… is from page 87 of the 1992 Transaction Publishers edition of Wilhelm Röpke’s 1946 book, The Social Crisis of Our Time:
There always exists a definite, more or less fixed relationship between a political and an economic system which makes it impossible to combine just any political system with just any economic system, and vice versa. Society is always and in all aspects a whole – politically, economically and culturally – and one would indeed have to believe in miracles if one would expect socialism to be an exception. That is precisely the spiritual tragedy of socialism, which anyone could experience who was its adherent at one time or other and which does not cease to torment every intelligent and upright socialist: the tragedy of a movement which suffers from an incurable contradiction, want to complete man’s liberation – initiated by liberalism and democrats – by radical means, it is forced to turn the state into a Leviathan. Socialism can be nothing but destructive of freedom in the widest sense of the word. It wants to crown the work of emancipation, yet can result in nothing but the most abject subjugation of the individual.
DBx: Yes. And although industrial policy isn’t full-on socialism and, hence, won’t subject the individual to as much arbitrary state power as would full-on socialism, because at the heart of industrial policy is the power of government officials to dictate resource allocation, industrial policy shrinks the domain of private property rights as it expands the domain of discretionary power. Exposure to arbitrary state power necessarily grows more and more as the scope of industrial policy expands.
Advocates of industrial policy, no less than advocates of full-on socialism, suppose that the state discretion that they champion poses no serious threat to freedom and democracy if the holders of that state power are democratically elected. This supposition, however, is fatally mistaken. Forget public-choice considerations (which, in practice, always operate). Forget also that coercion exercised by 51 percent of the people over 49 percent of the people is nevertheless coercion, which hardly seems gloriously justified and deserving of a strong presumption of being wise if it’s true that coercion exercised by 49 percent of the people over 51 percent of the people is a grotesque offense against humanity and presumed to launch a course of action terribly ill-advised.
Instead, recognize that no industrial-policy plan can allow itself to be constantly subject to majoritarian rule. If today’s plan to reallocate resources in a particular way – say, to revive manufacturing employment in rust-belt states – can be overturned in two- or four-years’ time by the results of the next election, proponents of that plan correctly understand that it won’t have sufficient time to be implemented and to work. The plan must be made immune to the results of future elections – and, of course, immune also to court rulings that uphold private property rights against state efforts to override or circumvent them, otherwise the industrial-policy plan is no real plan at all. It’s just an arbitrary intervention of those persons who today hold power, an intervention that cannot seriously be sold as part of a genuine plan to alter economic performance in a particular, steady direction over the long-run.
Industrial policy is incompatible with freedom, for its ‘success’ demands that government officials have a great degree of unchecked power to allocate resources by diktat.
Pictured above is Wilhelm Röpke (1899-1966).