Misunderstanding Hayek And The Road To Serfdom

“The Road To Serfdom” by Fredrick Hayek is a disappointing book. Conservative bloggers often race about it claiming it has great insights into modern politics. While I disagree with the Austrian school of economics I read it to here the other point of view. I found it a boring, out dated book that didn’t have anything particularly original or insightful to say. It’s mainly concerned with saying a totalitarian state where the government controls everything doesn’t work (you don’t say). The book might have been relevant when it was published, but I am at a loss to see its use today.

I think to a large extent Hayek has been misunderstood. I have regularly heard people use Hayek to criticize the growth of the state or the Obama administration. Yet Hayek makes it clear his problem is only with complete planning of the entire state by the government, in other words the Soviet Union. He does not criticize the welfare state or government regulations. In fact at the start of chapter 9, he says that “There is no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and capacity to work, can be assured to everyone.” No doubt if Obama said this he would be denounced as filthy socialist.

He also calls for social insurance in case of sickness and accident, as well as government assistance after a natural disaster. “But there is no incompatibility in principle between the state providing greater security in this way and preservation of individual freedom.” I think most advocates of Hayek have not read this passage and don’t realise he is not an extremist arguing against all forms of government. Let me repeat this, Hayek is arguing there is a good case for the government to get involved in healthcare, either in the form of universal healthcare or government insurance. It’s ironic that many people quote Hayek to denounce Obamacare.

Paul Ryan regularly quotes Hayek to criticize Obama, claiming this is the kind of socialist planning Hayek was opposed to. However it is unlikely that Hayek would endorse Ryan. He was opposed to complete central planning of the economy. At the time a few people supported this idea, arguing that it worked well in the Soviet Union. However nowadays it is a dead idea that not even socialists argue for. Hayek denounced communism, not every form of government intervention in the economy. He even declared the need to deal with large-scale unemployment and while stating a preference for monetary policies, he does not shoot down using fiscal measures. In fact he was offered a position at the University of Chicago but chose not to live in America due to the absence of government provided pensions and universal health insurance. This is a very different Hayek to the one commonly described.

Nor is he completely set against government regulation. He acknowledges that some regulation is justifiable so long as it is not used to control prices. “To prohibit poisonous substances, or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition.”He further points out the necessity of government building the roads and controlling pollution. Ironically, he says “In no system that could be rationally defended would the state just do nothing.” Hayek is less of an anti-government libertarian and more of some who simply doesn’t like communism.

Ironically Keynes endorsed this book. This is strange because many people use Hayek to criticize Keynesian economics. However Keynes did not support full government planning of the economy, only intervention in times of crisis. Likewise Hayek was not opposed to all forms of government intervention only complete control, ie communism.

Most of the book is dedicated the long, boring and tedious complaints about “planning”. This may have been a big issue in 1944, but the threat of communism died decades ago. In fairness he makes valid points about how the economy is too big and complex to be managed centrally. But these are very obvious points that everyone knows. This is no great insight and it’s likely no has argued in favour of central planning since Hayek’s time. This is not the revolutionary must read book many describe it as, rather it is a bland book that won’t tell you anything you don’t already know.


Filed under Books, Economics

7 responses to “Misunderstanding Hayek And The Road To Serfdom

  1. Regis Servant

    Dear Robert,
    Lots of people won’t know but in fact Hayek rejected later some of the state proposals he made in The Road to Serfom.
    In the preface to the 1976 edition of this book, Hayek wrote: “I had not wholly freed myself from all the current interventionist superstitions, and in consequence still made various concessions which I now think unwarranted”.
    Which concessions exactly? I do not know, but probably about large-scale unemployment and also monetary policy (since at the end of his life, Hayek advocated denationalization of money).
    Regis Servant.

  2. I think there’s a bit more to Hayek’s argument than just a critique of the feasibility of wholesale central planning. It was a warning to Western countries about how liberal democracies mutate into totalitarian regimes. The argument he put forward was that democratic safeguards cannot withstand the demands of central planning. He was warning of the road — how you get — to serfdom.

    When Hayek wrote the book, intellectuals thought the problem with central planning was that the governments had not been democratic enough or that planners were not “rightly oriented in their own minds and hearts to the moral issue,” as Keynes said. Hayek, though, argued central planning is incompatible with democracy.

    • I suppose it could be seen as a criticism of Hayek then that no liberal democracy has become totalitarian because of central planning. Like Marx his prophecy proved false. There is a further point about cause and effect. Does dictatorship lead to central planning or vice versa? Also, regardless of the merits of the central planning debate back then, its outdated now.

      • Is it a prophecy if it’s already taken place? Nazi Germany was an example of a democracy sliding into totalitarianism because of central planning. It could be argued that part of the reason other democracies have not met the same fate is because millions of people were influenced by Hayek’s critique of central planning, which was his purpose for writing it and why it has relevance today.

        I don’t think I can say that the debate over central planning has been settled. If you recall, included in his critique of central planning against competition is the notion of a middle way, which is still widely held.

        • The Nazis came to power in Germany for a number of reasons. Central planning was a bit far down the list. Again I’d say you have cause and effect reverse. Hitler always opposed democracy and built a cult of personality around himself. This therefore led to the claim that he alone could solve Germanys problems.

          The problem with your second point is that Hayek was widely ignored for decades after his book. It wasn’t until the 1980s that he became popular again with Thatcher being a particular fan.

          Central planning is dead. No political party of any significance in Europe or America advocates it. Hayek is flogging a dead horse.

          • Hayek argued that Hitler came to power after more than a quarter century of planning against competition. After decades of being softened to ideas of collectivism, a decline in the rule of law (in order to facilitate central planning), the public’s exasperation inept political solutions, and counter-productive economic interventions — enough Germans were willing to acquiesce to Hitler, thinking that someone had to take charge of the mess.

            Looking at the publication history of the book, like with Reader’s Digest, I would beg to differ that it was widely ignored when it was first published.

            I think we have a different understanding of central planning, at least as the way Hayek understood it. Maybe Hayek’s understanding was wrong. But the essence of his understanding had to do with when the government (intentionally or unintentionally) restricts competition; that’s seems still popular.

  3. I like your analysis of Hayek–my opinion is similar.

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