If you believe that stripping people of their freedoms and enslaving them makes for a great society, then you’ll find Hayek’s “The Road To Serfdom” to be a wonderful ‘how-to’ manual. Otherwise, if you think people should be left to maintain their individual rights and freedoms and have minimal constraints laid upon them, then this work will help you to recognize the threats - under the guise of justice and equality - that gather against them.
Hayek’s book can be read from three perspectives: as a piece of history, as a piece about history, and as a reasoned argument on why socialism fails.
As a piece of history, Hayek (Nobel prize in economics 1974) wrote this book during the second world war while living in England. Having grown up and been educated in Austria, and teaching at the London School of Economics, he was concerned that the British (and the Americans) were moving toward post-war socialism. This was his warning of the dangers that socialism posed.
That Hayek had personally observed the development of socialism in Austria and Germany, this book is much about the history of socialism, from its origins in the early 19th century up to the establishment of the totalitarian governments of Germany, Italy, and Russia. A difficulty for current readers is that in much of what Hayek refers to, he assumed that readers of the 1940's understood implicitly. Wading through this now obscure history, however, provides interesting insight into the political discourse of the time, and is thus in its own right, a piece of history.
As a reasoned argument with observations on how socialism destroys liberty and fails economically is what I'll try to cover in this review.
Socialism encompasses the ideas of social justice, equality and security. These are its ultimate goals. The methods of how to obtain them are seldom detailed by its adherents, but generally what is required and expected is the abolition of private property, the abolition of the private ownership of the means of production, and the establishment of a centrally planned economy that distributes wealth equitably.
The central attraction to socialism is “the potential plenty for all.” The belief is that with the level of technology and wealth we have achieved we can now, with proper planning, create even greater wealth and rapidly and distribute it equally to all. What is forgotten - or drowned out in the demonization of capitalism - is that this current wealth and technology was achieved in the first place through the capitalist, free market system.
A dilemma immediately presents itself in the process of trying to achieve this justice and equality. The problem is that fairness of outcome cannot be achieved by the application of a universal rule of law. This is so because some people, due either to their natural talents or their preposition in life, will be better off and will do better than others. Laws under socialism may start with an equal application to all, but soon will evolve to favor or disfavor particular groups, ultimately crippling the universal rule of law with exceptions, and throwing decision specifics to politicized judges or other authorities to achieve ‘equality of outcome.’ The result is the destruction of individual rights and the rule of law.
Economic planning cannot help but interfere with political life and curtail individual freedoms. Transferring property and the means of production to state ownership is the ultimate form of a liberty robbing monopoly. Freedom of consumption becomes limited to what the state is willing or able to produce. Freedom to work in jobs of one’s own choice is limited by the state’s determination of the makeup of the workforce. The disaffected - those who have lost property, those stuck in unfulfilling jobs, those who cannot obtain the goods they desire - will find that freedom of speech is also not tolerated. Hardly any aspect of life will not be affected.
State ownership of the means of production - even limited state ownership - places the state in the position where, in effect, it determines all people’s incomes. The close interdependence of all economic phenomenon makes it impossible to limit the degree of planning. The livelihood of individuals will no longer be determined by the impersonal forces of free markets, but by the deliberate decisions of state authority. In socialism, everyone is to receive their due according to an absolute, universal standard of right, but the political difficulties in determining and enforcing a common view of ‘the right’ is insurmountable in large heterogeneous groups. The more security offered to any one group necessarily takes freedoms from others, contributing more to the legions of the disaffected.
One of the attractions of socialism is that it promises to eliminate the uncertainties of market economies, and thus provide ‘freedom’ from the vagaries of economic cycles. Enforcing security, however, from price fluctuations leads to inefficiencies and stagnation in the economy, as price discovery and labor flexibility is necessarily inhibited. This impulse for security leads directly to a loss of individual liberty along with a loss of economy vitality.
In a socialist system with income security, inefficiency and stagnation, individuals will not sustain their best productivity, thus burdening the economy further and sending society into an ever deepening malaise. The resulting degradation in the economy may result in an equality of benefits, but will also result in an equal sharing of greater poverty.
Motivating workers to maintain productivity is an ever present problem, as is the containment of the less than virtuous persons. The only power to be had in a socialist society is to share in the coercive power of the state. Clearly, becoming a member of a group that can influence or control the state machinery is the only avenue available to improve one’s position in life, a situation that naturally attracts the less than virtuous. A tug-of-war of interest groups ensues. Who will plan from whom? The poorest and most numerous are most likely to lose out, while corruption, graft, and a new ruling elite takes root.
There is the belief that because socialism springs from high moral beliefs that it will produce leaders of high moral character. Good results, however, do not necessarily follow from good intentions. Necessarily, the talents required to lead and administer a socialist system are the least desirable and least virtuous. The argument that current and past socialist failures is due to the wrong people fomenting them, and the argument continues that future socialist systems will succeed with the right persons in the lead. This is categorically wrong - as no political system should be dependent upon the talent and virtue of individuals. Even a democratically elected leader, with the intention of delivering on socialist goals, will either have to eventually give up his goals, or assume dictatorial powers to achieve them. For a dictator, he will have to either abandon standard moral values or face failure of his program. It is the unattainable goals of socialism that produces the heinous leaders that populate the history of the effort, and will continue to do so in the future.
Bringing socialism into being requires making everyone believe in the plan and goals of the system. Control of the public narrative, and suppression of private thought is necessary for the central authority to maintain power. The allegiance to truth is an early victim - and as respect for truth is the foundation of all morality, this ultimately leads to the debasement of all moral authority of the socialist system. Capture by the central authority of the entire knowledge industry, from news outlets, to opinion leaders, to the education system is a necessity. Even disinterested, apolitical knowledge, such as the pursuit of science and innovation is stifled; entertainment is closely monitored. The irony is that the impulse of collectivist thought is to guide social development through reason, yet it has the ultimate effect of destroying reason.
Power vested in the hands of individuals is feared and detested by those who advocate socialism. Their solution, to this seeming problem, is to take power away from individuals and create a new and greater center of power, a concentrated power unimaginable under any system of individual liberty. No one in an individualist, free market society could ever wield the power of a socialist planning commission. To define, implement, and administer central planning, a centralized authority is required, and ultimately, centralized authority leads to dictatorship.
Forgetting the devastation socialism causes to the life of the individual and consequent damage to the vitality of society, central planning can never direct the economy to equitably provide for all. This is evident simply on the basis that the centralized collection and analysis of the massive amount of information required is impossible. The residue of legitimacy left of socialism - the belief that it will secure a more just and equitable distribution of wealth - is false. Wherever greater information is gathered, greater wealth and privilege follows, be it capitalist or socialist. Self-sacrificing virtue cannot be relied upon to distribute goods and services equitably, and in fact it is structurally impossible.
Hayek does not make a concerted effort to promote capitalism or free market economies, this he assumes has been done adequately by others, but he does on occasion interject observations on how free markets solve various problems better than planned economies. Hayek’s view is that from the limitations of our money based economies, we are made to feel the restrictions of our relative wealth, which leads to the socialist impulse. However in Hayek’s opinion, money, and the free exchange of goods and services, is one of the greatest innovations ever created to promote freedom and alleviate poverty.
The only explanation for the current and apparently rising interest in socialism, is the general lack of understanding of what it is and where it leads. Hayek’s “Serfdom,” sixty-five years on, is for those willing to take on the challenge, a great antidote for this affliction
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