Hayek's The Road to Serfdom

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Hello, in The Road to Serfdom, published in 1944, the economist Friedrich Hayek warned that the way Britain ran its wartime economy would not work in peacetime and could lead to tyranny.

His target was centralized planning, arguing this disempowered individuals and wasted their knowledge while empowering those ill-suited to run an economy.

And when the Reader's Digest selectively condensed Hayek's book in 1945 and presented it not so much as a warning against tyranny, but as proof against socialism, it became phenomenally influential around the world.

With me to discuss Friedrich Hayek's The Road to Serfdom, are Bruce Caldwell, Research Professor of Economics at Duke University and director of the Centre for the History of Political Economy, Ben Jackson, Professor of Modern History and Fellow of University College at the University of Oxford, and Melissa Lane, the class of 1943 professor of politics at Princeton University and the 50th Professor of Rhetoric at Gresham College in London.

Melissa, Hayek was Austrian by birth.

What was his background there?

So Hayek was born in 1899 into the Austro-Hungarian Empire, born in Vienna.

And we might borrow a phrase from George Orwell and say that he was born into the lower, upper, middle class, if we can transplant that to the class structure of the empire.

And we might emphasize three aspects of his upbringing and early life.

So one was science.

So his father was a physician who was also a passionate botanist.

And so Hayek developed a taste for the good of science and also a sense of what science should not be.

The second thing we might highlight is liberalism.

So he fought in the First World War and then studying at the University of Vienna he was active in a student party supporting the bourgeois democratic party which was effectively a liberal party.

But he inclined a bit more towards social democracy.

then than he would later on.

And then the third thing we might highlight is socialism.

So as a student and and a young man, he was mentored by Ludwig von Mies, who was an economist who, in the early 20s, wrote a stinging critique of socialism.

And I think that would be very significant for Hayek's thinking as he developed.

Can you say something about his education?

So he studied both law and economics at the University of Vienna.

Apparently, as a schoolchild, he wasn't a particularly assiduous student, but his

peers as a student recognized that he was actually very smart and kind of autodidactic, but he always followed his nose and was interested in really learning for its own sake rather than just jumping through hoops.

What had he seen, what had Arc seen in Austria and Germany that so affect

his way of thinking so profoundly?

So, of course, he lives through, as I said, fought in the First World War, sees the collapse of the German Empire, the Austro-Hungarian Empire.

Austria emerges as

what's called at the time German Austria,

a small republic.

And at that same moment at the end of the war, there are waves of socialist revolution, especially in Munich and Budapest.

Of course, there had been the Bolshevik Revolution in Russia.

So this question of the possibilities of revolution, the possibilities of socialism, Vienna would be ruled by the Social Democratic Party in in the period after the war.

So he sees socialism in action both in its more revolutionary and less revolutionary guises.

Are there any salient points that come from the discussion he and his friends had?

There was a group of them,

yeah.

So he's part of a group that's known as the Geistkreis, and they're thinking about the fundaments of social order.

And one of the fundamental questions was: should one follow a socialist path to revolutionary transformation, or should one not?

And I think he and other people who were young in this period, like Karl Popper and others, were very much confronted with that question.

Thank you, Bruce.

Bruce Caldwell, can you tell us more about his intellectual roots?

Can we go into it a bit more deeply?

So, yeah, Melissa has identified certainly one very important influence, that would be that of Ludwig von Mises, who not only was a severe critic of socialism, but also of

an impressive monetary theorist.

So, the two things that Hayek was most interested in in economics in his early years was monetary theory.

And then particularly when he got to Britain, he picked up on the critique of socialism.

But another aspect of it that's important is that he was part of the Austrian school of economics.

And I say Austrian school of economics to distinguish it from the German historical school.

The German historical school was far more dominant during the 1880s, 1890s, turn of the century.

In fact, they gave the Austrians the name, well, that's Austrian economics, as kind of dismissively.

And the distinction between the two schools is that the Austrian school of economics emphasized theory.

Just as the classical economists like Smith and Ricardo thought that you could take a theoretical approach to economic phenomena, the Austrians shared the theoretical approach.

They had a different theory of value, but they still emphasized the importance of theory.

The German historical school, on the other hand, thought that every country is unique.

You have to know its history, its economics, economics, social, political, cultural history, its trading partners, its neighbors, its state of development, before you could even pretend to come up with some sort of idea about what the appropriate economic policy would be for such a country.

So one particularly salient point is the German Empire was not particularly fond of free trade.

They wanted to say, well, wait a second, free trade, that's just Manchester Ismus.

This is an idea that is masquerading as a theoretical law of economics, but really it's just something that favors the British Empire during the 19th century.

Then he arrived at the London School of Economics in 1931.

What were the prevailing ideas there at that time?

The London School of Economics was formed or founded in 1895 by Fabian Socialists.

So its history was of a new school that had certain socialist leanings, but they also tried to hire the very best people that they could find.

And among these were Lionel Robbins, who preceded Keynes there.

He had been a student there, gone to Oxford, then come back to the LSE.

And both Robbins and Hayek were on the same page in terms of being proponents of a theoretical approach to economics, a market approach, as opposed to some of the new ideas.

They viewed some of the ideas that Keynes was promoting at the time as, well, Hayek labeled it a monetary hereticism.

And both Robbins, not early on, early on he had socialist tendencies just as Hayek did, but by the 1930s, they were much more in favor of liberalism and trying to promote liberalism.

Thank you very much.

Ben, Ben Jackson.

When they looked across to Germany and Italy, many economists saw the rise of tyranny and fascism and the last gasp of capitalism.

Why was that?

So, as Bruce said, within the economics department at the LSE, there were a lot of enthusiasts for market liberalism.

But outside of the economics economics department, Hayek found there were quite a lot of strong leftists at the LSE.

So, for example, William Beveridge, who was the director of the LSE at that time, later the author of the famous report on social insurance, other figures like Harold Lasky.

And these figures, Hayek found, argued that fascism should be thought of as the last line of defence of capitalism.

It's what happens when capitalism finds itself under threat,

under threat because of economic depression, because of the trend towards monopoly and other larger forms of organization in the economy, and also fundamentally because of the threat of the labor movement and the socialist movement in challenging capitalism.

And these people on the left basically argued that in those circumstances, the people with economic power in society, the property owners, are willing to cancel democracy, cancel civil liberties, and make deals with political organizations like the Nazis if it guarantees their economic interest.

The other piece of evidence that people on the left pressed in service of this argument was, of course, that the Nazis had persecuted socialists, communists, trade unionists, and that it was people on the left who were one of the main victims of those regimes.

And I guess you could say underpinning that analysis was a sort of Marx-influenced idea that it's economic interests that determine historical political outcomes.

It's the people who own property who really run things.

And that's one of the things that Hayek doesn't agree with, wants to push back against and say, actually,

economic interests don't work in quite that way, because ideas are also important in politics, and that's one of the things he's trying to get at in The Road to Serfdom.

Which ideas would he be thinking about at that stage?

He's thinking about socialism, but not.

I mean, he doesn't talk so much in the.

What does he mean by socialism?

Well, so he doesn't talk so much in The Road to Serfdom specifically about what you might think of as the kind of classical socialist authors, so Marx and Engels.

He's mainly focused on what he sees as a kind of technocratic, top-down kind of socialism that he sees emerging from earlier French thinkers like Saint-Simon and figures who had a kind of idea that you would have a sort of central brain directed by the state that would shape the economy and shape society.

And he saw that trend in socialist thinking as adopting what he thought of as a kind of scientistic view in that

they thought that you could sort of use, apply science to social affairs in the way that you could to natural affairs and control the economy in the same way that scientists can control nature.

And so it was those ideas he saw as very influential within socialism.

Did you see them fail?

Well, I suppose at the time he was writing, he was very concerned that they were too successful.

His whole impetus in writing the book was because he felt he was surrounded by people who'd imbibed these ideas and were trying to push them forward.

And he was perturbed by seeing all his colleagues at the LSE, other kind of intellectual figures in Britain, articulating what he saw as these false ideas, that it would be very straightforward for the state to control the economy and that you could very easily combine that with parliamentary democracy and civil liberties.

That you could transfer a war economy, the planning of a war economy, which was very tight and trent, almost of necessity.

You could transfer that, and it had been very successful, no unemployment, and so on and so.

You could transfer that to peace, and everything would be fine, but it wasn't.

That's right.

So, it was a very common argument that Hayek encountered during the Second World War:

demonstrably, the state seems to have done a good job in the war.

We have full employment, everyone has useful work to do.

Why can't we just carry that across into the peacetime?

And Hayek accepted that during wartime, it was possible to do that, because it was very easy to agree during wartime on what the objectives of society were.

That is, to win the war, they had to produce the tanks, the guns that were needed to win the war.

But his point was that when you move into peacetime, people start to disagree quite radically over what should be produced.

And at that point, it becomes very difficult to maintain that strong central planning.

Meanwhile, just biographically, he was not called into war service.

A lot of his colleagues, so Lionel Robbins, Keynes, they were all working

in the state apparatus in

various roles.

He, because of his Austrian background, he wasn't allowed to take part in war service.

And so, in a way, he felt detached from the mainstream of these debates.

And so, he thought that the contribution he could best make to the war was to write this book that would have a broad audience and would be a kind of countercultural blast that would explain to everyone why the argument had got in the wrong direction and how they needed to kind of get back to these basic ideas of economic liberalism.

Thank you, Melissa.

Mr.

Lane, in the road to serfdom, how does Hayek express his main concerns about planning?

So, as Ben says, and as you suggested, one simple way to think of it is the problem with transplanting a war economy into peacetime.

And one of the problems, as Ben said, is the problem of not having an agreed set of ends that everyone can agree on.

People have radically different ideas of what the ends should be.

But Hayek is also concerned with the problem about means.

So the problem is also, whatever you think the ends should be, you also would have to, in order to exercise central planning, you would have to specify the means through administrative bureaucratic discretion.

And that would lead to illiberalism because, for example, you would have to tell people what occupation to serve in.

But it's important to remember that what he's criticizing, as he emphasized when the book was republished and he issued another preface to it, he emphasized his target was the nationalization of the means of production and the central planning that that would make necessary.

So it's not just any kind of planning or any moment of planning.

It's really this idea of comprehensive state planning of the economy as a whole.

and that would require the planners, he argued, effectively to have to arrogate to themselves this dictatorial power to dictate both the ends and the means which economic activity should serve.

Aaron Powell, and they'd also have to choose the people who laid down the law,

the

dictatorate.

Exactly, exactly.

A directorate which would become a dictatorate, exactly.

Yeah.

Which he was very suspicious of.

That's right.

So he's really afraid.

And

one of the big debates in interpreting the road to serfdom is the question: is he saying that this is inevitable?

And there's certainly some language in the book that suggests that he's saying these are inevitable tendencies.

He himself pushed back against that later and said, Look, there would be no point in having written the book if it were really inevitable, because the book is a warning.

It's trying to tell us to not go down this path.

I think the best way to think of it is to think of it that it's akin to the work of Alexis de Tocqueville, for example.

And actually, Hayek took the phrase road to serfdom from Tocqueville's road to servitude in democracy in America.

And what Tocqueville is talking about is sort of fundamental tendencies.

So Tocqueville talks about the tendencies that the move to equality and democracy can bring about and they can become a road to tyranny.

And Hayek is talking about the tendency of moving in a direction of planning that it can sort of gather steam and become this road to tyranny.

Thank you, Bruce.

Bruce Caldwell, can you tell us more about the way knowledge is spread across a population and why that matters so much to Hayek?

I think we have to distinguish the two sets of arguments that Hayek is making regarding socialism.

One of them is the sort of argument he would be making to his colleagues at the Ludden School of Economics that Ben mentioned, who are also studying economics seriously.

They're developing models.

They're market socialists.

And they were making the argument that you could have a market socialist society where you replicate the workings of a market system in terms of its efficiency, the sort of things that come out of a perfectly competitive economic model.

And Hayek, trying to argue against these, wrote a wonderful little paper published in 1937 called Economics and Knowledge.

And in it he said, well, in these models that we use to try to explore the economy, what kind of assumptions are we making about what kinds of knowledge that agents in the models have.

And he said, well, we're basically assuming that they have full information and the information that they have is correct.

And he said, but if you look at the world, actually knowledge is dispersed.

Different people have different bits of knowledge.

And it's subjectively held.

Some people have knowledge that in the end turns out to be wrong, particularly forecasts about the future.

So the real question is, in a system such as ours, how does any kind of coordination actually occur?

That's the question he poses in economics and knowledge.

He answers it in various writings, but most famously in his 1945 piece, The Use of Knowledge in Society, where he talks about the market system as he actually uses the word marvel.

It's a marvel.

It's a marvelous system for coordinating human action in a world of dispersed knowledge.

And the image that he has is, well, we are each of us as consumers, as producers, in particular circumstances of time and place.

We know our circumstances, but we don't know anything else.

And we we have an array of prices, some of which are relevant for goods and services that we might want to demand.

We take actions as producers and as consumers in markets.

Our actions are part of that supply and demand that determine market prices.

And that causes that array of prices that's out there to adjust, keep adjusting to the actions that we take.

Now, this is a theoretical argument,

but the purchase of it was well put by an earlier writer, Frederick Bastiat, who talks about Paris getting fed.

Can you just explain a little to the listeners what that actually meant?

Yes.

And Boucher could later describe it as a feat of engineering which comparable with Newton's.

It was given very high status in the intellectual hierarchy.

Anyway, how Paris is fed, yes.

No one plans on feeding Paris, but millions of people participate in Paris getting fed not just breakfast and lunch and dinner, but every meal every day as long as it exists.

All of these things are taking place with individuals using their local knowledge, the knowledge that they have about what they're about, either as a consumer

or as a producer.

They're not planning to feed Paris, yet all of this coordination takes place, not just once, but over and over again.

So he's contrasting that sort of system with a system of central planning where you're supposed to gather all of that knowledge together in one place.

And it's not going to be a productive system in terms of economic efficiency.

And it is also one, as Melissa was pointing out, where you're going to have people at the top making decisions about how to allocate labor, how to allocate the production, which goods get produced, which don't, which jobs become redundant, which do we need to shift workers over to.

Thank you very much.

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Ben Jackson, what did Hayek have to say about laissez-faire?

What exactly does that phrase mean?

So laissez-faire is a slogan, really, that's used to capture a certain kind of economic liberalism.

And it's that kind of economic liberalism that basically believes that the optimal role for the state is to get out of the way of economic actors and leave them free to pursue their own interests.

And the idea is if everyone is free to pursue their own interests, that will then aggregate into the best outcome for everyone through the kind of unintended cooperation that you were just talking about with Bruce through through these complex market mechanisms.

Now, Hayek says in the book that he's not that comfortable with laissez-faire as a slogan.

And it's interesting, a few years before Hayek writes, John Maynard Keynes had written a famous piece called The End of Laisy Fair in 1926, where Keynes had argued that the time was ending for that kind of free market capitalism and we were moving into a new era where government would have to be more involved in the economy.

And maybe partly in response to that, Hayek says, you know, laissez-faire is not a great slogan because it implies that liberalism is passive and static and

doesn't involve any role for the state or the legal system.

And so Hayek in The Road to Serfdom says he envisages a form of economic liberalism where there would be a role for the state in laying down the rules that govern the market and in making up for some kind of market imperfections.

So he says he's comfortable with the state coming up with general rules that apply to everyone rather than arbitrary, discretionary judgments.

And he says it's a bit like the difference between the highway code and telling drivers where to drive.

So telling drivers where to drive, that's bad kind of planning.

But having a state that sets up the rules that then allows market actors to exist within those rules, then that is acceptable, Hayek says.

And he gives a few examples in the book of ways in which the state could be involved in setting up the laws around property,

regulating working hours,

some forms of social security, he says, would be compatible with that kind of idea.

All of these things are fine, Hayek says, as long as they don't disrupt the sort of fundamental mainsprings of competitive capitalism.

As long as it doesn't seek to replace competition, but rather to supplement competition, then that's okay.

Thank you very much, Melissa.

He was writing in Britain and drawing on a specifically British liberal tradition.

What would he have had in mind, do you think?

So he is very much in the tr sees himself very much in the tradition of John Stuart Mill as well as Lord Acton, these great nineteenth century liberals.

He also goes back to Smith and Hume as well as Burke.

And Robert Skidelsky, the biographer of Keynes, has pointed out that Keynes also would have greatly admired Hume and Burke, among others.

So in many ways, again, they actually see themselves as on the same team, broadly speaking, in terms of the history of ideas.

And Hayek would go even further back to Locke, to Milton, but he's not narrowly nationalistic only in terms of English or Scottish thinkers.

He's also, as I said, very much influenced by Tocqueville and other thinkers of the continent.

But

he sort of then constructs, I think, a rather incoherent pantheon of the thinkers whom he's against.

So Descartes, Saint-Simone, whom Ben mentioned, Comte,

Hegel, Marx, also Rousseau.

And Hayek wants to put all of them under this heading of people who believe that reason can centrally direct human activity for the overall general good.

So it's really a question of how reason operates.

So for the thinkers whom he aligns himself with, he sees them as saying reason is sort of writ small.

It's in each person making those individual decisions about how to live their lives.

And so tolerance and pluralism is the most important thing.

Whereas the thinkers whom he opposes, he calls false individualism.

And he says those thinkers believe that reason with a capital R can direct from the center.

And so you can see the affinity then with the central planning where there's a kind of social engineering that can take place.

And that's what he's suspicious of because it will trample on these liberal values of tolerance and pluralism.

Aaron Powell, can we go back to the idea of state for a second, Bruce?

Well, more than a second.

How important were the safety nets, let's call them that, in his society?

He mentions what we might refer to as safety nets in a couple of places in the road to serfdom.

He seems to say, and he's never very specific in terms of policy details.

Milton Friedman's someone who will give you every

bit of the policy implications of anything he talks about, whereas Hayek is often a bit vague.

But he said basically that Britain and the United States are rich enough to provide some sort of safety net.

If someone, an accident of some sort happens to someone, they should be taken care of.

We're rich enough countries that no one should ever face starvation, et cetera.

And he didn't specify exactly what level of safety net there should be.

In my own description of it, I would say that he was probably saying something like, we should have a safety net, but it shouldn't become a hammock.

It shouldn't become a permanent thing that is in place through time.

It is something there to catch someone if they fall, but they shouldn't remain in it forever.

The other place that he is.

It choose to judge

when it stops being a safety net and becomes a hammock.

This is what he says.

It is a difficult decision that has to be made,

and we need to face it as a society.

Presumably, in a democratic society, it is decided by the polity.

But he was just pointing out that this level is a difficult question question to ask.

The other thing that he seemed to worry about, and this is towards the end of the road to serfdom, was that when the war ended, there would be a necessity of transitioning industries over to a peacetime economy.

And a lot of people would be losing their jobs and having to find new forms of work because you are no longer making tanks but other things.

And he wanted that transition to be able to take place.

So he argued against people getting comfortable with thinking that once they reached a certain level of income that they always had to remain at that level of income.

He said, in a market system, disappointment of that sort of expectation is all part and parcel of it.

Thank you.

Ben Jackson, the book was caught up in a row between Churchill and Attlee.

What was the row?

The left in Britain were fairly critical of the Road Surfin when it came out, but the right and the Conservative Party were somewhat sympathetic to it.

And in fact, the Conservative Party used some of their paper ration

to ensure another edition of the book was published when it looked like it was selling out.

And Hayek sent a copy of the book to Churchill.

We think Churchill probably didn't read it, but people around Churchill had read it and knew it.

And during the 1945 general election campaign, Churchill made a broadcast which was widely thought to have been channelling Hayek-type arguments because Churchill,

well, so in that broadcast, Churchill said, were

Labour to be elected, then it was likely they would have to introduce a kind of Gestapo.

Churchill said, no doubt humanely in the first instance

was the phrase he used.

And it was a Hayek type argument because he was saying that if you move towards a more socialist form of government, inevitably

the government will have to crack down on dissent.

Now, I think it was widely felt at the time that that argument of Churchill's didn't land.

For example, Margaret Thatcher in her memoir recalls listening to Churchill's broadcast in the Somerville College Common Room in Oxford and thinking, he's gone too far,

which is not because she disagreed with what he was saying, but because she thought making that kind of argument wouldn't be very effective in a context in which the leaders of the Labour Party had just been working very closely with Churchill in the war effort.

And of course, Attlee, the leader of the Labour Party, then picked up this baton in his broadcast in reply to Churchill.

And he said, I'm not going to get involved in any of this theoretical stuff that Churchill was talking about.

It seems to be a second-hand version of the ideas of an Austrian economist, Professor Friedrich Auguste von Hayek, who is very popular in the Conservative Party at the moment.

And Attlee was clearly playing into the Germanic character of Hayek's name as a way of discrediting his ideas.

And I suppose perhaps what that incident shows is how difficult it was for Hayek to land the argument he was making in Britain because the leaders of the left leaders of the Labour Party were actually quite low-key, pragmatic, patriotic.

They'd just been involved in the war effort.

And so it was quite hard for people in Britain to get hold of Hayek's argument and think it had purchase on the left in Britain.

Although you could argue that that was partly what Hayek was saying, that you have these well-intentioned people who come into power with good ideas that then all go wrong because they can't sort of control the machine that they set in motion.

Thank you.

Melissa,

can we bring Keynes into the argument now?

Where did he stand in this discussion?

So, again, it's very interesting the complex relationship between Hayek and Keynes.

They butted heads on technical questions of economic theory in the early 30s.

But then, actually, during the war, when the LSE had been evacuated to Cambridge, based in Peterhouse, Keynes actually had gotten Hayek rooms himself in King's College, where Keynes was a fellow.

And there was a story that Hayek's son, at least, believed, that they had done fire warden duty together on the roof of King's College Chapel.

And they were, you know, discussing ideas.

They were both bibliophiles.

Hayek was a great anglophile.

So they had a kind of emotional resonance with each other and a friendship, I think.

And so, anyway, when Keynes receives his copy of the book, he actually reads it on the boat on the way to the Bretton Woods conference in the summer of 1944.

And he writes a famous letter to Hayek, and he says, I actually find myself not only in agreement with most of the book, but actually in deeply moved agreement.

This is with the road to serfdom.

But then he really presses this question of where to draw the line and if this is a slippery slope kind of argument.

I think he says slippery path.

And he says, the thing is, though, that

we have to draw the line.

We can do these bits of intervention, as Bruce was saying earlier.

We can do welfare state and up to a point.

We can do market correction up to a point where there are genuine market failures.

And then he says, also, there are certain things that you can do in a country that thinks rightly that you wouldn't be able to do in a country that thinks wrongly.

And I think by that he means what Ben was indicating, that it would be possible to do certain kinds of reform in Britain, for example, without going down the slippery slope of the road to serfdom.

So he appreciates much of the argument, I think, again, when it's applied against this extreme of complete nationalization of the means of production, which, of course, Keynes himself did not support.

But he doesn't hold with the kind of slide into tyranny dimension of the argument.

Bruce, the Reader's Digest in America, which was a fast-selling publication, made a significant intervention.

What was it, and what effect did it have?

Yes, so I think The Road to Serfdom would have been a book that would have been known only to the occasional Hayek scholar had it not been for the Reader's Digest.

So the book was published in England in March 1944 and in the United States in September.

And a copy of it went to the Reader's Digest.

Very wide circulation, something like 8.5, 9 million at the time.

And each issue has a condensation of some book of note.

So they did a condensation of the road to serfdom.

The condensation was done by Max Eastman, who was a well-known journalist.

He was someone who had been quite sympathetic to the Russian Revolution, had gone to the Soviet Union after it formed, married a Russian woman, was there for two years, befriended Trotsky.

But when Lenin died and Stalin took over, he quickly lost his taste for the revolution, became a critic, someone who Hayek, in fact, quotes in The Road to Serfdom.

And so it's a 20-page summary of the arguments in The Road to Serfdom.

And this goes out to everyone who reads The Reader's Digest.

The Book of the Month Club picked it up, so they did a little independent printing of the condensation.

At the same time, Look magazine, when this was all happening in the spring of 1945, just as World War II is coming to an end, comes out with a one-page spread of the Reader's Digest and cartoons.

So it was something that was certainly a book that was getting a lot of attention.

Hayek was on a boat coming over to the United States to do an academic tour, five or six different universities that he was going to speak at about the book when the condensation came out.

So he arrives in New York, and the University of Chicago Press got a publicity agency to take over the control control of the tour.

So he spends five and a half, six weeks in the United States giving a talk in the morning, giving an evening talk, getting on a night train, getting up in a new city the next day, giving another talk.

Thank you.

Ben Jackson, how did The Road to Serfdom come to be seen, especially as an attack on socialism in all its forms?

It seems clear that Hayek, when he wrote the book, had in mind a fairly classical understanding of socialism.

That is, public ownership of the means of production, strong forms of economic planning, very, very little role for the market.

But after the Second World War, socialism being a very protein political movement changes somewhat in its understanding, at least in Western Europe, away from that classical understanding of socialism towards more of a mixed economy model, where you might think of socialism as being about the pursuit of an egalitarian society through various kinds of policy tools, which might include a very strong welfare state or use of state spending to even out the economic cycle of the kind that Keynes had recommended, and in a way, a step away from the kind of public ownership and forms of strong economic planning that Hayek talks about in the book.

And so, a kind of interesting thing happens after the book's published, where it's sort of repurposed in a way or read by some people in a more simplified form as arguing against all kinds of state intervention in the economy, against the welfare state.

And when that argument is made, the advocates of that argument then find themselves coming up against the sort of obvious repost you might think of, which is someone might say, well, hang on, Sweden's got a very big welfare state.

Where's the secret police in Sweden?

It doesn't exist.

There doesn't seem to be this inevitable path to serfdom that you're talking about.

And so that makes the argument, I think, a bit harder to land in the post-war period as socialism changes its character.

But of course, in Hayek's later writings, he shifts his attention to those other forms of socialism.

In his later writings, he becomes very critical of the forms of public spending in the welfare state for reasons of economic efficiency and liberty, but not quite in the same way as he puts the argument in The Road to Serfdom.

Melissa, how did Hayek respond to that sort of interpretation?

Yeah, so on the one hand, he acknowledges the points that Ben was just making and says, you know, in many ways, the book is being misunderstood if people think that it's, you know, attacking Sweden.

It was attacking central planning

as it was being seen in the rise of Hitler and then in full-blown sort of fascism.

And he says also, of course, in some ways the book was misleading because it was being written during the Second World War, he played down

the attack on the Soviet Union, which would have also been part of his argument, but because the Soviet Union was a wartime ally of Britain, you know, from a certain moment, then he had downplayed that.

And that had also led to some confusion about what his real target in the book was.

And I think it's not very compelling when he says, you know, when he sort of picks up the question about Sweden again in the 1970s and says, well, really, the welfare state would lead to the same thing, but maybe by a different mechanism, because the whole point of the road to serfdom was the analysis of the mechanism.

So to say, well, it would be a different mechanism, but ultimately it would get to the same point.

He doesn't really explain that.

At the same time,

he had become quite close in some ways to Milton Friedman.

He'd moved to Chicago and had spent time teaching in Chicago before he moved back to Europe.

But also then, he said later, well, he regretted that he hadn't spent more time also pointing out his disagreements with Milton Friedman.

And there's a moment in one of his late books where he says, you know, I'm not advocating a minimal state.

For example, I think using the language that Robert Nozick and the libertarian movement was using at that time.

Again, he goes back to the point, you know, I've always said that there could be a social safety net.

I've always said that there are market failures failures that need to be compensated.

So you know, in some ways I've been conscripted into a sort of ideological movement for libertarianism, which in some ways he had played into, but in other ways I think he also saw that he had some

principled disagreements with.

Thank you, Bruce.

Bruce Caldwell, we've talked about the enormous success that the book had in the States and so on.

Did it

die a slow death or did it increase and did it enter into the mainstream of discussion?

The response to the road to serfdom, the reason that it may have persisted through time, is that both people who hated it wanted to refer to it and say, look, there are no jackboots in Sweden.

Obviously, he was wrong, so they're able to disprove it if it says that there's a slippery slope.

And then people who hate socialism say, look, Hayek is a great figure.

He won a Nobel Prize.

Here's his book that is meant to be the ultimate critique of socialism.

So he does keep adding new prefaces as time goes on, but then in a later instantiation in the United States in 2010, when socialized medicine was being debated, Obamacare is what it's called in the States, a television presenter held up the road to serfdom and said, this is like a Mike Tyson left hook to the jaw of socialism.

And its sales went to number one on Amazon.com.

Thank you.

We're coming to the end now, but I'd like to go around the table, starting with you, Melissa.

What other influences did this book have?

You know, one thing that we might say more about is some of the important criticisms that have been made of the book.

So, for example, George Orwell reviewed it at the time that it came out, and he made, I think, the important point that

Hayek never says that capitalism is perfect, and he actually acknowledges that there are many ways in which capitalism might be flawed, but he wants to say, but central planning and government direction and centralization of the means of production would be more flawed.

It would be more fundamentally flawed.

So we have to accept these flaws of capitalism, even though we might be able to ameliorate them in some ways, as Ben said before.

And what Orwell says is the thing is,

both capitalism can have some really

problematic effects.

So he's, you know, writing at a time when everyone is remembering the Great Depression.

It can lead to dole-cues.

That in itself can lead to political upheaval and possibly to tyranny.

So Hayek doesn't deal with any of that.

And, you know, similarly, Hayek doesn't ever deal with the question of the original distribution of wealth, which then a capitalist order sort of depends upon.

When he addresses questions of poverty, he says basically, well, it would be worse for the poor if they were going to be subject to state control than it is for them to be subject to the sort of control of their employers.

employers, even though control of their employers, he acknowledges can be a kind of dictatorial control.

So, you know, so there are these real criticisms of the book that I think are really about what it leaves out.

It has this very focused attack on central planning,

it has an attack on the nationalization of the means of production, but it's a kind of focus that leaves out many other really significant questions that people might want to ask.

And so, you know, critics from the left as well as the right would want to engage with it.

The other thing I wanted to say, raising my hand before, was just that

there's a sort of afterword in the Constitution of Liberty, which is called Why I Am Not a Conservative.

And so this is Hayek's attempt to say, you know, in some ways, my work has been conscripted by conservative politics.

And really, I'm a liberal.

And actually, many of the things that conservatism stands for, I also don't agree with.

Thank you.

Ben Jackson.

Yeah, so I think it was a book that had a small but very strong number of devotees.

It's a bit like, you know, an album that's published by an avant-garde band, and then all the people who bought the album go out and set up their own band.

It's a bit like that with The Road to Serfdom.

There were lots of people who read The Road to Serfdom and were really motivated into political action.

So, for example, in Britain, the founder of the Institute of Economic Affairs, which was the big market liberal think tank, Anthony Fisher, he was inspired by reading The Road to Serfdom and talking to Hayek to set up the Institute of Economic Affairs.

And there's a whole infrastructure of think tanks and activists who come into being through the 50s and 60s that are conjured into being partly by the road to serfdom.

And they think of themselves as being in the wilderness throughout that time.

But when it gets to the 1970s and the 1980s, there then emerge political leaders like Ronald Reagan and Margaret Thatcher who are actually very sympathetic to their analysis.

And again, Margaret Thatcher mentions in her memoirs that she read The Road to Serfdom as a student and thought it was a profound book that captured something important about socialism.

And in some ways, you might say The Road to Serfdom is the book of Hayek that probably most shapes Thatcher's rhetoric and worldview.

Well, thank you all very much.

Thank you, Ben Jackson, Bruce Caldwell, and Miss Elaine.

Next week, the book credited with starting the young adult fiction genre, Little Women, by Louisa May Alcott.

Thanks for listening.

And the In Our Time podcast gets some extra time now with a few minutes of bonus material from Melvin and his guests.

The question I'd like to ask, starting with you, Melissa, what did you not have time to say you wish you'd said?

So I think one thing to say is Hayek's diagnosis of why socialism and planning become attractive to people.

And

I think it's very interesting because he says, in some ways, people have forgotten the fragility of the very economic order that has delivered success so far, but that they think could be further perfected and improved.

So people become very aware of the flaws of capitalism, some of which I was talking about just before.

And then it was a sort of natural thought: well, if we can do this kind of social engineering, then we could have all the goods of capitalism and we could even do better.

We could have more efficiency and more everything, and it would be much better.

And he says, that's the kind of fatal mistake.

It's that hubris where you don't realize you're going to, in effect, kill the goose which has been laying the golden eggs by trying to kind of

build a better goose.

Sorry for mixing the metaphors there.

Breed a better goose, I guess we should say.

Yeah, one of the things we didn't talk about is the final chapter of the book tells us something about how Hayek thinks about the global economy as well as the national economy.

So he has this final chapter where he says it would be a disaster if the global economy collapsed back into national, warring, national camps where each nation thinks it has a monopoly over the economic resources within that nation.

We need some kind of sharing of economic resources across national boundaries.

And he says we need a form of international federalism that will facilitate free movement of people, capital, goods across national boundaries.

And that will need to be enforced by some kind of supranational legal authority that will be very minimalist.

It won't be a kind of global economic planning, which Hayek says would be a disaster, even more disastrous than national economic planning.

It will be a way of setting up rules of the global economy that everyone has to abide by.

And one reason he thinks that's attractive is because he thinks if you set up that kind of framework outside of the nation state, it will limit the kind of intervention that states can make in their own domestic economies because capital will flee to other jurisdictions if the jurisdiction they're in doesn't look like it's going to be kind of suiting the economic interests of capital.

So there is a kind of

a sort of federal single market vision at the end of the serfdom that Hayek has in mind of how the global economy will function, which also feeds through then into the kind of debates later on about the global economy, the EU, these global international trading and so on.

And Hayek is one of the tributaries that feeds into that debate.

And Bruce?

Yeah, there's two chapters in the book that I think are particularly scary to read in the current political environment in many countries: Why the Worst Get on Top and The End of Truth.

And it actually is

his warning about the dangers of having a centrally planned system: centralizing power at the top, and

people of a good nature have a difficulty in trying to make decisions for others, and then this opens the possibility of bad people getting in control.

And he describes the sorts of arguments that they would make, that they target the other, that they appeal to the lowest common denominator in their arguments, that they get people who would tend to be more comfortable as followers

and target enemies.

And he goes through the list of enemies at the time, but it can be anybody from the Jews to the plutocrats to

whoever is the other.

And the end of truth talks about that, you know, if you're trying to make people fall in line, truth is a byproduct.

It's something that can be discarded because you have this goal that you're trying to achieve.

So it's scary reading if you think of the political situation in many countries today.

And

it's almost not meant to be a how-to manual, but certainly could be viewed as providing that.

It's very scary that way.

And I thank Melissa for pointing out the why I'm not a conservative.

I mean, he

was forever, right from his student days, I think, a liberal.

And he was just trying to figure out how to make arguments to make liberalism make sense in a world in which most people were either on the left or at the right of him.

But again, one of the things that he sort of points out when he writes the preface to the American edition of The Road to Serfdom

in the 50s is that liberal had come to mean something very different in America.

So when he uses the word liberal, he's thinking of the classical British liberal tradition.

He's thinking of Mill and Acton.

And liberal had come to mean, you know, the New Deal and

kind of more of an interventionist policy than he was comfortable with.

Did he move to amend and put more nuance into his book?

I mean, he doesn't rewrite the book.

He issues these later prefaces where he kind of reflects on the argument and tries to defend it.

But then what he does do is go on and do later works in political philosophy.

So he writes probably his most important work of political philosophy is The Constitution of Liberty, which is published in 1960, where he tries to respond to that kind of criticism by Keynes, you know, where would you draw the line?

And he develops this idea of the rule of law and its generality as a a way of trying to say what sorts of interventions would be permissible and which wouldn't.

Melissa brought up the Constitution of Liberty.

He does have a chapter in the Constitution of Liberty that is the decline of socialism and the rise of the welfare state.

And this was a book that he was writing in the 1950s.

He recognized that

nationalization of the means of production types of socialism were no longer going to be popular, but that the welfare state was viewed as kind of

the new middle way.

And that was what he he was trying to combat in that book, in the way that Melissa just very nicely summarized, the idea that the rule of law provides a kind of a test for any kinds of laws that are being proposed within a welfare state.

Before we go, I'd like to get back to this idea of somehow Paris feeds itself without direction and millions of things happen in what turns out to be a very effective, amazingly enduring, complex, but almost, as it seems, unexaminable way.

Aaron Powell,

I think, again, this was his idea about we don't appreciate the goose that's laying the golden eggs.

You know, we take that for granted that this complex market system actually provides goods, gets them where they're needed.

You know, it seems like magic.

Well, it's this coordination through the price system.

That's the fundamental argument that the price system is really

capturing information, and the information is based on this local knowledge that people have.

And the problem, if you think about the five-year plans in the Soviet Union, is that the managers who were making those plans at the top didn't really know what was going on in the factories in Siberia, partly because there were distorted incentives for the people in Siberia to tell them the truth about what was going on.

And so the thought was, well, if you try to mimic that through prices, it's not going to if you try to mimic that through central control, it's not going to work.

I mean, I think

it's a matter of people acting in their own self-interest as well.

And

if you think of the Soviet Union and its food production, they had these massive farms that were supposed to be so efficient because they took advantage of economies of scale, but something like 50%

of the food in the Soviet Union during a certain this is just a factoid, I'm not sure exactly what period, but it's one that we would always use in class, was produced on 2% of the land.

It's because the people would, you know, they'd work their factory jobs, they're going to get paid no matter how hard they worked or not, and then they'd get home and they would grow the food that they could then sell, you know, privately.

And that was a much more productive system, even though these were tiny plots that they were working relative to the vast mass production agriculture.

So it's an element of each person is not saying I'm going to feed Paris, but I'm going to do my job and get paid and then be able to do the things I want to do.

And each of the steps that they take in a market is sending more signals to the price system.

Aaron Powell, Jr.: Yeah, I mean, I think Melissa and Bruce have explained it very well.

I mean, I guess for Hayek, he thinks it's a form of coordination that can take place without coercion, without requiring state coercion to order people about and make people do things that they don't necessarily want to do.

I mean, I guess, as George Orwell hinted in the review of Road to Serfdom that Melissa mentioned earlier, that does seem

to some people a bit one-sided as an analysis of the economy.

There are forms of economic harm that Hayek skates over quite quickly in this vision that you can have this intricate coordination mechanism that doesn't involve coercion because there are ways in which people experience unemployment, poverty, all those kinds of things as forms of coercion.

And

that's the kind of dividing point, really, between left and right when thinking about the arguments that Hayek's making.

Thank you very much.

Enter our producer, Simon Tillerson, to some silent trumpets.

Does anyone want to your coffee or biscuits?

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Well, thank you.

That was terrific.

In our time with Melvin Bragg is produced by Simon Tillotson and it's a BBC Studios audio production.

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