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Cutting up the cake

By Simon Goldie
March 22nd, 2011 at 12:16 pm | No Comments | Posted in Economics, Welfare State

For better or ill, the political settlement that Western liberal democracies have means that the government of the day decides how to cut the cake. That cake is cut according to the size of government borrowing, what its spending priorities are and the demands of the public as voiced by pressure groups.

If the cake is reduced there is less to cut and hand around. If you wish to give out more but have a small cake you need to find ways of making it bigger. This is a continuous challenge and leads to fierce arguments about post code lotteries and fairness.

During the last 30 years we have seen some steps to alter this. While the government may make the cut someone else hands out the goodies or administers the transfer. There have been attempts at getting the recipients to make more decisions about the services they get. This trend is continuing and is likely to grow as successive governments face tough fiscal decisions.

There is another way of distributing products and services. One of the best devices at crowdsourcing public demand emerged centuries ago. But making the price signalling of the open market function within public services is not easy.

The coalition is clearly using that policy tool to reshape the relationship between the citizen and the State. It will take some time before we know if they have achieved  that aim.

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Can a Whig give the coalition some soul?

By Angela Harbutt
September 7th, 2010 at 1:03 pm | 1 Comment | Posted in coalition, Conservatives, Liberal Democrats

Its been  a bit of a depressing summer for many..all that talk of cuts, hacking and slashing – we might be forgiven for thinking that Freddy Krueger has hit town. But the really depressing thing for me has been lack of a philosophy behind the slicing and dicing. Yes I know our coalition partners will point us to  “The Big Society”. But, to be honest, I still don’t understand it….the journalists and political commentators don’t understand it… hell I don’t think even David Cameron understands it. So it was a real  hallelujah moment when I was handed a copy of the Sunday Times to read. For there in black and white was the answer of course…in the slightly retro-looking form of  Friedrich Hayek.

In his article, Liberal Vision’s old friend and founder Mark Littlewood, now of  The Institute of Economic Affairs (IEA), serves up a convincing argument as to why Mr Hayek and his “Constitution of Liberty” has all the answers …(well most of the answers anyway).

In his article (which you can read in full on the IEA website) he says…

 “Although one of the most influential thinkers of the 20th century, Hayek has never been a household name. Remarkably, for a man who was born at the tail end of the 19th century, won the Nobel prize for economics in 1974 and died nearly 20 years ago, that may be about to change. Thanks to an extensive feature on the wildly popular Glenn Beck television programme in America, Hayek’s masterpiece The Road to Serfdom zoomed to the top of Amazon’s bestseller charts in June.

This is unusual enough for a philosophical tract, but is astonishing for a book originally published in 1944…… downloaded from our website tens of thousands of times over the summer.

This year also marks the 50th anniversary of the publication of another great Hayek text, The Constitution of Liberty. Anyone searching for an intellectual basis for a genuinely Liberal-Conservative approach to government should read it.

Hayek argues for strict limits on state activity and intervention. But he offers a very different take on the nature of the individual from that often – if wrongly – associated with free-market capitalism. Hayek sees individuals as intrinsically social beings. His vision of a free society is not one where men and women are trampling over one another in pursuit of narrow, venal self-interest, each using their own freedom of action to exploit others. Hayek believed each individual would benefit as much from the exercise of others’ freedom as their own.

This optimistic view of human nature should be what guides the British government as it grapples with the shocking state of the nation’s public finances and attempts to provide some coherence to its big society agenda.

Interestingly, and importantly for the coalition, although beloved of Margaret Thatcher, Hayek was not a Tory. He described himself as a Whig. And Mark Littlewood may well have had another annoying moment of foresight when he argues later in his article that the coalition should seek to rediscover the best elements of this Whig tradition.

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Friedrich August Hayek (1899-1992), The Road to Serfdom (1944)

By Barry Stocker
September 17th, 2009 at 12:35 pm | 4 Comments | Posted in Political theory

hayekThe Road to Serfdom is well known as an inspiration to classical liberals, libertarians and free market conservatives. However, on publication it was praised with great warmth by John Maynard Keynes, the economist and government adviser, often taken as a mascot by social liberals and social democrats. Hayek’s intention at that time was to reduce the influence of socialists and expand the appeal of classical liberalism in all parties. Hayek suggests that state welfare, public services, and regulation of the economy, are compatible with democracy and individual rights, so long as they are not part of an attempt to plan the economy from above.

Hayek was born in Vienna when it was the capital of the Austro-Hungarian Empire, and studied law and economics at the University of Vienna. He moved to Britain in 1931 to work at the LSE, and was then associated with a number of institutions in the USA and Germany, as well as the UK. Hayek’s achievements in economics led to a Nobel Prize in Economics in 1974. He is also well known for this work in political theory, together with a body of work in theory of knowledge, psychology and neuroscience.

Hayek’s most widely read book is The Road to Serfdom. Part of its appeal is the passion it expresses, which comes from Hayek’s fear that western democracies were moving towards the same kind of state economic planning used by the Nazis, even while fighting a monumental war against Nazi totalitarianism. He also wanted to explain how Marxism in power leads to a totalitarianism which is the same in essence as Fascism and Naziism. All branches of totalitarianism destroy individual rights in assigning economic wealth to some favoured group in society, defined by class, race, or some other distinction irrelevant to individual human capacities. The conflicts between totalitarian movements arose simply from differences about which groups should be favoured.

Hayek accepted that democratic socialists with Marxist ideas had good intentions and did not intend to destroy democracy. However, he thought incremental increases in state planning would inevitably reduce individual freedom and take us closer, step-by-step, down the road to the totalitarianism in which everyone is a slave, or serf, of the state. Hayek pointed out how Germany had become more and more affected by economic planning, under authoritarian nationalist-conservative governments during the Second Empire (1871-1919), and more democratic governments during the Weimar Republic (1919-1933). National Socialism in Germany after 1933 intensified that process, destroying all individual rights in Germany.

Though Hayek regarded democratic socialists, influenced by evolutionary Marxism, as well meaning people, he points out that even in such circles there are people calling for restrictions on democracy. He pointed out that Harold Laski, maybe the most influential left-academic and Labour Party thinker of the time, with senior positions in the Labour movement, had openly doubted that Labour should give up government if it lost an election, and was part of efforts to restrict the rights of parliament with regard to government backed legislation. The tendency of socialists to restrict democracy is a necessary product of the supremacy of state planning in the economy. State dominance of the economy requires increasing coercion and ultimately open terror.

In a summary of ideas expounded at length in his economic writings, Hayek suggests that the state can never match the amount of information, and knowledge, available to individual economic agents. Since the state has more limited knowledge than individuals, it will need to coerce individual people and enterprises to fit in with the economic plan. Economies create wealth through forms of cooperation arising from dispersed knowledge, encoded in prices and other forms not determined by a central agency. The coercion necessary to the plan would deprive workers of the right to choose their employment, and way of making a living; and would deprive everyone of the right to consume in the ways they prefer. The attempt to plan everything through a twisted rationalism would undermine the whole evolution of liberties and legal rights as they have evolved in human history.

Here Hayek introduces ideas that he expanded in his work on political theory, with regard to the evolutionary nature of society, and of its laws, which can only be violated at the cost of destroying liberty and economic growth. The role of law in establishing liberty and economic growth is extended to relations between states, in that Hayek supports federation between European democracies and looser federation between world democracies. The main roles of such a federation would be to guarantee free trade and prevent war.

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