Last week we asked what an economy is and what it is for, and we looked at various economic forms, centered around the common themes of free markets, managed capitalism, and non-Marxist forms of what are often called ‘socialism.’
If you have not already read the first half of this article, I suggest you do.
This week we will pick up where we left off, to look at Marxist style socialism (aka ‘Communism’), Fascism, Corporatism, and various fringe systems. As with last week, we will group similar systems together to compare and contrast them.
We will use the same criteria as last week, to determine what each system really is in terms of what it demands of people, and how it actually functions when exposed to real human nature. That criteria includes:
- Foundational Nature: Is it actually economic in purpose, or something else: political, religious, moral, or aesthetic?
- Human Compatibility: Does it align with what people are actually like, or does it demand perfection or obedience?
- Power and Control: Does it rely on voluntary interaction, or does it require coercion to function?
- Knowledge and Calculation: Does it work with dispersed knowledge and local information, or does it presume centralized omniscience?
- Production and Resource Use: Does it incentivize productivity and efficient use of resources, or does it generate waste and scarcity?
- Debt, Time, and Sustainability: Does it respect time, capital, and intergenerational stability, or does it borrow from the future to buy illusion in the present?
Marxism and Communism
Marxism is not an economic system at all so much as a philosophy of resentment, wearing economic clothing. Marxism inverts moral and economic truths.
Karl Marx had little interest in how goods were produced or how value was created. Like Keynes, he was not even an economist, and was not trying to put together a functional economic system so much as he was trying to rewire the world into a purely philosophical utopia.
To understand Marx, we have to understand a little about his motivations. I’ve written in the past on how Karl Marx appealed to the very worst of human impulses, and wrote very openly on that. I encourage you to read that earlier piece. Marx’ poetry in particular is disturbing.
Marx’ popularity stems from his critique of capitalism. The problems he brings up are real, but that does not mean Marx can, or does, solve them. Scarcity will always exist no matter what economic system is in place, as will the failings inherent to human nature. Marx brings up those failings and then compares free markets to a magical utopia, rather than to other systems that can exist in the real world.
Marx viewed production as a form of theft in which the laborer is alienated from the fruits of his work by the capitalist class. His entire focus was on class, power, and redistribution.
The Marxist worldview sees all history as class struggle. Economics becomes a means of analysis rather than coordination. Marx rejected the price system entirely as an evil tool of control.
Marxism assumes that what is produced today can still be produced in the future, independently of incentives. It then seeks to abolish private property, eliminate markets, and redistribute all capital under central control, in the hope of ushering in a stateless, classless utopia, where everyone works according to ability, and receives according to need.
To get there, Marxism requires violence. Lenin knew this, and so did Mao. The state must seize the means of production, and must crush all dissent. Enemies of the revolution must be re-educated, imprisoned, or killed, and as with all such visions, the supposed utopia is always just one more purge away.
Marxism treats people like farm animals, feeding them enough to survive while requiring that they work without any hope of personal gain, such gain being seen as theft. Marxism’s greatest trick was to masquerade as scientific. It is not. It is a secular religion, and as of yet nobody has been able to kill enough people to end greed and bring in the utopia. The Dictatorship of the Proletariat never ends, and it is thus the Dictatorship of the Proletariat we will use for our analysis.
Here is how Marxism and Communism stack up against our criteria:
- Foundational Nature:
Marxism is not primarily an economic system but a philosophical and political doctrine that uses economic language to advance a vision of class struggle and eventual utopia. It treats economics as a battlefield rather than a coordinating mechanism. Production, exchange, and value are secondary concerns; the primary objective is to overthrow existing hierarchies and redistribute power. - Human Compatibility:
Communism assumes a post-capitalist “new man” who will work according to ability and take according to need. It presumes that envy can be transformed into altruism once property is abolished, and that ambition will persist even when all rewards are removed. This view is fundamentally at odds with human nature as observed in every culture and epoch. In practice, the absence of personal gain leads to stagnation, corruption, and repression rather than to universal cooperation. - Power and Control:
Marxism cannot be implemented without coercion. To seize the means of production and eliminate private property, a revolutionary state must use force. Once in power, it must suppress dissent, as any alternative arrangement undermines the plan. Lenin, Stalin, Mao, Pol Pot, and others all recognized that violence and fear were not unfortunate by-products, but essential tools of Marxist rule. The system therefore requires a permanent apparatus of control: secret police, informants, censorship, and forced labor. - Knowledge and Calculation:
By abolishing private ownership and market prices, Marxism eliminates the information signals necessary for rational planning. Central committees must guess at needs and resources, issuing quotas and targets without feedback. Shortages and surpluses become endemic, innovation collapses, and corruption thrives. - Production and Resource Use:
Because rewards are disconnected from effort, productivity falls. Managers falsify reports to meet quotas. Workers do the minimum required. Scarce resources are wasted on politically favored projects. Over time, living standards decline even for basic goods. The system produces poverty and scarcity by destroying the incentives and feedback loops that drive improvement. Its only advantage is the ability to mobilize vast labor quickly for state priorities, such as military buildups, and even this is done through coercion. - Debt, Time, and Sustainability:
Marxism promises a stateless, classless future but never gets beyond the dictatorship required to create it. It consumes capital built up under previous systems, and once that capital is gone, it has nothing to replace it. It cannot generate the surplus needed for long-term stability as it must suppress initiative and free exchange. Each attempt collapses either into stagnation and bankruptcy or into a brutal reversion to more market-like arrangements to survive.
Fascism and Corporatism
Fascism emerged not as a rejection of Marxism, but as a correction to its failures. Where Marxism destroyed production, Fascism sought to preserve it, under state control.
Fascism retained private ownership (on paper), but subordinated it to the political needs of the regime. Firms could only operate at the pleasure of the state, and though markets existed, they were managed entirely from above.
Fascism is very similar to State-Managed Capitalism, which we covered last week, in the first half of this article. The differences are that Fascism has a political component to it in which a dictator acts as a kind of living embodiment of the people, and in that Fascism is an extreme form of State-Managed Capitalism. From an economic perspective, it is simply a question of degree.
Fascist economics rejects both laissez-faire liberalism and Marxist collectivism, replacing class struggle with national unity. The state becomes the embodiment of the people, and the economy is used as an engine to drive the state’s imperial or ideological goals.
Unlike Marxism, Fascism does produce, at least for a time, but it is overtly coercive, crushing dissent and using economic policy as a tool for obedience. It assumes the state knows best, and its economy functions through fear. People are still treated like farm animals, just with creature comforts replacing gulags.
Where Fascism places corporations at the service of the state, corporatism reverses the direction of power, using the state in support of corporate interests. It is not a formal ideology so much as a corrupt arrangement.
In a corporatist system, the largest firms partner with government to capture regulators, lobby for favorable laws, force consumers to purchase their products, and shape public policy for their own interests.
If you assume that the group with actual power is the actual government, then Corporatism and Fascism are effectively the same thing. Fascism is just more honest about who is in charge.
This is the system that exists, at least in part, in much of the modern West. Large banks write the rules for banking oversight, while Big Tech influences censorship policy to shape election results. Defense contractors live off government contracts, while firms rotate executives in and out of the federal agencies supposedly tasked with keeping them in line.
Corporatism does not abolish markets. It mimics and rigs them. The modern corporatist state is not free market, even if it uses free market language, but a private cartel designed to prevent risk, while shielding those at the top from market consequences.
Like Fascism, Corporatism is very similar to State-Managed Capitalism. The difference is that under State-Managed Capitalism, we assume the government is trying to work in the public interest.
Let’s look at Fascism and Corporatism across our criteria:
- Foundational Nature:
Fascism and corporatism are political ideologies that masquerade as economic systems. They are deeply nationalist, authoritarian, and often militaristic frameworks that use the economy as an instrument of state power. The economic role of the individual is subordinated to the interests of the nation, and economic entities exist not to create value, but to serve state or corporate ambitions. - Human Compatibility:
Fascism and Corporatism recognize human ambition and self-interest, but instead of liberating them, it redirects them toward state or corporate defined purposes. It encourages competition and achievement within the boundaries of national or ideological loyalty. While it aligns more realistically with human drives than communism does, it does so in a distorted way, weaponizing those drives rather than honoring them. Dissent, diversity of opinion, and individual autonomy are treated as threats to cohesion and must be crushed. - Power and Control:
Fascism and Corporatism require centralized power and a strong authoritarian state, allowing private property and enterprise but only under state supervision. Businesses operate at the pleasure of the regime, or the regime at the pleasure of corporate interests, and industries are often organized into cartels or syndicates. Labor unions are outlawed or absorbed into the state, and the government sets production targets, controls pricing, and ensures that economic activity serves its larger ideological mission. - Knowledge and Calculation:
Like socialism, fascism and Corporatism suffer from the calculation problem, though to a lesser degree. Prices and supply chains still exist in these systems, but they are distorted by political or corporate considerations. Some decentralized information flows through markets, but planning boards and national objectives override efficiency. - Production and Resource Use:
Fascist economies tend to produce short-term bursts of output, especially in heavy industry and military production, due to strict coordination and national mobilization. Corporatism just produces misery. Because profit is not the primary motive under Fascism and state power suppresses dissent, innovation slows, inefficiencies multiply, and corruption takes hold. The same happens under Corporatism, but for different reasons – under Corporatism profit is generally the only motive, but innovation is not needed to get it. In both systems, resources are often wasted on ideological or militaristic projects rather than consumer needs. - Debt, Time, and Sustainability:
Fascist regimes often fund expansion and militarization through debt and fiat currency manipulation. Long-term sustainability is sacrificed for immediate power and control. Because fascism depends on constant motion, whether through conquest, spectacle, or economic stimulation, collapse becomes inevitable once the regime exhausts both capital and credibility. Corporatism is more sustainable, but with no accountability, the corporations eventually push the government to bankrupt itself in pursuit of risk-free profit.
Fringe Systems
Not all systems are driven by power or envy. Some are grounded in moral conviction or religious law, to treat economics as a subordinate function of spiritual truth. These systems do not aim to optimize markets or maximize growth, but to align commerce with virtue.
In Islamic economics, this takes the form of bans on interest (riba), obligatory charitable giving (zakat), and Sharia-compliant financial instruments. Islamic banking is structured to discourage speculation and ensure that lending is tied to real economic activity. There is moral logic behind this, but by prioritizing compliance over efficiency, Islamic systems hamper development. Enforcement depends heavily on cultural unity and theological consensus.
Christian Distributism is a minor but interesting school championed by thinkers like G.K. Chesterton and Hilaire Belloc, seeking to broaden property ownership to make families economically independent.
Distributists distrust both state socialism and corporate monopoly, advocating instead for small businesses, family farms, and local cooperatives. The goal is moral and social stability through widely distributed economic power. It is an honorable vision, but it does not scale well in modern economies where complexity and specialization require highly distributed, often global systems.
Theocratic and moral economies often work at small scale or in tight-knit societies with shared beliefs, but they struggle to compete in a global market. They are not, strictly speaking, economic systems at all. They are moral frameworks that impose constraints on economic behavior.
Whether they are wise or not depends less on their logic and more on their people.
Modern Monetary Theory (MMT) is a recent entrant with growing political appeal. It argues that a country which issues its own currency cannot go bankrupt and can spend as much as it wants as long as there is demand.
Taxes, in this view, are not necessary for revenue, but to remove excess money from the system, keeping inflation under control.
MMT fails nearly every test. It is not truly economic in nature. It is, rather, a theory of state power cloaked in accounting language. It assumes that governments can precisely measure and control inflation in real time, failing the knowledge test, it fails the human compatibility test by treating people as mere data points to be stimulated or subdued, and it fails the sustainability test by encouraging unlimited spending today with only vague promises of discipline tomorrow.
In reality, debt still matters. MMT is nothing but a shell game that looks at taxation, spending, and inflation in reverse order, pretending that the government can do whatever it wants as long as it is willing to inflict enough harm.
Some MMT supporters will say that I just made a straw-man argument against MMT, but that is not the case. What I did was to make a short argument against MMT. If you want to hear a longer one, click here.
Anarchist economics, whether anarcho-communist or anarcho-capitalist, seeks to eliminate coercive institutions entirely. The communists envision a world without money or hierarchy, while the capitalists imagine a world where every service, including defense and law, is privatized. Both visions are, frankly, utopian to the point of fantasy, leading not to utopia, but to warlords.
Not all economic systems are driven by power or envy. Some are grounded in moral conviction or religious law, which treat economics as a subordinate function of spiritual or philosophical truth. These systems do not aim to optimize markets or maximize growth but to align commerce with virtue. Their viability often depends on cultural continuity rather than functional superiority.
Here are these fringe sections against our criteria:
Islamic Economics
- Foundational Nature: Moral-religious, not economic.
- Human Compatibility: Works within highly unified societies, but assumes cultural homogeneity and widespread theological agreement.
- Power and Control: Relies on religious authority and communal enforcement, not state coercion per se, but not voluntary in the classical sense either.
- Knowledge and Calculation: Prioritizes compliance over innovation. Moral rules replace efficiency-based decision-making.
- Production and Resource Use: Discourages speculation and ties finance to real activity, but at the cost of financial innovation and growth.
- Debt, Time, and Sustainability: Prohibits interest, which reduces predatory lending but also limits capital formation.
Islamic systems reflect sincere ethical goals and can promote social stability, but they limit economic dynamism. Their success depends heavily on moral unity and theological consensus, which are difficult to maintain in pluralistic societies.
Christian Distributism
- Foundational Nature: Moral and social in purpose, focused on virtue and family independence.
- Human Compatibility: Aligns well with localism and communal values but assumes a level of civic virtue and small-scale cohesion.
- Power and Control: Opposes both centralized state control and monopolistic corporate power, preferring decentralized, voluntary arrangements.
- Knowledge and Calculation: Struggles with scale and coordination; suitable for village economies but not global systems.
- Production and Resource Use: Idealizes self-sufficiency and small producers, which can lead to inefficiencies and underutilized talent.
- Debt, Time, and Sustainability: Cautious about financialization, but not equipped to handle capital-intensive industries.
Distributism is an honorable vision rooted in a noble moral framework, but it falters under the complexity of modern economic demands. It may offer inspiration, but not a blueprint.
Modern Monetary Theory (MMT)
- Foundational Nature: Political, not economic.
- Human Compatibility: Treats people as economic levers to be pushed or pulled, not as agents of free will.
- Power and Control: Concentrates immense control in the hands of central planners and bureaucrats.
- Knowledge and Calculation: Assumes real-time knowledge of inflation, productivity, and market dynamics that no human institution possesses.
- Production and Resource Use: Breaks the link between value creation and value exchange, which can lead to moral hazard and stagnation.
- Debt, Time, and Sustainability: Dismisses intergenerational constraints, encouraging present overconsumption with vague notions of future restraint.
MMT is not an economic system at all. It is a political justification for infinite state power, cloaked in technocratic language. It promises prosperity but delivers inflation and dependency.
Anarchist Economics
(Includes Anarcho-Communism and Anarcho-Capitalism)
- Foundational Nature: Ideological—committed to eliminating coercion.
- Human Compatibility: Based on utopian assumptions about human nature: either total cooperation or pure rationality.
- Power and Control: Rejects central authority entirely, assuming order can arise without governance.
- Knowledge and Calculation: Fails to account for the complexity of coordination without pricing mechanisms (in communism) or legal infrastructure (in capitalism).
- Production and Resource Use: Either distributes without incentive or incentivizes without enforceable norms. Both invite collapse.
- Debt, Time, and Sustainability: Cannot manage long-term capital accumulation or stable institutions across generations.
Anarchist systems are not just unrealistic; they are structurally incoherent. Without enforcement, even the most voluntary arrangements break down into chaos. Without markets, even the most communal instincts turn into starvation. In theory, these systems reject coercion; in practice, they guarantee it, by those with the most power and fewest scruples.
Whenever someone says that the first economies were anarchies, remind them that the first government was the guy with the biggest club and the most willingness to use it.
Conclusion
If the first half of this discussion asked what an economy is, the second half forces us to ask what kind of people we must be to sustain one. Freedom is not self-perpetuating. It does not survive simply because we have written constitutions or institutions to defend it. It survives because people choose, again and again, to take responsibility for themselves and to resist the temptation of letting the government take a parental role.
When citizens grow careless, outsourcing judgment to experts, or when they trade responsibility for comfort, liberty erodes. It rarely dies in one dramatic stroke. More often, it decays slowly as individuals abdicate their own agency, piece by piece, until there is little left to defend. The vacuum left by neglected duty is always filled by power, and once power settles in, it seldom leaves willingly.
History offers no shortage of examples. Every age produces theories that promise a better tomorrow through tighter control, whether in the language of equity, security, or progress. These schemes always present themselves as rational, scientific, or inevitable, but they are united by one common feature: the belief that some class of experts, rulers, or committees should manage the lives of others.
The better tomorrow we are promised never comes. No system can compensate for the erosion of personal virtue.
A free economy is not a self-running machine. It is a trust, extended from one citizen to another.
The challenge, then, is not just to defend free markets, or to limit government in the abstract, but to practice the habits that make limited government work.
An economy that treats us like adults also assumes that we will act like adults. It requires us to carry the weight of our own decisions, to live with the consequences of our failures, and to resist the urge to hand those burdens to others. If we fail in that duty, we should not be surprised when others step in to manage us. Power abhors a vacuum.
The real test of any economic system is not whether it can deliver comfort, but whether it can cultivate character. A society that preserves freedom must, by necessity, preserve the virtues that sustain it. That is the responsibility each generation inherits from the last, and it is the responsibility we must now decide, once more, whether or not to keep.
There is no ‘purpose’ to the economy. It is, rather, the sum of all of the purposes of everything everyone in the economy does, and when the people are left free, they can largely do as they wish as long as they do not interfere with the freedoms of others.
The question is not whether freedom works. The question is whether or not we are still willing to work.
Sadly, many of us today fail that test.
