The 1789 Discourse: Friedrich Hayek And The Free Market
For the month of July, my peers and I will be evaluating certain thinkers and their positions on issues pertinent to us today: the Coronavirus, free trade, police misconduct, and populism. For this article, I will be evaluating the positions of the Austrian economist, Friedrich Hayek, the staunch defender of the free market.
Friedrich Hayek was a self-proclaimed “classical liberal” from the school of thought shared with Scottish economist, Adam Smith. Adam Smith is considered the “Father of Capitalism” which he most notably achieved from his novel, Wealth of Nations, in which Adam Smith mentions the “invisible hand”. The invisible hand of the market is what we know now today as laissez-faire economics: the free market.
Hayek was not a radical libertarian despite what his staunch defense of the free-market might present him as. Hayek made mention of government regulation for work conditions and a potential social safety net for the impoverished. Ayn Rand, the writer credited with preaching the values of objectivism and a staunch libertarian, is quoted calling Hayek “their most pernicious enemy”. Hayek had libertarian opinions, but he was most essentially a classical liberal from the Austrian School of economics and a defender of individuals.
Friedrich Hayek grew up in what was known as the Austro-Hungarian Empire; his writing served as a commentary on the rise of totalitarianism and was influenced by the centralization of production throughout the Western world as a response to the First World War. Hayek’s most famous work, The Road to Serfdom, was an economic and political work evaluating the dangers of socialism and centralized planning and how centralization of authority for the sake of security would lead to despotism.
One of Hayek’s most famous quotes, “the road to serfdom is paved with good intentions”, is a chilling quote that condemns the Trojan horse that is disguised as entitlements and social benefits, but grants access to egregious despots the “goodwill” sought to destroy.
With that, let us explore what his policy views would be concerning the events unfolding before us today, starting with COVID-19. Would a centrally planned and organized response most effectively prevent societal destruction from the virus, or would decentralization of authority enable quicker, more efficient responses? Hayek would most likely be in support of a decentralized approach, however, with some coordination between localities and the central government.
How do I assume this? Hayek’s paper, “The Use of Knowledge in Society”, discusses how states could gather information and best employ it for the benefit of the state. Hayek begins the paper with the assumption that if we have all of the relevant information and all of the possible knowledge necessary to best handle a problem, then we could simply solve the problem with the information using logic.
However, Hayek disputes this assertion because he states that we cannot simply create a one size fits all rational economic order because information does not exist as a cohesive monolith over the expanse of civilization, but more of an incomplete entanglement and dispersed bits of knowledge. Hayek applies this argument for his advocacy of a free market, however, a pandemic response within a federalist system like the US, with a central government delegating responsibilities to regional authorities, would be the most efficient and effective way to combat a virus.
For example, if an area had a much larger elderly population, then a more relaxed approach might not be the most effective for that area, and vice versa for something like a college town with a bunch of people very capable of handling the virus. Furthermore, Hayek might apply his wartime logic to a pandemic and argue that a crisis is merely an excuse for the government to consolidate power and pass it off as unity in the face of adversity. Passing bills such as the CARES Act would be a dangerous reaction because it enables the government to increase taxes and controls later down the line.
Apply this logic of Hayek’s to the issue of police misconduct and I believe you have a similar situation: issues that should be handled by local forces with maybe some federal aid, but the protection of liberties must be paramount.
Hayek was a very strong defender of equality under the law and the concept of Rule of Law. In his essay, “The Decline of the Rule of Law”, he discusses how the Rule of Law can wane when the ideals it stood for begin to lose meaning. Hayek criticizes the controlling of industry, creates privilege, and thus weakens the rule of law.
Therefore, police cannot arbitrarily behave beyond the scope of the law, lest they demean the essence of liberty they are assigned to protect. If police misconduct was to result in the structural suppression or elevation of one group over another, the rule of law would be weakened to simply the rule of will.
Hayek was very skeptical of creating protected classes, and he viewed the government's goal was to make everyone equal under the law rather than allowing an individual or body to arbitrarily make laws to the benefit of another group.
Hayek’s greatest concern that he outlines in The Road to Serfdom is what the post-war welfare state would look like. Would the state ever relinquish the powers it so easily took hold of in peacetime? Hayek predicted that the “planners”, leaders of political groups that sought to organize society towards an ideological or utopian end, however, their inability to effectively produce the utopias they preach will leave the populace divided and some disaffected.
Hayek’s greatest fear, which he witnessed unfold before and during the outbreak of World War II, was that populists would rise up and fill the void left behind by the failed “planners”, which would result in absolute control over every aspect of life. Thus the quote, “the road to serfdom is paved with good intentions”, really starts to ring dangerously again when we see voters disaffected with the liberal world order start to strongly turn towards Marxism or hypernationalism.
Furthermore, these planners would inhibit the power and benefits of free trade between individuals within different states and what sort of wealth that could create. Hayek was a strong advocate for interstate commerce and advocated for an interstate federalist order within Europe that would promote free trade. Hayek’s dream for Europe, a continent ravaged by war and protectionist nationalism for centuries, would be that they could attain lasting peace.
Populists that advocate for protectionism threaten the peaceful interstate relationship Hayek hoped would be cultivated, however, he did worry that a regulated interstate trade federation could increase costs by way of excessive administration and regulation.
Hayek is a historically renowned economist and philosopher who observed the impending authoritarianism in the world and eerily outlined how such behaviors could become rampant within states. Hayek was by no means perfect in his observations, however, his voice still influences much of the modern libertarian thought pervasive today. Individuals must always remain skeptical and vigilant of utopian ideas that damage the rule of law and pave the way for those who prey on society’s most twisted desires.
