The modern edition of The Road to Serfdom is difficult to approach.
Not because of the subject matter; Friedrich Hayek’s work seems as applicable to today’s political environment as it was during the Second World War. It’s just that it’s literally difficult to get to Hayek’s 1940s-era opening words, which don’t actually appear until about a quarter of the way into the book. First, a reader must wade through dozens of pages, including two prefaces and two introductions penned over the years.
But a patient reader (or an impatient one who begins on page 57) is well-rewarded for the effort.
“Looking back, we can assess the significance of past occurrences and trace the consequences they have brought in their train,” Hayek begins. “But while history runs its course, it is not history to us. It leads into an unknown land, and but rarely can we get a glimpse of what lies ahead.” From that humble opening, Hayek proves himself wrong. He gives an apt description of the future. And it isn’t especially pretty.
He notes that the free market economic policies that allowed the West to thrive in the 19th and early 20th centuries were already disappearing in his day, and were likely to fade further in the years ahead. In fact, they’d been long abandoned in the Soviet Union and Nazi Germany.
And, even as the British were fighting Nazism overseas, plenty of leading British politicians were promising to create a kinder, gentler version of socialism (Nazism was officially known as “National Socialism,” after all). As indeed they would, launching the National Health Service in 1948. Other countries soon followed, expanding welfare programs at the expense of market competition.
Hayek also warned about “experts,” who, we were told (and are still being told), know more than markets.
Consider the energy sector. Less than a decade ago, the experts (in and out of government) thought that U.S. oil production had long peaked. Firms were building facilities to import all the natural gas it was predicted our country would need. The experts were wrong. Private entrepreneurs developed hydraulic fracturing – fracking – and began to extract vast amounts of domestic gas and crude oil. It would be fair to call the U.S. “Saudi America,” whether or not we’ve actually surpassed Saudi Arabia in production. Good thing we didn’t listen to experts.
Experts also like to “plan,” but Hayek also calls that a bad idea.
“Of the various arguments employed to demonstrate the inevitability of planning, the one most frequently heard is that technological changes have made competition impossible in a constantly increasing number of fields and that the only choice left to us is between control of production by private monopolies and direction by the government,” Hayek wrote. In fact, the monopolies and the government soon began uniting.
“Anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development,” he observed.
This is especially true in Washington today. Lobbyists don’t make products that people want. They don’t sell services that people need. They try to use the power of government to limit competition. Thus Mattel favors regulations that demand rigorous testing for toys. Mattel can afford the testing; small toy manufactures can’t. The big company uses the power of government to reduce competition.
The Rule of Law, he writes, “implies limits to the scope of legislation; it restricts it to the kind of general rules known as formal law and excludes legislation either directly aimed at particular people or at enabling anybody to use the coercive power of the state for such discrimination.” Again, the United States as we know it has failed this Hayekian test.
Today’s legislation tends to be open-ended, not limited. Instead of setting general rules, it attempts to deal with individual details. That’s why congressional bills tend to run to thousands of pages. They include everything but the kitchen sink. Even at that length, they fall short, though.
That’s why laws from ObamaCare to Dodd-Frank aren’t actually “laws” at all; they’re invitations for regulators to write laws. Hundreds of times in ObamaCare, the bill declares that “the Secretary shall” or “the Secretary may” do this or that. If you’re interested in planning your business in the health care field, good luck. Your first job is to figure out what the secretary of Health and Human Services is going to determine.
Hayek wrote about exactly this problem. He notes that “if the individuals are to be able to use their knowledge effectively in making plans, they must be able to predict actions of the state which may affect these plans.” So, “the more the state ‘plans,’ the more difficult planning becomes for the individual,” he notes.
Hayek ends up pointing the finger not at capitalists, but at lobbyists. “The fatal development was that they [capitalists] have succeeded in enlisting the support of an ever increasing number of other groups and, with their help, in obtaining the support of the state.”
This reinforces his point that, when governments write general regulations that apply equally to everyone, it allows individuals to make plans. Unfortunately, that’s not what happens when governments try to pick winners and losers.
The Road to Serfdom correctly pointed out the dangers of government planning. Hayek sang the praises of laissez-faire economics, even as the world was turning down a different road. If the Obama administration has shown us anything, though, it’s that we need to change course. Hayek’s vision presents a map back to where we need to be.
images via shutterstock / Gajus /