Once More, with Feeling: Our System Is Not Socialism, but Participatory Fascism

I continue to encounter many discussions in which the author or speaker bemoans the economic order’s drift toward socialism or, in some cases, its actual existence as such. If this characterization were simply a matter of linguistic imprecision, it might not matter much. But it is much more than a matter of terminology, because one’s understanding of the nature of our current economic order hinges on how we characterize it.

Socialism is a system in which all the major means of production are owned and operated by the state. Except perhaps for small firms or farms, all productive enterprises are state enterprises. All natural resources belong to the state. All resources are allocated and employed as the state dictates, insofar as its dictates can actually be carried out in practice (all such systems display much slack between orders given and actual conduct on the ground, owing to corruption and attempts to “fix” flaws embedded in the state’s overall plan).

Obviously the economic order that prevails in the economically advanced countries is not socialism. Indeed, these systems are commonly called capitalistic or market-oriented, notwithstanding the many types of government intervention that pervade their markets—various taxes, subsidies, direct government production, and regulations galore. Some people refer to these systems as “mixed economies,” which at least helps us to recognize that they are not market economies in any pure sense, not even in an approximate one. But in calling them mixed economies, we gain no insight into their nature or operation.

For thirty years or so, I have used the term “participatory fascism,” which I borrowed from my old friend and former Ph.D. student Charlotte Twight. This is a descriptively precise term in that it recognizes the fascistic organization of resource ownership and control in our system, despite the preservation of nominal private ownership, and the variety of ways in which the state employs political ceremonies, proceedings, and engagements—most important, voting—in which the general public participates. Such participation engenders the sense that somehow the people control the government. Even though this sense of control is for the most part an illusion, rather than a perception well founded in reality, it is important because it causes people to accept government regulations, taxes, and other insults against which they might rebel if they believed that such impositions had simply been forced on them by dictators or other leaders wholly beyond their influence.

For the rulers, participatory fascism is the perfect solution toward which they have been groping for generations, and virtually all of the world’s politico-economic orders are now gravitating toward this system. Outright socialism is a recipe for widespread poverty and for the ultimate dissolution of the economy and the disavowal of its political leadership. Socialism is the wave of the past; everywhere it has been tried seriously, it has failed miserably. Participatory fascism, in contrast, has two decisive advantages over socialism.

The first is that it allows the nominal private owners of resources and firms enough room for maneuver that they can still innovate, prosper, and hence propel the system toward higher levels of living for the masses. If the government’s intervention is pushed too far, this progress slows, and it may eventually cease or even turn into economic regress. However, when such untoward conditions occur, the rulers tend to rein in their plunder and intervention enough to allow a revitalization of the economy. Of course, such fettered economies  cannot grow as fast as completely free economies can grow, but the latter system would preclude the plunder and control that the political leaders now enjoy in the fettered system, and hence they greatly prefer the slower-growing, great-plunder system to the faster-growing, no-plunder one.

Meanwhile, most people are placated by the economic progress that does occur and by their participation in political and legal proceedings that give them the illusion of control and fair treatment. Although the political system is rigged in countless ways to favor incumbent rulers and their key supporters, it is far from dictatorial in the way that Stalin’s Russia or Hitler’s Germany was dictatorial. People therefore continue to believe that they are free, notwithstanding the death of their liberties by a thousand cuts that continues day by day.

Participatory fascism’s second great advantage over socialism is that when serious economic problems do arise, as they have during the past five years, the rulers and their key supporters in the “private” sector can blame residual elements of the market system, and especially the richest people who operate in that system, for the perceived ills. No matter how much the problems arise from government intervention, it is always possible to lay the blame on actors and institutions in the remaining “free enterprises,” especially the biggest bankers and other apparent top dogs. Thus, fascistic rulers have build-in protection against popular reaction that the rulers in a socialist system lack. (Rulers under socialism tend to designate foreign governments and capitalists and domestic “wreckers” as the scapegoats for their mismanagement and inability to conduct economic affairs productively and fairly.)

Americans do not like to admit that they live in a system that is most accurately characterized as participatory fascism. They insist that fascism requires death camps, goose-stepping brown shirts, comical yet murderous leaders in funny hats, and others hallmarks of the fascism that operated in Germany and Italy between the world wars. But fascism takes many specific forms. If you wish to see the form that it has increasingly taken in the economically advanced countries during the past century, just look around you.

Robert Higgs is Senior Fellow in Political Economy at the Independent Institute, author or editor of over fourteen Independent books, and Editor at Large of Independent’s quarterly journal The Independent Review.
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