How the Constitution Enabled Socialism and Fascism in America

Column by Scott Lazarowitz.

Exclusive to STR 

Even though Barack Obama is still president, the conservatives are already suffering from Obama Derangement Syndrome, as they constantly label Obama a “socialist,” just as the left continue to label George W. Bush a “fascist.” This is strange, given that Bush is also a socialist and Obama is also a fascist. Go figure.
But the more I have thought about these issues, the more I have realized there is not much difference between socialism and fascism. And with essentially total government control over every aspect of our daily lives, while America is presumably a “capitalist” society, it is really more communist than capitalist.
Now, “capitalism” didn’t originally refer to free markets and voluntary trade and commerce, as The Freeman editor Sheldon Richman has noted. And both socialism and fascism involve a nasty relationship between the State and the society’s wealth, property and the means of production. One refers to State or “public” ownership of property, wealth and the means of production (socialism), and one refers to State control of property, wealth and the means of production (fascism).
When you get right down to it, there is no actual private ownership of something without the right to control what is privately owned, and the right to be free from outside intrusions against that which is privately owned. Such intrusions used to be called “theft” and “trespass.” In other words, without 100% authority and sovereignty over their businesses and property, and under the Rule of Law that forbids such theft or trespassing – including by agents of the State – owners don’t really own their businesses and property. 
As Richman has pointed out, we have never really had any kind of “free market capitalism” in America that would include genuine private property ownership and control. But the “capitalism” that we have had since America’s founding has been State capitalism, the enmeshment between private businesses and the State. (“Crony capitalism” and “corporatism” are different terms, with aspects very similar to, if not the same as, State capitalism.)
But I see America’s State capitalism as consisting of two parts: socialism and fascism. The fascism is in which private ownership of wealth and property exists (at least in theory) but the State really has the final word on how the people may or may not use or trade such wealth or property. And the socialism is through the State’s claiming ownership of private wealth through seizure (taxation) for redistribution, either directly with welfare programs or indirectly through protectionism or regulatory measures on behalf of the corporate special interests of those currently in power, which is actually a good way to describe fascism: indirect redistribution of wealth via State compulsion. 
The moral decay that is so pervasive in America is a direct result of the State capitalism, socialism and fascism that have been institutionalized throughout our society. When one institutionalizes theft and trespass, and allows one segment of society – the agents of the State – to be above the law, one has institutionalized immorality and criminality.
So how is the current system different from communism, which is total State ownership and control of the means of production (including the people)? Can we ever get America to be the principled, morally sound society of freedom under the Rule of Law that the Founders envisioned?
Congressman Ron Paul has been emphasizing, especially in a recent C-Span interview, the “moral hazard” of various federal government intrusions. Dr. Paul speaks mainly of the moral hazard of central economic planning through the Federal Reserve’s control over our monetary system, the dollar, which Americans are compelled by law to use for trade and commerce, as well as the moral hazard of the Fed’s inflationary policies. But he has also discussed the moral hazard of government’s entitlement programs such as the nearly bankrupt and bankrupting Medicare, and now ObamaCare, and the irresponsibility underlying Keynesian economic policies of deficit spending and debts.
Many critics of ObamaCare, a recent moral hazard to come out of Washington, have labeled such policies as “socialized medicine.” But in reality, while it is socialistically funded through redistribution of wealth schemes, ObamaCare is essentially a fascist scheme, in which medical and insurance providers remain privately owned, but much of their control is seized by the State. In the case of ObamaCare, as with previous socialist/fascist intrusions by the State into Americans’ private medical and economic matters, the State capitalism aspect is the revolving door between private medical and drug company executives and some of their board of director members, and federal government agencies such as HHS, FDA, etc. The wheeling and dealing between these companies’ lobbyists and powerful members of Congress is one big example of the moral decay that State capitalism, socialism and fascism have wrought.
But how did such immoral schemes actually develop in America?
Since America’s founding, the growing centralization of federal power over the states was a major influence, and became an established blueprint for Total Federal Government Rule with President Abe Lincoln. During that time, besides winning his war in which the inhabitants of the South were then compelled through armed force to rejoin association in a federal union to which they did not want to belong, Lincoln further enslaved the people of the South, and the North (and the West), by instituting federal legal tender laws and the National Bank Act. This was despite the Founders’ arguing against paper money and warning that such policies essentially effect in debasing the currency and would cause economic turmoil. With the exception of big government centralist Alexander Hamilton, the Founders opposed central banks as well.
In 1913, President Woodrow Wilson, and his adherents in Congress and their special interest supporters on Wall Street along with the national cartel of Big Banks, wanted to solidify the federal stronghold over the workers and producers’ income and savings. Of course, they didn’t exactly put it in those words, but their new income tax and the creation of the Federal Reserve were to be the two new institutions that would do the job.
Despite the Founders’ warnings against government theft of private property, the income tax was the way to employ coercion and threats of violence against the people and compel them to do extra labor in order to serve the government, and was the collectivists’ way to institutionalize covetousness and fund the dreams of State expansionism of those in power.
The Federal Reserve was the further strengthening of centralized control over the people’s wealth, savings and income well beyond Lincoln’s National Bank Act and legal tender laws. Through the Fed’s compulsory monopolization of currency, new valueless money is printed out of thin air and circulated into the entire economic system, first to the biggest banks, their executives and the politically connected elites, and then eventually to the rest of us (that is, what’s left of it). Fed Chairman Ben Bernanke’s quantitative easing is a perfect example of that.
The Federal Reserve is essentially fascist, in that its compulsory powers control the people’s allegedly privately-owned wealth, but it is also a socialist redistribution of wealth scheme. As Murray Rothbard put it, well before Bernanke’s QE:
“New money injected into the economy has an inevitable ripple effect; early receivers of the new money spend more and bid up prices, while later receivers or those on fixed incomes find the prices of the goods they must buy unaccountably rising, while their own incomes lag behind or remain the same. Monetary inflation, in other words, not only raises prices and destroys the value of the currency unit; it also acts as a giant system of expropriation of the late receivers by the counterfeiters themselves and by the other early receivers. Monetary expansion is a massive scheme of hidden redistribution.”
How can our society possibly avoid becoming so morally bankrupt when that society institutionalizes government theft of private property and blatant involuntary servitude, not just through the income tax and other forms of compulsory taxation but through the government’s invasive regulatory trespasses and legal restrictions, as well as through government-usurpation of the people’s right to free trade and commerce with competing currencies?
The Unconstitutional Constitution
Actually, the American Founding Fathers were themselves unwitting ministers of socialism, fascism and communism, in that the U.S. Constitution they had signed on to and ratified specifically gave the Congress and the President monopolistic powers, and restricted private citizens from entering such endeavors. For example, the Constitution gives the federal government a monopoly in territorial protection, or “defense.” This is a socialist (or communist) scheme, in which the State owns the means of production in territorial protection, and the entire population are compelled by law to patronize this “service,” and forbidden by the State to use any other competing protection firms. As with any other State-mandated or State-protected monopoly, there is no incentive on the part of State agents for efficiency and true fulfillment of provision of such services, and especially when the funding for such services is not through voluntary exchange but by forced wealth expropriation of the people.
And the defense contractors of the “military industrial complex” have benefited from the Constitution’s natural consequences of military socialism and fascism, in which these supposedly privately-owned businesses’ lobbyists join the government-expansionist neoconservative think tanks to “convince” high public officials to start or expand wars overseas, for the sake of these politically-connected businesses being on the receiving end of redistributed wealth confiscated from the paychecks of middle-class workers.
The Washington Post series on the entire government security monopoly scheme has revealed (in Part 1, Part 2, Part 3, and Part 4) the natural outcome of the current out-of-control expansion and inefficiency that such a compulsory, non-competitive system is destined to become. As with all State usurpations of any of life’s endeavors, whether it is the provision of security, health care, banking, etc., the outcome of this constitutionally-mandated government-run operation has been counter-productive and has turned the force of the State against Americans’ Liberty, as well as their prosperity and their security. We are less secure and less safe because of the federal government’s centralization of security.
Unfortunately, many people just don’t seem to realize how the socialist and fascist intrusions of official State policies are at the very core of the destruction of property rights, civil liberties and inalienable rights of all human beings. The State’s ownership and control of the means of production in security have resulted in not only provoking foreigners to act against us, but have enabled the Feds via the PATRIOT Act, TSA, IRS, etc. to directly violate our Liberty. So many police powers now intimately permeate our private lives, persons, property and homes, despite whatever protections the U.S. Constitution theoretically provides.
But why this obsession with the Constitution, primarily by the conservatives, who claim to believe in the Founders’ “original intent”? The Constitution is a document of positive law, and goes against the Founders’ original intent.
It was the Declaration of Independence that truly recognized individual Liberty and the authority of the People over their governments, while the Constitution compromised those principles, and did nothing but ensure the empowerment of what would be an always growing centralized armed bureaucracy. But rather than having a nation of voluntary associations and contracts amongst the population, the Founders abandoned the principles of the Declaration of Independence, and instead chose centralization of power and federal enslavement of the people.
Unfortunately, the blind faith that so many people have in the Leviathan, despite its criminality, and the faith that people have had in the Constitution, as though it will protect them from government’s abuses despite the bureaucrats’ ignoring of Constitutional restraints, is beyond comprehension.
Despite whatever protections of private property the Constitution allegedly provides, and despite its assertion of the people’s right to be secure in their persons, houses, papers, and effects, given over 200 years of history, the Bill of Rights might as well state that “The government may take your property at whim,” and “There is no right to be secure in one’s person, papers, houses and effects.” Hence the recent passage in the House of the extension of the PATRIOT Act, in which everyone’s property, bank accounts, homes, and emails are fair game for any parasitic intruder.
Americans must recognize that the Constitution’s economic consequences of socialism and fascism are schemes that involve the direct violations of life, Liberty and property.
And culturally, Americans’ permitting such immoral acts of theft and trespass by the State has turned America into a country of widespread criminality ranging from street-level crimes to the Establishment crimes committed by Wall Street, the military-industrial complex and especially the government, as well as a country of dependence and discouragement of personal responsibility.
The Anti-Federalists instinctively knew that State monopoly and a compulsory federal government with armed power could never be restrained once such a regime was established. Alas, instead of the free and prosperous society of voluntary exchange and individual liberty under the Rule of Law that the Jeffersonians envisioned, the Hamiltonian statists and centralists triumphed. The end of America began at its beginning. 
Let us have a society of genuine “free market capitalism,” one that protects voluntary associations and contracts, private ownership and control of wealth, property and the means of production, including a free market in competing currencies, and a society in which no one would be above the law – not police, not soldiers, no one. In such a society would be the removal of all socialist and fascist government intrusions and restrictions, removal of confiscatory taxation, monopoly of security and policing and all other State monopolies. In other words, a society of freedom.
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Scott Lazarowitz's picture
Columns on STR: 16

Scott Lazarowitz is a libertarian writer and cartoonist. Website:


A Liberal in Lakeview's picture

Military socialism, indeed. It's one of my favorite terms, and it needs to be rubbed up the noses of rightwing conservatives as much as the leftwing ones. So, would anyone care to wager if Mr. Leave Us Alone Coalition, Grover Norquist, can be persuaded to adopt the term and to use it correctly, that is, with hostility to military socialism?

wkmac's picture

Enjoyed the piece Scott. The comparison of Bush/Obama to fascist/socialist and then visa versa was both funny yet excellent analysis. I've come to see what we call socialism today as more an offshoot of rightist political structure with it's authoritarianist approach than the soft hand approach of classical socialism of the 19th century that was of the left which is of the same air space also shared with Classical liberalism, libertarianism and anarchism of it's various stripe. All 4 shared a common foe in pure statism in all it's many manifestations.

Stalin and Hitler although alleged enemies of opposites were in fact tyrants joined at the hip when one looks at true end results. One could just as easily look at the bloody hands of Mao, Lincoln, Wilson, Churchhill, Roosevelt, Truman and JFK/LBJ/Nixon and see the same thing over and over again. One could also say the same of Bush and Obama or for that matter Clinton, Bush 1, Reagan, Carter. yada, yada, yada! Once we realize this, the spectrum becomes much clearer and statism and non-statism are seen in their true clarity making the road we need to travel a lot more obvious.

Thanks again for a good roadmap!

A Liberal in Lakeview's picture

Scott, you might enjoy the essay,

The Mystery of Fascism
by David Ramsay Steele.

It was published by the Libertarian Alliance,, and is a crash course in Mussolini's movement. It also unearths the roots of Fascism in the extreme left. The author, an Englishman, argues that it began as a revision of Marxism and that the Fascists eventually stopped thinking of the theirselves as socialists. In fact, Steele was once a socialist. After being mugged by reality, he went on to help found the LA and to write From Marx to Mises, which was reviewed favorably in an essay published in The Freeman.
Obama Derangement Syndrome. ODS. Odious.

Good one.

John T. Kennedy's picture

"Can we ever get America to be the principled, morally sound society of freedom under the Rule of Law that the Founders envisioned?"

I'm afraid that what you identify as state capitalism *is* what the Founders envisioned.

The Declaration of Independence was better than the Constitution but still flawed: "Governments are instituted among Men, deriving their just powers from the consent of the governed...". Consent of the governed is a logical contradiction.

Glock27's picture

Agreed. Beautiful point. I believe the Constitution had some emotionally sound ideas to it. I think life just got in the way along with a huge number of greedy people. Honestly I think we as people get in the way. Note: this is just random thinking. Not trying to be technical in train of thought.