JohnEngelman
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- Jan 8, 2022
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During and after the Second World War socialism was a popular ideal in the West. It was clear to many that socialism had enabled the Soviet Union to industrialize fast enough to build the weapons the Soviets needed to defeat the Nazi invasion. (The human cost of that industrialization was not yet sufficiently clear.) It was also clear that reform in a socialist direction had ended the Great Depression in the United States and enabled American industry to produce even more weapons than Soviet industry.
Consequently, when F.A. Hayek’s The Road to Serfdom was published in 1944 many educated people in the West responded with incredulity, and even anger. How could someone who wrote so well have so many discredited ideas?
Business owners and business executives, on the other hand, were grateful that someone so articulate had championed their economic interests.
Since 1944 the economies of the western democracies have moved to the left, particularly with the adoption of public health care. Nevertheless, the intellectual consensus has moved to the right. Consequently, much of The Road to Serfdom reads like something that could have been written today by a moderate Democrat.
To begin with, Hayek opposes laissez faire capitalism. This comes as a shock to those libertarians who urge me to read his book without having read it themselves. (When reading Hayek one should realize that when he mentions “liberals” he means nineteenth century liberals, or contemporary economic conservatives.)
For these libertarians I am happy to quote from Chapter 1, “The Abandoned Road,” “Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez faire.”
Then on Chapter 3, “Individualism and Collectivism,” he writes, “It is important not to confuse opposition against this kind of planning with a dogmatic laissez faire attitude.”
And on Chapter 6, “Planning and the Rule of Law,” he writes, “the term ‘laissez faire’ is a highly ambiguous and misleading description of the principles on which a liberal policy is based.”
These passages come from my fiftieth anniversary edition. They can be found on pages 21, 41, and 89. Read them yourself.
Since the publication of The Road to Serfdom, Margaret Thatcher’s statement about capitalism that “there is no alternative,” has become the reluctant consensus of the democratic left. Nevertheless, within capitalism there are alternatives to the casino capitalism that prevails in the United States, where the odds favor the house. Some of the reforms Hayek recommends have become part of the status quo. Some are needed now.
Hayek’s most valid insight is that an advanced economy needs people in commanding positions who are willing to take risks, and it needs many precise decisions to be made regarding price and attribute. Socialism enabled the Soviet Union to quickly develop the industry that enabled the Soviets to produce the weapons that defeated Nazi Germany. Nevertheless, the Soviet economy was deficient in producing consumer goods.
Everyone can agree on what is a successful weapon. A tank should be fast; it should have armor that resists anti tank weapons; it should have a gun powerful enough to destroy enemy tanks and enemy fortifications. In a statement made in private, Adolf Hitler revealed how disturbed he was when he learned that one factory in the Soviet Union produced more tanks every year than every German factory.
It is generally acknowledged that the Stalin tanks of the Soviets could outperform the Tiger and the Panther tanks of the Germans, which in turn could outperform the Sherman tanks of the Americans.
However, the Soviets never produced a car that could compete on the international marketplace. The Germans could with the Volkswagen and the Mercedes.
There is no consensus about what constitutes a good automobile. Some consumers want a car that can go from 0 to 60 miles per hour in a few seconds. Other consumers want fuel economy. When it comes to what makes a car beautiful, there is even less agreement. The same can be said about other consumer goods. A consumer good with a new feature may sell well. It may hardly sell at all.
Decisions about what consumer goods to produce, how to produce them, and how much to charge for them, are better made by many competing companies, than by government departments. The leaders of the Soviet Union did not learn this quickly enough. The Soviet Union fell. The leaders of Communist China did learn this in time. Much of what you buy in department stores is made in China.
Hayek is less insightful when he warns that democratic socialism has a tendency to devolve into totalitarianism. The closest approximation to democratic socialism can be seen in Scandinavian Social Democracy. It is difficult to think of nations less likely than Sweden, Norway, and Denmark to follow someone like Vladimir Lenin or Adolf Hitler.
Totalitarianism is what may happen to a nation that has been severely traumatized. Totalitarian dictatorships in Russia, Germany, and China resulted from the devastation of two world wars, not from the popularity of democratic socialism.
Hayek’s useful recommendations are likely to surprise libertarian ideologues who revere him without reading The Road to Serfdom. He is in favor of government work projects during periods of severe and durable unemployment. He thinks the government should assist those whose skills have become obsolete because of technical advances. He supports environmental protection, and conservation.
Public opinion surveys indicate that in the United States socialism is becoming a more popular ideal, especially among the young. This is not because Americans preferring socialism to capitalism have not read The Road to Serfdom. It is because capitalism is not working for those Americans. Not only are American paychecks shrinking, so are cubicles and seats on airlines. Nevertheless, the rich get richer. A natural tendency of capitalism is to accumulate wealth at the top. One does not find that insight in The Road to Serfdom. One finds it in The Communist Manifesto. Political thinkers should be read for insight, rather than doctrine.
In his review of The Road to Serfdom George Orwell wrote, “The trouble with competitions is that somebody wins them.” The more serious trouble is that most people lose them.
Emile Durkheim wrote, “Socialism is not a science…it is a cry of pain.” Politicians that revere The Road to Serfdom without understanding it are likely not to listen to that cry, to the peril of their careers.
Consequently, when F.A. Hayek’s The Road to Serfdom was published in 1944 many educated people in the West responded with incredulity, and even anger. How could someone who wrote so well have so many discredited ideas?
Business owners and business executives, on the other hand, were grateful that someone so articulate had championed their economic interests.
Since 1944 the economies of the western democracies have moved to the left, particularly with the adoption of public health care. Nevertheless, the intellectual consensus has moved to the right. Consequently, much of The Road to Serfdom reads like something that could have been written today by a moderate Democrat.
To begin with, Hayek opposes laissez faire capitalism. This comes as a shock to those libertarians who urge me to read his book without having read it themselves. (When reading Hayek one should realize that when he mentions “liberals” he means nineteenth century liberals, or contemporary economic conservatives.)
For these libertarians I am happy to quote from Chapter 1, “The Abandoned Road,” “Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez faire.”
Then on Chapter 3, “Individualism and Collectivism,” he writes, “It is important not to confuse opposition against this kind of planning with a dogmatic laissez faire attitude.”
And on Chapter 6, “Planning and the Rule of Law,” he writes, “the term ‘laissez faire’ is a highly ambiguous and misleading description of the principles on which a liberal policy is based.”
These passages come from my fiftieth anniversary edition. They can be found on pages 21, 41, and 89. Read them yourself.
Since the publication of The Road to Serfdom, Margaret Thatcher’s statement about capitalism that “there is no alternative,” has become the reluctant consensus of the democratic left. Nevertheless, within capitalism there are alternatives to the casino capitalism that prevails in the United States, where the odds favor the house. Some of the reforms Hayek recommends have become part of the status quo. Some are needed now.
Hayek’s most valid insight is that an advanced economy needs people in commanding positions who are willing to take risks, and it needs many precise decisions to be made regarding price and attribute. Socialism enabled the Soviet Union to quickly develop the industry that enabled the Soviets to produce the weapons that defeated Nazi Germany. Nevertheless, the Soviet economy was deficient in producing consumer goods.
Everyone can agree on what is a successful weapon. A tank should be fast; it should have armor that resists anti tank weapons; it should have a gun powerful enough to destroy enemy tanks and enemy fortifications. In a statement made in private, Adolf Hitler revealed how disturbed he was when he learned that one factory in the Soviet Union produced more tanks every year than every German factory.
It is generally acknowledged that the Stalin tanks of the Soviets could outperform the Tiger and the Panther tanks of the Germans, which in turn could outperform the Sherman tanks of the Americans.
However, the Soviets never produced a car that could compete on the international marketplace. The Germans could with the Volkswagen and the Mercedes.
There is no consensus about what constitutes a good automobile. Some consumers want a car that can go from 0 to 60 miles per hour in a few seconds. Other consumers want fuel economy. When it comes to what makes a car beautiful, there is even less agreement. The same can be said about other consumer goods. A consumer good with a new feature may sell well. It may hardly sell at all.
Decisions about what consumer goods to produce, how to produce them, and how much to charge for them, are better made by many competing companies, than by government departments. The leaders of the Soviet Union did not learn this quickly enough. The Soviet Union fell. The leaders of Communist China did learn this in time. Much of what you buy in department stores is made in China.
Hayek is less insightful when he warns that democratic socialism has a tendency to devolve into totalitarianism. The closest approximation to democratic socialism can be seen in Scandinavian Social Democracy. It is difficult to think of nations less likely than Sweden, Norway, and Denmark to follow someone like Vladimir Lenin or Adolf Hitler.
Totalitarianism is what may happen to a nation that has been severely traumatized. Totalitarian dictatorships in Russia, Germany, and China resulted from the devastation of two world wars, not from the popularity of democratic socialism.
Hayek’s useful recommendations are likely to surprise libertarian ideologues who revere him without reading The Road to Serfdom. He is in favor of government work projects during periods of severe and durable unemployment. He thinks the government should assist those whose skills have become obsolete because of technical advances. He supports environmental protection, and conservation.
Public opinion surveys indicate that in the United States socialism is becoming a more popular ideal, especially among the young. This is not because Americans preferring socialism to capitalism have not read The Road to Serfdom. It is because capitalism is not working for those Americans. Not only are American paychecks shrinking, so are cubicles and seats on airlines. Nevertheless, the rich get richer. A natural tendency of capitalism is to accumulate wealth at the top. One does not find that insight in The Road to Serfdom. One finds it in The Communist Manifesto. Political thinkers should be read for insight, rather than doctrine.
In his review of The Road to Serfdom George Orwell wrote, “The trouble with competitions is that somebody wins them.” The more serious trouble is that most people lose them.
Emile Durkheim wrote, “Socialism is not a science…it is a cry of pain.” Politicians that revere The Road to Serfdom without understanding it are likely not to listen to that cry, to the peril of their careers.
