“We are ready to accept almost any explanation of the present crisis of our civilization except one: that the present state of the world may be the result of genuine error on our own part and that the pursuit of some of our most cherished ideals has apparently produced results utterly different from those which we expected.” -pg 66
The Abandoned Road
In this first chapter we see the core thesis of Hayek’s work, how good intentions can lead to negative results. Although this is little more than assertion at this point we can already see the historical framing of the work. Hayek is fearful that the principles of freedom that were responsible for much of the prosperity of the 19th century will be tossed aside in the face of the successful planning that took place during World War II.
It is hard to argue with the success of WWII as an operation whose goal it was to defend freedom within Europe and around the world. A project where societies comprised of millions had to be rapidly planned and coordinated to address one massive obstacle, whose outcome would have serious ramifications for every person around the globe. It was apparent to Hayek that the ability of the government to manage this operation would drastically alter the beliefs of a society which not long before had believed in the principle of individualistic organization. To Hayek this shift in values towards central planning would inevitably lead to the fascist outcomes that he saw arise in Germany and Russia.
Fundamental Principles of Liberalism
For Hayek there were no hard and fast rules laid down by the principles of classical liberalism. He believed that the fundamental principle of classical liberalism was that in ordering our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to the use of coercion. It was his belief that deliberate action should be taken to create a system where competition would work as beneficially as possible and that liberalism was not an argument for the passive acceptance of institutions.
Hayek did not agree with classical liberals who ideologically supported a strict doctrine of laissez-faire but, considering that everyone could lay forth their particular preferred exception, Hayek understood that strict rules would be necessary and unavoidable. Without these rules it was trivial for special interest groups to show the immediate effects that their programs conferred on some, while the harm they caused was more indirect and difficult to see. Those that would pay the costs were dispersed within society and not entirely aware of the costs they paid.
If the principles of classical liberalism that created such great prosperity were not understood, it would only be a matter of time before the combined efforts of special interest groups would be able to penetrate the stiff laissez-faire doctrine and collapse the popular support for the philosophy. In Hayek’s mind the advancement required to fully understand the benefits of spontaneous order were not yet acquired to a degree suitable to scientifically fend off the propaganda of those who opposed classical liberalism. The special interest groups could create critiques faster than the scholars of political economy could discover the general laws that revealed the dispersed costs to the general public.
The defence against the ever increasing costs of special interests could only ever mean the protection of the general prosperity of a society. A prosperity that no individual could directly point to nor could they have a complete understanding of what their total share was. The inability to determine this share meant that individuals within society would be unable to rationally calculate their preferences and likely would support policies that they themselves would be forced to pay an unfair share for. While the classical liberal philosophy was slower and more gradual than government intervention, the classical liberal philosophy at least had an objective methodology for determining if it was meeting the individual preferences of those that paid for and benefitted from the voluntary programs within the economy.
Patterns of Sustainable Trade and Specialization
What Hayek is laying out in this first chapter is what has been the core of the economic debate since the time of Adam Smith. The agreed goal of all those who attempt to understand the workings of the economy is that people should be able to specialize in work that permits them to trade with others and acquire the goods that they demand. The patterns, or the specific ways in which individuals coordinate with each other to meet their demands, should be sustainable over time so as to prevent the stress that results when people are unemployed and cannot acquire the goods that they seek.
Those that promote theories of laissez-faire appeal to the market process because it is an objective method for determining which patterns are viable and sustainable. The price system, and more importantly the system profit and loss, allows individuals to coordinate their preferred forms of specialization and trade within the economy. It is a method of objectively testing and comparing between the subjective preferences of entrepreneurs and consumers. Wherever we see successful patterns of specialization or trade there is always the opportunity open to others to test for new patterns and create more profitable forms of trade. Likewise when there are dynamic shifts within the economy and certain patterns become unprofitable they are discontinued before much waste accrues to the economic system.
Although this process is open and objective it is a process that takes considerable time to coordinate and can be knocked from its course whenever a set of rules or institutions arise that give unfair advantage to some individuals over others. Failures of the market process may be overcome with time but in the interim it is hard to look at those affected simply as autonomous pieces within an economic theory and not as people that are suffering with no hope in sight. The interventionist may agree with the principles of the market method but see a need for fast action that can only be brought about by coercing people to support others within the economic system. If the method of waiting for voluntarily support to reach those who have suffered the fate of being in an unsustainable pattern takes too long, society might be justified in setting up coercive institutions that have the ability to circumvent the market method.
It is the conflict between these two world views that Hayek will end up discussing in The Road to Serfdom. It is Hayek’s belief that the interventionist method, while providing immediate relief, sets up long run forces within society that will continue to undermine the market process even after the immediate economic threat has passed. It is hard to determine what the true long run cost of intervention will be to society and therefore makes it impossible for those affected to calculate the best path to resolving the economic crisis. In addition, if people are unable to critically assess the merits of the program it becomes that much easier for special interest groups to make proposals that cost more than they really should.
Although this problem can occur within any coercive institution, it is specifically within the democratic paradigm that Hayek investigates. This suggests that the modern reader can gain much benefit from a reading of The Road to Serfdom, not only to draw parallels with historical cases but to help the supporter of democracy to see how democratic institutions have within them the seeds of what would typically be considered undemocratic outcomes.