Ludwig von Mises on Hayek's "The Constitution of Liberty"

Mises wrote in 1960 that Hayek made too many concessions to the welfare state:

 Professor Hayek has enlarged and substantiated his ideas in a comprehensive treatise, The Constitution of Liberty (University of Chicago Press, 1960). In the first two parts of this book the author provides a brilliant exposition of the meaning of liberty and the creative powers of a free civilization. Endorsing the famous definition that describes liberty as the rule of laws and not of men, he analyzes the constitutional and legal foundations of a commonwealth of free citizens. He contrasts the two schemes of society's social and political organization, government by the people (representative government), based upon legality, and government by the discretionary power of an authoritarian ruler or ruling clique, an Obrigkeit as the Germans used to call it. Fully appreciating the moral, practical, and material superiority of the former, he shows in detail what the legal requirements of such a state of affairs are, and what has to be done in order to make it work and to defend it against the machinations of its foes.

The Welfare State

Unfortunately, the third part of Professor Hayek's book is rather disappointing. Here the author tries to distinguish between socialism and the Welfare State. Socialism, he alleges, is on the decline; the Welfare State is supplanting it. And he thinks the Welfare State is, under certain conditions, compatible with liberty.

In fact, the Welfare State is merely a method for transforming the market economy step by step into socialism. The original plan of socialist action, as developed by Karl Marx in 1848 in the Communist Manifesto, aimed at a gradual realization of socialism by a series of governmental measures. The ten most powerful of such measures were enumerated in the Manifesto. They are well known to everybody because they are the very measures that form the essence of the activities of the Welfare State, of Bismarck's and the Kaiser Wilheim's German Sozialpolitik as well as of the American New Deal and British Fabian Socialism. The Communist Manifesto calls the measures it suggests "economically insufficient and untenable," but it stresses the fact that "in the course of the movement" they outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionizing the mode of production."

Later, Marx adopted a different method for the policies of his party. He abandoned the tactics of a gradual approach to the total state of socialism and advocated instead a violent revolutionary overthrow of the "bourgeois" system that at one stroke should "liquidate" the "exploiters" and establish "the dictatorship of the proletariat." This is what Lenin did in 1917 in Russia and this is what the Communist International plans to achieve everywhere. What separates the Communists from the advocates of the Welfare State is not the ultimate goal of their endeavors, but the methods by means of which they want to attain a goal that is common to both of them. The difference of opinions that divides them is the same as that which distinguished the Marx of 1848 from the Marx of 1867, the year of the first publication of the first volume of Das Kapital.

However, the fact that Professor Hayek has misjudged the character of the Welfare State does not seriously detract from the value of his great book. His searching analysis of the policies and concerns of the Welfare State shows to every thoughtful reader why and how these much praised welfare policies inevitably always fail. These policies never attain those, allegedly beneficial, ends which the government and the self-styled Progressives who advocated them wanted to attain, but, on the contrary, bring about a state of affairs which?from the very point of view of the government and its supporters?is even more unsatisfactory than the previous state of affairs they wanted to "improve." If the government does not repeal its first intervention, it is induced to supplement it by further acts of intervention. As these fail again, still more meddling with business is resorted to until all economic freedom has been virtually abolished. What emerges is the system of all-round planning, i.e., socialism of the type which the German Hindenburg plan was aiming at in the first World War and which was later put into effect by Hitler after his seizure of power and by the British Coalition Cabinet in the second World War.

(Thanks to a comment by David Gordon)