“The dispute between the modern planners and their opponents is, therefore, not a dispute on whether we ought to choose intelligently between the various possible organizations of society; it is not a dispute on whether we ought to employ foresight and systematic thinking in planning our common affairs. It is a dispute about what is the best way of so doing. The question is whether for this purpose it is better that the holder of coercive power should confine himself in general to creating conditions under which knowledge and initiative of individuals are given the best scope so that they can plan most successfully; or whether a rational utilization of our resources requires central direction and organization of all our activities according to some consciously constructed blueprint.” –pg 85
Individualism and Collectivism
In this chapter Hayek carefully lays out the scope of the debate and begins to discuss the general outline of how a socialist society can end up on the road to serfdom. As seen above, it is important to define what is meant by the term planning. The debate revolves around the fact that central planning is coercive planning and the more coercive the central planner the less room there is for individual planning. To maximize the amount of freedom within individual planning, Hayek argues that it is the role of the government to construct the conditions necessary to facilitate the planning of individuals. This not only includes a central legal authority but also allows for the production of public goods that cannot be properly calculated for by the system of private property and prices.
The problems begin to arise for the socialists because the means of achieving their ends are the same means that are required for any preferred distribution of wealth. The danger with striving towards the socialist ends, regardless of the means, is that the success of the project cannot be determined until after the costs of the project have already accrued. Therefore, those who wish to redistribute wealth along lines socialists would consider unjust only need to create methods wherein the redistribution is diverted to unjust ends while making the claim that the program will meet the desired ends of the socialists. As long as the ends satisfy the socialists to some degree, support can be gained from the socialist movement for any redistribution of wealth, even those that would be considered unjust. Once the wealth has been redistributed to unjust ends it is often too late to rectify this distribution and without competition between methods there is no objective way to calculate the costs of possible alternative programs.
It is the belief that the costs of coercive central planning outweigh the benefits that leads Hayek to support a system of laissez-faire. The threat of special interest groups hijacking the socialist process imposes an initial cost on the socialist project regardless of whether or not the socialists are capable of weeding out those people that are attempting to gain support for an unjust redistribution of wealth. The research required in making this determination and the need to educate those in a position of possibly supporting an unjust program imposes large costs, in terms of time spent, on the socialists. Since the socialists do not receive any monetary compensation when they succeed at making this determination and the special interest groups receive monetary compensation when the socialists fail, there is a huge disparity in the incentives faced by those individuals who are attempting to make this process a success or failure.
The expected value the socialists receive from the methods of coercive central planning can simply be calculated as the net gain to social justice minus the costs imposed on them by special interest groups and weighted by the percentage chance of the socialist’s success in preventing their programs from being hijacked by special interest groups. The support of a system of laissez-faire can rest entirely on the outcome of this calculation wherein a negative value means the system of laissez-faire leads to greater social justice even if we assume there is no private charity supporting programs of social justice.
The First Step on the Road to Serfdom
We can further understand the costs imposed by special interest groups once we understand that the costs imposed onto socialists are often imposed by other socialist groups. What Hayek refers to as socialists of the Left and Right are often united in their support of the coercive means of organizing society but, ironically, have opposing ends whose costs they seek to impose onto each other. These two groups are united behind their anti-competitive mentality but seek the implementation of completely different socialist programs. While the Left socialists support the centrally planned redistribution of wealth towards the poor, the Right socialists support the centrally planned redistribution of wealth to the business and working class individuals within society. The Left supports centrally planned education and health care services, while the Right support a centrally planned monetary supply and the limited liability of corporations.
This union against competition is the first step towards the road to serfdom and can lead to the organization of a society’s industries along syndicalist or “corporative” structures which attempt to eliminate competition but leave the planning in the hands of the independent monopolies of each industry. The rents acquired by these monopolies are then split between the organized labour and business groups that support each of these industrial monopolies. These monopolies impose costs onto consumers by appealing to the socialist values of the average citizen while the failure of the citizenry to properly calculate these costs leads to an ever increasing financial burden upon the productive class of consumers and tax payers that pay for the costs of these programs. When these monopolies become too overbearing the only way to move back to a state of competition is for the citizens to vote in a government that is willing to return full control of the monopolized industries to the state. This position leaves society at a precarious point where they can move towards a freer state of competition or a state of complete central control depending on the motives of those in power.
The problem with this chapter, and the classical liberals take on laissez-faire in general, is that Hayek can spend the opening paragraphs criticizing socialists for using monopolistic solutions to social problems and then later openly call for the institutionalization of a monopolized legal service simply on the basis that he is incapable of creating voluntary solutions to the problem of public legal goods. When a voluntary solution cannot be found to the problem of public goods implementing a monopolistic solution still carries the problems of monopolies even if there is no alternative solution. The very outcomes Hayek so clearly lays out in the beginning of the chapter are then completely incomprehensible to him in the latter half of the chapter when he complains about the monopolization of legal services slowly eroding the legal framework of his preferred economic structure.
Who was it that said that focusing on the ends without analyzing the means will lead you to form groups with those that support your preferred means but with the intention of undermining your ends? It was Hayek from the first half of the chapter! Maybe someone should introduce him to the Hayek of the second half of the chapter. It is disheartening to see a writer that is usually so clear and precise in his thinking get so muddled up and contradictory within the space of five pages.
But we should not completely fault Hayek, monopolized legal services has been a core exception to laissez-faire philosophy for a long time and is not something that has been adequately solved by anyone. The problem to having an exception to a laissez-faire philosophy is that it opens up the door to anyone and everyone who might have an exception. Those in the laissez-faire camp even have one of the weakest excuses; they simply cannot think of any voluntary solutions to the problem of providing legal services as if they have searched the entirety of the solution space. Socialists on the other hand use the power of the state to enrich the lives of the poor, why shouldn’t their exceptions take precedent?
Until those that support free markets solve the problem of free market legal services they will never be able to live in a free market society because their lack of principles only gives others the freedom to circumvent principles when it suits their needs. The discussion of free market legal services is far beyond the scope of this book but I think it is important to point out the unprincipled nature of the laissez-faire argument as we go forward with discussing the ideas of The Road to Serfdom.