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Originally published: 1944
266 pages
Chapter 13


Friedrich A. von Hayek

Near the end of the twentieth century Friedrich von Hayek lived to see the future he had predicted in 1944: the self-destruction of the socialist monolith that was almost everywhere ascendant as World War II was brought to a close. The Road to Serfdom explores and explains why this result was inevitable. But readers must understand that the demise of socialist collectivism and the implosion of the Soviet Union in 1989-the most significant event of the second half of the twentieth century-did not happen by accident or evolution. It was brought about through a series of intentional acts. Hayek's book, one of those acts, literally helped change the course of history because it was read by and underpinned the resolve of Margaret Thatcher and Ronald Reagan-the two leaders who hammered the final nails into Soviet Communism's coffin.
     The path from Lord Acton's nineteenth-century Essays in the History of Liberty (Chapter 9) to Hayek's mid-twentieth-century declamation of socialism's inevitable collapse is easily negotiated. As was noted at the outset of this treatise the intention of First Principles is to define the rational foundations for governance and social organization as they have developed over the centuries, then to identify the means of their application to the real world. In other words, there are differences between perfect theory and our best efforts-because of the human element. The intended effect of this group of synopses is to look at the picture from afar to understand the subject, then to investigate the brush strokes that underpin the reality. Hayek's The Road to Serfdom


is key to this effort. His book represents the culmination of a century of dissecting collectivism, totalitarianism, and especially socialism.
     As the world experienced the failure of two centuries of the Enlightenment's utopian thought near the middle of the twentieth century it became incumbent to speak the truth about romantic or idealistic schemes-despotic socialism in particular. Hayek did that concisely and concretely. At the time Hayek wrote, his thoughts and theories were considered most politically incorrect-in essence they were blasphemous.
     Hayek begins by investigating the merits and appeal of collectivism versus individualism. In an introduction to the fiftieth anniversary re-publication of The Road to Serfdom Milton Friedman put it fairly simply: the argument for individualism is subtle and sophisticated and depends on rational thinking while the argument for collectivism is emotional. Because our emotional faculties are both more developed and more easily influenced than our rational faculties collectivism initially evokes a strong-even visceral-response that can overwhelm rationality. Ultimately, however, regardless of the rhetoric or slogans used in political discourse much of this emotional/intellectual conflict comes down to definitions and a logical application of theory to fact. What does "fair" mean? What is "equal" treatment? What is the "right" thing? What is a "just" result?
     The attack on individualism during and after the Enlightenment was based on the idea that people should not be allowed to be self-interested or to act for themselves. Of course, as Adam Smith points out in Wealth of Nations (Chapter 12), self-interest is the first stimulus that motivates
humanity. If people are not allowed to create for themselves it is simply impossible to inspire them to create for others. Enlightened self-interest, the heart of Smith's explanation of how a society functions, allows both of these things to happen.
     Hayek argues that the core issue for government is the coordination or absence of coordination of the activities of the governed. Liberals, from about 1750 onward, saw no plan in the economic structure then developing-and that freedom frightened them. They were constitutionally incapable of believing Adam Smith's admonitions and were too used to monarchy at best, despotism at worst. Conversely, Hayek observes that a lack of freedom is even more frightening and destructive. He contends that central direction of our activities leads to serfdom. For Hayek, only individual action and voluntary coordination lead to freedom. The proof in this case is truly in the pudding. The free nations


of the world brim with activity and successful living standards while the collectivist and/or totalitarian societies struggle to meet minimum human needs. Hayek sees governmental terrorism often associated with these latter societies compounding economic inefficiency with brutality. Brutality is invariably not a good motivator-except to foster change away from those doing the brutalizing.
     Hayek had witnessed insidious government expansion during the first half of the twentieth century. These increases were partially the result of sheer growth in population but they were also the product of the efficiencies found in centralized control of economic processes necessary during both of the twentieth century's world wars. Hayek outlines the social and economic distortions created by government's growth outside a wartime setting and defines for the reader the decay which necessarily would eventuate when war-time centralization and its focused purpose was no longer an issue.
     He observes that shortsighted politicians and bureaucrats see the solution to the failures of big government not in retrenchment, but rather in still more government. Instead of returning more control and responsibility for one's own life to the individual the liberal agenda was based on more centralized power and increased one-size-fits-all regulations. (Examples of such centralization today include federal No Child Left Behind educational mandates, Patriot Act coercion, and health care edicts where medical cost and treatment decisions are preordained irrespective of individual medical facts.) Hayek accurately predicts the current-day neosocialist obsession to cure moribund big government's ills by making it bigger.
     In contrast to this mania Hayek's classical liberal thinking turned in the exact opposite direction. The lesson of the Soviet Union's rise and fall is clear: centralized planning and control causes more problems than it solves and decrees more inequality than it redresses. More to the point centralization stifles individuality and personal freedom.
     As Hayek explains, authoritarianism was the mechanism by which the designers of the collectivist society ordained change. He finds the modern genesis of this effect in the socialist model created by the French Revolution of 1789. Freedom of thought was abhorrent to the revolutionists for free thinking led to freedom of action. Thus, the guillotine was installed in the town square and liberally used to enforce conformity and silence dissent. Today, as in the eighteenth century, social welfarists seek to achieve equality of condition or result through legislation that is as unrelenting as that of Revolutionary France (but


with less use of the guillotine). That goal remains as impossible as it always has been. Beyond a base level (termed the social safety net) Hayek notes that redistributionist activities simply result in different inequalities-inequalities founded in politics and favoritism.
     Hayek comments that collectivists want equality of result because they see that as the most viscerally "fair" condition for those at one end of the social spectrum. However, collectivists forget (or ignore?) how much others, who occupy different slots on the economic continuum, are denied through the mandates of economic conformity. Any attempt to control a society is not only unfair to all who individually strive but also to society as a whole. Collectivist control sowed the seeds for its own destruction when it suppressed innovation-generating incentives of every sort. People are not blind. While temporarily lifting some, collectivism and its modern cousin state welfarism hold most others down. Where would modern society be if expressing individual imagination and acting through incentive were illegal or were controlled solely by the state? Would we have the light bulb, the airplane, the Internet, or the CAT scan?
     Classical liberalism (generally, but only generally, connoted "conservatism" in the U.S.) seeks equality of opportunity. And, because of the nature of man's inequalities-of intellect, of drive, of desire, of understanding, of will, of circumstance, and even of luck-the results of individual efforts must necessarily be uneven regardless of whether everyone has an equal opportunity to achieve. For Hayek, the myriad ways a free society utilizes individual differences reflect liberty's beauty and have allowed the creation of virtually all of the world's material success. This success is the point. What might be achieved if the world and all its inhabitants were perfect, or just acted in perfect harmony, is not germane because either perfection is not just illusory, but unimaginable.
     The Road to Serfdom's core investigation concerns the political, social, and economic ramifications of the central control essential to socialism, but its lessons apply as well to state welfarism. Of course, the fundamental difficulty of central planning as Hayek observes, is that it cannot be achieved without a dictatorship in one form or another. We do not arrive at central planning through an agreement abdicating either our liberty or our democratic principles; rather, socialists implement authoritarianism because agreement among myriad individuals cannot be achieved. At that point, to solve the impasse, the intellectuals, the liberal "elite," demand control of decision making. They say in the


maelstrom of conflicting options and reasoning "We will decide for you." Hayek comments on the morality of this approach:

               [T]he spirit of commercial enterprise has been represented as
               disreputable and the making of profit as immoral, where to employ
               a hundred people is represented as exploitation but to command
               the same number as honorable.

     For Hayek, an open society allows everyone to choose his own path and make his own decisions so long as his course or his decisions do not impede others with an equal right to freedom. When idealistic philosophical rhetoric is used for political purposes this truth is often intentionally buried if the good of society can be claimed as a justification. It must be continually recalled, however, that the best "good" that can be achieved for society is freedom, not ever-expanding government control. The authoritarian means proposed by socialists (earlier) and welfare statists (today) deny humankind's inherent qualities and characteristics. Only man's frailties and faults are seen as relevant. Modern social and economic systems are so complex that only a combination of free, competitive motivations and imagination can work efficiently to self-order social and economic relationships. Hayek spells out for the reader why central planning, regardless of its techniques,
cannot act and react to order society nearly as well as can myriad individual decisions, freely made and unhindered by authoritarian direction. The difference is found in a single word: incentive.
    Hayek explains that how we get from collectivist goals (offering lowest common denominator social equality) to collectivist action and finally to totalitarianism is elemental. As was noted earlier, because agreement cannot be reached on most-much less all-goals, dictatorial powers must be ceded to the rulers in order to get the machinery of a state economy focused and moving in any direction. Regarding the individual, socialists and welfarists contend there is too much selfishness for the good of society when individualism is allowed, thus each citizen must submit to oversight. In particular, socialists deny Adam Smith's concept of enlightened self-interest in economic and other matters.
     Human beings are surely flawed but that is hardly humanity's primary characteristic. Therefore, for Hayek, society's first concern is not to counteract people's imperfections but to ensure their freedom. Humanity's occasional venality must be dealt with individually for in


a free society that flaw is the exception not the rule. Most importantly for Hayek it is imperative to remember that human flaws and frailties, especially the desire for power, are just as likely to exist at the top of any dictatorship as in one or another layer of a capitalistic system. The obvious problem with a dictatorship is that there is no form of redress.
     To curb the worst of human impulses free societies have effected the rule of law. As John Locke noted in 1690 "There can be no liberty without law" for absolute freedom results in absolute anarchy. Where there is liberty under law we know the rules before we play the game and we know that there is a framework to enforce the rules, as well as to change them if necessary. We agree to the rules so long as they apply equally to all, including the government (in this vein think of all the special privileges members of Congress grant themselves and government employees, but think the citizenry unworthy of). We can adjust the rules by consensus, up to a point. We cannot alter natural law by legislation or wishful thinking. Individual rights (for example those embodied in the U.S. Constitution) can only be adjusted by the people themselves. The rule of law is the antithesis of the institutionalization of status, and status is the foundation of the socialist/welfarist form of government. Under the rule of law who you are does not matter; how you act does.
     Hayek observes that once the rules are in place members of society can interact with one another efficiently and confidently. He notes that the economic basis of that interaction is private property; and the creation and protection of private property, concomitant with the preservation of individual rights, is the essential goal and effect of the rule of law. Where the state in a democratically consensual manner controls the rules (but not the results) of the game there is actual freedom. Hayek contends that we ignore these tenets of human interaction at the price of our individuality and then our humanity. As the title of his book implies, we must choose freedom or else embark on the road to serfdom. Ultimately there is no middle ground.
     As is obvious from the history of the twentieth century, socialism is today universally discredited. Yet Hayek's generations-old insights as to why government intervention in people's lives is counterproductive still helps us address a perplexing modern question: if socialism was dismissed as not viable why does government become more pervasive and invasive each year? The answer is somewhat simple. There are those who think that government power is acceptable so long as it is


used to do good; to them so long as their intentions are laudable, to achieve equality, or to create rights, government power is justified. These objectives seem valuable but as measures of security
for the populace they are actually destructive of real values. Individual freedom is abolished when the state makes choices for citizens or evaluates what the content of anyone's life should be.
     In essence, policies effecting "entitlements," to achieve equalitarian goals, masquerade as a charitable (emotional) way to protect some individuals who may have failed to connect responsibility and success (this group does not include the truly needy). It is not that these individuals are venal, quite the contrary, their behavior is learned, not innate. As Hayek observes,

               [a] movement whose main promise is the relief from responsibility
               cannot but be antimoral in its effect, however lofty the ideals to which
               it owes its birth.

Ultimately, as Hayek demonstrates, socialist thinking is self-evidently self-destructive. It prevents self-actualization by creating a culture of dependency and a climate of learned helplessness. Yet political missionaries use soaring oratory to promise what no one can deliver-a perfect world cocooned in perfect equality, for which the government, not the people, is responsible. Who wouldn't want to believe?
     In The Road to Serfdom, Hayek's message, declaiming the necessity of a free society ordered by a moral government (not only a moral populace) was designed to expose the poverty of socialism and central planning as effective means to arrange economic relations and society itself. His comprehensions have become even more pertinent in the modern era because present governing methods and goals carry a patina of caring that is either false or fanciful when viewed in the context of real world individualism and personal accountability.
     Today, liberal activists on both the political and bureaucratic fronts attempt to apportion wealth, not through state takeover of production or economic management but through income redistribution. They attempt to achieve this goal by more subtle procedures and through smaller steps than in Hayek's era. Taxation, rather than collectivist decree, has become the primary tool to effect redistributive policy and to work toward a "greater good." Although the mechanisms are obviously different from socialism's halcyon days the effect is the same-a diminution of individual opportunity and responsibility. The road to


serfdom, and perdition, is paved with good intentions. The need for vigilance and rational action to combat the sought-after, but flawed end product-equality of result-has not diminished thus Hayek's continued relevance.
     Certainly for Hayek, government has a role but it is as referee not overseer. While the goals of the welfare or nanny state can be presented as superficially admirable they are inevitably as illusory as the goals of socialism. More to the point, they fail because their social and intellectual intentions are founded in myth; they simply wish to ignore human nature. Ultimately, as was shown by Hayek and others, the goals of state welfarism are incompatible with the preservation of a free society. There is a simple reason why this is true-welfarism has no logical endpoint. When combined with an insistence as to what is politically correct (no-fault social equalitarianism) state welfarism can be convoluted to support assistance at any level, to any degree, for any period. Eventually society devolves into two camps: those who are "entitled" to public support and those who are to supply such. The unhappy social and economic result of this scene, taken to its logical conclusion, is self-evident.
     It is our obligation today to comprehend government intervention and controls in their more sophisticated and canny-and emotional-guises. When Hayek deals with blunt totalitarianism there is
no misunderstanding what is afoot. The state took over at the very beginning of economic activity and ordered everything thereafter. As the inefficiency of that process-demonstrated by more than a century of failed collectivism-became clear, the utopians reversed their methods, but not their goals. Instead of telling people what they will do, the welfarists let the free market continue (rather successfully as can be seen) and then confiscate as much of the product as they can for the alleged benefit of the whole. If the liberal "elite" had stopped at any rational point, had there been any sense of proportion, the system (free enterprise supporting a social safety net), by the agreement and cooperation of all, might have worked. But power begets the desire for ever more power, until all that is left is the argument about power itself-who will have it. The consequences of its application are taken for granted.
     As the twenty-first century begins, the arguments for state intrusion into both the economic system and our personal lives are increasingly synthetic and distorted. They are often built on a foundation of supposition (as was socialism)-of what laudable results could occur if


someone tells us how to live and what to do, and what terrible consequence might or even will happen if they do not. These ideas and methods are nothing more than a recalibration of the socialist ideals Hayek criticized in The Road to Serfdom. The modern liberal goal, social welfarism, is evidenced in overarching legislation and regulation designed to control a politically correct society and to redress its inequalities by means of "entitlements." This is a sophisticated but morally corrupt political device. Social welfarists pursue this agenda to the detriment of a rational vision of personal responsibility in a framework of opportunity. And, when welfarist legislators and administrators employ their utopian methods, merely imagined evils (of forced conformity and confiscation of labor's products) are dwarfed by the harm wrought on the other side of this equation, the side founded on core human values: freedom, responsibility, and discipline. Hayek points out that the pursuit of the illusory collectivist goal of equality is simply incompatible with individualism or any sense of intellectual integrity.
     Along with a number of political/social philosophers before him Hayek contends that political freedom is inextricably intertwined with economic freedom and that each must exist for the other to survive. This insight, which seemingly needs to be rediscovered every two or three generations (or is it every two or three decades, or even years?) is basic to Hayek as it was to Adam Smith, Edmund Burke, Lord Acton, and Alexis de Tocqueville. As the economies of the world, and the governments, become bigger and more complex our understanding of how a free system operates becomes lost in the details. Our awareness of what is needed to keep the system working also becomes muted. In any society mistakes inevitably occur. Social programs and government intrusion into the marketplace to fix the aberrations always begin small-but the problems are often politically exaggerated so the solutions can be more grand; government size and intrusiveness grow in equal measure to the political claims on behalf of the allegedly abused and neglected.
     Hayek shows that a free system's occasional malfunctions do not require its abandonment; he observes that it is only necessary to formulate adjustments to allow the system to work properly where it wasn't before. The solution to capitalism's missteps is not the welfare state but the rational state. (The idea of capitalism as one of the driving forces in the rationalization of human behavior is investigated in more detail in Joseph Schumpeter's Capitalism, Socialism and Democracy


[Chapter 38].) Hayek sees our economic system as an evolutionary process, not an immaculate
conception. If society attempts to mandate actions in what is an evolutionary process, then, as night follows day, totalitarian measures will eventuate.

About the Author
From economics (the field in which he won the Nobel Prize in 1974) to psychology, history, anthropology, and science, Friedrich August von Hayek amply demonstrated his intellectual abilities. In twenty-five books and numerous articles he established the breadth and depth of his insights and thoughts. Obviously he was no casual scholar. Born in 1899, he earned two doctorates at the University of Vienna by the time he was 24. Hayek met his intellectual partner, Ludwig von Mises, after his schooling was completed, although both were in Vienna while Hayek was a student. Along with others, Hayek and Mises eventually helped develop what became known as the Austrian School of Economics. This system of economic thought denounced and then intellectually dismantled socialism as a viable form of government or economics. Hayek taught in London (1930-50), at the University of Chicago (1950-62), and then again in Europe (1962-88) at the conclusion of his teaching career. Although an economist by training and interest, Hayek took a more fundamental view of the interconnections of society. His works, which initially concentrated on economic matters, broadened in later years to the point where he argued passionately for a liberal (free) society. In 1960 he published The Constitution of Liberty, his treatise on classical liberal political economy. Hayek died in 1992.

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