The Mirage of Welfare
Why Security Kills Freedom
I. The Illusion of Modern Capitalism
According to the Austrian School, a truly capitalist economy is one in which money arises from the market and not from the State, where private property is inviolable, prices are freely formed, and capital is accumulated through saving and production, not through debt. In that system, money must represent real value, whether gold, commodities, or any scarce asset freely chosen by individuals in voluntary exchange. Since the gold standard was abandoned and fiat money came under the control of central banks, no modern economy can be considered fully capitalist.
“If the supply of money increases while the demand for money remains unchanged, the purchasing power of money must drop. Inflation is taxation without legislation.” — Ludwig von Mises, On the Manipulation of Money and Credit (1953)
The loss of the gold standard opened the door to an era of monetary illusion that we have mistaken for prosperity. Nations grew on credit, governments learned to print promises, and entire generations began to live off the future.
II. Financial Communism
What we call “capitalism” today is, in reality, social democratic models sustained by monetary expansion, public debt, and state control. When the State can create money out of nothing to finance its spending, it manipulates interest rates and distorts the natural process of the market.
From the Austrian perspective, the world lives under a form of financial communism disguised as a mixed economy. Calling it “communism” may sound exaggerated, but the logic is the same: a central elite plans, prints, and decides the distribution of value while the citizen loses autonomy over his work, his savings, and his time.
“The power to do good with other people’s money is also the power to do harm with other people’s money. It is a power which increases as the State plans and directs.” — F. A. Hayek, The Road to Serfdom (1944)
It is not a matter of ideology but of incentives. When the State prints money, it steals human time, that is, hours of life converted into paper without backing.
III. Bitcoin: The Crack in the System
This argument can be radically transformed with the introduction of a hard and scarce currency such as Bitcoin. An economy that adopts money that cannot be manipulated recovers the basic principle of real value: one can only spend what has previously been produced and saved.
Bitcoin is to the twenty-first century what gold was to the nineteenth: a reserve of human time. Its supply is limited to 21 million units, which makes it a truly scarce and inflation-resistant asset. It cannot be printed; it is mined with energy and knowledge. Its finite scarcity allows long-term savings to appreciate naturally and fairly, because value is not devalued by political decisions.
“Bitcoin is the hardest money ever invented, the first monetary technology that can enforce its own scarcity across space and time.” — Saifedean Ammous, The Bitcoin Standard (2018)
That is why I defend Austrian education and monetary education through a scarce asset such as Bitcoin, which returns sovereignty to the individual. In many economies a natural migration toward precious metals and alternative currencies is already being seen because the dollar and the euro have weakened until they have become simple instruments of debt.
IV. The Invisible Cost of Welfare
The combination of excessive public spending, high taxes, and expansionary monetary policy was already slowing production and saving in Europe. But the massive immigration of the last decade and the war in Ukraine worsened everything. The arrival of millions of people without solid labor integration increased pressure on the welfare system, and the conflict in Ukraine caused energy costs and public debt to skyrocket. Today, young generations bear the burden of a model that is increasingly expensive, less productive, and more dependent on the State.
From the Austrian economic view, this is unsustainable: without saving, without incentives, and without fiscal responsibility, there is no accumulation of capital or creation of real wealth.
“Wealth is not measured by subsidies, but by the ability to sustain welfare without borrowing.”
V. The Nordic Exception
Norway is a distinct case within the Nordic model because its wealth does not come from superior productivity but from oil. The country created a huge sovereign fund that allows it to sustain high taxes and a generous welfare state without breaking the productive system.
In contrast, in countries like Greece or Italy, where the productive structure is weaker, the same public spending policy generates debt, inflation, and unemployment. Sweden and Norway work better because their work culture is more disciplined and their institutional trust higher, but not because socialism works. What keeps them stable is the capitalist foundation and the ethic of production, not redistribution.
VI. The Model That Does Not Hold
A country can maintain prosperity if it preserves a free market where production, competition, and private property remain the driving forces of the economy, and uses part of that wealth to finance efficient social programs. The balance is sustained when the State does not replace the producer but protects the law, the currency, and the freedom of exchange. In those cases, public services do not destroy wealth, they manage it.
The model breaks when public spending grows faster than productivity. When the State overregulates, imposes high taxes, controls the currency, and restricts individual freedom under the pretext of health or digital security, per capita wealth begins to fall. Massive immigration without labor integration, mandatory vaccination policies, and the future centralized digital currency aggravate this loss of economic sovereignty. The more control and the less private initiative, the less real saving and the more dependence.
VII. Europe and the Debt of Welfare
Although many Europeans celebrate State aid, subsidies, and social policies, few understand that all this is sustained only while there is a strong economy or an exceptional resource such as oil in Norway. It is not possible to compare Norway with Spain or Greece because those countries do not have a productive base capable of supporting such a level of redistribution. In Greece, social democracy became debt; in Spain, structural unemployment; and in Germany, it is beginning to show cracks.
The model works while there is wealth to distribute, but when the State distributes more than it produces, the system collapses.
VIII. The American Laboratory: New York
New York faces a similar paradox but with greater obstacles. Its new social democratic mayor promises to freeze rents and lower prices, but he cannot do so without destroying the productive base that sustains the city.
New York does not have a sovereign fund or a natural resource that could finance those policies. The wealth belongs to the citizens, not to the State. It is not possible to expropriate or redistribute without breaking the trust that keeps the market alive. Furthermore, the city depends on the federal budget, and Washington is not oriented toward financing a social democratic agenda, much less under a government that defends private capital.
That is why the promises of redistribution end up colliding with fiscal reality and with the limits of an economy based on individual property.
IX. The Moral Oxymoron
And this is what I finally want to talk about with you, dear X. It is ironic, but if you bring it closer to your personal case, it becomes clearer. The problem, for example, in Colombia, is that a president with socialist tendencies was elected who wants to expropriate and redistribute. Whom will he expropriate? People like you, who own land and live from what it produces. In your case, you do not want that to happen, but you live in a European country that defends social democracy.
It is an oxymoron; it does not make sense. Because when the State wants to intervene in your land, you do not want redistribution, but when you can benefit from the social democratic systems of another country, you see it as fair. That contradiction sums up the moral and economic dilemma of the twenty-first century.
“When comfort replaces coherence, freedom ceases to have meaning.”
X. The Generation Without Savings
For younger generations, understanding this is vital. If the State does not produce and citizens cannot save in a currency that preserves its value, there is no sustainable future. Neither the dollar nor the euro can be considered strong money because both are fiat, created without backing and condemned to devaluation.
So, what incentives do young people have to believe that they will enjoy social programs without losing their freedom? The central bank digital currencies (CBDCs) that are already being prepared in Europe promise control and efficiency but imply surveillance and total loss of privacy. We saw it with vaccination mandates, and we will see it with the digitalization of money: every transaction recorded, every decision monitored, every freedom conditioned.
People will end up sacrificing their autonomy and their dreams for a false sense of social security. And that sacrifice, more than economic, is spiritual. It is the silent death of authenticity and the inner freedom of the human being.
“The worst thing that can happen to a socialist is to have his country ruled by socialists who are not himself.” — Ludwig von Mises, Planned Chaos (1947)
XI. Human Action
In Austrian economics everything begins with human action: the individual who chooses, decides, and acts seeking to improve his condition according to his values and knowledge. That sum of free decisions, not state decrees, is what builds a prosperous society. Ludwig von Mises called this praxeology, the study of human action as the basis of all economics. Aristotle had already anticipated it when he defined politics as the most noble art, the one that orders collective life toward the good, not through imposition but through virtue and consciousness. True wealth is born when individual actions are responsible, free, and directed toward the common good. Without freedom of action there is no economy, and without responsibility there is no civilization.
“Economics is not about things and tangible material objects; it is about men, their meanings, and actions.” — Ludwig von Mises, Human Action (1949)
November 6, 2025