The Road to Serfdom is a shocking book. It was shocking when it was published in 1944 and it is still shocking today because it is so widely ignored by opinion leaders and especially by economists specializing in public policy. Yet its lessons are as fresh and important today as they were in 1944.
In 2013, I decided to reread the book, many years after I first studied it. I had barely started when an invitation to the 2014 Economic Freedom Institute Conference at Manhattanville College arrived. In this paper, I'll often refer to The Road to Serfdom: Text and Documents--The Definitive Edition, edited by Bruce Caldwell (2007). Caldwell has done a masterful job of adding notes that provide deeper insight into the book. His edition also contains the preface to the original edition, the foreword to the 1956 American paperback edition, and the preface to the 1976 edition. I have also relied on Hayek on Hayek: An Autobiographical Dialogue, edited by Stephen Kresge and Leif Wenar (1994). When footnoting Hayek's words, my references will be to Caldwell's edition to maintain the accuracy of the page references.
My paper has two parts. In the first, I discuss Hayek's views about The Road to Serfdom; in the second, I explore the book's relevance to current conditions in high-income and developing nations. I will use the word "liberal" in the Hayekian sense. American-style liberals will be "progressives"; however, I will throughout put the word in quotation marks, for I cannot bring myself to accept that many of the policies favored by "progressives" are in fact progressive. For one example--a number of others appear in the second part of the paper--Peter Schuck notes that "many farm subsidy programs, which originated in the days of the Dust Bowl and the New Deal, are now egregiously bad policy--distributively perverse and cost-ineffective--yet their congressional support makes them relatively invulnerable" (Schuck 2014, p. 176). To me, the willingness of many "progressives" to support such policies demonstrates that the word "progressive," which has a positive ring to it, has been hijacked.
I will quote Hayek extensively; it is not possible to improve on his articulate and forceful argument. As does Hayek, I want to emphasize the importance of language in the analysis. For example, the opposite of a "planned economy" is not an unplanned one but rather a market economy in which households and firms plan their affairs given the market constraints and opportunities they face. If raising issues of language seems pedantic at times, doing so is nonetheless extremely important given the linguistic slights of hand that so bedevil policy analysis.
Caldwell, in his introduction, emphasizes that "what one finds in this book, and in all of Hayek's work, is a clear recognition of the power of ideas.... those who fail to understand the origins of the ideas do so at their peril" (2007, pp. 32-33). And, needless to say, those who fail to understand the continuing relevance of Hayek's ideas do so at the peril of all of us. II.
The original preface, which appeared in the British, Australian, and American editions, is only four paragraphs long. It follows the dedication, "To the socialists of all parties." Hayek goes on to note that the book "is certain to offend many people with whom I wish to live on friendly terms" (Caldwell 2007, p. 37). Hayek argues that socialist doctrines led to the horrors of Nazi Germany--extermination camps and all. Hitler's National Socialism was the logical conclusion of the socialism advocated by British and American thinkers. "Progressives" could not imagine that the policies they favored could ever lead to totalitarian government. That was indeed a shocking claim. "Offend" is not quite the right word.
The intelligentsia, particularly in the United States, greeted [the book's] publication with condescension and, occasionally, vitriol. Then a diplomat in the British Embassy in Washington, Isaiah Berlin wrote to a friend in April 1945 that he was "still reading the awful Dr. Hayek." The economist Gardiner Means did not have Berlin's fortitude; after reading 50 pages he reported to William Benton of the Encyclopedia Britannica that he "couldn't stomach any more." The philosopher Rudolf Carnap, writing to Hayek's friend Karl Popper, apparently could not muster even the stamina of Means: "I was somewhat surprised to see your acknowledgement of von Hayek. I have not read his book myself; it is much read and discussed in this country, but praised mostly by the protagonists of free enterprise and unrestricted capitalism, while all leftists regard him as a reactionary. (2007, p. 2) From time to time, Hayek's critics would sneer that he dropped the "von" in his name in an effort to hide from his privileged background. Such comments demonstrate simple ignorance. In Austria, both the titles and privileges of nobility were eliminated in 1919. (1)
Hayek sometimes said that he regretted publishing The Road to Serfdom. He considered the book a political tract and said he would have preferred to spend his time on economics. However, it is a book that could only have been written by a superb economist. We can safely regard his commentaries on how governments in democratic societies behave as a precursor of the public choice literature. His conviction favoring liberal government--"liberal" in the sense of nineteenth century writers--is not just a matter of his preference. Instead, it is a consequence of his predictions about how governments behave and about the inherent superiority of markets in using information.
Hayek's predictions are partly a reflection of his deep knowledge of public affairs in many countries and partly a matter of pursuing ideas to their logical conclusions on one topic after another. Hayek emphasizes that agreement in principle that government planning is needed will not ordinarily translate to majority support for any particular plan:
It may be the unanimously expressed will of the people that its parliament should prepare a comprehensive economic plan, yet neither the people nor its representatives need therefore be able to agree on any particular plan. The inability of democratic assemblies to carry out what seems to be a clear mandate of the people will inevitably cause dissatisfaction with democratic institutions. Parliaments come to be regarded as ineffective "talking shops," unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be "taken out of politics" and placed in the hands of experts--permanent officials or independent autonomous bodies. (Caldwell 2007, p. 104)
How sadly familiar this passage sounds to anyone who follows congressional policy debates. Politicians could spare their nations so much turmoil and waste if they would concentrate on Hayek's principles for government action:
There is nothing in the basic principles of liberalism to make it a stationary creed; there are no hard-and-fast rules fixed once and for all. The fundamental principle that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion, is capable of an infinite variety of applications. There is, in particular, all the difference between deliberately creating a system within which competition will work as beneficially as possible and passively accepting institutions as they are. Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez faire. (Caldwell 2007, p. 71)
Hayek insists, therefore, that liberalism should be an activist agent of change. We should not accept the world as it is, but use competition and the rule of law to effect change. Restrictions on international trade violate the principle of fostering competition. In the modern welfare state, subsidies to particular firms and industries do, also. Hayek emphasizes, "It is of the utmost importance to the argument of this book for the reader to keep in mind that the planning against which all our criticism is directed is solely the planning against competition--the planning which is to be substituted for competition." (Caldwell 2007, p. 90)
In chapter 4, "The 'Inevitability' of Planning," Hayek demolishes the arguments for planning. He observes that "aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective" (Caldwell 2007, p. 93). And consider his analysis of the argument that...
Hayek on The Road to Serfdom.
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