Similarities and Differences Between Socialism and Communism

My reading of “Planned Chaos” changed the way I see current events. Blaming capitalism as the source of economic crisis is an evidence that the public knows nothing about Mises’ ideas concerning the widespread influence of socialism. 

Similar misinformation that happened during WW2 is still with us in the 21st century. Nazi Germany then was described as the worst form of capitalism as far as the Russian Marxians were concerned. They denied Hitler’s regime as the embodiment of socialism. However, for Mises, socialism prepared the way for Hitler through interventionists policies.

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. As a new comer into the field of political economy, I have almost zero knowledge as to the real nature of both communism and socialism. All I know is that both of them are political and economic terms in which the first has an ugly reputation at present while the second is gaining increasing popularity especially in the academe. 

I hope that by understanding the nature of relationship between these two ideologies, one can now see better what’s happening around the world. Hopefully, this would also result into a new appreciation of capitalism. And I think the third section of Mises’ “Planned Action” can help us achieve this goal. He discussed here historically the relationship between communism and socialism. 

The year 1917 is significant in understanding the similarity and distinction between communism and socialism. According to Mises, prior to 1917, no Marxist dared to make a distinction between communism and socialism. The two terms are identical. Even though Marx distinguished between the two levels of communist society in the future, he did not attempt to make any distinction between communism and socialism. 

We can see the historical development for the difference between socialism and communism by restating Mises’ understanding of Marxist political economic theory. In the mind of Marx, two trains of thought exist. He believes that socialism is the natural negation of capitalism. By this, I understand that socialism will naturally result out of the highest development of capitalism. Marx believes in this natural transition from capitalism to socialism, at least in words:

"The bourgeoisie forces all nations to become capitalist nations. When the final hour of capitalism sounds, the whole world will be uniformly in the stage of mature capitalism, ripe for the transition to socialism. Socialism will emerge at the same time in all parts of the world."

However, when it comes to political action, Marx believes otherwise. He considers violent action through revolution and civil war as necessary for the transition. The use of violence is justified in order “to establish the dictatorship of the proletarians and to exterminate mercilessly all bourgeois.” 

Moreover, Marx’s followers in Europe did not trust both the natural transition idealism and the use of violent action. They recoursed to “democratic” procedures to influence the government. They believe in election and parliamentary procedures. This “interventionist” development is absent in Marx’s teaching. Marx himself “did not believe that interventionism could benefit the masses.”

As noted, violent action is inconsistent with Marxist natural transition idealism. However, Russian Marxians selected this as their tactic. They were known in history as the “Bolshevists”. Nevertheless, there is another brand of Russian Marxism that believes in winning the support of the majority. They were known as the “Mensheviks”. 

Lenin organized a Bolshevist version of Marxism in Europe in 1917. 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. 

The Three Invisible Qualities of Interventionism

In the second section of "Planned Chaos", Ludwig von Mises described interventionism as dictatorial, anti-democratic and socialistic. If these descriptions are true, why is it that interventionist policies keep on growing? One reason perhaps is that people are not aware about the real nature of interventionism.

I think even if just one of these charges is true, it is enough to discourage the people to support interventionism. The reason why it keeps succeeding is because people are confused about its existence and unaware about its real nature. Its message is subtle and utilizes popular ideas to achieve its own end. 

Interventionism claims to oppose what people oppose - tyranny, monopoly and socialism. It also shows concern for the things that people are concerned about - 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."

The above paragraph explains why the public find it difficult to decipher the real color of interventionism. People are hearing messages they want to hear, but seeing things they do not want to see. The dictatorial end is the logical conclusion of a series of interventionists policies aimed to satisfy people's immediate concerns. This is a typical example of simply looking at the short-term consequence of a specific policy without considering its long-term impact.  

In the following paragraphs, I just want to cite Ludwig von Mises' other statements proving the socialistic, undemocratic and dictatorial qualities of interventionism.

Mises spoke about interventionism's failure to fulfill its promises and its unnoticeable and gradual step towards dictatorship:

"What these people fail to realize is that the various measures they suggest are not capable of bringing about the beneficial results aimed at. On the contrary they produce a state of affairs which from the point of view of their advocates is worse than the previous state which they were designed to alter. If the government, faced with this failure of its first intervention, is not prepared to undo its interference with the market and to return to a free economy, it must add to its first measure more and more regulations and restrictions. Proceeding step by step on this way it finally reaches a point in which all economic freedom of individuals has disappeared."

Mises emphasized once again the difference between two forms of socialism. Knowing this difference is important in identifying the character of interventionism:

"But when this state of all-round control of business is achieved, the market economy has been replaced by a system of planned economy, by socialism. Of course, this is not the socialism of immediate state management of every plant by the government as in Russia, but the socialism of the German or Nazi pattern."

Again, we read Mises described the enforcement of the will of the police state upon its people.

"What the interventionist aims at is the substitution of police pressure for the choice of the consumers. All this talk: the state should do this or that, ultimately means: the police should force consumers to behave otherwise than they would behave spontaneously. In such proposals as: let us raise farm prices, let us raise wage rates, let us lower profits, let us curtail the salaries of executives, the us ultimately refers to the police. Yet the authors of these projects protest that they are planning for freedom and industrial democracy."

This dictatorial character of interventionism is best illustrated by replacing the plan of individual consumers with a centralized plan. Read how Mises described such replacement: 

"Whatever people do in the market economy, is the execution of their own plans. In this sense every human action means planning. What those calling themselves planners advocate is not the substitution of planned action for letting things go. It is the substitution of the planner's own plan for the plans of his fellow-men. The planner is a potential dictator who wants to deprive all other people of the power to plan and act according to their own plans. he aims at one thing only: the exclusive absolute preeminence of his own plan."

In closing the section, Mises issued a call for everyone to take a definite stand between capitalism and socialism. Interventionism is not the compromise between these two. It is the other face of socialism.

Believing in economic neutrality will not help simply because it does not exist. Let us listen to Mises' solemn warning:

"In this conflict of opinions everybody must make up his mind and take a definite stand. Everybody must side either with the advocates of economic freedom or with those of totalitarian socialism. One cannot evade this dilemma by adopting an allegedly middle-of-the-road position, namely interventionism. For interventionism is neither a middle way nor a compromise between capitalism and socialism. It is a third system. It is a system the absurdity and futility of which is agreed upon not only by all economists but even by the Marxians."

To respond to this call, the role of the intellectuals is critical. Only them have the capability to educate the public about the real identity and nature of interventionism. 

Interventionism as German Pattern of Socialism

In the first section of "Planned Chaos" where Ludwig von Mises explains about "The Failure of Interventionism", it is my first time to realize that socialism has two patterns - 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. Of course, rhetoric and appearances can make this association difficult. And this kind of argument could be considered ridiculous. But that's how I read and understand this section. 

The first pattern of socialism suffered collapse in 1989. This caused the Marxian pattern of socialism difficult to convince the world. The world obviously witnessed that this form of socialism does not 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 that to a thinking person would appear unbelievable and contradictory simply because they cancel out each other. Mises gave a list of these charges:

• The atheists make capitalism responsible for the survival of Christianity. 

• The papal encyclicals blame capitalism for the spread of irreligion ...

• The protestant churches and sects are no less vigorous in their indictment of capitalist greed.

• Friends of peace consider our wars as an offshoot of capitalist imperialism. 

• The adamant nationalist warmongers of Germany and Italy indicted capitalism for its 'bourgeois' pacifism,...

• Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. 

• The 'progressives' blame capitalism for the preservation of allegedly outdated rules ...

• Almost all men agree that poverty is an outcome of capitalism.

The above list demonstrates the bad reputation of capitalism in our time and an indication of the present success of socialism through interventionist policies.

As you can see 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. Mises describes several features of this type of socialism:

• It still "maintains private ownership of the means of production, entrepreneurship, and market exchange." 
• The "entrepreneurs do the buying and selling...But they are no longer entrepreneurs." They were shop keepers.
• The government tells them "what and how to produce, at what prices and from whom to buy, at what prices and to whom to sell."
• "This is socialism with the outward appearance of capitalism."

Similar to the fate of Russian socialism in 1989, the German type will certainly suffer similar failure. We cannot escape the logical economic consequences of interventionist policies. Since the date of the writing of "Socialism: An Economic and Sociological Analysis" (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."

Exposing and Challenging the Spirit Behind Interventionism

In the "Introductory Remarks" of "Planned Chaos", an excerpt from Ludwig von Mises' book "Socialism: An Economic and Sociological Analysis" (1951), you will have an overview of what to expect in reading the material. As for me, after reading the entire material once (it only has 43 pages) and rereading it again while taking down notes and relevant quotes for writing, I see that the whole message of "Planned Chaos" is all about the influence of socialism using government interventionism to suppress personal liberty and the free enterprise. 

Of course, interventionists will not admit that. They claim to dislike tyranny and monopoly. They also claim to be fighting for poor's welfare, social justice and fairer distribution of income. 

But Mises' "Planned Chaos" tells a different story. He actually describes our time as an "age of dictators, wars and revolutions". In fact, he said that "History will call our age the age of the dictators and tyrants."

One distinguishing mark of our dictatorial age is hostility against capitalism. Such hostility has been expressed through interventionist policies. This explains the co-existence of free enterprise and anti-free market policies. 

However, despite of interventionist policies, people still reap the advantages from the free enterprise. Unfortunately, interventionists claim credit to these advantages. This is the reason why Mises emphasized the need to expose and challenge the interventionist policies of the government. 

Most people according to Mises are "Entangled in the superstitions of statism and government omnipotence". He adds, people "expect everything from authoritarian action and very little from the initiative of enterprising citizens." They appear 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. 

For us to challenge interventionism, we need to identify first the spirit that raised the dictators in the past for interventionism is leading to nothing but tyranny. Mises describes that spirit as follows:

"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."

In other words, the above 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.