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- The Centenary of Ludwig von Mises’s Critique of Socialism - June 9, 2022
- In the Beginning: The Mont Pelerin Society, 1947 - May 19, 2022
The rebirth of a belief in and an enthusiasm for socialism and government planning among a noticeable number of academics, intellectuals, young people, and elected officials raises many of the fundamental issues surrounding freedom and command, market competition and political control.
Once more, a call is heard for doing away with free enterprise, this time in the name of a Green New Deal. The case is being made, again, that humankind must take the future of society into their own hands and remake it into forms and directions that are more rational and just than what results when “capitalism” runs unrestrained over the societal terrain in the pursuit of personal profit rather than goals advancing the common good and the general welfare.
Social justice, it is said, requires doing away with the income inequalities that emerge from the free play of supply and demand, because free-market–based results are all meant to distribute the most wealth into the hands of a few at the expense of the many. The “purpose” of the capitalist system is to exploit workers, minorities, and other victimized groups so the rich can be, well, rich.
The most frustrating elements in all this for the friend of freedom is how much of it has all been heard before, over and over again, during the last two hundred years. There is little in the latest versions of these statements that was not said in the nineteenth and twentieth centuries.
The only new aspect is the attempt to couch demands on government control in an hysteria that insists that not implementing them means the end of life on Earth as we know it, because of human-caused pollution in the atmosphere. In the past, Marxists would declare that the workers of the world should unite because they had nothing to lose but their chains. Now the cry is for humanity to unite behind central planning because we face the danger of global warming.
There are a variety of fundamental assumptions in this new case for socialist planning, similar to those older appeals for government control. Among them is the notion that society can be designed or remade in any shape desired, and with an outcome better than anything resulting from leaving the social system on its own. Another assumption is that the distribution of income under a competitive market economy is inherently unjust and unjustifiable, and that income and wealth may be redistributed in a manner demonstrably shown to be ethically superior to that generated by the market itself. And one other assumption is that the best government is one that is generally unrestrained by constitutional limits that would otherwise hinder those in power from fully expressing and implementing the will of the majority.
While progressives and the Green New Deal planners perhaps can be considered those most implicitly consistent in holding such views in 21st-century America, most political movements and parties in the United States, and indeed around the world, believe in variations on all three assumptions. The interventionist-welfare state, after all, is merely a halfway house on the way to a more thoroughly collectivist and planned society. And there are, alas, few who question or challenge all three assumptions in any country in the world.
Hayek on the dangers from planning
But there have been voices that spoke out against that set of ideas, and did so in reasonable and insightful ways. One of the most important was that of the Austrian economist and Nobel Laureate Friedrich A. Hayek (1899–1992). Hayek had early on made his international reputation as a leading monetary theorist who developed the Austrian theory of money and the business cycle, which had been first formulated by Ludwig von Mises. In that role, Hayek became one of the leading critics of the emerging Keynesian Revolution in the 1930s and 1940s.
During the war years, Hayek’s interests increasingly turned to answering the question, why was it that collectivism and totalitarianism had been intellectually and politically so successful in the first half of the 20th century, given the earlier successes of free-market liberalism in the 19th century in ending monarchical tyranny and fostering widening and rising material betterment for growing numbers of people in Western societies?
Hayek’s explanation was offered in The Road to Serfdom (1944), a work that soon won him popular recognition and notoriety in the wider community of public opinion in both Europe and the United States. He offered an interpretation of how and why a civilized and advanced nation such as Germany could succumb to the demagoguery of Adolf Hitler and his National Socialist (Nazi) movement. Hayek’s warning was that there was nothing culturally or politically unique in the German people that made them susceptible to it.
It was the attraction to the same collectivist and socialist ideas that were also increasingly common in countries such as Great Britain and the United States. The appeal and hold of those ideas on the German people were just a few decades ahead of their impact in other countries. And if any people did not wake up to their danger, economic control in a society can easily lead to political command over all aspects of life.
Liberty and its institutions
In the 1950s, Hayek’s interest centered on the political and social ideas and ideals upon which a free society is based, and without which such a free society is not easily maintained in the long run. That interest culminated in his grand 1960 book, The Constitution of Liberty. Here Hayek inquired into the nature and aspects of individual freedom, the meaning of the rule of law and the role of constitutions, and the rationales and limits to the welfare state in a free society.
Soon his mind turned to a new project that built on the arguments in The Constitution of Liberty but which, he believed, deepened and extended them in ways that recently published work had not. After working on the new book through the 1960s, he began to publish it in the 1970s in three separate volumes.
Under the general title, Law, Legislation, and Liberty: A Restatement of the Liberal Principles of Justice and Political Economy, they were: Volume 1: “Rules and Order” (1973); Volume 2: “The Mirage of Social Justice” (1976); and, Volume 3: “The Political Order of a Free People” (1979). This year, therefore, marks the 40th anniversary of the completion of Hayek’s last major contribution to the social, economic, and political philosophy of the free society.
Given the recent revival of the socialist idea, its seems appropriate to turn our attention to these volumes to better understand the presumptions and pretenses in the latest call for a return to government planning of human society.
Not the result of human design
Central to much of Hayek’s thinking beginning in the 1930s — and especially “Rules and Order” — is his emphasis that many if not most of the social institutions that serve human purposes and improvement are not the creation of human intention and design. A little reflection on the nature of language, custom, tradition, rules of everyday ethics, etiquette, manners and mores, and the related rules of human interaction in various social settings, including those of commerce and enterprise, as well as aspects of the common law, all show that they are for the most part what the 18th-century Scottish philosopher Adam Ferguson referred to as “the results of human action, but not of human design.” Almost all of them are the products of social evolution through the interactions of multitudes of people over many generations as they have grappled with and stumbled upon ways of effectively and successfully associating with each other for mutual gain.
Most of us can recall being assigned to read some play by William Shakespeare when in high school or college and often found it difficult to follow the use of words and the turns of phrases the Bard used. Yet, only 400 years separate us from Shakespeare’s death in 1616. His use of the English language differs from ours and has changed in many ways, but none of it was planned, designed, or commanded by government edict or decree. Every day in many little ways, all the users of English over those four centuries spoke words, wrote sentences, modified some spellings, forgot or added some punctuation, or imbued phrases with different meanings that have cumulatively changed how the language is spoken and how ideas are conveyed through it.
Nor could anyone in 1616, or 1716, or 1816, or 1916 have been able to know or anticipate the changes in English that have resulted in the language we speak and take for granted today. And none of us can have any real inkling of what changes await the English language in, say, the 100 years to come.
No one can doubt that whether it is the language we speak or the customs and traditions we follow, or the manners, etiquette, or everyday ethics we practice in our dealings with others, they all form parts of the essential societal glue without which complex and continuous human association would be nearly impossible. If their structures and changes in them had been dependent on a handful of minds that were guiding legislatures and bureaucracies on how and for what purposes they were used, society would be poorer in every imaginable way.
Choice and the free society
Central to Hayek’s argument on social institutions and their evolution is that only freedom allows all the minds of all the people in the world to participate in interactions from which each of us gains from what all the others can contribute to the global community of humankind, and within which each attempts to better fulfill his own personal ends and purposes.
Another element in the nature and structure of many social institutions is that they have evolved as procedural rules in the context of which each of us can go about his own ends, while respecting the courses of action chosen by others. An example of such procedural rules is the rules of the road. They specify at what speed a car may be driven, that drivers must stop for red lights at intersections, and that drivers must pull over when an emergency or police car is racing by with lights on and sirens blasting. But as long as the procedural rules of the road are followed, everyone is free to go where he wants, when he wants, for any purpose of his own choosing when behind the wheel of his automobile.
This contrasts, Hayek points out, with government regulations, controls, commands, and prohibitions that dictate when people may act or interact, with whom, for what purposes, and under what terms and conditions. When that is done, not only are people limited in their liberty to what government tells them, their opportunities are also limited to what the planners and regulators can know or imagine as possible and desirable. The actions of all of us are confined within what the limited minds of the planners and regulators can conceive. Human progress, as well as everyone’s liberty, is straitjacketed to the decisions and knowledge of the few in political authority and power.
The mirage of social justice
Socialists and interventionists frequently insist that among their ultimate goals in redesigning society and its institutions is to establish “social justice.” This is said to be different from older or more traditional notions of justice, in the sense of respecting another’s life, liberty, and private property, or abiding by and fulfilling contracts and agreements into which a person has voluntarily and freely entered.
Social justice, its proponents argue, calls for everyone’s receiving what he “justly” deserves or to which he has a distributive “right” or entitlement. But what are each person’s just desserts in society, other than what he may have earned in the free exchanges of an open and competitive market?
In volume 2 of Law, Legislation, and Liberty, Hayek’s theme is the demonstration that social justice is a “mirage,” that is, something that when thought about from “afar” seems definite and clear but when looked at up close loses all reality and objective meaning. What is a “fair wage,” or a “reasonable” standard of living, or a “just reward” for services rendered, or the redistribution due to each for an equitable society?
Hayek argues that there is no meaning to “social justice,” in the sense that society has been unfair, because society does not act and benefit or harm anyone. Society is merely the covering term for all the individual actions, interactions, and associative trades and exchanges in the marketplace made by and between individuals. Each earns income from services rendered to others according to his chosen role and participation in the social system of division of labor.
When I do my shopping in the supermarket and take a box of breakfast cereal off one of the shelves and put it in my shopping cart, I do not ask who has participated in the processes of production of that box. Nor have I asked what each of those participants “really” deserves or what his personal merit and circumstances warrant in deciding what price to pay for the product. In fact, it is impossible for any of us to do so.
Markets or politics?
If government were to take on the role of ladler of deservedness and merit to each member of the society, we would have to presume that the people in government know enough about each and every one of us in society to objectively and correctly distribute to each what he justly should have, no more and no less. Not only would it require a godlike knowledge of all of humanity, it would also involve such a degree of totalitarian control and determination of every human being’s material and social fate that few of us would want to live under it, if we but reflected a moment on what its consistent application would entail.
In the free marketplace, I need neither the approval nor agreement of all my fellow human beings or the government about what I “really” deserve or should have. My life is my own, lived by me, as I consider best, guided by the values and purposes I decide will give happiness and meaning to my existence.
Yes, how much I may earn, and therefore the standard and quality of my life, are dependent on what others consider the worth of what I can do for them in the marketplace in the pursuit of their own purposes. But in that marketplace there are actual and potential opportunities for me to improve my talents, abilities, and skills in ways that may enhance my value in the eyes of those others.
But once my “just rewards” are to be determined by those in political power, it is far more outside of and beyond my control or influence. In the free marketplace, I am free to try to find avenues on my own through which I can improve my income-earning abilities. But once rewards are politicized under a regime of redistributive “social justice,” it is out of my hands, with my only avenue being participation in political pressure groups attempting to get government to give more to the social group to which I have been assigned on the basis of class, race, gender, or sexual orientation. My individual fate is tied to that of a collective, my membership in which will most likely have been imposed on me by others, whether I’ve wanted it or not.
For that reason, Hayek says at one point,
The near-universal acceptance of a belief does not prove that it is valid or even meaningful any more than the general belief in witches or ghosts proved the validity of these concepts…. I believe that social justice will ultimately be recognized as a will-o’-the wisp which has lured men to abandon many of the values which in the past have inspired the development of civilization….
Like most attempts to pursue an unattainable goal, the striving for it [social justice] will also produce highly undesirable consequences, and in particular lead to the destruction of the indispensable environment in which the traditional values alone can flourish, namely personal freedom.
Liberty requires limited government
In “The Political Order of a Free Society,” Hayek warns that a free society is also endangered by the attempt to have a purer and more unrestrained system of political democracy. Democracy is an enemy of liberty when it is not appreciated that many of the historical freedoms that emerged along with the democratic ideal — freedom of speech and the press, freedom of association, freedom of religion, wide ranges of personal freedom of choice — can be secured only when majorities are limited in what they decide. That includes their economic liberty.
Majorities can be as intolerant and tyrannical as the worst absolute monarchs of the past, if not even more so. What has failed, in Hayek’s view, has not been the idea of democracy as such, but the particular form of democracy that developed over the last 200 years, under which fewer and fewer corners of individual life are safe from what coalitions of special-interest groups can impose on the rest of society.
Hayek hoped that there could be found forms of “free government,” under which those who are ruled may “democratically” select those holding political office, but which at the same time leaves the individual citizen free in most matters to live his own life as he sees best in free association with others.
A thoroughgoing classical liberal or libertarian, will, no doubt, find a noticeable number of inconsistencies and even contradictions in Hayek’s arguments concerning the role and limits of government in society. But that in no way detracts, in my view, from the underlying and essential insights that Hayek developed on the importance of freedom and the nature of a free society.
The spirit of all that Hayek argues in Law, Legislation, and Liberty is captured in the following passage in volume 1 devoted to a discussion of principles and expediency:
A successful defense of freedom must therefore be dogmatic and make no concessions to expediency, even where it is not possible to show that, besides the known beneficial effects, some particular harmful result would also follow from its infringement.
Freedom will prevail only if it is accepted as a general principle whose application to particular instances requires no justification. It is thus a misunderstanding to blame classical liberalism for having been too doctrinaire. Its defect was not that it adhered too stubbornly to principles, but rather that it lacked principles sufficiently definite to provide clear guidance….
People will not refrain from those restrictions on individual liberty that appear to them the simplest and most direct remedy of a recognized evil, if there does not prevail a strong belief in definite principles.
At a time when freedom is once more directly under attack by those who wish to return to the failed system of government centralized planning, renewing our understanding of and appreciation for Friedrich A. Hayek’s contributions can only strengthen our arguments for a society of liberty.
[Originally Published at the Future of Freedom Foundation]