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Introduction 1. The Problem

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We call capitalism or market economy that form of social cooperation which is based on private ownership of the means of production.

Socialism, communism, or planned economy, on the other hand, is the form of social cooperation which is based on public ownership of the means of production. The terms state capitalism and authoritarian economy have essentially the same meaning.

It is frequently asserted that a third form of social cooperation is feasible as a permanent form of economic organization, namely a system of private ownership of the means of production in which the government intervenes, by orders and prohibitions, in the exercise of ownership. This third system is called interventionism. All governments which do not openly profess socialism tend to be interventionist nowadays, and all political parties recommend at least some degree of interventionism.1 It is claimed that this system of interventionism is as far from socialism as it is from capitalism, that as a third solution to the social problem it stands midway between the two systems, and that while retaining the advantages of both it avoids the disadvantages inherent in both.

In this study the question will be analyzed whether we are justified in considering interventionism as a possible and viable system of social cooperation. We shall attempt to answer the question whether interventionism is able to accomplish what its advocates expect, and whether, perhaps, it does not produce consequences diametrically opposed to those sought by its application.

Such an analysis has more than merely academic value. With the exception of the two socialist countries of Soviet Russia and Nazi Germany, interventionism is today throughout the world the prevailing economic system. Therefore, an understanding of interventionism and its inevitable consequences is an essential prerequisite for a comprehension of present-day economic problems.

We intend in this analysis to refrain from value judgments. Consequently we do not ask whether interventionism is good or bad, moral or immoral, to be commended or condemned. We merely ask from the standpoint of those who want to put it into operation whether it serves or frustrates their intentions. In other words, does its application attain the ends sought?

In order to answer these questions we have first to clarify the meaning of the terms of capitalism, socialism, government, and intervention.

Interventionism

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