By Chet Yarbrough
The Road to Serfdom
By Friedrich A. Hayek
Narrated by William Hughes
Hayek wrote “The Road to Serfdom” during WWII. His observation was that Nazi Germany and its rise to power had a direct relationship with the growth of socialism, a belief that central planning and control are keys to national prosperity. Hayek suggests that America and Great Britain suffer a similar strain of belief. He argues that central planning and control leads to totalitarianism. “The Road to Serfdom” is a prescient vision of the dangers of socialism.
The dilemma of government is in drawing the line between central planning and public service. It is particularly complicated by what the intent of Article 1, Section 8 of the Constitution meant when it said a part of the purpose of government is to “promote the general welfare”
It seems common that authors of popular, sometimes classic, books are often interpreted by people who have not read them. Authors like Harriet Beecher Stowe, Richard Wright, Ayn Rand, Vladimir Nabokov, and Friedrich Hayek are frequently commented on but content often becomes a surprise to actual readers.
Friedrich Hayek’s book is frequently lauded by American conservatives and vilified by American liberals.
In truth, Hayek is a seer for both ignorant American’ conservatives and liberals; i.e. Hayek is neither a spokesman for modern American conservatism or liberalism but a strong proponent of classic liberalism.
To be clear, today’s conservatism and liberalism are not defined in the same way Hayek defines them in his 1944 publication. Liberalism in 1944 meant belief in freedom of choice and endorsement of laissez-faire economic principles. 1944 conservatism meant a rejection of the principles of equality with an aristocratic, “rank has privileges”, ideology.
Contrary to Hayek’s conservatism, modern conservatives and liberals endorse subsidization of private enterprise. Subsidization comes from tariffs, tax incentives, and other preferential treatment for private business and industry.
Principles of equality and laissez-fair economic principles are less doctrinaire in the 21st century because American political parties blur the difference. Modern liberals are closely associated with government regulation and intervention but not necessarily laissez-faire principles.
Modern conservatives are opposed to government in most forms of regulation and intervention, but only in principle; not in practice. Modern conservatives, as well as liberals, endorse subsidization of private enterprise. Subsidization comes from tariffs, tax incentives, and other preferential treatment for private business and industry.
Contrary to a wide perception that John Maynard Keynes (a liberal economist in today’s parlance) denigrated “The Road to Serfdom”; Keynes, in fact, praised it. John Maynard Keynes believed in government intervention when a state’s economy is in crisis.
According to Thomas Hazlett in the July 1992 issue of “Reason Magazine”, Keynes wrote “In my opinion it (Road to Serfdom) is a grand book…Morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in deeply moved agreement”.
Though Keynes praised “The Road to Serfdom”, he did not think Hayek’s economic’ liberalism practical; i.e. Keynes infers that Hayek could not practically draw a line between a safety net for the poor, uninsured-sick, and unemployed (which Hayek endorsed) while denying government intervention in a competitive, laissez-faire economy.
When businesses have an unfair advantage that denies competition, Hayek suggests government regulation is required.
Where modern conservatives get “The Road to Serfdom” wrong is where Hayek writes that government has an important role in a nation’s economy that goes beyond a simplistic notion of laissez-faire.
Where modern liberals misunderstand “The Road to Serfdom” is where Hayek explains that freedom of choice is essential within the bounds of safe pursuit of economic success. When human safety issues from uncontrolled industrial pollution threatens the safety of society (which most modern scientific opinion calls global warming) Hayek writes government intervention is necessary.
After listening to “The Road to Serfdom”, one cannot help but believe that Hayek would be as appalled by “private” industry’s greed in the 21st century.
Hayek wrote that big business is not bad in itself but big business that fails to compete on a level playing field because of government subsidy, through tax concession and special treatment, should be regulated by government to insure fair play.
In the face of overwhelming evidence to the contrary, Trump denies the reality of global warming.
One is compelled to agree with Hayek when he observes that government programs interfere with free choice when government officials create social programs they think are good for someone else. Hayek is not saying that government should not care for the poor, work-disabled, or technologically unemployed. He writes: “Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong.”
Hayek goes on to suggest that technological change that causes unemployment warrants government assistance. The danger Hayek tries to make clear is that government interferes with free choice when social programs try to create false equalities.
BREAD LINES IN NEW YORK 1933–Hayek is not saying that government should not care for the poor, work-disabled, or technologically unemployed. He writes: “Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong.”
Hayek is acknowledging a role for government. The role is to regulate private enterprise in those areas where freedom of choice or equal opportunity is infringed upon.
If insurance is not available to all in a land of prosperity, then government has a role in creating a program that will offer insurance to all. Hayek’s only caveat is that the insurance be offered as an affordable, free enterprise, and individual choice; not as an entitlement.
Hayek opposes government programs that interfere with free competition among similar businesses.
The weakness of Hayek’s argument is in idealization of humanity; i.e. human nature is that leaders in government and the private sector will drive for advantage. In the case of one country, that advantage may theoretically be mitigated by impartial government regulation but, in a world of sovereign nations, power is inherently limited.
If China wants to subsidize steel exports, American options are limited to creating import tariffs that further distort market competition. This is the mistaken route that President Trump has taken. Further, Hayek’s idealization presumes that politicians cannot be bribed, human beings are not prejudiced, populations have an equal opportunity to succeed, and humanity is inhumanly perfect when left in a state of grace.
Hayek correctly points out the importance of money as a measure of success in a free society. However, in today’s America, “Moneyocracy” has become an American form of government. “Moneyocracy” is the aristocracy of the 21st century that elects public officials, denies equality of opportunity—for education, economic mobility, and employment.
The gap between the rich and poor is widening by degrees that may bankrupt America because of an enlarging safety net for the old, the sick, the unemployed, and the unemployable.
The field of competition for free enterprise is becoming more unequal. Hayek observes that government intervention slips into socialism when free enterprise is artificially manipulated. The fear is that America will begin looking for their Hitler to manage a sick economy.
Conservatives that rant against government regulation based on Hayek’s “Road to Serfdom” are as incorrect as liberals that argue Hayek wrote against social government programs for the poor, disabled, and unemployed.