Friday, December 3, 2010

Book Review: 'The Road to Serfdom' by Friedrich Hayek

The Road to Serfdom: Text and Documents, The Definitive Edition (2007)
Friedrich August Hayek (1899-1992 )

283 pages

Given the attention Friedrich Hayek's book The Road to Serfdom has recently received from conservatives, especially in the Tea Party movement since Glenn Beck praised it on his program during the summer of 2010, one could be forgiven for assuming that in the book Hayek presents himself as a standard-bearer for conservative thought, and insists on the need to dismantle government. In reality, is thought-provoking book provides a much more nuanced argument than some of his over-simplifying promoters would have people believe.

This new edition of the book was published in 2007, as part of a project to re-publish the entire, collected works of Hayek.  It carries the sub-title: Text and Documents, The Definitive Edition, and contains an introduction that describes Hayek's background, discusses the publishing history and common criticisms of the book, and 'sets the stage' a bit for the text, by describing the historical context in which the book appeared. The text itself has additional footnotes, many of which are used to give brief autobiographies of historical figures mentioned in the text who may not be as familiar to today's reader as they would have been to a reader in the 1940's. Also included are several other short texts dealing with the publishing of the original edition. The book deals primarily with political-economic philosophy, and so does not require a background in economics to understand the fundamental points; someone with an active interest in history, politics and economics will have no trouble following his arguments.

The book grew out of a memo (Nazi-Socialism) Hayek wrote in 1933, two years after he moved to England from his native Austria to take up a position at the London School of Economics. In the memo (reproduced in this edition of the book) Hayek argued that German Fascism, as created by the National Socialist party, was not "reactionary," as commonly thought, but rather "a genuine socialist movement," differing from "established socialist parties" by replacing "their internationalism and … cultural programme … influenced by liberal ideas" with an "anti-liberal" and "anti-rational" sentiment used to "[coerce] everyone's Weltanshauung into line with the ideas of the rulers" --- thus the reduction of the population to the 'Serfdom' of his title.  He saw fascist national-socialism as a natural outgrowth of socialism, and warned that many countries, struggling with the challenges of the modern world and enamored with the promises of socialism, "have been for a long time steadily following Germany ---albeit at a considerable distance" and risk eventually "following Germany in this last step [to totalitarianism] also." Over the balance of the 1930's and into the 1940's Hayek watched England in particular continue down the road to socialism, and he further developed the ideas presented in the memo, until, in 1944, he published The Road to Serfdom.

The fundamental argument that Hayek makes in The Road to Serfdom is that many countries in 1940's were moving steadily away from capitalism and toward socialism and that this would inevitably mean the transition from democratic governments to totalitarian regimes, and so the end of liberalism. In the original introduction, he stated that he "regard[ed] the writing of this book as a duty" to warn the public of the fate that awaited them under this transition.

Before describing his arguments, however, it is important to highlight several definitions that he himself found important to clarify in later editions of the book targeted to American audiences.

The first is his definition of socialism. In the introduction to the 1956 American edition, he notes that, when originally writing the book, his concern was for "hot socialism … that organized movement toward a deliberate organization of economic life by the state as the chief owner of the means of production." By 1956 he admits that while "hot socialism … is nearly dead in the western world," he remains worried that "a great many [people] still believe in measures which, though not designed completely to remodel the economy, in there aggregate effect may well unintentionally produce this result." He argues that "the Welfare State has largely replaced socialism as a goal of reformers" and that although "some of its aims are … practicable and laudable," there may be better "ways in which we can work toward the same goal."  Thus, although he has significant concerns about the movement toward the Welfare State, he is careful to distinguish between the Welfare State and socialism. In fact, the editor to this new edition of The Road to Serfdom points out that:

Now evidently, in the years since he wrote, the countries that Hayek was most concerned about (the Western European democracies and the United States), despite the rhetoric of their left-wing politicians, did not go to anything like complete central planning or full nationalization of the means of production. … If one confronts Hayek's logical argument … the subsequent paths of the western European democracies are not really tests of Hayek's thesis … the existence of such [welfare] states, and whatever successes they may or may not have had, does not undermine Hayek's logical argument from "The Road to Serfdom:" a welfare state is not socialism.

Also important are his definition of liberalism, and its distinction from conservatism. In the introduction to the 1956 American edition, he writes: "… there is one point of phraseology which I ought to explain here to forestall any misunderstanding. I use throughout the term "liberal" in the original, nineteenth-century sense in which it is still current in Britain." Thus he considers himself a liberal in the classical sense of supporting limited government and the primacy of individual liberty. He states that in "current American usage it often means the opposite of this … [having] come to mean the advocacy of almost every kind of government control."

He then goes on to clearly and strongly distinguish liberalism from conservatism:

… true liberalism is still distinct from conservatism, and there is a danger in the two being confused. Conservatism, though a necessary element in any stable society, is not a social program; in its paternalistic, nationalistic, and power-adoring tendencies it is often closer to socialism than true liberalism; and with its traditionalistic, anti-intellectual, and often mystical propensities it will never, except in short periods of disillusionment, appeal to the young and all those others who believe that some changes are desirable if this world is to become a better place. A conservative movement, by its very nature, is bound to be a defender of established privilege and to lean on the power of government for the protection of privilege.

He in fact went on in a later book to include an essay entitled Why I Am Not a Conservative.

Hayek divides the book into a series of relatively short chapters, each addressing aspects of the movement from liberal, capitalist, democracies through to the collectivist, state-run economies of socialism and eventually to totalitarianism. In the initial chapters he examines the importance of liberalism in opening the way to economic growth in the 1800's, why the movement away from the individualist philosophy of liberalism was in full swing in the 1930's, and in particular what had become so attractive about socialism in its place. He argues that a significant role in the shift of support towards socialism was the desire for more social justice, and frustration at the slow progress being made in this regard in the liberal, capitalist structure. (Although he also makes that argument that the business class can be equally socialist in their attempt to promote government regulation that protects their own interests at the expense of competition and free markets; thus his dedication to open the book: "To the socialists of all parties".)

Hayek, as will be shown later, supported at least the most basic goals of those frustrated with social injustice, but he feared that people who support socialism in the hope of eliminating social injustice incorrectly believe that they can build a socialist society (that is, one in which a planned economy eliminates such injustice), without sacrificing what he views as the critical liberal value of individual freedom. The middle several chapters describe his views of why socialism and liberalism cannot co-exist. He argues, for example, that a planned economy once in place will lead to the following sequence of events: the loss of individual freedom, firstly in the economic sphere as individuals will need to be coerced to fill the jobs that are available in the plan; the need to impose necessarily arbitrary rules to govern such a society, rules that will be distinct from what he calls the Rules of Law that exist in a free country and that he describes as "known rules of the game [within which] the individual is free to pursue his personal ends and desires"; the need to enforce a standard "Weltanshauung" (roughly, world outlook) on the individual, so that they do not resist the needs of society (to support the economic plan); the rise of the worst of society (those with the least inhibition to exercising control over others) will naturally move into positions of power; and, finally, the unavoidable descent into a totalitarian society. This summary greatly simplifies his presentation, in which he demonstrates his points using examples from developments in Germany over the century leading up to the Second World War, and what he saw as the similar direction being followed in Britain and other countries in the middle of the 19th century, but it gives the fundamental path he sees, of The Road to Serfdom.

In the book, Hayek argues vigorously that the competitive and individual aspect of capitalism is critical to not only a growing economy but also a free society. In his view, the economic injustices that socialists try to  combat by way of a planned economy are not only best addressed by the liberal, capitalist democracy he champions, but that significant progress has already been made in large part due to the advantages of this system. He does allow that "the progress [under liberal, capitalist democracies] … was necessarily slow, and .. for the immediate improvement liberalism had to rely largely on the gradual increase of wealth which freedom brought about…. It came to be regarded as a "negative" creed because it could offer to particular individuals little more than a share in the common progress. … Because of the success already achieved, man became increasingly unwilling to tolerate the evils still with him which now appeared both unbearable and unnecessary." Thus, the very successes of liberalism and capitalism drove good men to want to move more quickly to an even more just society, and to consider socialist, planned economies as the answer.

A critical element in Hayek's argument, however, is that there is an important role for government to play in the economic affairs of a country. He makes clear his disdain for laissez faire economic policy: "Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all the principle of laissez faire." And he argues for the need for the government to play a role in regulating a capitalist society: "In no system that could be rationally defended would the state just do nothing. An effective competitive system needs an intelligently designed and continuously adjusted legal framework as much as any other." Still later in the book he adds:

It is important not to confuse opposition against [central] planning with a dogmatic laissez faire attitude. The liberal argument is in favor of making the best possible use of the forces of competition as a means of coordinating human effort, not an argument for leaving things just as they are. … It does not deny, but even emphasizes, that, in order that competition should work beneficially, a carefully thought-out legal framework is required and that neither the existing nor the past legal rules are free from grave defects.

In the introduction to this edition of the book, in fact, the editor points out that:

[Hayek] repeatedly emphasized in his talks before business groups that he was not against government intervention per se: "I think what is needed is a clear set of principles which enables us to distinguish between the legitimate fields of government activities and the illegitimate fields of government activity. You must cease to argue for and against government activity as such."

Hayek also states that government can address economic injustice, environmental concerns and other issues in ways that do not lead down the path totalitarianism, claiming: "Nor is the preservation of competition incompatible with an extensive system of social services" Thus, he argues, at various points in the book:

To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition.

… there can be no doubt that some minimum of food, shelter and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody …. Nor is there any reason why the state should not assist the individuals in providing for these common hazards of life against which, because of their uncertainty, few individuals can make adequate provision.

There is, finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them … the very necessary efforts to secure protection against these fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom.

The successful use of competition as the principle of social organization precludes certain types of coercive interference with economic life, but it admits of others which sometimes may very considerably assist its work and even requires certain kinds of government action. … Any attempt to control prices or quantities of particular commodities deprives competition of its power … [but] this is not necessarily true, however, of measures merely restricting the allowed methods of production, so long as these restriction affect all potential producers equally…. Though all such controls of the methods of production impose extra costs … they may be well worth while.

The key in Hayek's point of view was that when the state steps in to regulate the economy in any way, whether to strength the competitive climate or correct social injustices, that it do so under what he refers to as the Rule of Law. By the Rule of Law he means that a clear and universally applicable set of laws are put in place and enforced, that do not favor one individual over another, and so provide for a competitive and free marketplace. If the Rule of Law is being followed by a government, it means that an "individual can foresee the action of the state and make use of this knowledge … in forming his plans, … and that the individual knows precisely how far he will be protected against interference from others." Thus, in the example quoted earlier, the state can "prohibit the use of certain poisonous substances" as long as the prohibition applies to all, so that all can operate with the knowledge of this prohibition and account for it in their economic dealings.

In The Road to Serfdom, Hayek presents a compelling case, to readers from across the political spectrum, for the critical role that a competitive, capitalist economic environment plays in maintaining individual freedom, and more broadly a democratic state. He argues that while socialists who are intent on implementing a  planned economy, with government control of the means of production, may have the best intentions in their desire to rid the world of social and economic injustice, they are mistaken in believing that they can create such a state while maintaining a free and democratic society; the socialist path must eventually lead to totalitarian societies. In his view, only liberal, capitalist, democratic societies have been and can continue to be effective at improving the social and economic 'wealth' of the average person, slow though the progress may at times be.  At the same time he makes clear, however, that there is an important and active role for government to play, in regulating capitalism to maintain the necessary conditions for a competitive and free marketplace, in addressing environmental concerns and in maintaining some basic standard of living, as long as the rules the government put in place are applied in such a way that they do not limit the competitive ability of the individual.

Read quotes from this book

Other reviews / information:

The Carolina Review

On YouTube, a video cartoon from the 1940's, depicting Hayek's arguement that socialism invevitably leads to totalitarianism; oversimplifies the discussion in his book, but interesting to see. (From there, links to video interviews of Hayek.)

Lecture by Lord Robert Skidelsky, The Road to Serfdom Revisited, at the Manhattan Institute for Policy Research.

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