Honolulu Advertiser

SECOND OPINION  by Cliff Slater

April 12, 2004

Best-seller changed history

Sixty years ago this month, Nobel laureate F.A. Hayek published “The Road to Serfdom” and set off a reversal of the then prevailing trend towards socialism when social and economic planning was seen as the antidote to the “chaos” of capitalism.

Hayek’s book, explaining the dangers of socialism and why the free market allowed more individual freedom, was a runaway best seller in the UK and lauded by such disparate intellects as John Meynard Keynes and George Orwell. It experienced the same success when published in the U.S. as a Book of the Month Club selection and condensed in Reader’s Digest (see my webpage to download).[1]

It is difficult for most people today to imagine that the mood of those times was for government ownership to be thought better for the average citizen than private ownership.

For example, around this time Britain socialized its mines, trains, telephone systems and much else. In the U.S., President Truman called for socializing the steel industry and only the Supreme Court ruling against its constitutionality prevented it. And price controls were in place in both countries across the board.

Hayek noted that, "The younger generation of today has grown up in a world in which the spirit of commercial enterprise has been represented as disreputable and the making of profit as immoral”[2] and where to employ people is exploitation but to politically to coerce them is seen as honorable.

‘Serfdom’ provided an explanation for the seeming contradictions in the superiority of free markets vs. socialist planning; why so-called ‘greed’ produces better outcomes for everyone than ‘selfless public service.’ In addition, he discussed Adam Smith’s observation that the businessman seeking “only his own gain is led by an invisible hand to promote an end which was no part of his intention,”[3] and showed how individual liberty is closely associated with the growth of commerce.[4]

Hayek’s case was that free market competition is preferable to government coercion because not only is it economically more efficient “but even more because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority."[5]  And the reduced ‘intervention of authority’ necessarily minimizes the amount of coercion that may be exercised by one person over another.[6]

Hayek made the case that society needs to define the rules rather than the ends. Defining the ends presupposes a known and inevitable future and assumes prescience on the part of the planners. However, the knowledge needed to plan anything beyond a very limited future is not knowable by any one person, or group, and thus the planning process, by definition, limits outcomes.

Hayek always assumed good intentions on the part of those with whom he disagreed and ‘Serfdom’ was a warning to people of goodwill when he asked, Is there a greater tragedy than while attempting together to idealistically shape a beneficial future, we should produce the very opposite?[7]

‘Serfdom’ would profoundly influence Herb Cornuelle, later a prominent Honolulu businessman, who helped begin the Foundation for Economic Education in New York shortly after ‘Serfdom’ appeared, later became head of the Volker Fund and through it was able to significantly assist Hayek and other free-market scholars.

Hayek dedicated his book “To the Socialists of all Parties” and that alone makes it particularly relevant for today.

Cliff Slater is a regular columnist whose footnoted columns are at: www.lava.net/cslater


[2] Hayek, Friedrich. The Road to Serfdom. University of Chicago Press. 1944. pp. 130-1.

[3] “…generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention… By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.” Adam Smith. An Inquiry into the Nature and Causes of the Wealth of Nations. Volume I. Liberty Fund. 1981. p. 456.

[4] Hayek, Friedrich. The Road to Serfdom. University of Chicago Press. 1944. p. 14.

Another to see through the apparent contradiction in property ownership was Max Eastman, a former Marxist, friend of Lenin and Trotsky biographer, who said, “It seems obvious to me now — though I have been slow, I must say, in coming to the conclusion — that the institution of private property is one of the main things that have given man the limited amount of freedom and equal-ness that Marx hoped to render infinite by abolishing this institution. Strangely enough Marx was the first to see this. He is the one who informed us, looking backwards, that the evolution of private capitalism with its free market had been a precondition for the evolution of all our democratic freedoms. It never occurred to him, looking forward, that if this was so, these other freedoms might disappear with the abolition of the free market."
(Max Eastman in the Readers Digest, July, 1941, p. 39. Quoted by, F. A. Hayek "The Road to Serfdom" 1944, p116.)

[5] Hayek, Friedrich. The Road to Serfdom. University of Chicago Press. 1944. p. 36.

[6] Hayek, Friedrich. The Road to Serfdom. University of Chicago Press. 1944. p. 145. "To split or decentralize power is necessarily to reduce the absolute amount of power, and the competitive system is the only system designed to minimize by decentralization the power exercised by man over man."

[7] Hayek, Friedrich. The Road to Serfdom. University of Chicago Press. 1944. “Is there a greater tragedy imaginable than that in our endeavor consciously to shape our future in accordance with high ideals we should in fact unwittingly produce the very opposite of what we have been striving for?”