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Austrian Economics and the Political Economy of Freedom

Richard M. Ebeling

Richard Ebeling’s insightful and highly readable book explains and applies the ideas of the Austrian economists to a wide range of contemporary public policy issues. He combines intellectual political–economic history with the modern Austrian theory of the market process to challenge the premises and uses of mainstream neoclassical economics.
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Chapter 7: The Political Myths and Economic Realities of the Welfare State

Richard M. Ebeling


THE ORIGIN OF THE MODERN WELFARE STATE Austrian economist Ludwig von Mises began his 1922 treatise on Socialism with the observation that ‘Socialism is the watchword and the catchword of the day. The socialist idea dominates the modern spirit. The masses approve of it, it expresses the thoughts and the feelings of all; it has set its seal upon our time. When history comes to tell our story it will write above the chapter, “The Epoch of Socialism”.’1 It may seem that the socialist epoch has now come to a close. Nothing is in greater disrepute at the present time than the idea of government ownership of the means of production and the theory of comprehensive central planning. The material and spiritual destructiveness of the socialist ideal is too visible in Eastern Europe and the former Soviet Union for anyone seriously to propose a return to the total state as it was experienced in the 20th century, either in its fascist or its communist variation. Maybe the 21st century will see the renewal of its appeal under some new ideological garb. The appeal of Utopia, unfortunately, seems indestructible.2 But for now, utopian collectivism is in hiatus. However, the ghost of socialism past still haunts the present. That ghost of socialism past is the modern welfare state. Even in the face of the failure of Soviet-style socialism, the ideas that were the foundations upon which the Marxian scourge came to plague the globe still dominate and guide the thinking of...

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