what I already understood. The Soviet Union was crumbling from within. There were couple of consumer goods, and products available to the ordinary Soviet resident were shoddy beyond my worst expectation. In Yuri Maltsev’s excellent introduction to  Requiem for Marx , he points out that one of the reasons that the Iron Curtain  dropped was that the people simply gave up trying to live in an increasingly insane society.

Hayek reminds us that the authoritarian has no better insight compared to anyone else into how to purchase an economy; neither is it feasible for any group of planners choose the most powerful tools. The particular billions of decisions required are unknown and unknowable. Couple of know more than what their own industry specialization allows all of them, and the need for continuous version to market forces is above any particular person’s perception. We must all be prepared to throw out the old and embrace the new in order to keep pace along with changing markets. The law is “ change or die. ” Death may be slow or sudden, but there is absolutely no substitute for change.

The Importance of Understanding That Freedom Can be Indivisible

5 years of fiat money growth has so disrupted economies worldwide that a serious economic downturn is on the horizon. Prices are rising. World trade is under attack. The world is definitely on the brink of nuclear war. Sovereign debt has reached absurd levels. All these insults toward ordinary people are usually brought to us by out of control governments who have no knowledge of real economics and, of course , no real understanding of prosperity creation.

A good example of this is how lavish unemployment  benefits   have discouraged workers from looking for employment. Do not blame all of them. It is rational self-interest for millions of people to take handouts whenever they can. Please instead fault politicians for making it all probable with fiat money expansion. Unfortunately, when the bitter fruits of these failed policies cannot be ignored, too many may call upon government to take a strong hand and “ take action. ” The problem is that the authorities caused the problem in the first place plus, therefore , has no viable answer. But that will not stop them. They must appear to be doing something.

The only solution is total freedom in both the economic and political spheres. The economy must go through wrenching adjustments in order to redirect capital to the best use as based on consumers and not as based on the government. Reality must prevail. This fiat money expansion has destroyed much capital by directing it to less productive uses than the public would determine within an environment of total independence.

We must withstand the temptation to believe that a strong man can save all of us. We can only save ourselves. The modern West is characterized by laziness, frivolous spending, and living beyond one’s means. We must do the opposite. Spending so much time, living frugally, and saving money are solutions all people can adopt to protect themselves from the encroachments of authoritarianism.

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