Posts Tagged ‘Austrian’

On the Road to Serfdom with Von Hayek

August 8, 2013

The ideology of the modern Conservative Party is partly based on the Libertarian ideas of Von Hayek. Von Hayek was a refugee to America Austria after the Nazis’ Anschluss. In his books, such as The Road to Serfdom and the Constitution of Liberty Von Hayek defended ‘the freedom in economic affairs without which personal and economic freedom have never existed’. He was a bitter opponent of the extension of state interference in the economy. He argued that the extension of the welfare state would inevitably lead to the loss of freedom if it permitted no choice. The Road to Serfdom was published in 1944, and reinforced Churchill’s own doubts about post-War reconstruction. His ideas became the major force in Conservative ideology under Margaret Thatcher, who was introduced to them through her mentor, Sir Keith Joseph.

There was a piece on Thatcher’s adoption of Von Hayek about a decade ago in the Financial Times. The article repeated a story about Thatcher’s official promotion of it at a Conservative party meeting. She went to it with the book in her hand. She arrived just when a young man was on the floor making a speech supporting the middle of the road economic consensus. According to the article, it was Thatcher’s turn to speak after him. She slammed the book down on the table with the words ‘This is what we all believe in now’. Or words to that effect. The article then went on to discuss the various ways in which she actually misunderstood von Hayek, such as on the importance of central institutions, such as the monarchy and parliament in Britain. The article suggested that elements of von Hayek’s views could be adopted by a Labour government without crossing the floor.

Well, maybe, though with retrospect the article seems like a subtle piece of propaganda aimed at getting New Labour to continue von Hayek’s Liberalism but under a less extreme, slightly more socialistic guise after public discontent with the Tories increased.

Von Hayek’s influence also explains why Thatcher banged on so much about how the Tories’ represented ‘choice’, despite the contraction of individual liberty implied by her ‘strong state’ policy.

Margaret Jones and Rodney Lowe reproduce an extract from von Hayek’s 1959 work, The Constitution of Liberty, in their collection of documents, From Beveridge to Blair: The First Fifty Years of Britain’s Welfare State 1948-98. This contains the following paragraph attacking the notion of the state provision of welfare:

‘In many fields persuasive arguments based on considerations of efficiency and economy can be advanced in favour of the state’s taking sole charge of a particular service; but when the state does so, the result is usually that those advantages soon appear illusory but that the character of the services becomes entirely different from that which they would have had if they had been provided by competing agencies. If, instead of administering limited resources put under its control for a specific service, government uses its coercive powers to ensure that men are given what some expert thinks they need; if people can thus no longer exercise any choice in some of the most import5ant matters of their lives, such as health, employment, housing and provision for old age, but must accept the decisions made for them by appointed authority on the basis of its evaluation of their need; if certain services become the exclusive domain of the state, and whole professions – be it medicine, education or insurance – come to exist only as unitary bureaucratic hierarchies, it will no longer be competitive experimentation but solely the decisions of authority that will determine what me shall get’.

Now this needs very careful critiquing. More specifically, how well has this argument stood up now that it has been and is continuing to be government policy?

Actually, not very well.

Von Hayek’s assumption, that economic freedom is the basis of personal and political freedom, is flawed. As critics of the Conservative party have pointed out, private property and ideologies of economic freedom existed long before most of the European population had personal or political freedom. It was the basis of late 18th and early 19th century laissez-faire economic liberalism at a time when only the aristocracy and the upper middle class in Britain, for example, had the vote.

It also does not take into account the importance of public opinion in formulating government policy. It assumes that decisions regarding health, social insurance and so on would be taken by a bureaucratic, technocratic elite deciding what it believes the public wants and needs on their behalf. Now this certainly was the case in the former Soviet Union. In England the early Fabians, including Beatrice and Sidney Webb, certainly had this authoritarian mindset and did believe that the new socialist society should be administered by an efficient bureaucracy. It does not, however, envisage the way the public actively tries to influence government policy through public meetings, bureaucratic forums in which the public can state their objections and demands, such as patients’ groups and similar organisations, or the fact that the public can and is frequently actively involved in welfare issues through the simple process of democratic debate. Von Hayek’s simplistic view of state power is only true of monolithic, single party autocracies such as Communism, Nazi Germany and the Fascist dictatorships. It does not consider the state as a means of empowering people and granting them a freedom, which they would otherwise be denied by their economic circumstances. John Steward Mill, in his class formulation of Liberalism in the 19th century, passionately defended personal liberty. However, he was also influenced by contemporary socialist experiments, such as the French Saint-Simonians. As a result, he believed that some freedoms could only be secured through the collective action of the state.

Now let’s examine the claims for freedom made on behalf of the private provision of welfare services. This seems to assume an ideal condition in which such private organisations are able to offer service comparable to those of the state. But as we’ve seen, in recent years the privatised industries such as the railways and privatised hospital administrations are now very heavily subsidised by the state to an extent which far exceeds the amounts they received when they were directly owned and operated by the state. In the case of the railways, the service they provide is actually poorer than in the last days of British Rail.

It also does not accept that private provision may result in a lack of choice. In America, for example, 1/7th of the population cannot afford medical insurance. These people have absolutely no choice regarding their health care. They are forced to use medicare. As for those, who have the benefit of private medical insurance, these are tied very much to the demands of their insurance company. The days when Americans were free to take or leave their doctor’s advice are very much a thing of the past. Not that you’d know that from the polemic coming out of the American Right.

It also does not foresee the way private companies may also close down or alter services without consulting their customers, purely for the benefit of their shareholders. An example of this was the way one of the American firms charged with running GPs’ surgeries in London closed three of them, leaving the patients with no doctor. It does not accept the fact that certain industries are natural monopolies, which can be both more efficiently and more democratically administered by the state in the public interest.

Furthermore, von Hayke ignores the possibility of the use of state coercion to enforce and support private industry at the expense of the liberty of the individual. The use of workfare to compel the unemployed to work in selected retail venues or other industries is a prime example of this.

Von Hayek also makes the statement ‘It would scarcely be an exaggeration to say that the greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with what they regard as the public good’. There’s a bitter irony here. The administration of the modern state and party political machines is now highly technocratic and corporative, using experts drawn extensively from industry, to promote the interests of those industries against the public good.