Hayek also provides a history lesson of the term "liberalism". Because the United States began its existence based on liberal ideas of freedom and self government, the word "conservative" has taken on a strange meaning for Americans. To be conservative in the U.S. is to uphold that original liberalism. Hayek, being from Europe, where the liberal ideas never reached their fullest expression, was striving for that liberalism. Hayek took issue with the fact that in America, statism (the movement to increase the influence of the state) was mischaracterized as liberalism. (Hayek later wrote this 1960 essay: Why I am not a Conservative, an interesting look at political brand names.)
I'd like to share some of my favorite passages from the book. Hayek was inspired by Tocqueville. He uses this quote early in the book:
"Democracy and socialism have nothing in common but one word: equality. But notice the difference: while democracy seeks equality of liberty, socialism seeks equality in restraint and servitude." (Ch 2, Pg 77)Hayek noticed that socialists took the liberal idea of freedom and corrupted it into the idea of "freedom from want". He said:
"What the [socialist] promise [of freedom] really amounted to was that the great existing disparities in the range of choice of different people were to disappear. The demand for the new freedom was thus only another name for the old demand for an equal distribution of wealth. But the new name gave the socialists something in common with the liberals and they exploited it to the full....what was promised to us as the Road to Freedom was in fact the High Road to Servitude".Hayek saw that when bureaucrats plan the economy, they subvert the efficient transmission of price information. This inevitably leads to less efficiency and to distortions such as we see with our health care system.
"The important point here is that the price system will fulfill this function only if competition prevails, that is, if the individual producer has to adapt himself to price changes and cannot control them. The more complicated the whole [economic system], the more dependent we become on that division of knowledge between individuals whose separate efforts are coordinated by the impersonal mechanism for transmitting the relevant information known by us as the price system." (Ch 4, Pg 95)Hayek demonstrated that economic planners cannot foresee all the unintended consequences of their plans, no matter how gifted they may be intellectually.
"We all find it difficult to bear to see things left undone which everybody must admit are both desirable and possible. That these things cannot all be done at the same time, that any one of them can be achieved only at the sacrifice of others, can be seen only by taking into account factors which fall outside any specialism...which lie outside our immediate interest and for which, for that reason, we care less." (Ch 4, Pg 98, italics added)He is adept at showing that simply because a nation is democratic, it is not necessarily free from arbitrary use of power.
"There is no justification for the belief that, so long as power is conferred by democratic procedure, it cannot be arbitrary; the contrast suggested by this statement is altogether false: it is not the source but the limitation of power which prevents it from being arbitrary." (Ch 5: Planning and Democracy, Pg 111)I think Hayek's most important contribution is in the area of values and state morality. He shows that governments that plan the economy also control morality. That is, the rulers push their values and their quest for certain ends onto all people. We recently saw how certain views on contraception were pushed onto Americans by arbitrary rule makers empowered by the Patient Protection and Affordable Care Act (Obamacare).
[The government] must, of necessity, take sides, impose its valuations upon people and, instead of assisting them in the advancement of their own ends, choose the ends for them. As soon as [an interest-promoting] law is made, it ceases to be a mere instrument to be used by the people and becomes instead an instrument used by the lawgiver upon the people and for his ends. The state ceases to be a piece of utiltarian machinery intended to help individuals in the fullest development of their individual pesonality and becomes a "moral" institution which imposes on its members its views on all moral questions, whether these views be moral or highly immoral. In this sense the Nazi or any other collectivist state is "moral," while the liberal state is not. (Ch 6: Planning and the Rule of Law, Pg 117)
"And whoever has sole control of the means must also determine which ends are to be served, which values are to be rated higher and which lower--in short, what men should believe and strive for." (Ch 7: Economic Control and Totalitarianism, Pg 127)
"To undertake the direction of the economic life of people with widely divergent ideals and values is to assume responsibilities which commit one to the use of force; it is to assume a position where the best intentions cannot prevent one from being forced to act in a way which to some of those affected must appear highly immoral." (Ch 15: Prospects for International Order, Pg 116)In my view, the moral nature of state planning makes statism a secular religion. Only, it is a religion that is forced on others via the ballot box rather than by persuasion.
Hayek makes the distinction between arbitrary rule and the Rule of Law. Arbitrary rule becomes necessary when the state attempts to plan the entire economy, because lawmakers cannot foresee all the minutia involved. The movement toward arbitrary rule is exemplified in the U.S. by the tendency to turn over ever more power to unelected alphabet-soup agencies run by the executive branch.
"It is the Rule of Law, in the sense of the rule of formal law, the absence of legal privileges of particular people designated by authority, which safeguards that equality before the law which is the opposite of arbitrary government...It may even be said the for the Rule of Law to be effective it is more important that there should be a rule applied always without exceptions than what this rule is.Often the content of the rule is indeed of minor importance, provided that the same rule is universally enforced." (Ch. 6 Pg. 117)
"By giving the government unlimited powers, the most arbitrary rule can be made legal; and in this way a democracy may setup the most complete despotism imaginable." (Pg. 119)
The book also touches on themes that are probably agreed upon by everyone. Nobody tired of negative campaign advertising will take issue with this:
"It seems to be almost a law of nature that it is 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. The contrast between the "we" and the "they," the common fight against those outside the group, seems to be an essential ingredient in any creed which will solidly knit together a group for common action." (Ch. 10, Why the Worst Get On Top, Pg 160)
"If the members of one's group cannot all be personally known, they must at least be of the same kind as those around us, think and talk in the same way and about the same kinds of things, in order that we may identify ourselves with them. Collectivism on a world scale seems to be unthinkable--except in the service of a small ruling elite." (Pg 161)
And if you've ever uttered the phrase "Absolute power corrupts absolutely", this should ring true to you:
"To split or decentralize power is necessarily to reduce the absolute amount of power, and the competitive system is the only system designed to minimize by decentralizing the power exercised by man over man...
Economic power, while it can be an instrument of coercion, is, in the hands of private individuals, never exclusive or complete power, never power over the whole life of a person. But centralized as an instrument of political power it creates a degree of dependence scarcely distinguishable from slavery." (Pg 166)
Hayek's one line summary of what created Nazism:
"It was the union of the anti-capitalist forces of the Right and of the Left, the fusion of radical and conservative socialism, which drove out from Germany everything that was liberal." (Ch. 12 The Socialist Roots of Naziism, pg 182)
Hayek also covers the tendency of statists to believe that their planning is justified by scientific evidence or intellectual superiority. He felt that scientists helped enable the rise of Nazism.
"The influence of these scientist-politicians was of late years not often on the side of liberty: the 'intolerance of reason' so frequently conspicuous in the scientific specialist, the impatience with the ways of the ordinary man so characteristic of the expert, and the contempt for anything which was not consciously organized by superior minds according to a scientific blueprint were phenomena familiar in German public life for generations before they became of significant in England...It is well known that particularly the scientists and engineers, who had so loudly claimed to be the leaders on the march to a new and better world, submitted more readily than almost any other class to the new tyranny [of National Socialism]." (Ch 13:The Totalitarians In Our Midst)He felt that scientists have a tendency toward statism because they believe people obey scientific laws the same way inanimate objects do:
"Those who argue that we have to an astounding degree learned to master the forces of nature...[are mistaken when they] argue that we must learn to master the forces of society in the same manner in which we have learned to master the forces of nature. This is not only the path to totalitarianism but the path to the destruction of our civilization and a certain way to block future progress. Those who demand it show by their very demands they they have not yet comprehended the extent to which the mere preservation of what we have so far achieved depends on the coordination of individual efforts by impersonal forces." (Ch 14 Material Conditions and Ideal Ends, Pg 212)Hayek understood human society. It is true that the rise of Eurosocialism has yet to create a repeat of Nazi Germany. But to a degree, every one of Hayek's observations has been born out again and again. Canadians face penalties for bypassing state health care. Green-lobby scientists push for greater government control of energy use around the world. Americans are being told when and how much health insurance to buy. Expanding governments have distorted housing markets, healthcare markets, and debt markets. Regulatory barriers impede business creation and reduce competition. Interest groups control the tax code for special treatment. Hayek's work foresaw all of this. Hayek has something to teach us about our contemporary political and economic challenges.
