Tuesday, March 15, 2011

ObamaCare and the Dodd-Frank Act : What Would Hayek Say?

By Peter Wallison

Hayek, as an Austrian economist, had closely observed the rise of national socialism (Nazism) in neighboring Germany in the late 1920s and early 1930s. In The Road to Serfdom, he made the central point that economic planning would eventually lead to the kind of totalitarianism, then seen in both the Soviet Union and Nazi Germany, that most socialists professed to despise. Among his arguments were the ideas--then very new in political thought--that resources could not be efficiently allocated without a pricing system, and that fascism, Nazism, and communism were not different systems, but the inevitable outcome of the same collectivist thinking with which socialists in England and elsewhere were hoping to remake the postwar world.

One of the most interesting aspects of the book's publication--aside from the fact that it was rejected repeatedly by the most respected publishing houses in the United States before it was picked up by the University of Chicago Press--was its differing reception in England and the United States. At the time, Hayek was a professor at the London School of Economics and wrote the book principally for political economists in England. The book received what might be called a polite reception among the English intellectual and political elite; the initial printing was 2,000 copies, followed by another 2,500. But the reception in the United States was quite different. The Road to Serfdom became an enormous bestseller, but its reception among the intellectual elite of the Left was furious and hostile. The difficulty in finding a US publisher is typified by the response from Macmillan: "Frankly, we are doubtful of the sale which we could secure for it, and I personally cannot but feel that Professor Hayek is a little outside the stream of much present-day thought, both here and in England."[2]

In his introduction, Hayek described his surprise at the strong reaction his views provoked in the United States: "Contrary to my experience in England, in America the kind of people to whom this book was mainly addressed seem to have rejected it out of hand as a malicious and disingenuous attack on their finest ideals; they appear never to have paused to examine the argument. The language used and the emotion shown in some of the more adverse criticism the book received were indeed rather extraordinary."[3] This has the ring of truth for anyone who has published similar analyses from the conservative or free-market point of view, even in contemporary America.

What is the contemporary significance of The Road to Serfdom? The fact that Hayek was warning against the possible onset of socialism in England suggests an immediate parallel with the warnings about ObamaCare and other Obama initiatives--that these are socialist policies, or at least the result of Obama's socialist inclinations. In a strict sense, this claim seems wildly off the mark. Socialism is almost always defined as government ownership of the means of production, but nothing in the Obama program involves government ownership. In fact, Obama has provoked heated opposition from the Left because he would not press for a public option in ObamaCare, which--because it would have made the government the single payer for medical services--would have had significant elements of government ownership and socialism.

However, Hayek's critique of planning--describing it as the road to serfdom--was not a critique of an existing socialist system but of an idea that he thought would eventually lead to socialism and from there to totalitarianism. Economic planning, in his view, would ultimately mean control over the means of production, not necessarily its ownership; but control would have the same practical effect as ownership on the lives of individuals: "It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us, that we as individuals can decide what to do with ourselves. If all the means of production were vested in a single hand, whether it be nominally that of ‘society' as a whole or that of a dictator, whoever exercises this control has complete power over us."[4]

Read the rest here.


  1. It's worth the effort to read at least one more paragraph of Wallison's essay. At the end of that paragraph, he has the following howler, apparently unintended:

    "It's because he puts individual freedom at the top of his value hierarchy that Hayek's views are so compatible with those of US conservatism."

    Individualism. Compatible with US conservatism. Uh huh. And Tea Partiers will be holding flag burning ceremonies on June 21 this year to commemorate the action by New Hampshire's convention in 1788, and every flag burnt will be the American flag. Right.

    Now, I don't know what Hayek would say if were he alive today. Maybe he'd have become disgusted with politics by now and so said something banal like, 'Ich liebe Breisgau im Fruehling. Gehen wir jetzt zur Kneipe fuer Bier.'

    However, I have a good idea what M. Friedman would say about roads to serfdom. He would remark, as he did in a foreword of an edition of ThRTS published in the 1990s, how often it is that people who claim to be champions for individual liberty also promote policies which undermine individualism. Friedman makes it clear enough that he's referring to Hayek, though he could just as easily been referring to Friedman. (Recall withholding of taxes by employers, one of Friedman's gifts to Americans.)

    On second thought, about Hayek: Once you got a beer into him, he might observe that Obama gave up socialism for a different form of parental collectivism, albeit still with aggressive militarism. He'd observe how Obama is trying to merge the corporations with the state that proclaimed them in the first place.

    So Hayek would say, 'Herr Obama ist einen Faschist, nicht wahr?'.

  2. Darn it all. Sein is intransitive, so let's try this again:

    'Herr Obama ist einer Faschist, nicht wahr?'.

    If only I could blame my German teachers, of whom all have been leftists. By the way, have you ever heard the old trope about Fascism being right wing?

    Leftists like to quote Mussolini saying that Fascism is the merger of the corporation and the state. Ok, so let's suppose that the quote is correct and that Fascism is the merger alleged. Then the state would own the corporations, and Fascism would be socialism. But if the corporations are not owned by the state, then why claim that they've been merged with the state?

    Of course, if Fascism is not socialism and if the corporations are still somehow merged with the state, then why claim that Fascism is anything but antithetical to free trade?

    On a related note, again about the PPACA: The Medical Loss Ratio (MLR) dictated by the law would ordinarily be left to management discretion. It might even be something that is specified in CXO's contract as a requirement, or be a criteria for judging how much bonus to pay at the end of the year. But it's not under PPACA. Thus do we have evidence of a merger of the corporation and the state...Sort of. But that merger is a merger of the MANAGEMENT of corporations with the state.

    It's long since become obvious that American leftists have some 'splainin to do about their tendency to support Fascism. So also the neocons, whose movement from Trotskyism is suspiciously like Mussolini's abandonment of Marxism.