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   From: jewbee@nytimes.com   
      
   My purpose today is to make just two main points: (1) To show   
   why Nazi Germany was a socialist state, not a capitalist one.   
   And (2) to show why socialism, understood as an economic system   
   based on government ownership of the means of production,   
   positively requires a totalitarian dictatorship.   
      
   The identification of Nazi Germany as a socialist state was one   
   of the many great contributions of Ludwig von Mises.   
      
   When one remembers that the word "Nazi" was an abbreviation for   
   "der Nationalsozialistische Deutsche Arbeiters Partei — in   
   English translation: the National Socialist German Workers'   
   Party — Mises's identification might not appear all that   
   noteworthy. For what should one expect the economic system of a   
   country ruled by a party with "socialist" in its name to be but   
   socialism?   
      
   Nevertheless, apart from Mises and his readers, practically no   
   one thinks of Nazi Germany as a socialist state. It is far more   
   common to believe that it represented a form of capitalism,   
   which is what the Communists and all other Marxists have claimed.   
      
   The basis of the claim that Nazi Germany was capitalist was the   
   fact that most industries in Nazi Germany appeared to be left in   
   private hands.   
      
   What Mises identified was that private ownership of the means of   
   production existed in name only under the Nazis and that the   
   actual substance of ownership of the means of production resided   
   in the German government. For it was the German government and   
   not the nominal private owners that exercised all of the   
   substantive powers of ownership: it, not the nominal private   
   owners, decided what was to be produced, in what quantity, by   
   what methods, and to whom it was to be distributed, as well as   
   what prices would be charged and what wages would be paid, and   
   what dividends or other income the nominal private owners would   
   be permitted to receive. The position of the alleged private   
   owners, Mises showed, was reduced essentially to that of   
   government pensioners.   
      
   De facto government ownership of the means of production, as   
   Mises termed it, was logically implied by such fundamental   
   collectivist principles embraced by the Nazis as that the common   
   good comes before the private good and the individual exists as   
   a means to the ends of the State. If the individual is a means   
   to the ends of the State, so too, of course, is his property.   
   Just as he is owned by the State, his property is also owned by   
   the State.   
      
   But what specifically established de facto socialism in Nazi   
   Germany was the introduction of price and wage controls in 1936.   
   These were imposed in response to the inflation of the money   
   supply carried out by the regime from the time of its coming to   
   power in early 1933. The Nazi regime inflated the money supply   
   as the means of financing the vast increase in government   
   spending required by its programs of public works, subsidies,   
   and rearmament. The price and wage controls were imposed in   
   response to the rise in prices that began to result from the   
   inflation.   
      
   The effect of the combination of inflation and price and wage   
   controls is shortages, that is, a situation in which the   
   quantities of goods people attempt to buy exceed the quantities   
   available for sale.   
      
   Shortages, in turn, result in economic chaos. It's not only that   
   consumers who show up in stores early in the day are in a   
   position to buy up all the stocks of goods and leave customers   
   who arrive later, with nothing — a situation to which   
   governments typically respond by imposing rationing. Shortages   
   result in chaos throughout the economic system. They introduce   
   randomness in the distribution of supplies between geographical   
   areas, in the allocation of a factor of production among its   
   different products, in the allocation of labor and capital among   
   the different branches of the economic system.   
      
   In the face of the combination of price controls and shortages,   
   the effect of a decrease in the supply of an item is not, as it   
   would be in a free market, to raise its price and increase its   
   profitability, thereby operating to stop the decrease in supply,   
   or reverse it if it has gone too far. Price control prohibits   
   the rise in price and thus the increase in profitability. At the   
   same time, the shortages caused by price controls prevent   
   increases in supply from reducing price and profitability. When   
   there is a shortage, the effect of an increase in supply is   
   merely a reduction in the severity of the shortage. Only when   
   the shortage is totally eliminated does an increase in supply   
   necessitate a decrease in price and bring about a decrease in   
   profitability.   
      
   As a result, the combination of price controls and shortages   
   makes possible random movements of supply without any effect on   
   price and profitability. In this situation, the production of   
   the most trivial and unimportant goods, even pet rocks, can be   
   expanded at the expense of the production of the most urgently   
   needed and important goods, such as life-saving medicines, with   
   no effect on the price or profitability of either good. Price   
   controls would prevent the production of the medicines from   
   becoming more profitable as their supply decreased, while a   
   shortage even of pet rocks prevented their production from   
   becoming less profitable as their supply increased.   
      
   As Mises showed, to cope with such unintended effects of its   
   price controls, the government must either abolish the price   
   controls or add further measures, namely, precisely the control   
   over what is produced, in what quantity, by what methods, and to   
   whom it is distributed, which I referred to earlier. The   
   combination of price controls with this further set of controls   
   constitutes the de facto socialization of the economic system.   
   For it means that the government then exercises all of the   
   substantive powers of ownership.   
      
   This was the socialism instituted by the Nazis. And Mises calls   
   it socialism on the German or Nazi pattern, in contrast to the   
   more obvious socialism of the Soviets, which he calls socialism   
   on the Russian or Bolshevik pattern.   
      
   Of course, socialism does not end the chaos caused by the   
   destruction of the price system. It perpetuates it. And if it is   
   introduced without the prior existence of price controls, its   
   effect is to inaugurate that very chaos. This is because   
   socialism is not actually a positive economic system. It is   
   merely the negation of capitalism and its price system. As such,   
   the essential nature of socialism is one and the same as the   
   economic chaos resulting from the destruction of the price   
   system by price and wage controls. (I want to point out that   
   Bolshevik-style socialism's imposition of a system of production   
   quotas, with incentives everywhere to exceed the quotas, is a   
   sure formula for universal shortages, just as exist under all   
   around price and wage controls.)   
      
   At most, socialism merely changes the direction of the chaos.   
   The government's control over production may make possible a   
   greater production of some goods of special importance to   
      
   [continued in next message]   
      
   --- SoupGate-DOS v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)