In the spirit of “know thy enemy”, I recently read Hayek’s The Road to Serfdom. (Note to the anxious – I survived the experience, and remain a convinced left Keynesian democratic socialist.)
Hayek is, of course, the totemic figure of neo liberalism who fought Keynes and Keynesian economics in the 1930s and is the intellectual figurehead of today’s “austerians”; the political theorist who, the right wing mythologizers tell us, kept the torch of market freedom alive during the dark days of post War managed capitalism; the intellectual guru of Milton Friedman, Chicago school economics, and Alan Greenspan.
There is an enormous amount to disagree with in Hayek but, somewhat to my surprise, I found his political theory at least to be a bit more nuanced that that of many of his contemporary followers.
There is no doubt that Hayek was a fervent believer in so called free markets and the virtues of market liberalism, espousing the classically liberal principle that government intervention should be severely limited. The core argument of The Road to Serfdom captured in the title is that abandonment of that limited government principle by socialists ultimately leads to the death of liberal democracy.
That said, the book was published in 1944, and the enemy he concentrates his attack upon is Stalinist Communism – sometimes lumped together with National Socialism as “totalitarianism” – not the mixed economy and post War social democracy which has been attacked since the mid 1970s by neo liberalism. He defines socialism as the more or less complete replacement of the market and private ownership by public ownership and central planning, and barely has a word to say about forms of socialism – from Austro Marxism to Scandinavian social democracy – which envisage some continued role for the market and a mix of forms of ownership.
Especially in Chapter 9, “Security and Freedom”, Hayek endorses a role for government which goes somewhat beyond Adam Smith and would bring down jeers of derision from most of today’s extreme neo liberals. Contrary to Thatcher’s famous view that “there is no such thing as society” he does see a role for government in pursuing “social ends” which command broad agreement. (p102.)
He supports a minimum income guarantee by the state … “security against severe physical privation, the certainty of a given minimum level of sustenance for all.” (p.147.) At a minimum, that sounds like a universal entitlement to welfare.
He also supports social insurance. “Nor is there any reason why the state should not assist individuals in providing for those hazards of life against which, because of their uncertainty, few individuals can make adequate provision… the case for the state helping to organize a comprehensive system of social insurance is very strong.” (p.148.)
He explicitly cites the need for social insurance to cover the risk of sickness — which sounds a lot like Obamacare, at a minimum.
“There is no incompatibility in principle between the state providing greater security in this way and the preservation of individual freedom.” (p.148.)
In Chapter 8, Hayek clearly puts market freedoms before equality of outcomes in his scale of values, but is also much more clear-eyed about the inherent inequalities of capitalism than most of today’s neo liberals.
” In a system of free enterprise, chances are not equal since such a system is necessarily based on private property and (though perhaps not with the same necessity) on inheritance, with the differences of opportunity which these create.” (p.134.)
“The opportunities open to the poor in a competitive society are much more restricted than those open to the rich.” (p.135.)
He agrees on this basis that “there is a strong case for reducing inequality of opportunity” through at least limited government action. (p.134.)
In short, Hayek strikes me as a classic nineteenth century liberal who should be more closely read by today’s neo liberals.
(Page references are to Volume 2 of the Collected Works, edited by Bruce Caldwell, University of Chicago Press, 2007.)
- Economics for Everyone: Second Edition (June 25th, 2015)
- Rethinking Economics Waterloo Conference, Feb 7 (January 22nd, 2015)
- Louis-Philippe Rochon’s Top 10 Economic Predictions for 2015 (January 11th, 2015)
- (Macro) Econ 101 (December 16th, 2014)
- Economics 101 (October 26th, 2014)