The second model of the socialist economy is the national-socialist economy, which Mises called the German system. Mises tells us that the difference between the national-socialist economy and soviet socialism is that the former, seemingly and nominally, maintains private ownership of the means of production, entrepreneurship, and market exchange. Entrepreneurs do the buying and selling, pay the workers, contract debts, and pay interest and amortization. But they are entrepreneurs in name only. The government tells these seeming entrepreneurs what and how to produce, at what prices, and from whom to buy, at what prices, and to whom to sell. The government decrees to whom and under what terms the capitalists should entrust their funds and where and at what wages laborers should work. Market exchange is but a sham. As all prices, wages, and interest rates are being fixed by the authority, they are prices, wages, and interest rates in appearance only; in reality they are merely determinations of quantity relations in authoritarian orders. The authority, not the consumers, directs production. This is socialism with the outward appearance of capitalism. The labels of the capitalistic market economy are retained, but they signify here something entirely different from what they mean in the true market economy.”
What is important for us, however, is that in both types of socialism described above, it is the government, not the market, that determines production and consumption.
The fact that several companies will be nationalized in a market economy doesn’t mean that we are dealing with a socialist economy, just as agreeing to a small amount of private initiative in a socialist system does not yet mean a transition to a market economy. Mises writes: „If within a society based on private ownership of the means of production some of these means are publicly owned and operated, this still does not make for a mixed system which would combine socialism and private property. As long as only certain individual enterprises are publicly owned, the remaining being privately owned, the characteristics of the market economy which determine economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods, and labor, and as sellers of goods and services, must fit into the mechanism of the market economy; they are subject to the same laws of the market”.
So how do we distinguish when a market economy ends, and a socialist economy begins? That’s exactly what Murray Rothbard asked Mises which is described in the book „Making economic sense”:
“One time I asked Professor von Mises, the great expert on the economics of socialism, at what point on this spectrum of statism would he designate a country as “socialist” or not. At that time, I wasn’t sure that any definite criterion existed to make that sort of clear-cut judgment. And so I was pleasantly surprised at the clarity and decisiveness of Mises’s answer. “A stock market,” he answered promptly.
A stock market is crucial to the existence of capitalism and private property. For it means that there is a functioning market in the exchange of private titles to the means of production. There can be no genuine private ownership of capital without a stock market: there can be no true socialism if such a market is allowed to exist.”
So, as we can see, the boundary is the existence of a stock exchange. Let us note that in Polish People’s Republic there was no stock exchange. In the USSR too. There was no stock exchange in North Korea until today. In Nazi Germany the number of stock exchanges was reduced from 21 to 9 in 1935, and by 1936 citizens were forbidden to buy foreign shares.
So, what is interventionism? It is based on the fact that private ownership of the means of production still exists, but the state is actively involved in regulating the economy through orders, bans, restrictions or controls. Mises calls interventionism “a hampered market economy” or “domestic policy of governmental interference with business“. The market exists, but its functioning is disrupted in various ways. What are these ways? What are their effects? Is interventionism a possible and sustainable “third form of social interaction”? Is there a so-called “third way”, which combines the advantages of capitalism and socialism and is devoid of their disadvantages? The answers to these questions will be sought in future films.