The New Socialism Is a Public-Private Partnership

In 1990, socialism seemed to be done once and for all, but the times have changed. In the last twenty years, socialism has again become fashionable beyond the academic fringes. The covid-19 crisis demonstrated how quickly and thoroughly the traditionally free societies of the West may be transformed by small groups of determined and well-coordinated decisionmakers. Top-down central planning of all aspects of human life is today not merely a theoretical possibility. It seems to be right around the corner.

Now, the renaissance of central planning is an intellectual and practical dead end, for the reasons that Ludwig von Mises explained one hundred years ago. But if Mises was right, then how can we explain the renaissance of socialism as a political ideal? To some extent, this might be explained by the fact that new generations are likely to forget the lessons that were learned, often the hard way, by their ancestors. However, there are also other issues at stake. In what follows, I shall highlight two institutional factors that have played a major role: state apparatuses and ownerless private foundations.

1. State Apparatuses

An important driving force of the socialist renaissance has been the constant growth of state organizations. This includes all organizations that are largely financed by the state or thanks to state violence. For example, the so-called public service media are state organizations in this sense. In contrast, the so-called social media networks are mixed forms. It is true that they have received significant state support (for their establishment and for the expansion of the internet infrastructure). But they are also financed through advertising.

Socialism is growing out of the already existing state organizations. The crucial importance of this connection has been emphasized again and again by liberal and conservative theorists. A ministry, an authority, or a state-subsidized television station do not fully belong to the competitive life of ordinary society. Special rules apply. They are funded by taxes and other compulsory contributions. They are literally living at the expense of others. This has two important consequences for the renaissance of socialism.

On the one hand, state organizations are constantly forced to justify their privileged existence and therefore have a special need for intellectual services. Good cobblers and good bakers do not need to convince their customers with verbose theories. Their services speak for themselves. But creating and maintaining a government monetary system or a government pension system requires a constant torrent of words to pacify taxpayers, retirees, and the whole gamut of money users.

On the other hand, these intellectual suppliers typically have a personal agenda. State organizations are irresistibly attractive to ideological do-gooders of all stripes. This becomes clear as soon as we realize what doing good things really means.

Every day private companies and private nonprofit organizations create new products and new services—thousands of attempts at improvements. But their achievements fit into the existing social network. They are contributions that take into account the objectives and individual sensitivities of all other people. Private organizations thrive in competition. By contrast, the ideological do-gooder does not want to care about the sensitivities of other people. But that is only possible if his own income does not depend on those others, and if his plans can also be carried out against the will of the others. And that is exactly what the state, especially the republican state, enables him to do.

From the classical liberal point of view, the republican state should not pursue its own agenda. It should not be private, but public, should only provide the framework for free social interaction. But this theory hurts itself with the horror vacui it provokes. Ownerless goods will sooner or later be homesteaded by someone. Even an abandoned “public” state will sooner or later be taken into possession. History over the past two hundred years has shown that this privatization of the public state does not necessarily have to occur by coup or conquest. It can also grow out of the bosom of the state itself. The domestic staff, the servants of the state, can make themselves its masters.

Abandoned goods hold a magical attraction for people. An abandoned state magically attracts ideological do-gooders into the civil service. They are trying to privatize public space, to transform it into an instrument for their agenda. At first there may not be a consensus among them, but at some point the best-organized and best-connected groups gain the upper hand. The sociologist Robert Michels called this process the iron law of oligarchy.

The bureaucratic oligarchy can influence personnel decisions in terms of its ideology. Their ministry becomes “their” ministry (or their school, their university, their broadcasting service, etc.). It becomes an ideological state apparatus as defined by the French Marxist philosopher Louis Althusser. Through commands and prohibitions, an ideological state apparatus can convey its ideology to the outside world.

Notice that the bureaucratic oligarchy is only a small minority. This explains why the oligarchic ideology is typically a socialist ideology. Only where there is private property is it possible for a minority to undertake anything that might displease other people. But the oligarchs of a republican state cannot assert property rights. The state does not belong to them—they just control it. In order to be able to direct it inexpensively, they must avoid inciting the majority to resist them. The easiest way to do this is through a socialist ideology. Slogans like “We govern ourselves” cover up the real power relations.

A classic case is the French ministry of education, which was appropriated by a coalition of Communists and Christian democrats after the Second World War. In those years, Professors Paul Langevin and Henri Wallon (both members of the French Communist Party) pursued a strategy of centralizing and homogenizing all secondary schools, along with a dumbing down of the entry requirements. With the help of their allies, Langevin and Wallon slowly but steadily filled all the key positions of the ministry with their people while greatly expanding it. Thus, they made “their” ministry resistant to reform. No bourgeois minister has ever dared to make it a “public” institution again. So it has remained in the Communist inheritance to this day. The supposed servants of the commonwealth have become the real rulers, against whom the elected representatives can only grind their teeth.

This tendency toward privatization is at work in all public institutions in all countries. President Donald Trump had not understood this before his 2016 election. He is probably wiser now, but the problem remains.

A state apparatus is often the first place where socialist reforms are implemented. In the past, state organizations have served as laboratories for expensive socialist labor-law reforms (quotas for civil servants, vacation regulations, etc.), for the typically socialist control of language (political correctness), and for harmonizing thought and action.

Over the past thirty years, international bureaucracies have played a growing role in making the world a better place for socialism. Intergovernmental organizations such as the European Union, the United Nations, the World Health Organization, and the International Monetary Fund have always served as reservoirs for intelligent radicals who found no place in national politics. But the influence of these people has grown considerably in recent years as they have played a key role in covering up interventionist failures.

This can be explained as follows: The state, which rules over the media and education, can gloss over and explain away its failures. But talk does not help when people see with their own eyes how things are abroad. The competition of political alternatives is ruthless, and the comparisons show time and time again that socialism and interventionism do not work. Hence the urge of all socialists to rule out alternatives as much as possible from the outset. So-called international cooperation and the abolition of the nation-state in favor of international organizations serve the same purpose. By proceeding as uniformly as possible, states aim to prevent the population from realizing that there are political alternatives and perhaps even better alternatives.

Another weapon in the socialists’ arsenal is the use of secret services to further their aims. The importance of these services cannot be overstated. This cloak of secrecy, often funded by substantial off-the-books resources, is particularly favorable for socialist agitation as long as the socialists are in a minority. Secrecy is a weapon often used successfully upon the unwitting citizenry.

It should never be overlooked that the socialists will use any and all areas of society and control of the state to further their aims and agenda.

2. Ownerless Foundations

The same iron law of oligarchy also applies to the large private law foundations (the Rockefeller Foundation, the Ford Foundation, the Bertelsmann Foundation, the Bill and Melinda Gates Foundation, etc.). Although these organizations are usually not themselves financed by taxpayers’ money, they—and the US foundations in particular—have made decisive contributions to the renaissance of socialism, for three main reasons.

First, the executives of such institutions are in constant search of self-affirmation and self-justification, and are therefore prone to activism.

Self-justification is particularly necessary if the organization does not provide a clear statement of purpose. The large US foundations serve general goals such as “progress” or “humanity.” Words of this kind must of course be backed by concrete content, and this is where the ideological suppliers come into play, just as in the case of the state bureaucracies.

Ideological do-gooders find an ideal playground in the large private foundations, especially when the founders let the supposed “experts” run free and entrust them with the management of the organization’s assets without any strings attached. The executives of such ownerless foundations are then subject to even fewer restrictions than their colleagues in government offices. While the high bureaucratic officials are still responsible to the elected political leadership (even if this responsibility is small for the reasons mentioned above), the directors and supervisory boards of the private foundations are among themselves. Nobody gets in their way—nobody they have not themselves accepted into their illustrious circle. Ownerless private foundations will therefore sooner or later serve those ideologies that are highly valued by the leading experts. As in state institutions, there may be temporary rivalries among the leading forces. In the end, however, the best-organized and best-connected groups prevail with regularity. From then on, their ideas determine the foundation’s direction.

These ideas are often diametrically opposed to those of the founders, as Niall Ferguson explains in “I’m Helping to Start a New College Because Higher Ed Is Broken.” In my opinion, the most important reason for this contrast is to be seen in the fact that the founders no longer have to prove themselves and also reject excessive activism on the part of their foundation for other reasons. They know the importance of free competition. They know that excessive donations from foundation money can seduce the recipients into laziness and frivolity. They want to help others. But above all they want these others to know how to help themselves.

Things are completely different in the case of the supposed experts who run the foundations. In contrast to the donors, many of them have not yet been able to show that they can achieve great things themselves. The decision-making power over the foundation gives them the opportunity to put their stamp on the world. This temptation is just too great for most. Those who have large resources at their disposal can make it their business to improve the world according to their taste.

The history of the US foundation system provides numerous cases of this tendency, well documented by Waldemar Nielsen. The largest American foundations of the twentieth century (Ford and Rockefeller) in particular committed themselves to changing American society in the 1950s and 1960s. Such activism is more or less inevitable if ideological do-gooders have free rein and well-filled treasure chests.

Second, the cooperation between private foundations and state organizations has a very similar effect. Such cooperation concretely means the joint pursuit of goals; the pooling of private and state funds; and the exchange of personnel. The private foundations thus come into the ideological orbit of the state institutions, as Ludwig von Mises explained in Human Action; and state institutions are captured by the “managerial” spirit of private foundations, to use Paul Gottfried’s phrase.

The private foundations like the partnership of the state for reasons of prestige and use it to “leverage” their own activities. One example among many: The Ford Foundation had already developed the basic principles of what would become the American welfare state in the 1950s and financed them on a small scale. But the means were lacking for large-scale application. Things changed when US president Lyndon Johnson adopted the Ford model and used taxpayer money to spread it across the country.

This partnership is also very welcome to the state because its bureaucrats also feel confirmed by the friendly response and the active support from the Potemkin-style world of “civil society” financed by foundation funds.

Third, the combination of grandiose objectives and enormous financial resources entails the tendency to pursue large and highly visible projects. (The tendency also exists for cost reasons. For a private foundation it is usually cheaper to finance a few large projects than thousands of small initiatives.) These large projects must be planned for the long term and centrally managed. The management of large foundations is therefore typically associated with a perspective on the economy and society that is very similar to that of a central planning committee. The case of other large companies is very similar.

Because of this perspective, the executives of large organizations can succumb to a special kind of delusion, which we propose to call the Rathenau delusion in honor of the great German industrialist who flirted with the socialist planned economy at the beginning of the twentieth century. The Rathenau delusion consists in seeing only a difference in scope between the private planning of very large companies and the centrally planned economies of entire nations. In fact, there is a categorical difference here. Rational economic planning always takes place within an order based on private property and monetary exchange. It is this order that orientates the numerous individual plans and coordinates them. Mises taught us that the rationality of economic activity is always and everywhere rooted in a microeconomic perspective and presupposes a social order under private law. By contrast, the basic socialist idea consists precisely in abolishing this superordinate order and replacing it with top-down planning. But whoever does this saws off the branch on which he is sitting. Instead of making rational economic activity easier, he makes it impossible. This is exactly what Mises proved a hundred years ago.

For the past seventy years, the major US foundations have been the main drivers of socialism, even more so than the state bureaucracies. Something similar can be said about the Bertelsmann Foundation and other German foundations. They also apply a saw with great relish to the capitalist branch that carries us all.