Since the 2014 midterm elections, Democrats have been trying to
figure out what happened. There are probably dozens, if not hundreds, of
reasons for the Democratic bloodbath. But one reason, in my opinion, is
that Democrats never discuss, much less analyze, the fundamental
theories of modern conservatism. As a result, erudite-sounding nonsense
is passed off as wisdom, and sways an electorate grasping for answers.
Republican calls for limited government find fertile ground with workers
whose wages are stagnating.
One of the intellectual foundations
of this idea of limiting government comes from an Austrian émigré
economist named Friedrich A. Hayek, in his 1944 book
The Road to Serfdom.
Conservatives use that term as shorthand for the idea is that socialism
and centralized economic planning don’t work and ultimately lead to
totalitarianism, which ends up enslaving the people and impoverishing a
nation. That idea taken alone isn’t necessarily wrong, but the theory
actually takes a step back and says that any form of centralized
economic planning, including government regulation of business, is the
first step on the road to serfdom.
Hayek argued that government
intervention almost always creates more problems than it fixes, and many
current Republicans believe this as a matter of faith. Rand Paul
mentions Hayek as one of the intellectual forefathers of his economic
ideas and former vice-presidential candidate Paul Ryan discussed Hayek
frequently on the campaign trail. Ryan is also notorious for giving
copies of
The Road to Serfdom to his staffers.
At
the time Hayek wrote the book in the early 1940s, governments around
the world were engaged in central economic planning. Russia had been
collectivizing and devising “five-year plans,” for nearly two decades,
and a number of Eastern European countries were following Russia’s lead.
Germany had created a massive war machine through central planning.
Beyond that, many Western democracies, including the United States and
Britain, had instituted various degrees of centralized economic planning
to help deal with the economic collapse of the Great Depression and
then with the emergency of the second world war.
Hayek didn’t like
what he was seeing in the west because it was too close to what he’d
seen firsthand in Eastern Europe. He wrote the book as a warning that
even small efforts at government control of the economy could cause
changes in society that would eventually lead to collectivism,
dictatorship, and ultimately, widespread poverty and suffering.
The
book was a hit among conservatives in the United States, more so than
in England. It neatly encapsulated their worst fears about government
and the behavior of liberals. Hayek noted that starting in the 1930s
there was “a complete change in the direction of the evolution of our
ideas and social order.…We have progressively abandoned that freedom in
economic affairs without which personal and political freedom has never
existed in the past.”
This may have accurately reflected the
existing political changes in the 1930s, but Hayek acts as if this was
the end product of some nefarious liberal takeover of the economy. He
largely ignored the events that caused this change, most notably the
Great Depression.
Hayek said that collectivism was replacing
individualism, and that was dangerous because the development of
individualism “is closely associated with the growth of commerce. From
the commercial cities of northern Italy the new view of life spread with
commerce” throughout Europe, “taking firm root wherever there was no
despotic political powers to stifle it.” But over the years many in
society forgot this lesson, and as social problems arose many began to
look to collective action. As this happened there was a “decline of the
understanding of the way in which the free system worked, [and] our
awareness of what depended on its existence also decreased.”
And
so, step by step, society changed, resulting in “an entire abandonment
of the individualist tradition which has created Western civilization.”
Command economies also “replaced the… mechanism of the market by
collective and ‘conscious’ direction of all social forces to
deliberately chosen goals.”
Hayek then describes some of the
problems with collectivism and central planning. “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.”
It is not possible,
according to Hayek, to simply control the economy. Government will
eventually control every aspect of life. That is because ultimately a
“conflict arises between individual freedom and collectivism.”
Collectivism differs from “liberalism and individualism in wanting to
organize the whole of society and all its resources for the unitary end
and in refusing to recognize autonomous spheres in which the ends of the
individuals are supreme.”
This happens step by step. First
economic plans are made, then education has to be controlled to ensure
the population learns the necessary information to achieve the economic
goal, then government has to engage in propaganda to ensure that the
population agrees with the centralized goal, then a strong police state
must be instituted to round up and silence the dissenters, then
democracy must be abandoned to ensure that those hostile to the plan
aren’t elected.
Hayek’s point is that once you start central
planning you can’t stop. This is because people get in the way, they
don’t cooperate, they object, and so this “people problem” also has to
be controlled. Freedoms are slowly stripped away, and then all freedom
is lost. The end result is that planning, according to Hayek, inevitably
leads to dictatorships.
“Most
planners who seriously consider the practical aspects of their task
have little doubt that a directed economy must be run on more or less
dictatorial lines.” And this slide toward dictatorship is the crux of
conservatives’ worst fears:
“The authority directing
all economic activity would control not merely the part of our lives
which is concerned with inferior things; it would control the allocation
of the limited means for all our ends. And whoever controls all
economic activity controls the means for all our ends and must therefore
decide which are to be satisfied and which are not. This is really the
crux of the matter. 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.”
So, according to Hayek,
once you allow a little control, you will always need more to make it
work. Small planning inevitably leads to big planning, and protecting
people from the vagaries of life eventually leads to people becoming
dependent upon government. That is the idea that many of Hayek’s
conservative followers fervently believe. And that is why they so fear
any government involvement in the economy.
It’s an interesting
theory, and given the state of the world in 1940, certainly one worth
taking seriously. But how did Hayek do? As he noted at the beginning of
the book, “we can in a measure learn from the past to avoid a repetition
of the same process.” So what does the past, which was Hayek’s future,
teach us about Hayek’s predictions?
The book was published during a
worldwide trend toward central economic planning. Some of it was due to
the rise of communism, some was the Western response to the Great
Depression, and some was the rise of Fascists and their drive to world
domination. So the book certainly fit the times. And, in the immediate
aftermath of the war, many western European nations embraced
cradle-to-grave welfare, nationalized industries, and created employment
boards, and government managed industrial cartels. Many others fell
behind the Iron Curtain, and had communism and totalitarianism imposed
on them. It was a dark time, and Hayek’s ideas seemed prescient.
But
by the early 1950s, economic conditions began to improve, particularly
in Western Europe, and nations began to weaken government control of
their economies. Some nationalized industries were sold off, many
countries abandoned employment boards, others removed government control
over industrial cartels. The Western world was not following Hayek’s
model, and so he had to adapt. In a new introduction to the book in
1956, he admitted that no country had apparently taken his road to
serfdom, and suggested that it wasn’t some kind of iron rule (though
he’d been pretty adamant that it was).
"It has
frequently been alleged that I have contended that any movement in the
direction of socialism is bound to lead to totalitarianism. Even though
this danger exists, this is not what the book says. What it contains is a
warning that unless we mend the principles of our policy, some very
unpleasant consequences will follow which most of those who advocate
there policies will not want."
He modified his
argument to fit the new reality. Now he said that the first step on the
road to serfdom was a “soft” socialism, in the form of government
regulation of aspects of the economy, wealth-transferring welfare
programs and high taxes to pay for it all. Hayek said that these
programs would protect people from the consequences of their actions,
which would erode individual initiative and make people increasingly
dependent on a paternalistic government. (If this sounds familiar it’s
because it could have come from the stump speech of virtually any recent
or present-day Republican candidate for president.)
So how did
this revised theory pan out? Well, again particularly in the West, as
economic conditions began to improve in the late 1950s, and increasingly
in the 1960s and into the 1970s, governments continued to scale back
on their government control of the economy. The wave of nationalization
of industries crested in the late 1960s, labor boards eliminated in the
UK, and a wave of deregulation began in the United States. The tide of
“centralized planning” receded. A few countries, particularly the
Scandinavian countries of Northern Europe, retained exceedingly generous
welfare programs, and the necessary high taxes, and retained some
aspects of centralized planning, but they never abandoned democracy.
The
United States never nationalized industries, but did have the War
Production Board during World War II, which helped manage and coordinate
industry to supply material for the war effort. It was abandoned in
1945. The United States did have a number of government management
boards for various industries, like airlines and trucking, but those
were eliminated during a wave of deregulation in the late 1970s. Banking
and financial regulations were also scaled back in the 1990s (with a
minor effort to re-regulate after the crash of 2008).
A
number of countries in South America have lurched from incompetent
socialist states to equally incompetent fascist and right-wing police
states. And with recent examples of Venezuela and Bolivia, the lurching
continues. But none have followed Hayek’s road from soft socialism to
hard socialism to totalitarianism. Many Mideast countries have strange
hybrid economies, with many large industries, particularly the petroleum
industry, controlled by the government. Some provide government support
for their citizens based on oil revenue, but they don’t have
Western-style welfare systems. And they are largely autocratic, but none
have embraced communism or even socialism.
Quite a few countries
became communist at the end of the second world war, but that was a
product of geography, not political or economic philosophy. Many nations
in Eastern Europe fell behind the “Iron Curtain” and had communism and
totalitarianism forced upon them. Essentially the same thing happened to
North Korea and North Vietnam. And a few countries did become
communist, particularly China, Cuba and Vietnam, but this was only after
violent upheaval and civil war. So while these countries ended up as
communist and totalitarian, they didn’t get there on Hayek’s "road."
How
many countries in the last half-century have moved, as Hayek suggested,
from soft socialism to totalitarianism? Precisely none.
Another
aspect of Hayek’s theory was that once the communists or the
collectivists take over, all is lost. They will institute
totalitarianism and control the populace with an iron fist. And how has
that worked in the intervening 60 years? Well, the vast majority of
formerly communist countries have abandoned communism. And far from
abandoning it in a bloody fight, with the commissars holding onto power
with a bloody grip, as Hayek seems to imply, most of these countries
sloughed it off with a shrug.
Russia did so in the late 1980s and
early 1990s. The Berlin Wall came down in 1989 and most of the former
Soviet Bloc countries behind the Iron Curtain abandoned communism. China
allowed private ownership of property and businesses in 1978 in a move
at market reform, and now it is one of the largest economies on earth.
The government still exerts enormous economic control, and total
political control, but it resembles nothing like what Hayek suggested.
It is now more of a mercantilist country, like England in the 18th
century. And most of the formerly communist countries of Asia,
particularly Cambodia and Vietnam, have abandoned most of the economic
aspects of communism, though they are far from free market capitalist
economies, and certainly not democracies.
The last few remaining
communist and totalitarian holdouts are North Korea, Cuba and Burma,
though Cuba and Burma are slowly scaling back government control of the
economy. Despite these efforts, the economies of both are complete
basket cases, which is an insult to baskets. That leaves North Korea as
the last communist dictatorship. But it had communism imposed on it at
the end of WWII, so even it did not follow Hayek’s road.
In fact,
around the world the road ran in the exact opposite direction as Hayek
prophesied. Countries certainly did become socialist and communist, but
it wasn’t the slow march Hayek predicted. A few countries elected
socialist governments, but those never took over in the way Hayek
predicted. And most of the countries with various forms of “soft”
socialism—much of Europe—scaled many of these programs back. Certainly
most European countries still have generous welfare programs and a high
degree of government regulation of the economy, and many have
government-controlled healthcare, but few still have widespread
nationalized industries. And they are among the oldest democracies and
the freest nations on earth.
There is no other way to say this:
Hayek was wrong. He swung, and he missed. Nice try, though. Yet despite
this, conservatives still bring him to the plate. He’s Paul Ryan’s
lead-off hitter. Despite the fact that Hayek was completely wrong,
conservatives still claim that liberal economic policy will lead us down
the road to serfdom. Republican politicians say it, libertarian
activists hold panel discussions about it, and conservative commentators
allude to it.
So what does it mean that Hayek was so wrong in his
predictions of the future? I know it’s easy for us to look back and
criticize those from the past who get their predictions wrong. But let
me suggest that the issue isn’t really fairness. The inability to
predict the future indicates a flaw in the underlying theory. That’s how
it works in science. A scientific theory is only considered valid to
the extent that it accurately predicts future behavior. Galileo’s theory
of gravity, for example, was that gravity applies equally to all bodies
regardless of their weight or density, and that a falling body will
speed up over time. Subsequent experiments proved Galileo correct.
Newton based his gravitational theories on Galileo’s work, and
scientists ever since can reliably predict the effect of gravity. NASA
landed men on the moon with little more than calculus, slide rules and
Newtonian physics. They were able to do it because Galileo and Newton
were right, and the underlying theories were sound.
Shouldn’t
political theories be subject to the same criteria? Shouldn’t they be
judged based on how well they predict future events? Perhaps the test
shouldn’t be as rigorous as in the physical sciences, because we’re
dealing with messy and imperfect human affairs, but there should be some
correlation between a prediction and actual events.
In
The Road to Serfdom
Hayek said that embracing socialism—government ownership of the means
of production, pervasive social welfare programs—was the first step on
the road to serfdom. And what happened? Not a single country has gone
that direction. In fact, in the past 50 years almost exactly the
opposite has happened. So what does that say about Hayek’s theory? In a
word: wrong. But, more importantly, what does that say about modern
conservatives who quote a fool and call him a sage? And what does it say
about the liberals who let them get away with it?
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