Critique of Hayek’s Road to Serfdom
Chap. 10: “Why the Worst Get on the Top”
“The Road to Serfdom” is one of the most popular works of Friedrich Hayek, a theoretical economist and a philosopher. Belonging to the Austrian School of Economic Thought, Hayek had been the proponent of a complete laissez-faire system (perhaps, except for the banks), with minimal to zero government intervention in economic decisions of the country. He famously won the Nobel Prize in 1947 for his ground-breaking work in the theory of money and economic fluctuations.
In the 1920s, Hayek went head-to-head with another economic heavy-weight, John Maynard Keynes. The latter has gained substantial acclaim for his pioneering idea of deficit-financing to get the US out of the economic doldrums of the Great Depression. In a nutshell, Keynes promoted government control while Hayek didn’t and an analysis of that would necessitate an essay (if not a book) of its own. (If you are the sort which prefers TL;DRs, I’d suggest you close this tab and instead watch a Keynes vs Hayek rap battle.)
Now, back to Hayek. The Road to Serfdom is one of the most important works in the Austrian School, in modern times, owing to its brilliant exposition on the need of market libertarianism. While analysing the entire book itself might be slightly too hefty for an essay, I have picked one of its most renowned chapters, “Why the Worst Get on Top” for my review.
The premise of Hayek’s piece is the inefficacy and violence of totalitarian regimes is a result of collectivistic politics. While there is some truth to his statement, there are a few flaws in his argument. Let me begin by stating what he got right. As he explains in his seminal essay, “The Use of Knowledge in Society”, central planning is an impossibly inefficient system, owing not only to its dependence on the central planner for the decisions of allocation of resources but also because even in a completely controlled economy, it is impossible to control consumer sentiments. When the prices in the economy are not governed by market forces, the consumers cannot properly comprehend the nature of the fluctuation and may, in fact, react wrongly which can send the wrong signal to the producers and result into a drove of unpleasant market distortions.
That being said, equating socialism with totalitarianism, as many of the Austrians (Austrian Economists, that is) do, is a bit unfair. Despite originating in the same Austro-Germanic region, Austrians and Socialists have been at loggerheads for over a century. It is true that the morality of socialism to bring a collectivist, classless state is akin to a utopian fantasy. The piece delivers some excellent critiques of socialist policies.
However, Socialism itself is an umbrella term for a variety of ideologies, even with some intra-group clashing. Yet, any socialist worth their salt will tell you that socialism, truly, has never existed in any country. But yes, while a “Fully-Automated Luxury Communist” (FALC) state isn’t feasible, knowing its roots in the ideas of Fabian Socialists like Alfred Marshall, himself, might make you hesitant to be dismissive of the idea completely.
Now, on the totalitarian part. Hayek coins the term Accident Theory of Socialism as “a belief from which many who regard the advent of totalitarianism as inevitable derive consolation and which seriously weakens the resistance of many others who would oppose it with all their might if they fully apprehended its nature.”
According to his piece, a totalitarian state emerges out of the populist deception of the gullible masses. These autocrats, once in power, in the best case, create a centrally-planned economy which inevitably crumbles in its inefficiency. In the worst case, you have a malodorous dictator who sends the country into the doldrums of violent chaos. This does present a formidable argument as to why the socialist exercise has failed; it’s paradoxical in its execution. Although a socialist state aims to create a classless society, to liberate the working class from the inequities of “capitalist greed”, both possibilities of governance — a) a communist society, self-governed by the workers themselves, such that the producer and the worker are one; and b) the rise of an omniscient, benevolent bureaucracy that would represent the needs of the workers — seem equally farfetched.
But, let me present another caveat: the notion of a totalitarian, dastardly! socialist state was only further propounded post-WWII as an ideological tactic (perhaps more subtle than McCarthyism) against the Soviets during the Cold War. And historically speaking, politics of the now “communist” states and the success of their regime is best criticised with a dollop of salt; right from the Truman Doctrine of 1947, there has been US’ hegemonical intervention in the politics of states, especially in Latin America, as a form of neo-imperialism (Dietz., 1984).
As for centrally planned economies, they are the best examples of French Economist, Frederic Bastiat’s idea that bad economists who happen to be great populists make the decisions. The populism theory is still relevant today in the victories of Trump, Modi, and Bolsonaro (the Top 3 on the COVID billboards); yet, are all of these the leaders of a socialist, totalitarian state?
Now, this is where things get interesting. When Hayek writes that the worst get on the top, his core argument is against populist economic policies that ignore the long-term disadvantages for the short-term public pleasing. Yet, in his attempt to showcase the dangers of populism, Hayek reduces the general masses to uneducated “sheeple”. In his words (not verbatim), “collectivism brings societal morals to the lowest common denominator, which is far beneath the differentiated tastes of the educated elite”. While Hayek proposes a decentralized economy in his Use of Knowledge, highlighting the importance of knowing every sort of market information by the respective market participants, this argument makes his claim sound hollow.
Other than the obvious deepening of class-conflict, there is a deeper implication to it, my final critique. Hayek doesn’t mind a government of the educated elite because he perhaps, believes them immune to the lures of power, and can thus, function efficiently. Other economists, like Keynes, have fallen prey to the same elitism in economic policy (Hall, J., & Smith, M., 2002).
This raises the issue of plutocracy — an essentially undemocratic enterprise. They know better and the masses don’t know at all, now isn’t that reductive?
Or is it an excuse to say public choice doesn’t matter?