Friedrich Hayek was right to worry that central planning of an economy would lead to full totalitarianism. Hayek explains in The Road to Serfdom that economic liberties and personal liberties are inseparable. Politics is the authoritative allocation of values and resources, therefore when a government controls all aspects of the economy, it controls all aspects of people’s lives.
In The Road to Serfdom, Hayek writes: “Our freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another. But if we face a monopolist we are at his absolute mercy. An authority directing the whole economic system of the country would be the most powerful monopolist conceivable. It would have complete power to decide what we are to be given and on what terms. It would not only decide what commodities and services were to be available and in what quantities; it would be able to direct their distributions between persons to any degree it liked.”1 According to Hayek, the government should not have the power to decide beforehand who is going to be successful in society. The government cannot effectively plan for outcomes and when economic power is consolidated in the government, it can lead to despotism.
According to Hayek, the rule of law requires that all people follow the same rules. The role of government is to enforce the rules of just conduct. A state cannot have central planning and the rule of law because central planning limits individual freedom while the rule of law is not meant to limit freedom, but rather protect the individual. The rule of law is nullified by central planning because central planning reduces the value of the individual to a means to serve the ends of the totalitarian regime and disregards the happiness of the individual. The rule of law means nothing if the people live in a state of slavery. Hayek writes: “Although we had been warned by some of the greatest political thinkers of the nineteenth century, by Tocqueville and Lord Acton, that socialism means slavery, we have steadily moved in the direction of socialism.”2
Hayek’s view on the government helping people who have been negatively affected by economic conditions is simple: the government should redistribute wealth. According to Hayek, the government should help people, not industries, so when an industry fails, the government should not bail it out but rather let it fail. By choosing what industries to keep running, the government decides who will be successful and disregards the market. If there is no demand for an industry to continue or an industry becomes obsolete due to the emergence of a new industry, the market dictates that it should fail, and the government should not intervene.
Communism was more than just an idea to Hayek, he observed how socialism in Germany led to the full scale totalitarianism of the Nazi regime and how communism in Russia led to the totalitarian dictatorship of Josef Stalin. His view was not warped by what he saw in Germany and Russia, instead his views on economics and the rule of law were directly informed by the arbitrary administrative government led by dictators. When the government creates a plan for each person, it engages in soft despotism which creates rules that limit the freedom of the individual. When the government is controlled by a dictator, it can disregard the value of human life in pursuit of its political goals. In both cases, the freedom of the individual is restricted by the regime.
A modern day example of how central planning of an economy can fail and lead to massive social unrest is in Venezuela. When oil production, the main source of income for Venezuela, became under government control, led by the dictator Hugo Chavez, oil prices fell dramatically leading to an economic collapse. The recession in Venezuela has cause food shortages, inflation and unsustainable debt. According to Hayek, the government should have stayed out of the economic planning because it could not have predicted the fall in oil prices. Although European and South American countries continue to move towards socialist policies, Hayek would have warned them that their economic future depends on their ability to allow the market to operate on its own and only seek to prevent monopolies.
Footnotes
The Road To Serfdom, Friedrich August von Hayek, Routledge Press, United Kingdom, 1944
The Road To Serfdom, Friedrich August von Hayek, Routledge Press, United Kingdom, 1944
No comments:
Post a Comment