Statism—encompassing both socialism and fascism—can’t work because it fundamentally lacks the ability to calculate.  Socialism, defined as the government owning all property, and fascism, where the government controls property but leaves nominal ownership to individuals, are not entirely distinct.  They exist on the same spectrum, often blending elements of both.  Regardless of the exact form, statism is inherently impossible because it destroys the economic calculation necessary for a functioning society.

Calculation is the backbone of any economy, enabling entrepreneurs to assess profits and losses.  These signals guide decisions: whether to expand production, shift resources, or abandon failing industries.  Such feedback mechanisms depend on true ownership of property, where individuals bear the consequences of their choices.  Without private property, the signals vanish.  Under statism, where the government either owns or controls resources, no one can determine whether an industry is thriving or squandering resources.  The economy operates in the dark.

Markets change constantly, driven by shifting consumer preferences and the availability of resources.  These changes require continuous adaptation.  A private property owner adjusts quickly, seeking to meet consumer demands and avoid losses.  The government can’t react with the same agility.  Bureaucracies are rigid, constrained by political agendas and insulated from the consequences of their actions.  No central plan, no matter how sophisticated, can match the dynamism of decentralized decision-making in a free market.

Statism’s rigidity creates a deeper problem: stagnation.  Even if a government could somehow freeze economic values to maintain control, this would halt innovation.  Technological progress depends on flexibility—the ability to reallocate resources to more efficient uses.  Without profits and losses to guide this process, industries stagnate, and societies fall behind.

At its core, statism also clashes with human nature.  Humans are not chess pieces to be moved by central planners.  They are dynamic, purposeful actors, responding to incentives and making choices based on their own goals and values.  In a free market, entrepreneurs must earn money by convincing consumers of the value of their goods and services.  In a statist system, the state simply takes resources through coercion.  This approach severs the connection between production and consumer satisfaction, misallocating resources and funding ventures that would never survive in a competitive market.

Proponents of statism often deflect criticism by shifting definitions.  When faced with historical failures, they claim, “That wasn’t real socialism.” But the underlying flaw remains: no form of statism can calculate.  It is not a question of leadership or implementation.  The problem is structural and unavoidable.  Economic laws can’t be bypassed by decree.

Human action and the laws of the market are inescapable.  Statism denies these realities and, in doing so, ensures its own failure.  The verdict is clear: no matter the name or form, statism is doomed.

Reference

Ludwig von Mises; Human Action