Authoritarianism is not compatible with economic progress: Freedom is indivisible

Patrick Barron is a private consultant to the banking industry. He has taught an introductory course in Austrian economics for several years at the University of Iowa. He has also taught at the Graduate School of Banking at the University of Wisconsin for over twenty-five years and has delivered many presentations at the European Parliament.

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This article was first published by the Mises Institute on 31 December 2022.

This article may be republished without prior consent but with acknowledgement to the author.

Authoritarianism is not compatible with economic progress: Freedom is indivisible

Is it possible, or perhaps even desirable, for economic freedom and progress to be compatible with authoritarian government? Let’s cut right to the chase. Although some may believe so, this is a fallacy. Freedom is indivisible. There is no separating political freedom and economic freedom.
This is the position of Ludwig von Mises himself:
“Tyranny is the political corollary of socialism, as representative government is the political corollary of the market economy.” Planning for Freedom, pg. 218. The Quotable Mises, pg. 27.
“If one master plan is to be substituted for the plans of each citizen, endless fighting must emerge. Those who disagree with the dictator’s plan have no other means to carry on than to defeat the despot by force of arms.” Planned Chaos, pg. 30. The Quotable Mises, pg. 85.
“Capitalism means free enterprise, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means full government control of every sphere of the individual’s life and the unrestricted supremacy of the government in its capacity as central board of production management. There is no compromise possible between these two systems.” Bureaucracy, pg. 10. The Quotable Mises, pg. 27.
Some may challenge Mises’ assertion. After all, referral to authority, even to one as great as Mises, does not prove that he is right. Some may say that, surely, economic progress depends upon the safety of one’s person and one’s property. And isn’t it clear that authoritarian regimes do provide better internal security, however harsh the punishment may be, than their more permissive neighbours? Some authoritarian countries, such as China and some Arab countries, validate that premise. As long as one obeys the rules, business can prosper. Or so it is claimed.
So, there must be more to the argument than throwing Mises’ claim against the claims of others. Let’s look at a few.
One of the main problems with authoritarian rule is “who gets to choose the authoritarian?” Western society has passed beyond the Divine Right of Kings, although noble succession still prevails in some Middle Eastern countries. Most authoritarians base their right to rule on violent overthrow of the pre-existing regime. China, North Korea, Iran, and Cuba come to mind. But this hardly provides a solid intellectual foundation for either current or future rule. Mises claimed that democracy was the best form of government because it allowed peaceful transitions of governments. The people decide who rules via periodic elections. When society seems to be going in the wrong direction, a peaceful change of leadership is much preferable to attempting to violently overthrow the existing regime.
Dynamism is the essence of a progressing economy, adopting new ways of meeting the demands of consumers and the discarding of old ways. Joseph Schumpeter called this process “
creative destruction”. This is anathema to an authoritarian society. Authoritarian societies receive support from incompetent sycophants, who were placed in favourable positions by the authoritarian himself. However, where there is no creative destruction there is no progress, only retardation. My trip to the Soviet Union in the early 1970’s while an officer in the Air Force confirmed what I already knew. The Soviet Union was crumbling (literally!) from within. There were few consumer goods and what was available to the ordinary Soviet citizen was shoddy beyond my worst expectations. In his long and excellent introduction to his book Requiem for Marx, Yuri Maltsev points out that one of the reasons that the Iron Curtain fell was that the people simply gave up trying to live in an increasingly insane society.
Hayek reminds us that the authoritarian has no better insight than anyone else into how to order an economy, nor is it possible for any group of planners armed with the most powerful tools. The billions of decisions required are unknown and unknowable. Few know more than a few small facets of their own industry and the need for continuous adaptation to market forces beyond their, or anyone else’s, ken. We all must be willing to throw out the old and adopt the new in order to keep pace with changing markets. The law is “change or die”. The death may be slow, or it may be sudden, but there is no substitute for change.
The importance of understanding that freedom is indivisible
A half decade of fiat money expansion has so disrupted economies worldwide that a serious recession is on the horizon. Prices are rising. World trade is under attack. The world is on the brink of nuclear war. Sovereign debt is at absurd levels. All these insults to ordinary people are brought to us by out-of-control governments, who have no understanding of real economics and, of course, no real understanding of wealth creation. An example is how
lavish unemployment benefits have discouraged workers from seeking employment. Don’t blame them. It’s rational self-interest for millions to take the handouts. But, please blame the politicians for making it all possible with fiat money expansion. Unfortunately, when the bitter fruits of these failed policies can no longer be ignored, too many will call upon government to take a strong hand and “do something”. The problem is that these are the same people who caused the problem and, furthermore, neither they nor anyone else in government have any idea what exactly to do. But that won’t stop them. They must appear to be “doing something”.
The only answer is total freedom, freedom in both the economic and political spheres. The economy must go through wrenching adjustments to redirect capital to its best use as determined by consumers and not as determined by government. Reality must prevail. All this fiat money expansion has destroyed much capital by directing it to less productive uses than the public would determine in an environment of total freedom.
We must resist the temptation of believing that a strong man can save us. We can only save ourselves. That means hard work, saving, and living frugally. Of course, these three traits are the opposite of what characterizes the West today; i.e., not working, not saving, and living beyond one’s means.

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