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Book Review: Hayek on Hayek

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Hayek on Hayek: An Autobiographical Dialogue
by F. A. Hayek, edited by Stephen Kresge and Leif Wenar (Chicago: University of Chicago Press, 1994) $27.95; 170 pages.

This year marks the fiftieth anniversary of the publication of Friedrich A. Hayek’s classic volume, The Road to Serfdom. Appearing towards the end of the Second World War, it challenged many of the collectivist premises of the day. First, Hayek argued, socialist central planning was inconsistent with the preservation of political freedom. Once the state has the responsibility to manage all of the society’s economic affairs, the political authority becomes the single producer of all goods and services, the single employer of all labor, and the monopoly redistributor of all income and wealth. Even if the outward forms of political democracy and civil liberties seem to remain intact, this concentration of power will by necessity reduce the individual to the status of a serf, totally dependent upon the whims and decisions of the government.

Second, explained Hayek, rather than Nazism being a pro-capitalist reaction against communism, it was merely one of the intellectual currents that emerged out of 19th- and early 20th-century socialism. German National Socialism gave the state total control over the political and economic destiny of every German subject. And Nazism’s triumph in Germany was due precisely to the fact that for fifty years before the rise of Adolph Hitler, German socialists had been planting the seeds of totalitarian ideology, with their emphasis on the need for individuals and their property to be made subordinate to a higher social good dictated by the state.

And third, Hayek forcefully argued that Great Britain and the United States were following the same intellectual and ideological currents that had created the Total State in Hitler’s Germany and Mussolini’s Italy. Tyranny was not inevitable in Britain and America, but like causes tended to generate like effects; and unless the people of Britain and America reflected on the road they were moving down, the triumph of some form of socialism in these countries could bring about a significant loss of freedom, just as the victory of socialist ideas had done in other places in Europe.

It is now generally accepted that Hayek’s book was one of the most important of a small handful of works defending liberty and the free society during the period of the 1940s that helped bring about the revival of a philosophy of freedom in the post-World War II era. It is noteworthy, therefore, to discover that, for many of the decades after the war, in Hayek’s own mind The Road to Serfdom was one of the intellectual disasters of his life. While a great success as a popular work, he considered that the book ruined his career as a scholar. In the eyes of many of his academic colleagues, Hayek believed, he now had reduced himself to a propagandist for capitalism, not to be taken seriously anymore by real thinkers. He considered this one of the reasons why, after being considered one of the leading economists of the 1930s (and certainly the most important anti-Keynesian of the time), he fell into intellectual oblivion until he was awarded the Nobel memorial prize in economic science in 1974.

This is merely one of the interesting insights the reader comes across in Hayek on Hayek. For several decades after the Second World War, Hayek kept a diary in which he recorded both his thoughts and an account of his life and his family’s history. In the 1970s, a group of economists and intellectual historians did a series of extensive interviews with Hayek about his life and his work. Editors Stephen Kresge and Leif Wenar have combined his diary and the interviews into one systematic text. And as a result, the reader is given an insightful look inside the life and mind of one of the greatest economists and political philosophers of the 20th century.

Hayek traces his family back to the 18th century, explains his early interest in biology and psychology and how these eventually influenced how he came to think about economics, and discusses his relationship with Ludwig von Mises in the Vienna of the 1920s. He also tells about his years at the London School of Economics in the 1930s when he battled Keynes and defended Austrian Economics, and how he came to the University of Chicago in the 1950s.

After The Road to Serfdom was published, Hayek came to the United States in 1945 on a lecture tour. Kresge and Wenar include in the volume the transcript of a radio talk show that Hayek participated in with two American socialists, one an economist and the other a political scientist. What makes it so intriguing is that more than anything else it demonstrates why in the post-war period interventionism and welfare statism triumphed in America and in Europe: the friends of freedom conceded the debate.

Hayek’s two critics are in no way his intellectual equals, but at several points in the discussion they ask him some point-blank questions. Does he support laws setting a maximum number of hours in the workday? Hayek: “Yes, if it is not carried too far. It is one of those regulations which creates equal conditions throughout the system.” Does he agree with a minimum-wage law? Hayek: “A general, flat minimum-wage law for all industry is permissible, but I do not think that is a particularly wise method of achieving the end.” Did he support the TVA [Tennessee Valley Authority]? Hayek: “There is a great deal of the TVA to which no economist in repute, and certainly not the laissez-faire people, will object. Flood control and building dams are recognized functions of the government.” Does he think a system of social insurance is a harmful form of planning? Hayek: “Certainly not a system of social insurance as such, not even with the government helping to organize it. The only point where the problem can arise is how far to make it compulsory. . . .” Does he support a guaranteed minimum income? Hayek: “I have always said that I am in favor of a minimum income for every person in the country.” Does he believe that America needs a central bank? Hayek: “That the monetary system must be under central control has never, to my mind, been denied by any sensible person.” Does he oppose war-time economic controls and planning? Hayek: “No, because you might sacrifice for a time part of your freedom to preserve it in the long run. . . . During the war, we all have to go to some extent totalitarian.”

Hayek was not alone in conceding these points. Unfortunately, practically all the advocates of a market economy and individual freedom during this period made the same concessions. In Germany after the war, the intellectual fathers of the “German Miracle” all did so. One merely needs to read Wilhelm Röpke’s The Social Crisis of Our Time (1942) and Civitas Humana (1944) or Walter Eucken’s This Unsuccessful Age (1951) to see this. In the United States, the same was true in Frank D. Graham’s Social Goals and Economic Institutions (1942) and Henry Simon’s Economic Policy for a Free Society (1948). The lead essay in Simon’s book is called, “A Positive Program for Laissez-faire.” As economist Leland Yeager once expressed it, what one finds there is an extensive “positive program” (for government regulation), but not much “laissez-faire.” And in England the pattern repeated itself, as is demonstrated, for example, in Lionel Robbins’ The Economic Problem in Peace and War (1947).

The experience of the Great Depression in the early 1930s and the growth of state power through the rest of that decade, culminating in all-encompassing controls during the war, convinced these proponents of freedom that in order to save what they viewed as the essential elements and institutions of a market economy, it was necessary to accept a degree of state intervention, regulation and redistribution that most classical liberals and free-marketeers would have opposed before the First World War and criticized even in the 1920s. They believed that to oppose all forms of regulation would result in a loss of all legitimacy in the arena of public opinion. And even worse, most of them had come to believe that many of these forms of intervention and welfare statism were necessary and desirable.

This, unfortunately, meant that in the debates over economic and social policy in the West after the Second World War, the case for the truly free society and the completely unhampered market economy was made by practically no one. One of the few voices during this period who uncompromisingly made the case for laissez-faire was Ludwig von Mises, Hayek’s mentor and friend. But people like Mises were drowned out by all the others who were merely arguing about the extent to which the state should control and manipulate the market. And this included even Friedrich A. Hayek.

It is not surprising, therefore, that even though socialism and central planning have now lost almost all respectability — and Hayek, it must not be forgotten, was one of the most important figures in the West opposing and refuting the socialist ideal — the interventionist and welfare state remain in place. Part of the responsibility for this is due to the concessions made by the advocates of freedom a half century ago. The battle today, as a consequence, involves overcoming the compromised legacy of freedom’s friends as well as its enemies.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).