One of the great warnings of government’s threat to liberty, Friedrich Hayek’s The Road to Serfdom, is more than 75 years old, yet it has renewed relevance. Although it was very popular after it was first published in 1944, Hayek complained that it was less well-received by the American intelligentsia than by their British counterparts. The future winner of the 1974 Nobel economics prize argued that economic planning and its supporting ideologies were a threat not only to prosperity, but also to individual liberty. Western societies, he claimed, were on the road to serfdom, the same road traveled by Germany.
Economic planning / Hayek began working on the book around the start of World War II. He argued that the growing popularity of government economic planning had deep intellectual roots in socialism, often traceable to Germany three-quarters of a century before. In the late 19th century, Germany was arguably the most advanced country in the world, where “all the social and political forces of modern civilization have reached their most advanced form,” as Hayek quoted American theologian Reinhold Niebuhr observing. That seemingly made Germany inhospitable to a group of homicidal authoritarians — and yet, that’s who came to power.
The experience of wartime planning boosted the reputation of economic planning. In the foreword to the 1956 edition of The Road to Serfdom, Hayek observed that in 1947 the United Kingdom’s Labour government issued an order that could have allowed it to punish workers who would not accept jobs considered high priority. It is doubtful, he wrote, “whether it can be said that the Rule of Law still prevails in Britain.” In both the UK and America, “only those whose memory goes back to the years before [World War I] know what a liberal world has been like.”
Despite those strong words, Hayek was emphatically not an advocate of laissez-faire, the minimal state, or extreme libertarianism at the time he wrote The Road to Serfdom. He believed that the state had an active role to play in defining property rights, countering externalities (see p. 18), ensuring the conditions of competition and macroeconomic stability, preventing monopolies, and offering a safety net against poverty. In case of “war and other temporary disasters,” freedoms could be suspended provided the suspensions were temporary and necessary to protect freedom itself. He said nothing against military conscription in wartime. (In many ways, he became more radical as his ideas later developed.)
The only minimal state envisioned in The Road to Serfdom was his proposal for an ideal world federal government, discussed in the book’s last chapter. It is not the best chapter. Hayek’s world government would only intervene to prevent war and tyranny and impose a minimum rule of law everywhere. How this world government would remain minimal, and how we could retreat from it if it did not, he did not explain.
Fatal conceit / Hayek was a classical liberal who still claimed the label “liberal,” with its original content of economic freedom, limited government, and the rule of law. In America, the meaning of “liberal” had already drifted to meaning left-of-center, progressive, soft-socialist.
The economic problem of government planning is that the central planners do not and cannot have the required information on utility, costs, and local circumstances to make sound decisions. This information is dispersed in the minds of all consumers and producers. Only competitive markets can efficiently coordinate the actions of individuals without government coercion. Instead of bringing security, government intervention (at least at some level) disrupts economic efficiency and increases insecurity. Hayek had introduced these ideas on planning before and would further develop them later. (See “Against Tribal Instincts,” Spring 2018.)
Economic planning reduces the freedom of the individual. Italian fascist leader Benito Mussolini, who thought that this constriction of liberty was inevitable and good, explained that “the more complicated the forms assumed by civilization, the more restricted the freedom of the individual must become.” Hayek argued that, on the contrary, it is individual liberty and economic freedom that make a complex civilization possible. State direction and authoritarianism stifle diversity and complexity.
Economic planning offers illusory hopes. Many people thought it would relieve citizens of the burden of inferior economic activity. But economic activity is only inferior in the sense that free individuals use their budgets as they see fit to satisfy what they consider their most important desires. A “mere” economic loss matters less when an individual can reallocate his budget from what he values less to what he values more. Hayek brilliantly explained:
So long as we can freely dispose over our income and all our possessions, economic loss will always deprive us only of what we regard the least important of the desires we are able to satisfy. … Economic values are less important to us than many things precisely because in economic matters we are free to decide what to us is more, and what less, important.
If the government, through economic planning, directly or indirectly decides what we may consume and in what quantity (or quality), an individual will not be able to organize or reorganize his affairs according to his own priorities. The collectivity, “society,” and in fact the government will decide what the economic priorities are for everybody. For example, when foreign exchange is controlled (as it was in Europe during World War II and for many years after), an individual’s capacity to travel is severely limited: not only is he limited to purchasing the amount of foreign currencies allowed by the government, but foreign suppliers will not honor his credit cards.
Totalitarian danger / Hayek crucially demonstrated how economic planning is politically dangerous — that is, dangerous for individual liberty. On the market, everybody can buy the tie or car he likes (among those he can afford); not so when central planners decide, directly or indirectly, which sorts of ties or cars are made. Individuals with minority preferences will be short-changed. Just think of what you would not be allowed to consume if the majority were to decide for you.
Planning breeds discord and resentment. Every supporter of planning thinks that it is his preferences and values that will guide the economy, but other supporters also have their own preferences and values; many or most of those are different and will be bulldozed when planning is implemented. To try to please and pacify dissatisfied groups, the state will need to plan more. Tugs-of-war will emerge between collectivist factions, which are all in favor of central planning provided they are the ones doing the planning.
If the government effectively plans the economy in the sense that it decides what will be produced or not, or in what quantities, it will also have to “control the entry in the different trades and occupations” at least indirectly by determining “the terms of remuneration.” As Richard Acland, founder of the British socialist Commonwealth Party, wrote during World War II, “It must be the community as a whole which will decide whether or not a man shall be employed upon our resources, and how and when and in which matter he shall work.”
Planning gives more economic power to the planning authority than any private party can have in free market transactions. As Hayek writes, “It creates a degree of dependence scarcely distinguishable from slavery.” Supposedly backed by the sacralized collectivity, government planners will think that the goals pursued are supreme values and that the means justify the ends — a moral principle absent from individualist ethics. Successful planning implies the tyranny of either the majority or of a minority.
Nazism and socialism / The Nazi experiment was just one extreme case (although the Soviet experiment was a good one too). However you twist the pretzel, the Nazis were both nationalists and socialists, as the name of their party clearly indicated.
Many Nazis or Nazi forerunners came from Marxism or socialism. Professor Werner Sombart, a former Marxian socialist, had welcomed World War I as the “German War” in defense of the “German idea of the state” against the commercial civilization of England. This German state stood over and above individuals, who had no rights but only duties. Nazi philosopher of history Oswald Spengler thought that Prussianism (the German ideal of the state) and socialism were the same. Moeller van den Bruck, whom Hayek describes as “the patron saint of National Socialism,” thought that the classical liberals were the archenemy.
Although Hitler was a politician and not a political philosopher by a long stretch (a very long stretch), he was quoted as saying that “basically National Socialism and Marxism are the same.” Hayek tells us that, according to a leader of German “religious socialism,” liberalism was the doctrine most hated by Hitler. On the softer fascist side, Mussolini himself was a former socialist.
Socialists bear this stain. They have tried to erase it by making it impossible to mention Hitler or Mussolini when discussing the dangers of socialism, as if they had no relation with anything that can happen now…
Individualism and collectivism / Socialism and fascism are different sorts of collectivism (except perhaps for so-called “market socialists,” who are not very realistic). As a political system, Hayek writes that individualism recognizes the individual as “the ultimate judge of his ends.” He affirms that “as far as possible [the individual’s] own views should govern his actions. … Common action is thus limited to the fields where people agree on common ends” — “ends” in the sense of preferences and values. Collectivism, on the contrary, pretends to impose a single scale of preferences and values on all individuals.
Since even parliaments cannot agree on a single scale of preferences and values, collective decisions must in practice be delegated to experts or to a ruler like Hitler, “strong enough to get things done.” Planning is thus incompatible with democracy, except in the sense of majoritarian and totalitarian democracy. Collectivists love government power because it is the means for them to impose their wishes on recalcitrant individuals.
To give a flavor of the times in which Hayek was working on The Road to Serfdom, C.H. Waddington, a British scientist and philosopher who favored central planning, thought that Marxism was a “profound scientific philosophy.” In this perspective, Waddington wrote, “the freedom to be odd and unlike one’s neighbor is not … a scientific value.”
The totalitarians were united by their hate for liberalism because it represented what Hayek saw as “the individualist tradition which has created Western civilization.”
Rule of law / Hayek explained how central economic planning and powerful governments are not consistent with the rule of law. The rule of law is based on “formal rules … intended for such long periods that it is impossible to know whether they will assist particular people rather than others.” Laws are general and abstract; they don’t intentionally “take sides” in favor of some identifiable individuals and against others. The rule of law implies that the government itself “in all its actions is bound by rules fixed and announced beforehand,” which allows individuals to plan their actions without fear of ad hoc government interventions.
If the planners divert resources from manufacturing paper to manufacturing steel, they take sides with buyers of cars against, say, buyers of books.
The idea of the rule of law, which Hayek identified as “the legal embodiment of freedom,” was to become the kernel of his social, political, and economic theory. This can be seen in his later The Constitution of Liberty (1960) and his three-volume series Law, Legislation and Liberty (1971–1979).
Economic planning, on the contrary, requires ad hoc decisions dependent on concrete circumstances and constantly interferes with the private plans of individuals. The planning state is bound to continuously prevent individuals from using their own means to satisfy their own preferences. For example, if the planners divert resources from manufacturing paper to manufacturing steel, they take sides with buyers of cars against, say, buyers of books.
Rule by the worst / As the state gains power, the more likely it becomes that the worst people will become the rulers. A totalitarian dictator relies for support on “the largest single group … whose members agree sufficiently to make unified direction of all affairs possible.” This high degree of uniformity will be found among those with “lower moral and intellectual standards” and “the more primitive and ‘common’ instincts and tastes.” The dictator will most easily “obtain the support of the docile and gullible.” It is also “easier for people to agree on a negative program — on the hatred of an enemy, on the envy of those better off — than on any positive task.” Finally, the idea that collectivist ends justify the means will attract the ruthless and unscrupulous to government and planning jobs; others will largely stay away.
These conjectures would also apply to a tyranny of the majority or to the man incarnating “the people.” More generally, and even before a dictatorship is effectively established, the general moral atmosphere of power and economic control leads people to lose any “respect for the individual qua man instead of merely as a member of an organized group.” Does this sound like today’s America?
Crying wolf / If a wolf is lurking, it’s a good idea to cry wolf, but neither too late nor too early. Too late, and nobody will be able to prepare to fight it off. Too early, and people will forget about the danger.
Did Hayek cry wolf too early? Or did the wolf never come, as some critics claim? In the West, there was no widespread Soviet-style public ownership of the means of production and no persistent central planning with direct allocation of resources. “Indicative planning” or five-year plans French-style did not last long and appear rather innocuous compared to the direst predictions of The Road to Serfdom.
In his preface to the 1976 edition, Hayek acknowledged this criticism: “Socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state.” But although the process is different, he said, the consequences discussed in the book are simply “brought more slowly, indirectly and imperfectly.”
It’s a disguised wolf that came. The “monster state” did not come exactly as Hayek had forecasted and it may not yet be totalitarian, but it has become more and more encompassing. Government control has taken insidious forms. The regulatory state is represented by the more than one million interdictions in the Code of Federal Regulations and this does not include the state and local levels. The government does not directly or generally control people’s choice of occupations, but access to one-fifth of occupations in America — from physicians down to plumbers and hair braiders — is controlled by state governments or by professional corporations under government auspices. One out of 13 American adults has a felony record, which greatly limits a person’s economic and other opportunities. The reigning (albeit confused) ideal remains that collective choices should determine how society and the economy are organized. It is generally accepted that the “common welfare” as defined by the state must overrule individual welfare.
Bruce Caldwell, editor of the latest edition of The Road to Serfdom, suggests that Hayek’s argument is not a historical argument but a logical one. Hayek (explicitly) does not claim that there is a historically determined necessity that some socialism — say, a mild welfare state — will lead to complete totalitarianism. His argument instead is that the completion of any socialist experiment logically requires a totalitarian government. In other words, it requires the transformation of society into a garrison or, as Anthony de Jasay argues in his 1985 book The State, a plantation.
The End of Truth / Perhaps the direst prediction of The Road to Serfdom and the one that seems the closest to current concerns comes in the chapter (fittingly) titled “The End of Truth.” A totalitarian government must make people believe its propaganda about its values and goals, as well as the wisdom of the chosen means to those ends. Bringing people to approve the means involves peddling causal relationships whether they are true or not.
The propaganda of totalitarian governments is thus “destructive of all the foundations of all morals,” which lie in “the sense of and respect for truth.” Both in the Soviet Union and Nazi Germany, the ruling party was presented as the source of all truth. This generates a “spirit of complete cynicism as regards truth” and “the disappearance of the spirit of independent inquiry and of the belief in the power of rational conviction.” It is true that, in the West, government propaganda and censorship have not grown to that point. In America, on the contrary, First Amendment protections were strengthened in the last three quarters of the 20th century. However, even here, governments and political parties have contributed to the debasement of the notion of the truth. The latest U.S. political developments reflect this.
Taking stock / If not all the predictions of The Road to Serfdom have been realized, many have been or, if nothing changes, soon will be. The goal of Soviet-style economic planning has crumbled, but the idea that government is responsible for the economy and for solving all problems by ad hoc interventions has become natural. Indeed, governments are continuously waging wars against this or that calamity, often recycling war metaphors (war on poverty, war on drugs, war on smoking, etc.). The supremacy of collective choices over individual choices has found practical acceptance among the political and intellectual establishments, if not in the majority of the population. The rule of law now refers to anything that is decreed as a law or a regulation. Very few people reflect on the danger of tyranny — and many of those who fear it don’t reflect on it at all. The intellectual blindness and moral poverty of reigning elites vindicate Hayek’s warnings of 1944.
There is another lesson and warning. Hayek argued that it was not only socialists but also conservatives who had prepared the way for the totalitarian episode in Germany and its milder Italian version. He noted that “it is ‘conservative socialism’ that is the dominant trend among us now.” In Germany, there was even a movement called “conservative socialism,” mainly influenced by the German Youth Movement. Caldwell writes that the group “called for an autarkic, planned national economy.” Who will disagree that today in America, the conservatives and the many shades of socialists have united against classical liberalism and libertarianism?
A revival of the ideas Hayek defended in The Road to Serfdom is urgent.
