The Road to Serfdom

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Summary: Very actual in context of EU's highly politicised economies.
Review: A truly great book by one of the leaders, along with Ludwig von Mises, of the Austrian School of Economics, and still very a propos in the context of EU's nations highly politicised economies.

Have you ever considered why large and over-sized animals like elephants and whales have no natural predators? Such large animals have reached an evolutionary stage (a Darwinian term for lack of a better word, although I do not believe in the evolutionary theory in its present state) where they devote the best of their strength in the daily struggle of their own bodily survival, without having to compete with other species. In the end of the scale, the extremely large animals are seeing to feed on the extremely small, just like the whole world of animal life feeds on water and oxgen...

Compare this to such gigantic conglomerates and companies as General Electric, Walmart, Intel, IBM and Microsoft. They have virtually no real competitors left in their own respective field, and their own growth stimulates a broad-band growth in all of their related respective industrial fields as well as in the Economy as a whole. These companies literally own, and are owned by the respective sectors in which they strive. Competition has been abolished and the reins of power have been democratically handed over to such gigantic and entrenched Stalwart-winners. Now if such industrial Behemoths are in the loom of failing, they are likely to tear down whole facades of the economy. Such a feat cannot be left to happen, i.e. there should be a cushion or a safety net, as the damage occurred in the respective company are likely to be propagated to the whole economy.

This has early enough been universally recognized.

Just remember that JP Morgan saved the Steel Industry and the Stock Market by bailing it out with his own personal funds, a move which proved to be very rational and beneficiary not only to the economy as a whole but also to himself and his own vested interests. Remember that highly rich individuals and personal funds were urged by the Fed to bail out LTCM at the wake of its collapse, and to do this they readily agreed, as they recognized that it was not only in the interest of the economy and the stock market as a whole to prevent the total financial collapse of ailing LTCM Mammoth, but it was also very much in their own private interest.

These are highly illustrative examples were free-market features typically deemed as market-failures have been hampered by the free-market itself, without any government agency regulation and/or State intervention.

Why then could not such free-market self-regulatory features be adopted in other parts of the world, such as in France (Renault, Credit Lyonnais, and now Alston?)?... Simply because France sometimes looks like it's possessed by one of the world's biggest nationalistic ego? Simply because when the ideology of egalite-fraternite does not spontaneously materialize itself on an individual level, as it actually seldom does, the paternalistic Etat Francais sees it as its own responsibility to use an expeditive predicament as the ultimate arbitrary short term economic solution, for lack of a better one? That may well be some of the reasons, although it can be said en passant that other European nations such as Switzerland are neither immune from such self-complacent attitudes (witness the attempted but failed political rescue/bailout of Swissair/Swiss), but Switzerland, although not a member of the EU, is at least more firmly grounded in the principles of a free-regulated market economy, a fact which prevents it from intervening strongly in local domestic economic issues, at least as strongly as France has been seen to be doing in the past.

Some political and/or economical animals are sooner or later deemed to extinction, like it was the case with the dinosaurs. That is the natural outcome of striving and struggling economies, and a fact with which it should not be hampered with. If it is generally agreed that the survival of private enterprises close to extinction on the economic evolutionary scale should not be made at the expense of the tax-payers money (i.e. oxygen and water in the world of animal life), it is at least certain that the mistakes and misdemeanors and mismanagements of high tax-bracket executives of so-called private companies should not be bailed out by the average tax-payers held hostages under various political agendas.

In that context, globalisation, although it is now a social issue that has been very badly politicised in latter times, seems to be once more the healthiest solution, offering the most sensible safeguards against human management failure and unjustified corporate greed.

The risk of seeing France again floating adrift such illusionary (illusionary because State-subsidized) dreams of national grandeur (witness the Concorde, the TGV, and so forth), while it cannot be argued that France definitively possesses a high degree of engineering expertise and vision, is today only tampered by its binding adhesion to the EU and its implied adhesion to principles of free-market economics.

Let's just hope that the EU's Competition Commission will stand up to its mandate and tamper the delusive French wishes of once more dangerously amalgamating economics and politics in a rather hazardous form of hegemonic mixes.

More than fifty years after publication, it seems that the concepts depicted in this book are still in an urgent need to be preached, especially among European nations.

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Summary: Understanding this is the road to revcovery for the U.S.
Review: One of the things this book makes clear is the murky origins of the conceptions of "Left-Wing" and "Right-Wing" in American politics. For the record: "Right" in America theoretically means small-government, decentralized-governance, constitutional limitations under the doctrine of enumerated powers; in short, what Europeans a hundred years ago called "liberal!" Hayek also (tangentially) discusses that the political differences between the famously mis-labeled leftist Adolf Hitler and the universally recognized leftist, Josef Stalin, amounted to a minor infight between two similar political philosophies whose differences were greater in rhetoric than in fact.

The realization that central planning, as practiced in European socialism, is ultimately different from Nazism only in degree is only the first paradigm shift that awaits the reader. Hayek's book is a masterwork. Although some of the particular policies it discusses are now out-of-date, when taken as history it lays a foundation for every American's understanding of what's at stake when he votes.

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Summary: Old intellectual political harangue
Review: The vast majority of people, a long time ago, were serfs. Those who are rich still get richer, but those who lived in California knew they could never pay enough property taxes to keep their government solvent. In a war, with frequent incidents of destruction, political logic is easily portrayed as perverse. THE ROAD TO SERFDOM by F. A. Hayek was published in 1944, and its history up to the fiftieth anniversary is well summarized in the Introduction by Milton Friedman and Prefaces by F. A. Hayek that are included in the 1994 paperback. Due to new modes of triumph, some people have great expectations, but THE ROAD TO SERFDOM is about modern economic development leading to the stagnation of socialism. Military measures are a topic of concern in Chapter 9, Security and Freedom. The author's knowledge of Europe, where he was born and raised, prompted him to follow such considerations with Chapter 10, Why the Worst Get on Top, in which it is written: "In the Central European countries the socialist parties had familiarized the masses with political organizations of a semi-military character designed to absorb as much as possible of the private life of the members. All that was wanted to give one group overwhelming power was to carry the same principle somewhat further, to seek strength not in the assured votes of huge numbers at occasional elections but in the absolute and unreserved support of a smaller but more thoroughly organized body." (p. 151). Television hardly seems to be as threatening, no matter how weirdly the news and entertainment mix and match, but combined with the courts, the major political parties, and the American electoral college in 2000, it largely seemed to support the imposition of a geopolitical superpower over the rest of the world, comparable to what Europe experienced when Hitler showed, "The chance of imposing a totalitarian regime on a whole people depends on the leader's first collecting round him a group which is prepared voluntarily to submit to that totalitarian discipline which they are to impose by force upon the rest." (p. 151).

Hayek was writing far too early to consider television, but his book has an antiquated view of the role of law which seems to me absurdly scholarly. There is a big difference between legal training (his degree from the University of Vienna) and legal practice, mostly related to deals that involve real money. Hayek writes about privilege without referring to attorney-client privilege, a consideration which makes most lawyers reluctant to discuss fraud by the officers of any corporation that has ever hired a firm that pays its lawyers to do legal work with the usual great degree of confidentiality assumed by those who expect to get paid. Unexpected massive losses, no matter how likely in volatile times, don't get any consideration, even in this book. Hayek is more concerned about people who are granted privileges by a government which expects them to perform a task that others will not be allowed to do.

Assume that for Hayek, "liberalism" means that no one is entitled to such privileges, which were standard in a feudal society, and could be blamed for the position of the serfs in such kingdoms, and interpret for yourself what he meant in 1944 when he wrote, "Because of the growing impatience with the slow advance of liberal policy, the just impatience with those who used liberal phraseology in defense of antisocial 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." (p. 23). The turn of the century in 1900 was a time of restless thinking, when "the hope of the new generation came to be centered on something completely new, interest in and understanding of the functioning of the existing society rapidly declined; and, with the decline of the understanding of the way in which the free system worked, our awareness of what depended on its existence also decreased." (pp. 23-24). Financial speculation within the United States might have replaced manufacturing as the hope for the future, with an internet economy offering personal connections to whatever turned on the consumer becoming the ultimate shopping system for intimate personal interactions, by the year 2000, but on an individual level, each worker was assumed to have a financial interest in the Social Security system, with its lockbox for U.S. government bonds purchased with a portion of earnings and employers' contributions.

Defining the serfs, Hayek wrote, "It would indeed be privilege if, for example, as has sometimes been the case in the past, landed property were reserved to members of the nobility. And it is privilege if, as is true in our time, the right to produce or sell particular things is reserved to particular people designated by authority. But to call private property as such, which all can acquire under the same rules, a privilege, because only some succeed in acquiring it, is depriving the word `privilege' of its meaning." (p. 89). Hayek was writing long before anyone thought of a lockbox protecting social security benefits, but it is easy to see Hayek's exasperation with guaranteed incomes putting everyone on the downhill path. "Within the market system, security can be granted to particular groups only by the kind of planning known as restrictionism (which includes, however, almost all the planning which is actually practiced!)." (pp. 141-142). The biggest fraud to be guarded against is the devaluation of the lockbox by an utter collapse of fiscal discipline, recently observed in Argentina, suspected in the unbalanced budget of California, and bound to be worse in our future, but this is most likely, given the level of utter frustration with the economy we are rapidly approaching.

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Summary: In Defense of Liberty.
Review: In _The Road to Serfdom_ the Nobel Prize winning economist F. A. Hayek makes a profound case against socialism and economic planning in favor of the traditional "classical liberal" position, which originally consisted of advocates of the principle of "laissez-faire". Arguing from the point of view of such classical liberals as J. S. Mill, Alexis de Toqueville (who inspired the title of this book), Edmund Burke, Adam Smith, and Lord Acton ("absolute power corrupts absolutely"), as well as economists of the "Austrian school" and von Mises, Hayek argues that what was (and still is) termed "liberalism" in his day is in fact an abdication of the true ideal of liberty in favor of a redefinition of this term. Hayek shows how socialism and economic planning, such as that advocated by economists such as Keynes for example, have failed in both Russia and Germany. According to Hayek, economic interventionism, planning, and centralization are leading the state on "the road to serfdom" and destroying individual liberty. Fundamental to any notion of liberty is the belief in private property and Hayek argues that liberty is impossible without private property following Hume. While many who might advocate socialism will accept that liberty is impossible without private property, they still continue to push their ideology because they believe it will somehow enable man to focus on "higher things". Hayek argues that this itself is a conceit and shows the fundamental importance of economics and money in our lives. Hayek wrote this book near the end of the Second World War, and he shows that many of the socialists in Britain were coming close to advocating the same principles which were used by Hitler to establish his dictatorship. In particular, the works of the socialist theorist Werner Sombart played an important role in the economic understanding of the Third Reich. Hayek suggests that Nazism was made possible by German socialism and that in fact many individuals on one side of the communist/Nazi split could easily go back and forth between the two alternating in their hatred for the West. Many in the Third Reich regime such as Moeller van den Bruck, railed against the "West" (as it was understood by them, not the meaning it is given now where it would of course include the German nation) and its institutions as well as the ideals of classical liberalism. Hayek shows that there are indeed totalitarians in our midst who in the name of security will abolish our economic freedoms if given the opportunity to do so. While the United States claim to abide by capitalism, it continues to amount a burgeoning government bureaucracy and a monstrous "welfare-warfare state". Individuals such as Hilaire Belloc and Herbert Spencer had pointed out the dangers in such notions as socialism and statism earlier in the century, and Hayek has taken off from many of their writings. Hayek argues that socialism is a product of Germanic thought while he affirms the thought of certain individuals in Britain such as John Stuart Mill against the Germans. These remarks can probably be understood in the light of his times which had just witnessed a world confrontation against Fascism and National Socialism. Hayek concludes with a chapter on internationalism which he advocates in the classical liberal sense, but he also shows the dangers involved in the kind of "world unity" schemes which were then being devised and were to take shape in such bodies as the League of Nations and the United Nations. My copy of this book includes an excellent introduction by another Nobel Prize winning economist Milton Friedman. In this introduction Friedman makes two points which I believe are worth mentioning. First, he argues that it is ironic that many of those regarded as the intellectual elite continue to accept the ideal of collectivism against that of individualism, basing their arguments on emotion and not on reason. Secondly, he notes the irony of the fact that socialist nations such as the Soviet Union, North Korea, China, and the former East Germany had to develop walls to keep their citizens within, while capitalist nations have been forced to use police forces to keep too many people from coming in. This itself illustrates the great failure of the socialist ideal. While the intellectual "elite" continue to cling to their dying ideal of socialism and disparage individuals such as Hayek, history shows that their schemes will result in failure. Hopefully, they will continue to be opposed in the future by all people who consider themselves lovers of liberty, in the true sense of the word.

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Summary: Must read
Review: As most colleges assigned reading is the Communist Manefisto I can see why the masses are awaiting national health care. We are already serfs. Hayek examples this from a 1940's perspective.

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Summary: Brilliant but not completely timeless
Review: In this work, his most famous, Hayek presents the classic arguement against central planning of economic activity. But the book has to be understood within its context. Hayek wrote it as a warning to the British who appeared at the time to be embracing socialist planning advocated by the Labour party. So most of the book is somewhat dated by this focus that has less relevancy today. Those elements that do have a broader applicabilty Hayek returned to later in greater detail, but these works are much less popular.

Regardless of this Hayek has a problem in his analysis. He uses the experiences of the rise of totalitarian government in Germany and Russia (primarily) and seeks to generalize that result to Britian (and to a lesser extent the U.S.). Hayek ignores the important difference between these states, the existence of stable democratic rule. Hayek sees any serious economic planning attempt as the begining of a slippery slope that will end in totalitarian government. But the experience of Britian disproved this view. While the post-war Labour government did create a number of socialist programs, these programs never really expanded later. A "collectivist consensus" developed in which it was understood that Labour would not seriously push for more socialized planning and the Conservatives wouldn't seek to unravel what was already settled. This arrangment lasted until the system begain to breakdown in the late 70s and Thatcher was elected. This demonstrates that a healthy democratic polity can engage in planning without it necessarily sliding into the abyss. A similar story is evident in American politics, though in a different and less dramatic fashion due to the more conservative nature of American institutions. Hayek's main problem is that he discounts the value of a democratic system because his direct experience was in unstable democracies such as interwar Austria. These experiences installed a deep distrust of democracy that colors his analysis.

While this is a significant limitation this book should be read by anyone interested in political economic theory. Its historical and intellectual impact has been enormous.

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Summary: Signs of Freedom
Review: F.A. Hayek provides articulate a strong argument against the use of centralized state power to satisfy our wants and needs. In 2003, in a time period when we have elected small-government minded Republicans who wish to experiment by expanding the role of centralized government (i.e., Medicare), it is best to heed Mr. Hayek's warning. By centralizing power for the elites (who are always in favor of increasing its power; for reference, read any major newspaper's editorial page, academic arguments in journals; elite judges and other holier-than-thou commentators), we cede our control to them. Rather than "emporing" people to make decissions for themselves, centralized state power limits the available choices we can reasonably make for ourselves. As such, we have given some of our freedom away. We ought not make this decission now. It is quite easy for liberals to say we need governmental intervention in the economy. But what say you regarding the results, including giving up the power to dictate our own destinies? Why should we give this freedom to the state, and then beg for the freedom to do what we wish economically?

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Summary: Really teriffic treatment of freedom and economics
Review: I would recommend this book over both "Free to Choose" and "Capitalism and Freedom" by Friedman. Although Friedman is probably a bit easier to read, Hayek's arguments and clear thinking are much more powerful. Hayek does an excellent job of describing why planned, socialist economic systems necessarily lead to loss of both civil and political freedoms. To paraphrase: A planned economy simply cannot exist without strict economic, civil, and political controls of the people, niether in theory or in practice.

Hayek's analysis of the often overlooked economic changes in pre-Nazi Germany and pre-Fascism Italy that led to the emergence of such horrible dictatorships is worh the price of admission alone.

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Summary: Hayek should be canonized!!!
Review: Hayek's ideas were necessarily self-moderated by the circumstances surrounding "The Road to Serfdom"'s authorship. He was in the wrong place at the wrong time to go about writing a sarcastically damning indictment of government and central planning. While some claim that this detracts from the importance of his work, I disagree. The fact that he literally risked his life for his ideas in noble and honorable, and adds to the value of the book. If he were any weaker a person we might not have ANY of his ideas, ideas that were influential in shaping Macroeconomics and helping to tear down the Berlin wall, among other things.

While the writing is characteristic of the era, and often awkward, the power of the idea that individuals are the best judges of their own interests and that planning does not work, and the arguments used to support these ideas more than overcome this defect. The next saint to be canonized should be Ludwig von Mises, the second Rothbard, and the third Hayek, for the ideas of the Austrian school of Economics and the great minds behind them have led to countless social miracles.

For more information on the battle between Keynes and Hayek, one would be wise to view the series "Commanding Heights".

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Summary: Still Timeless and Still Misunderstood
Review: Hayek was a proponent of the "Austrian School" of free-market economics which, although not commonly known, was key to the post-WWII West German Wirtschaftwunder ("economic miracle") under Erhardt (further reading on this is also highly recommended). Hayek was a friend of Keynes but an opponent of Keynesianism. For those who will read no other Mises or Hayek, read this book as a layman's introduction to economics and Homo Economicus. Hayek was also a refugee from Nazi Europe who nevertheless also was troubled by certain political trends in the relatively free Anglo-Saxon democracies. The longevity of this book is due partly to its dual service not only as an economics classic but also as a classic in political philosophy. Well before Hannah Arendt, in her classic 1951 treatise, Totalitarianism, linked the dictatorships of the right and left and noted not only their similarity in operation but their similarity in public support (Arendt Pt3 1968 p.1-9), Hayek identified these commonalities in socialisms in his 1944 Road to Serfdom (1994 p.34). More importantly, it is too often overlooked that Hayek derived this book and its title from Tocqueville's Democracy in America and Tocqueville's warnings about democracy's threat to liberty (p.xli). Because the connection between 1830s American democracy and Nazism might not be immediately obvious, ideally, this book should be read in tandem with Tocqueville (most histories ignore Tocqueville's most important points but that issue is for another time). The continued relevance of this book is evident throughout, including Hayek's debunking of the (recently feted) beatification of moderates and their "reasonable" and "common sense" compromises (p.47-48).