The Road to Stimulus

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In his best-known book, The Road to Serfdom, which remains a classic of political and economic philosophy, Friedrich Hayek laments the trends that are turning Western societies toward socialism. His works have been widely read, and his contributions to economic theory and understanding have been significant—he shared the 1974 Nobel Memorial Prize in Economics.

The Road to Serfdom was, and is, meant to be a warning to governments of today and tomorrow which are rapidly consolidating power, to avoid the trends that led Germany to fascism. He says so quite explicitly in the book’s introduction:

“It is necessary now to state the unpalatable truth that it is Germany whose fate we are in some danger of repeating. The danger is not immediate, it is true, and conditions in England and the United States are still so remote from those witnessed in recent years in Germany as to make it difficult to believe that we are moving in the same direction. Yet, though the road be long, it is one on which it becomes more difficult to turn back as one advances. If in the long run we are the makers of our own fate, in the short run we are the captives of the ideas we have created. Only if we recognize the danger in time can we hope to avert it.”

Hayek clearly meant for his book to be read by future generations, or at least for readers to heed its advice on behalf of future generations. Not surprisingly, at a time when Hayek’s observations seem especially prescient, many are eagerly prepared to accuse him of false predictions.

Hayek’s nightmare scenario has far from materialized with the sweeping Democratic victories in November, and President Obama is certainly not the only politician of either of the two major parties whose policies seem to reflect the trends that Hayek warns of. It is nonetheless worth reexamining The Road to Serfdom, originally published in 1944, in light of Obama’s ascendancy.

The book focuses to a large degree on the inherent problems of collectivism or “planning.” One of these problems is the understanding that the state cannot intervene in the market and remain objective. The government, like any other institution, is run by people. When they take it upon themselves to violently interfere with the economy, it is not only out of mistrust toward the system, but out of a desire to see their own ideals realized.

As Hayek points out, “we all think that our personal order of values is not merely personal but that in a free discussion among rational people we would convince the others that ours is the right one.” He continues to explain that the activists of all persuasions “all know that their aim can be fully achieved only by planning—and they all want planning for that reason.” President Obama’s efforts to push the stimulus package through Congress at break-neck speed are a clear sign of an idealist beginning to make his dream a reality for the rest of us—whether we believe in his dream or not. The resounding rejection of his bill by the GOP should come as a sign to rational thinkers that the proposal contains real problems.

It is not surprising that Republicans do not support the bill in its current form. What should be surprising is that Americans in general do not want a bill without bipartisan support. According to a CBS poll, only 13 percent of Americans think that the stimulus bill should be passed with only the backing of a Democratic majority.

In all cases involving money someone wins and someone loses. And that is exactly how it should be. However, the process should be natural. In the free market system, some succeed beyond their wildest dreams, while others lose everything. No individual or institution decides who is right and who is wrong—supply and demand decide that for us. This system has worked for us precisely because it is impersonal.

Some of our leaders have decided that it is no longer acceptable to allow failure to occur in our system. However, competition, a key component of which is failure, is absolutely essential to healthy economic life. As Hayek says, the liberal argument for competition is “based on the conviction that, where effective competition can be created, it is a better way of guiding individual efforts that any other.”

For example, the bailout of the auto industry, which punctuated the financial crisis, came about because of poor decision-making and a clear mandate from American buyers that they are no longer interested in many of the cars made in Detroit. Offering money to these failing companies entirely disregards the traditional respect for competition that forms the groundwork of capitalism.

The question is not only one of money. It is also a question of personal rights and freedoms. As much as the average person may dislike the idea, money is tied to everything in American life, and how we manage and choose to spend that money drives our society. Allowing the government to wield more control over that lifestyle is precisely what our representatives are doing. And they are making a mistake.

Hayek wrote, “We have progressively denied that freedom in economic affairs without which personal and political freedom has never existed in the past. Although we had been warned by some of the greatest political thinkers of the nineteenth century, by De Tocqueville and Lord Acton, that socialism means slavery, we have steadily moved in the direction of socialism.”

Not only the bailout and stimulus bills, but dialogue calling for the nationalization of banks, and the plan for universal healthcare are of concern, not to mention the general push toward larger, more involved government. Near the end of The Road to Serfdom, Hayek writes, “Nowhere has democracy ever worked well without a great measure of local self-government…Where the scope of the political measures becomes so large that the necessary knowledge is almost exclusively possessed by the bureaucracy, the creative impulses of the private person must flag.”

In his conclusion, Hayek offers a final word of advice: “If we are to build a better world, we must have the courage to make a new start.” Funding failed institutions, expanding government intrusion and partisan rule is far from a new start.

This is a perfect time to reread Hayek’s book, which eloquently proclaims that the dangers of this type of governance are real. As Friedrich Holderlin, who is quoted in The Road to Serfdom, said, “What has always made the state a hell on earth has been precisely that man has tried to make it his heaven.”

Daniel Allen is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.