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Ludwig von Mises

In society’s economic organization there are the liberals advocating private ownership of the means of production, the socialists advocating public ownership of the means of production, and the interventionists advocating a third system which, they contend, is as far from socialism as it is from capitalism.

The issue is: How does a system of interventionism work? Can it realize those ends which people, in resorting to it, want to attain?

The interventionist in advocating additional public expenditure is not aware of the fact that the funds available are limited. In his opinion there is plenty of money available. The income and wealth of the rich can be freely tapped.

With the present height of income and inheritance tax rates, this reserve fund out of which the interventionists seek to cover all public expenditure is rapidly shrinking. It has practically disappeared in most European countries. In the United States the recent advances in tax rates produced only negligible revenue results beyond what would be produced by a progression which stopped at much lower rates. From day to day it becomes more obvious that large-scale additions to the amount of public expenditure cannot be financed by “soaking the rich,” but that the burden must be carried by the masses. Those anxious to get subsidies will themselves have to foot the bill.

All these champions of interventionism fail to realize that their program thus implies the establishment of full government supremacy in all economic matters and ultimately brings about socialism. If it is in the jurisdiction of the government to decide whether or not definite conditions of the economy justify its intervention, no sphere of operation is left to the market. Then it is no longer the consumers who ultimately determine what should be produced, in what quantity, of what quality, by whom, where and how—but it is the government.

It is difficult to find out how many of the supporters of interventionism are conscious of the fact that the policies they recommend directly lead to socialism, and how many hold fast to the illusion that what they are aiming at is a middle-of-the-road system that can last as a permanent system—a “third solution.”

An essential element of the doctrines advanced both by socialists and interventionists is that the recurrence of depressions is a phenomenon inherent in the very operation of the market economy. Yet the evils in the great depression that started in 1929 were not created by capitalism, but, on the contrary, by the endeavors to “reform” and “improve” the operation of the market economy by interventionism. The crash was the necessary outcome of the attempts to lower the rate of interest by credit expansion. Institutional unemployment was the inevitable result of the policy of fixing wage rates above the potential market height.

The interventionist interlude must come to an end because all varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors, but bring about a state of affairs which is less desirable than the previous state they were designed to alter. If one wants to correct [this] by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.

Men must choose between the market economy and socialism. They cannot evade deciding between these alternatives by adopting a “middle-of-the-road” position, whatever name they may give to it. In abolishing economic calculation the general adoption of socialism would result in complete chaos and the disintegration of social cooperation under the division of labor.

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