F. A. Hayek’s “The Road to Serfdom” warns against the dangers of planning, or more specifically, economic planning. Hayek believes the idea that a nation’s economy would produce more if only there were a central power to plan and control economic processes is one that is not only incorrect, but in practice opens the doors for totalitarian regimes such as the fascists in Italy or the Nazis in Germany. He surmises that planners will fail to agree on what is best for the economy and the public will as well. This disagreement will lead to the planners’ conviction that people must be forced to agree, but because they are too timid to use the force themselves, they will delegate that responsibility to someone else. Once that party leader comes into power, the planners have lost all control and the conversion to dictatorship will soon follow.
I find Hayek’s perspective on this topic to have extra credibility due to his background. As is mentioned, Hayek spent about half is life in Austria and the other half in the U.S. and England. In Austria he must’ve been very familiar with economic policies in Germany at the time and he references multiple times that anyone who has seen “the transition from socialism to fascism at close quarters”, knows that the connection is clear. It is a bit scary to think that Hayek observed some of the same forces and ideas that he warns against in England and the United States. His work was published in 1945, which leads me to wonder what he would think of the current state of political and economic affairs in both countries today.
I like how Hayek portrays the strengths of the competitive system. He shows that basically all human progress and technological advancement has been due to innovation under individualism. A theme that I feel has been present in the past few weeks’ topics is that socialism and central control are nothing but detrimental to innovation. Without innovation and individual spontaneous action, society would not advance and improve. Central planning would lead to stagnation of the economy and humanity.
Similar to last week, the topic of power is also present here. Hayek discusses what power really is in an economic system. A corporation or businessman that employs a man may have some coercive influence over him based on his wages and job security, but they have no real tangible power over his life. He can still make his own decisions. He can quit and walk away. A socialist planning board would hold much greater power over the same man. A bureaucrat in such a regime would hold power over the man’s life and work. And depending on how far along the conversion from socialism to totalitarianism the state is, there is no chance for him to leave without risk to his life. That is the true power to be feared. The state is once again the only actor that creates monopoly power. Hayek refers to this abuse of monopoly power and says it is the result of regulation of competition. Only by inhibiting competition can the conditions for true monopoly be present.
Another recurring idea was that of a universal basic income/dividend. Although Hayek only mentions it briefly, he states that there is no reason why a certain minimum amount of food, shelter, and clothing should not be provided to all to provide security. Once again, I really like this idea. It guarantees everyone the ability to survive and pursue a better life if they choose to do so. What is individual freedom if not the ability to make decisions on how to direct your own life without restriction? This first kind of security Hayek sees no issue with. He objects to planning designed to keep people or groups stable in their position of wealth. That is, to protect themselves from competition and ensure their incomes by excluding others. Many people see socialism as a means to equally redistribute wealth. However, the scenario that Hayek describes is more likely. Groups of people in power who abuse their power to ensure they see higher profits and wages. Competition would be destroyed and there would be no way to challenge those businesses favored by the central planners.
One more concept I thought was interesting was Hayek’s section on why the worst type of people flourish under the system created by planning. There is no way to get everyone to agree to a central plan. Because of this, such a central power would have to force people to comply. The moral quandary of a rational leader is described by Hayek, “Just as the democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans, so the totalitarian leader would soon have to choose between disregard of ordinary morals and failure. It is for this reason that the unscrupulous are likely to be more successful in a society tending toward totalitarianism.” Leaders with good morals are not willing to cross these boundaries, so those willing to commit atrocities to destroy individual liberty achieve success and following.
Hayek also points to the fact that the type of people most suited for the radical ideologies of a totalitarian party are those who are less educated. Higher education usually produces more diverse opinions among individuals, and they are also more likely to have strong convictions that are less susceptible to the propaganda of a collectivist party. Less educated people with no convictions are more likely to be won over by rhetoric from strong orators and engagement in a common, usually negative, cause. Education and competition seem to me to be the crucial principles that must be preserved to combat the danger of central planning and ensure the continued advancement of society. Highly educated citizens are less likely to tend towards giving up their personal liberties, and competition without overregulation protects the financial freedom of individuals. Social liberties follow financial ones. Freedom under a centrally planned economy is an illusion.
