Friedrich von Hayek: The Road to Serfdom?

Friedrich von Hayek's Road to SerfdomFriedrich von Hayek is a huge figure in economics and of immense influence on neoliberalism, and reading this I was struck by just how deeply and completely neoliberalism goes as a theoretical framework. I know many would not agree with that (though many would), but Thatcher claimed him as her own and that is enough for me. There are also those conversations in the Mount Pelerin Society with Milton Friedman. It fascinates me that this resonance is true not just of the ideas, but also in the way language is used and in its underlying sense of victimisation, a sense that continues even as so many neoliberal policies have waxed victorious over Keynsianism across the world.

The Road to Serfdom was written in 1944; I found it so chilling to see the same arguments in so much vogue today used in the context of WWII, Hitler, and Stalin. The chill comes from the fact that so little of the rhetoric has changed in over sixty years, and that really, Hayek saw the world in the same stark black and white that George W. Bush did, and both benefited greatly from it. Below are what I believe to be some of the principle strands of thought found here that were entirely familiar with present day rhetoric:

  • Socialism inexorably leads to fascism, liberalism is the only alternative
  • Glorification of the individual but a fear of the masses
  • Necessity of limited democracy
  • Money as the measure of all things
  • Competition in a free market as the best regulator of society
  • Growing the total wealth rather than redistribution of wealth as the solution to poverty (trickle-down economics)
  • A return to ‘traditional’ individualist values
  • The sacredness of private property
  • The selfishness of organised labour
  • Necessity of government intervention to favour the market

What struck me most forcibly was undoubtedly this claim: “Few are ready to recognise that the rise of Fascism and Nazism were not a reaction against the socialist trends of the preceding period, but a necessary outcome of those tendencies” (p 4). This equation of socialism with fascism seems only to have grown through the years, you have only to witness the immense outcry against “Obamacare”. I wondered where the hell that came from, now I know.

Hayek sets Socialism up essentially as a straw man by first equating it with some brand of what I would call Stalinism (though I’ll never deny that too many calling themselves socialists supported many of these totalitarian ideas), and then insisting that any kind of government effort to achieve a more just world will lead to totalitarianism. To disagree with a critique of an Orwellian system of mind control is something I would never do; to claim that there are only two choices before us, totalitarianism or Hayek’s vision of liberalism, is equally absurd. But going back to the “Obamacare” debacle, that is clearly what many people think.

Hayek in some ways comes off as the more reasonable and kinder face of liberalism when you look through the ages; life for him is not brutal, nasty and short, and he insists that liberalism does not argue that all men are egotistic or entirely selfish (and I use ‘men’ deliberately, the only woman mentioned in the book is the poor plain girl with the futile wish to be a salesgirl in a shop). Men are simply limited in their knowledge and imagination, and it is impossible for them to agree on any but a handful of very general things. This agreement can never stretch to values of any kind. Sad but true.

Read on and there is a darker side to this. Side by side with the glorification of individual choice and freedom, there exists also the characteristic contempt for the masses. Hayek says on page 168:

Probably it is true enough that the great majority are rarely capable of thinking independently, that on most questions they accept views which they find ready-made, and that they will be equally content if born or coaxed into one set of beliefs or another. In any society freedom of thought will probably be of direct significance only for a small minority.

This of course means that any kind of mass movement requires organising the worst elements:”It is, as it were, the lowest common denominator which unites the largest number of people” (p 142). In spite of his statement that democracy cannot exist without capitalism, he wants it in its most limited form. He states tellingly: “We have no intention, however, of making a fetish out of democracy . . . . Democracy is essentially a means, a utilitarian device for safeguarding internal peace and individual freedom. As such it is by no means infallible or certain” (p 73).

Thus it is not ‘the people’ who should ultimately control things, but something else. And again there is no room for alternatives here, there is only a stark choice between totalitarianism and the market (never mind that people control and manipulate the market in myriads of ways, just look at centuries of stock market scandal). Hayek argues that in claiming man’s ability to regulate his life and society, one “fails to see that, unless this complex society is to be destroyed, the only alternative to submission to the impersonal and seemingly irrational forces of the market is submission to an equally uncontrollable and therefore arbitrary power of other men” (p 210).

Money becomes the measure of all things, the only way we can be motivated to our full potential and know what to value. He writes on page 129,

It is not merely that if we want people to give their best we must make it worth while for them. What is more important is that if we want to leave them the choice, if they are to be able to judge what they ought to do, they must be given some readily intelligible yardstick by which to measure the social importance of the different occupations…

This yardstick is salary. It is absurd to me that I should view a Wall Street trader as a thousand times more valuable to society than any teacher, fireman, nurse, or even the latest winners of the Nobel Prize in physics, but so Hayek argues.

Competition becomes the great regulator, the only possible regulator in the face of human fallibility. Hayek equates competition with justice in that neither favours one person over another, and success is based only on capacity and luck. Even he is forced to admit that this more true in theory than in fact given a system of private property and inherited wealth, but in spite of this, competition is the best we can hope for. And indeed, under a competitive system and with money as the measure of all things, we are able to find the perfect tool for recording all individual actions and guiding them, and that is prices.

So precise a tool is it, Hayek compares entrepreneurs to engineers watching the hands of a few dials and adjusting their activities to the rest of humanity. To rely on anything other than competition to regulate society, even for the best of ends, will inexorably result only in fascism as it substitutes a moral rule of law (controlled by a democratic majority and we’ve already seen where that will end given the lowest common denominator belief) for an arbitrary and predictable one. I’m beginning to understand the zealousness of neoliberalism’s proponents, it’s like a rewriting of the Lord of the Rings really, a saga of good against most absolute evil. And everybody hates fascism.

Rounding it up, we have trickle-down economics: “Perhaps no less important is that we should not, by short-sighted attempts to cure poverty by a redistribution instead of by an increase in our income, so depress large classes as to turn them into determined enemies of the existing political order” (p 214-15), and what is undoubtedly a good line: “It may sound noble to say: damn economics, let us build up a decent world–but it is, in fact, merely irresponsible” (p 215).

We have the return to traditional values:

If we are to succeed in the war of ideologies and to win over the decent elements in the enemy countries, we must first of all regain the belief in the traditional values for which this country stood in the past, and must have the moral courage stoutly to defend the ideals which our enemies attack (p 224).

The values are familiar too, as compassion and kindness are thrown out the window in favour of

independence, self-reliance, and the willingness to bear risks, the readiness to back one’s own conviction against a majority, and the willingness to voluntary co-operations with one’s neighbours (p 218).

Of course there is the sacredness of private property as the most important guarantee of freedom, not just for those who own it, but somehow for those who do not. Organised labour is bad and constraining capitalism only hurts everyone.

To the worker in a poor country the demand of his more fortunate colleague to be protected against his low wage competition by minimum wage legislation, supposedly in his interest, is frequently no more than a means to deprive him of his only chance to better his conditions by overcoming natural disadvantages by working at wages lower than his fellows in other countries (p 231).

I’ve read this so many times before it’s as though it has been copied verbatim into every report and article justifying the existence of exploitation around the world. The necessity of limited government intervention to favour the market is here too (which David Harvey would argue is one thing distinguishing neoliberalism from liberalism), as he argues strongly against a pure laissez-faire position, though you could argue that the interventions we have seen are rarely to make “the best possible use of the forces of competition as a means of coordinating human efforts”.

It’s not just ideas, but attitudes that have continued strong. The way that the right-wing always perceives itself as the underdog, as under attack. Hayek bemoans the fact that socialism is dominant while liberalism is in fact the motor of progress, so taken for granted that people can no longer recognise it. As he states, “It might be said that the very success of liberalism became the cause of its decline” (p 19). There might have been some truth when he was writing, but the rhetoric continues long after the years of Reagan and Thatcher completely turned it around.

There is also the same clarion call to sacrifice, “It is essential that we should re-learn frankly to face the fact that freedom can only be had at a price and that as individuals we must be prepared to make severe material sacrifices to preserve our liberty”, when the growing gap between rich and poor since these policies have become victorious make it so clear just whose sacrifice is required. It is hard to see why sacrifice should still be necessary after so many decades of it. The good times never arrived for most people I’m afraid.

The interesting things that don’t quite mesh with the neoliberal world today? He does admit that some kind of basic safety net may be necessary, even a good thing, as long as it doesn’t inhibit competition. There is also the railing against monopolies. Hayek argues that they also lead to totalitarianism, not quite purposefully but in effect. I think possibly he might not be happy with the giant corporations we see today, it’d be an interesting question and one I’d quite like to ask him. The outcome of policies self-described as neoliberal has, in effect, been the death of competition; I would claim that this is inevitable in a system where the only measure of value is wealth and the only regulatory mechanism is competition, but it would be interesting to hear Friedrich von Hayek’s response.

And the ultimate irony? He also states quite clearly that democracy works best in very small nations, smaller even than the UK…what would he make of America, the country which has done more to promote his views in theory than any other?

All this said, this book reads with a certain sort of integrity, written by someone who has struggled to some extent with ideas and how to bend them to create a better society. I only appreciated this after reading Milton Friedman.

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