NOTHING is more unpopular today than the free market economy, i.e., capitalism. Everything that is considered unsatisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its “bourgeois” pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the “progressives” blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether.
Although capitalism is the economic system of modern Western civilization, the policies of all Western nations are guided by utterly anticapitalistic ideas. The aim of these interventionist policies is not to preserve capitalism, but to substitute a mixed economy for it. It is assumed that this mixed economy is neither capitalism nor socialism. It is described as a third system, as far from capitalism as it is from socialism. It is alleged that it stands midway between socialism and capitalism, retaining the advantages of both and avoiding the disadvantages inherent in each.
More than half a century ago the outstanding man in the British socialist movement, Sidney Webb, declared that the socialist philosophy is “but the conscious and explicit assertion of principles of social organization which have been already in great part unconsciously adopted.” And he added that the economic history of the nineteenth century was “an almost continuous record of the progress of socialism.”[2] A few years later an eminent British statesman, Sir William Harcourt, stated: “We are all socialists now.”[3] When in 1913 an American, Elmer Roberts, published a book on the economic policies of the Imperial Government of Germany as conducted since the end of the seventies, be called them “monarchical socialism.”[4]
However, it was not correct simply to identify interventionism and socialism. There are many supporters of interventionism who consider it as the most appropriate method to realize step by step full socialism. But there are also many interventionists who are not outright socialists: they aim at the establishment of the mixed economy as a permanent system of economic management. They endeavor to restrain, to regulate and to “improve” capitalism by government interference with business and by labor unionism.
In order to comprehend the working of interventionism and of the mixed economy it is necessary to clarify two points:
First: If within a society based on private ownership of the means of production some of these means are owned and operated by the government or by municipalities, this still does not make for a mixed system which would combine socialism and private ownership. As long as only certain individual enterprises are publicly controlled, the characteristics of the market economy determining economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods, and labor and as sellers of goods and services, must fit into the mechanism of the market economy. They are subject to the law of the market; they have to strive after profits or, at least, to avoid losses. When it is attempted to mitigate or to eliminate this dependence by covering the losses of such enterprises with subsidies out of public funds, the only result is a shifting of this dependence somewhere else. This is because the means for the subsidies have to be raised somewhere. They may be raised by collecting taxes. But the burden of such taxes has its effects on the public, not on the government collecting the tax. It is the market, and not the revenue department, which decides upon whom the burden of the tax falls and how it affects production and consumption. The market and its inescapable law are supreme.
Second: There are two different patterns for the realization of socialism. The one pattern we may call it the Marxian or Russian pattern is purely bureaucratic. All economic enterprises are departments of the government just as the administration of the army and the navy or the postal system. Every single plant, shop, or farm, stands in the same relation to the superior central organization as does a post office to the office of the Postmaster General. The whole nation forms one single labor army with compulsory service: the commander of this army is the chief of state.
The second pattern -we may call it the German or Zwangswirtschaft system[5] differs from the first one in that it, seemingly and nominally, maintains private ownership of the
