Is America Still On F.A. Hayek’s “Road to Serfdom”?

Published February 18, 2015

A little more than seventy years ago, on March 10, 1944, there appeared in Great Britain one of the most amazing and influential political books of the twentieth century, The Road to Serfdom by Friedrich A. Hayek, which forewarned of socialist trends in Britain and America that ran the danger of leading to tyranny if taken to their logical conclusions.

Written during the Second World War, Hayek’s main and crucial thesis was that many of the ideological and economic trends that had culminated in the triumph and tragedy of German Nazism could be seen developing and taking hold in Great Britain, where Hayek was then living, and also in the United States.

Hayek did not argue that either Great Britain or America were inevitably and irretrievably heading for a totalitarian state exactly like the National Socialist regime then existing in Hitler’s Germany, and against which the combined economic and military strength of Great Britain and the United States were at that moment in mortal combat.

But as I shall try to explain, the threat against which Hayek was warning was that there were certain underlying political philosophical and economic policy currents at work in these two bulwarks of Western civilization that if continued ran the risk of moving these countries further away from being societies of freedom.

Great Britain and the United States, Hayek argued, were increasingly becoming politically controlled and managed states in which the individual human being faced the danger of being reduced to a cog in the machine of governmental planning. Individual liberty would be lost in societies of socialist paternalism and centralized economic direction of human affairs.

The Life and Contributions of F. A. Hayek

Friedrich August von Hayek was born on May 8, 1899 in Vienna, in the now long gone Hapsburg Empire of Austria-Hungary. While still a teenager he served in the Austro-Hungarian Army during the First World War, seeing military action on the Italian front. When released from military service shortly after the end of the war in November 1918, he entered the University of Vienna in an accelerated program that enabled him to earn a doctorial degree in jurisprudence in 1921. Two years later in 1923, he earned a second doctoral degree in political economy from the University of Vienna.

Hayek’s first international reputation was as one of the most highly regarded economists of the 1920s and 1930s, the years between the two World Wars. With the assistance and support of his mentor and friend, the well-known Austrian economist, Ludwig von Mises, Hayek became the founding director of the Austrian Institute for Business Cycle Research in1927, a position that he held until the summer of 1931.

Hayek was invited to deliver a series of lectures at the London School of Economics in January1931 on what has become known as the Austrian theory of money and the business cycle, which resulted in his being offered a professorship at the London School, a position that he accepted and took up in the autumn of 1931.

His lectures were published shortly after under the title, Prices and Production. Along with his other writings during this period of the 1930s, he was soon recognized as one of the foremost monetary and business cycle theorists in the English-speaking world, and as a leading critic of the emerging new Macroeconomics of the Cambridge University economist, John Maynard Keynes.

Also in the 1930s and 1940s, Hayek was an outspoken critic of socialism and government central planning, editing and contributing to a collection of essays on Collectivist Economic Planning (1935); his two most famous writings on this theme during this period were his book, The Road to Serfdom (1944) and an article on “The Use of Knowledge in Society” (1945).

At the beginning of the 1950s, Hayek moved to the University of Chicago here in the United States. But his attention had turned from economic theory and policy in the narrow sense to the broader problems of social and political philosophy and the nature of societal order and the competitive market system. These interests culminated in two major works, The Constitution of Liberty (1960) and Law, Legislation, and Liberty that appeared in 3-volumes between 1976 and 1979,

In recognition for his work on monetary and business cycle theory and his analysis of social evolution and the institutional structures of human society, he was awarded the Nobel Prize in Economics in 1974. Friedrich Hayek died on March 23, 1992, at the age of 92.

Growing Collectivism in Great Britain and America

As I pointed out, when The Road to Serfdom was published Great Britain and the United States were engulfed in a global war, with Nazi Germany as the primary enemy and Soviet Russia as their primary ally. In 1944 the British had a wartime coalition government of both Conservative and Labor Party members, with Winston Churchill as its head. During these war years plans were being designed within the government for a postwar socialist Britain, including nationalized health care, nationalized industries, and detailed economic planning of both industry and agriculture.

For the eight years before America’s entry into the war Franklin Roosevelt’s New Deal had transformed the United States through levels of government spending, taxing, regulation, and redistribution the likes of which had never before been experienced in the nation’s history. Many of the early New Deal programs had even imposed a network of fascist-style economic controls on private industry and agriculture; the only thing that prevented them from being permanently in place were a series of decisions by the Supreme Court that declared most of these controls unconstitutional in 1935.

At the same time, the Soviet Union was frequently portrayed as a model – however one rather rough around the edges – of an ideal socialist society, freeing “the masses” from poverty and exploitation. The Nazi regime, on the other hand, was usually depicted as a brutal dictatorship designed to maintain the power and control of aristocratic and capitalist elites that surrounded Hitler.

Nazism an Outcome of Bismarck’s Welfare State

Hayek’s challenge in The Road to Serfdom was to argue that German Nazism was not an aberrant “right-wing” perversion growing out of the “contradictions” of capitalism, as Marxists and many other socialists insisted.

Instead, Hayek documented, the Nazi movement had developed out of the “enlightened” and “progressive” socialist and collectivist ideas of the pre-World War I era in Imperial Germany, ideas that many intellectuals in England and the United States had praised and propagandized for in their own countries in the years before the beginning of the First World War in 1914.

Large numbers of American graduate students went off to study at German universities in the 1880s, the 1890s, and the first decade of the 20th century.

They returned to the United States and spoke and wrote about a new and higher freedom observed in Germany, a “positive” freedom provided through government welfare state paternalism rather than the mere “negative” freedom of individual liberty in the form of absence of coercion in human relationships as practiced in America.

It was in Bismarck’s Germany during the last decades of the 19th century, after all, that there had been born the modern welfare state – national health insurance, government pension plans, regulations of industry and the workplace – and a philosophy that the national good took precedence over the interests of the “mere” individual. In this political environment Germans came to take it for granted that the paternalistic state was meant to care for them from “cradle to grave,” a phrase that was coined in Imperial Germany.

Two generations of Germans accepted that they needed to be disciplined by and obedient to the enlightened political “leadership” that guided the affairs of state for their presumed benefit. Beliefs in the right to private property and freedom of exchange were undermined as the regulatory and redistributive state increasingly managed the economic activities of the society for the greater “national interest” of the German fatherland.

The German government restricted competition and fostered the creation of monopolies and business cartels under the rationale of directing private enterprise into those avenues serving the higher interests of the German nation as a whole.

Germany’s trade with the rest of the world was hampered by taxes and tariffs designed to shift German industry and agriculture into those forms the government considered most useful to prepare the nation for greater self-sufficiency during the war that was expected to come, and which finally broke out in 1914.

By 1933, Hayek argued, fifteen years after Germany’s defeat in the First World War, when Adolf Hitler came to power during the Great Depression, the German people not only accepted the idea of the “führer principle,” – the belief that people should follow and obey the commands of the political leaders of the nation – but many in German society now wanted it and believed they needed it. Notions about individual freedom and personal responsibility had been destroyed by the philosophy of collectivism and the ideologies of nationalism and socialism.

But Hayek’s main point was that this tragic history was not unique or special to the German people. The institutional changes that accompanied the implementation of socialist and interventionist welfare-state policies potentially carried within them the seeds of political tyranny and economic servitude in any country that might follow a similar path.


Government Planning Means Control over People

The more government takes over responsibility for and control over the economic activities of a society, the more it diminishes the autonomy and independence of the individual. Government planning, by necessity, makes the political authority the ultimate monopoly, with the power to determine what is produced and how the resulting output shall be distributed among all the members of the society.

Belief in and expectation of government paternal care from the everyday vicissitudes of life, employment, and enterprise, Hayek insisted, weakens the spirit of self-reliance and independence. It makes for a more passive people who lose any sense of a loss of personal freedom and autonomy, as they increasingly cannot imagine a world in which government does not guaranteed many if not most of the necessities and amenities of human existence.

But it is not only economic independence that is lost as the government extends the safety nets of welfare statism and expands regulatory and planning control over society.

What personal and intellectual freedom is left to people, Hayek asked, when the government ownership of industry or heavy-handed regulation of business has the ability to determine or influence what books will be printed or movies will be shown or plays will be performed? What escape does the individual have from the power of the state when the government controls everyone’s education, employment, and consumption?

He also warned that the more that government plans production and consumption, the more the diverse values and preferences of the citizenry must be homogenized and made to conform to an overarching “social” scale of values that mirrors that hierarchy of ends captured in the central plan.

Road to Serfdom with ObamaCare cartoon

Each Free Man an End in Himself and a Means to Others’ Ends

One of the hallmarks of a free society in which people associate and cooperate through the networks and institutions of the market economy is that each individual is at liberty to peacefully pursue those interests, inclinations, and desires that suggest themselves as a source of personal meaning and happiness for him.

The more developed and complex the market society becomes with a growing population, the more there will emerge and develop diverse conceptions of the good life among people.

In the competitive market order there is no need or necessity for society-wide agreement about desired ends and goals among its members. In the division of labor of the market order, individuals earn the living that enables them to have the financial wherewithal to pursue the self-interested purposes that give value and meaning to their own lives by specializing in the production and sale of goods and services that serve as the means to the desired ends of others.

Thus, in the liberal, free market society, every man is an end in himself with his own chosen scale of values reflecting what he considers important and worthwhile. And each can try to attain those values by producing and supplying others in trade with the goods and services that serve as the means for trying to achieve their respectively chosen ends.

Fulfilling the Government Plan Requires Obedience by All

One of Hayek’s central points was the fact that a comprehensive system of socialist central planning would require the construction and imposition of a detailed system of relative values to which and within which all in the society would have to conform, if “the plan” imposed by the government was to succeed.

This was the origin of Hayek’s warning that government central planning ran the danger of becoming tyranny and a new form of “serfdom,” since any meaningful dissent in word or deed could not be permitted without threatening the fulfillment of the goals of the government’s plan. All would have to be assigned to their work, and be tied to it to assure that “the plan” met its targets.

Even dissent, Hayek warned, becomes a threat to the achievement of the plan and its related redistributive policies. How can the plan be achieved if critics attempt to undermine people’s dedication to its triumph? Politically incorrect thoughts and actions must be repressed and supplanted with propaganda and “progressive” education for all.

Thus unrestricted freedom of speech and the press, or opposition politicking, or even observed lack of enthusiasm for the purposes of the state becomes viewed as unpatriotic and potentially subversive.


Rule of Law or Unequal Treatment for Equal Outcomes

In addition, the classical liberal conception of an impartial rule of law, under which individuals possess equal rights to life, liberty, and the peaceful acquisition and use of private property, would have to be replaced by unequal treatment of individuals imposed by the political authorities to assure an ideologically preferred redistributive outcome.

In the free society, equality of individual rights under rule of law inevitably means an inequality of economic outcomes. Men widely differ in how they use and take advantage of their equal rights to life, liberty and property. We all know that people are far from being the same in terms of inherited traits and potentials, as well as attitudes and inclinations concerning acquiring an education, working hard, and being willing to make personal sacrifices in the present for some hoped for and possible greater benefits in the future.

In addition, our fellow men value more highly some things than others and are willing to pay more to get them. This means that some of us, as a result of intelligent forethought in deciding what occupations and trades to undertake, the education and skilled talents to acquire, as well as general circumstances and even a bit of luck, will earn higher salaries than those who market less valued goods and services in the eyes of the buying public.

To make people more “equal” in terms of the economic outcomes that emerge in the marketplace requires people to be treated very differently by the political authority responsible for that equalization.

In the foot race of life, it is inevitable that some will speed ahead of others in terms of financial and other forms of social success. But if the government is assigned the task to reduce these disparities, then it must place weights on the ankles of some in the form of taxes and regulations to slow down their outdistancing the others, while those others must be allowed to cut across the field in the form of wealth transfers, subsidies or other special treats provided by the government so they can catch up with or get ahead of those in front of them on the racecourse of society.

But, asked Hayek, by what benchmark, other than prejudice, caprice, or the influence of interest groups, would or could the planners make their decisions concerning who would be treated better and who worse in the form of government interventions, regulations, redistributions and controls? How will it be found out who is more deserving or meritorious for government differential benefits at the expense of others?

Who is more deserving? The man to whom things such as learning and luck often seem to come easily but who has eight children, a sick wife and an elderly mother to care for? Or a man to whom luck never comes, has to work hard for everything he finally gets but has only himself and a one high school honors student daughter to take care of?

And if it is replied that the answer to that requires detailed gradations of evaluation and judgment, then in whose evaluating and judging eyes and on what standard or benchmark of relative merit, deservedness and neediness shall the decisions be made by those in government?

The means available are always insufficient to attain all our desired ends, and some in the society will invariably consider any politically decided trade-offs in these matters to be unfair, unjust, and uncaring.

Whether a dictatorial minority or a democratic majority makes such decisions, there is no escape from the imposition of advantages and disadvantages given to or imposed on different members of the society by those in political authority, and upon whom the individual becomes dependent and subservient for the social and material fortunes and misfortunes of much if not all of his life.

Why the Worst Get on Top

Finally, in one of the most insightful chapters in the book, Hayek explained why, in the politicized society, there is a tendency for “the worst to get on top.” Fulfillment of the government’s plans and policies requires the leaders to have the power to use any means necessary to get the job done.

Thus those with the least conscience or fewest moral scruples are likely to rise highest in the hierarchy of control. The bureaucracies of the planned and regulated society attract those who are most likely to enjoy the use and abuse of power over others.

One form of this in Hitler’s Nazi Germany was known as what was called “working towards the Fuhrer.” In 1934, a senior Nazi government official told his subordinates, “It is the duty of every single person to attempt, in the spirit of the Fuhrer, to work towards him.” And, “the one who works correctly towards the Fuhrer along his lines and toward his aim will in future as previously have the finest reward . . . “

As historian Ian Kershaw explained in his biography, Hitler, 1889-1936 – Hubris (1998), “The way to power and advancement [in the Nazi regime] was through anticipating the ‘Fuhrer’s will’, and, without waiting for directives, taking initiatives to promote what were presumed to be Hitler’s aims and wishes.”

As Kershaw continues, “Through ‘working towards the Fuhrer’, initiatives were taken, pressures created, legislation instigated — all in ways which fell in line with what were taken to be Hitler’s aims and without the dictator necessarily having to dictate.”

In this instance, the government bureaucrat was stimulated by his superiors to anticipate Hitler’s will in instituting policies and actions in the hope for material gain and promotion within the Nazi hierarchy, and to do so with often brutal ruthlessness to the misfortune of many helpless victims.

Those who pursue such careers and who are willing to introduce and implement whatever policies necessary in the name of explicit or implicit government goals will be those who often care little about the unethical and immoral conduct that holding such political positions will require of them.

But there are others who may be led to do things in their government role and position that as a private individual in their personal life they would consider immoral or unethical behavior. This often is due to a person’s confidence of patriotic purpose and belief in his superior understanding of what must be done regardless of the violation of other people’s rights or the sacrifices imposed on other members of society to attain the greater “national” or “social” good.

With the realization that it is a controversial subject, let me suggest that a type of person who searches out employment and specialized surveillance work in the National Security Agency because he truly believes that there are potential “enemies” everywhere threatening harm to the “homeland” is highly likely to be a person who gives few second thoughts about whether intruding into the privacy of ordinary people’s emails, phone conversations, text messages, and private computer documents is unethical, illegal or even simply “bad manners.”

Indeed, the more zealous among such types of individuals will at the end of their workday not lose sleep due to a guilty conscience that a human being’s privacy rights have been violated. He is more likely to be thinking of tomorrow’s day of work and how he can find ways to do it even more effectively, regardless of high much more other people’s rights and privacy might have to be abridged in the attempt to attain the highly allusive goal of “national security.”

Indeed, way back in 1776, the famous Scottish economist, Adam Smith, warned about such people in government, when he said that nowhere would such political power “be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”

Men are easily subject to arrogance and hubris, and never is that human weakness so to be feared as when government has the power that allows such individuals to practice their pretensions of superior knowledge and wisdom over their fellow human beings.

The Continuing Relevance of The Road to Serfdom

It may be asked how relevant remains Hayek’s arguments and warnings more than seventy years after the appearance of The Road to Serfdom? After all, Nazi- and Soviet-style totalitarian socialism, with their attempts to comprehensively control and plan every facet of human life, and with a ruthlessness and violence unsurpassed in any period of modern history, are now things of past. They are closed chapters in the history of the 20th century.

First, as I said earlier, Hayek never claimed and went out of his way to insist that he was not forecasting that Western nations like Great Britain or the United States would become carbon copies of either Nazi Germany or the Soviet Union.

What he did say was that the more governments extended their power and control over the personal, social and especially economic affairs of the private individuals of society, the less freedom of choice and decision-making would the individual continue to retain in his own hands.

The less flexible and dynamic would become the society, with the greater the direction of production, investment and employment under the influencing hand of government agencies, bureaus and departments.

The wider the net of welfare state dependency and guarantees for the circumstances of everyday life, the weaker would become the sense of initiative, self-reliance, and risk-taking to improve one’s own life.

The type of serfdom that has increasingly enveloped parts of human life in the Western world was, in fact, anticipated with concern and fear by the 19th century French social philosopher, Alexis de Tocqueville, in his study of Democracy in Americapublished in the 1830s:

“After having thus taken each individual one by one into its powerful hands, and having molded him as it pleases, the sovereign power extends its arms over the entire society; it covers the surface of society with a network of small, complicated, minute, and uniform rules, which the most original minds and the most vigorous souls cannot break through to go beyond the crowd; it does not break wills, but it softens them, bends them and directs them; it rarely forces action, but it constantly opposes your acting; it does not destroy, it prevents birth; it does not tyrannize, it hinders, it represses, it enervates, it extinguishes, it stupefies, and finally it reduces each nation to being nothing more than a flock of timid and industrious animals, of which the government is the shepherd.

“I have always believed that this sort of servitude, regulated, mild and peaceful, of which I have just done the portrait, could be combined better than we imagine with some of the external forms of liberty, and that it would not be impossible for it to be established in the very shadow of the sovereignty of the people.”

The Freedom We have Lost

Ask yourself, what corners of your daily life, in its most mundane and important aspects, are not controlled, regulated, planned, and overseen by the guiding hand of government?

Americans are free to say whatever they want – as long as it does not offend any ethnic, gender or racial group. They can pursue any career they choose – as long as they have been certified or licensed and have successfully passed inspection by an army of state regulators.

Americans may come and go as they please – as long as they have been approved for a government-issued international passport, declared whether they are carrying more than $10,000 in currency, reported all taxable or forbidden items they wish to bring into the country, and have not attempted to visit any foreign lands declared off-limits by the state.

They may buy whatever satisfies their fancy – as long as it has been manufactured, packaged, and priced according to government standards of safety, quality, and fairness, and as long as it has not been produced by a foreign supplier who exceeds his import quota or who offers to sell it below the state-mandated “fair market price.”

Americans may go about their own affairs – as long as they send their children to government schools or private schools approved by the state; as long as they do not attempt to employ too many of a particular ethic, gender, or racial group; as long as they do not attempt to plan fully for their own old age rather than pay into a mandatory government social security system.

They may enter into market relations with others – as long as they do not pay an employee less than the government-imposed minimum wage; as long as they do not attempt to construct on their own property a home or a business in violation of zoning and building ordinances; that is, as long as they do not try to live their lives outside the permissible edicts of the state.

And Americans freely take responsibility for their own actions and pay their own way – except whey they want the state to guarantee them a job or a “living wage”; except when they want to state to protect their industry or profession from competition either at home or from abroad; except when they want the state to subsidize their children’s education or their favorite art or the preservation of some wildlife area, or the medical research into the cure of some hated disease or illness; or except when they want the state to ban some books, movies, or peaceful acts between consenting adults rather than trying to change the behavior of their fellow men through peaceful persuasion or by personal example.

That many who read such a list of lost freedoms in the United States will be shocked that anyone should suggest that the state should not be concerned with many or all of these matters shows, I would suggest, just how far we have come and are continuing to go down a road to serfdom.

Restoring a Philosophy of Individual Rights

Yet, a hundred years ago before the First World War, when the citizens of the United States still lived under the influence of 19th century classical liberalism with its emphasis on individual liberty, free enterprise, limited government and voluntary association to service and solve many of the “social problems” of modern society, most people would have strongly opposed anyone who suggested that the government should envelope society with such a vast spider’s web of paternalistic plans, regulations, controls and redistributions.

It would have been considered “socialistic” and “un-American,” and not only by some supposed “right-wing fringe group” but by a wide consensus of the American people as a whole.

If we are to find a way to get off this road to paternalistic serfdom that has been weakening an understanding and draining existence out of the free society, the first task is to appreciate how this came about and what its implications can be.

Most importantly, the immorality of collectivism, with its insistence that the individual must live and sacrifice his life for “the tribe, “the nation,” “the society” must be wholeheartedly challenged and rejected. And in its place we must recover a sound and rational philosophy of individual rights that defends and respects the right of every human being to live his own life for himself as the core ethical concept in all human relationships.

As part of undertaking this task, Friedrich Hayek’s Road to Serfdom still serves an invaluable role in explaining how this road was first entered upon, what it led to in the middle decades of the 20th century century and why government planning and regulation carries within it a loss of personal freedom and choice, and undermines the human spirit of creative thought and self-responsibility from which have come all the great accomplishments of mankind.

This is why The Road to Serfdom remains a classic of political and economic ideas that still speaks to us in our own time, and why anyone who values liberty and fears for its diminishment and loss can do no better than to open its pages and absorb its lessons.

(The text is based on a talk delivered at the College of Coastal Georgia, St. Simon Island, Georgia, February 12, 2015)

[Originally published at Epic Times]