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ESHET 10th Annual Conference Porto , 28-30 Apri l 2006

Reassessing Hayek as Popularizer 1

Robert Nadeau Department of Philosophy

University of Quebec at Montreal P.O. Box 8888, Succursale centre-ville

Montreal (Quebec), Canada H3C 3P8

nadeau.robert@uqam.ca

1. Introductory remark

The Road to Serfdom (Hayek 1944)2 is without a doubt the book that made Friedrich Hayek world famous. But one must immediately add that Hayek the trained economist was far from being satisfied with this situation, at least at the beginning. “I have long resented”, writes Hayek, “being more widely known by what I regarded as a pamphlet for the time than by my strictly scientific work.” But he adds immediately: “After reexamining what I wrote then in the light of some thirty years’ further study of the problems then raised, I no longer do so” (Hayek 1976: xxiv-xxv).

In the following pages, I will first establish that The Road to Serfdom was not intended from the start as a ‘popular’ book. This will force me to raise the question of the place and importance Hayek himself grants his 1944 book compared to the rest of his published work. I will then go on to take a stance on what seems to be the central question of the day concerning Hayek’s thesis in this book, which has often been presented and, for that matter, much criticized and often rejected, as an “inevitability thesis”. As we will see, Hayek’s actual argument has been distorted and misread by some commentators. Finally, I will challenge the view that Hayek has changed his mind as a social and economic philosopher over time: in his subsequent books, Hayek did not come to adopt a more ‘libertarian’ attitude than the liberal one he was promoting in The Road to Serfdom, which nevertheless needs to be accurately qualified.

2. Hayek as popularizer

Hayek began to write The Road to Serfdom in September 1940 (Friedman 1994b: xvii) and he intended that the book be published in 1943, while the war was still going on. Because of a paper shortage, however, he was unable to get it published in England by Routledge & Kegan Paul before March 10, 1944. Although the first printing was only 2,000 copies, it sold out in about a month (Friedman 1994b: xviii) and was afterwards reprinted many times. The Chicago first edition was published on September 18, 1944, and many printings were rapidly needed to cope with the increasing demand for the book. A

1 I would like to thank the Canadian Social Sciences and Humanities Research Council of Canada (SSHRC) as well as the Fonds québécois de recherche sur la société et la culture (FQRSC) for the financial support provided. 2 All following citations are from the 4th edition (Hayek 1994).

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Reader’s Digest condensed edition was published in April 1945, reaching, as one can guess, hundreds of thousands of readers, and the Book of the Month Club subsequently distributed 600,000 copies of it. In the first fifty years following its publication, the University of Chicago Press sold about a quarter of million copies of this bestseller, and more than twenty translations had already been published throughout the world. Furthermore, we know as a fact that unauthorized translations were also circulated in Eastern Europe during the Cold War and, as Milton Friedman remarks, “(T)here is little doubt that Hayek’s writings, and especially this book, were an important intellectual source of the disintegration of faith in communism behind the Iron Curtain, as on our side of it” (Friedman 1994b: xix).

While this book was incredibly well received (Rosenoff 1974), Hayek stressed that he “was made to feel by most of (his) fellow social scientists that (he) had used (his) abilities on the wrong side”, and he wrote: “I was myself uncomfortable about the possibility that in going beyond technical economics I might have exceeded my competence” (Hayek 1976: xxi). But was Hayek a popularizer? More precisely: can we say that The Road to Serfdom was and still is a “popular” book, meaning a book intended for a large audience of non-specialists in political economy—a book for the layman? If we look at what Hayek himself wrote in the first preface (Hayek 1944a), this book, dedicated “To Socialists of all parties”, was intended for social scientists and the British intelligentsia, and not for British people in general. It is true that, as a matter of fact, the book was widely read by all sorts of people, be they specialists, intellectuals or otherwise. But the British first edition targeted educated people, and especially people who had already made their choice in favour of socialism or collectivism. It is only with the American edition, fifteen years after the British one, that the publisher targeted the general American audience instead of targeting only, or primarily, American academics and political leaders or public opinion leaders.

My reading of Hayek challenges the myth of two Hayeks that implies that Hayek purposely reoriented his career during the 1940s by abandoning theoretical research in economics in order to pursue new intellectual interests in philosophy, social sciences and the humanities (i.e. sociology, law theory, political science and evolutionist anthropology). The research Hayek did in those specialized fields from the 1950s on is closely interlinked with problems belonging to the field of economics or at least political economy. What in fact happened with The Road to Serfdom is that Hayek was no longer addressing a technical problem of economic theory (like in Prices and Production or in The Theory of Pure Capital) but rather a problem (still theoretical) belonging to political economy. Hayek is quite clear about this when he declares that “(T)his is a political book” (Hayek 1944a: xlv). The Road to Serfdom is considered by him to be “an essay in social philosophy” for it stems “from certain ultimate values” (ibid.). But to this he adds that, of course, “the beliefs set out in it are not determined by my personal interests”, as if the argument could be reduced to a question of taste or ideological preference. The problems discussed in that book are “the very views which I held as a young man and which have led me to make the study of economics my profession”, writes Hayek again (ibid.). This is to say that if the book is not a “strictly academic work” (Hayek 1944a: xlvi), it is nonetheless intended as an alternative to ideas that “amateurs and cranks”, i.e. “people who have an axe to grind or a pet panacea to sell” (ibid.), were at that time conveying to public opinion3. Even if the book is intended for a larger audience than the one strictly composed of professional economists, Hayek has no intention of leaving aside his specialized knowledge 3 The central Hayekian argument was first articulated in ”Freedom and the Economic System” (Contemporary Review, April, 1938), which was republished in an enlarged version as Freedom and the Economic System in Chicago (The University of Chicago Press, Public Policy Pamphlet nº 29 edited by Prof. H.D. Gideonse, 1939; and in Great Britain and Ireland by Cambridge University Press, 1939).

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as a trained economist. On the contrary, his aim is to put his intellectual skills and expertise to work in a field were political aims must be scrutinized in order to see whether they can be made compatible with the constraints of an efficient market economy.

In fact, many of Hayek’s articles and chapters written after The Road to Serfdom are very technical pieces of research related to work done before the publication of that book. For instance, no one will dispute the fact that the major concerns of Hayek’s entire career as an economist were related to understanding the workings of money, explaining the causes of the trade cycle, and giving a theoretical account of inflation. All those problems lie in the background of what Hayek says in his 1944 book about central planning and authoritarian direction of economic production by the state. For instance, his concern for the economic problem posed by money began with his 1929 Geldtheorie und Konjunkturtheorie (Hayek 1929), which he fully developed in 1937 (Hayek 1937a). Later on, Hayek wrote many other essays that critically scrutinized the institutional arrangements that have granted governments discretion in the supply of money in the 20th century. The question of whether the government’s monopoly over money should be abolished was still being raised by Hayek in 1976 (Hayek 1976b) and his proposal for a commodity-backed monetary Standard was launched in his very last contribution to economic theory in 1986 (Hayek 1986)4. During the same period, Hayek was also concerned by sustainable employment and insisted that it depends on appropriate changes in relative real wage rates. The idea that producers, both unions and capitalists, often work to prevent such relative changes from becoming effective, thus provoking unnecessary unemployment, lies at the heart of this argument. And there is, of course, a direct link to be made between this line of reasoning and what Hayek has to say in The Road to Serfdom about “the trade unions successfully (resisting) any lowering of the wages” and sticking to their quest for “full employment” (Hayek 1944; see Hayek 1994: 226). Hayek has reiterated time and again that wage rates play a vital role in determining the volume of employment, and it is clear that the employment problem that Hayek addresses in his 1944 book continued to draw his attention as an economist afterwards. For instance, Hayek argues in 1946 that even a continued increase in the demand for consumers’ goods would not necessarily lead to a parallel increase in the demand for producers’ goods. Continued increases in spending would not, therefore, be sufficient to maintain full employment (Hayek 1946). Fourteen years later, in the very same vein of argument, Hayek insisted that it was unwarranted to identify the interests of union members with the interests of the working class as a whole, since unions were able to obtain higher wage rates for their members only by limiting the supply of unionized labour and by thus increasing the supply of non-union labour, i.e. by reducing the wage rates of non-collectively organized workers (Hayek 1960, chap. 18). It therefore becomes clear that there is no real gap between Hayek’s research in “social and economic philosophy” and his technical research in theoretical economics, as one can also see by looking into his analysis of the consequences of inflation. Hayek not only tried to identify the underlying causes of this economic disorder, but he also emphasized two social dangers of inflation. First, by destroying the value of savings and of fixed incomes, inflation creates the problem of poverty in old age, as well as a dangerous gap between the wealthy minority and the property-less majority. Second, inflation reinforces the disinclination to take long-term effects into account when determining policy, as was the case within the Keynesian macro-approach to this problem (Shenoy 1978: 69). The problem of inflation of course lies in the background of the warning 4 For an excellent analytical overview of Hayek’s ideas in monetary theory in the years 1931-1978 and a presentation of the critical reactions those ideas brought about, see Sudha Shenoy, “A Tiger by the Tail”, introduction to F. A. Hayek 1991: 1-123.

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The Road to Serfdom attempts to convey to intellectuals. And finally, as a last example, when Hayek complains about “the complete misapprehension of the working of competition” (Hayek 1994: 41-48), when he insists that all the details of the changes constantly affecting the conditions of demand and supply of the different commodities can never be fully known (Hayek 1994: 112) but that “the price system under competition” fulfils precisely the information function that a free market and decentralized economy is based upon (Hayek 1994: 56), he is making a connection with his theoretical analysis of the pricing system as it appears, for instance, in “Competition As a Discovery Procedure” (Hayek 1968). He is also connecting with the idea that prices are transmitters of empirical knowledge, a concept first systematically propounded in his famous 1937 essay on “Economics and Knowledge” (Hayek 1937), as well as in his 1945 essay on “The Use of Knowledge in Society” (Hayek 1945d).

This is to say that Hayek has never forsaken theoretical research in economics in favour of social and political philosophy; rather, he tightly combined these two approaches with economics. Many questions lying at the heart of his “political book” were indeed addressed before the 1940s or were targeted in subsequent years, such as, for instance, the question of central planning efficiency as compared with the free market economy, the role of private property and the search for profits, the consequences of central political control over the economy and the question of political freedom, the question of “nomocracy” and of the rules of just individual conduct, the questions pertaining to trade unions, wage rigidity and unemployment, and finally the intricate questions of fair wages and, more generally, of ‘social justice’, a concept which he rejected as inconsistent. There is therefore a continuum of thinking in Hayek’s research program, and he was almost always acting not only as an economist but also as a social and political philosopher, as an epistemologist and a methodologist of the social sciences. It is true that, in writing The Road to Serfdom, Hayek decided to offer an extension of his theoretical research in economics because he strongly believed that, in this area of research, the political and legal dimension of social reality cannot really be separated from, and therefore has to be articulated with, its economic dimension. But certainly this work, as “political” as it may have been in Hayek’s own eyes, is far from being an isolated piece of research within the body of Hayek’s intellectual and scientific work. For, as Jack Douglas has already remarked, “The Road to Serfdom was written at the same time that Hayek was developing his theory of the information exchange among actors and environments which constitutes the foundation for his theory of the free (spontaneous) generation of social orders” (Douglas 1985: 104).

3. Bewilderments about inevitabi lity

Stating what exactly was the point Hayek was trying to make in The Road to Serfdom may look simple but it is not. “It has frequently been alleged”, writes Hayek, “that I have contended that any movement in the direction of socialism is bound to lead to totalitarianism. Even though this danger exists, this is not what the book says. What it contains is a warning that unless we mend the principles of our policy, some very unpleasant consequences will follow which most of those who advocate these policies do not want” (Hayek 1976: xxiv). Yet there is no doubt that Hayek wanted intellectuals “to recognize that the rise of fascism and Nazism was not a reaction against the socialist trends of the preceding period but a necessary outcome of those tendencies (italics are mine. R.N.)” (Hayek 1994: 6). Again and again Hayek claims not so much that the danger is imminent but that if Britain is to continue on the same path, then the

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resulting situation will very probably bring political and economic serfdom -- if we don’t fight against this trend.

In the 1980s, Hayek’s book unfortunately came to be received as a statement about political and economic slavery being an avoidable and necessary consequence of the Welfare State. This disquieting appraisal of the book is something that must be explained and, of course, Hayek rejected it promptly. I suggest that in the course of discussion three different arguments became mixed up, which I would now like to unravel. First, one can easily find in the book an “inevitability thesis”, which Hayek opposes. I will call the thesis “Inevitability Thesis I”. It states that there is no necessary trend for which the outcome will be socialism (or any form of collectivism such as, e.g., communism). For instance, Hayek opposes forcefully in 1944 “the fatalistic belief of every pseudo-historian since Hegel and Marx” who believe that an “inevitable revolution” began with the first World War which will sooner or later bring the defeat of “liberal democracy, national self-determination and laissez faire economics” (Hayek 1994: 206). Hayek writes in the very conclusion to The Road to Serfdom that “(T)he first need is to free ourselves of that worst form of contemporary obscurantism which tries to persuade us that what we have done in the recent past was all either wise or inevitable” (Hayek 1994, pp. 261-2). Those “who believe in inevitable tendencies” and see a “New Order” inescapably emerging in Western history fall prey to “a projection of the tendencies of the last forty years” (Hayek 1994 : 262). As is obvious, Inevitability Thesis I concerns the historical inevitability of socialism as such. For Hayek, there is no historical trend that can necessarily force any society like our own to develop into a socialist organization: there are no “historical laws” of the sort, as Hayek puts it in his critique of “historicism” (Hayek 1943)5. Inevitability Thesis I must be sharply contrasted with two other arguments that have seemingly never been disentangled, up until now. “Inevitability Thesis II” is the name I propose to give to the argument that Hayek’s critics have used with regard to the inference they (wrongly) think Hayek made. “Inevitability Thesis III” is the argument that I think Hayek actually put forth. I will first try to make Inevitability Thesis II unambiguous.

What exactly is the “inevitability thesis” that Hayek’s critics have been reading in Hayek’s book? Following Bruce Caldwell, it was “a common criticism” to emphasize “Hayek’s apparent prediction that planning must necessarily and inevitably lead to authoritarianism” (Caldwell 1997: 1868). And Caldwell adds that in a book which Hayek praised as being a “courteous and frank study” (Hayek 1956: xxix, n. 1), Barbara Wootton repeatedly raised the very same criticism (Wootton 1945 : 28 ; 36-7 ; 50; indicated in Caldwell 1997: 1868). George Stigler is also said to have read Hayek the very same way, as is Paul Samuelson. But I think that Caldwell’s recapturing of this criticism—which I will identify with Samuelson’s criticism to simplify discussion—is misguided. What exactly was Samuelson’s interpretation and how was it phrased? As is evident from Figure 35-3, which I reproduce below from the universally acclaimed introductory book to economics, Paul Samuelson (jointly with William Nordhaus and, for the Canadian edition, with John McCallum) understands the “libertarian” Hayek as contending that there his a necessary historical linkage between “government intervention in a market economy” on the one hand and “political serfdom” on the other. Following this interpretation of Hayek’s argument, there would be unavoidable loss of freedom if we were to ask the state to adopt policies to protect people and especially

5 This very same philosophical argument is articulated by Karl Popper in Poverty of Historicism (Economica N.S., Vol. 11, No. 42 (1944): 86-103; Vol. 11, No. 43 (1944): 119-137; Vol. 12, No. 46 (1945): 69-89), which Popper accepted to publish at Hayek’s request.

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workers against insurable risks like illness, work accidents and unemployment. This is in precise terms the statement I refer to as “Inevitability Thesis II”.

[From Paul Samuelson, William D. Nordhaus, John McCallum, Economics, Sixth Canadian Edition Toronto-Montreal-New York, McGraw-Hill Ryerson Limited, 1988, p. 786]

It is very difficult to believe that Samuelson, Nordhaus & McCallum have read Hayek correctly6. Indeed, they classify Hayek among the “libertarians” and “conservative thinkers” (together with Frank Knight, Henry Simons, Milton Friedman). But they also surprisingly present Hayek as being part of the “Chicago School of Economics” (Samuelson et al. 1988: 967), together with Friedman, Simons and George Stigler. As such, these thinkers are globally described as “modern-day apostles of laissez-faire and the minimal state” (Samuelson et al. 1988: 828). Taking Friedman as a reference model for them all7, the authors insist that this group of economists came to be against “social security, flood relief, government inspection and regulation of food and drugs, minimum wages, mandatory installation of seat belts in cars, compulsory and free public schooling, prohibition of open sale of heroin, compulsory licensing of doctors, establishment of national parks like Yellowstone or Grand Canyon” (Samuelson et al.: 828). They argue that Hayek claimed that “economic reforms and government coercion are the road to serfdom. By attempting to get a fairer division of the pie, you will simply be reducing the size of the pie. If you tamper 6 Samuelson made amends in 1981 and promised Hayek that he would change his presentation of Hayek’s thesis (see Caldwell 1997: 1868, n. 7). 7 They refer to Capitalism and Freedom, The University of Chicago Press, 1962.

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with the price mechanism, shortages will occur. But, most important, personal and economic freedoms are inseparable. Once you start down the route to government regulation and planning of the economy, the freedom to speak minds and select political leaders will be jeopardized.” And their conclusion leaves no doubt about how they read Hayek’s argument: “As shown by the historical scatter on the right side of Figure 35-3, our own reading of history is more cautious but more optimistic than that of Hayek. There is no doubt that totalitarian regimes can destroy both economic and political freedoms. But a modern democracy, proceeding carefully and applying the best of accumulated wisdom, can have the best of both worlds. It can repair the worst flaws of a market economy. And at the same time it can preserve those best things that can never be measured in the GNP: freedom to speak, freedom to change, and freedom to live as we choose” (Samuelson et al.: 786-7).

Inevitability Thesis II is about the Welfare State and not about socialism. Hayek is supposedly claiming that the policies we have already implemented in our free market economy will necessarily lead to political slavery. This second inevitability thesis is the one that Hayek is strongly arguing against, and vigorously opposing, when he says that, as far as he is concerned, political serfdom is not inevitable. It should be noted in passing that nowhere in The Road to Serfdom is Hayek talking of the “Welfare State”. It is indeed only in the 1956 Preface that Hayek finds a way to connect his criticism of socialism with a general argument pertaining to the Welfare State. He writes: “That hodgepodge of ill-assembled and often inconsistent ideals which under the name of the Welfare State has largely replaced socialism as the goal of the reformers needs very careful sorting-out if its results are not to be very similar to those of full-fledged socialism. This is not to say that some of its aims are not both practicable and laudable.” (Hayek 1956: xxxiv). Hayek must therefore be seen more as opposing the methods by which social policies get implemented than as opposing the aims of these policies. What is clear from the context is that Hayek is being very critical of using “administrative coercion and discrimination” where we could appeal to “general rules of law” to fulfil the very same social task (Hayek 1956: xxxiv).

As a rebuttal of this inevitability thesis, Hayek replied to Samuelson that his book was not written as a “historical prediction” but as a “warning”, to stop people from increasing state interference in the market economy before it is too late (Caldwell 1997: 1869). As Bruce Caldwell rightly recalls, Hayek never took these developments as necessary trends simply “because no development is inevitable” (Hayek 1994: 3). Nor did he see the “danger as immediate” (Hayek 1994: 4), because if those detrimental developments were unavoidable and immediate, wrote Hayek, “there would be no point in writing this (book). They can be prevented if people realize in time where their efforts may lead” (Hayek 1994: 6). But, unfortunately, two distinct arguments got mixed up in this discussion, and Hayek’s reply to his opponents does not make things sufficiently clear. There are indeed two issues here that must be kept separate: the first pertains to the consequences of state interventions already implemented in the British or American economies (or, for that matter, in any other Western Welfare State). But the second one is completely different, more general and more abstract, because it pertains to the consequences of socialism as it is defined by Hayek, i.e., as a “centrally planned and state directed economy where the means of production are collectively owned”. This is why we have to specify a third inevitability thesis (Inevitability Thesis III), which correctly represents Hayek’s theoretical claim and which forms the gist of his argument against socialism.

One can indeed find in The Road to Serfdom, as well as in other Hayekian writings about socialism, statements which give grounds for a reading of Hayek’s line of reasoning that corresponds to

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Inevitability Thesis III. For instance, in The Road to Serfdom, Hayek writes that “(I)f ‘capitalism’ means here a competitive system based on free disposal over private property, it is far more important to realize that only within this system is democracy possible. When it becomes dominated by a collectivist creed, democracy will inevitably destroy itself” (Hayek 1994: 77-78). But the same claims can be found elsewhere in Hayek’s writings. For instance, Hayek already claimed in 1938 that “the most advanced socialists openly admit that the attainment of their ends is not possible without a thorough curtailment of individual liberty” (Hayek 1938; see Hayek 1997: 181). He claimed in 1939 “that the expansion of state control over economic life, which is so generally wanted, should necessarily lead to the suppression of intellectual and cultural freedom” (Hayek 1939; see Hayek 1997: 191). In 1940, Hayek had already come to the conclusion that “socialism is bound to become totalitarian” (Hayek 1940; see Hayek 1997: 138). He also seemed clearly to think in 1941 that “all that planning and direction, which in Germany longer than elsewhere has been universally demanded, necessarily require a ‘totalitarian’ regime, arbitrary preferences, the use of force...” (Hayek 1941a; see Hayek 1997: 174). In other words, the argument that Hayek articulates in The Road to Serfdom cannot be isolated from his theoretical analysis of socialism. Furthermore, close inspection of the preceding passages and sentences undoubtedly show that it is not at all strange to find an inevitability thesis in Hayek’s 1944 book, a theoretical thesis which concerns, at an abstract level, the inevitability of the consequences of socialism wherever it might be implemented. The practical consequence of this political development where it does in fact happen, and which is presented by Hayek as inevitable, is loss of economic and political freedom, i.e., serfdom. This is, theoretically speaking, what is bound to happen following Hayek if socialism or any other kind of centrally planned and centrally directed economy regime is put into operation, be it in highly industrialized and culturally developed countries or not. To my mind, this is precisely the inevitability thesis Hayek is convincingly arguing for. Indeed, it forms the very gist of Hayek’s whole argument against all forms of state-directed economy. What is characteristic of this thesis is that it is a theoretical one, and it is not an inference deriving from empirical evidence. What Hayek is saying is precisely that there is a necessary link to be made between a general political model of the economy (statist economy or socialism) and the practical consequences of that particular model. This seems to me to be undisputable.

The distinction I am proposing here is not a mere question of nuance. It is about understanding correctly what Hayek is claiming. But once this clarification has been made, we are far from being done with the problems that Hayek’s opponents raise: for example, when George Orwell (Orwell 1944) reviews Hayek’s book, he sees a problem that he presents as a dilemma because, for him, the choice people have is said to be between two kinds of serfdom, and he predicts that people will choose socialist serfdom over capitalist serfdom. Samuelson’s problem is quite different in nature because he challenges Hayek’s thesis by appealing to data. Samuelson finds evidence that industrialized countries like what was called West Germany at the time (1988), as well as Canada (1988), which mixed market economy and state interventionism, never became countries that lacked real, broad political freedom. Even if Hayek’s argument about socialism per se is robust or resilient when confronted with historical facts, this does not mean that any state interference in the economy will, either necessarily or probably, lead to serfdom. A completely different argument would be needed if Hayek wanted to prove this. Undoubtedly, however, this is not something he wants to prove.

With this interpretation in mind, we can then understand why Hayek praised George Orwell’s review of his book (Orwell 1944) to such an extent. Orwell chose to review two books at the same time

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in order to take together two opposite views, the first one criticizing socialism (Hayek 1944), the second one criticizing capitalism (Zilliacus 1944). Hayek says of Orwell that he “kindly reviewed” his book, and nowhere does he show any problem with accepting Orwell’s reading. But, as a matter of fact, Orwell is quite clearly putting an “inevitability thesis” in Hayek’s mouth: “each writer”, following Orwell, “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.” (...) “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.”

This reading is one we can also find elsewhere, for instance in Theodore Rosenof’s survey study of the reception of The Road to Serfdom (Rosenof 1974: 150) and also in Jack Douglas’ article (Douglas 1985: 105). And because Hayek sees Great Britain as following the path to serfdom that Germany had earlier followed, he can say, as he does in fact, that he was trying to “warn” intellectuals against the danger that a slip towards serfdom could happen if they were not sufficiently aware of the limits we should fix to state intervention into the economy. Be that as it may, Hayek’s argument was meant, in the first place, not as a mere warning but as a confutation of socialism. This leaves open the question whether all economic doctrines that accept state intervention in the economy up to a point as a way of rationally designing social order, including the theory of mixed economy, can lead to a loss of political freedom. That it could happen is of course what Hayek believed. And there are certain passages in The Road to Serfdom where Hayek leaves the purely theoretical question of state interventionism and where he addresses problems related to what is going on at the political level in Britain. Because Hayek then strongly suggests that the British people “re-examine [its] ambitions and discard all those parts of the socialist inheritance which are a danger to a free society” (Hayek 1994: 228) and then goes on to say that if we do not do that “we are likely to continue to drift in the same direction in which outright socialism would merely have carried us a little faster” (ibid.), many readers may have thought that Hayek claimed this slide into serfdom of the Welfare State to be inescapable. But this is a claim Hayek never expressed. To be sure, Hayek never claimed that a mixed economy would certainly mean slavery, just as he never said that competitive economies would in fact certainly give optimal results. As far as evolutionary trends are concerned, whether we are talking about the possible development of socialist or capitalist regimes, Hayek always thought that the issues were empirical and contingent8.

8 Bruno Jossa writes nevertheless that “(A)ccording to a widely shared interpretation (Hayek is confident) that social evolution will guarantee the survival of efficient institutions” (Jossa 1994: 80). Jossa adds that “other well known advocates of economic liberalism, among them Viner and Buchanan, have severely criticized Hayek’s opposition to institutional reforms by emphasizing that the institutions that are found to survive, and even to thrive, are not necessarily apt to maximize human capabilities. (…) In other words, according to Viner and Buchanan, cultural evolution does not guarantee the survival of the best institutions.” But Hayek never upheld such Panglossian ideas.

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4. A query about Hayek ’s social l iberalism

Hayek’s book focuses especially on political events during the war years and he contends that Britain was actually developing along the very same political line followed by Germany in the 1930s. This explains why the book can be read more like a case study than as a philosophical treatise against collectivism. But it is important to insist that, when he warns the British intelligentsia against the threat of totalitarianism and authoritarianism, Hayek is first of all referring to the German case of national-socialism, and secondarily to the Italian case of fascism. He is not adamant about the Soviet Union’s case of bolshevism if only because, at the time, Russia was a war ally.

Taking into account the international political background of the 1930s and 1940s, Hayek nonetheless identifies in The Road to Serfdom several social measures or “social insurance” policies (Hayek 1994: 134), judged as legitimate in a free market economy. Hayek shows himself without a doubt to be in favour of such political measures each time we are dealing with “genuinely insurable risks” (Hayek 1994: 134). Moderate “economic security” (ibid.: 132), including “security against severe physical privation” (ibid.: 133), “security of minimum income” (ibid.: 133) in order to provide “some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work” (ibid.: 133), are seen as totally consistent with economic freedom and the principles of free market economy, so long as these measures are offered universally and “outside of and supplementary to the market system” (ibid.: 133). Hayek goes on to claim that “there is (no) reason why the state should not assist the individuals in providing for those common hazards of life” (ibid.: 133) such as “sickness and accident” (ibid.: 134). And he even goes so far as to say that the state must have something to do to combat “general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them” (ibid.: 134), be it through “monetary policy” or through “skilful timing of public works undertaken on a very large scale” (ibid.: 135). The important thing to say is that, for Hayek, all those measures “do not lead to the kind of planning which constitutes such a threat to our freedom” (ibid.: 135).

It is furthermore possible to single out the kind of measures Hayek opposes completely: measures granted to groups of people to protect their members against diminutions of income, i.e., a “kind of security or justice (which) seems irreconcilable with freedom to choose one’s employment” (ibid.: 135). Freedom of one’s choice of occupation is perhaps in Hayek’s views the most crucial of all economic liberties, and Hayek takes great care in articulating the argument that shows the incompatibility between economic policies securing people against diminutions of income (or loss of employment) and the liberty of choice in the work market. Hayek insists (ibid.: 137) that we look at “undeserved loss” (of employment) and at “unmerited gain” (of income and profit) not as being a function of personal merit but as being an “intelligible yardstick by which to measure the social importance of the different occupations” (ibid.: 138). We have the choice, writes Hayek, between two—and only two—types of social organization: the “commercial” type and the “military” type. Hayek insists decisively: “there is no third possibility” (ibid.: 140). The military type tends to organize society as if it were “a single great factory” (ibid.: 141): loss of freedom of employment is compensated by security, which comes with the hierarchical order of political and economic life. The only way in the market system to grant complete security to particular groups of workers is to implement “restrictionism” (ibid.: 141), which means some form of “control” of prices and wages. But, Hayek remarks, “(E)very restriction on the freedom of entry into a trade reduces the security of all those outside it”, so that “(T)here can be little doubt that it is

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largely a consequence of the striving for security by these means in the last decades that unemployment and thus insecurity for large sections of the population has so much increased” (ibid.: 142).

These economic views are the most important ones Hayek wanted to popularize in 1944. But did Hayek become a more radical liberal afterwards? This remains to be seen. As remarked by Bruce Caldwell, in his 1976 preface to the reprint edition of his book (Hayek 1976), Hayek seemed to have strongly backed off from the positions he held in the 1940s. As Hayek argues, during the years when he wrote The Road to Serfdom, his mind was still under the influence of “prejudices” and “superstitions” which were the common views held by the public opinion of the time (Preface 1976: xix [see Hayek 1994: xxi]). Twice in this little text, Hayek writes that some of the ideas he was advocating at the beginning of the 1940s made him unhappy, to say the least. He writes that he was also operating under “the prevalent confusions of terms and concepts” (Hayek 1994: xxii), which no longer held sway over him twenty-two years later. Hayek even goes as far as writing that he “made various concessions” which he now thought were plainly “unwarranted” (Hayek 1994: xxiv). For Caldwell, this tends to prove that the acceptance of state interventions by Hayek which plays so important a role in the very first edition of The Road to Serfdom were “qualified remarks” (Caldwell 1997: 1870) with which he basically no longer agreed in 1976. In this last section, I would like to challenge this understanding of Hayek’s declaration.

To make sense of Hayek’s statement, we should first look carefully into its immediate context. What Hayek was talking about when he appeared to be retreating is precisely delimited. Indeed, Hayek writes: “Where I now feel I was wrong in this book is chiefly in that I rather understressed the significance of the experience of communism in Russia”, and I humbly suggest that it was about Soviet communism that Hayek had been lenient and perhaps had made concessions he now thought were unwarranted. Hayek adds immediately that he “certainly was not yet fully aware how bad things already were in some respects” (Hayek 1976: xxiv). The Cold War context explains this apparent reversal of opinion. The appropriate reading of this passage, then, is that, with the passage of time and with information being collected as to what was really happening in Soviet Union and elsewhere behind the Iron Curtain, Hayek became progressively aware of the fact that communism had become a greater danger to freedom than fascism and Nazism were before World War II. As Jack Douglas writes, “(C)ertainly Goebbels and the Hitler Youth were ominous portents of the future, but they hardly approached the totalitarianism of the Soviets or the later Maoist Chinese” (Douglas 1985: 112). Second, we have to believe Hayek when he admits openly in the very same 1976 preface that he is “still prepared to defend all the main conclusions of (his) book”, especially if we keep in mind that the kind of socialism he was criticizing was one that “meant unambiguously the nationalization of the means of production and the central economic planning which this made possible and necessary”, and that “socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state” (Hayek 1976: xxiii). Third, if in 1976 Hayek was rejecting the economic policies he had advocated in his 1944 book as unwarranted concessions, and if, in particular, he had come to be against any state intervention directed at the castoffs of the market economy, then traces of this change of mind should also be found in the books Hayek wrote to expand the ideas he sketched in The Road to Serfom, i.e., The Constitution of Liberty (1960) and his trilogy Law, Legislation, and Liberty (1973, 1976, 1979), of which the third and last book was published three years after the 1976 preface to the 3rd edition to The Road to Serfom. On the contrary, if we search those books for some precisions about the state interventions Hayek is ready to accept in a capitalist democracy, i.e. what kind of justice is judged to be

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compatible with a social and economic order of liberty, we do not find any retraction from the 1944 guiding principles. And Hayek makes it very noticeable that the ideas explored and articulated in these books are the ones which were first exposed in the 1944 book: the “consequence of socialist policies”, as he writes, had to be completed with an “account of what an appropriately run market order requires and can achieve” (Hayek 1976: xxii).

It is true to say that in the 1970s Hayek opposed the concept of “social justice” (Hayek 1976, chap. 9). But he nevertheless still proposed, as in 1944, economic measures forming a universal social insurance safety net. He also opposed the notion of “equal opportunities”, but he did propose a “minimum income” policy in order to prevent social crumbling, economic calamities and political upheaval. But there is no good reason to deny that Hayek still buttressed in the last quarter of his long life the same variety of ‘social liberalism’ that he was already advocating in the 1940s. Up to the end, Hayek contrasted laissez-faire liberalism, which is a conservatist kind of liberalism born in 19th century Great Britain, with the classical liberalism of David Hume and Adam Smith. His form of liberalism, as he himself says loud and clear, is Alexis Clérel De Tocquevilles’ and Lord Acton’s liberalism (Hayek 1994: 266). We must remember that, at the end of the 1930s, there was a trend to rediscover and reshape liberalism: people like Walter Lippmann (Lippmann 1937) and Louis Rougier (Rougier 1938) were pushing hard to reform economic liberalism so that it could be better adapted to the modern conditions of social and political life. The “Walter Lippmann Conference” organized in 1938, and which Hayek attended, brought together many thinkers, and especially economists, in order to set up an agenda to establish new foundations (i.e. ethical, sociological, political and economical principles) for free market economies9. This conference gave birth, after the war, to The Mont-Pèlerin Society. This kind of liberalism was often labelled “social liberalism”, and what is sure is that people like Hayek were at that time trying to restructure liberalism to render it more attractive, first of all to intellectuals, but also to political leaders and to public opinion. Hayek thought that the European intelligentsia was already granting that socialism was, from the economic point of view, largely superior to capitalism, and he wanted to challenge this dominant intellectual inclination. The Road to Serfdom is a book which was written in that spirit.

Hayek’s new liberalism was a “Rule of Law” liberalism: he had to show that the social and political order coming out of a free market economy was, as far as liberty is concerned, largely superior to any kind of state-planned and state-directed economy. The first step was, of course, to show how market economy had to be embedded in a specific constitutional framework in order to work properly, i.e., to produce maximum wealth. Private property rights (as opposed to state ownership of all means of production) had to be accepted as the rule of the game. In view of the observed trend to give a mandate to the state to direct the economic process and regulate economic institutions, Hayek thought that we needed to orient the most basic law of them all, i.e. the constitutional law defining the state itself, in order to severely limit the spheres where state intervention was to be regarded as legitimate. He thought that we needed to specify precisely the legal modes and legislative mechanisms of those limited state interventions in the economy. It is not surprising, then, that Hayek took the chapter on the Rule of Law (chapter 6) to be the most central of his book The Road to Serfdom. I think that the most essential idea Hayek was fighting for is the standard by which this new economic liberalism would have to be defined: and this very simple idea is that no privileges whatsoever, and especially economic privileges, should ever

9 See Louis Rougier, ed., Compte rendu des séances du Colloque Walter Lippmann, Paris, Librairie de Médicis, 1939.

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be granted by the state to any group of people, be they entrepreneurs, capitalists, unions or special interest lobbies.

5. Concluding remarks

We saw what kind of popularizer Hayek was. We saw that, when he was addressing political matters or when he was analyzing intricacies and technical problems belonging to theoretical economics, Hayek’s stance was first of all the stance of an intellectual. Hayek always characterized himself as a scholar, and a scholar he remained, even in writing a “political book”. In his 1944 book, he was never defending personal interests or fighting for partisan ideology. Certainly, he made very clear what his personal values were and never hid that, in the battle between socialism and liberalism, he was on the side of those who thought that economic freedom was to be defended because it was the key to all other civil liberties. But Hayek fought for ideas, not for interests. This explains why the readers he wanted to reach first of all in The Road to Serfdom were the academics. Hayek was convinced that, in order to win the battle against the ‘statist philosophy of the economy’, he had to debate with the leftist intellectuals of his time. And this he did until his last book, The Fatal Conceit (1988), which was part of a plan to organize an international conference where defenders of both liberalism and socialism would confront their views; a meeting which never took place.

It is only as a sort of afterthought in 1976 that, observing that so many people had already read his book—as had being going on for years and is still going on now in many different countries and languages—he changed opinion. Hayek indeed came to consider that, without having readily wanted this to happen, he had written a book “for the general reader who wants a simple and nontechnical introduction to what [he believed was] still one of the most ominous questions which we have to solve” (Hayek 1976: xxiii). This book, needless to say, is one of the most popular books (apart from textbooks, of course) that any economist has ever published. We have nonetheless seen that this book was in continuity with the theoretical research Hayek had done in the years before the 1940s. The book also launched the research program Hayek was to expand afterwards in the 1960s and the 1970s.

But now, does this mean that there is no real difference between The Road to Serfdom as a “political book” and the rest of Hayek’s work? This is the last question I would like to address here. It is all a question of stance and commitment. Whereas in the mid 1930s Hayek was following up on the socialist calculation debate (Hayek ed., 1935, 1935a, 1935b, 1940) and tried to add a new “impracticability” argument to Mises’ “impossibility” argument in answer to those who, like Oskar Lange, Fred Taylor, Abba Lerner H.D. Dickinson and many others, were mending the socialist doctrine with a new approach called “market socialism”, Hayek tried a new approach in 1944: he started from economic and political liberty as an absolute value and showed how this most cherished value was in danger of disappearing under a regime where the state (through a Central Governing Board), and not the individuals themselves, decides economic matters. Hayek wanted to spell out the kind of political arrangements we need to enforce if spontaneous forces are to do their coordinating job and protect liberty as much as possible. Hayek writes explicitly that ‘laissez-faire’ does not at all correspond to what he has in mind when he upholds liberalism

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(or competitive economy), and he prefers by far to talk about the ‘Rule of Law’ if we are to characterize with more precise terms what is at stake here.10

Hayek is indeed propounding a new liberalism which has to be considered as a break with the tradition of nineteen century liberalism, as he already insisted in 193511. To put it more smoothly, Hayek declares in 1976 that, when he tried to follow up on the ideas already developed in The Road to Serfdom, he “essentially attempted to restate and make more coherent the doctrines of classical nineteenth-century liberalism” (Hayek 1976, p. xxii). But in 1944, he wrote that “(P)robably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez faire” (Hayek 1994: 21)12. He also asserted that “(I)t is important not to confuse the opposition against planning “with a dogmatic laissez faire attitude” (Hayek 1994: 41), planning being defined as central direction and organization of all economic activities according to some consciously constructed ‘blueprint’ of society. Hayek wants to make it unequivocal that “(t)he liberal argument is in favor of the best possible use of the forces of competition as a means of co-ordinating human efforts, not an argument for leaving things just as they are” (ibid.). And he readily adds that this can only be done if competition is working within “a carefully thought-out legal framework”, insisting that where competition cannot be made effective “we must resort to other methods of guiding economic activity” (ibid.). Elsewhere in the same book, Hayek rightly infers that adopting laissez-faire as the liberal principle would tend to prove that liberalism equals state inaction, which is plainly false (Hayek 1994: 89). From the liberal point of view, the question is no longer whether the state should or should not interfere in the economy but where, when and how it should do it. The answer given in 1944 is straightforward: as a matter of principle, the state should intervene only where an economic problem cannot be solved by using the competitive price mechanism; it should get in the way each and every time privileged groups of interests prevent the market economy from operating efficiently; it should get involved whenever a legislation is needed to formulate explicit rules of just conduct—for example to prevent the use of violence by unions of workers on picket lines (Hayek 1994: 89-90). In short, state action by legislation and regulation is legitimate if and only if it is intended to be general and permanent, if it does not cause any unnecessary suffering to anybody and does not grant any kind of privilege to anyone.

10 As it is usually understood, “laissez faire” is for Hayek a “misleading and vague term” (Hayek 1941: 219) and this is why he prefers to differentiate the liberal or market-based economy from planned economy by reference to the Rule of Law. 11 “But here again it is necessary to guard against misunderstanding. To say that partial planning of the kind we are alluding to is irrational is, however, not equivalent to saying that the only form of capitalism which can be rationnally advocated is that of complete laissez faire in the old sense. There is no reason to assume that the historically given legal institutions are necessarily the most ‘natural’ in any sense. The recognition of the principle of private property does not by any means necessarily imply that the particular delimitation of the contents of this right as determined by the existing laws are the most appropriate” (Hayek 1935a: 65-6). 12 But he immediately adds: “Yet, in a sense, this was necessary and unavoidable. Against the innumerable interests which could show that particular measures would confer immediate and obvious benefits on some, while the harm they caused was much more indirect and difficult to see, nothing short of some hard-and-fast rule would have been effective. And since a strong presumption in favor of industrial liberty had undoubtedly been established, the temptation to present it as a rule which knew no exceptions was too strong always to be resisted” (Hayek 1994: 21).

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Speaking about the relationship between the market mechanism and “what it gives to society”, Amartya Sen wrote recently (Sen 2004) that he was ”not persuaded that Hayek got the substantive connections entirely right.” For Sen, Hayek “was too captivated by the enabling effects of the market system on human freedoms and tended to downplay – though he never fully ignored – the lack of freedom for some that may result from a complete reliance on the market system, with its exclusions and imperfections, and social effects of big disparities in the ownership of assets.” Sen adds: “But it would be hard to deny Hayek’s immense contribution to our understanding of the importance of judging institutions by the criterion of freedom.” This is a conclusion I fully endorse.

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