Mises on Nazi Economics Debunked

I read an absolutely atrocious blog post from the Mises institute that was sent to me by a subscriber. The post by George Reisman declared at the beginning the intention to show “why Nazi Germany was a socialist state, not a capitalist one”. The premise is simply ridiculous and obviously an attempt to erase the blatant capitalist nature of capitalism from the Nazi government. It’s also a very transparent attempt to paint an untruthful picture of socialism with the purpose of scaring people away from it. The fascist McCarthy would be proud of their propaganda effort. Mises and the Mises followers must have missed that part about Hitler killing because he thought communism and socialism was a Jewish conspiracy. They tend not to be too historically accurate.

Interestingly it begins with the simple line “For what should one expect the economic system of a country ruled by a party with ‘socialist’ in its name to be but socialism?” Anything can be called anything, it’s the content that matters. This is the same group of people that think the government holding businesses accountable for mislabeling their products is fascism by the state. Saipan is close enough to be able to say “Made in America” right? Labels on products say PRC, instead of People’s Republic of China aren’t being misleading at all are they, they’re not trying to obscure the fact their made in China right? Not to mention the manufacturing town in China called USA. Which of course is never mistaken for U.S.A..

So maybe we can see why they would take such a superficial trait as proof. Besides, America is capitalist country; its leaders remind us of that every day. So why do they think America is really socialist? “For what should one expect the economic system of a country ruled by parties that praise capitalism, to be but capitalism?” America is also called the leader of the free world, and the best country in the world. Why doesn’t the Mises institute agree? Why do they deny the simple fact that America is called the freest and best country in the world? Why do they hate their country so much? Clearly it’s called capitalism, so it must be. Why does the Mises institute need to lie?

The really obviousness of the fake socialism in the name came from the persecution of all Leftists in the country. Anyone who has even a beginner’s knowledge of Nazi Germany knows Hitler had the entire Communist party massacred. Communists from other countries and at home were sent to the Concentration Camps to die. People in trade unions were sent to Concentration camps to die. Hitler had the Reichstag burned down and blamed it on communist “terrorism”. Why would he have persecuted “his own kind” if they were socialists like him? How much more obvious can you get? Sending Communists and Labour organizers to be killed. You don’t kill off an entire party and those around it who are the same as you. It’s really obvious these people were killed for being socialists. Well, it’s not as obvious as their name.

In continuing to try and “prove” Nazi Germany was socialist, they quote Mises himself saying private property didn’t exist. “…private ownership of the means of production existed in name only under the Nazis and that the actual substance of ownership of the means of production resided in the German government. For it was the German government and not the nominal private owners that exercised all of the substantive powers of ownership…”

What they’re saying in this part is that despite the fact businesses were owned by individuals, profits were pocketed by individuals, it ran with markets, it wasn’t capitalist because the state planned the economy. They continue fraudulently saying that the state decided how much the business owners could receive in profits. In actuality the various large enterprises were run by very wealthy Nazi party supporters. They entered into deals with Hitler to be the exclusive supplier of a particular product and decided upon a rate of tax which they would pay to the government and keep private profits. The tactic here is clear, just deny the pocketing of private wealth and deny how it came about. This is what they call crony capitalism, or as the rest of the world calls it, capitalism. Essentially, “that’s not real capitalism.”

In a dishonest statement Mises goes on to say that since this isn’t real capitalism, just cronyism, it “was logically implied by such fundamental collectivist principles”. In other words, even though one person actually owned it and took profits and worked it in a way no one competed with him, it must be socialism. One person owning the enterprise is collectivism. We see them trying the same thing today. In our time corporations and the 1% (so to speak) use connections with paid off government officials to achieve similar conditions and they scream “that’s not real capitalism”. Because the profit motive, the desire to make as much money as possible would never incentivize someone to block competition and hoard a market and wealth for themselves, right?. Tremendously dishonest.

“But what specifically established de facto socialism in Nazi Germany was the introduction of price and wage controls in 1936. These were imposed in response to the inflation of the money supply carried out by the regime from the time of its coming to power in early 1933.”

Okay, now here he’s decided it is de facto socialism. He’s saying well it’s not socialism but close enough, like taking the name of a Party at face value. Price and wage controls exist relatively in the society we have today, in fact wage controls are what they refer to the minimum wage as. So what they consider to be wage controls really doesn’t mean much at all since all regulation to them is “control”.

In any case price and wage controls at this time was absolutely necessary, Germany in the beginning was in a desperate situation, World War One ended in great disaster for it, both socially and economically. This was the actual cause of the inflation. In 1923 the largest denomination was a 100 trillion Mark. In December 1923 the exchange rate was 4.2 trillion Marks to 1 US dollar. This was hyper inflation, and it was actually not the Nazis’ doing, this was the doing of German capitalism going to war. So when they say price controls were carried out because of inflation “carried out by the regime from the time of its coming to power in early 1933″ is outright lying. They are outright taking a problem caused by capitalism and trying to dump it on socialism.

Essentially, if Nazi Germany had been socialist, then they just stated that socialism cured the problem caused by capitalism. It’s a smart thing to do, if you have hyper inflation you need strict economic controls to fix the problem. The Nazis were just using the same common sense that anyone would have used. Except Mises of course, he would have advocated just letting the hidden hand magically fix everything.

“The effect of the combination of inflation and price and wage controls is shortages, that is, a situation in which the quantities of goods people attempt to buy exceed the quantities available for sale.

Shortages, in turn, result in economic chaos. It’s not only that consumers who show up in stores early in the day are in a position to buy up all the stocks of goods and leave customers who arrive later, with nothing — a situation to which governments typically respond by imposing rationing. Shortages result in chaos throughout the economic system.”

Here the author is blaming inflation and price and wage controls as a source of shortages. Well, yes that does cause shortages. Inflation does indeed along with these other factors cause shortage. The inflation caused by capitalist economics led to the necessity of measures to bring inflation under control. I know why he’s saying this, he’s using the fact shortages happened and the false notion of Nazi Germany being socialist to blame socialism for shortages. The shortage caused by capitalist led inflation. These policies of controls to fix the inflation problem are like complaining about having to undergo surgery to remove a cancerous mass from your body. This is simply trying to juxtapose shortages with socialism, while ignoring the causing factor have come from capitalism.

“The combination of price controls with this further set of controls constitutes the de facto socialization of the economic system. For it means that the government then exercises all of the substantive powers of ownership.”

Now Mises has returned to the argument of de facto socialism. Capitalism caused a monumental problem of hyperinflation with government intervention being the only solution to the problem. A market, despite the opinion of any fundamentalists, cannot regulate itself. Basically government intervention was the only way to save capitalism from its unregulated self, so therefore since it is regulation put out by the state, its “de facto” socialism. Once again this means very little considering he and his followers think all regulation is socialism. Nazi Germany could say “this lake too polluted to swim in without being infected” and they would think its socialism

The abstractions of socialism do not stop there.

“This was the socialism instituted by the Nazis. And Mises calls it socialism on the German or Nazi pattern, in contrast to the more obvious socialism of the Soviets, which he calls socialism on the Russian or Bolshevik pattern.”

Okay, so de facto socialism is basically covert sneaky socialism. Interesting how everything is socialism if you simply change the definition of socialism to include anything you don’t like. It’s similar to watching a Catholic berate a Protestant telling them they’re not a real Christian because they don’t follow the Pope.

“Of course, socialism does not end the chaos caused by the destruction of the price system. It perpetuates it. And if it is introduced without the prior existence of price controls, its effect is to inaugurate that very chaos.”

The problem here is that the so-called socialism actually did bring inflation under control. Which was its intended purpose, it didn’t perpetuate it. So “not real capitalism” solved the problem caused by real capitalism and then didn’t make it worse as Mises said the “not real capitalism” would. The he claims “its effect is to inaugurate that very chaos”. The purpose of “not real capitalism” is to cause the problem that capitalism actually did cause.

From here the blog post turns into a socialism bashing session that supposedly “proves” socialism is totalitarian. But that is for an entirely different work, one I’ve already done more than once. Most of it is just whining about socialism doing the same thing capitalism does in a different context. I’ll give you an example by taking on a few blatantly glaring hypocrisies.

“In sum, therefore, the requirements merely of enforcing price-control regulations is the adoption of essential features of a totalitarian state, namely, the establishment of the category of “economic crimes,” in which the peaceful pursuit of material self-interest is treated as a criminal offense…”

Here George Reisman exposes his complete ignorance of socialist theory. The goal of a socialist society is to decrease class differences. Laws regarding economics is a tool to carry out that transformation which is the purpose of the system, class struggle. (Class antagonism, which Mises followers classically deny exists. Therefore Occupy Wall street doesn’t exist.) This is not any different than copyright law and patents, necessary laws to combat “economic crimes” in capitalism. Threats of legal action and lawsuits are the threat used against “peaceful pursuits” of profit making and more generally just an expression of freedom of speech. YouTube videos taken down for containing “copyrighted” material. Steve Jobs sued an endless number of people all through his career to keep anyone from competing with him. Any product that bore even the slightest resemblance to “his” was threatened with lawsuits. His actions lead to the bankruptcies of many companies. He didn’t want anyone to compete with him; he would have done the same to Microsoft if he could have gotten away with it. You also have to look no further than the 50 years Kim Dotcom is facing for allegedly participating in copyright infringement.

“The answer is a combination of severe penalties combined with a great likelihood of being caught and then actually suffering those penalties. Mere fines are not likely to provide much of a deterrent. They will be regarded simply as an additional business expense. If the government is serious about its price controls, it is necessary for it to impose penalties comparable to those for a major felony.”

The hypocrisy here is astounding. The recording music industry (RIAA) tried to bankrupt and make homeless the family of Brianna LaHara, a 12 year old girl who downloaded a song illegally [2]. They launched a lawsuit against a child in order to protect private intellectual property. Criminalizing children was their response to an extraordinarily small theft. Kim Dotcom is facing huge fabricated charges for having a file sharing site. Dotcom is accused of racketeering on top of the copyright charges. [3] He’s facing 50 years for supposedly helping people download copyrighted material. He’s actually facing felonies.

I don’t think it’s even necessary to go into what it’s like to be accused of having drugs while being Black. As much as Mises people try to deny, the War on Drugs is about keeping Marijuana away so that it can’t be held as an alternative to many products. Not only textiles but as a pain killer as well. It’s entirely the profit motive of large companies who want to keep it illegal to protect the profits that drive the insanely fascist law behind drug possession. Oh they cry about ending laws against illegal drugs, but they deliberately ignore the source of those laws.

“Under a system of de jure socialism, such as existed in Soviet Russia, in which the legal code of the country openly and explicitly makes the government the owner of the means of production, all black-market activity necessarily entails the misappropriation or theft of state property.”

That is not any different than how laws in every other country were set up to protect companies of private property. It’s the entire backing behind the beatings, arrests and killing of union activists today, and much more in the past industrial Revolution. The violence police commit against Occupy Wall street protesters is of the same source. Violence and killings against those who don’t own is even more common in the Third World.

This entire post was intended to take the failures and the crimes of capitalist Nazi Germany and dump them in the lap of socialism. This is primary example of the academic and intellectual dishonesty behind the market fundamentalist movement.

Oh look sources! More than George Reisman gave.

[1] Inflation in pre-Nazi Germany, “The Economis of Inflation” by Costantino Bresciani-Turroni (Ironically available in the Mises archive) http://mises.org/books/economicsofinflation.pdf

[2] 12 year old Brianna LaHara sued
http://www.foxnews.com/story/0,2933,96797,00.html

[3] Charges against Kim Dotcom
http://www.rollingstone.com/music/news/megaupload-founder-kim-dotcom-preps-album-20120124

Original Mises Post:
http://mises.org/daily/1937

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