While on vacation I have had time to follow the news about our economy, the debate about the debt ceiling, the downgrade of our credit rating, the hand-wringing over unemployment, the need for jobs, the gyrations of the stock market, and the future prospects for business, commodity prices, and the presidential election. Alongside this contemporary debate I have been reading The Road to Serfdom by F.A. Hayek. It is described as an “unimpeachable classic work in political philosophy, intellectual and cultural history, and economics.” Originally published in 1944 it was seen as heretical for its passionate warning against the dangers of state control over the means of production.
While it was written to warn his readers about the socialistic roots of Nazism, Fascism and Communism during World War II, The Road to Serfdom prophetically described what would happen in Europe, China, Great Britain, and even in the United States. I would like this book to be required reading in civics, political science, economics, history and philosophy classes. It is as relevant today as when it was written.
Hayek argues that the free market in goods, labor, ideas, and speech is incompatible with the coercive power of central government to plan our economy. Personal freedom and individual responsibility is endangered by state control. The objective and impartial Rule of Law is threatened when politicians and government agencies choose winners and losers in business and employment. Policies aimed at achieving the ideal of distributive justice (i.e. economic equality), leads to the destruction of the Rule of Law. There can be no liberty without law. There is conflict between different kinds of law: one is the Rule of Law, general principles laid down beforehand, the ‘rules of the game’ which enables individuals to foresee how the coercive apparatus of the state will be used, or what he and his fellow-citizens will be allowed to do, or made to do in stated circumstances. The other kind of law gives in effect the authority power to do, or made to do what it thinks fit to do. Current examples include the political decision to favor the unions over the shareholders in the bankruptcy of General Motors, and the location of a Boeing plant in South Carolina.
Government agencies are given broad powers without being bound by fixed rules so that they have almost unlimited discretion in regulating activities of citizens and companies. Yet true Rule of Law would limit the scope of such powers and legislation so that they could not be aimed at particular people or companies in a discriminatory way.
There seems to be a cry from the pundits, the news anchors, the critics, for a plan to create jobs, to right the ship of state, and to restore prosperity. But what kind of plan? There is a temptation in troubled times for people to want a savior, a strong man, who will come up with the answer to all problems. Hayek is skeptical about such an approach. He had seen it at work in Germany, Italy and the Soviet Union. The following excerpt is classic.
“As soon as the state takes upon itself the task of planning the whole economic life, the problem of the due station of the different individuals and groups must inevitably become the central political problem. As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power. There will be no economic or social questions that would not be political questions in the sense that their solution will depend exclusively on who wields the coercive power, on whose are the views that will prevail on all occasions…..That a government which undertakes to direct economic activity will have to use its power to realize somebody’s ideal of distributive justice is certain. But how can and how will it use that power? By what principles will it or ought it to be guided?”
There is the tendency to prefer economic security to freedom – to guarantee incomes rather than reward endeavor. Thus proponents of government subsidies disparage all activities involving economic risk.
“We cannot blame our young men when they prefer the safe, salaried position to the risk of enterprise after they have heard from their earliest youth the former described as the more superior, more unselfish and disinterested occupation. The younger generation of today has grown up in a world in which school and press the spirit of commercial enterprise has been represented as disreputable and the making of profit as immoral, where to employ one hundred people is represented as exploitation but to command the same number as honorable….Nothing is more fatal than the present fashion among intellectual leaders of extolling security at the expense of freedom. It is essential that we should relearn frankly to face the fact that freedom can only be had at a price. As Benjamin Franklin expressed, ‘Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.’”
To get something for nothing is an illusion. Nothing worthwhile comes cheap. To expect someone else to pay for it so that we do not have to work for it is laziness. The teaching of the book of Proverbs would cure us of that malady.
The issues facing our nation, and indeed the whole world, have to do with political and economic power. These are influenced by moral values and our spiritual beliefs. “Power corrupts, and absolute power tends to corrupt absolutely.” (Lord Acton) Ideas have consequences. Hayek’s ideas are worth taking note of again. I am wary of delegating too much power to central governments and agencies, whether state, national or international. In this hurricane season I am aware of the precarious state of our Florida insurance market due to government interference. I am glad that it is In God We Trust, rather than those politicians who tend to think they can save us from paying for our own security by handcuffing the insurance industry.
Perhaps we need to stand back and let the economy heal itself, let the home mortgage situation bottom out and wait patiently for recovery. Every time the government tries a new plan there are unintended consequences that worsen the situation. The government needs to get its own house in order – its own debt and budget problems. We are in for a rough enough ride as we gear up for a presidential election in 2012. May the Lord have mercy on us all!