The Mixed Economy Mirage

Pleasant reassurances crop up regularly in commentaries these days to the effect that we now have a "mixed economy." This is good, the commentators say, and a reason why there’ll be continued prosperity along with a measure of stability. The mixed economy, it’s argued, tends to give us the best of both worlds; we can have the productivity of traditional free enterprise combined with the wis­dom and objectivity of an all-wise, all-protective government.

But what reassures people the most is the implication that the major changes in the structuring of the economy are now behind us, and that the present mix is the pattern for the future. We face not socialism, but a rather com­panionable arrangement much like the present, in which certain busi­nesses will be owned and operated by the government, some will be owned and operated by the private sector, while still others will be privately owned and managed but must operate under government control. There’s something in this succotash to please the proponents of every social philosophy, and many of the commentators only stop short of saying that the mixed economy is really the long-sought millennium.

Quite likely, however, the mixed economy is more mirage than mil­lennium. The belief that the econ­omy will continue indefinitely in its present mix is probably an il­lusion based on wishful thinking, because there are too many ideas in force and trends in motion that portend more major changes and continuous adjustments in the direction of increased collectivism. We have not arrived at a "mixed economy"; instead, we are really on a journey toward a thoroughly socialist one. There are several reasons why this is so.

No End to Socialism

One reason why the mixture will become more socialistic is that socialists are the real archi­tects of the present state of affairs; and in their view, a "mix" is really only a transitional phase. This is not to label as "socialist" the legislators and other political leaders of the past few decades who sponsored and voted for the laws that changed the economy. Most of them were highly in fa­vor of the traditional American patterns. But the ideas and pro­posals which they adopted were formulated and skillfully offered in piecemeal fashion by men who frankly despised capitalism and believed it to be the cause of much human suffering. They were not out to modify the existing sys­tem; they were bent on replacing it; and for the most part, this is still the purpose of the writers and intellectuals who supply most of the basic ideas which later ap­pear as legislation.

The socialists probably won their most important victory with the gradual adoption of their view of property rights — something which may have happened as long as 50 or 75 years ago. They view property possession and control as a privilege granted by the state, revocable at any time the state re­quires use of the property or the holder uses it in a "socially un­desirable" manner. The traditional American view was that property rights were almost as important as a man’s right to life and should be modified only under the most extraordinary circumstances. But the view that property pos­session is a privilege rather than a right gradually won favor. The result has been the extension of government control into every ac­tivity, usually on the grounds that people are abusing their privileges or not meeting their obligations.

Inherently Unstable

Another reason for the contin­uing socialist drift is that the mixed economy has an unstable tendency caused by the pleadings of special interest groups. This in­stability seems unavoidable. The chief tools of the legislators and political managers in dealing with special interest groups are subsi­dies and regulations.

One difficulty with subsidies is that they never quite answer the problems or the wants of those subsidized. At the same time, grants to certain groups always inspire others to seek similar favors. Subsidizing seems to be a self-perpetuating process. The tax­ing and inflation necessary to sub­sidize certain groups soon pinches almost everybody, with the result that further subsidies are de­manded.

The same self-perpetuating proc­ess seems to apply to government regulation, with each special in­terest group pleading for tighter regulation of its competitors or its adversaries but not of its own affairs. Human nature being what it is, such developments are fairly predictable; but in any case they do nothing to stabilize the mix be­tween socialism and freedom. An­other tendency of socialist trends is that once a measure of social­ism is accepted, it continues to grow during prosperity and ad­versity; either condition will pro­pel the economy further down the collectivist pathway. If the econ­omy is prospering, the advocates of central planning quickly take credit and offer the tantalizing suggestion that if some govern­ment intervention has done this much good, more will do even bet­ter. Their cudgel is the memory of 1929 and the Great Depression, and they never tire of resurrect­ing this stupendous disaster and reminding us that only the benev­olent hand of government prevents a repetition.

But what if a 1929 should occur even with the present controls? Socialists would never question whether existing controls helped bring on collapse. They would sim­ply blame the crash on the greed and short-sightedness of managers in the private sector. The business managers’ attempts to protect themselves would be condemned as antisocial. Even in recent busi­ness recessions of brief duration, managers come in for considerable criticism from government officials when they make logical opera­tional adjustments such as inven­tory reductions and staff layoffs. Such criticism may be expected to reach hurricane proportions in the event of a truly deep depression. And the result would be taken as justification for more government control of business activities.

No Short Cut to Freedom

In this kind of a "heads I win, tails you lose" situation, what can individuals do to check the drift toward socialism? It does little good to warn of "creeping" or "galloping" socialism, because most people long ago lost their fear of it. "If this be socialism, let’s have more of it!" they say, when praising the merits of a pet program. It also is of little avail to defeat specific socialist measures, for collectivism has been accepted up and down the line and persists as a hydra-headed monster. An individual who defeats it on one issue looks up to find ten new issues confronting him. Nor does it help much to point to the fail­ures of socialism in other coun­tries, because many feel that it’s not a fair comparison. They say that the U.S., with its vastly su­perior technology and resources, has the edge on many smaller countries. The achievements of the free enterprise system ought to be a good argument against inter­vention, but people prefer to be­lieve that competitive enterprise will continue to produce lavishly no matter how much it is altered and regimented.

Possibly there is no way to halt the socialistic trend at this mo­ment. No way has been found for a country to remain in a condi­tion of freedom when a large num­ber of its citizens favor certain forms of socialism; sooner or later, their feelings are bound to become expressed in the laws and economy of the country. These feelings may be based on false hopes and deceptions foisted upon them by unscrupulous leaders and clever propagandists; but if false ideas are accepted, they are for a time the reality one has to face. Though it may be clear to a few in­dividuals that these false ideas will someday produce grim results, there’s little that can be done if the majority insists that bad ideas and bad laws must run their course.

Individuals May Be Trusted

There is hope, however, in the good common sense of individuals, which can be trusted in the long run to spot falsehood and to do something about it. There’s been considerable disillusionment lately with majority rule, which many had thought to be a panacea for the world’s problems. Majorities, it’s being learned, can institute tyrannies quite as harsh as those imposed by one-man despotisms. But individuals can learn to do better than they have done, and so can ruling majorities. This cor­recting process may not work smoothly and automatically, and for a time the power of the ma­jority in the United States may even be supplanted by a ruling elite, as seems to be happening now in Britain. Yet the long term future for good ideas is bright, for the simple reason that freedom works, while regimentation fails.

The duty of the libertarian is to keep his own thinking straight in this period of vast change. He should think of what ought to be, rather than what is. His beliefs may not be politically popular, but this does not mean they are wrong or that they will not be re­vived and accepted at a later date. Truth is not determined by a show of hands, and the fact that people will not vote for what is right does not destroy the truth. Crushed to earth, truth always rises again and challenges men to re-examine what they have done. That will be easier to do, in social affairs, if believers in the ideas of freedom stick to their principles and forget such passing illusions as the belief in the permanency of the mixed economy.