PANDEMIC REREADS: HAYEK’S THE ROAD TO SERFDOM

Pandemic Rereads is one of my lockdown projects. Over the next few months I have set myself the goal of going through my study bookshelves in search of books that I have not read in a while. These are books I don’t regularly use in my research or teaching, and so they cry out to be reappraised. I do not claim to be an expert on these books, so I am sure that I am missing many of the nuances in the texts that have been picked up by real experts. Hopefully, though, there is value in casting a fresh pair of eyes over a text that we think we know.

Today I post my thoughts on rereading Hayek’s The Road to Serfdom. This is a book I have not read since the first year of my PhD, when the core course for my political theory minor took Hayek’s thought as its theme.

Page numbers in the text refer to the 50th anniversary reprinted edition: F. A. Hayek, The Road to Serfdom (Chicago: Chicago University Press, 1994)

In 1944 F. A. Hayek published The Road to Serfdom. The book, based on an earlier LSE memo and magazine article, was widely read, and has been frequently reprinted. It remains to this day a classic statement of the neoliberalism that would become the dominant ideology in the West from the 1980s. Although a relatively short book, Hayek managed to cover many issues and tropes that would become popular parts of neoliberal thinking in the decades to come. Some of these were developed by Hayek himself, but others were ideas that had been circulating in inter-war neoliberal circles, and so had a longer history. Hayek’s genius was to put all of these into a single easy to read volume.

Familiar neoliberal tropes that appear in The Road to Serfdom include: economic freedom as a guarantee of political freedom, fascism as a form of socialism, prices as knowledge, freedom under a rule of law as more important than democracy, democracy as only possible under capitalism, unionized labour as a new elite, the importance of a strong middle class, and the internationalizing of the rules of the market through international organizations.

Hayek Road to Serfdom cover

Hayek’s Argument in Context
The Road to Serfdom, though, needs to be read as more than just a classic summation of early neoliberalism. It was also part of a wider Anglo-American genre of post-war settlement themed articles, pamphlets and books published during the war years. What set Hayek’s contribution apart was that, rather than laying out a blueprint for a new world, it (as the title suggests) warned that western society was in danger of taking the same wrong turn that had led Russia, Italy, and Germany to totalitarianism.

The core of the book’s argument was that the often well-meaning and pragmatic changes that western states were going through in response to economic and political crises were in fact leading western civilization down the same road that the totalitarian states had already taken. Hayek is even critical of the voguish idea, prevalent across the political spectrum at the time, that ideas of market competition and planning could be combined into a pragmatic ‘mixed’ economy. That way also led to totalitarianism he claimed (47-8). While socialism is often used to describe this dangerous mindset, he frequently used another broader term, collectivism, that he saw as both the opposite of his ideal of individualism, and also a mindset that was as common on the right as it was on the left. Socialism was, for Hayek a form of collectivism that advocated state planning in whole or part.

The book contained both reactionary and progressive elements. Its major reactionary element was a defence of earlier abstract classical liberal notions of freedom, a way of thinking that many of his contemporaries blamed for the problems the world now faced. Yet, Hayek did not advocate for a full return to classical liberalism. Instead, borrowing from those new liberals who had criticized classical liberalism as a failed project, Hayek repackaged classical liberal ideas of freedom and the rule of law within new liberal notions of global governance. This included Hayek’s advocacy of international organizations and international federalism (240ff), two extensions of government often bitterly opposed by nineteenth century classical liberals.

Since its publication we had three decades of prosperity linked to the mixed economy in the western world, and four decades of neoliberalism. This neoliberalism was inspired in part by the writings of Hayek, and has spread to dominate the global economy. In this sense we are at an ideal time to look back and appraise the extent that Hayek’s predictions were correct. Were the three decades of the ‘mixed’ economy the road to serfdom, and has the four decades of neoliberalism led us towards a freer society?

In the rest of this blog I want to do two things. The first will be to give a reappraisal of what Hayek wrote in 1944, and how it fit in with two of his contemporaries. The aim here is to examine the argument of The Road to Serfdom within the context of its times. The second is to discuss the extent to which the argument holds up, given what happened over the next seven decades.

The Road to Serfdom is a defence of freedom against a particular form of collectivism that Hayek calls socialism. Freedom is defined as the particular form of individual liberty found in classical liberalism, which is based on an abstract argument not reducible to historical experiences, and is defended by a rule of law that is prior to political institutions. Socialism, on the other hand, means state control of the economy, and is distinct from the idea of the welfare state. Socialism, in this sense, is neither right nor left, and can be found across the political spectrum. Indeed, Hayek singles out the Conservative-led British government between 1931-9 as a period of particularly egregious socialism (15, 200).

Twenty Years Crisis
Hayek Takes on Classical Realism
A major problem with state planning for Hayek is that it is capricious, ad hoc, and treats different groups in different ways. The advantage of a rule of law based on abstract ideas of freedom is that it is based on clear general laws that treat everyone the same. Here Hayek launches a spirited defence of an abstract liberalism against the historically grounded philosophy of classical realism. He singles out E. H. Carr’s realism as a particularly English form of proto-fascism akin to the pre-Nazi German philosophers and historians that Carr admired (204ff).

Carr was not alone in developing a classical realism that criticized what he saw as the utopianism of abstract thinking. The same position was taken by Hayek’s future colleague at the University of Chicago Hans J. Morgenthau. The summation of this position was that abstract utopian thought had two strikes against it: it was unable to understand the historical and contingent complexities of politics, and its use of general rules was a cover for the interests of powerful classes. Carr had used the examples of the ban on privateers and the opposition to submarines as an example of how dominant interests tried to establish general rules that benefited their interests.

Hayek’s response to Carr and the classical realists was two-fold. First, he defended general rules as the only means by which freedoms could be guaranteed and safeguarded from the capricious whims of sectional interests, and here reiterated the case for what new liberals would disparagingly refer to as the limited ‘nightwatchman’ state of the nineteenth century. Second, he argued that Carr’s pragmatic historical expediency led to arbitrary government that would only lead to the erasing of rights, and ultimately to totalitarianism. In this sense we can see Hayek as the ultimate defender of the liberalism attacked by the classical realists, and consequently he is also the ultimate anti-realist.

Mitrany Working Peace System
Hayek vs Mitrany
In terms of his contemporaries writing in the post-war settlement genre, the big lacuna in The Road to Serfdom is the lack of an engagement with David Mitrany. Mitrany had written a successful pamphlet (A Working Peace System) the year before in 1943 that covered similar ground to Hayek, but from a very different position. Both were also associated with the London School of Economics. Hayek’s failure to engage with Mitrany is unfortunate on two levels. First, they shared many of the same concerns, despite coming to different conclusions. Second, Hayek takes two important positions that had already been intellectually savaged by Mitrany beforehand.

While Mitrany’s close association with new liberalism meant that he was critical of Hayek’s desire to prolong and promote the limited nightwatchman state, he shared Hayek’s concerns about knowledge in society and the dangers of state planning. For both Mitrany and Hayek knowledge was spread throughout society, and mechanisms were needed to share this knowledge widely throughout society. Hayek argued that the free market did this, while Mitrany saw the best way to unlock this grassroots knowledge through functional organizations built around specific functions and needs. Both Hayek and Mitrany worried that greater centralized state planning would lead to stronger nation-states, which were more likely to go to war against each other. It was, however, their answers to this growth in the power of the modern state that divided them.

In The Road to Serfdom Hayek makes two major engagements with the problem of the state in international relations. The first is to dismiss the idea that the problems of national planning could be solved by international planning. Here his curt dismissal is based on the idea that national planning would be something that stronger countries would impose on weaker ones. In other words, planning at the international level would be carried out with states (242-3, 247-8).

What Hayek does not address in the book is Mitrany’s concept of international planning through functional organizations, where the organizations are run by those engaged in the function, not by states. Or Rosenboim has written that, in his earlier engagement with British federalists, Hayek was critical of the functionalist idea of non-political experts. Yet, this is not included in The Road to Serfdom. Instead, Hayek’s bare bones treatment of international planning seems closer to the state-dominated League-like institutions that Mitrany criticizes at the beginning of A Working Peace System.

Hayek’s second engagement with international relations is to argue that the problem of quarrelling states can be solved through federation. First a few states would federate with each other, and then these federations would merge with other federations (255-6). Mitrany spends a whole section of A Working Peace System exploring why the idea of international federation is a naïve pipedream. First, the complex diplomacy involved in negotiating harmonization of modern government functions would be both enormous and would also merely succeed in galvanizing special interests against federal plans. Second, even successful federations would end up acting as states towards other federations, thus merely recreating the problem of the nation-state on a larger scale.

Hayek may have had responses to both of these points, but sadly there never was a full-blown Mitrany-Hayek debate to properly hammer out these differences. As a result, the international relations sections of Road to Serfdom remain preliminary and jejune.

Where Hayek does add something new to the study of international relations, though, is in his brief summarization of the international thought of his neoliberal colleagues in what Quinn Slobodian calls the Geneva School. This was Hayek’s argument towards the end of the book which precedes his federalist solution. Here, he suggests something that stops short of full federation, in which a global rule of law would liberate the economic sphere from state sovereignty (254, 258-9).

A set of general rules beyond the state could be administered by international organizations that have the power to restrain restrictive practices by states. Hayek points out that this is not the power to direct, but rather to prevent actions that contravene general rules (254). Although tantalizingly short, the international organization regime that Hayek lays out is the system of general rules that is currently managed by institutions such as the IMF, WTO, the Washington Consensus, and many current trade deals around the world. This is the neoliberal order we are familiar with today.

In this sense Hayek needs to be taken seriously in the field of International Relations (IR) as a key liberal internationalist scholar. In the last few years at least two people, Jorg Spieker and Or Rosenboim, have done just that.

… but what about Hayek’s predictions in 1944?

le-salon-de-l-auto-vers-1960-illustration-tableau-d-elocution-rossignol-

So, Were We on the Road to Serfdom in 1944?
Which leads us to the question of, given the passage of time, does the experience of the last seven decades confirm Hayek’s thesis that the collectivist trends he highlighted were a road to totalitarianism? Here we need to evaluate both the three decades of the post-war ‘mixed’ economy, and the following four decades of neoliberalism.

What makes Hayek’s thesis testable is that, despite the popularity of the book, it failed to change the direction of politico-economic thinking in the West, which moved to the hybrid ‘mixed’ economy of planning fused with competition that Hayek warned would lead to the same result as a full-blown state planning regime. From Hayek’s point of view this should have been a threat to both democracy and freedom (47-8).

Yet, the relationship between the post-war West and freedom is rather different. Internally at least, the trend of the three postwar decades in the core western countries was for an expansion of freedoms and an entrenchment of liberal democratic norms. The concept of the autonomous freedom of the individual became a central feature of both youth counterculture, and of deliberate government reforms that led to what became known as ‘the permissive society’. In fact, if anything the worry of older generations was that the idea of individual freedom was being taken too far.

Even the mix between competition and planning did not seem to be a variable here, with less planned societies like Britain and the United States not showing a marked divergence from more planned democracies such as Sweden, West Germany, or Japan. A possible exception here might be France, where the Fifth Republic proved a deeply controlling and planned society dominated by the right.

Where the record of the West over freedom was more worrying was in its foreign policy and its attitude towards non-western states. Here, in the name of anti-communism (and therefore in opposition to collectivism) western states, particularly the United States, often helped impose and prop up dictatorships that curtailed freedom. Indeed, the occasional worrying curtailments of freedom within western societies, such as McCarthyism, often came from the fear of communism.

reagan_economy
Hayek Triumphant?
Indeed, the eventual demise of the post-war mixed economy West in the late 1970s and 1980s seemed to have more to do with its increasing failure to keep up the levels of prosperity that it had managed to deliver in the 1950s and 1960s. Stagflation – the tendency of an economy to combine both low growth and inflation, and something that Hayek himself had worked on – was a major factor that led to the early victories of pro-neoliberal governments in key western states. These new neoliberal-leaning governments inherited stable democratic governments with populations that valued freedom and free expression. Indeed, neoliberal ideas sometimes appeared attractive to many who had supported or benefited from the ‘permissive society’ revolution.

Freedom plays a crucial part in neoliberal ideas, and in many areas there has been strong continuity with the changes during the three decades of the post-war. Yet, in three ways neoliberal ideas have a less than stellar record on both democracy and freedom.

The first is that, in the name of individual freedom the post-1980 neoliberal period has presided over the growth of economic inequality in the West. The growth in the wealth of the super rich, coupled with the easing of restrictions on cross-border financial transfers, has been comprehensively explored by Thomas Piketty. This growth of a super-rich has, in turn, led to distortions in political power as the wealthy have poured money into campaign finances. At the same time many jurisdictions have seen a hollowing out of the middle class, a process Hayek warned was linked to the growth of totalitarianism (229). The inequality of neoliberalism thus becomes a threat to democracy.

The second is an issue that stands at the heart of Quinn Slobodian’s recent analysis of neoliberalism, and is covered by Hayek in The Road to Serfdom. With the goal of preserving the freedom of individual cross-border economic transactions there has been a conscious effort via international organizations and trade agreements to create an international rule of law that is designed to be outside of state regulation and intervention. This removal of the rule of law from the potential control of states is an important pillar of neoliberalism, and is advocated by Hayek, as I mentioned above. The problem here is that the cost of this preservation of the rule of law is the loss of an ability for populations to have a say on what the rules should be as democratic institutions remain firmly at the national and sub-national level. There is no neoliberal equivalent of Mitrany’s functional democracy.

In both of these cases a neoliberal concern with freedom through general rules leads to a subverting of democracy, and in turn the limiting of the freedom of those not in possession of high levels of wealth. Hayek in other publications tried to get around this by arguing that freedom was (like peace) a great negative that meant just the absence of direct coercion, and consequently freedom did not mean having choice. While this solves the philosophical problem, it still leaves the politico-economic one of creating a free society where one part of the population has little to no choices. The question is not whether freedom necessarily means choices, but rather whether freedom can be valued when there are no choices.

Finally, and to show that intellectual history is not without a sense of irony, neoliberal ideas have become attractive to groups on the far right, many of which are interested in resuscitating aspects of fascism and Nazism. Quinn Slobodian has documented the split in neoliberalism that led to this adoption of neoliberal ideas by elements of the far right (sometimes referred to as the alt-right). While Hayek linked his ideas to culture and cultural changes, others fused neoliberal economics with hierarchies linked to race and biology. The use of neoliberal economics by the emerging alt-right, and its adoption by political parties of the far-right such as The Alternative for Germany (AfD), demonstrate how libertarian ideas of freedom are not immune to being fused onto dangerous biological and hierarchical ideas associated with earlier forms of fascism.

Chile coup

At one level this should not surprise us. The Pinochet dictatorship from 1973 successfully fused the neoliberal economics of the Chicago School with a brutal military dictatorship. Indeed, Hayek saw value in General Pinochet’s economic policy in Chile, despite the government’s oppressive record. Yet, there is an earlier example.

By classing the Nazi regime as socialist and collectivist, Hayek and other neoliberals were able to argue that a concern for freedom (in the abstract classical liberal sense) would inoculate a society from becoming totalitarian. Yet, Hayek, despite his claim to know the German case through German sources, misread the political economy of the Nazi regime.

Far from being a command economy, like the Soviet Union, the Nazi state left firms to manage themselves in a free market run by super managers of large firms. Indeed, Hitler once told business leaders that he had freed them from the constraints of democracy. Hayek thus missed a warning sign from the Nazi regime. While it did talk the language of protecting workers, it also ran an economy that kept the trappings of the free market and of private control.

The Many Roads to Serfdom
In The Road to Serfdom Hayek assumed that a respect for a particular kind of freedom would, in turn, lead to and support a proper functioning democracy. It seems, though, that the relationship between freedom and democracy is more complex than that. While democracy without the rule of law can lead to majoritarian dictatorship, it seems that placing freedom and general rules before democracy can also undermine both democracy and the freedom of choice for certain groups. The relationship between democracy and liberty is more complex than Hayek realized in 1944.

Many neoliberals comfort themselves with the thought that all totalitarianism is left-wing, and therefore a concern for neoliberal freedoms can only lead to democracy and never to totalitarianism. This may be naïve. A neoliberal political economy is not incompatible with an anti-democratic regime, and indeed without democratic limits neoliberalism can lead to an erosion of democracy. In short, there are many roads to serfdom across the political spectrum.

Indeed, the naïve belief that your own political thought can never be bad could be a first step down that road. The fear that your ideas might lead to something brutish is an important safety-catch that prevents us taking our ideologies too far. By denying their potential affinity with the far-right neoliberals take that safety-catch off their ideas. They become blind to their own particular road to serfdom.

There is, therefore, a gap in Hayek’s thought. In The Road to Serfdom he criticizes well-meaning democratic socialists for inadvertently leading society to totalitarianism. It looks worryingly like Hayek fell into the same trap.

 

If in the long run we are the makers of our own fate, in the short run we are the captives of the ideas we have created.
Hayek, The Road to Serfdom, p. 4.

 

Stay tuned for more Pandemic Rereads

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