Americans are currently finding themselves ensnared in the trap of socialism, as they fail to realize that attempting to solve the issues of big government with an even larger government is a perilous path.
Many individuals attribute their financial burdens to capitalism, when in reality, the true root is statism. Statism involves using political control, public spending, regulations, taxation, and monetary interventions to gradually replace civil society, markets, savings, and individual choices.
The “predatory state” discussed in “The New Global Economic Order” is the extreme manifestation of statism. It is a system where the political elite siphon wealth and freedom from families and businesses to sustain their own operations, reward vested interests, and exert control over society.
Big government, high taxes, continuous currency printing, and cronyism are not features of free-market capitalism.
Socialism succeeds in marketing itself because scholars and politicians often evaluate its policies based on the propaganda slogans of socialistic ideals, rather than considering their disastrous consequences. Hence, socialism becomes the perfect ideology for the elite class, selling a sense of moral superiority and compassion but ultimately making those it claims to protect poorer, more dependent, and less free. By the time people realize it’s a trap, the state has grown too large, its power too entrenched, and repression has been imposed on the very people it pledged to safeguard.
The massive government, interventionism, currency debasement, and high taxes have dismantled the economy, stifling the opportunities for middle-class families and small businesses to thrive. More government, taxes, currency printing, and intervention only serve to further weaken the economy.
If big government, hefty subsidies, high taxes, and political control over the economy were the answer to today’s economic burdens, then countries like France wouldn’t be grappling with economic stagnation, social unrest, massive debts, and deficits. Moreover, no economy can address issues of affordability, inequality, and living costs by politically controlling government debts and monetizing resources.
The public sector does not belong to “the public.” It is a system funded by taxpayers and controlled and managed by politicians who continually demand increased taxes and spending to provide the same or even fewer services. There is no true nationalization; it is merely politization.
Many American youths have been fed the idea that their dissatisfaction with housing, sluggish real wage growth, low returns on savings, and decreased upward mobility signify the failure of capitalism. However, this is not the reality.
In most developed economies, including the United States post-2008, the dominant model is not free-market capitalism but a model characterized by big government, long-term deficit spending, high debts, rising taxes, currency devaluation, regulatory hurdles, and political interventions. This model protects insiders while punishing newcomers. This is why many millionaires and wealthy individuals support socialism. Socialism eliminates the meritocracy, stifles competition, preserves privileges from political connections, and demands further government control, making it a perfect path for the well-connected. Cronyism is a direct outcome of statism and a step towards socialism.
Few are wealthier and more powerful than socialist despots and their collaborators. Meanwhile, socialism requires the poor to remain impoverished and compliant. Socialism replaces success-driven inequality with politically directed inequality. In statism, inequality is an issue of prices, not resource allocation. Socialism leads to hyperinflation and scarcity by disregarding economic calculations, exploiting currency devaluation to seize the remaining wealth created by the private sector, keeping citizens reliant and compliant, while political leaders enjoy privileges. By eliminating the incentives for individuals to earn, develop, and prosper, socialism ultimately results in the opposite of its promises. By the time people realize this, it is too late to reverse course.
This is why Americans are falling into the trap of socialism, when in reality, what they should condemn is statism, not capitalism. Socialism is the perfect ideology for the elite class, wrapping coercion in the cloak of moral vanity. It packages itself in compassionate rhetoric and a sense of moral superiority, yet makes those it purports to protect poorer, more dependent, and less free.
A cat promises mice free cheese, but the mice fail to understand why it is “free.”
The allure of socialism lies not in its effectiveness but in its facade of nobility. Yet, this is far from the truth. It promises security, fairness, dignity, and protection from market turmoil. However, when people realize it is a trap, the state has become too bloated, too costly, too intervening, and too powerful to easily reverse.
The model of statism prevails in developed economies. The International Monetary Fund (IMF) in Washington, D.C. forecasts that by 2026, government spending in developed economies will comprise 40.7% of GDP. The Organisation for Economic Co-operation and Development (OECD) based in Paris reports that the average government spending as a share of GDP in EU member countries is 49.3%. In countries like France, government spending surpasses 57% of GDP. The outcome is economic stagnation, social discontent, rising living costs, and the so-called “free welfare” becoming increasingly costly in the long run. This trade-off involves worsening “free” services in exchange for escalating taxes, unaffordable housing, and reduced opportunities. These figures are not reflections of minimalistic systems but results of massive political allocation.
If expanding government, increasing taxes, and enhancing interventions were ways to achieve social justice, young people should flourish, and socialist economies should lead globally. However, they face issues like overpriced assets, unaffordable housing, devalued deposits, and lowered thresholds for middle-class entry. This is not due to excessive market freedom but excessive government power.
China and Nordic countries are not proofs of effective socialism but demonstrations that when nations abandon socialist-controlled economic policies in favor of what many in the West term “unbridled capitalism,” growth and wealth accumulation can be achieved.
The unfortunate news is that despite the multitude of pitfalls, the same model of enormous government finances continues to expand. The IMF estimates that the fiscal deficits of developed economies will reach 4.8% of GDP in 2026, with total global public debt rising to 93.9% of GDP in 2025 and projected to hit 100% by 2029. Many developed economies still face historically high levels of public debt. The political system hasn’t rectified past overspending but continues to mortgage the future to maintain the current privileges. Hence, the newly wealthy politicians blame the current plight on millionaires and wealthy individuals, even though confiscating more wealth from the rich only worsens economic conditions. This is what is referred to as “predatorial statism,” where politicians claim the lion’s share of national wealth each year and then turn around to blame those who have created wealth, inciting jealousy, hatred, and dependency.
This model has long relied on continuous interventions by central banks worldwide, shielding governments and sovereign debts from the repercussions of excessive expenditure and irresponsible fiscal policies. Cross-central bank data reveals that the Federal Reserve’s balance sheet peaked at $8.97 trillion in April 2022, the Eurosystem’s balance sheet reached €8.84 trillion in June 2022, and the Bank of Japan’s balance sheet peaked at ¥764.8 trillion in August 2024, equivalent to approximately 34.5%, 64.2%, and 125.8% of their respective GDPs. Even by 2026, these balance sheets remain vast relative to national outputs.
This is not a neutral bureaucratic system; it penalizes savings, subsidizes debt, weakens price discovery mechanisms, pushes up financial asset prices by masking sovereign debt risks, and subtly shifts wealth from depositors, workers, and wage earners to heavily indebted governments. When government spending exceeds its limits and central banks conceal its consequences, citizens are told they are being protected. Nevertheless, currency devaluation and asset inflation only exacerbate their impoverishment.
Artificial creation of money is never neutral. It disproportionately benefits governments and asset holders resistant to monetary inflation while harming real wages, deposit savings, and those without assets. Politicians attempt to reassure the public that they can offset these impacts through taxation, government transfers, and expropriation. However, this is a trick aimed at making workers and low-income individuals more reliant on a state that can never fulfill its promises of “easy money” as the process of poverty only accelerates.
As the size of government grows, the populace becomes poorer; the larger the government, the poorer the people.
Socialism is often touted as a force against privilege, but in reality, it is one of the most effective tools for consolidating privilege. The larger the state, the more valuable the political influence. The more intervention in the system, the easier it is for vested interest groups, bureaucratic agencies, and their affiliated interest groups to sway policies, garner subsidies, stifle competition, and determine who receives special treatment.
This is why socialism holds such appeal for the elite class. It allows them to speak in the language of compassion and humanitarianism while constructing a structure of dependency. It offers them moral cover to implement increased spending, greater taxation, heightened control, and expanded bureaucratic structures, even though these policies diminish productivity, punish labor and investment, and stagnate millions. The elite class doesn’t suffer under a socialist system, as they can keep their wealth outside the system, while those voting for an expanded government often wonder why their situation worsens.
The solution to the inefficiency and debt-laden government problem is not to enlarge its size. Expanding government, increasing taxes, and intensifying interventions cannot resolve the damages caused by the existing big government, rising taxes, and planning of interventionism. Instead, these actions only further weaken the economy and diminish the drive for work, savings, investment, construction, and innovation among individuals.
The housing crisis is a prime example. The OECD highlights that public policy choices like land use restrictions, zoning barriers, and supply bottlenecks are core drivers of the housing affordability issue. However, the socialist political resolution is not to remove barriers and expand supply but to increase subsidies, enforce regulations, introduce more layers of interventions, thus protecting vested interests and exacerbating market distortions.
American youths are not bearing the failures of capitalism but the cumulative failures of statism, big government, endless fiscal deficits, debt reliance, currency interventions, heavy regulatory burdens, and tax systems that penalize labor and capital. When sympathetic rhetoric gives way to the reality of suffering, the socialist system has already been established, designed to punish those it claims to protect.
Prosperity and equal opportunity require ideas entirely contrary to socialism. They necessitate smaller, more efficient government, budget control, an open and free monetary system, reduced barriers to innovation, entrepreneurship, and housing supply, and a tax system that encourages effort, savings, and entrepreneurship over reliance, consumption, and borrowing.
Socialists know they cannot sell socialism solely based on socialism itself; no one would vote for them. All socialist centrally planned economies have failed catastrophically. They need to market socialism using false examples, like the Nordic countries, disguised as “improvements” to the existing system. They claim that more power vested in socialist politicians would not lead to any losses but instead would bring success. This lie of “handing more power to socialist politicians will result in no losses and instead bring gains” always leads to stagnation, dependency, poverty, and oppression.
Socialists always claim that “true socialism has never been implemented,” but this is evidently a falsehood. Socialism is not a great idea simply executed poorly or incompletely; it is a terrible idea executed perfectly. When socialists inevitably convince the public to accept socialism, the trap is set. They manipulate various institutions, build a compliant society dependent on them, and while waving the banner of “democratic socialism,” they internally dismantle democracy—contradicting themselves since socialism always leads to tyranny and control, not prosperity. By then, the people are powerless to escape it.
In conclusion, blaming the disasters caused by political interventionism on capitalism rather than statism is not a mistake; it is a mask for selling the trap of socialism.
Author bio:
Dr. Daniel Lacalle is the Chief Economist at Tressis hedge fund and author of works such as “Freedom or Equality” (2020), “Escape from the Central Bank Trap” (2017), “The Energy World Is Flat” (2015), and “Life in the Financial Markets” (2015).
Originally published in English Epoch Times.