NOTICE: FUTURECASTS BOOKS
Available at Amazon.com
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"Understanding the Economic Basics &
Modern Capitalism: Smith:
Wealth of Nations. Ricardo: Principles.
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FUTURECASTS online magazine
www.futurecasts.com
Vol. 5, No. 6, 6/1/03.
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Hayek wrote this book in 1944 as a defense
of 19th century liberal ideals, which were far different from
the liberal ideals of the 20th century. The ideal of individual
liberty - the belief that each individual should be free to pursue
his own destiny within his own narrow sphere - is viewed and
defended as one of the greatest achievements of Western civilization.
This great accomplishment, Hayek warned, is incompatible with
socialism. Individual liberty must be destroyed wherever socialism
exists. & He believed that the Anglo Saxon democracies, by pursuing the chimera of economic security and equality that socialism promised, were treading the same path to serfdom as had Germany and Italy after WW-I. & |
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In place of individual liberty, socialism
offers security. It promises protection from personal economic
necessities and restraints, and an equality of economic well
being. & From his perspective, as a native of Central Europe who had experienced the rise of fascism and communism throughout Europe, Hayek concluded that fascism and communism were not opposites, but very similar creeds based on autocratic socialism. Their goals of "social welfare," "the good of the community," "social justice," and "fairness," are open ended and provide no real guidance as to what is and is not desirable or required of the system. Their ideological goals justify authoritarian means, and the practical requirements of complex central planning require extensive arbitrary and discretionary powers. & Ultimately, with all freedoms compromised, socialism offers only "the security of the barracks." & |
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Collectivism justifies any means to
achieve its great ends. Any expediency is justified, no matter
how it may affect individuals or small groups, for the benefit
of the whole. The "greater goal" justifies even horrific
means. & |
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Once collectivist goals are accepted, the way is open for demagogues and ruthless men to gather the "strength" needed to impose the needed measures. To rise in such a system, only totally callous apparatchiks are desired. They must be "unreservably committed to the person of the leader; but next to this the most important thing is that they should be completely unprincipled and literally capable of everything." |
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Ultimately, even the language is perverted.
All the most treasured virtues, such as "freedom,"
"justice," "law," "right," "equality,"
etc., are redefined for collectivist purposes, so that even thought
can be controlled. & Hayek quotes Benjamin Franklin: "Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety." & |
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Thus, under socialism, the "rule of law"
must be replaced so that the central planners can have the
arbitrary and discretionary powers that they must have to have
any chance to make socialism work. Discretionary powers, he points
out, will inevitably be used for discretionary purposes. & |
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"It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us." |
Socialism must eliminate the private property
rights that diffuse power and allow people a larger measure
of freedom.
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Socialism must eliminate the opportunity
for private wealth that capitalism offers the ordinary citizen.
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Socialism must eliminate free choice
of occupation, production and consumption. & If the planners are to control production, we must be content to consume what they think we should consume, when and where they think proper. & |
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Democratic government will fail as a check
on the abuse of power as the central planners acquire the degree
of arbitrary and discretionary powers that they need. & |
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Even partial socialism is a threat to democratic
liberties. & When the state controls more than half the economy (as it did in Germany in the late 1920s), just about all economic entities become dependent on government. & Socialism will breed vicious factionalism as everyone chooses up sides to influence the authorities who have control over their lives. & Socialism promises only greater equality, not exact equality, leaving open the question of who gets what. Ultimately, socialism dissolves into factions squabbling over which group will reap the lions share of the benefits, a competition in which those who resort to compulsion have obvious advantages. |
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The mythological laissez faire alternative
is readily rejected by Hayek. & "Planning for competition" (planning to facilitate competitive commerce) has always been a necessary government function, requiring such things as an appropriate legal framework, infrastructure, and social regulation applied generally to all commerce to achieve such societal objectives as environmental and safety goals. & |
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It is "planning against competition"
that threatens us all. Even as early as 1944, Hayek is aware
that technological progress and complexity make automatic market
mechanisms and decentralized decision making more imperative,
and central planning more hopeless. The rational allocation of
rewards - and efficient decisions about supply and demand - are both impossible
without the pricing mechanism. & All administrative substitutes for market prices are arbitrary and capricious. Protection and subsidies for favored economic entities he labels "restrictionism," and points out that this always causes greater volatility and diminished performance for the rest of the economy. & |
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Socialists love monopolies and oligopolies, Hayek notes. Large, dominant economic entities support the clearest arguments and provide the easiest opportunities for socialist nationalization.
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The American model of a federal union, with local government empowered as much as possible, is the political system favored by Hayek. International organizations should be limited to facilitating international commerce and competition by establishing rules of conduct against restrictionist practices.
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First, the popular commitment to democracy and
liberty in the Anglo Saxon nations was not understood by
Hayek. & |
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Democratic traditions had been sorely tested by
the Great Depression and the economic troubles that preceded
it during the 1920s. Democracy had failed in many places after
WW I, but had survived in the Anglo Saxon nations. & Hayek failed to acknowledge the comparative weakness of democratic institutions in Germany, Italy and Russia. As events proved, if socialism were tried and failed in an Anglo Saxon nation, the people would abandon socialism rather than surrender their democratic powers and individual liberties. & |
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Second, the inherent ineptness of government
management was not understood by Hayek. & Socialism was doomed to failure even where the central planners were given absolute power and were permitted to act in an arbitrary and capricious manner. & |
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Hayek understood the connection between individual
liberty and the explosion of energy and inventiveness that drove
the Western economic advance in the 19th century. Individual
liberty set the individual free to pursue his own economic destiny.
Economic advance was propelled by the advances of numerous enterprising
individuals. However, he failed to suspect - or even just to hope - that withdrawal of individual liberty must stifle economic advance
and ultimately cause the widespread failure of autocratic socialist
systems. & Lacking guidance from market prices - meaningful sales charts - objective accounting systems - and the profit and loss statement - and encumbered by political and bureaucratic imperatives and due process decision making procedures - even the best managers must fail. & Indeed, central planning must inevitably fail even where it is given autocratic power to remove the constraints of due process decision making requirements and democratic checks and balances. Corruption grows unchecked where power is autocratic, and creates far greater obstacles to progress than the procedural obstacles of due process and democratic politics. |
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Copyright 1999 Dan Blatt