Socialism requires a totalitarian dictatorship

At Mises Institute, George Reisman makes

two main points: (1) To show why Nazi Germany was a socialist state, not a capitalist one. And (2) to show why socialism, understood as an economic system based on government ownership of the means of production, positively requires a totalitarian dictatorship.

The basis of the claim that Nazi Germany was capitalist was the fact that most industries in Nazi Germany appeared to be left in private hands.

What Mises identified was that private ownership of the means of production existed in name only under the Nazis and that the actual substance of ownership of the means of production resided in the German government. For it was the German government and not the nominal private owners that exercised all of the substantive powers of ownership: it, not the nominal private owners, decided what was to be produced, in what quantity, by what methods, and to whom it was to be distributed, as well as what prices would be charged and what wages would be paid, and what dividends or other income the nominal private owners would be permitted to receive. The position of the alleged private owners, Mises showed, was reduced essentially to that of government pensioners.

...The requirements of enforcing a system of price and wage controls shed major light on the totalitarian nature of socialism — most obviously, of course, on that of the German or Nazi variant of socialism, but also on that of Soviet-style socialism as well.

...We can start with the fact that the financial self-interest of sellers operating under price controls is to evade the price controls and raise their prices. Buyers otherwise unable to obtain goods are willing, indeed, eager to pay these higher prices as the means of securing the goods they want. In these circumstances, what is to stop prices from rising and a massive black market from developing?

The answer is a combination of severe penalties combined with a great likelihood of being caught and then actually suffering those penalties.

...But the mere existence of such penalties is not enough. The government has to make it actually dangerous to conduct black-market transactions. It has to make people fear that in conducting such a transaction they might somehow be discovered by the police, and actually end up in jail. In order to create such fear, the government must develop an army of spies and secret informers. For example, the government must make a storekeeper and his customer fearful that if they engage in a black-market transaction, some other customer in the store will report them.

Because of the privacy and secrecy in which many black-market transactions can be conducted, the government must also make anyone contemplating a black-market transaction fearful that the other party might turn out to be a police agent trying to entrap him. The government must make people fearful even of their long-time associates, even of their friends and relatives, lest even they turn out to be informers.

In sum, therefore, the requirements merely of enforcing price-control regulations is the adoption of essential features of a totalitarian state, namely, the establishment of the category of "economic crimes," in which the peaceful pursuit of material self-interest is treated as a criminal offense, and the establishment of a totalitarian police apparatus replete with spies and informers and the power of arbitrary arrest and imprisonment.

...A socialist government totally annihilates these freedoms. It turns the press and every public forum into a vehicle of hysterical propaganda in its own behalf, and it engages in the relentless persecution of everyone who dares to deviate by so much as an inch from its official party line.

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