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Our Awful
Managed Economy; is Capitalism Dead in the U.S.?
5th December, 2025
A managed economy is no longer a future risk in the U.S., or a theoretical drift, it is the system we already live inside. EB Tucker argues that calling it capitalism is now a category error.
What once resembled an open arena of voluntary exchange has hardened into a structure where prices, credit conditions, and even expectations are shaped from above. From an Austrian perspective, this shift is unmistakable: the mechanisms that once made capitalism self-correcting have been replaced by interventions designed to suspend discipline and defer loss.
The consequences have accumulated over decades.
When the dollar was severed from gold in 1971, the last external constraint on monetary expansion disappeared, and with it the feedback loop that tied credit to real savings. Since then, every major dislocation has been met with liquidity rather than liquidation, policy signaling rather than price discovery. Tucker’s framing places this not as a series of isolated decisions but as a systematic transition from decentralized capitalism to a managed economy built on engineered liquidity, political credit channels, and asset markets that depend on official reassurance.
The fragile equilibrium this creates is the backdrop of Tucker’s warning: when distortions accumulate for long enough, they do not unwind gently.
This article explores that thesis across its full terrain – from the historical erosion of free-market discipline, to the anatomy of today’s bubbles, to the new digital instruments and political incentives that entrench managerial control. The picture that emerges is not one of capitalism in crisis, but of capitalism already replaced.
How a Free Market
is Supposed to Function
A genuine free market is not a romantic ideal; it is a historically documented system defined by distributed decision-making and the absence of centralized steering.
In the long 19th century (before technocratic policy became a permanent feature of economic life) capital formation i.e., investment spending, was undertaken from a bottom-up approach. Individuals saved, entrepreneurs borrowed from those savings, and interest rates emerged from countless private negotiations rather than from a committee’s projections. Prices signaled scarcity honestly, profits rewarded foresight, and losses quickly removed failed ventures from the field.
That constant pruning is what kept the system healthy.
Gold convertibility at that time imposed an additional layer of discipline. Governments could not paper over errors indefinitely, because redemption demands forced immediate accountability. Industrial America rose in precisely this environment: railroads, oil, steel, and early communications technology were born in a world where survival depended on efficiency, not proximity to policymakers.
No one in that era would have described the U.S. as a managed economy because the state lacked both the tools and the political mandate to micromanage outcomes.
The drift away from that model began gradually. The founding of the Federal Reserve in 1913 introduced, for the first time, a centralized institution capable of influencing credit conditions at scale. World War I and the Great Depression further legitimized federal intervention. By the time Bretton Woods was constructed, global finance was already bending toward an architecture where political priorities shaped monetary arrangements.
The decisive break came in 1971 when Nixon severed the dollar’s link to gold. That moment removed the last constraint preventing policymakers from steering the economy according to desired political outcomes.
From that point forward, the United States evolved into a managed economy. Interest rates no longer expressed pure time preference; they reflected committee decisions. Credit creation became unanchored from real savings. Corporations realized they could rely on cheap debt rather than productive reinvestment. Governments discovered they could run uninterrupted deficits without immediate penalty.
Most importantly, markets learned to expect intervention whenever volatility threatened political objectives.
Once those expectations congealed, the character of the system changed. What had been a decentralized market process hardened into a managerial structure, with the Federal Reserve acting as the de facto allocator of capital through its manipulation of liquidity, collateral frameworks, and asset purchases.
The incentives shifted from value creation to rent extraction, from entrepreneurial risk to policy arbitrage. Firms that might have failed in a free market survived through access to liquidity pipelines; sectors that aligned with political priorities grew insulated from competitive pressure. This is the essence of a managed economy: outcomes are shaped not organically but through continual oversight, nudges, and backstops.
The historical arc; from gold standard to fiat, and decentralized allocation to central orchestration, has created the conditions EB Tucker now warns about. The bond, stock, and real estate bubbles did not appear spontaneously. They are the cumulative result of a century of drift toward a managed economy that suppresses normal business cycles, rewards leverage, and punishes genuine saving.
The anatomy
of the bubbles: bonds, stocks, real estate
The three big bubbles are connected by a single thread: artificially low discount rates applied over decades.
- Bond markets, buoyed by central-bank accommodation and demand from regulatory and institutional portfolios, have suppressed yields to levels that misprice long-term risk.
- Stocks have been priced not on present earnings but on extrapolated, near-infinite growth narratives; speculative expectations have replaced profit signals.
- Real estate has been the final beneficiary: cheap credit and policy support turned housing into a leveraged asset play rather than a productive shelter market.
That the three bubbles are correlated means their unwind will be correlated too. When yields move materially higher, the present value of future cash flows in equities collapses, bond prices fall sharply, and leveraged real-estate positions face refinancing stress. This simultaneity makes the looming crisis systemic rather than sectoral.
Why
Stablecoins make the Managed Economy even more Fragile
Stablecoins are now being promoted as a new layer of financial plumbing – a seamless, digital-native rail that will supposedly modernize global payments. Their appeal is obvious: fast settlement, portability, and the appearance of technological neutrality.
Yet beneath that surface, stablecoins expose the same tensions that define today’s managed economy. They are private IOUs pegged to government currency, dependent on regulatory favor, and vulnerable to confidence shocks that play out in real time.
This fragility is now widely acknowledged; the BIS has warned:
Stablecoins offer some promise on tokenisation but fall short of requirements to be the mainstay of the monetary system when set against the three key tests of singleness, elasticity and integrity.
(Bank for International Settlements)
Stablecoins behave like brittle funding instruments whose stability rests on the quality of reserves, the credibility of issuers, and the absence of panic – none of which can be guaranteed in a managed economy where liquidity conditions shift quickly.
Rather than decentralizing finance, stablecoins risk centralizing it further. Their real-time settlement and programmable features make them natural tools for policymakers seeking tighter oversight and faster transmission of monetary intent.
At the same time, because their backing depends on short-term assets like Treasuries and commercial paper, any large-scale redemption event could transmit shocks directly into traditional markets. This creates a circular dependency: the state relies on stablecoin demand for funding, while stablecoins rely on the state to preserve confidence.
For these reasons, stablecoins don’t solve the core problem; they magnify it. In an economy already steered by a small set of institutional actors, adding a new digital liability layer simply extends the architecture of control while increasing the risk of sudden destabilization.
Their rise signals not a return to monetary decentralization, but another step deeper into a managed economy where liquidity is engineered, credit is politicized, and money continues to drift further from anything resembling a true market signal.
Technology,
AI, and the social dimension of control
Technology accelerates both the crisis and the capacity to manage it. AI amplifies market reflexes, automates trading, and concentrates decision pathways, making markets more fragile to common shocks.
At the same time, AI and digital identity enable unprecedented levels of economic supervision.
Tucker paints a future where wallets, tokens, and machine learning models form a closed loop of incentive and oversight. In such a regime, political authority can steer consumption, punish dissent, and allocate access to goods.
The Austrian warning is that this kind of techno-managed economy replaces spontaneous order with planned outcomes, and when planning fails, the failure cascades fast.
What an
Austrian investor does now
Expecting collapse doesn’t mean abdication. It means reallocating to what survives a systemic re-rating.
Cash is ephemeral in a fiat managed economy; but so is confidence in complex credit structures. Physical capital that produces consumable goods, unlevered land with productive use, and honest monetary stores retain real optionality.
Gold and certain forms of base commodities remain the classic Austrian hedge against debasement and liquidity collapse.
Defensive positioning includes low leverage, high optionality, and preparation for illiquidity: repo market freezing, bank runs, counterparty failures, and the real-estate refinancing cliff will be the proximate shocks. Those who assume “this time is different” risk being flattened by simultaneity in bursting bubbles.
Political
economy and the social fallout
Managed economies are political projects. When central planners prop up asset prices they create winners and embed political obligations. The social fallout from a synchronous asset collapse will be enormous: collapsing pensions, insolvent municipalities, frozen credit lines, and mass unemployment in sectors that were sustained by artificial demand.
Populist responses will range from capital controls to open redistribution and the further centralization of financial authority.
The public will willingly trade privacy and freedom for the promise of restored calm. That bargain is the final stage of the process that began in 1971: incremental debasement, crisis, and then the political seizure of remedies that entrench managerial power.
Conclusion:
the choice before us
The managed economy is not a neutral observation; it is a diagnosis and a warning. EB Tucker’s account is valuable because it describes not just the mechanics of intervention but the cultural and technological vectors that make control easier, and crisis more likely.
From an Austrian standpoint the policy record since Nixon points toward a severe correction when markets finally insist on real price discovery. When the bond, stock, and real-estate bubbles unwind together, the result will be a brutal process of revaluation.
That does not mean human ingenuity ends; it means that those who understand capital structure, maintain real savings, and preserve autonomy will survive and help rebuild.
For now, the prudent response is fatalistic in tone but active in practice: assume the managed economy will attempt to delay reckoning, prepare for a sharp synchronized contraction when it comes, and anchor one’s portfolio and life around real capital, sovereign money, and personal resilience.
Source:
- EB Tucker - Capitalism Is Dead; the New "Managed Economy" Taking Over Markets
- BIS - The next-generation monetary and financial system
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About the Author
Steve Bain is an economics writer and analyst with a BSc in Economics and experience in regional economic development for UK local government agencies. He explains economic theory and policy through clear, accessible writing informed by both academic training and real-world work.
Read Steve’s full bio
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