The Economic Fallacies Underpinning Hitler’s Disastrous Views

Ludwig von Mises wrote:

“It is ideas that group men into fighting factions, that press the weapons into their hands, and that determine against whom and for whom the weapons shall be used. It is they alone, and not arms, that, in the last analysis, turn the scales.”

Regardless of all the suffering men like Hitler, Stalin, and Mao caused, it is vitally important to understand that they were fellow humans, like any others, who absorbed a complex set of ideas that led them to act the way they did. Although we no longer see people as being possessed by evil spirits, or heretics to be tortured or burned at the stake, many people still see these men as non-humans, maniacal creations that just commit “irrational evil,” thus overlooking what really matters—the ideas they held. Therefore, we understandably keep repeating the same fallacies and their consequences. Let us briefly try to understand some of the actual fallacies which led to Hitler’s disastrous views and actions.

Let’s begin by briefly summarizing how the modern socioeconomic order has arisen during the last 300 years, and the vital role that increasing freedom and “economic competition” played. For this, I quote a previous article, “How Austrian Economists Repeatedly Saved Civilization”:

“Until the late 1700s, most people lived in small, nearly self-sufficient farming towns. As technology improved (engines and factories) the rate at which mankind could transform raw materials into wealth was rapidly increasing in cities. A growing class of businessmen-entrepreneurs-capitalists were constantly innovating and due to people’s ‘freedom to trade’ their private property only for things they deemed superior alternatives, entrepreneurs also had to copy the innovations of competitors thus inadvertently creating and spreading superior information, turning cities and eventually the entire planet into supercomputers that were constantly reordering mankind in increasingly productive and technologically advanced states.

Competition between increasingly wealthy and productive factories and entrepreneurs motivated them to pay increasing amounts of wealth for labor relative to what people could earn in farms causing people to move to cities, quickly leading to massively complex metropolises and steadily increasing living standards for everyone.

These changes—what we could refer to as the emergence or evolution of modern capitalism—were not the deliberate design of people, they were, as Carl Menger writes: ‘the unintended result of individual human efforts (pursuing individual interests) without a common will directed toward their establishment,’ or, in the words of Adam Ferguson: ‘indeed the result of human action, but not the execution of any human design.’

Since these changes were unintended, their benefits were not widely understood. Ignorance of how competing private sector companies were the creators and spreaders of superior information and subsequent social order led to some common errors. Erroneously and resentfully seeing the growing fortunes of some entrepreneurs and investors as exploitation of laborers—among numerous other fallacies led to the rapid spread of a new erroneous ideology-mythology—socialism.

Misguided ideologues and resentful masses increasingly thought that private companies led to unfair differences in wealth and exploitation, and that abolishing them or having them managed by a competition-immune coercive bureaucracy of experts, in other words, the state or government or the ‘public sector’ would be better for society. Naive intellectuals would describe these increasingly popular fallacies-myths in a manner that was bound to go viral and that is what sort of happened with Karl Marx and his bite-sized ‘Communist Manifesto’ where he famously writes: ‘the theory of the Communists may be summed up in the single sentence: Abolition of private property.'”

Hitler was one of those “misguided ideologues” who did not understand the vital role freedom and emerging private sector businesses and their competition played in both, generating and spreading superior information, as well as using profit-loss calculation to ensure they were ordering society in a manner where more wealth (sales revenue) was produced, than consumed (costs), thus being a profitable wealth-increasing order. This, of course, made Hitler a socialist, a National Socialist (Nazi). These economic fallacies he shared with other leading socialist-minded figures of his time like Mussolini, Stalin, and FDR.

The Soviet competition-immune bureaucracy owned and generated all the information that attempted to order production. The Nazis allowed private ownership in name, but, as Mises explains in his treatise Human Action,

“[…] in all their activities they are bound to obey unconditionally the orders issued by the government’s supreme office of production management […]. This is socialism under the outward guise of the terminology of capitalism. Some labels of the capitalistic market economy are retained, but they signify something entirely different from what they mean in the market economy.”

Thus, as with the Soviets, all information needed to coordinate and order production emerged and was coerced from a competition-immune bureaucracy, leading to—per Mises—Planned Chaos.

Hitler, being a man of his time—like other major racists like Churchill and Roosevelt—also fooled himself into believing that race or tiny biological differences within humans were a vital factor for socioeconomic prosperity. It was culture-software, the above-summarized emergence of capitalism and related social institutions like private property, money, finance-banking, the rule of law, etc., not “hardware” (blue eyes, white skin, etc.), which was the main factor in the rapid relative socioeconomic advancement Europeans had enjoyed paving the way for their misguided imperialism of the time. The cultural—not biological—evolutionary process which has created capitalism is much, much faster than the slow genetic biological evolution, thus rendering slight genetic differences between races and populations largely irrelevant. As Hayek writes:

“[…] biological evolution would have been far too slow to alter or replace man’s innate responses in the course of the ten or twenty thousand years during which civilisation has developed. […] Thus it hardly seems possible that civilisation and culture are genetically determined and transmitted. They have to be learnt by all alike through tradition.”

As numerous great free-market thinkers like Mises, Robert Higgs, and Ralph Raico have shown, during the last couple thousand years different groups of people, in widely dispersed locations like the Middle East, Asia, and Europe, traded the sort of title for most socioeconomically-advanced places. Mises makes this point and criticizes people who erroneously focus on race:

“But it is by all means an unsatisfactory answer to say that a genius owes his greatness to his ancestry or to his race. The question is precisely why such a man differs from his brothers and from the other members of his race.

It is a little bit less faulty to attribute the great achievements of the white race to racial superiority. Yet this is no more than a vague hypothesis which is at variance with the fact that the early foundations of civilization were laid by peoples of other races. We cannot know whether or not at a later date other races will supplant Western civilization.”

Hiter’s anti-Jewish fallacies significantly grew from misinterpreting inadvertent Jewish overrepresentation in the horrific Bolshevik revolution and resulting Soviet Communist calamity, with some deliberate malicious plot masterminded by Jews and/or tied to their “race.” Jewish author, Yuri Slezkine, writes in his excellent book The Jewish Century:

“At the First All-Russian Congress of Soviets in June 1917, at least 31 percent of Bolshevik delegates (and 37 percent of Unified Social Democrats) were Jews.”

Jews—at least in Lenin’s Russia—were, on average, better educated, thus inadvertently rising to the top of the disastrous ideological bureaucracy, which required the better-educated to coerce the rest. Lenin mentions how:

“Jewish intelligentsia members in the Russian cities was of great importance to the revolution […]. It was only thanks to this pool of a rational and literate labor force that we succeeded in taking over the state apparatus.”

Unfortunately, ethnic Jews were also over-represented in the tyrannical Soviet secret police. Slezkine again:

“In 1923, at the time of the creation of the OGPU (the Cheka’s successor), Jews made up 15.5 percent of all ‘leading’ officials and 50 percent of the top brass (4 out of 8 members of the Collegium’s Secretariat). ‘Socially alien’ Jews were well represented among Cheka-OGPU prisoners, too, but Leonard Schapiro is probably justified in generalizing (especially about the territory of the former Pale) that ‘anyone who had the misfortune to fall into the hands of the Cheka stood a very good chance of finding himself confronted with and possibly shot by a Jewish investigator.'”

In just 13 years—from 1927-1940—the Soviet secret police destroyed 29,084 Christian Orthodox Churches, leaving less than 500, while killing an estimated 80,000-100,000 priests. This erroneously made it seem to naïve thinkers like Hitler—and sadly many to this day—that “the Jews” were purposely annihilating Christianity due to sheer malice instead of just being over-represented in a disastrous ideology.

Bottom line, per Mises:

“We must substitute better ideas for wrong ideas.”