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Thoughts on ‘The Road to Serfdom’: Chapter 3, “Individualism and Collectivism”

In Arts & Letters, Austrian Economics, Book Reviews, Books, Economics, History, Humane Economy, Humanities, Liberalism, Libertarianism, Philosophy, Politics, Western Civilization, Western Philosophy on September 16, 2013 at 7:45 am

Slade Mendenhall

Slade Mendenhall is an M.Sc. candidate in Comparative Politics at the London School of Economics, with specializations in conflict and Middle Eastern affairs. He holds degrees in Economics and Mass Media Arts from the University of Georgia and writes for The Objective Standard and themendenhall.com, where he is also editor.

This analysis is the fourth installment in a series of chapter analyses of Friedrich Hayek’s The Road to Serfdom. The previous analysis of Hayek’s introduction, Chapter I, and Chapter II can be found here, here, and here, respectively.

Hayek’s third chapter, “Individualism and Collectivism,” proves to be what our earlier analyses had anticipated: good on recognizing the economic benefits of liberalism, skilled at pointing out the flawed concepts and illogical thinking that facilitate and perpetuate socialism, and effective in arguing for certain basic fundamentals such as the necessity of an effective legal system, but slightly inadequate in its offering of better concepts, lacking in its defense of capitalism, and guilty of a borderline intrinsicist endorsement of ‘competition’, without treating that endorsement as premised upon the benefit rendered to man as an individual or, for that matter, any other more fundamental value.

The chapter begins with a valuable point as to the extent to which socialism has succeeded by distorting and disguising its own nature, with each socialist faction clinging to its chosen group or alleged beneficiary—a race, party, or class—and proclaiming that by virtue of its superficial differences in approach it is somehow different from all other varieties of statism. It thus exaggerates concrete matters of application, treating them as differences in fundamentals. Hayek repudiates this approach, pointing out that, regardless of the group they claim to represent, “the methods which [the socialists] shall have to employ are the same as those which could ensure an equalitarian distribution” (25). He goes on to acknowledge that “nearly all the points which are disputed between socialists and liberals concern the methods common to all forms of collectivism and not the particular ends for which socialists want to use them” (24), establishing that the basic objection of liberals to socialist policies apply to all socialist policies, not those of a certain type, as the conflict is fundamentally between individualism and collectivism.

Hayek’s shift of focus from political ideologies to the more fundamental dichotomy in all political theory is valid and much-needed in a world that so rarely thinks in terms of fundamentals anymore—both at the time of writing and today. What is lacking in this effort, however, is an explicit definition of ‘individualism’ and ‘collectivism.’ He implies, though does not expound upon, the idea that the collectivism is best thought of as a set of “methods which can be used for a great variety of ends,” seeing socialism “as a species of that genus” (25). While he is correct in viewing socialism as a subtype within a broader category of collectivist politics, collectivism itself is not fundamentally definable as a set of methods, but as an ideological framework.

The question that divides the two political philosophies of individualism and collectivism is one of standards of value. It asks, ‘Which is the primary unit for consideration in judging what is politically ‘good’?” Hayek’s failure to define the two concepts and their difference misses the opportunity to dispel the socialist misrepresentation of that dichotomy. Socialists, rather than seeing the question as one of standards of value and units for consideration, mischaracterize human affairs as a perpetual conflict between the individual and collective, accepting conflict as a necessary ingredient in social relationships, and, therefore, self-interest as fundamentally anti-social. They therefore view the question of individualism and collectivism as one of loyalty: “Individuals or the collective: whose side are you on?” Many defenders of socialism, having accepted this false notion of man’s life as perpetually in conflict, thus accept the morality of altruism that preaches that someone’s sacrifice is necessary and good for society to function, and accordingly defer to socialism for fear of being an enemy of an alleged ‘greater good.’

Other flaws punctuate Hayek’s challenge of socialism. The first is his failure to challenge socialists’ ends as goods to strive for. He describes their ends as a desire for “social justice, greater equality, and security” (24), but then sets upon his argument as to the impossibility of separating socialists’ means from the system itself, implicitly suggesting by his omission that their ends are indeed desirable. He writes, “There are many people who call themselves socialists although they care only about [the ideals of social justice, greater equality, and security], who fervently believe in those ultimate aims of socialism but neither care nor understand how they can be achieved, and who are merely certain that they must be achieved, whatever the cost” (24). The error in their reasoning that Hayek seems to imply lies in socialists’ disregard for the means by which they hope to achieve their ends. He does not, however, challenge the ends as such.

Hayek fails to challenge the concepts offered by socialists or to insist that they properly define their terms—what they mean by the bromides they use: social justice—by what standard of justice? equality—of rights or of results? security—from force, or from the facts of reality? Hayek leaves these questions unasked, thus leaving the socialists’ values uncontested and the socialists themselves with more apparent justification than they could ever deserve.

In tandem with this omission, he describes it as “unfair to use the term socialism to describe its methods rather than its aims, to use for a particular method a term which for many people stands for an ultimate ideal” (25). Though he does not elaborate upon this, it can easily be interpreted as a suggestion that some more peaceable socialists’ ends are well-intended—at least “for many people,” but that it is their means which are flawed. Despite his earlier insistence upon the essential connection between different apparent varieties of socialist, he apparently further accommodates the socialists’ ultimate values without challenge.

Hayek’s approach to the subject of planning offers some valuable insights that go to the heart of modern mainstream misunderstandings of liberal thought. “’Planning’”, he writes,

“owes its popularity largely to the fact that everybody desires, of course, that we should handle our common problems as rationally as possible, and that in so doing we should use as much foresight as we can command. In this sense everybody who is not a complete fatalist is a planner, every political act is (or ought to be) an act of planning, and there can be differences only between good and bad, between wise and foresighted and foolish and short-sighted planning” (26).

This distinction—that liberal policies advising against intervention are no less a deliberate form of planning than interventionism and no less based in a conscientious logic—is an important one in today’s world, as libertarian and capitalist ideas are moving more into the mainstream, being discussed more frequently in publications throughout the Western world, but still remain largely misunderstood by those who see liberals’ insistence upon letting the market work as some mysticist assumption ungrounded in empirical observation. Hayek highlights that they are indeed based in a strategic logic, but one that maintains a belief in the ability of markets to provide man’s needs.

From there, however, Hayek proceeds down a shakier path, again criticizing those who advocate laissez-faire capitalism and defining liberalism along strictly economic lines, making no reference to the fundamental values of liberals and showing his own liberalism as based primarily on a pragmatic approach. He writes,

“It is important not to confuse opposition against this kind of planning with a dogmatic laissez-faire attitude. The liberal argument is in favor of making 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. It is based on the conviction that where effective competition can be created, it is a better way of guiding individual efforts than any other” (27).

He further argues that “where it is impossible to create the conditions necessary to make competition effective, we must resort to other methods of guiding economic activity” (27), supporting our understanding of his earlier defense of antitrust regulations.  His warning of the dangers of a mixed economy and the destructive effects of trying to combine liberalism and socialism is valid. However, he doesn’t clearly or adequately address the fact that the destructiveness of a mixed economy stems from its statist, coercive elements, and that while the leaders of private industry may use the coercive power of government to enrich themselves in such an economy, it is ultimately the force of government and the political principles it follows that allow the system to exist, enabling such injustices.

Instead, he poorly allocates the ultimate responsibility for a mixed economy, writing that

“the universal struggle against competition promises to produce in the first instance something in many respects even worse, a state of affairs which can satisfy neither planners nor liberals: a sort of syndicalist or ‘corporative’ organisation of industry, in which competition is more or less suppressed but planning is left in the hands of the independent monopolies of the separate industries… By destroying competition in industry after industry, this policy puts the consumer at the mercy of the joint monopolist action of capitalists and workers in the best organized industries” (30).

True though this description may be in some respects, its emphasis on private businessmen as the primary drivers of the process evades the fact of which side makes the whole collusion possible. Private businessmen of a certain kind—the kind that thrives not on productivity but on political pull—can and do act as the accelerants and perpetuators of a mixed economy. They cannot, however, bring it into being. The responsibility for that lies with a country’s political officials, whether in the legislative, executive, or judicial branch. It is through an abandonment of the legal principles of capitalism that businessmen and legislators have either the occasion or the cause to collude.

Hayek goes on to make several statements that will likely surprise strict adherents of liberalism, writing “Nor is the preservation of competition incompatible with an extensive system of social services—so long as the organisation of these services is not designed in such a way as to make competition ineffective over wide fields” (28), and endorsing the idea of naturally occurring market failures. “The functioning of competition,” he writes, “not only requires adequate organisation of certain institutions like money, markets, and channels of information—some of which can never be adequately provided by private enterprise“ (28), suggesting that such instances must be met by governments practicing “the very necessary planning which is required to make competition as effective and beneficial as possible” (31).

Ironically in the context of later debates between classical liberals and mainstream political culture, Hayek argues that roads offer an example of a good that cannot be provided by market forces. Thus, every liberal who has endorsed the potential for market provision of transportation services only to hear political moderates suddenly become crusaders for the transportation sector, passionately demanding “What about the roads?!” has Hayek to credit for endorsing this line of thinking.

Hayek goes on to even endorse broader regulations, with the sole cited criterion for judgment being whether the regulation distorts the market by treating producers differently, or whether it equally infringes upon all:

“Any attempt to control prices or quantities of particular commodities deprives competition of its power of bringing about an effective coordination of individual efforts, because price changes then cease to register all the relevant changes in circumstances and no longer provide a reliable guide for the individual’s actions. This is not necessarily true, however, of measures merely restricting the allowed methods of production, so long as these restrictions affect all potential producers equally and are not used as an indirect way of controlling prices and quantities” (27).

True, policies that apply equally across the board at least have the benefit of not being narrowly discriminatory in their oppression, but they also have the distinction of violating the rights of all producers. If an intrinsicist notion of “competition” and not rights, however, is the standard to be maintained, it is not surprising that Hayek lands at this conclusion.

If it can then be said, following the logic of Hayek, that some regulations are necessary, what is the standard for determining the conditions under which it is proper? He gives us an indication:

“Economic liberalism is opposed, however, to competition being supplanted by inferior methods of co-ordinating individual efforts. And it regards competition as superior not only because it is in most circumstances the most efficient method known, but even more because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority” (27) [emphasis mine].

In this passage, Hayek reveals his defense of competition (and, thus, of economic freedom) as based on a belief in its superior abilities in coordination, its efficiency, and, almost tautologically, the fact that it does not involve coercive action. The last condition is an act of circular reasoning, as Hayek states, to word it differently, that a system not guided by coercive action is superior because it is not guided by coercive action, without referencing any particular standard of the good that would make such an argument functional. His other expressed standards, however, tell us something of his political values.

Elsewhere, he writes of the need for regulations “[t]o prohibit the use of certain poisonous substances, or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements,” arguing that such use of preventive law “is fully compatible with the preservation of competition.”  One is then brought to wonder: if a regulation or any other use of preventive law can be said to promote competition, is there some other standard that it must meet, some other moral test it must pass to merit enforcement? Hayek would tell us there is not, writing that “The only question here is whether in the particular instance the advantages gained are greater than the social costs which they impose” (28) [emphasis mine].

We can thus see Hayek’s defense of liberalism as a largely pragmatic, utilitarian one and not one based soundly or primarily in a moral argument. In line with this, he pursues what can be interpreted as an intrinsicist approach to valuing “competition” and policies that promote it. Certainly, competition is a value agreed upon by all who value freedom in economics, but the failure to tie it back to what competition offers individuals and to root the defense of it in the political freedom and material well being it provides gives us only half a defense.

Competition is, after all, not a value in and of itself, but a process by which men can pursue their own self-interest, hindered only by their own limitations. In the words of Ayn Rand, “Competition is a by-product of productive work, not its goal.” Elsewhere, she elaborates

“The concept of free competition enforced by law is a grotesque contradiction in terms. It means: forcing people to be free at the point of a gun. It means: protecting people’s freedom by the arbitrary rule of unanswerable bureaucratic edicts… There is no way to legislate competition; there are no standards by which one could define who should compete with whom, how many competitors should exist in any given field, what should be their relative strength or their so-called “relevant markets,” what prices they should charge, what methods of competition are “fair” or “unfair.” None of these can be answered, because these precisely are the questions that can be answered only by the mechanism of a free market.”

Alan Greenspan, writing in his early years, makes a similar observation on the subject that may point out from where Hayek is deriving this emphasis on “competition”:

“Competition” is an active, not a passive, noun. It applies to the entire sphere of economic activity, not merely to production, but also to trade; it implies the necessity of taking action to affect the conditions of the market in one’s own favor.

“The error of the nineteenth-century observers was that they restricted a wide abstraction—competition—to a narrow set of particulars, to the “passive” competition projected by their own interpretation of classical economics. As a result, they concluded that the alleged “failure” of this fictitious “passive competition” negated the entire theoretical structure of classical economics, including the demonstration of the fact that laissez-faire is the most efficient and productive of all possible economic systems. They concluded that a free market, by its nature, leads to its own destruction—and they came to the grotesque contradiction of attempting to preserve the freedom of the market by government controls, i.e., to preserve the benefits of laissez-faire by abrogating it.” (“Antitrust”)

Whether this is in fact the context of Hayek’s focus on “competition” as the ultimate goal to be pursued is uncertain, but it reveals both a misplaced focus and, yet again, the propensity to look at matters of political ideology through the lens of economic reasoning, failing to adopt the necessary concepts to make an effective, complete defense of capitalism.

Along those same lines, even in those instances where Hayek seems to be on the right track, there is a conspicuous absence of concepts that one would expect from a defender of liberalism. For instance, he offers a valid argument on the need for legal structure in functioning capitalist systems, writing that competition “depends above all on the existence of an appropriate legal system, a legal system designed both to preserve competition and to make it operate as beneficially as possible” (28).  As true as this is, what is striking is that his assertion of the need for appropriate laws rests entirely upon the question of competition and effective operation, and not on any more fundamental principles or political values of a higher order.

Such navigating around the task of making principled arguments appears to be a recurring theme in The Road to Serfdom thus far. It is intriguing and disappointing that after an introduction and three chapters of Hayek, dealing with questions and issues as fundamental as the intervention of government in economics, individualism versus collectivism, and the dangers of socialism to a society, we have not once read the word “rights” in any of Hayek’s arguments. It is difficult to fathom how one could effectively address subjects that deal with such fundamental questions without even mentioning what are and are not man’s rights.

That Hayek has not even mentioned rights once suggests that the notion is so far outside of his intellectual framework as to not have occurred to him (doubtful), or that he has some aversion to a rights-based argument to freedom, or does not have a certain view himself as to what man’s rights are. Indeed, were he to be consistent as a skeptic, Hayek would be unable to maintain a consistent and objective notion of man’s rights, and would thus have to either advocate rights as floating abstractions not grounded in man’s nature, or resort to arguing that rights are debatable and subjective.

Hayek’s third chapter proves to be roughly what we expected: stronger and less contradictory than chapter one, but not as successful as chapter two. He occasionally makes valid points that we can translate into the present day. “The dispute about socialism,” he writes, in a passage that could be applied as truly to the statist elements of both parties in the United States in 2013 as to England in the 1940s, “has thus become largely a dispute about means and not about ends” (24). However, the pragmatic, utilitarian approach Hayek takes to counter it sounds much more like the moderate defenders of capitalism in the US today, Republicans who argue for “free markets” because they “work” without the slightest mention of their ethical superiority, than like the paragon of liberal intellectual thought that Hayek is portrayed to be. Whatever Hayek’s abilities as an economist supporting liberal economic policies—and they are remarkable—his force as a political theorist and defender of liberalism is lacking. In tandem with the author’s reputation as an economist, this deficiency threatens to encourage those who seek to defend liberty to invest too heavily in the wrong kind of argument, potentially crowding out more worthwhile ones. Just as in monetary economics “the bad money chases out the good”, so in political philosophy a chiseled, fool’s gold defense of freedom stands the risk of jeopardizing that which it seeks to uphold.

Thoughts on ‘The Road to Serfdom’: Chapter 1, “The Abandoned Road

In Arts & Letters, Austrian Economics, Book Reviews, Books, Britain, Economics, Epistemology, Essays, Ethics, Historicism, History, Humane Economy, Humanities, Liberalism, Libertarianism, Literary Theory & Criticism, Literature, Modernism, Philosophy, Politics, Pragmatism, Western Civilization, Western Philosophy on September 11, 2013 at 7:45 am

Slade Mendenhall

Slade Mendenhall is an M.Sc. candidate in Comparative Politics at the London School of Economics, with specializations in conflict and Middle Eastern affairs. He holds degrees in Economics and Mass Media Arts from the University of Georgia and writes for The Objective Standard and themendenhall.com, where he is also editor.

This analysis is the second installment in a series of chapter analyses of Friedrich Hayek’s The Road to Serfdom. The previous analysis of Hayek’s introduction can be found here.

If Hayek’s introduction gave us a brief summary of the ideas and practices he is setting out to oppose and contextualized the progression toward a socialist political culture in the last half century of Europe’s history, his first chapter, “The Abandoned Road”, firmly roots his grievances in the present and the problems facing England at the time of his writing and seeks to explain how England (and the West more generally) arrived there. He describes the intellectual evasions, distortions, and faulted epistemology—often consisting of poorly defined key concepts —that led to and are, in his time, perpetuating the state of affairs he observes. He then proceeds to address the subject of liberalism and how socialists who misconceive of their own system do so at least as much with its antithesis. In the process, Hayek makes many excellent observations, but also succumbs to several dangerous philosophical errors and unsubstantiated claims against laissez-faire capitalism that tarnish what might otherwise be an outstanding defense against government controls.

Hayek begins the chapter with one of the most argumentatively powerful, poignant approaches that one can take in opposing socialist ideas: illustrating to those who support more moderate, tempered versions of statist controls that though they may differ in degree from those statists they oppose, the philosophical fundamentals they advocate are the same. “We all are, or at least were until recently, certain of one thing,” he writes,

“that the leading ideas which during the last generation have become common to most people of goodwill and have determined the major changes in our social life cannot have been wrong. We are ready to accept almost any explanation of the present crisis of our civilisation except one:  that the present state of the world may be the result of genuine error on our own part, and that the pursuit of some of our most cherished ideals have apparently produced utterly different results from those which we expected” (8).

Hayek’s point is well made and much needed at a time when such widespread, utter contradictions were even more severe than they are today. Writing to Britons in the 1940s, but with as much truth to offer Americans who stumbled over the same contradictions in the 1960s and 1970s, as the platitude “we are all socialists now” manifested on Nixon’s lips as “we are all Keynesians now” (and with less fundamental difference between them than Keynesians would have you believe), he asks us to recognize that “the tendencies which have culminated in the creation of the totalitarian systems were not confined to the countries which have succumbed to them” (8-9). Nor, for that matter, are they confined to those times, and Hayek’s message to this effect—the importance of recognizing the same fundamental ideas across contexts—is as much needed today as it was then.

He goes on to recognize that the conflict between the Axis and Allied powers in World War II is fundamentally a conflict of ideas: “The external conflict is a result of a transformation of European thought in which others have moved so much faster as to bring them into irreconcilable conflict with our ideals, but which has not left us unaffected.” He is quick to point out, though, that “the history of these countries in the years before the rise of the totalitarian system showed few features with which we are not familiar” (9).

Such an appreciation for the motive power of ideas in human conflict was not so unique in Hayek’s time. In fact, the Allied leaders superlatively acknowledged the enemy they faced as “fascism” and condemned it explicitly (though the economic and social policies of FDR, along with his earlier overt flirtations with such ideas, may have made the condemnation somewhat ironic). If Hayek has a lesson to teach to this effect, it is most needed in today’s world, when the significance of philosophy is so frequently cast aside by the influences of multiculturalist nihilism and the failure, even in academia, to appreciate the role of broadly held cultural ideas in deciding man’s fate. At a time when the mention of a “clash of civilizations” invites accusations of oppressive Western chauvinism, Hayek’s acknowledgement that conflicting fundamental ideas may lead to actual conflict is a welcome reminder.

Much of the chapter appropriately looks to fundamental ideology as the cause for the rise of Nazism, seeing the rejection of individualism in favor of collectivism as a necessary prerequisite to the “National-Socialist revolution” and a “decisive step in the destruction of that civilisation which modern man had built up from the age of the Renaissance.” The spirit of this argument is undoubtedly sound. However, the method by which he proceeds to argue it leaves much to be desired. Hayek proceeds down a path of questionable historical interpretations, a half-cocked swipe at moral philosophy (that, as we shall see, is flawed but not unfamiliar to readers of this site), and ultimately an incomplete defense of the liberal policies he hopes to defend—showing the consequences of that brief glimpse of skepticism we witnessed in the introduction.

In his historical contextualization of the trends he observes, Hayek writes,

“How sharp a break not only with the recent past but with the whole evolution of Western civilisation the modern trend towards socialism means, becomes clear if we consider it not merely against the background of the nineteenth century, but in a longer historical perspective. We are rapidly abandoning not the views merely of Cobden and Bright, of Adam Smith and Hume, or even of Locke and Milton… Not merely the nineteenth- and eighteenth-century liberalism, but the basic individualism inherited by us from Erasmus and Montaigne, from Cicero and Tacitus, Pericles and Thucydides is progressively relinquished” (10).

Hayek’s invocation of these great names in the history of liberal thought is, in most instances, not misplaced. It is true that all emerged from Western civilization and that to varying extents they all fit well into the liberal, individualist tradition he means to illustrate. One would be wise to regard the inclusion of Hume and Montaigne, paragons of skepticism, as only conditional points on such a list, though Hayek’s own skepticism and that of many libertarians in his tradition would certainly allow them.

More broadly, however, it must be said that the individuals mentioned, no matter how great their contributions to political and social thought, were not often the rule in their place and time, but the exception. One can admire the works of Pericles, but should bear in mind the fickle reception he received among the Athenians. Likewise, Cicero may deserve praise above any in his time, but for those virtues we might praise he was slaughtered without trial by a dictator who faced no consequences.

Thus, as admirable as Hayek’s examples may be, to suggest that they were the norm throughout most of Western civilization is unsubstantiated. They may have embodied those qualities that most distinguished Western civilization and have been most responsible for its progress, but it was a progress often achieved by much-abused minorities. The Renaissance, Enlightenment, and nineteenth century were the high-points of individualism and Western ideals, and Hayek is right in singling them out. However, he also runs the risk of obscuring the philosophical roots of National Socialism, itself the product of contrary trends in Western thought, by engaging in careless generalization from those high-points and distinguished individuals to Western history in general.

Departing from this somewhat problematic historical interpretation, Hayek moves through a favorable discussion of the benefits of economic and political freedom on scientific innovation. His recognition and argument that “[w]herever the barriers to the free exercise of human ingenuity were removed man became rapidly able to satisfy ever-widening ranges of desire” is incontestable (12). He also anticipates the common objections by socialist apologists today who characterize the Industrial Revolution as a period of oppression by citing the difficult living conditions of the urban poor. He rightly rejects this by contextualizing the period in the experiences and expectations of those who lived through it, writing that

“[w]e cannot do justice to this astonishing growth if we measure it by our present standards, which themselves result from this growth and now make many defects obvious. To appreciate what it meant to those who took part in it we must measure it by the hopes and wishes men held when it began… that by the beginning of the twentieth century the working man in the Western world had reached a degree of material comfort, security, and personal independence which a hundred years before had seemed scarcely possible” (12-13).

What proceeds from there is where Hayek seems on unsteady footing, as he briefly undertakes the task of trying to explain what ideas diverted man from the individualist course set from the Renaissance to the nineteenth century. Inexplicably, Hayek credits an excess of ambition as responsible for the turn toward socialism. He writes,

“What in the future will probably appear the most significant and far-reaching effect of this success is the new sense of power over their own fate, the belief in the unbounded possibilities of improving their own lot, which the success already achieved created among men. With success grew ambition—and man had every right to be ambitious” (13).

He returns to the idea again later, writing that,

“Because of the growing impatience with the slow advance of liberal policy, the just irritation with those who used liberal phraseology in defence of anti-social privileges, and the boundless ambition seemingly justified by the material improvements already achieved, it came to pass that toward the turn of the century the belief in the basic tenets of liberalism was more and more relinquished” (14-15).

It is here that Hayek’s inadequacy in analyzing philosophical ideas, and perhaps an economic bias toward looking at matters purely as a function of supply and demand, begins to show. The notion that an inadequate or insufficiently rapid provision of living standards by capitalism is to blame for the introduction and spread of socialism is baseless, as it not only commits the philosophical error of attributing a total change in fundamental beliefs to external conditions, but also ignores the fact that the introduction of socialist policies preceded the slowdown in quality of living improvements in the Western world—and, furthermore, that the slowdown still wasn’t all that slow, as anyone who looks at world history from 1870 to 1928 will readily observe.

Thus, Hayek’s notion that “ambition” is somehow to blame is irrational. If we accept the notion that capitalism was responsible for man’s improved quality of living, then the only function that ambition should serve in this context is to drive men back toward capitalism and its fundamental values—not toward socialism. To the contrary, it is not an excess of ambition that drove men away from capitalism, but the fact that the philosophical principles that underlie and empower capitalism were not consistently established in the minds of its practitioners in the first place. That is: those who lived under capitalism had not explicitly embraced reason as man’s means of acquiring knowledge, nor rational egoism as his proper ethical system, and thus lacked the fundamentals on which individualism rests. Thus, ultimately, the individualism that Hayek admires was present in the West, but not firmly rooted enough to survive the philosophical revival of Plato in the forms of Kant and Hegel. Undercut by their philosophies, in the face of Marx and Engels the West was a pushover.

Hayek’s invocation of excess ambition as an explanation for socialism shows that though he understands the role of political ideology in man’s fate, his ability to explain how that ideology stems from deeper levels of philosophy is severely lacking. Unfortunately, he does not allow this lack of expertise to stop him from making such baseless speculations as to the roots of socialism being in man’s ambition, nor from making a similarly arbitrary and more dangerous conjecture: that the essential quality that animated the Renaissance and Western civilization’s embrace of individual man was “tolerance.”

“Tolerance,” he writes, “is, perhaps, the only word which still preserves the full meaning of the principle which during the whole of this period was in the ascendant and which only in recent times has again been in decline, to disappear completely with the rise of the totalitarian state” (3). Hayek offers no further explanation to support this statement or the implication that tolerance was the animating virtue of these times, or at the very least played some crucial role in it. Nor does he illustrate the point with citations or examples. The claim stands alone.

We are thus left to speculate as to his actual beliefs on this point. However, a look at a somewhat younger contemporary libertarian economist who dabbled in political writings such as this and who shares certain philosophical fundamentals—namely a skepticist epistemology—may shed some light on the claim. Milton Friedman similarly cited ‘tolerance’ and, more specific to Friedman’s case, “tolerance based on humility” as the fundamental basis of his libertarianism. That is: the rejection of statism based not on the rights of individuals but based on the fact that no one can rightly initiate force against another since the initiator has no basis by which to know whether the cause in whose name he would initiate that force is right or wrong. Put simply, it establishes a social system in which peaceable relations between men depend upon the impossibility of establishing objective principles. In which ignorance, not knowledge, is man’s saving grace. In which moral certainty is perceived to be the root of all tyranny.

(I will not go further into Friedman’s confused moral philosophy here, though it is encouraged that the reader reference my article “The Failures of Milton Friedman” for a fuller explanation his views and the dangers they entail.)

Whether Hayek’s implication in citing “tolerance” as the great virtue lost by the rise of collectivism is in line with Milton Friedman’s connections of “tolerance” and libertarianism is unknown, but the fact that the two men share a skepticist epistemology and both ultimately land at the same word to describe the virtue that they see to be animating their ideals cannot be ignored and provides a possible explanation for Hayek’s unsupported statement.

Where skepticist epistemology and haphazard forays into moral philosophy are found, an incomplete defense of freedom usually follows. So it is here with Hayek, who shows us precisely his conception of freedom and how it should be fought for, writing, “There is nothing in the basic principles of liberalism to make it a stationary creed, there are no hard and fast rules fixed once and for all. The fundamental principle that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion, is capable of an infinite variety of applications” (13).

I will not engage with this statement directly, as it has been soundly argued elsewhere in other essays from this publication such as “The Philosophy of Capitalism” and Brian Underwood’s “Political Capitalism”, as well as in Ayn Rand’s essays “Man’s Rights”, “The Objectivist Ethics”, and “The Nature of Government.” I will observe simply that for a man accepted by many to be symbolic of twentieth century liberalism to take such a pragmatic, unprincipled approach to the defense of freedom stands as much as a symbol of the unsteadiness and lack of a moral basis in that movement as it does a condemnation of the man himself. What’s more, it shows that no sound defense of liberty can be based on a skepticist epistemology. A defense of man begins with an admiration for man and his nature as a rational, efficacious being. Whoever hopes to undertake a task so daunting and so crucial as a defense of man’s rights against oppression cannot enter the fray with a puttering “Who knows?!” as his battle cry.

It is the inevitable fate of such pragmatists that they should ultimately abandon a strict conception of liberty and that they should shrink principles down to the level of momentarily expedient guidelines to be cast aside at the first sign of opposition. We must be immensely grateful that the Founding Fathers of the United States had the moral basis to recognize and firmly assert the rights of “life, liberty, and the pursuit of happiness”, yoking future statesmen to these principles rather than settling for such a shrugging recommendation that they “make as much use as possible of the spontaneous forces of society.” We must be proud that Jefferson swore “an oath upon the altar of God eternal hostility against every form of tyranny over the mind of man”, and not merely an oath to “resort as little as possible to coercion.”

The distortions, sadly, do not end there. Hayek confounds our expectations further by seeking to balance his critique of socialism with a contrary charge against advocates of full individual rights, writing 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” [emphasis mine] (13).

Hayek’s ambiguous accusation against advocates of laissez-faire, that they are somehow partly responsible for the rise of socialist policies, apparently rests on the capitalists having viewed the principle as a “hard and fast… rule which knew no exceptions” (13).  He goes on to explain that the downfall of liberalism is explainable by reference to the liberal’s strict adherence to the laissez-faire principle, finding it “inevitable that, once their position was penetrated at some points, it should soon collapse as a whole” (13).

At this point, Hayek quickly reveals several key implications: that advocates of laissez-faire are partly responsible for the rise of socialism, that laissez-faire is a flawed system, and that its legitimacy has indeed “collapse[d]” through being disproven. He continues, “No sensible person should have doubted that the crude rules in which the principles of economic policy of the nineteenth century were expressed were only a beginning, that we had yet much to learn, and that there were still immense possibilities of advancement on the lines on which we had moved” (14).

To be clear: Hayek is not referring to changes in application or translation of the existing principles, but a shift in principles as such. ‘What’, one must ask, ‘could have fundamentally changed so drastically in the period in question, to make the basic principles of economic freedom no longer relevant or applicable in one period as they had been in the previous one?’ According to Hayek, it was the inevitable result of having

“gained increasing intellectual mastery of the forces of which we had to make use. There were many obvious tasks, such as our handling of the monetary system, and the prevention or control of monopoly, and an even greater number of less obvious but hardly less important tasks to be undertaken in other fields, where there could be no doubt that the governments possessed enormous powers for good and evil;” (14)

Thus, Hayek posits that our “increasing intellectual mastery” (though I can think of a century of economic instability primarily brought by government controls that would refute this alleged “mastery”) is to credit for government intervention in the economy. He implies that the belief that governments could regulate the economy by force somehow translates to the presumption that they should do so—a significant leap that Hayek does not and cannot, without reference to philosophy, explain. Not only does this misconceive of the problem; it carelessly implies that those statesmen of earlier times did not intervene in the economy because they could not conceive of how to do so. To the contrary: earlier liberal thinkers did not plead ignorance in the face of proposed interventionism—they opposed it on principle, and suggesting otherwise is a discredit to their defenses of liberty.

Hayek’s passing statements apparently endorsing the “control of monopoly” and his suggestion that “the governments possessed enormous powers for good and evil”—that is, that good could be achieved by force just as surely as evil—only add layers to the disappointing picture established thus far. He goes on to make an unconvincing argument that the slow pace of economic progress under liberalism was to blame for people having turned away from it—a confounding claim to make about a century that witnessed the most rapid and dramatic rise in quality of life in the history of humankind, and one that even Marx himself would likely have disputed as unsubstantiated.

Finally, he ends the chapter on an agreeable note with a brief description of how the geographical flow of ideas—from Britain and the US east to continental Europe—reversed at this period in history and the prevailing current turned westward, exporting German socialist ideas to the Atlantic. He astutely summarizes how the ideas of Marx, Hegel, List, Schmoller, Sombart, and Mannheim overtook the intellectual tone set by the English after 1870. He ends on the essential point that it was ultimately the lack of confidence in their own convictions by Western thinkers that made this shift possible. In this effort—narrating the history of philosophical and cultural trade balances—Hayek is excellent and displays the power of which he is capable when he remains in his purview, capitalizing on his unique perspective.

After a promising introduction, the first chapter of Hayek’s book has proven shaky at best. The flaws are numerous and fatal: a questionable interpretation of the histories of both liberalism’s origins and socialism’s ascendance, a dangerously inadequate grasp of the role of moral philosophy in the histories he details, a desire to blame liberalism for its own destruction with insufficient substantiation, a skepticist rejection of principles that leads to a pragmatist’s approach to policy, and, finally, a rejection of laissez-faire capitalism.

To his credit, Hayek is overall favorable on matters of economic history, arguing effectively for the role of capitalism in promoting scientific progress and advances in standards of living. However, his suggestion that advancement in the nineteenth and early twentieth centuries was slow, and that this slowness of progress is to blame for the West’s acceptance of socialism, is largely without a supporting argument, is contrary to the unrivaled history of economic progress that we know to have characterized that period, and, incidentally, indulges a determinist philosophy that we saw him as likely to avoid in the introduction—a serious point of inconsistency.

Overall, Hayek’s first chapter is a dramatic step down from the introduction and a disappointment considering the reputation of the book. It is, in its own way, an abandonment of the road, if in a slightly different direction than those whom Hayek criticizes. Though future chapters may redeem the work to some extent, the fact that so much ground is lost in the first few pages is a severe blow, but one that is in keeping with the suspicions which we noted in assessing the introduction and which we warned to be on the lookout for. It illustrates well the consequences of even small cracks in one’s intellectual foundation and confirms the value of critically applying careful philosophical detective work in reading works such as this, no matter their reputation.

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