This book was written in 1944 by Friedrich Hayek, an Austrian economist. It is addressed to: The socialists of all parties, and attempts to explain why socialism, particularly the real version with a centrally planned economy, is doomed to the failures we saw occur everywhere this version of socialism was implemented.
The notes I’ve taken here are my either quotes, or recaps, of the main points Hayek was making in each of the sections. I’m starting off with three chapters because I’m including the Intro, but I’ll go down to 2 chapters per post for the next iterations.
Remember this was written in 1943-44 during the height of WWII. He was writing in Britain.
Planning in this book generally refers to the socialist dream of a centrally directed economy; competition refers to free market competition.
Introduction
History never quite repeats itself, but we can learn from the past in order to avoid repeating a process.
While the US and England don’t resemble Hitler’s Germany, the same determination of the governments that once the nation be organized for defense in wartime, it is best to retain that same organization for the purpose of creation.
The tragedy is that it was men of good will in Germany who prepared the way for Nazism. Our chance to avert that depends on our facing the danger and being prepared to revise our most cherished ambitions, if they should prove to be a source of the danger.
The rise of fascism was not a reaction against the socialist trends of the day, but the necessary outcome of those tendencies. It is because so many people want these things that we are moving in this direction. It is not inevitable.
But we need to seriously seek to understand the forces which have created National Socialism. Saying we are ‘fighting for freedom to shape our ideals’ isn’t concrete enough. But liberal democracies are insecure and uncertain of their own ideals and the nature of the differences which separate them from the enemy. Many on both the left and right are convinced that Hitler’s National Socialism was pro-capitalism and opposed all forms of socialism. But we won’t ever be successful in dealing with the Germans until we understand the character and growth of the ideas which now govern them.
It would be misguided to think that the problem is some particular deficiency of the German people. This wrong idea blinds us to the real threat. The problem wasn’t ‘German’, but the socialist element that produced totalitarianism.
1 The Abandoned Road
We are threatened by evils we associated with times well past. Haven’t we worked towards freedom, justice, and prosperity? It’s hard for us to recognize that the leading ideas of our time might be wrong. It’s hard to accept that our pursuit of some of our most cherished goals have produced results far different from what we expected.
It’s easy to think of Germany, Italy, and Russia as ‘different’. But we all were part of the same common heritage. Totalitarian systems grew out of human will and changes in ideas. We have been steadily growing away from the very ideas that made western civilization what it is.
The basis of western civilization is individualism. Many people think of individualism as ego and selfishness. That isn’t the individualism that our civilization was founded on. It is respect for the individual man as being a man. Recognizing his own views and tastes as supreme in his own sphere, and that it is desirable that men should develop their own individual gifts.
The transformation from a rigid hierarchical society into one where men could attempt to shape their own lives was closely associated with commerce. European society was able to free the individual from the constraints of custom that bound him. The conscious realization that the spontaneous and uncontrolled efforts of individuals were capable of producing a complex order of economic activities could only come after this development had made some progress. It was the unchaining of individual energies that led to the incredible growth of science.
The prior paradigm was that the beliefs of the majority on what was right and proper could bar the individual innovator. But the new paradigm allowed anything to be tried, if someone could back it through personal risk. And more often than not, this innovation came from outside the officially entrusted institutions.
But at this point in time, we have come to accept the current standard as the norm. We should look at where we came from and gauge where we are by that standard, but as success has grown, so has ambition, and now we look at our society with a sense that not enough progress has been made.
The fundamental principle is that we should make as much use of the spontaneous forces of society as possible, and resort to as little coercion as possible. This principle has a variety of applications. But maybe nothing has hurt the liberal cause as much as the wooden insistence on converting principles to hard and fast rules, above all, laissez-faire. This is a natural enough, but can also be detrimental. Our progress depends on understanding the social forces and conditions favorable to progress. Our first requirement is to understand the principles.
Of course the crude rules of our initial economic policies in the early years of capitalism were only a beginning. As we advanced, we gained some ideas about how to master the forces we had to make use of. We had to learn how to handle our monetary system, and learn to prevent or control monopolies, and other measures that a government with enormous power for either good or evil could wield.
As our progress moved ahead, it came to be accepted as the standard, and we began to think that the evils which still remained were somehow unbearable and unnecessary. A growing impatience with the liberal order made people feel like the system was a problem rather than a solution. It was no longer a question of refining, but of scrapping and remaking the system. Thus we arrive at a reversal of the trends that brought us so much prosperity in the first place.
The question is no longer how we can best make use of the spontaneous forces found in a free society. Now we want to dispense with the market, which produced unforeseen results, and replace it with the collective and conscious direction of all social forces towards deliberately chosen goals.
2 The Great Utopia
Socialism was authoritarian from the beginning. It could only be put into practice by a dictatorial government. Freedom was to be sacrificed in order to achieve this level of planning.
Individualism stood at an irreconcilable conflict with socialism. Democracy attaches all possible value to man; socialism makes each man a mere agent. They share a common word- equality; but while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.
In order to get rid of these suspicions, socialism tied itself to the common human desire for freedom by changing its meaning. Typically, freedom meant freedom from coercion. Socialism promised freedom from necessity. Before man could be free, the “despotism of physical want” had to be broken.
But this is just another name for power. This new definition of freedom was another name for redistribution of wealth. Socialism was rebranded as the natural replacement of liberalism, so it was difficult for those that accepted it to recognize that it was actually the opposite of liberty.
The road to freedom was the road to servitude.
It should have been recognized that nearly all the Fascist leaders were originally Marxists. Stalinism itself was worse than fascism: more ruthless, barbarous, unjust, immoral, anti-democratic, and unredeemed by any scruple… but also… Stalinism IS socialism.
Of course, the fascists and communists clashed with each other, but it was because they were in competition for the same people, and reserved for each other the hatred of the heretic. Hitler claimed all kinds of mantles: protector of Christianity and democracy, but he never claimed to represent true liberalism. He hated liberalism.
Democratic socialism is not only unachievable, moving towards it produces the opposite of what its adherents claim they want.