A defining trait of socialism is the nationalization of all means of production. It puts one central owner in charge of all resources. In a voluntary system many independent owners make their own decisions. The final paragraph of the previous chapter explained that a central owner must be instituted with the use of force because the market naturally prevents a complete merger of all firms, which practically makes it impossible for a single owner to arise spontaneously (without legal compulsion).

For this reason socialism is imposed against the will of the owners of the means of production. It is an egregious infringement of property rights. Monetary calculation, which emerged as a result of voluntary agreements, is undermined. The introduction of socialism requires mass nationalization. Socialists who want to pursue their ideas of how the economy ought to be organized do not have the monetary capital necessary to buy out the property of other entrepreneurs. Realizing the economic weakness (i.e. unprofitability) of their designs, they employ organized aggression, and make drastic changes in how resources are taken in control.

The nature of socialism is closely linked to the phenomena of bureaucracy, imperialism and monopolization. By analysing them we will find that in real-world socialism they appear in their extreme forms.

BUREAUCRATIZATION AND THE MARKET

In the previous chapters we have sketched out the distinction between two kinds of human interactions: voluntary and coercive.

If we analyse only their direct legal consequences, we shall conclude that in the first case both sides gain, and in the second one of them loses. But the two kinds of interactions also have some external effects that can be observed in a monetary economy with an advanced division of labour. In such an economy it is beneficial to form organizations oriented towards achieving chosen goals. When relations are voluntary, organizations aiming to generate profits are called firms. They are oriented towards increasing their capital value and profits. A firm is governed by statute and rules of conduct established by the owner. These rules are subservient to the firm’s main goal: to make products intended for sale in the market.