Revisiting the Road to Serfdom
Friedrich Hayek’s 1944 The Road to Serfdom is firmly established as one of those books you’re supposed to read.
But on the spectrum of works about economics, it probably falls more on the Wealth of Nations and Das Kapital side than on the Economics in One Lesson or even Freakonomics side. If its style and language appear somewhat dated, that’s because it was published in 1944. It is also focused on conditions to be found in prewar England and Germany, which takes the book into questions of not just economics but politics too. Yet Hayek’s book has stood the test of time, because its key messages are not constricted by the politics of the moment or passing economic fashions. The Road to Serfdom asks fundamental questions about how we as humans can live together, not just tolerably well, but in a way that allows us to thrive.
We all are, or at least were until recently, certain of one thing: that the leading ideas which during the last generation have become common to most people of good will and have determined the major changes in our social life cannot have been wrong. We are ready to accept almost any explanation of the present crisis of our civilization except one: that the present state of the world may be the result of genuine error on our own part and that the pursuit of some of our most cherished ideals has apparently produced results utterly different from those which we expected. (10–11*)
Planning to Fail
Even at the time Hayek was writing this, the world seemed impossibly more complex than it had been only a generation earlier. The focus of the intellectual classes, and indeed many of the governing classes, was to bring order to the chaos of complexity. Complexity was to be conquered by planning.
The most ardent of these dreams of order would be “realized” in the multiyear plans of China and Russia, but the Germany of the Nazis wanted to impose order not just on its own country but on all of Europe. Yet not only has history proved all such planning to be folly, but Hayek even in the early 1940s saw that it was individuals, who comprised the marketplace, as the only answer to managing, not controlling, the chaos of change and innovation:
Far from being appropriate only to comparatively simple conditions, it is the very complexity of the division of labor under modern conditions which makes competition the only method by which such co-ordination can be adequately brought about. (48)
Further on, he adds:
The co-ordination of the multifarious individual efforts in a complex society must take account of facts no individual can completely survey. . . . 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. In his anxiety to escape the irksome restraints which he now feels, man does not realize that the new authoritarian restraints which will have to be deliberately imposed in their stead will be even more painful. (205)
The technophiles of today might wave away the failed planning boards of the past and assure us that if only Hayek knew about Artificial Intelligence, AI, his worries would have been unfounded, but however much AI can allegedly help us figure out what movies to watch, what books to buy, or even which roads to take while driving, it still suffers from the same limitations that human planners do: it must decide for us instead of allowing us to decide for ourselves, and hence must make decisions that arbitrarily and adversely affect others. It’s not even an exchange of liberty for something like security. It’s just a trade for convenience. The thinking man doesn’t need the dystopias of The Matrix or The Terminatorto know that abdication of the rhythms of daily life to machines may make our lives easier, but undermines what was once a basic tenet of Western society: man should have liberty of action. Today’s addendum reads: “But anything you can do, machines can do better.” Alas, conscience and deliberation are sold separately.
Planning for Freedom
A regular feature of the news in the United States is the (un)employment report. This is seen as a vital statistic that relates the pulse of the economic health of the country. Most Americans can (and do) debate the usefulness of this metric, but few, if any, realize that it’s the output of a collectivist mind-set.
The common features of all collectivist systems may be described, in a phrase ever dear to socialists of all schools, as the deliberate organization of the labors of society for a definite social goal. (56)
If order is to be brought out of chaos, says the collectivist, it can be done only by an ever-stronger state. Over time that state may give reports of that ordering through statistics like employment numbers. The conceit is that the government, not individuals or society, can then act (or plan) accordingly to “fix” the numbers in a way that is politically pleasing to the masses.
Both the mind-set and the statistics are out of joint with reality, and the tragedy is that Hayek pointed this out half a century ago:
The question is no longer how we can make the best use of the spontaneous forces found in a free society. We have in effect undertaken to dispense with the forces which produced unforeseen results and to replace the impersonal and anonymous mechanism of the market by collective and “conscious” direction of all social forces to deliberately chosen goals. (21)
We only have to look a decade back to see what the results of state-sponsored “governance” of one sector led to. The 2008 financial crisis, which had many fathers but only one guarantor: the taxpayer. The mortgage crisis was created by the very banks which were unleashed by the repeal of Glass-Steagall which allowed them to play with house money…the house being the taxpayer funded Treasury, and the obvious moral hazard being the principle of Too Big To Fail. Their multiple gambles paid off, and companies like Goldman Sachs unbelievably collected on both sides of their bets: the credit default swaps that they took on their own gambles against their investors, and in the form of bailout money from the taxpayers. There were no partisan squabbles when it came time to write out the checks for the banks either, and this too was foreseen by Hayek: “…the increasing similarity between the economic views of the Right and Left…” (Hayek 182)
The Economy Is Not Enough
But in an interconnected world, regulation of one sector necessarily leads to the regulation of others, and in order to coordinate the regulations, the state puts itself above everything. Not content with planning the economy, it must plan our lives:
Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends. (92)
The state ceases to be a piece of utilitarian machinery intended to help individuals in the fullest development of their individual personality and becomes a “moral” institution — where “moral” is not used in contrast to immoral but describes an institution which imposes on its members its views on all moral questions, whether these views be moral or highly immoral. (77)
Though Hayek constantly had in mind Nazi Germany as he composed his thoughts, could he have foreseen the state regulating who could be married, who could use which toilets, and whether the military should pay for sex-change operations? Hayek saw the dead-end road:
Surely we have learned that knowledge cannot create new ethical values, that no amount of learning will lead people to hold the same views on the moral issues which a conscious ordering of all social relations raises. (113)
Even beyond the nightmares of state control, we are in a new era, that of Rollerball, in which the powerful entities are not faceless states, but large multinational corporations. It has only been a short time since Apple, YouTube, and Facebook simultaneously removed the channels of Infowars from their platforms, the coordination belying any semblance of objectivity on the matter. We must be told what to think, what is right thinking, and must not even be allowed to see alternative points of view. Who needs state regulation when large multinationals are willing to do the dirty work for you? Planning morals comes swiftly after planning economics.
Lessons Not Learned
At least as far as Germany goes, Hayek has only been a Cassandra, his perspicacious conclusions ignored. Far from fleeing National Socialism, Germany has simply given it new clothes. An apt description for the experience of the modern German citizen can be read in Yuval Noah Harari’s Sapiens:
The state and the market are the mother and father of the individual, and the individual can survive only thanks to them. The market provides us with work, insurance and a pension. If we want to study a profession, the government’s schools are there to teach us. If we want to open a business, the bank loans us money. If we want to build a house, a construction company builds it and the bank gives us a mortgage, in some cases subsidized or insured by the state. If violence flares up, the police protect us. If we are sick for a few days, our health insurance takes care of us. If we are debilitated for months, national social services steps in. If we need around-the-clock assistance, we can go to the market and hire a nurse — usually some stranger from the other side of the world who takes care of us with the kind of devotion that we no longer expect from our own children. If we have the means, we can spend our golden years at a senior citizens’ home. The tax authorities treat us as individuals and do not expect us to pay the neighbors’ taxes. The courts, too, see us as individuals, and never punish us for the crimes of our cousins.
Despite his dark forecasts, Hayek maintained a basic optimism, founded in an unwitting conservatism. (I say “unwitting” because in the 1972 foreword to the reprint of his work he rejected the label, referring to conservatism as “paternalistic, nationalistic, and (with) power-adoring tendencies.”)
It is essential that we should re-learn frankly to face the fact that freedom can be had only at a price and that as individuals we must be prepared to make severe material sacrifices to preserve our liberty. (133)
If it is up to individuals to restore liberty, they need to start at the local level by restoring an organic order through intentionally not planning. When Hayek says, “Nowhere has democracy ever worked well without a great measure of local self-government,” he is agreeing with the ideas of Pope Pius XI, who himself took a dim view of totalitarian regimes and addressed them in his encyclical Quadragesimo Anno:
As history abundantly proves, it is true that on account of changed conditions many things which were done by small associations in former times cannot be done now save by large associations. Still, that most weighty principle, which cannot be set aside or changed, remains fixed and unshaken in social philosophy: Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do. For every social activity ought of its very nature to furnish help to the members of the body social, and never destroy and absorb them.
So, while times have changed, the best economic ideas have not, nor have viable solutions. Sound economics always begins with the effort and enterprise of the individual, subject to an enduring moral order, which leads to the organic growth that can nourish future generations. We would do well not to trust in princes, or their assistants the multinationals, who would have us build new Towers of Babel. Rather, we should take to our families, neighborhoods, and communities to rebuild our own orders as best we can, for as long as we can.
*The numbers cited in the Hayek excerpts are page numbers taken from the 1976 University of Chicago Press Edition edition of The Road to Serfdom.