Among people of the Left, F. A. Hayek probably rates with Milton Friedman as the person most hated, on a level with Reagan and Thatcher who were usually depicted as dancing to tunes composed by Hayek and Friedman. In 1944 Hayek published The Road to Serfdom, a tract against the times, warning of the likely consequences of central planning if wartime practices were consolidated and extended in the post-war period. In due course, state intervention continued under both Labor and Conservative governments, bringing in its train both inflation and unemployment, adroitly blamed on the deficiencies of inadequately restrained capitalism. Hayek has been vindicated but the Left persist in calling for more of the addictive drug of state intervention to cure the evils caused by de facto socialisation of industries by protection, subsidy and centralised wage fixing systems.
Friedrich August Hayek devoted much of his career to keeping alive the ideas of classical liberalism. After studying law, he did most of his work in economics for which he received the Nobel Prize in 1974. In 1948 he convened a meeting of liberal scholars at Mont Pelerin in Italy to plan for the ideological war that he anticipated (despite the 'end of ideology' pronouncements of American liberals during the 1950s).
The rise of John Howard to Liberal Party leadership in Australia may convert this party of Tory conservatives into a vehicle of genuine liberal ideas. [A short-lived move in this direction occurred some time later under the leadership of John Hewson]. This will be the most interesting political phenomenon since the Whitlam era because the doctrines of the 'New Conservatism' as it is misleadingly called, are political and social dynamite. It is likely that Howard has yet to realise the extent of the forces against him. Big business, subsidised and tariff protected, will line up with the unions, the public sector bureaucracies and the 'new class' of socialist intellectuals. Howard's first problem is to get his constituency to recognise that he is, in fact, their man. This constituency consists of just about everyone, especially small business people and the unemployed. His second problem is to get this constituency, dispersed and fragmented as it is, to generate enough political clout to balance the opposed groups who are concentrated in 'command posts' of extra-Parliamentary power and influence (the state broadcaster, the unions, the progressive media and the interest groups of the grievance industries).
Howard has to win a battle of ideas, a mind-boggling prospect since political debate has increasingly focussed on the seesaws of the polls and the personal styles of the party leaders. The ideas of the New Liberalism have to be brought down from the heights of Mont Pelerin to the folk in the marketplace and they are being spread by a world-wide network of think-tanks, including Centre 2000 and the Centre for Independent Studies in Sydney.
The Institute of Economic Affairs in London produces the Hobart Paperback series in which Hayek's "Serfdom" Revisited is number 18. This volume contains essays by economists; philosophers and political scientists, elaborating the agenda laid down by Hayek 40 years ago. An interesting feature is that the six contributors (one female) are of the same age as Hayek's book (or younger) which places them in the student generation of '68. Most of the essays, apart from a set-piece introduction by Hannes Gissurason of Iceland, develop important themes and merit close attention. The collection is quite outstanding in the range of ideas covered and in the strength and vigor of the arguments deployed. Clearly liberalism is intellectually alive and well, so much so that this slim volume contains more food for thought than most if not all of the Marxist tomes which roll endlessly off the presses.
For all that, the jaunty optimism and exhortations to liberal action are likely to grate on those of us with memories of hours and hours and hours spent trying to move Conservatives, Old Leftists and New Leftists even a centimeter, no, a millimeter in their views. Pundits talk about the ever-increasing rate of social change but it appears that the people in the command posts of power and at the heart of the ideological debate have maintained their core values virtually unchanged for many decades.
Gissurason in his essay "The only truly progressive policy..." reminds us of Hayek's warning that increased government intervention in the marketplace would stifle economic growth (required to raise the standards of the poor) and would lead by some kind of inevitable logic to the collapse of democracy. Thus the humanitarian intentions of the socialists would be defeated in the domain of material welfare and in the area of freedom and justice as well. The usual Left response nowadays is to redefine freedom and justice to mean those states of unfreedom and injustice, which we observe in the existing socialist states. Some interventionists such as Keynes and Orwell were sympathetic to Hayek's message. Keynes read the book on the way to the Bretton Woods negotiations in America and on reaching Atlantic City he wrote to Hayek (those were civilised times).
In my opinion it is a grand book. We all have the greatest reason to be grateful to you for saying so well what needs so much to be said. You will not expect me to accept quite all the economic dicta in it. But morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement, but in a deeply moved agreement.
However he did not share Hayek's fear of central planning on the grounds that responsible Leftists (like himself) would ensure that genuine socialist governments would not let democracy collapse. Nor did he fear the inflationary consequences of Keynesian intervention; a few weeks before his death he assured Hayek in conversation that if inflation became a bother (as predicted by Hayek), he would turn his whole influence against it. Of course he died too soon to correct the errors of his earlier ways. Orwell, in a generally favourable review, voiced one of the two major prejudices of the Left which have prevented adequate appreciation of Liberalism. He wrote that competition leads to monopoly unless held in check by state controls. So the Left offers a choice of monopoly or planning and not surprisingly most people of good will opt for planning without pausing to consider the third (liberal) alternative or to notice that the usual outcome of central planning is to end up with state monopoly, or state protected monopolies.
The second major assumption is that central planning is more efficient in allocating the factors of production (capital and labour), than is the 'anarchy' of the marketplace. Most of Hayek's professional career has been devoted to destroying the credibility of this notion, though the impact of his criticism has had little impact due to the general vogue of Keynesian macroeconomics at the expenses of the Austrian school of Microeconomics in which Hayek is the leading modern exponent.
In collections of fairly short essays there is a tendency for writers to make impressive throat-clearing noises and then stop just when the argument starts to get interesting. This occurs in John Gray's contribution "The Road to Serfdom: Forty Years On". A number of good points are made in summary of some leading themes from Hayek's work, then the conclusion urges the need for urgent activity, both intellectual and political. Gray touched on the two things which pose the major threat to the liberal rescue operation that aims to arrest the slide to serfdom, or at least to welfare-statism. One is the parlous state of the social sciences at large and economics in particular, the other is the huge weight of vested interests which will be threatened any hint of a retreat from the de facto socialisation of the status quo.
For instance the rural socialists of the Country Party will quite likely split the coalition if the Liberal Party turns really 'dry'. And the assorted welfare lobbies work harder all the time making out the case for this or that disadvantaged group, with no concern for the total picture or for alternative funding mechanisms to make welfare agencies more efficient and more accountable to their clients. The road to hell (or serfdom) is not just paved with good intentions, it is paved with ignorance of the outcomes of our well-meaning activities; in complex systems these are hidden from us by distances and time-lags. The social sciences need to tell us more about these things so that decisions can be informed by better understanding of the likely results.
Norman Barry "Ideas versus interests: The classical liberal dilemma" touched on one of the sore points of modern liberalism, the way that the concept of liberty has been shifted from individual freedom, sometimes labeled 'negative freedom' (freedom from constraints) towards 'positive' freedom. Barry pinpoints J.S. Mill in economics and T. H. Green in philosophy as major English influences towards the 'positive' or collectivist view of liberty which justifies active state intervention to maximise a notion of liberty which transcends the merely 'negative' absence of restraints.
Those who labour under very severe restrains in so many countries of the world might think better of merely 'negative' liberty but still the socialist states and much of the Third World favour positive freedoms ahead of straightforward ideas about individual liberty and civil rights. This collectivist mentality in which justice is that which serves the interests of the state can be traced back to Plato and his dialogues which purported to establish that individualism and altruism are mutually exclusive orientations towards our fellows. For a counter-argument see Chapter 5 of Popper's The Open Society and its Enemies where Popper shows that individualism can be and often is combined with non-collectivist altruism.
Under the heading 'Hayek's recent anti-rationalism' Barry explored an apparently discordant note struck by Hayek in some of his essays. This is summed up by the formula "we never know what we are doing", a point urged against people labelled as "constructivist rationalists" who think that society should be reformed root and branch along properly rational lines. The position taken by Hayek is hardly irrational or even anti-rational, and really has to do with the fact that many of our actvities are carried out for reasons that we may never know, as when we place our watch on our left wrist we may not know the origin of this traditional practice.
Jeremy Shearmur has a fine piece which shows how Hayek corrected errors by Marx and Weber, errors which are served up as veritable paradigms of methodology for the contemporary social sciences. Some people like to think that The Road to Serfdom is old hat at 40 while the works of Marx and Weber "are offered to students as providing the key (rival) frameworks of ideas in which our immediate past, our own time, and our future prospects are to be understood". He also suggests that their work is especially bad as a model of the inter-relationship between academic analysis and political action. This point is well taken though he might usefully have elaborated on the more proper relationship of the policy sciences to policy.
The heart of the issue between Marx and Hayek is the role of markets in a socialist state. Alec Nove in The Economics of Feasible Socialism (George Allen & Unwin 1983) indeed has a place for markets though this has attracted fire from radical colleagues such as Boris Frankel who cheerfully perceive a role for the police in a socialist state to suppress free transactions between individuals. Once the essential incoherence of the 'marketless economy' is appreciated it should only be a matter of time before socialists like Nove simply cease to be socialists, even in name. Shearmur's argument with Weber is based on the tendency for followers of Weber to imply that there is some inevitable drift to bureaucracy (rather than the classless society). Of course nobody denies that such a drift has happened, Shearmur's point is whether Weber offers either a theory to account for it, a methodology to study it, or a technologoy to do something about it (if we want to). In a regrettably short space Shearmur hints that Weber failed on all three counts and we would like to know more.
The third section of Shearmur's paper touches the problems created by raised expectations among 'deprived' or 'disadvantaged' groups whose support is purchased by politicians as a desperate expedient for electoral survival. This relatively modern phenomenon has made de facto socialisation into a bipartisan stance, with elections turned into auctions. This paper almost sinks beneath the weight of the issues raised though the author gives the impression of being in charge of the large volume of material cited in footnotes and so one might expect each of the three sections to grow into a book before long.
John Burton discussed the mixed economy, the apparently happy marriage between socialism and the free market. This liaison of course does not satisfy genuine socialists and Socialist Left factions persist as a thorn in the side of Labor parties seeking control of the electoral middle ground. And according to Burton the mixed economy should not make liberals happy either because ever-increasing intervention has become part and parcel of both Conservative and Leftwing politics. The problem arises from a surfeit of good intentions and a dearth of understanding of the consequences.
As Hayek has shown in his Law, Legislation and Liberty, this intrusive intervention by government in western countries today results from the widespread acceptance of the idea that democratic governments have the right to exercise unlimited powers provided that they have been mandated by a majority of representatives in the legislative assembly. There has thus been a gradual abandonment of the principles of constitutionalism which seek the containment of government power by a set of permanent and unchanging rules.
One may wonder whether liberals should have any truck with permanent and unchanging rules but the major point is crucial and seldom surfaces in constitutional debate, at least as it is reported in the media. Under the heading "The new Hobbesian process" Burton warns that the scenario of "warre of all against all" has been replaced by a battle of interest groups for the taxpayers' dollar. He reports an estimate that some 4500 interest groups are represented in Washington DC, each drawing on one or more professional lobbyists, in turn serviced by over 13,000 lawyers. One would like to see a calculation of the personnel involved in tax minimisation, the "warre" of the taxpayers against the interest groups. The response of the socialists/interventionists to this situation is of course more intervention, perpetuating a climate of opinion in which respect for tax liabilities is steadily replaced by the game of 'ripping off the taxman'.
Burton claims that the Fabian middle way of democratic socialism is simply a drift down the road to serfdom, liable at any moment to become a stampede towards chaos. If this seems alarmist, consider the long-term prospects for social cohesion while a quarter of the young people in this country are unemployed and hence denied a meaningful stake in society. Deregulation of the labour market would help but the usual response is to spend more on job creation schemes which rarely seem to work. One way out of the stultifying effects of intervention is described by Burton as 'the Italian solution' where as much as 30% of the economic activity in the country is conducted in the economica sommersa, the "submerged" or black economy, and 10 to 15% of the workforce is in jobs that do not officially exist. This is a reaction to the nationalisation of large tracts of the Italian economy by means of state investment holding companies which lose money hand over fist and have brought the state system of lacci e laccioli (shackles and snares) into widespread contempt. Liberals of course can hardly advocate such a solution, but simply point to it as a warning.
Karen Vaughan, from the George Mason University in Virginia is the sole female contributor to this volume. Her essay examines the constitution of liberty from an evolutionary perspective and provides a subtle and disturbing account of the evolutionary forces at work to keep society on track to serfdom. She begins with the seminal insight of Hayek's Serfdom, that the similarities between national socialism and communism are more striking than their differences and that "the same kinds of attitudes and philosophical beliefs which gave rise to the two most despicable regimes in modern history were also dominant among the intelligencia and political pundits in the liberal West". This is reminiscent of Orwell's comment in postwar Britain that the intelligentsia of left and right were less inclined towards democracy than were the mass of the people.
Vaughan's account should be disturbing for liberals because it highlights the problem of rationality in Hayek's description of the evolution and selection of social rules. Ideas tend to be perpetuated by social groups in bundles; if the group survives, then the bundle of ideas, including its ideology, survives as well, though the fact of survival in competition with other groups need not be connected in any obvious way with the moral worth of the group's ideology. This raises the issue of moral worth: is there any such thing? Second, quite apart from moral validation, some ideas in the bundle may be at odds with others and as times change discordant ideas may subvert the chances of survival of whole bundle. For example, fearless resolve in battle was no doubt important for the survival of groups in hand-to-hand fighting and tribal warfare. However such resolve is no match for well located machine guns; substitute nuclear arms for machine guns and fearless resolve becomes a recipe for even greater disasters.
Vaughan appears to be demonstrating the need to break up ideologies to see how their bits and pieces fit together, to find out what should be kept and what discarded. This venture, if it is what she has in mind, runs the risk of foundering on the lack of a principle for selection that is located outside the bundle. This dilemma is left in mid-air as she ends with the usual exhortation that liberals need to be more active in putting their case in the marketplace of ideas. Progress in that venture depends on finding people who are open to arguments, especially among the ranks of rival partisans such as conservatives and Marxists. The prospects are not bright in the short term. It is asking a great deal for liberal reformers to convert the members of interest groups who have so much to gain from the existing political and economic order.
One thing is clear; if John Howard does pursue anything like true liberalism he is going to antagonise many people in his own party. At the same time, the possibility is there for the the Liberal Party to move some way towards its ancient and all but invisible ideological roots.
Rafe Champion . Age Monthly Review, 1985
