In this article I want to explain that a rapid departure from the free market system (or what is left of it today) is taking place before our eyes, and that this is a development that endangers not only prosperity but also the peaceful coexistence of people in this world.
1. The Starting Conditions
The economies are struggling to recover from the politically dictated lockdown crisis. The fact that the international production and logistics chains have suffered considerable damage becomes apparent in persistent production downtimes, delivery delays, rising goods prices, and here and there empty supermarket shelves. One could now hope that sooner or later, these disruptions will be resolved and that the global supply and demand structure will normalize again. Unfortunately, however, this hope is clouded by the relentless economic and sociopolitical paradigm shift that is taking place. Before our eyes, the politically and ideologically induced renunciation of the system of free markets (or what little is left of it today) is taking place. What is happening is supposed to give way to a kind of command and planned economic model that does not bode well for prosperity and peace in the world.2. What the Free Market System Can Do
The system of free markets can do great things economically and socially. In a system of free markets, consumers are free to demand goods they want to buy. And the suppliers have the freedom to offer goods, which they believe will be bought willingly by the consumers.In a free market, people take advantage of the division of labor. This increases work productivity; it allows for more and better goods to be produced. Companies are established and set out to produce and offer the goods and services that consumers want to buy.
If the companies are successful, they will be rewarded with a profit. The profit allows them to expand their production in the customer’s interests. If the entrepreneur makes a loss, his capital literally goes into better hands; i.e., to entrepreneurs who are comparatively better at fulfilling consumer demands. The profit and loss principle ensures that production output aligns with customer requirements.
The formation of the price of goods plays a particularly important role in the system of free markets. If the price of a good rises, it indicates that the good in question is scarce (relative to the supply of other goods). On the one hand, this encourages consumers to use the good more sparingly. On the other hand, companies get the signal to expand production. The increased production volume of the good counteracts its price increase and improves the supply situation for the consumer. The same applies to a drop in the price of a good. It signifies that the good is abundantly available and that the entrepreneurs should better increase the production of other goods, the prices of which are higher relative to the cheaper good. The price mechanism ensures that scarce resources are channeled into uses in which, from the consumer’s point of view, they generate the greatest benefit.
A free market system—and this is its core feature—is characterized by property: the means of production are privately owned. The entrepreneur can collect the profits of his activity, and he must bear the costs of what he does.
In a free market, the endeavor to keep property or obtain more also encourages the entrepreneur to consistently align his production output with the consumer’s wishes. He uses his means of production to produce goods that do not meet his own needs but those of the buyers. He, therefore, puts himself and his property at the service of the consumer. And it is the consumers who decide whether the entrepreneur will succeed or fail with their decision to purchase or not; we call this consumer sovereignty.
The issue of the environment can also be brought under control in a system of truly free markets. If there were a system of free markets, all resources—such as land, roads, forests, lakes, rivers, seas, oceans—would be privately owned—either by individuals or by groups of people. Overuse and waste of resources would be prevented because the owners would manage their property; that is, they would try to maximize the capital value of the resources.
Owners who see their property rights damaged by, for example, noise, air, or climate change, would have the option of taking the wrongdoer to court. To do so, they would provide evidence of harm caused by a third party, and judges would rule on the complaint, issue injunctions, determine compensation, or reject the lawsuit in the absence of sufficient evidence.
Another characteristic of the free market system is mass production; i.e., the production of goods intended for consumption by the broader population. Associated with this is a tendency toward a constant improvement in the average standard of living for the broad population, that is, a progressive enhancement of the living situation of the majority of the population. One could also say (and the Marxist-socialists may not want to hear that at all): the free market system deproletarianizes ordinary people, gradually elevating them to the rank of middle class (a.k.a. bourgeois).
As already mentioned in the introduction, a free market system develops an increasing, more and more finely divided division of labor, both nationally and internationally. Because it is the division of labor that increases the productivity of the work, it encourages people to produce those goods they can produce at a comparatively low cost. The division of labor not only allows more goods to be produced with a given labor force but also creates goods that could not be produced without a division of labor. A permanent division of labor creates unimagined improvements in prosperity for people. The system of free markets creates a work-sharing connection between people worldwide, bringing them together in a cooperative and productive network to the benefit of all. In that sense, the free market is a peace program for the world.
3. The Rise of Interventionism
In the past decades, there has been no free market system in its purest form in the Western economies. The prevailing economic model was and is interventionism.In interventionism, the means of production are formally privately owned. However, the state restricts the owners’ rights of disposal over their property—through rules and regulations, taxation, etc., and it also dictates what they can and cannot do with their property. The problem with interventionism is that the goals you want to achieve with it either cannot be achieved or can only be achieved with undesirable and problematic side effects.
Let me give you an example: the state wants to lower the rent to make living space affordable. To do this, it sets a rent ceiling. If the rent ceiling is lower than the market rent, the demand for space to rent exceeds the supply. The scarce supply of space then has to be allocated somehow; i.e., rationed. The foreseeable consequences are queues, corruption, nepotism, etc. Also, a rent ceiling will discourage investors from investing in the construction of new apartments. This also applies to maintenance and renovation investments.
As a consequence, living conditions for tenants deteriorate. Therefore, a rent ceiling not only reduces the available living space but also lowers the housing quality for tenants.
4. Interventionism as a Trojan Horse
Interventionism has become a universally accepted model these days: the idea that the state should and must intervene in the market system to achieve politically desired goals is very popular. It is celebrated by the well-meaning people who believe that interventionism can tame or eliminate the undesirable consequences that they attribute to the free markets—such as financial and economic crises, too great a gap between rich and poor, poverty among the elderly, etc. But this conviction results from a wrong root cause analysis, for it is interventionism, not the free market, that is responsible for the evils that are widely lamented today, and it is self-evident that interventionism cannot eliminate the issues it causes.However, some advocate interventionism because they know that with its help, the system of free markets (or what is left of it) can be quietly and discretely abolished or destroyed. With finely worded proposals, they recommend that the state intervene in the economy and society to achieve supposedly better results. And so the state actually penetrates education (kindergarten, school, university), transport, media, health, retirement planning, money, credit, and the environment, becomes the dominant player everywhere—undermines the remaining elements of the free market system until it is no longer a free market system but just an empty shell.
5. The Agenda of the Political Globalists
Among the supporters of interventionism, a particularly aggressive branch has emerged in recent years: the zealots who want to convert and rebuild the economy and society according to political provisions and that worldwide. They can aptly be described as political globalists. What they have in common is the conviction that people should not be allowed to lead their lives independently in a world of free markets, but rather that they must be controlled by a central authority. And who should fill this central authority? If the political globalists have their way, this power should be placed in the hands of a cartel of states, ideally a kind of world government, an interest group of high-ranking politicians and bureaucrats, central bank councils, representatives of large companies—i.e., those who are commonly referred to as the Davos Elite or the establishment. The path taken by political globalism boils down to establishing a command and planned economy on this planet, a world command economy.It would be a preliminary stage to socialism, an expression of the idea that the output of the national economy could be determined by a central authority to create a better, fairer, more environmentally friendly world economy. This should not only be achieved through direct stipulations (i.e., how and what is to be produced when and where and under what conditions), but also in particular through state influence on market prices—through taxes, but also by setting price ceilings (for scarce goods) and/or price floors (for goods available in abundance)—which make the production and consumption of certain goods economically impossible. But this is a path that must lead to disaster because it will shatter what is left of the free market system.
The failures of interventionism—from the rise in goods prices and empty supermarket shelves to hunger and misery—do not convince them of the impracticality of interventionism. Rather, they attribute the failure to reach their goals to the fact that the interventions were not far reaching, not aggressive enough, and that, in the future, they will achieve the desired goal with better and more courageous interventions. And so intervention follows intervention, and the remaining elements of the free market are increasingly overridden and destroyed. The rights of disposal that owners have over their property are gradually curtailed until owners are, in fact, no longer owners.
One of the demands of the interventionists is to standardize the policies in the different regions of the world—for example, by aligning tax rates and labor market regulations, by coordinating fiscal and monetary policies, etc. Above all, the political globalists who use interventionism are also systematically prompting the relativization and discreditation of the system of free markets (or what’s left of it). For example, they propagate the idea that companies should no longer pursue capitalist profit maximization but must follow the guidelines of stakeholder capitalism: that is, their activities are not consistently defined by the interests of the owners, but (also) aligned with the objectives of customers, lenders, suppliers, employees, as well as their local communities. This reeducation of thinking is often touted as rethinking capitalism.
In particular, political globalism starts with the investments of capital collection agencies such as insurance companies, pension schemes, and mutual funds. The principle is well known and has been practiced for government bonds for years. The state privileges its debts. For example, banks do not have to hold equity capital for government bonds. Furthermore, government bonds are given privileged treatment by the central bank by being approved for open market operations. This increases the attractiveness of government bonds from an investor’s point of view, and they lend the states their money on terms that would be inconceivable without the privileges that the state grants its own debts. This is how the state gets a considerable amount of private capital.
6. Old Socialism and Neosocialism
In the history of ideas, political globalism has collectivist-socialist roots, and it is the precursor for neosocialism. Compared to old socialism, however, neosocialism has a much more gloomy, sinister guiding principle. The old socialism, at least officially, had the goal of improving the material facilities of the working population and raising their standard of living. (Unfortunately, the means it used to achieve its goals were the wrong ones.) Neosocialism, however, is different. It does not see man as God’s creation but a destroyer of the earth whose self-indulgence must be challenged. Whose resource consumption must be reduced. And probably one or two political globalists may also have the desire to control or reduce the world population so that the planet does not become uninhabitable.Scarcity and renunciation, which neosocialism advocates, harbor enormous explosive potential. Because economic growth; i.e., the increase in available goods over time, not only increases people’s standard of living. It also proves to be an instrument for avoiding conflict: if the pie grows overall, everyone will be better off, even if their share of the pie remains the same. If the cake shrinks, however, there is suddenly less for everyone, and then the struggles for distribution inevitably become harder. By working towards a reduction in the demand for goods, the supply of goods and the consumption of resources, neosocialism inevitably turns people against each other, nationally and internationally, and the risk of armed conflicts increases.
7. Neosocialism and Unbacked Paper Money
This is financed by issuing new national debt, which is bought by the central banks and paid for with new money. Declining economic clout, but above all, the growing amounts of money that the central banks are issuing are driving up goods prices. Life is becoming more expensive, the standard of living of the broader population is declining. If people do not recognize the cause of the deterioration in their material situation, the state will act as a permanent problem solver. It takes measures to counteract the rise in food prices, rents, insurance premiums, etc.—for example, by issuing price ceilings (for example, for food and transport) and price floors (for example, for wages). This inhibits the national economy, production suffers, the supply situation for the people deteriorates.The (increased) price inflation is entirely in keeping with the neosocialist program. Not only does it slow down economic expansion, but it also turns large sections of the population into needy people who (have to) turn to the state for handouts. The devaluation of money and the monetary savings, which the price inflation provides, gives the state a growing following, which has a vital interest in a large and financially strong state. It is therefore not surprising that the central banks are now pursuing a monetary policy that drives price inflation above the 2 percent mark. As long as price inflation remains hidden from the eyes of the general public, inflation does its evil job: devaluation, destruction of savings, redistribution. But if price inflation gets too high, the scam threatens to be exposed.
This can even lead to people abandoning money: people try to get rid of their money by exchanging it for real assets (stocks, houses, art, etc.). If confidence in unbacked money wanes, high inflation or even hyperinflation is just around the corner—unless the central banks turn around and reduce price inflation by raising interest rates and slowing down money supply growth. Then, however, the debt pyramid, which has been built up in the Western world for decades, would collapse and with it the structure of production and employment as well as the entire neosocialism project. So it is understandable why the central banks are doing everything in their power to convince the population that they, the central banks, are indispensable, are the guarantors of good money, the fighters against inflation. The distortion of truth couldn’t be greater.
8. The Fight of Ideas
Human history is not—as Karl Marx whispered to the people—the result of social development laws that inevitably lead to socialism-Marxism. Rather, it is determined by ideas that drive people. If you are convinced that socialism is the system that brings salvation, then you will do everything in your power to establish socialism. So to stop and reverse what is currently going on worldwide—the advance of the state and the repression of the free market system—there is no other way than to enter the fight for the better ideas, to debunk the bad ideas, to help the good ideas—the ideas of the free markets—to break through.From an economic point of view, the battle has long been over: it is easy to prove that socialism and all its varieties are doomed to failure, that their failure, in reality, is not a coincidence, but that it can be traced back to the working of economic laws. But since this knowledge is not pervasive, we have to educate our fellow men about the dangers that come with socialism and all its varieties. We also have to explain that what is touted as green policies, as a great reset, comes straight from the socialist witch’s kitchen and represents a reissue of well-known socialist ideas in a new guise.
We can educate our fellow men, for example, by sending articles, podcasts, videos of libertarian thinkers or giving their books to family members, friends, or colleagues. And we always have to show the positive alternative that the preservation and defense of property, individual freedom, and free markets has in store—and that their acceptance makes a lasting, peaceful, and productive coexistence of people in this world possible.
Joining the battle of ideas, communicating the better economic ideas, explaining and promoting the superiority of free market ideas is one way of stopping the rise of neosocialism, one opportunity that must not be missed.
Either by getting involved yourself, becoming active, or courageously supporting others going into intellectual battle for them—like, for instance, the Mises Institute and other freedom- and libertarian-minded think tanks.