Saturday, September 14, 2013

Ludwig von Mises' Planned Chaos

Mises, L. (1951). Planned Chaos: An Excerpt from Socialism: An Economic and Sociological Analysis. (43 pages).

The booklet Planned Chaos is an excerpt from Ludwig von Mises' Socialism: An Economic and Sociological Analysis (1951). Its main thesis is about the influence of socialism using government interventionism to suppress personal liberty and the free enterprise. Mises elaborated this thesis under ten sections. I intentionally left out the two and focus on eight of them - the need to expose and challenge interventionism, the identification of interventionism as German pattern of socialism, the three invisible qualities of interventionism, similarities and differences between socialism and communism, liberation of demonic forces, fascism, Nazism, and the assumed inevitability of socialism as the future destiny of humanity. 

The Need to Expose and Challenge Interventionism

Exposing and challenging interventionism is a difficult task for it claims to dislike tyranny and monopoly. It also asserts fighting for poor's welfare, social justice and fairer distribution of income. However, one distinguishing mark of interventionism is hostility against the free market expressed through economic policies. And then interventionists blame the free market for the outcome of its previous interference and use it to justify further intervention. And not only that, any advantages resulting from free market activity are claimed by interventionism as a proof of its success. This is the reason why Mises emphasized the need to expose and challenge interventionism. 

Moreover, another difficulty is related to the mindset of the majority. According to Mises, most people are "entangled in the superstitions of statism and government omnipotence" and they "expect everything from authoritarian action and very little from the initiative of enterprising citizens." People seem to be blind about the fact that "the only means to increase well-being is to increase the quantity of products", which only the free enterprise is capable of doing. 

So there is a necessity first to identify the spirit behind interventionism that raised the dictators in the past. Notice Mises' description of this spirit: "But the spirit which raised these knaves to autocratic power survives. It permeates textbooks and periodicals, it speaks through the mouths of teachers and politicians, it manifests itself in party programmes and in play and novels. As long as this spirit prevails there cannot be any hope of durable peace, of democracy, of the preservation of freedom or of a steady improvement in the nation's economic well-being."

This spirit is the dominant spirit that controls the existing academic and political institutions, which is no other than but socialism! This is the spirit that prepares the way for dictators. This is the spirit that needs to be exposed and challenged if we want to maintain both our personal and economic freedom. 

Interventionism as German Pattern of Socialism

Reading Planned Chaos, the two dominant patterns of socialism will be obvious to you - the Russian or Marxian pattern and the German pattern. Understanding these two patterns, one will see that interventionism is in reality the German pattern of socialism. 

The first pattern of socialism suffered collapse in 1989. The Russian pattern lost credibility for the world witnessed that it doesn't work in the real world. Putting all private initiatives under the control of the government is the certain path to slavery and poverty. 

However, the second pattern of socialism is subtle. It utilizes government policies to accomplish its goal. The policies appear to be acceptable to the people, but the logical conclusions of these policies are the exact opposite of what they claim to achieve. The existence of these policies explains why today the free enterprise is falsely charged with all kinds of social evils. Blaming capitalism for these social evils confirms its bad reputation in our time and an indication of the present success of socialism through interventionism.

The German pattern is more effective in implementing socialism's agenda. The widespread influence of economic policies such as minimum wage rate, credit expansion, and the idea that the government can create jobs through increased government spending are now popular especially among democratic countries. In Mises' word, "This is socialism with the outward appearance of capitalism."

Mises was confident that similar to the fate of Russian socialism in 1989, the German pattern will allso collapse. We cannot escape the logical economic consequences of interventionism. In 1951, Mises foresaw this interventionist crisis: "No economist ever dared to assert that interventionism could result in anything else than in disaster and chaos. . . . The failure of interventionism does not demonstrate the necessity of adopting socialism. It merely exposes the futility of interventionism. . . . Our age has to face great economic troubles. But this is not a crisis of capitalism. It is the crisis of interventionism, of policies designed to improve capitalism and to substitute a better system for it."

The Three Invisible Qualities of Interventionism

Interventionism is dictatorial, anti-democratic, and socialistic. This is its real color but most people could not see it. They are either confused or unaware about the basic nature of interventionism. This is understandable for the message of interventionism is subtle and it utilizes popular ideas.

Interventionism claims to oppose tyranny, monopoly and socialism. It also shows concern for the welfare of the poor, social justice and fairer distribution of income. And above all, it claims to preserve capitalism and democracy. Mises states: "Many advocates of interventionism are bewildered when one tells them that in recommending interventionism they themselves are fostering anti-democratic and dictatorial tendencies and the establishment of totalitarian socialism. They protest that they are sincere believers and opposed to tyranny and socialism. What they aim at is only the improvement of the conditions of the poor. They say that they are driven by considerations of social justice, and favor a fairer distribution of income precisely because they are intent upon preserving capitalism and its political corollary or superstructure, viz., democratic government."

Similarities and Differences Between Socialism and Communism

In addition to my realization that socialism has actually two faces (Russian Marxism and German Interventionism), it is also something new for me to understand the relationship between socialism and communism. Mises discussed the historical connection between communism and socialism. 

The year 1917 is significant in understanding the similarity and distinction between communism and socialism. Prior to 1917, no Marxist dared to make a distinction between communism and socialism. The two terms are identical. 1917 was the year Lenin organized a Bolshevist version of Marxism in Europe. He named it as the Communist Party. Its mission is to annihilate members of socialist parties in Europe whom they considered as “social traitors”. They also aimed to liquidate the bourgeois and to seize government power. Lenin believed that the Communist Party was “the only genuine Marxians”. This action resulted to the distinction between communists and socialists. 

Communists and socialists have two things in common. Both have common origin in Marxism and believe in the idea that production and distribution of economic goods must be under public control through central planning. On the other hand, they differ in approach and in the detail of distribution of goods. Socialists rejected the use of violent action, believe in democratic process, and does not uphold the equal distribution of goods.

As to the question which is better between the two political and economic systems, for the European Marxians, socialism is "the third stage" in economic evolution, which to my understanding is considered better than both capitalism and communism. But for both Stalin and Marx, socialism is the lower form of communism. 

Liberation of Demonic Forces

The liberation of demonic forces was closely associated with the legitimate use of violence to advance communism in relation to Lenin's rise into power in 1917. It was introduced first by campaigning against those who advocate for the rule of law. They were accused as "individualistic" and "selfish". Individual interest must give way to national concern. In time, the rule of law was replaced by the legitimate use of violence in the service of national interest. 

Liberty is at the center of this conflict and since with it, the rule of law, capitalism, democracy, and economic development are difficult to confront directly, socialists resort to a different strategy. In their private meetings, they still talk about the coming dictatorship of the proletariat, but before the public, they preach liberty and democracy. However, Russian communism exposed the real face of socialism. The message of salvation through the legitimate use of violence could now be preached openly. For Mises, this was the essence of the liberation of demonic forces and the real significance of Lenin revolution. 


Due to the unpopularity of Fascism, both capitalism and socialism disown her as their offspring. However, the prevailing idea is that Fascism is a product of capitalism. This is in agreement with Mises’ statement that such accusation is a result of semantic innovation on the part of communist intellectuals. In fact, together with Nazism, Fascism was described as “the highest and last and most depraved stage of capitalism” (Mises, Planned Chaos, 1951, p. 29). However, examining the seventh section in “Planned Chaos” we find the actual thoughts of Mises on Fascism.

For Mises, Fascism “began with a split in the ranks of Marxist socialism” (p. 32). Such split happened in 1914 in Italy. Benito Mussolini was considered the most “outstanding man in Italian socialism” (p. 30) Mussolini is a great champion of Marxian socialism. Notice how Mises described Mussolini’s Marxian zeal: “Nobody could surpass Mussolini in Marxian zeal. He was the intransigent champion of the pure creed, the unyielding defender of the rights of the exploited proletarians, the eloquent prophet of the socialist bliss to come. He was an adamant adversary of patriotism, nationalism, imperialism, monarchical rule and all religious creeds” (ibid.). 

However, Mussolini faced a problem. The Italian intellectuals were nationalists. Mussolini changed his mind and joined the nationalists and so the Fascists party was organized. As a result of such defection, anti-Fascists attacked Mussolini. But after the communists’ failed in 1920, the masses joined Mussolini’s party. For Mises, Mussolini’s claim “that he had saved Italy from the danger of communism” (p. 31) is not true. Fascism “was not the cause, but the consequence of the communist fiasco” (ibid.). 

The way Mises described the characteristics of Fascism demonstrated its origin not in capitalism, but in socialism. He called it “vehemently anti-capitalistic” (p.31) though “it did not suppress the industrial and financial corporations” (p.32). Other features of Fascism include fanatical nationalism, Nazi interventionism, Russian dictatorship, and German non-Marxian socialistic economic program. It is a hybrid of German and Russian brands of socialism with additional features taken from other non-socialistic ideas. Moreover, it also gave lip-service to liberty of thought and the press and the right of assembly. Though Fascism was buried in history, Mises claimed that the forces behind it is still active and gave his readers a solemn warning about the great possibility of the revival of fascism under a new name.


Regarding Nazism, four factors are important to understand it. These are the intellectual influence that shaped Nazism, its anti - capitalistic character, the influence of Soviet version of socialism and eugenics (I did not include in this article Mises' explanation about the relationship between Nazism and eugenics). 

The intellectual influence of Nazism was laid down by learned Marxist professors. Werner Sombart was one of them who helped shaped Hitler's mind. In fact, prior to Hitler's rise into power, the German universities had already been prepared to hate capitalism. "For more than seventy years the German professors of political science, history , law , geography and philosophy eagerly imbued Their disciples with a hysterical hatred of capitalism , and preached the war of 'liberation' against the capitalistic West . . . At the turn of the century the immense majority of the Germans were already supporters of radical socialism and aggressive nationalism. They were then already firmly committed to the principles" that would later be known as Nazism .

The essential ideas of Nazism are not of German origin. Their sources came from Latin, French and Jewish intellectuals. The only German ingredient in Nazism "was its striving after the conquests of lebensraum."

Basically, Nazism was egalitarian. It's aim was to attain "income equality" and "fairer distribution of the earth's natural resources." They "consider themselves as revolutionaries fighting for their inalienable natural rights against the vested interests of a host of reactionary nations." So Nazism, contrary to popular belief, "is the purest and most consistent manifestation of the anticapitalistic and socialistic spirit of our age." Their slogan "condensed their economic philosophy, viz., Gemeinnutz geht vor Eigennutz (i.e., the commonweal ranks above private profit)." The Nazi believes "that profit - seeking business harms the vital interests of the immense majority, and that it is the sacred duty of popular government to prevent the emergence of profits by public control of production and distribution." So Nazism "therefore was more comprehensive and more pernicious than that of the Marxians. It aimed at abolishing laissez - faire not only in the production of material goods, but no less in the production of men."

Furthermore, Nazism found an intellectual justification for mass killing through the example of Soviet version of socialism. The Nazis learned to use violence and "mass extermination of all dissenters" as their methodology to advance Nazism. In fact, Mises described the Nazis as the most submissive disciples of Lenin, Trotsky and Stalin : "They imported from Russia : the one - party system and the pre-eminence of this party in political life; the paramount position assigned to the secret police; the concentration camps; the administrative execution or imprisonment of all opponents; the extermination of the families of suspects and of exiles; the methods of propaganda; the organization of affiliated parties abroad and their employment for fighting governments and their domestic espionage and sabotage; the use of the diplomatic and consular service for fomenting revolution; and many other things besides. There were nowhere more docile disciples of Lenin, Trotsky and Stalin than the Nazis were. "

The Inevitability of Socialism

Mises did not believe in the inevitability of socialism. Socialism to him will result to nothing but waste, chaos, and poverty. Compared to capitalism, it is less efficient and leads to the destruction of economic activity. This is due to the absence of market prices that make economic calculation impossible. 

However, bacause of economic ignorance, socialists believe that no human force could stop mankind's socialistic destiny. For Mises, the only explanation for the growth of socialism was due to the absence of “decided opposition” and “civilian courage”.

Socialism in the eyes of Mises is a formidable enemy and cannot be defeated apart from "painstaking study". It is useless to attack its minor features such as its divorce stand, birth control and other anti-Christian tenets. The role therefore of the intellectuals in this conflict is vital. Mises described this role: “The Socialist propaganda never encountered any decided opposition. The devastating critique by which the economists exploded the futility and impracticability of the socialist schemes and doctrines did not reach the moulders of public opinion. The universities were mostly dominated by socialist or interventionist...The politicians and the statesmen, anxious not to lose popularity, were lukewarm in their defense of freedom...It was this defeatism that made the rising generation believe that the victory of socialism is inevitable” (p. 39).

Mises also opposed the idea that the people aspire for socialism. He explains: “It is not true that the masses are vehemently asking for socialism and that there is no means to resist them. The masses favor socialism because they trust the socialist propaganda of the intellectuals. The intellectuals, not the populace, are molding public opinion. It is a lame excuse of the intellectuals that they must yield to the masses. They themselves have generated the socialist ideas and indoctrinated the masses with them. No proletarian has contributed to the elaboration of the interventionist and socialist programmes. Their authors were all bourgeois background. The esoteric writings of dialectical materialism of Hegel, the father both of Marxism and of German aggressive nationalism, the books of Georges Sorel, of Gentile and of Spengler were not read by the average man; they did not move the masses directly. It was the intellectuals who popularized them “ (pp.39-40).

So for Mises, the intellectuals were responsible for the spread of socialism and genocide that marked the 20th century. The same role remains in our days. It is also the intellectuals who are capable to change the trend and prepare the way for the revival of freedom.