Review by Orwell: The Road to Serfdom by F.A. Hayek / The Mirror of the Past by K. Zilliacus Observer, 9 April 1944
Taken together, these two books give grounds for dismay. The first of them is an eloquent defence of laissez-faire capitalism, the other is an even more vehement denunciation of it. They cover to some extent the same ground, they frequently quote the same authorities, and they even start out with the same premise, since each of them assumes that Western civilization depends on the sanctity of the individual. Yet each writer is convinced that the other’s policy leads directly to slavery, and the alarming thing is that they may both be right.
Of the two, Professor Hayek’s book is perhaps the more valuable, because the views it puts forward are less fashionable at the moment than those of Mr Zilliacus. Shortly, Professor Hayek’s thesis is that Socialism inevitably leads to despotism, and that in Germany the Nazis were able to succeed because the Socialists had already done most of their work for them, especially the intellectual work of weakening the desire for liberty. By bringing the whole of life under the control of the State, Socialism necessarily gives power to an inner ring of bureaucrats, who in almost every case will be men who want power for its own sake and will stick at nothing in order to retain it. Britain, he says, is now going the same road as Germany, with the left-wing intelligentsia in the van and the Tory Party a good second. The only salvation lies in returning to an unplanned economy, free competition, and emphasis on liberty rather than on security.In the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said too often – at any rate, it is not being said nearly often enough – that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of.
Professor Hayek is also probably right in saying that in this country the intellectuals are more totalitarian-minded than the common people. But he does not see, or will not admit, that a return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them. Professor Hayek denies that free capitalism necessarily leads to monopoly, but in practice that is where it has led, and since the vast majority of people would far rather have State regimentation than slumps and unemployment, the drift towards collectivism is bound to continue if popular opinion has any say in the matter.
Mr Zilliacus’s able and well-documented attack on imperialism and power politics consists largely of an exposure of the events leading up to the two world wars. Unfortunately the enthusiasm with which he debunks the war of 1914 makes one wonder on what grounds he is supporting this one. After retelling the sordid story of the secret treaties and commercial rivalries which led up to 1914, he concludes that our declared war aims were lies and that ‘we declared war on Germany because if she won her war against France and Russia she would become master of all Europe, and strong enough to help herself to British colonies’. Why else did we go to war this time? It seems that it was equally wicked to oppose Germany in the decade before 1914 and to appease her in the nineteen-thirties, and that we ought to have made a compromise peace in 1917, whereas it would be treachery to make one now. It was even wicked, in 1915, to agree to Germany being partitioned and Poland being regarded as ‘an internal affair of Russia’: so do the same actions change their moral colour with the passage of time.
The thing Mr Zilliacus leaves out of account is that wars have results, irrespective of the motives of those who precipitate them. No one can question the dirtiness of international politics from 1870 onwards: it does not follow that it would have been a good thing to allow the German army to rule Europe. It is just possible that some rather sordid transactions are going on behind the scenes now, and that current propaganda ‘against Nazism’ (cf. ‘against Prussian militarism’) will look pretty thin in 1970, but Europe will certainly be a better place if Hitler and his followers are removed from it.Between them these two books sum up our present predicament. Capitalism leads to dole queues, the scramble for markets, and war. Collectivism leads to concentration camps, leader worship, and war. There is no way out of this unless a planned economy can somehow be combined with the freedom of the intellect, which can only happen if the concept of right and wrong is restored to politics.
Both of these writers are aware of this, more or less; but since they can show no practicable way of bringing it about the combined effect of their books is a depressing one.
Orwell claims that free markets necessarily led to monopolies. Perhaps. But the State’s a MONOPOLOY already! That’s almost a definition of “State.”
….Another reason that centralized government social engineering simply doesn’t work is what F.A. Hayek called “the knowledge problem.” Hayek was the only Austrian economist ever to win a Nobel Prize. He won it partly for a brief essay called “The Use of Knowledge in Society,” in which he explained that government is intrinsically helpless before most social and economic problems because the knowledge needed to solve them is too widely dispersed among the members of society. It cannot ever be made known in a timely fashion to a central authority, and even if it could, that authority would lack the godlike coordinating ability needed to use that knowledge effectively. Adding to the difficulty, much of this knowledge is tacit knowledge, not consciously known or articulated by the individuals who have it.
What can make effective use of the knowledge distributed locally among the members of society? Only the free market system and its accompanying structure of voluntary trades and changing prices. Freely determined market prices are what send signals to individuals telling them how to best use their unique knowledge to their own, and ultimately society’s, advantage. Without a free market, the only way to allocate resources is by government fiat–a few, far-removed individuals making choices for us all, perhaps with the best of intentions but in near-total ignorance. The result is government programs that clumsily and ineptly ape the market, with none of its efficiencies and never coming close to achieving consumer satisfaction. A government program must be counted a success if it does not achieve the exact opposite of its stated goal.
Whatever it does achieve comes at a terrible cost. If you include all forms of taxation, government confiscates about 40 to 50 percent of our income every year. What we receive for this robbery in goods and services is a pretty poor trade by any measure. Our schools turn out ill-mannered ignoramuses by the millions, many of them not fit for anything but Congress. Our health care system is a shell game where Peter is robbed and Paul doesn’t even get paid. Our social security system is a transparent Ponzi scheme that, if perpetrated by an individual, would earn him life in prison. The U.S. Treasury is the world’s greatest counterfeiter, inflicting on us an invisible form of taxation called inflation….
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Orwell fails to give example (any) of monopolies from private sourses. I wonder which ones he considered monopolies then are even in existence today.. as opposed to state monopolies which never seem to die from competition and knowledge advances.
This stubborn pattern goes on and on among leftists and statists of every sort. There seems to be a love of the state as an instrument of power and control which Hayek’s thesis denies can work, but which the left has too much myth and faith invested to re-think.
Re the “knowledge problem” mentioned above. This assumes that the alternative to completely free markets is a completely planned economy (the final destination in Hayek’s “road to serfdom”). The inevitability of this extreme case has not been established, and Hayek’s thesis underestimates the robustness of democracy in the modern age. The failsafes against the slippery slope are strongly embedded now.
The choice is not between individual liberty and the state dictating everything that happens in life or the economy. Instead, it is about the state (comprising elected representatives remember) intervening where necessary to say to the market “you can do everything but the following…” or, where there is market failure (such as climate change) making sure things are done which would not otherwise be done by the market left to its own devices. Ultimately, this approach benefits the greater good of society rather than leading to a concentration of wealth (and therefore power and influence) in the hands of a small number of unelected individuals and organisations, i.e. a global plutocracy.
I am not sure that there is much a meaningful choice for voting citizens(democracy). As consumers we have more choice by far. Special interests of every sort seem to hold sway with governments being the leading special interest in nearly every case. The global plutocracy seems to love to concentrate power and control and then blame industries for making great depressions and recessions worse.
Knowledge bubbles seem a great villian as they represent fads and “true” knowlege pools the powerful use to maintain their trajectories toward their separate centralized goals. The sudden hidden momentum of Keynesian government spending ideas has suprised a lot of us in its recent ressurrection from the dead ideas pool, but illustrates the point.
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Brits believe other people’s behavior must be regulated–it’s just good manners!
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The “Knowledge Problem” is a purely technical one, and subject to revision, as many other technical problems have been over the last few centuries. To base your argument in favor of freedom on the contention that some technical issue is insoluble is very dangerous: if someone comes along and solves it, you have no argument left. Better to argue that freedom is a unconditional principle.
Hayek would have predicted that economies with more public investment – such as Sweden- would be a kind of Orwellian dystopia. Instead they enjoy one of the highest business startup per capita rates in the world. The market thrives thanks to their wise public investments, and actual Socialist groups are denouncing them. Here in the states most folks think that any public investment is Socialism, rather than the state controlling the means of production.
The smarter societies have evolved past extremes since Orwell, and largely thanks to him and his writing. Nations like Sweden and others are able to offer education and other wise public investment and see a return in higher GDP and sustained productivity and growth. One can hardly call the Swedes who enjoy a far higher standard of living as well as general tolerance and more protected liberties than nearly anywhere else as slaves.
Swedes can start businesses, travel where they choose and say and do far more than most others around the globe today. Compared to places where Hayek would suppose more freedom exists, because the state is less powerful, the power vacuum is filled by local tyrants and religious militias. Actual slavery does exist in places such as these, places where there are no protected rights because the state isn’t powerful enough to protect anything. Offering the market free reign hasn’t meant freedom or much economic growth aside from piracy, and literal slavery.
Orwell’s reviews here are spot on and most prescient. Morality has infused itself in governments around the world, and places who base morality upon civil and human rights have been proven better for it.
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>But he does not see, or will not admit, that a return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them.
Unlike the State which is in constant state of monopoly, the winners in free market are not winners for long time (unless the state helps them e.g. PG&E).
Microsoft and Google took their eyes off the smart-phone market and Apple won it handsomely but staying on top is not easy as they seem to be lagging in the AI field. Amazon looked like a Winner in cloud but Microsoft and Google are gaining on it fast.
Google failed miserably to create a social network and Facebook looked like a winner until Snapchat and Whatsapp seem to have built even larger networks than Facebook.
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