Private property rights and the dangers of liberal socialism

by Roland Fritz “A society that chooses between capitalism and […]

House in Open Hands

by Roland Fritz

A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings.” (Ludwig von Mises)

In his recent, yet unpublished paper (titled “Socialism is dead, long live socialism”), the Texas A&M University’s economist Svetozar Pejovich argues that large parts of the Western world, and especially so Europe,  are on the decline to what he calls “liberal socialism”.

According to Pejovich liberal socialism can be defined as to be “evolving from within social democracies in western Europe via free and democratic elections” (Pejovich, Socialism is dead, long live socialism, p. 5) and as accepting private property rights, at least to certain extend. Professor Pejovich sees support for liberal socialism coming from a variety of different institutions and political organizations: Democratic parties, labor unions, environmentalists, the European Union and organizations like the OECD all have certain interests in promoting and institutionalizing liberal socialism. All these organizations on the whole promote practices like excessive taxation, heavy regulation and equalization of human lives in order to build fairer and more equal societies. If these goals can actually be reached by using those measures is – of course – open to debate. Professor Pejovich writes: “Equality of opportunity in capitalism may be a dream yet to be attained, but it is certainly not more of a dream than the equality of outcome in socialism.” (Pejovich, page 7 of “Socialism is dead, Long live socialism”)

However, the promotion of this new form of collectivism is all but easy. Proponents need to reconcile the socialist idea of governmental control of economic activities with the respect of private property rights, which is of course a very tricky thing to do. Professor Pejovich argues that the insidiously progressing attenuation of property rights is the way that has been chosen to solve this contradiction.

One could use the old anecdote of how to properly boil a frog: Thrown into already boiling water most frogs will panic and jump out of the sauce pan again, frogs put into cold water that is then gradually heated however usually will not perceive the danger and be cooked to death. Things are very similar with property rights nowadays.
Mr. Pejovich’s explanations are of critical importance, also for Austria. On September 10th the Property Rights Alliance published the 2013 International Property Rights Index( IPRI), which measures the acceptance of physical and intellectual property rights as well as the stability of the legal and political environment in 130 countries. Austria again occupies the supposedly good 12th rank, just like in 2012. That result might be very deceptive though, because it hides the fact that the overall score of the acceptance of property rights in Austria has been going down very dramatically. In 2009 Austria’s score on the Property Rights Index was 8.4 out of 10, in 2013 it is at 7.8, which hints at a pretty severe deterioration of the acceptance of property rights.

Yet this worsening is not really noticed by many citizens, just like the story of the frog that’s being cooked would predict. Professor Pejovich concludes that the emerging liberal socialism in Europe is much more seductive and attractive to people than “normal” socialism has ever been. He writes: “It is bribing people to accept voluntarily the erosion in private property rights and free markets.” (Pejovich, p. 19) Looking at the data of the IPRI for Austria and considering the fact that nobody really seems to care about this downfall, one can certainly see that he is right. The transition from social democracies to liberal socialism might just be underway in this minute. It will be completed “when the median voter becomes addicted to and ceases to question the cost of the ‘stuff’ handed down by the state”, writes Professor Pejovich. Ever increasing redistribution and progressing regulations will inevitably erode the acceptance of private property rights, without which no market economy can continue to survive.
These are dark prospects for the future of Europe. Liberal socialism would certainly be unable to fulfill people’s material needs as good as the market economy does. And it is also to be expected that liberal socialism, despite its glorious name and nice rhetoric, would hollow out political and civil rights. In other words, it is not compatible with the ideal of a free and prosperous society.

Is all hope lost then? Are we doomed to get boiled by socialism like frogs without even noticing until it is too late? One need not think like that! Like Edmund Burke wrote: “The triumph of socialism depends on free men doing nothing.” But if socialism has to rely on people not doing anything, then it can be pushed back by doing something against it. The realization of the problem certainly is the first step in the right direction. That is why the work of both Professor Pejovich and the IPRI is so important: they hint at the problem and allow us to take arms against them.

 2013 International Property Rights Index (IPRI),

Here you can find a provisional version of Professor Pejovich’s paper

Profressor Pejovich’s website


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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