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Book Review: The Road from Serfdom

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The Road from Serfdom: The Economics and Political Consequences of the End of Communism
by Robert Skidelsky (New York: Viking Penguin, 1996); 214 pages; $24.95.

It has been five years since the collapse and formal demise of the Soviet Union. The “evil empire” has passed into the dustbin of history. Democracy and the market economy have been hailed as triumphant in the great battle between freedom and tyranny that has dominated our century.

Has freedom, in fact, triumphed over statism, and, if so, how has it come about? Are we now positioned for a coming century of human liberty and expanding prosperity for a growing number of people around the world? Or are we to see more collectivist experiences? Answers to these types of questions add up to an historical understanding of the 20th century.

This is part of the task Robert Skidelsky assigns himself in his recent book, The Road from Serfdom. Professor Skidelsky is an economist and a masterful intellectual biographer. He is in the process of finishing a three-volume biography of John Maynard Keynes, of which the first two volumes, John Maynard Keynes: Hopes Betrayed, 1883-1920 (1983) and John Maynard Keynes: The Economist as Savior, 1920-1937 (1992), have already appeared. Even when the reader strongly disagrees with Professor Skidelsky’s sympathetic interpretations of many of Keynes’s theories and policy prescriptions, the work stands out as an impressive study of the economist who has had more influence on interventionist government policy in the 20th century than any other.

The value of The Road from Serfdom is that it clearly explains the forces behind the growth and effects of collectivism in our time, while at the same time highlighting the ideological residues of collectivism that still stand in the way of the actual triumph of individual liberty and a free market at the end of the 20th century. The book is even more telling precisely because, while eloquently laying bare the essential evil of the collectivist mentality and the political order it produced, Professor Skidelsky is not an advocate of the minimalist state. Indeed, he thinks that a free society requires the core institutions of the interventionist-welfare state for its long-term viability.

Professor Skidelsky explains the origins of collectivism in the late 19th century in the development of Marxian socialism and the neo-mercantilist welfare state of Bismarckian Germany.

But the turning point, he shows, came with the First World War. Before then, collectivist ideas were merely utopian visions; the Great War enabled their practical application as the belligerent powers imposed economic controls in the name of wartime emergencies. No aspect of social life was left outside the control or supervision of the state. And when the “war to end war” was over, the relatively classical-liberal world of limited government, free trade, and domestic free markets was gone. In the wake of the war, communism was imposed in Russia, fascism was triumphant in Italy, and with the coming of the Great Depression, National Socialism came to power in Germany.

With Franklin Roosevelt’s New Deal, the collectivist idea was soon applied in America, as well. Professor Skidelsky details the ways in which FDR’s New Deal and Hitler’s Nazi economic policies paralleled each other-in the areas of industrial and price regulations, agricultural controls, public works programs, regimentation of social life, and “bigger than life” propaganda campaigns. These tendencies were intensified, he points out, as a result of the Second World War.

Then, the socialist and welfare state ideas originating in Europe spread to the newly independent countries of the Third World in the post-World War II period.

The fundamental error in the socialist and collectivist doctrine, he argues, was the belief that society could be successfully socially engineered through central planning and regulation. Adopting Friedrich Hayek’s arguments against socialism and the planned society, Professor Skidelsky demonstrates that the collectivist vision was flawed from the beginning. For it is impossible for any group of central planners and regulators to do better than a competitive market, in which individuals are left free to use their own knowledge, for their own purposes, with market prices serving as the mechanism to guide production and resources into these avenues best reflecting the wants and desires of the consuming public.

But while enthusiastically endorsing the superiority of a market economy over all forms of collectivist planning-because only a market economy can both “deliver the goods” and guarantee human freedom-he does not advocate an unregulated free market. Why? Because he believes that the government must supply a number of public goods; must regulate the market to prevent monopolistic tendencies; must guarantee certain “essential” welfarist securities against unemployment, old age, and disability; and must “macro manage” the economy through monetary and fiscal policy to assure full employment.

His belief that these “functions” must be provided by the government actually demonstrates just how much collectivist thinking has triumphed in our century. Because each one of them can be shown to have their origin in the socialist critique of “capitalist society.” In other words, it shows how much the “mainstream” free-market position has moved to “the left” during the last sixty or seventy years.

Worse still, and unfortunately true, many of Professor Skidelsky’s rationales for supporting these activities as “appropriate” responsibilities for the state are taken by him from the writings of those who are often considered the leading opponents of collectivism during the last fifty or sixty years: Friedrich Hayek, Wilhelm Röpke, Joseph Schumpeter, and Karl Popper. And, perversely, Professor Skidelsky tries to argue that rather than being an enemy of the market economy, one of its greatest defenders was John Maynard Keynes.

Indeed, what Professor Skidelsky’s book shows more clearly than many others is precisely where the intellectual “battle lines” are drawn today. A defense of the “free market” now is understood to include much of what at the beginning of this century would have been considered socialist positions in debates over government policy.

In the past, the advocate of the unregulated free-market society had opponents who distinguished themselves by clearly stating that they wished either to abolish or significantly restrain the free market. Now, after six decades during which many of these controls, regulations, and interventions have been put in place, the system created is hailed as a benchmark of what a market economy should be considered. The interventionist-welfare state is now the “free market.”

This makes the task of the advocate of laissez-faire even more difficult than in the past. He must not only continue to show that socialism was a false turn made by many countries around the world, he must also now argue that what passes for a free market, in fact, is not. The value of Professor Skidelsky’s book is precisely that he not only lucidly shows why the planned society was a failure, but also shows where the new intellectual lines of attack must be fought if freedom truly is to be triumphant.

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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).