Hayek’s Road to Serfdom still takes a regular place on undergraduate reading lists, is placed on lists of intellectually important books, and it still plays the role as a prophetic warning against socialism for many libertarians (see e.g., Glenn Beck). There’s no question that Road to Serfdom has been a historically important book. But like its rough contemporary The Open Society and Its Enemies, it’s a book which hasn’t aged well. The Constitution of Liberty is a much more timeless book, and also the philosophically much more sophisticated one. Here are some scattered observations on the book, and what’s worth reading in Hayek.
(The following is based on notes for teaching, and many of the points I’ll make can be found in secondary literature on Hayek. But the reader might find it useful to have some of it assembled in one place.)
The Two Socialisms
The crux of the issue is Hayek’s definition of “socialism”. Hayek does not use the word in the broad sense it is now often taken, where it is roughly identical with advocating a welfare state. Hayek is quite explicit about this:
[Socialism] may mean, and is often used to describe, merely the ideals of social justice, greater equality and security which are the ultimate aims of socialism. But it means also the particular method by which most socialists hope to attain these ends and which many competent people regard as the only methods by which they can be fully and quickly attained. In this sense socialism means the abolition of private enterprise, of private ownership of the means of production, and the creation of a system of “planned economy” in which the entrepreneur working for profit is replaced by a central planning body. (RS 33-4)
It is the second sense of socialism which Hayek is concerned with in the book. Hayek’s historical target here is the programme of the post-war British Labour Party, whose programme included a demand for the collectivization of various national industries. Hayek’s book is not an argument against what is commonly understood to be socialism in a contemporary sense.
If this point needs to be carried home, we only need to look at Hayek’s amended forewords to the 1956 edition of The Road to Serfdom, where Hayek now talks of “hot” socialism:
I believe that what is important in [The Road to Serfdom] still has to render its service, although I recognize that the hot socialism against which it was mainly directed—that organized movement toward a deliberate organization of economic life by the state as the chief owner of the means of production—is nearly dead in the Western world. The century of socialism in this sense probably came to an end around 1948. hough I recognize that the hot socialism against which it was mainly directed—that organized movement toward a deliberate organization of economic life by the state as the chief owner of the means of production—is nearly dead in the Western world. (RS 43)
So in 1956 Hayek already implicitly admits that his original argument was somewhat outdated.
This raises the immediate question of how, if at all, The Road to Serfdom is then still a relevant book—in particular, how its message would be relevant to thinking about the modern welfare state. In the same 1956 foreword, Hayek claims that the “hodge-podge of ill-assembled and often inconsistent ideals which under the name of the Welfare State has largely replaced socialism […] needs very careful sorting out if its results are not to be very similar to those of full-fledged socialism”. In other words, Hayek now tells us, even though the new socialism is different from the old socialism, the essentially same results apply. This, however, is rather lame gesturing.
Hayek repeats the same point in the new 1976 preface:
At the time I wrote [The Road to Serfdom], socialism meant unambiguously the nationalization of the means of production and the central economic planning which this made possible and necessary. In this sense Sweden, for instance, is today very much less socialistically organized than Great Britain or Austria, though Sweden is commonly regarded as much more socialistic. This is due to the fact that socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state. In the latter kind of socialism the effects I discuss in this book are brought about more slowly, indirectly, and imperfectly. I believe that the ultimate outcome tends to be very much the same, although the process by which it is brought about is not quite the same as that described in this book. (RS:CE 54, my emphasis)
But Hayek needs to show that the welfare state is relevantly similar to the socialism that he deals with in Road to Serfdom, rather than merely claim it. And as Hayek acknowledges, many of the details of the criticism are likely to be rather different. So this puts a big asterisk next to the book. It immediately raises the question: why should the modern reader be concerned with it, given the death of “hot” socialism?
Another misunderstanding of the book would be that Hayek opposes any planning at all. Hayek does not advocate a laissez-faire type of capitalism in which “everything goes”. (Hayek explicitly disavows the “dogmatic laissez-faire attitutde”, RS 37.) Again, Hayek is quite clear on this question:
The dispute between the modern planners and their opponents is […] not a dispute on whether we ought to choose intelligently between the various possible organisations of society; it is not a dispute on whether we ought to employ foresight and systematic thinking in planning our common affairs. It is a dispute about what is the best way of so doing. The question is whether for this purpose it is better that the holder of coercive power should confine himself in general to creating conditions under which the knowledge and initiative of individuals is given the best scope so that they can plan most successfully; or whether a rational utilisation of our resources requires central direction and organisation of all our activities according to some consciously constructed “blueprint”. (RS 36-7)
In this and other sections, Hayek reveals his indebtedness to the Austrian-German tradition of ordoliberalism. For ordoliberals, the state ought to fulfil the “task of creating a suitable framework for the beneficial working of competition” (RS 41), as Hayek nicely puts it. Ordoliberals wish to ensure that markets are competitive; they do not necessarily care about markets as such. This entails, implicitly, that the state is justified in intervening in markets if they fail to be competitive. Hayek clearly shares some of the central commitments of this view. He claims that the state must organise “certain institutions like money, markets, and channels of information”, and above all “the existence of an appropriate legal system, a legal system designed both to preserve competition and to make it operate as beneficially as possible” (RS 39).
The difference between an emphasis on markets and an emphasis on competition is fine, but important. Throughout, Hayek isn’t a market fanatic, he is a competition fanatic. The difference comes out most clearly in one’s thinking about monopoly. A market ideologue will take the outcomes of the market as a given; monopolists who corner the market have earned their rewards, and normally the state shouldn’t intervene. If your focus is on competition—as it is for ordoliberals—you’ll oppose monopolies, and try to break them up. It’s later neoliberals who tended to switch the market from competition to markets; Hayek’s treatment of the issue is arguably more sophisticated than that.
Interventions beyond Markets
Interestingly, Hayek also suggests that interventions beyond ensuring competition are fine—e.g., prohibiting poisonous substances, or limiting working hours, and even “an extensive system of social services” (38-9). Furthermore, Hayek suggests that authorities must step in where industries impose negative externalities, such as “certain harmful effects of deforestation, or of some methods of farming, or of the smoke and noise of factories” (RS 40).
Particularly illuminating in this respect is an interview which Hayek gave in 1945 to NBC. Two socialist colleagues of Hayek’s press him, and Hayek accepts—without much hesitation, and only a few qualifications—that limiting working hours, a minimum wage, large public infrastructure projects, and a “minimum income on which every one can fall back” (Hayek’s own wording!) are compatible with his argument from The Road to Serfdom. Here’s Hayek:
Mr. Krueger: […] What about limitation of working hours—a maximum-hours act? Is that compatible with your notions of proper planning?
Mr. Hayek: Yes, if it is not carried too far. It is one of these regulations which creates equal conditions throughout the system. But, of course, if it does beyond the point where it accords with the general situation of the country, it may indeed interfere very much. If today you dictate that nobody is to work more than four hours, it may completely upset the competitive system.
Mr. Merriam: Would any limitation on the hours of labor be objectionable in your judgment?
Mr. Hayek: Not “any,” but they can be. There you have one of the instances where my objection is not one of principle but one of degree. It is one of the things which cannot be made to fit the question of the cost involved in that particular measure.
Mr. Krueger: Is a minimum-wage law permissible?
Mr. Hayek: A general, flat minimum-wage law for all industry is permissible, but I do not think that it is a particularly wise method of achieving the end. I know much better methods of providing a minimum for everybody. But once you turn from laying down a general minimum for all industry to decreeing particular and different minima for different industries, then, of course, you make the price mechanism inoperative, because it is no long the price mechanism which will guide people between industries and trades.
Mr. Krueger: Is a comprehensive system of social insurance a violation of your definition of good planning?
Mr. Hayek: Certainly not a system of social insurance as such, not even with the government helping to organize it. The only point where the problem can arise is how far to make it compulsory and how far, incidentally, it is used to strengthen the monopolistic actions of trade unions, because that is one way in which it may well eliminate competition.
Mr. Merriam: You do not mean to say that you would be against any government social insurance, would you? You want to make it entirely optional?
Mr. Hayek: It might well be made optional, which is not in contradiction to its being government-assisted, but why it needs to be made compulsory I do not see in the least.
Mr. Krueger: One of the reasons was that a great many people, the population at large, was supposed to get it. That was the reason for making it compulsory. I think that everybody is pretty well agreed on that.
Mr. Hayek: I do not know about that.
Mr. Krueger: What do you think of a minimum guarantee of food, clothing and shelter to people? Is that a violation of your definition of proper planning?
Mr. Hayek: What do you mean by a “minimum guarantee”? I have always said that I am in favor of a minimum income for every person in the country.
Mr. Merriam: You used that in your own book [The Road to Serfdom]. What did you mean by it?
Mr. Hayek: I will restate it in my own way—I mean to secure a minimum income on which every one can fall back. You have it, of course, very largely in the form of unemployment insurance.
Some of Hayek’s reservations here are interesting—especially his opposition to compulsory social insurance, while allowing for “government-assisted” insurance. But overall, this passage should be poison to any modern libertarian who tries to use Hayek in the battle for the ideological causes. Not only is Hayek’s Road to Serfdom concerned with “old”, “hot” socialism instead of the “new” socialism of the welfare state—it also seems that Hayek allows for, and is even sympathetic towards, some of the basic commitments of modern welfare states (though it’s clear that the extent to which Hayek supports it is much smaller).
This carries us to the second major philosophical problem with The Road to Serfdom, which is that Hayek provides little to no guideline regarding the crucial dividing line between permissible and impermissible planning. Given that Hayek himself accepts various types of state intervention, but at the same time argues against the legitimacy of large-scale centralised planning, the rationale for this dividing line remains difficult to see.
This problem is seen, very perceptively, by Keynes in a latter to Hayek (a letter in which Keynes also praises the book—which should also make libertarians think):
You admit here and there that it is a question of knowing where to draw the line [between premissible and impermissible planning]. You agree that the line has to be drawn somewhere, and the logical extreme is not possible. But you give us no guidance whatever as to where to draw it. It is true that you and I would probably draw it in different places. I should guess that according to my ideas you greatly underestimate the practicability of the middle course. But as soon as you admit that the extreme is not possible, and that a line has to be drawn, you are, on your own argument, done for, since you are trying to persuade us that so soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice.
To cut the point short, I think that Keynes is essentially correct. This is not necessarily a problem for Hayek—he could insist that a line could be drawn, but that it would distract from what (Hayke himself calls) a “political” book; all he needs, perhaps, is that socialist planning and ordoliberal intervention are so dissimilar that it is unlikely that they are subject to the same phenomena. The Road to Serfdom is a polemical book, and it’s perhaps wrong to come to it with expectations of great philosophical rigour. But given that centralised planning no longer seems like a live political issue, knowing that this kind of state intervention is illegitimate no longer looks like a particularly exciting result.
As we can see now, the Hayek in Road to Serfdom actually holds a pretty complex position, one which has little to do with the neoliberal nemesis he is sometimes depicted. For the various exegetical reasons mentioned, it is somewhat opaque why The Road to Serfdom should have become such an important libertarian text. A much better label would be to call it a liberal book (in the European sense of “liberal”). While a society which implemented the Road to Serfdom would certainly be more pro-market than some existing social democracies, in other respects it would be very dissimilar from the laissez-faire state that many libertarians dream of.
At the same time, on the issues where Road to Serfdom might actually still hold much value for contemporary readers—that is, on the boundaries between proper and improper interference by governments—it remains disappointingly vague. This broad question is picked up by Hayek in the Constitution of Liberty, in which he tries to provide a more general and abstract answer to that question, although Hayek remains an eclectic thinker on these issues who can hardly be boiled down to simplistic libertarian slogans. With the Constitution of Liberty available, I suspect that Road to Serfdom can mostly be skipped.