The difference between the traditional and the modern socialist corresponds to the distinction that Ludwig von Mises discerningly made between socialism and State intervention in the free market. The traditional socialists, of direct Marxist inspiration, have almost disappeared today, as one socialist experiment after another failed during the 20th century as well as in our times. No one calling himself a socialist or a "progressive" today believes that the State’s ownership of the means of production is the best way to organize society. No modern socialist or "leftist" condones the socialist State’s typical political oppression and economic suffocation of society.
But the modern socialist still turns a blind eye to the overwhelming evidence showing that the free market is the greatest creator of wealth in history, even when it is hobbled by State intervention. She/he still refuses to accept that billions of people have been brought out of poverty by capitalism - though a hampered version of it - and that hundreds of millions of people have joined the middle class thanks to the liberalization of international trade and the opening up of large swaths of developing economies.
The modern socialist is therefore a paradoxical creature; he both accepts and rejects the free market. To believe in free markets in some cases but not in others is an ambiguous ideological position; one that seems intellectually untenable and that at least ought to be defended. But modern socialists generally do not address directly this intellectual incoherence. Rather, they usually claim that the free market works to some extent, and that it must be limited and controlled. They are convinced that the State must play a fundamental role in society, to protect the "workers" against "unbridled" capitalism that will otherwise not only continue to oppress them, but even destroy civilization itself.
Modern socialists include leftists and progressives, but also mainstream social democrats and standard liberal elites, as well as many right-wingers, and those conservatives who have abandoned classic liberalism in order to adapt to the times. They represent a very large and heterogeneous majority of the population, but they have one thing in the common: their trust in the State. Following Mises’ dichotomy above, modern socialists can thus also be called "statists". As the name implies, statists believe that the State should intervene in the market to correct its many perceived excesses and provide a regulatory framework without which, they are convinced, it would run amok. Large areas of the economy (like education or healthcare) should be brought under State control, if they aren’t already. The sectors that can be left in private hands must, in their view, nevertheless be regulated by the State and protected, if needed, by subsidies, tariffs, and other kinds of wealth transfers. Statists often believe, though they might not always admit it openly, that "inappropriate" social and cultural values, such as consumerism or conservatism, be choked by the State.
The popularity of such ideas has had very serious economic, political and social consequences over the last decades. Most statists mean well, but they have been inculcated with an ideology that is based on erroneous convictions, misunderstandings, and frankly, ignorance. Perhaps the most fundamental mistake that statists make is how they define "capitalism". What they call "capitalism" is really "State capitalism". This is capitalism as corporatism, with its inevitable cronyism, artificial monopolies, vested interests and regulatory capture, which libertarians have long criticized as the inevitable outcome when the State gets involved in the economic life of society. In other words, what many confused statists think is "unfettered" capitalism, is actually free market capitalism that is fettered to the State. They confuse cause and effect, since it is their statist ideas that in the first place have created the political and economic conditions that they now criticize. Put in another way, they are convinced that the State must intervene in society to correct problems for which it is largely itself responsible.
Most statists are not aware of this contradiction, nor the nefarious consequences of their political beliefs. This is inevitable since they haven’t learned how the unhampered market economy works and the myriad ways in which State intervention distorts it. They are simply followers of the modern socialist ideas and "progressive" values that they have received from their schools and universities, from the media, and often unwittingly, from family and friends. The overwhelming majority of the population has unfortunately never been introduced to libertarianism, and therefore do not have the conceptual tools to understand why this statist conventional wisdom is wrong.
There is thus a screaming need for a different kind of education – a libertarian education. It is the education in the economic and political pillars of libertarianism; respectively, Austrian Economics and Natural Law. It might seem presumptuous, and even condescending, to suggest that modern socialists need to be educated. It would indeed seem presumptuous to propose an alternative education to the majority if modern society were free, peaceful, harmonious and affluent. But this is not the case, as most statists immediately acknowledge. Further, libertarians are humbled by the fact that most of them were themselves statists, before they also received the same education in liberty. Incidentally, this is why libertarians understand statists so well, while the reverse is almost never the case.
When setting the curriculum for this libertarian education, the distinction between traditional and modern socialists is relevant. Since modern socialists interpret and express "socialism" differently compared to traditional socialists, the education needed to convince statists of the foolishness of their political and economic ideas cannot be the same as the one used in the past. Traditional socialists needed to be educated first and foremost in the disastrous consequences of central planning, the definition of freedom, and the essential role of prices in society. This is why they needed to understand Böhm-Bawerk’s early critique of Marxism, Mises’ critique of socialist economic calculation, Hayek’s warning against collectivism and his theory of the use of knowledge in society.
That education, though still important, is not as essential as it used to be, since modern socialists have already implicitly learned these lessons. They realize that Marx’s theory of surplus value is flawed, that a centrally planned economy and the attempt to abolish private property will eventually lead to the collapse of society. What statist do need to be educated about are the causes and consequences of the State’s intervention in a free society. The education of the modern socialist should thus include such key concepts as the Cantillon effect of inflation, Say’s Law of production, Bastiat’s broken window fallacy, Rothbard’s analysis of the State, and Hoppe’s critique of taxation.
These libertarian concepts are essential to understanding why a highly regulated and tax-financed State capitalist society becomes unsustainable and unstable over the long term, inevitably embarking on an economic, political and cultural decline. A libertarian education is essential for reversing this trend, by teaching the younger generations that modern socialism is inherently decadent, as individual savings decrease, family values weaken, personal responsibility evaporates, rent seekers multiply, and trust in politicians plummet. All of these outcomes are predictable consequences of modern socialism.
The moral and financial bankruptcy of the current political and economic system, and with it the nagging feeling that this system has now come to the end of the road, can make many statists receptive to the answers that libertarianism provides. The education of the modern socialist should also be a simpler task than converting a traditional socialist to libertarianism. The latter often had a solid ideological framework based on the writings of Hegel, Marx, Engels and Lenin. But most modern socialists have never read these authors and are at best only vaguely familiar with their ideas, however erroneous. Statists have no real ideology to speak of; their political beliefs are usually based more on emotions than principles. A typical example is when the mandatory payment of taxes is smugly construed as an act of "solidarity".
The libertarian education of the modern socialist must therefore also include morality. Statists need to become convinced that adopting libertarianism will turn them into better people. If they embark on this education with an open mind, if they take the time to truly understand the political and economic insights of libertarianism, they will find that free market capitalism, properly understood, leads to most peaceful, stable and just society.
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