The Road to Serfdom: Chapter 2

“That socialism has displaced liberalism as the doctrine held by the great majority of progressives does not simply mean that people had forgotten the warnings of the great liberal thinkers of the past about the consequences of collectivism. It has happened because they were persuaded of the very opposite of what these men had predicted.” –pg 76

The Great Utopia

                In this chapter Hayek begins by laying out the first step required in moving the masses from supporting the general theories of laissez-faire to the more modern views of democratic socialism. The lynchpin of this shift was to be a subtle but important shift in the meaning of the word freedom. A subversion of the meaning of a people’s central principle could lead them to support philosophies that were drastically opposed to those philosophies that they initially supported. In this case the word freedom was gradually changed from meaning freedom from political coercion to meaning freedom from scarcity. It is easy to see how this would appeal to supporters of free markets when one takes into consideration the lack of freedom of choice experienced by those on the lower rungs of the socio-economic ladder. True liberty would mean that an individual’s choices would not be limited by economic factors.

                We can see that in this context freedom is synonymous with wealth and the consequence of the union of these two concepts is that no one can truly be free while wealthier individuals have greater opportunities of freedom. This complete reversal of values, from the principles of individual achievement to the equal redistribution of wealth, was not completely appreciated at the time. The move towards democratic socialism was seen as an advancement upon the laissez-faire philosophy which made it difficult for many intellectuals to view this shift critically. Socialism was embraced as the heir of the liberal tradition and it therefore would have been impossible for the intellectuals of the day to realise that socialism would produce an outcome opposite to that which had previously been produced under the liberal doctrine.

                For those that believe our current economic malaise is the result of decades of socialist economic policies an acknowledgement must be made of the failure of the old liberal doctrines to defend against this shift in values. If we want to move beyond the current state of democratic socialism it will do us no good to promote simple-minded principles of 19th century laissez-faire as some modern libertarian groups do. We must acknowledge that an individual cannot properly express their political freedoms if they cannot also acquire economic freedoms. It cannot be denied that the rich lose less relative to what the poor gain from the coercive redistribution of wealth and simply pointing out the coercion of redistribution will not convince socialists to once again accept the principles of liberty.

                To move the current debate forward I believe that it will become important to point out where legitimate arguments for the necessity of coercive distribution of wealth are being used to justify unjust distributions of wealth. While the coercive redistribution of wealth from rich to poor may be necessary, there is nothing within the modern socialist theories that can justify the monopolistic operation of government poverty programs. The true level of poverty cannot be calculated in a system that draws monopolist rents from society at the same time that it attempts to eliminate poverty. We do not know where those monopolist rents would have gone and it is possible that some of the poverty may in fact be due to the removal of these rents from the economic system. Since socialists are interested in eliminating poverty and not simply padding the coffers of government officials, a move towards a competitive system of government regulated poverty programs can easily be seen as an important compromise between socialists and supporters of free market competition.

A Book of its Time

                The second half of this chapter dives headlong into Hayek’s theories of the inevitable slide of democratic socialism into fascism. It is difficult to see how much I am going to discuss this part of the book because I simply believe that Hayek got it wrong. Having a broader understanding of the total threat faced by the allies during WWII and also during the cold war we can see many totalitarian elements rise within the democratic nations of the time; internment camps, coercive central planning and distribution, and a permanent military industrial complex are just some examples. The seeds of Hayek’s vision were all in place and yet it did not come to pass. As we read The Road to Serfdom with the advantage of hindsight we can see that as bad as things got the democratic nations never supported leaders that engaged in extreme violence against their own populace. Instead of simply dismissing this part of Hayek’s thesis I believe it will beneficial to look into the causes of his error.

                The first thing that needs to be pointed out is that, depending on the definition of fascism used, Hayek was not entirely incorrect. While we do not live in the brutal fascist society of Germany during the World Wars, we do face a certain amount of soft economic fascism. The populace of modern democracies would be outraged if their government engaged in open violence against them but it is often forgotten that laws benefitting special interest groups at the expense of the general populace are still backed by the threat of unjustified violence. This system of soft fascism remains in place because people have been led to believe that the laws are necessary or they simply do not understand the consequences of all the redistribution and regulation that the government engages in. When reading The Road to Serfdom we must always remember that our current state of economic fascism at its worst is nothing more than the reduction of the wealth of the middle and upper classes and is no way similar to the regular threats of violence those in Germany and Russia faced for disobeying orders that often had nothing to do with the amount of the wealth the individual possessed.

                The other point that needs to be taken into consideration is that there have been two main forces holding back the ability of the state to consume the productive capital of the economy. Namely the massive number of technological advances that occurred throughout the 20th century and the reliance on deficit financing to ensure that the government was never in a position to fail at maintaining its spending commitments. If we are living in a time of technological and economic stagnation and the only way to prop up the socialist democratic system is through deficit financing, we have to admit that we cannot be entirely sure how much conflict will be created once the status quo cannot be sustained. When there are a limited number of resources to pay for an unsustainable number of social programs it will inevitably create conflict between the groups that wield political power and the voters that fund those groups. If voters refuse to pay for these programs and the unions of the socialized economy respond by going on strike, it may become necessary for the government to engage in violent actions against certain portions of its populace. We may not see the fascism because the forces that would lead the government to require a fascistic response are being held at bay through deficit financing.

                It is this view that I will take whenever discussing Hayek’s more archaic views. I address the issue here because going forward I will not spend much time defending or criticizing the similarities between modern democratic socialist states and the most heinous aspects of Hitler’s Germany and Stalin’s Russia, I think it is pretty evident that we will never slide back to that extreme. However, I will discuss Hayek’s views in relation to the aspects within modern democracies that can cause a perfectly functioning democracy to slide into the soft economic fascism that we see many modern states threatened with today.

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