Is This Country Having Its Socialist Moment?

As Frédéric Bastiat put it, the government is “the great fiction through which everybody endeavors to live at the expense of everybody else.”

By Connor O’Keeffe, Mises Institute

In the last few weeks, we have seen self-described democratic socialists winning primary elections across the country. Most were closely associated with Zohran Mamdani, the socialist who became mayor of New York City this year, who is seen by many on the left as a figure who is finally able to enact the kind of agenda that had made Bernie Sanders and AOC popular in previous election cycles.

At the same time, Vice President JD Vance went viral last week for celebrating that the American right was moving away from Milton Friedman-style market economics and supporting the idea that the federal government should get a lot more involved in the economy.

The growing popularity of this kind of sentiment and the indisputable electoral success it’s having in some primaries has predictably caused establishment liberals, conservatives, and libertarians to panic. Centrist commentators across the country have been sharing the most extreme policy positions and previous statements from the socialist candidates who won their races, seemingly under the assumption that the radicalism alone will be sufficiently off-putting to enough people. That is, at best, a dangerous misreading of the situation.

Despite the surface-level rhetoric used by all sides, the growing popularity of “socialism” or “populism” is primarily a non-ideological phenomenon.

That becomes obvious if we look back in time. Because there was a period in the early twentieth century when the intellectual battle between advocates of socialism and capitalism was as rigorous and intellectual as many like to pretend it still is. That phase culminated in the so-called “calculation debate” between Austrian economists Ludwig von Mises and F. A. Hayek and socialist scholars like Abba Lerner and Oskar Lange. The debate sought to determine if a centrally planned economy was—not preferable to a free market or workable in practice—but whether it is even possible in theory. The Austrians unequivocally won that debate.

Mises, specifically, delivered a simple yet devastating case that economic calculation—or the efficient allocation of capital goods and available resources for the production of goods and services that end consumers value—is impossible under a centrally planned economy. That is because the only way to know if production inputs are abundant enough and best used in a line of production or if the output is valued enough by the end consumer to make that project a better venture than the alternatives is through prices that can only come about through a market process.

In other words, gathering all the data necessary for central planners to run a command economy is not just difficult; it cannot happen. Because the process that generates that data (prices) is, by definition, prohibited in a centrally planned economy.

For example, consider this: would it make more sense to build a bridge out of steel or platinum? That question sounds absurd to us, but only because we know that platinum is way more expensive than steel. If there are no prices, that isn’t as clear.

Add to that whether the bridge would provide more value as a pedestrian bridge, or a rail bridge, or a tunnel instead of a bridge, or if it would better serve customers in a different location, or if the resources that would be used on the bridge would better serve people’s needs in some other line of production. None of this is possible to determine in the absence of a profit-and-loss system. Even assuming the economic planners would be solely motivated by the good of society and had access to the best supercomputers processing an unrealistic amount of related data, they would still be, as Mises himself put it, “groping around in the dark” in the absence of market prices. There is no non-market way to replicate them, the specific information they convey, or the incentives they create.

In the hundred years since Mises first laid all this out, there have been no adequate counterarguments. The best the other side has managed to come up with requires them to focus instead on Hayek’s directionally accurate but fundamentally flawed focus on dispersed knowledge to argue that advances in computing power and artificial intelligence are quickly making central planning viable.

But none of those later arguments take on Mises’s point. The case he made against socialist central planning remains as ironclad as an economic concept can possibly be.

And yet, socialism has remained popular, and is once again growing more popular. Why?

Because not everyone is motivated by truth. Government officials and political leaders especially are more often motivated by their own power, material wealth, and status. And because government immunizes itself from economic losses, members of the political class have a lot more room to prioritize that effort than their counterparts in the truly private sector.

So, when encountering arguments made or amplified by government officials and their well-connected allies who rely on government power for their way of life, they are rarely genuine arguments attempting to further our understanding of the world. They are better understood as excuses for expansions of state power that would benefit them.

As Frédéric Bastiat put it, the government is “the great fiction through which everybody endeavors to live at the expense of everybody else.” It is a fiction in that it rests on the lie that one group within society operates outside of the basic ethical norms that the rest of us must abide by. That shared delusion, and the vacuum or absence of justified resistance it brings, is a source of enormous power. It allows those who wield it to simply take wealth from those who already created it. There’s no need to struggle to create it themselves.

It’s a good deal. But to maintain that power, state officials need to share it, or at least share some of the coercively-seized profits gleaned from it, with whoever they need to help keep the delusion that this setup is good and just alive. Or, at least, that resistance is just not worth it.

That basic formula is how states work; and it is how they have always worked. It doesn’t matter if you’re looking at the absolutist regimes in eighteenth-century Europe, the USSR at the height of Stalin’s rule, or the modern US. The narratives, rituals, and “scientific” arguments evolve into whatever form is necessary to keep enough of the population convinced. But the result is always the same: a small group of officials and well-connected courtiers and plutocrats use state power to enrich and empower themselves and their close friends and allies. State power is used to redistribute wealth from the broader population to whichever groups are organized and connected enough to steer it in their own favor.

One reason socialism has remained a viable political force despite losing the economic argument is that socialists have done a good job of convincing much of the population that the current setup—where government works on behalf of well-connected companies and lobbies—is simply laissez-faire capitalism. And that socialism is the only real alternative.

But there is another less ideological component. Especially since the days of Marx, interest in socialism tends to rise when the true nature of the current system, or the consequences of its institutionalized theft, become more acute. When it becomes impossible to deny that the government is simply using its power to transfer wealth to a small sliver of society, it is understandable that much of the public reacts by demanding that the wealth transfer instead benefit them, for a change.

That, however, is just another popular delusion. The idea that states would or even could siphon wealth from the broader public to benefit that same broader public is a fundamental misunderstanding of what states are and how they work. The fact that more and more people are arriving at that conclusion should not surprise anybody. However, they promise nothing more than an acceleration of the interventionist death spiral we find ourselves in.

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