Kamala Harris and Her Socialism with 1930s-German Characteristics

Presidential candidate, Kamala Harris, responding to accusations that she is a Marxist and has been concealing much of her economic agenda from the public, gave a speech at the Economic Club of Pittsburgh on September 25 attempting to reassure voters that her earlier proposals for price controls, debt cancellations, and consumer subsidies, as well as her new proposals are not a Bolshevik assault on capitalism, but are intended to create an “opportunity economy” for the benefit of the American middle class. She affirmed “Look, I’m a capitalist, I believe in a free and fair market” and went on to specify three “pillars” of how she intends to confer the blessings of “opportunity” on market actors. 

Harris spelled out a basic principle underlying her proposals as:

I believe an active partnership between government and the private sector is one of the most effective ways to fully unlock economic opportunity. And that is what I will do when I am president, I will target the major barriers to opportunity and remove them. We will identify common sense solutions to help Americans buy a home, start a business and build wealth, and we will adopt them.

In other words, she is promising that a Harris regime would not overtly seize the means of production from their current owners as Communist revolutionaries would, but instead would force those owners to accept the Harris administration as their active “partner” in making decisions about production. Evidently, she conceives of “opportunity,” not as something that capitalists are naturally incentivized to pursue by seeking profits and avoiding losses in the context of peacefully-acquired ownership rights and voluntary market exchanges, but rather as something that has to be incentivized by compulsory obedience to bureaucratic orders emanating from a central planning office under her allegedly beneficent leadership.

Of course, it is false advertising to label oneself a “capitalist” when one would compel capitalists to hand over effective control over their businesses to their new “partner” from the government. Such a system of compulsion is, as Ludwig von Mises explained, just as much a form of socialism as Communism is:

There are two different patterns for the realization of socialism. The one pattern—we may call it the Marxian or Russian pattern—is purely bureaucratic. All economic enterprises are departments of the government just as the administration of the army and the navy or the postal system. Every single plant, shop or farm, stands in the same relation to the superior central organization as does a post office to the office of the Postmaster General. The whole nation forms one single labor army with compulsory service; the commander of this army is the chief of state.

The second pattern—we may call it the German or Zwangswirtschaft system—differs from the first one in that it, seemingly and nominally, maintains private ownership of the means of production, entrepreneurship, and market exchange. So-called entrepreneurs do the buying and selling, pay the workers, contract debts and pay interest and amortization. But they are no longer entrepreneurs. In Nazi Germany they were called shop managers or Betriebsführer. 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 at what wages laborers should work, and to whom and under what terms the capitalists should entrust their funds. Market exchange is but a sham. As all prices, wages and interest rates are fixed by the authority, they are prices, wages and interest rates in appearance only; in fact they are merely quantitative terms in the authoritarian orders determining each citizen’s income, consumption and standard of living. The authority, not the consumers, directs production. The central board of production management is supreme; all citizens are nothing else but civil servants. This is socialism with the outward appearance of capitalism. Some labels of the capitalistic market economy are retained, but they signify here something entirely different from what they mean in the market economy.

The three pillars of Harris’s version of Zwangswirtschaft socialism are: (1) reduction of costs paid by middle class consumers to promote their economic security; (2) greater investments in small business startups to promote innovation, entrepreneurship, and jobs creation; and (3) greater investments in “industries of the future” to beat China.

While she didn’t back off of her earlier advocacy of price controls, etc., she did try to soften the anti-capitalist edge of her proposals by adding targeted tax deductions to her policy mix, oddly echoing a traditional staple of Republican rhetoric. As is also usually the case with Republican tax proposals, corresponding reductions in government spending are not part of the mix, meaning that the benefits of her new tax deductions would be offset by the burdens of additional dollar printing and higher prices for everything.

It should be noted that the compulsory provision of economic security both discourages and consumes savings, while compelling investments in sectors favored by central planners wastes savings that could have been invested more profitably in ventures that produce goods preferred by consumers. Since private thrift, not dollar creation, is the only means available for providing the additional labor and natural resources, as well as the additional financing needed for creating additional capital goods that serve the needs of consumers, Harris’s intensified war on savings (which are already under terrific assault over the past half century thanks to the combination of Social Security and Medicare) can only mean that the supply of capital goods will be diminished further, and the real productivity and incomes of labor will suffer as a result. The decline of America’s middle class can only be accelerated by such measures.

Paying rhetorical homage to opportunity, economic security, innovation, entrepreneurship, jobs creation, etc., can’t sidestep the basic truth that such phenomena are not ends in themselves; they are useful only to the extent that they help better realize the goals sought by economic actors. It is magical, cargo-cult thinking to suppose that an “investment” will automatically pay off merely because it mimics some important feature of free market production, or that a market economy provides an endless cornucopia of goods that can be harmlessly tapped to provide “security” on a political whim. Such “pillars” amount to a house of cards.

Harris’s desire to promote “industries of the future” to counter China, perhaps the most substantial pillar of her planning program, sounds eerily like a reprise of the German model, where the actual beneficiary of the planning wasn’t the middle class, but rather a military machine that needed to gear up for a major war and was afraid that domestic producers wouldn’t be able to handle an anticipated disruption of the international division of labor. Just as Germans leaders in the 1930s feared that they would need ersatz synthetic substitutes for commodities like gasoline, rubber, textiles, and fats in the event of a war, the decay of America’s manufacturing and mining industries have similarly left it dangerously dependent upon imports from an economy ruled its principal enemy, the Communist Chinese government, for a number of essential high tech goods and metals needed for producing cutting-edge weaponry. It is likely that the Pentagon has been sounding the alarm about this economic risk and that both Harris and Biden’s advisors have been listening. While in public they might politely frame the problem as the Chinese exploiting “overcapacity” or a Chinese failure to adhere to statist international “rules” of trade to advance their industries at the expense of Americans, the truth is that America has an under-capacity problem brought on by decades of welfarism deindustrializing America. 

In his magnum opus, Human Action, Ludwig von Mises called attention to the folly of squandering scarce labor and natural resources on ersatz-oriented central planning, noting that consequences of socialism are just as bad in war as they are in peace. If he were alive today, Mises would undoubtedly urge that the best means for all states to achieve their national security is to spurn starting wars, to incentivize peace by a willingness to curb economic nationalism, and back off of threats of strategic encirclement and first-strike deployments. This would be instead of states trying to hide from economic realities behind trade, currency, and investment barriers, or behind a cloak of central planning delusions.

Short of achieving peace by such means, reindustrialization via private thrift and investment is the only sustainable way to strengthen an economy’s ability to produce war-related goods and to minimize war-related disruptions of supply chains. Any attempt to cannibalize future productivity to pursue short-run victories while maintaining a pretense of capitalism leads, not to a triumphant thousand-year Reich, but rather to what Günter Reimann labeled The Vampire Economy, and ultimately to a catastrophic defeat at the hands of more economically-advanced powers. If the Zwangswirtschaft model takes hold in America, Reimann’s dystopian account of life under such an economy will become a reality here too, though with streets adorned with rainbow flags instead of swastikas.

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