Friedrich Hayek The Road To Serfdom

Friedrich Hayek The Road To Serfdom, Hayek Theory and Quotes

In recent years Hayek has been concerned with describing the threats to a free society and his 'road to serfdom' thesis implies that totalitarianism is the inevitable result of collectiyist policies. It is to be noted that this is not the demonstration of an empirical trend but rather the inference that, if certain policies are adopted undesirable (and unforeseen) consequences must follow. There are three causes of the transformation of free societies
into totalitarian orders which Hayek has highlighted. One, government direction of market economies by inflationary measures, we have already discussed. The other two are policies of social justice, and the practice, common to all western democracies, of entrusting elected legislatures wiht the making of both the rules of just conduct and the rules of government. All three errors are examples of constructivistic rationalism', i.e. the dogma that the human mind can design institutions which can improve on those that have developed spontaneously. The idea of social justice poses a serious threat to market efficiency and liberal individualism because it 'justifies' the imposition of a particular pattern of income distribution on a self-generating market system (Hayek, 1976b). His argument is that it is illegitimate to describe the outcomes of a market process" as 'just' or 'unjust' since they are the results of impersonal forces, The concept of justice can only be used to evaluate individual conduct within general rules. A market is required to draw labour to its most efficient uses and~ this necessitates inequality of earnings. Now if an efficient allocation is to be achieved without a market then labour will have to be directed to specific tasks. The replacement of a distribution of income determined by the market with one determined by the subjective opinions of officials can only lead to extreme inefficiency or tyranny. Hayek does concede that it is legitimate for government to make welfare payments to those who cannot earn an adequate income in the market, but this is not owed to them as a consequence of justice since that concept is not relevant to questions of income distribution. Also, Hayek regards the presence of economic inequality as desirable, apart from questions of efficiency, since it provides sources of indepen­dence from the state. It is for this reason that he opposes, in general, wealth taxes, or indeed any attempts, by political methods, to equalise access to the market.The final element in Hayek's 'road to serfdom' thesis is his argument that the operation of unlimited democracy leads to a radical transformation of the legal order. The problem is that in modern democracies the legislature makes both types of law, the rules of government and the rules of just conduct (Hayek, 1978, Chapters 6-10; 1979). The result is that the area of social life occupied by government tends to expand so that the person and property of the individual come to be used for collective ends.

Hayek does not dispute majority-rule democracy as such but rather unlimited government of any kind. In fact, he thinks that majority-rule procedures would be acceptable if the legislature represented genuine majority opinion but says that this does not happen because electoral strategy dictates that a party will put together a coalition of interests to win an election. This means that an unlimited legislature can divert the stream of income in an economy to benefit special groups. This happens in Britain where subsidies to politically important industries, uneconomic council rents and inequities in the tax system constitute clear examples of the 'politicisation' of economic life. It is not just the increase in the volume of public spending under a democracy that is the problem, it is the fact that this must be accompanied by a massive increase in government directions and the implementation of bogus 'collective' purposes.

Hayek's solution (1979) to the problem is to recommend a new version of the 'separation of powers'. Traditionally this doctrine has meant that the legislature, executive and judiciary should be in separate hands but Hayek argues that, since there are two types of law, the legislature itself should be divided into two parts. The Legislative Assembly should restrict itself to the improvement and modification of the rules of just conduct, while the Govern­mental Assembly should be concerned only with the despatch of government business. In public finance, for example, the tax rules would be decided by the Legislative Assembly, while how the revenue should be spent would be the responsibility of the Governmental Assembly. To avoid the possibility of party politics dominating the Legislative Assembly Hayek makes the curious suggestion that it should be composed of representatives between their forty-fifth and sixtieth years, who shall sit for 15 years, and be elected by those who reach their forty-fifth birthday. Re-election would be forbidden and voters would vote only once so that the composition of the Assembly would be constantly renewed.

While liberal economists are in general agreement with Hayek that vote-maximising in a competitive-party democracy does not tend to produce the public interest, few have been attracted to his arcane constitutional proposals. Most suggest that the apparently inexorable drive towards inflation, high public spending and the dominance of 'group politics' could be checked by the strict enforcement of more conventional constitutional rules. It has been recommended that governments should be legally obliged to balance their budgets, or that control of the money supply should be taken out of government and given to a body which is independent of politics. In Britain the introduction of propor­tional representation, which Hayek (1978, p. 161) is against, would go some way towards checking the anti-social activities of government.

Until recently it was thought that Hayek's 'road to serfdom' thesis was a gross exaggeration and had, indeed, been 'refuted' by the co-existence in western countries of macroeconomic planning, welfarism, redistribution and the market economy, freedom and the rule of law. However, the recent failures of Keynesian economics, the wastefulness of the welfare state and the threats to the rule of law that have emerged from the relentless politicisation of social and economic life, have all combined to make Hayek's prognosis grimly accurate. Furthermore, those countries that have pursued more market-oriented policies have been economi­cally more successful than others.