Wednesday, April 22, 2009
Friedrich Hayek: The Road to Serfdom (1944)
“The various kinds of collectivism, communism, fascism, etc., differ among themselves in the nature of the goal toward which they want to direct the efforts of society. But they all differ from liberalism and individualism in wanting to organize the whole of society and all its resources for this unitary end and in refusing to recognize autonomous spheres in which the ends of the individuals are supreme. In short, they are totalitarian in the true sense of this new word.” One of the most notorious foundations of neo-liberal economic theory, Hayek's The Road to Serfdom argues that economic planning necessarily leads to totalitarianism. Written in England near the end of WWII by an Austrian exile, the book warns that Great Britain risks repeating the historical path of its enemy, Nazi Germany, if it does not return to the principles of liberal economics that it pioneered in the 19th century. Surprisingly, Hayek's book is far more preoccupied with politics than economics. Hayek equates liberal economics with individual freedom, asserts that human rationality must humbly submit to the complexity of the market, and claims free competition is the best method for achieving the greatest good. Yet he spends more time associating liberal economics with morality, Western Civilization, and even the wisdom of the ancients than he does explaining how competition works so well (worshipful descriptions of the "invisible hand" are mostly absent). The book instead has a primarily negative purpose: demonstrating how any large-scale economic planning will necessarily face practical obstacles that can only be overcome by renouncing democratic principles and individualist ideals. Look magazine published a cartoon version of this argument in 1945 that to an unsympathetic reader (need I explain where I stand on this?) might appear as a parody of Hayek's book. Hayek's core assumption is that a common idea about economic plans is impossible at large scales. Whereas small groups such as working class movements might be able to unite around an economic goal and plan, at a national and especially at an international level there will necessarily be disagreements about the goals, means, and practical steps of economic intervention: though everyone may initially demand an economic plan, they will eventually disagree about the details. Centralized planners who suggest and attempt to implement a common economic program therefore must either be defeated by popular disagreement or increasingly seek non-democratic and dictatorial powers in order to carry out their plan. Once this power is granted or taken, centralized economic planning will extend itself to every region of society and co-opt the production of truth in order to justify or rationalize itself. For Hayek, all socialists and sympathizers of economic planning (which were many at the time since ideas were circulating about maintaining war-time planning in the impending peace-time era) are nascent Nazis, regardless of their good intentions. Needless to say, Hayek's rejection of a possible economic commons can be itself rejected, along with the tidy little political-institutional narrative he derives from it. Hayek's critique of centralized planning has many reasonable points - witness the struggle over the recent economic recovery plan - but his belief that the problems of centralized planning must always exist in the same form and follow the same tragic path can be denied, and his critique might then help generate a new concept of planning. As Foucault points out, Hayek's neo-liberalism does not promote laissez-faire government policies. Hayek finds strong government intervention acceptable as long as it is aimed at making competition possible or at non-market concerns. “In no system that could be rationally defended would the state just do nothing. An effective competitive system needs an intelligently designed and continuously adjusted legal framework as much as any other.” Hayek articulates the idea of a liberal Rule of Law (Foucault considers this a "governmental rationality") that sets the boundaries of legitimate government intervention. For Hayek, the Rule of Law, “Stripped of all technicalities . . . means that government in all its actions is bound by rules fixed and announced beforehand – rules which make it possible to foresee with fair certainty how the authority will use its coercive power in given circumstances and to plan one’s individual affairs on the basis of this knowledge.” The Rule of Law determines the rules of the economic game, but does not intervene in or concern itself with the fates of individual players (the makers of the board game "Monopoly" create the rules that allow consumers to play the game, but would never intervene to assist a specific player win). “Within the known rules of the game the individual is free to pursue his personal ends and desires, certain that the powers of government will not be used deliberately to frustrate his efforts.” For Hayek, centralized planning dismantles the Rule of Law, replacing its formal equality/indifference with arbitrary favoritism. He cites Carl Schmitt, and part of his point is that the shift from the liberal market to centralized planning forces the government to declare a "state of exception" that transcends legal norms. But the boundary between the norm and exception, Rule of Law and arbitrary planning decision, is not nearly as clear as Hayek admits (again the problem of the rule for the application of the rule). Keynes of all people found much to like in Hayek's book, claiming in a letter to Hayek that "morally and philosophically I find myself in agreement with virtually the whole of it." But Keynes goes on to emphasize the ambiguity of Hayek's distinction: "You admit here and there that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere, and that the logical extreme is not possible. But you give us no guidance whatever as to where to draw it."