Economics takes ends and goals of action as a given and—in matters of value judgments—it assumes neutrality (i.e., non-normativity), which is characteristic of a science. However, questions of suitability of means and various policies adopted to attain chosen ends are not beyond the scope of economic analysis.

The “Dismal” Task of the Economist

The competent economist—when presented with a proposed plan of action—always asks: Is the means adopted suitable for the attainment of the end in view? He critically analyzes the means in question and declares their fitness or unfitness on the basis of logical demonstrations that are unassailable and apodictly true. This peculiar task of the economist is often misapprehended as an expression of his value judgments and an attempt to frustrate the attainment of ends chosen. Thus, the economist is often met with disapproval.

More significant in the history of the science are the several attempts to discredit the economists through a denial of economics as a universally-valid science, applicable for all peoples, times, and places. This is a pernicious attempt because the social, political, and economic consequences tend to be disastrously far-reaching. This article attempts to establish a connection between a denial of economics and the emergence of totalitarianism.

Historicism as a Precursor of Totalitarianism

Historicism was one of such concerted attempts at denying the universal validity of the body of economic theorems. The historicists advanced the view that economic theories are not valid for all peoples, places, and times; and thus, are only relevant to the specific historical conditions of their authors. The German Historical School’s rejection of the free trade theories, propounded by the classical economists, was not on grounds of inherent inadequacies in these theories—given that they never unmasked any logical errors as to the untenability of these theories—but motivated by ideological pre-possessions. Mises puts it very succinctly in Epistemological Problems of Economics:

The historian must never forget that the most momentous occurrence in the history of the last hundred years, the attack launched against the universally valid science of human action and its hitherto best developed branch, economics, was motivated from the very beginning not by scientific ideas but by political considerations.

Historicism is bound to lead to some form of logical relativism, and it is not surprising that the doctrine of racial polylogism gained a general acceptance among many Germans in the early twentieth century. In order to invalidate the relevance of a theory on grounds of historical or racial origins of the author, one has to proceed with the indefensible assumption of differences in the logical character of the human mind amongst different peoples and within the same people at different historical epochs. But in fact, there is no scientific evidence as to the existence of these differences in the logical structure of the human mind. Thus the historicists’ arguments against the universal validity of economic theory are unfounded.

The social, economic, and political significance of a denial of economics would also imply the denial of insights from economics about the preservation of society—concerted action in voluntary cooperation. Economic theory asserts that there is greater productivity to be obtained from social organization under the division of labor than would be obtained in individual self-sufficiency. The Ricardian Law of Association explains the tendency of humans to intensify cooperation given a rightly-understood interest in better satisfying wants under the social order of the division of labor. While there are many ways for people to coexist in the world, there are fewer ways for them to coexist peacefully and prosperously. This is the central lesson of classical economics about human society.

Historicism’s denial of the universal validity of these theories on non-logical grounds betrays a prejudice for policies aimed at attaining the alternative of autarkic self-sufficiency and the substitution of the social apparatus with coercion and compulsion. In fact, the Nazi totalitarian regime, whose intellectual precursor was German historicism, never relented in applying force to induce cooperation while simultaneously pursuing autarkic self-sufficiency by means of disastrous policies. Thus, German historicism, in denying the universal validity of economic theory and the general laws of human action as advanced by praxeology, played a causal role by creating a favorable intellectual climate for arbitrariness and the subsequent emergence of Nazi totalitarianism.

Marxism as Pseudo-Economics

Marxist socialism, on the other hand, denies the validity of economic theories on grounds of the “class origins” of the economists. Like historicism, it subscribes to a variant of polylogism in which it asserts the existence of a difference in the logical structure of mind for the respective social classes—even though Marx never defined what he meant by “class.” Consequently, for the Marxians, the science of economics becomes mere ideological expression of the class interest of the exploiting class—the bourgeoisie.

It is precisely the fact that Marxism rejects the essential teachings of economics in favor of utopian ideas which fail to achieve the ends sought wherever it was tried. The ultimate goals of Marxians—improvement in material and social conditions of its adherents—are no different from those of their liberal counterparts of the late eighteenth and early nineteenth centuries who enjoyed considerable improvements in standard of living; it is in the choices of means that they differ. But it is the unsuitability of the means adopted by the Marxians that always and everywhere frustrated the attainment of ends sought by Marxism.

Furthermore, as with the capitalist system, based on private ownership of the means of production, the pure socialist commonwealth must be faced with the problem of allocation of resources in view of satisfying the most urgent wants of its citizens. And in this regard, Mises, in his irrefutable criticism of the socialist commonwealth, exposes the impossibility of socialism. He argues that, given the absence of a price structure for factors of production, the problem of impracticality of economic calculation must emerge in a socialist community. The planner, without recourse to tools of economic calculation, would be lost amid the sea of economic possibilities.

That capitalism has succeeded in improving the lives of men wherever its institutions are left unhampered is because those societies recognize the validity of economic theory about the potential benefits of the free market. They did not adopt arbitrary policies that economists declared unfit for the ends they sought to attain. Thus, the horrors brought about by the series of abortive attempts to implement the utopian ideas of socialist thinkers are the logical consequences of a denial of economics.

The Middle-of-the-Road Policy Leads to Totalitarianism

The doctrine of interventionism wrongly conceives of a compatibility of the market and violent interventions by the state, between social cooperation and the apparatus of coercion and compulsion. It purports to be a third economic system—a compromise between capitalism and socialism. But, as the logical demonstrations of the economists show us over and over, interventionism, so-called middle-of-the-road policy, inevitably leads to socialism. Interventionism is, in fact, a denial of economics in that economics recognizes that interventions of any sort in the market tend to produce outcomes that—judged from the point of view of their initiators—are even more dissatisfactory than the previous problems that they pretend to fix.

Mises clearly remarks in his short book The Historical Setting of the Austrian School of Economics that “the worst illusion of our age is the superstitious confidence placed in panaceas, which—as the economists have irrefutably demonstrated—are contrary to purpose.” Interventionism, carried to its logical conclusion, is bound to lead to totalitarianism, given that the more its policies fail to produce the desired outcomes, the more the statesmen who wrongly believe in the appropriateness of interventionist measures find it necessary to employ the coercive state apparatus to compensate for their failures.

Economics and the Free-Market System

The science of economics is a rational science that recognizes the primacy of the laws of human society. Economics teaches that the market is a system of logically necessary relations brought about by the actions of individuals seeking to satisfy their most urgent wants. It teaches that any instance of coercion aimed at influencing the actions of individuals is disruptive to the market process. A denial of these teachings would inevitably lead to the state of affairs in which force becomes the only means of eliciting the cooperation of individuals in society.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

During October—the first month of the 2025 fiscal year—the federal deficit was more than a quarter of a trillion dollars, coming in at $257.4 billion. Tax revenue in October had totaled $326 billion, but spending totaled $584 billion.

Now one month into the new fiscal year, the federal government is on pace to add more than $2 trillion dollars to the national debt during the 2025 fiscal year. If the economy significantly worsens in coming months—and tax revenues plummet as they do during times of economic trouble—the deficit will be much larger than $2 trillion.

There is no sign of any relief from mounting deficits. The 2024 fiscal year ended on September 30 with the FY’s total deficit coming in at $1.8 trillion. That’s the largest deficit in three years and is the worst since 2021 when the US will in the midst of the Covid Panic.

With this additional $1.8 trillion added to the national debt, the total debt is now over $35 trillion. Federal spending has trended up since the third quarter of 2023, once again accelerating overall growth in the debt, and all but ensuring total debt will top $36 trillion by the time Donald Trump is sworn in in January 2025. […]

— Read More: mises.org

American society teaches hatred and distrust of everything capitalist, even though its benefits are all around us—helping to feed, cloth, house, and protect us. In contrast, the government screws up virtually everything it lays its hands on and charges us double to do so.

I remember when I was a child that my mother would retrieve the morning milk, just outside the back door, from the “milk box.” I don’t remember how old I was when I finally asked how the milk got there, and my mother told me that the milkman put it there. I think I had previously chalked it up to something akin to Santa Claus or the tooth fairy, and when I realized how dark and cold—even snowy—it could be outside early in the morning, I was amazed!

Today, on the drive to work, I heard an otherwise-intelligent retired athlete say the following:

If you are a billionaire sports team owner you obviously have screwed a lot of people over, but in the case of building sports stadiums, taxpayer subsidies are needed because they create jobs. […]

— Read More: mises.org

Similarly, in the United Kingdom, the Church of England is making plans to fund reparations for slavery.

The Church of England should create a fund of 1 billion pounds ($1.27 billion) to address its historic links to slavery, an advisory panel said Monday. That’s 10 times the amount the church previously set aside.

An independent oversight group established by the church said a 100-million-pound fund announced last year was insufficient compared to the wealth of the church and “the moral sin and crime of African chattel enslavement.”

The arguments in support of paying reparations are based on the principle that slavery is wrong, and therefore someone ought to make restitution and right that historical wrong. But little attention is paid to the question of who should now pay to redress historical wrongs and why that person should be held liable for historical crimes. The applicable principle here is that of individual responsibility—no one is responsible for the crimes of another and, therefore, no innocent person should be forced to pay for historical wrongs. David Gordon, discussing the case of Germany paying reparations for Hitler’s crimes, cites with approval the Welsh philosopher H.D. Lewis who said:

If I were asked to put forward an ethical principle which I considered to be especially certain, it would be that no one can be responsible, in the properly ethical sense, for the conduct of another. Responsibility belongs essentially to the individual. […]

— Read More: mises.org

For many years—especially during the 1980s and 1990s— the abortion lobby in America insisted that it only supported abortion as a last resort for low-income mothers who had no other choice. The slogan was “safe, legal, and rare.” In practice, however, the mere legality of abortion was never enough for these people. Even during the “safe, legal, and rare” days, abortion advocates repeatedly lobbied for taxpayers to foot the bill for abortions.

This is why, in 1984, local opponents of taxpayer-funded abortions put Amendment 3 on the Colorado ballot, which banned the use of taxpayer money for abortions in most cases. The push for “public” funds is why Congress adopted the Hyde Amendment in 1977, banning the use of federal funds for abortion. For more than 45 years, abortion advocates have been hard at work trying to loot the taxpayers.

Now comes Amendment 79 which is specifically designed to overturn previous limits on public funding, and to ensure that taxpayer funds will be used to pay for abortions. Moreover, these funds will be used to fund abortions for out-of-state residents who travel to Colorado specifically for an abortion.

By defining abortion as a right in the state constitution, the abortion lobby attempts to ensure that state Medicaid funds and other state funds can be spent on abortions. This is all meant to be stacked on top of Colorado’s existing anti-market and interventionist abortion laws which include state mandates that require private insurance companies to pay for abortions with no out-of-pocket expense for the person seeking the abortion. Or, put another way, existing state law requires that virtually everyone who pays health insurance premiums subsidize abortions. […]

— Read More: mises.org

Money-supply growth accelerated, year over year, in August by the largest amount in 23 months, and August was the third month in four months that the money supply has grown, year over year.

The current trend in money-supply growth suggests a significant turnaround from more than a year of historically large contractions in the money supply that occurred throughout much of 2023 and 2024. Since April 2023, year-over-year growth in the money supply has slowly inched upward, and the money supply appears to be, for now, in a period of stabilization overall.

Looking to month-to-month growth, the money supply has been largely flat for 17 months, coming in between $18.8 trillion and $19 trillion with only small variations, month after month.

The positive money-supply growth of recent months ends an eighteen-month period, from late 2022 to mid 2024, during which the money supply repeatedly contracted, year over year. In August, YOY growth in the money supply was at 0.75 percent—the highest since October 2022. August’s growth rate is up from July’s decline of 0.5 percent, and was a sizable reversal from August 2023’s YOY decline of 10.9 percent. […]

— Read More: mises.org

The ruse has certainly worked. Economists and media pundits frequently refer to this alleged Fed “independence” as if it were a given, and as if there were a wall of separation between the executive branch and the central bank. Others take it even further, and in podcasts and social media one encounters a variety of crackpot theories asserting that the Fed is somehow at odds with the regime, or that the Fed answers only to bankers without regard for the regime’s agenda. Some of those who have been hoodwinked by the Fed-independence myth will, at times, even claim that the Fed is some kind of benevolent fifth column that’s trying to undermine federal fiscal profligacy and save the dollar from tax-and-spend politicians.

Yes, the senior technocrats at the Fed don’t always agree with Congressional or White House priorities, but the same could be said of diplomats at the State Department. Few would claim, however, that disagreement means there is “State-Department independence.”

Indeed, its true that bureaucrats generally prefer to do their own thing without having to get approval from the higher-ups. In this respect, Fed personnel are no different from senior technocrats at any executive-branch department. In practice, however, historical experience shows that, time and again, the Federal Reserve has “coordinated” its policies with those of the Treasury and the administration to ensure that the federal government gets exactly what it wants from the central bank.

Keeping the War Machine Going

During the great Depression and the Second World War, for example, the executive branch under Franklin Roosevelt overtly managed the Federal Reserve and required the Fed’s close cooperation with the White House. During this period, the Fed had attempted to gain more autonomy, but only ostensibly succeeded in doing so with a 1935 amendment to the Federal Reserve Act. These timid efforts at independence were cut short by the onset of the Second World War. According to a report from the Richmond Fed,

When the United States entered World War II, the Fed became again a mechanism by which the government could more cheaply finance the war effort. In April 1942, the Fed announced a policy of cooperating with the Treasury to keep interest rates low. By 1947, the Fed was summarizing its “primary duty” as “the financing of military requirements and of production for war purposes.” In his memoirs, [Fed Chairman Marriner] Eccles even described his work during this period as “a routine administrative job” as the Fed “merely executed Treasury decisions.” Alan Sproul, the president of the New York Fed, lamented, “We are not the masters in our own house.” […]

— Read More: mises.org

Now comes a story about TikTok, where 40 percent of young adults get their news these days. Recent news sources report TikTok videos portraying people believing they could get “free” cash from Chase Bank ATMs. These videos showed people depositing checks for large sums of money at Chase ATMs, and then making withdrawals for smaller yet substantial amounts, leading them to believe they had discovered a computer glitch to take advantage of. One video viewed over 100,000 times shows a young woman calling her mother and telling her she could get $40,000 to $50,000 out of her Chase account by depositing a check and taking advantage of the “glitch.”

Chase normally allows customers to withdraw a portion of deposited checks before the full check amount clears, but a technical error allowed customers to withdraw all of the funds from a check before it had cleared. Chase says that this error existed for a few days before being quickly fixed.

If this sounds like fraud, it is. Such schemes in earlier times were called “check-kiting”, when someone takes advantage of bank float to make use of non-existent funds. It has been illegal by both state and federal law for many years. Check-kiting is much less common today than in prior times—-not because bank customers are more law-abiding today but because the elapsed time from check deposit to check clearance has become significantly shorter over time. […]

— Read More: mises.org

The tariffs have proved popular with industries that have faced stiff competition from Chinese firms, like makers of kitchen cabinets…the industry realized that Chinese companies had taken over about 40 percent of the market and that their share was continuing to grow.

In “Protectionism and the Destruction of Prosperity,” Rothbard explains why tariffs and protectionism are incompatible with economic prosperity:

As we unravel the tangled web of protectionist argument, we should keep our eye on two essential points: (1) protectionism means force in restraint of trade; and (2) the key is what happens to the consumer. Invariably, we will find that the protectionists are out to cripple, exploit and impose severe losses not only on foreign consumers but especially on Americans.

Rothbard’s point is that free trade is essential to the prosperity of ordinary consumers. Protectionism ultimately hurts domestic consumers when import tariffs cause prices of domestic goods to rise: “And since each and every one of us is a consumer, this means that protectionism is out to mulct all of us for the benefit of a specially privileged, subsidized few.” Moreover, tariffs do not create “fair” trade any more than price controls create “fair” prices. As Rothbard warns, […]

— Read More: mises.org

As ZeroHedge has noted, “only 9 of 113 economists surveyed” expected this sort of move, and the Fed’s own dot plot shows a growing appetite for more aggressive action in the near future.

Amazing what an 818K downward jobs revision that "nobody could have seen coming because the Biden economy was so strong" will do… pic.twitter.com/xvTwmE4eUJ

— zerohedge (@zerohedge) September 18, 2024

The Fed’s actions are best understood as acknowledging the obvious: the regime has been gaslighting the public about the economy. Despite the constant assistance from the Biden-Harris Administration and their reliable allies in the media that the economy is strong, today’s Fed action was a crisis-level response.

What changed? The job market is an obvious one. Once the go-to argument for the strength of the American economy, official numbers show there are now fewer full-time jobs in America than there were a year ago. This follows significant revisions to jobs reports that overstated almost a million jobs. […]

— Read More: mises.org