Mises Wire

No, Mises Was not Wrong about the Middle of the Road

Ultimate Fighting Championship fighter Renato Moicano’s recent statement that patriots should read Ludwig von Mises has led the Institute of Economic Affairs to upload a nine-minute video addressing the most googled questions about Mises. It is largely accurate and does justice to some of Mises’s major contributions, and for these reasons it is to be lauded; however, the presenter, Kristian Niemitz, notes that Mises’s intransigence led to his getting “a few things wrong,” including his belief that “there could be no such thing as a mixed economy in the long term.” In contradiction of Mises’s position, he argues, “Virtually all the world’s economies are mixed economies of one kind or another.”

The position under attack is Mises’s famous 1950 article, “The Middle of the Road Leads to Socialism,” in which he shows that each intervention

proves abortive from the very point of view of the government and the groups it was eager to favor. It brings about a state of affairs, which—again from the point of view of the government—is even less desirable than the previous state of affairs which it was designed to improve.

As Mises points out, this necessitates that the government either nullify the intervention in question or intervene again, this time in the sectors tangential to that in which the aforementioned intervention took place, in order to mitigate the damage. In the latter case, the follow-up interventions induce similar problems of their own, requiring even further interventions, and since there exists no sector that is completely decoupled from the rest of the economy, this process leads to an ever-increasing socialization of the entire economy.

Summarizing the inherent instability of interventionism as a so-called third way, Mises shows that such an economic policy must necessarily tend toward a progressive socialization of ever more industries or the iterative abstention of market interference and the progressive liberalization (in the classical sense) of the entire economy:

The conflict of the two principles is irreconcilable and does not allow for any compromise. Control is indivisible. Either the consumers’ demand as manifested on the market decides for what purposes and how the factors of production should be employed, or the government takes care of these matters. There is nothing that could mitigate the opposition between these two contradictory principles. They preclude each other. Interventionism is not a golden mean between capitalism and socialism.

But then what should we make of Niemitz’s observation that we find only mixed economies in real life? In point of fact, it confirms Mises’s assertion, which states that over time, intervention will either increase or decrease and cannot stay stable. Yes, we find many mixed economies, but a glance at the relevant statistics will show that, in accordance with Mises’s prognosis, the size and scope of government intervention is everywhere on the rise. Anecdotally, Western governments recently demonstrated their ability to intervene on a previously unimaginable scale in response to the coronavirus pandemic. Thus, Mises was right; we are indeed well on our way toward progressive socialization of the entire economy.

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