By Barry Stocker
The 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.
Tags: Friedrich Hayek
, Road to Serfdom