XPost: me.politics, tn.general, neworleans.general 
 XPost: nm.general 
 From: jewbee@nytimes.com 
  
 My purpose today is to make just two main points: (1) To show 
 why Nazi Germany was a socialist state, not a capitalist one. 
 And (2) to show why socialism, understood as an economic system 
 based on government ownership of the means of production, 
 positively requires a totalitarian dictatorship. 
  
 The identification of Nazi Germany as a socialist state was one 
 of the many great contributions of Ludwig von Mises. 
  
 When one remembers that the word "Nazi" was an abbreviation for 
 "der Nationalsozialistische Deutsche Arbeiters Partei € in 
 English translation: the National Socialist German Workers' 
 Party € Mises's identification might not appear all that 
 noteworthy. For what should one expect the economic system of a 
 country ruled by a party with "socialist" in its name to be but 
 socialism? 
  
 Nevertheless, apart from Mises and his readers, practically no 
 one thinks of Nazi Germany as a socialist state. It is far more 
 common to believe that it represented a form of capitalism, 
 which is what the Communists and all other Marxists have claimed. 
  
 The basis of the claim that Nazi Germany was capitalist was the 
 fact that most industries in Nazi Germany appeared to be left in 
 private hands. 
  
 What Mises identified was that 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: it, not the nominal private 
 owners, decided what was to be produced, in what quantity, by 
 what methods, and to whom it was to be distributed, as well as 
 what prices would be charged and what wages would be paid, and 
 what dividends or other income the nominal private owners would 
 be permitted to receive. The position of the alleged private 
 owners, Mises showed, was reduced essentially to that of 
 government pensioners. 
  
 De facto government ownership of the means of production, as 
 Mises termed it, was logically implied by such fundamental 
 collectivist principles embraced by the Nazis as that the common 
 good comes before the private good and the individual exists as 
 a means to the ends of the State. If the individual is a means 
 to the ends of the State, so too, of course, is his property. 
 Just as he is owned by the State, his property is also owned by 
 the State. 
  
 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. The Nazi regime inflated the money supply 
 as the means of financing the vast increase in government 
 spending required by its programs of public works, subsidies, 
 and rearmament. The price and wage controls were imposed in 
 response to the rise in prices that began to result from the 
 inflation. 
  
 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. They introduce 
 randomness in the distribution of supplies between geographical 
 areas, in the allocation of a factor of production among its 
 different products, in the allocation of labor and capital among 
 the different branches of the economic system. 
  
 In the face of the combination of price controls and shortages, 
 the effect of a decrease in the supply of an item is not, as it 
 would be in a free market, to raise its price and increase its 
 profitability, thereby operating to stop the decrease in supply, 
 or reverse it if it has gone too far. Price control prohibits 
 the rise in price and thus the increase in profitability. At the 
 same time, the shortages caused by price controls prevent 
 increases in supply from reducing price and profitability. When 
 there is a shortage, the effect of an increase in supply is 
 merely a reduction in the severity of the shortage. Only when 
 the shortage is totally eliminated does an increase in supply 
 necessitate a decrease in price and bring about a decrease in 
 profitability. 
  
 As a result, the combination of price controls and shortages 
 makes possible random movements of supply without any effect on 
 price and profitability. In this situation, the production of 
 the most trivial and unimportant goods, even pet rocks, can be 
 expanded at the expense of the production of the most urgently 
 needed and important goods, such as life-saving medicines, with 
 no effect on the price or profitability of either good. Price 
 controls would prevent the production of the medicines from 
 becoming more profitable as their supply decreased, while a 
 shortage even of pet rocks prevented their production from 
 becoming less profitable as their supply increased. 
  
 As Mises showed, to cope with such unintended effects of its 
 price controls, the government must either abolish the price 
 controls or add further measures, namely, precisely the control 
 over what is produced, in what quantity, by what methods, and to 
 whom it is distributed, which I referred to earlier. 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. 
  
 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. 
  
 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. This is because 
 socialism is not actually a positive economic system. It is 
 merely the negation of capitalism and its price system. As such, 
 the essential nature of socialism is one and the same as the 
 economic chaos resulting from the destruction of the price 
 system by price and wage controls. (I want to point out that 
 Bolshevik-style socialism's imposition of a system of production 
 quotas, with incentives everywhere to exceed the quotas, is a 
 sure formula for universal shortages, just as exist under all 
 around price and wage controls.) 
  
 At most, socialism merely changes the direction of the chaos. 
 The government's control over production may make possible a 
 greater production of some goods of special importance to 
  
 [continued in next message] 
  
 --- SoupGate-Win32 v1.05 
  * Origin: you cannot sedate... all the things you hate (1:229/2)