The Road to Serfdom (1944)
National Review's List of the Top 100 Nonfiction Books of the 20th Century
If there are two things most people can agree on
these days, they are that free market capitalism is the
only practical way to organize a modern society
and that the key to economic growth is "knowledge."
So prevalent are these beliefs that their origins
are rarely examined, which is somewhat surprising,
since both statements can be traced back, in large
part, to one man, Friedrich August von Hayek
-John Cassidy, The
Hayek Century
For anyone who's ever read Adam Smith's Wealth of Nations, there is little that is new in The Road to Serfdom. Hayek's basic argument is that central planning is by it's very nature inefficient; only a free market allows for the exchange of information that can provide efficiency. It is hard to believe that there are any serious political philosophers or economists who would still argue with this thesis. Even John Cassidy, economics correspondent for The New Yorker, and no friend of capitalism, is forced to make the concession which appears in the epigrah above. Indeed, it was not Hayek's basic argument that made the book so controversial, instead what made this text a particular object of Left wing animus was Hayek's corollary that such central planning inevitably leads to totalitarianism.
The very title of the book refers metaphorically to his argument that Socialism, even the somewhat benign form of socialism that was popular in Europe at the time, represented simply a step along the path to the same kind of tyranny that held sway in Nazi Germany and the Soviet Union:
It is the price of democracy that the possibilities
of conscious control are restricted to the fields
where true agreement exists and that in some fields
things must be left to chance. But in a society
which for its functioning depends on central planning
this control cannot be made dependent on a
majority's being able to agree; it will often be
necessary that the will of a small minority be imposed
upon the people, because the minority will be the
largest group able to agree among themselves on
the question at issue. Democratic government
has worked successfully where, and so long as, the
functions of government were, by a widely accepted
creed, restricted to fields where agreement
among a majority could be achieved by free discussion;
and it is the great merit of the liberal creed
that it reduced the range of subjects on which agreement
was necessary to one on which it was
likely to exist in a society of free men.
It is now often said that democracy will not tolerate
"capitalism." If "capitalism" means here a
competitive system based on free disposal over private
property, it is far more important to realize that
only within this system is democracy possible.
When it becomes dominated by a collectivist creed,
democracy will inevitably destroy itself.
This powerful idea, that every type of centralized authority is a deadly threat to democracy and freedom, is always timely, but it was especially important coming, as it did, towards the end of a Depression and a War which had seen most of the democracies come to increasingly depend on just such centralization. To the extent that Hayek was responsible for sounding the alarm against complaisance in the face of the rise of the mammoth Social-Welfare State, he must be considered one of the most significant political philosophers of the Century.
Nor did he stop after stating the negative, that all central planning is necessarily the enemy of freedom, he went on to enunciate a philosophy of individualism:
[Individualism] does not assume, as is often asserted,
that man is egoistic or selfish or ought to be. It
merely starts from the indisputable fact that the
limits of our powers of imagination make it impossible
to include in our scale of values more than a sector
of the needs of the whole society, and that, since,
strictly speaking, scales of value can exist only
in individual minds, nothing but a partial scales of
values can exist--scales which are inevitably different
and often inconsistent with each other. From
this the individualist concludes that the individuals
should be allowed, withing defined limits, to follow
their own values and preferences rather than somebody
else's; that within these spheres the individual's
system of ends should be supreme and not subject
to any dictation by others. It is this recognition of
the individual as the ultimate judge of his ends,
the belief that as far as possible his own views ought to
govern his actions, that forms the essence of the
individualist position.
and to describe the positive conditions that are required in order for free markets to flourish. Most importantly, he recognized that the fundamental precondition for making free markets function effectively is a coherent and impartial legal system:
It is important not to confuse opposition against...planning
with a dogmatic laissez faire attitude. The
liberal argument is in favor of making the best
possible use of the forces of competition as a means of
co-ordinating human efforts, not an argument for
leaving things just as they are. It is based on the
conviction that, where effective competition can
be created, it is a better way of guiding individual
efforts than any other. It does not deny,
but even emphasizes, that, in order that competition should
work beneficially, a carefully thought-out legal
framework is required and that neither the existing nor
the past legal rules are free from grave defects.
This point is frequently misunderstood, both by libertarians, who tend to be absolutists about freedom, and by those, say in Russia, who think that free markets in and of themselves offer a quick fix and an easy solution to problems. It is also ignored by those who wish to cast capitalism as little more than Social Darwinism. But even as Hayek recognized that any legal system does inevitibly allow central authority to exercise power over individuals, which entails a significant risk, he ably explained why it is worth that risk:
Nothing distinguishes more clearly conditions in
a free country from those in a country under arbitrary
government than the observance in the former of
the great principles known as the Rule of Law.
Stripped of all technicalities, this means that
government in all its actions is bound by rules fixed and
announced beforehand--rules which make it possible
to foresee with fair certainty how the authority
will use its coercive power in given circumstances
and to plan one's individual affairs on the basis of
this knowledge. Though this ideal can never
be perfectly achieved, since legislators as well as those to
whom the administration of the law is intrusted
are fallible men, the essential point, that the discretion
left to the executive organs wielding coercive power
should be reduced as much as possible, is clear
enough. While every law restricts individual
freedom to some extent by altering the means which
people may use in the pursuit of their aims, under
the Rule of Law the government is prevented from
stultifying individual efforts by ad hoc action.
Within the known rules of the game the individual is
free to pursue his personal ends and desires, certain
that the powers of government will not be used
deliberately to frustrate his efforts.
For some reason people tend to interpret this tenet of free market capitalism as a psychic disconnect, but Hayek has used exactly the right metaphor there: capitalism is the game, but it requires a set of rules. It is only once that framework of rules has been established, and the players have been assured that the rules will be enforced as written, that the individual can be turned loose to pursue his own ends.
There isn't much that is new in Hayek's ideas as presented here--the
antecedents can be found in Hobbes and Locke and Adam Smith--what was new
at the time was that he applied these theories of classical liberalism
to modern social planning and thereby illuminated the threat that such
central planning posed to liberty. Sadly for us, the threat remains
even today--think of Hillary's Health Care Plan--and so this book remains,
almost sixty years after it's publication, a vitally important restatement
of the principles which guide free market capitalism. At a time when
everyone claims to be an adherent of these ideas, it is refreshing to see
them laid out in such clear and convincing fashion so that we may measure
folks' actions against these words.
(Reviewed:13-Jul-00)
Grade: (A+)
