Nazism, an Outcome of Bismarck’s Welfare State

“Hayek’s challenge in The Road to Serfdom was to argue that German National Socialism was not an aberrant “right-wing” perversion growing out of the “contradictions” of capitalism, as Marxists and many other socialists insisted. Instead, he documents, the Nazi movement had developed out of the “enlightened and “progressive” socialist and collectivist ideas of the pre– World War I era in Imperial Germany, ideas that many intellectuals in England and the United States had praised and propagandized for in their own countries in the years before the beginning of the First World War in 1914.”

“Large numbers of American graduate students went off to study at German universities in the 1880s, the 1890s, and the first decade of the 20th century. They returned to the United States and spoke and wrote about a new and higher freedom observed in Germany, a “positive” freedom provided through government welfare-state paternalism rather than the mere “negative” freedom of individual liberty in the form of absence of coercion in human relationships, as practiced in America.
It was in Bismarck’s Germany during the last decades of the 19th century, after all, that there had been born the modern welfare state — national health insurance, government pension plans, regulations of industry and the workplace — and a philosophy that the national good took precedence over the interests of the individual. In that political environment Germans came to take it for granted that the paternalistic state was meant to care for them “from cradle to grave,” a phrase that was coined in Imperial Germany.”

“‘Two generations of Germans accepted that they needed to be disciplined by and obedient to the enlightened political leadership that guided the affairs of state for their presumed benefit. Beliefs in the right to private property and freedom of exchange were undermined, as the regulatory and redistributive state increasingly managed the economic activities of the society for the greater national interest of the German fatherland.”
“The German government restricted competition and fostered the creation of monopolies and business cartels under the rationale of directing private enterprise into those avenues serving the higher interests of the German nation as a whole.
Germany’s trade with the rest of the world was hampered by taxes and tariffs designed to shift German industry and agriculture into those forms the government considered most useful to prepare the nation for greater self- sufficiency during the war that was expected to come, and which finally broke out in 1914.”
“Hayek argues that by 1933, fifteen years after Germany’s defeat in the First World War, when Adolf Hitler came to power during the Great Depression, not only had the German people accepted the idea of the “Führer principle,” — the belief that people should follow and obey the commands of the political leaders of the nation — but many in German society now wanted it and believed they needed it. Notions about individual freedom and personal responsibility had been destroyed by the philosophy of collectivism and the ideologies of nationalism and socialism.”
“But Hayek’s main point was that this tragic history was not unique or special to the German people. The institutional changes that accompanied the implementation of socialist and interventionist welfare-state policies carried within them the seeds of political tyranny and economic servitude in any country that might follow a similar path.”

Austrian Economics & Public Policy–Restoring Freedom and Prosperity, Richard Ebeling, pp. 117-118.