Decades Later, Free Market Economist’s Warnings Go Unheeded In California

December 6, 2019 Updated: December 6, 2019
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News Analysis

In October 1944, Austrian economist Ludwig von Mises was a guest of honor in a gathering of business leaders at The California Club in Los Angeles. Introduced as “the most eminent and uncompromising defender of English liberty and the system of free enterprise,” the economist had already made a name for himself as an ardent critic of socialism.

He was one of the first economists to write that the Soviet system was destined to fall in his 1921 book “Socialism: An Economic and Sociological Analysis.” He had also predicted the great depression, as he saw the problem developing as early as 1924.

However, after fleeing the Nazis and arriving in New York, the Austrian economist found relatively little support among scholars and politicians, his message often obfuscated by colleagues who had a rosy view of socialist policies and who believed that the state was perfectly capable of managing the economy efficiently.

These same economists and policymakers went on to push major changes to American society. And soon enough, California became the leader in this movement and one of the most progressive states in the country, as it embraced many policies and programs inspired by socialist and communist theories.

And 75 years later, the leaders of the economics institute named after Mises recently gathered once again at the California Club, discussing what the prophetic economist would think of California—and America—today.

Government Control, Poverty, and Mass Immigration

California has the nation’s highest poverty rate, according to recent US Census Bureau data. And despite its relatively high wages when compared to other states, California is one of the least-affordable housing markets in the country—a reality that has worsened the housing crisis.

But how did California get here?

Mises used the term “nurseries of socialism” to describe universities in his time, Jeff Deist, the Mises Institute president, told the crowd at the California Club. Looking at California today, the economist would probably be “appalled” to see how this situation worsened considerably, Deist continued, as colleges in both the Golden State and in the rest of the country have developed generations of intellectuals and academics who justify socialism and actually applaud the ideologues who made communism a possibility.

“Today socialists don’t organize in union halls or loading docks,” Deist said, “they organize in university sociology departments.”

Homelessness in California is also among the worst in the nation, as well as the likelihood that homeless people receive treatment for urgent medical or mental health issues. Meanwhile, California’s policies have worsened the issue, according to a recent Mises report.

“High taxes are a burden on the middle and lower-middle classes. Regulations make it harder to start and sustain a business,” states the report.

However, instead of focusing on the working class, today’s socialists have “turned to ‘woke’ intersectional academics as the vanguard,” said Deist.

“[Mises] would especially shake his head at the rising amount of support for socialism among young people, nearly 100 years after he wrote the definitive case against it, and against the backdrop of the 20th century’s collectivist failures [with his book ‘Socialism: An Economic and Sociological Analysis’]. Surely it would be hard for someone who believed so strongly in using arguments instead of bullets to see the West today backsliding politically toward collectivism and bloodshed.”

Deist also added that Mises might have seen recent mass immigration in a negative light. Not because the economist had anything against people of other cultures or nations coming together to trade—quite the contrary.

However, he understood that “ethnic or linguistic minorities” would eventually find a need to “change existing institutions” using the power of the state. And that’s because most countries, including America, aren’t decentralized enough—meaning that some immigrant groups may tend to fight for enough political power to completely change federal policies in the United States.

As explained by Professor Ben Powell of Texas Tech University, Mises believed that states are not liberal in the truest sense of the word. Instead, they are interventionist.

“Once states interfere with economic activity, some people are able to use the state to secure economic gains for themselves at the expense of others living under that same government,” said Powell.

This reality, he added, creates an unsustainable situation.

“Once different nations are living under the same government, they come into conflict with each or, as Mises put it, ‘Migrations thus bring members of some nations into the territories of other nations. That gives rise to particularly characteristic conflicts between people.’”

In this sense, Mises would have certainly worried about the future of California—and America—seeing the radical cultural and political change that has dominated American politics in 2019.

But despite this, Deist added, Mises would at least feel somewhat vindicated, seeing that so many more people today know and study his work.

He would also feel optimistic about the eventual win of liberty over socialism, as a growing number of economists and policy makers become better acquainted with his past warnings regarding the dangers of too much government interference in the shape of regulations.