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Hayek - Individualism and Collectivism - Part 2

Monrovians - Unite!

We saw in Part 1 that the mechanism of socialism is primarily central control of all economic activity (and what activity may not be described in economic terms?).  It is the mechanism of socialism, not the desire for social justice, that those who believe in the inherent freedom of the individual object.  The central planner may plan well, plan poorly, or plan corruptly.

But what type of planning is meant by socialism?  The planning necessary to accomplish the distributive ideal, of course.  That is, whatever planning is necessary to distribute goods and services in a way that those in power believe is "just." 

Hayek isolates another reason that Socialism and Central Planning have an initial appeal.

Planning 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.

So, Hayek notes, virtually everyone is in favor of planning.  What is the difference then, between those who believe in the general economic freedom of the individual and the socialist?

The question is whether for this purpose it is better that the holder of coercive power [government] should confine himself in general to creating conditions under which the knowledge and initiative of individuals are given the best scope so that they can plan most successfully; or whether a rational utilization of our resources requires central direction and organization of all our activities according to some consciously constructed blueprint.

Hayek also notes that it is unnecessary to argue that all decisions should be left to the individual.  Those in favor of economic freedom contend that effective competition is a better way of guiding individual efforts than any other, where it can be created.  In order for competition to work beneficially, a carefully thought-out legal framework is required and . . . neither the past nor present legal rules are free from serious defects.  Where this is not possible, then resort may be had to other more coercive methods.

Economic liberalism is opposed, however, to competition being supplanted by inferior methods of coordinating 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.  Indeed, one of the main arguments in favor of competition is that it dispenses with the need for "conscious social control" and that it gives individuals a chance to decide whether the prospects of a particular occupation are sufficient to compensate for the disadvantages and risks associated with it.

Hayek next hints at the reason economic competition works - the price mechanism.  All other things being equal, the price of goods and services reflects a vast multitude of considerations in one easy number - the price.  Just contemplate the price of a complex machine, with parts created all over the world, from raw materials throughout the world, each of which faces competitors for those same raw materials, finished products, and the labor and capital that went into their production.

Imagine that one of the parts may be made from either copper or steel.  If copper is desperately needed in one part of the world, for a highly sought-after device which requires copper, the people who want the copper are going to bid for the copper, and not for steel.  This would cause the relative price of the copper to rise, and make it more likely that those who don't require copper will choose steel instead.  That becomes a small factor in the price of the machine made with the part.  Multiply this same type of mechanism by the number of parts in the machine, to see that the one number (price) of the machine has very efficiently incorporated the results of thousands, and even millions, of decisions around the globe.

Give a central planner control over only one small part of the puzzle, and it is obvious that no central planner can as efficiently account for the millions of preferences the same way that the price mechanism can.  Even more important, controlling only a small part of the puzzle will not achieve the goal of the central planner - tell people they can't use copper, they will switch to steel.  No steel, and they will switch to plastic, or some other material.  This throws the whole plan out of whack, since the could not anticipate in advance how many will choose steel, how many plastic, etc.  This occurs not because people are evil or obstinate, but because their own needs and wants are different from those of the central planners.

How do I know this?  Because if everyone shared the same needs and wants of the central planners, in the same quantity and with the same intensity, the result would occur automatically in a free society without the need for a central planning mechanism.  Central control of all economic activity (i.e., what we are calling planning) is necessary only to the extent that people do NOT want the same thing as the central planners.

Hayek - Individualism and Collectivism, part1

Monrovians - Unite!  Hayek's third chapter is one of definition - making sure that we are all thinking the same thing when we use certain words.

Socialism may mean, and is often used to describe, merely the ideals of social justice, greater equality, and security, which are the aims of socialism.  But it means also the particular method by which most socialists hope to attain these ends and which many competent people regard as the only method by which they can be fully and quickly attained.  In this sense socialism means the elimination of private enterprise, of private ownership of the means of production, and the creation of a system of "planned economy" in which the entrepreneur working for profit is replaced by the central planning body.

Hayek makes the brilliant point that "central planning" is necessary to redistribute income so that all have equal incomes, but is also the same device that can be used to politically redistribute income in ways that we would all consider unjust - to favor a particular group over others.  Hayek then states that it may be unfair to use socialism as a term to describe central planning that seeks other ends, and uses the term "collectivism" to describe them.  Socialism is, then, a sub-species of collectivism.  Hayek points out that the objections of the believers in individual freedom have the same objections to all forms of collectivism, and the critique of collectivism applies also to socialism.

Put another way, state control and central planning can be used for good or for evil.  There is nothing inherent in central planning that requires that it be done well or poorly, for good aims or for corrupt ones.  It merely gives the central planner all power and authority, in the hope (expectation?) that the planners will use that power justly and wisely.  This is a crucial insight to understanding the critique of collectivism by the idealist who wants only equality, social justice, etc.

Hayek - The Great Utopia - Meaning of Freedom Distorted

Monrovians - Unite!  Hayek's second chapter is entitled The Great Utopia.

Hayek notes that by 1944, large numbers of people supported Socialism, believing that a Socialist system would bring freedom and justice.  He explains how the meaning of the word "freedom"  had been distorted by socialists to hide the truth about socialism's restriction of freedom with the inevitable state-sponsored injustice.

Hayek points out that:

Where freedom was concerned the founders of socialism made no  bones about their intentions.  Freedom of thought they regarded as the root-evil of nineteenth-century society, and the first of modern planners, Saint-Simon, even predicted that those who did not obey his proposed planning boards would be "treated as cattle."

In the 1800s, those in favor of Socialism were in favor of central planning and control (a lot like the Kings and Queens of Europe), while those in favor of Democracy celebrated the common man's ability to control his or her own future, and to vote accordingly.  At the time, Alexis de Tocqueville wrote:

Democracy extends the sphere of individual freedom, socialism restricts it.  Democracy attaches all possible value to each man; socialism makes each man a mere agent, a mere number.  Democracy and socialism have nothing in common but one word: equality.  But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.

When it became obvious that the forces of Democracy would carry the day, the socialists began a campaign to gain the allegeiance of those in favor of Democracy, by changing the meaning of the word freedom.

To . . . harness to its cart the strongest of all political motives - the craving for freedom - socialism began increasingly to make use of the promise of a "new freedom."  . . . The coming of socialism was to bring "economic freedom."

The subtle change in meaning to which the word "freedom" was subjected . . . is important.  To the great apostles of political freedom the word had meant freedom from coercion, freedom from the arbitrary power of other men, release from the ties which left the individual no choice but obedience to the orders of a superior to whom he was attached.  The new freedom promised [by the socialists], however, was to be a freedom from necessity; release from the compulsion of the circumstances which inevitably limit the range of choices of all of us, although for some very much more than for others.

Freedom in this sense [that is, the socialist's new freedom] is, of course, merely another name for power or wealth. . . . The demand for the new freedom was thus only another name for the old demand for an equal distribution of wealth.

Recall that the "old" demands of the socialists were for centralized planning, power to be wielded by the elites only, with anyone who disagreed with the central planning board to be "treated like cattle."  Of course, that philosophy had not proven very popular, so the socialists, like any good public relations outfit, decided to hide their true desires behind words that had carried the day - freedom.  Socialists began claiming that they were in favor of "Economic Freedom", "Democratic Socialism" and "Economic Justice" - and successfully disguised the fact that they wanted central planning, not economic freedom in economic affairs, central planning, not decentralized democracy where decisions are made by the individual, and identical economic results for everyone regardless of their choices, an unjust restribution of wealth by force, the opposite of justice.

Seveal  years earlier, W.H. Chamberlain, who in twelve years in Russia as an American correspondent had seen all his ideals shattered, summed up the conclusions of his studies there and in Germany and Italy in the statement that "socialism is certain to prove, in the beginning at least, the road NOT to freedom, but to dictatorship and counter-dictatorsihps, to civil war of the fiercest kind.  Socialism achieved and maintain by democratic means seems definitely to belong to the world of "utopias."  Similarly a British writer, F.A. Voigt, after many years of close observation of developments in Europe as a foreign correspondent, concludes that "Marxism has led to Fascism and National Socialism, because, in all essentials, it is Fascism and National Socialism."  And Walter Lippmann has arrived at the conviction that "the generation to which we belong is now learning from experience what happens when men retreat from freedom to a coercive organization of their affairs.  Though they promise themselves a more abundant life, they must in practice renounce it; as the organized direction increases, the variety of ends must give way to uniformity.  That is the nemesis of the planned society and the authoritarian principle in human affairs."

Note that  Chamberlain had visited communist Russia, Nazi Germany, and Facist Italy.  The communists sought international socialism (i.e., world government), while the Nazis were National Socialists.

Science Advanced Fastest When Individuals Were Given Freedom

Monrovians - Unite!  In the first chapter of The Road to Serfdom, F.A. Hayek discusses the history of freedom and the celebration of the individual - a road he believes Western civilization, and particularly the socialists, have abandoned.  Hayek is a recipient of the Presidential Medical of Freedom, was a pioneer in monetary theory, and co-winner of the Nobel Memorial Price in Economics.

In discussing the history of freedom for individuals, Hayek writes:

Perhaps the greatest result of the unchaining of individual energies was the marvelous growth of science which followed the march of individual liberty from Italy to England and beyond.  [Prior to this time] . . . the few attempts towards a more extended industrial use of mechanical inventions, some extraordinarily advanced, were promptly suppressed, and the desire for knowledge was stifled, so long as the dominant views were held to be binding for all:  the beliefs of the great majority on what was right and proper were allowed to bear the way of the individual innovator.  Only since industrial freedom opened the path to the free use of new knowledge, only since everything could be tried -- if somebody could be found to back it at his own risk -- and, it should be added, as often as not from outside the authorities officially entrusted with the cultivation of learning, has science made the great strides which in the last hundred and fifty years have changed the face of the world.

Hayek notes that "wherever the barriers to the free exercise of ingenuity were removed, man became rapidly able to satisfy ever widening ranges of desire. . . . [a]nd the rising standard soon led to the discovery of very dark spots in society, spots which men were no longer willing to tolerate."

Unbridled freedom, Hayek seems to believe, is the cause of enormous progress in society, but it does have downsides.  One Hundred Fifty Years of unparallelled progress led SOME to oppose ALL government regulations. 

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.  There is, in particular, all the difference between deliberately creating a system within which competition will work as beneficially as possible and passively accepting institutions as they are.

Hayek then explains how it came about that those in favor of little or no government regulation came to be seen primarily as naysayers - what we might call, the party of NO.  (Remember that Hayek was writing fifty years ago):

. . . for immediate improvement [the doctrine of freedom] had to rely largely on the gradual increase of wealth which freedom brought about, it had constantly to fight proposals which threatened this progress.  It came be regarded as a "negative" creed because it could offer to particular individuals little more than a share in the common progress - a progress which came to be taken more and more for granted and was no longer recognized as the result of the policy of freedom.  It might even be said that the very success of [freedom] became the cause of its decline.  Because of the success already achieved, man became increasingly unwilling to tolerate the evils still with him which now appeared both unbearable and unnecessary.

* * *

According to the views now dominant, the question is no longer how we can make the best use of the spontaneous forces found in a free society.  We have in effect undertaken to dispense with the forces which produced unforeseen results and to replace the impersonal and anonymous mechanism of the market by collective and "conscious" direction of all social forces to deliberately chosen goals.

Hayek then describes the crisis created in Western civilization, as follows:

, , , the people of the West continued to import German ideas and were even induced to believe that their own former convictions [regarding freedom] had merely been rationalizations of selfish interests, that free trade was a doctrine invented to further British interests, and that the political ideals of England and America were hopelessly outmoded and a thing to be ashamed of.

 This, suggests Hayek, allowed socialist ideas to gain prominence, ultimately leading to the International Socialists (the communists) and the national socialists (the Nazis). - both of which committed genoicide against their own citizens.  Hayek seems to tie the decline of the doctrine of freedom and free markets to an abandonment of the primacy of the individual, a taking for granted of the material progress that has resulted from freedom and free markets, and the idea that our Founding Principles had become outdated.

Road to Serfdom - Abandoned Road

Monrovians - Unite!  F.A. Hayek, author of The Road to Serfdom, captured the essence of the conflicts of ideas we are now struggling with in the United States.  This is the first of what I hope is a series of entries summarizing and discussing his important book.

Hayek first outlines the fact that we have abandoned, in recent times, the belief in the value and primary of the individual.  The importance of each individual is a basic foundation of Western Civilization.

We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.  Although we had been warned by some of the great political thinkers of the nineteenth century, by Tocqueville and Lord Action, that socialism means slavery, we have steadily moved in the direction of socialism.  And now that we have seen a new form of slavery arise before our eyes, we have so completely forgotten the warning that it scarcely occurs to us that the two things may be connected.

Then:

Individualism has a bad name today, and term has come to be connected with egotism and selfishness.  But the individualism of which we speak in contrast to socialism and all other forms of collectivism has no necessary connection with these.  . . . But the essential features of that individualism which, from elements provided by Christianity and the philosophy of classical antiquity, was first fully developed during the Renaissance and has since grown and spread into what we know as Western civilization - are the respect for the individual man qua man, that is, the recognition of his own views and tastes as supreme in his own sphere, however narrow that may be circumscribed, and the belief that it is desireable that men should develop their own individual gifts and bents.

Hayek then explains how the growth of the importance of the individual is closely connected to economic freedom.

The gradual transformation of a rigidly organized heirarchical system into one where men could at least attempt to shape their own life, where man gained the opportunity of knowing and choosing between different forms of life, is closely associated with the growth of commerce.  . . . During the whole of this modern period of European history the general directon of social development was one of freeing the individual from the ties which had bound him to the customary or prescribed ways in the pursuit of ordinary activities.  The conscious realization that the spontaneous and uncontrolled efforts of individuals were capable of producing a complex order of economic activities could come only after this development had made some progress.  The subsequent elaboration of a consistent argument in favor of economic freedom was the outcome of a free growth of economic activity which had been the undesigned and unforeseen by-product of political freedom.

Hayek begins to lay out the idea that without economic freedom, we cannot maintain personal and political freedom.

The Road to Serfdom, F.A. Hayek (2007 U. Chicago Press)