The Belt and Road to Serfdom

(“The Road to Serfdom” by Friedrich Hayek) (1944) [and why it matters now]

While the last resort of a competitive economy is the bailiff, the ultimate sanction of a planned economy is the hangman.”#

The Argument

In 1933, the year Hitler came to power in Germany, there was a view that the fascists’ National Socialism model (as the joke went, neither nationalist nor socialist) constituted the lees of the empty vessel of capitalism, and that socialism and centrally planned economies represented the vibrant new vintage for the future. That year, Hayek, a Newby at the London School of Economics, wrote a short memo demolishing such nostrums, noting that “the scare of Russian communism has driven the German people unawares into something which differs from communism in little but name.” Nazism, then, was just another form (albeit more vivid in its moral squalor) of socialistic command-and-control as the Soviet system, “not a reaction against the socialist trends of the preceding period but a necessary outcome of those tendencies...the fusion of radical and conservative [Prussian] socialism.”  Eleven years later, contemplating the end of the worst global conflict of our times, Hayek expanded such ideas in this book, a landmark and decisive refutation of socialism.

Essentially, Hayek demonstrated, socialism calls for central planning – government control over prices, incomes, property, resources, enterprise and endeavour; rejection of the free market and its ‘chaotic’ setting of prices, incomes, property, resources, enterprise and endeavour. He proved by historical example and clear logic that socialism, even implemented with the purest and most altruistic intent, could only be meaningful through coercion – totalitarianism, tyranny, despotism, and oppression in the name of liberation. He quotes Alexis de Tocqueville on the authoritarian nature of socialism (1848): “Democracy attaches all possible value to each man; socialism makes each man a mere agent, a mere number. Democracy and socialism have nothing in common but one word: equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.”

In other words, socialism renders individuals as no longer free to choose how to live their lives but mere automata in a ‘rational,’ ‘scientific’ clockwork of serfdom or slavery where a small cabal of enlightened overlords formulate and administer (but never explain or articulate) how things be done. The obvious idiocy of such a paradise in practical terms needs to be explained in times of darkness and confusion – 1933, or 1944, or 1945, now, and perhaps always. The argument against pre-emptive collectivism via state control and its invariable descent into economic stagnation or collapse, has never been defeated, but it yet may be, through apathy, ignorance, obfuscation and misplaced good intentions. This book is more a political and sociological document than a purely economic one, but underpinned by clear understanding of the dismal science.

Of course, we currently contend with the spectre “democratic socialism, the great utopia of the last few generations, [which] is not only unachievable, but that to strive for it produces something so utterly different that few of those who now wish it would be prepared to accept the consequences…” Some of us, indifferent to wealth, suffused with ‘altruism’, or lazily preferring freedom from choice, have an unwholesome affection for the specious ease of leaving all to central planning, abdicating their right of choice along with their responsibility for chosen risk. It all seems so easy, but no longer couched as central planning but “investments” in “wage justice,” and to solve the ”environmental crisis” or the ”war on poverty.” Incredibly, Marxism and Socialism, like Frankenstein’s Monster, seem to be galvanised and rise again.

The absurdity and bitter fruits of central planning (not in any general policy sense, but in the genuinely socialistic sense of direct control) can be seen by a review of the economies of (1) Soviet Russia [Remember the kolkhoz described in John Barron’s classic KGB: it “contained one ramshackle store to sell bread, vodka, canned goods, and sundries, but its shelves were mostly empty. Years before, Moscow planners had allotted the store a piano and two motorcycles. They were still there, unsold and encrusted with the dried spittle of contemptuous people who could neither afford nor use them“]*; (2) Mao’s China [“the country was reorganized into “people’s communes” pooling possessions, food, and labor. Peasants were conscripted in quasi-military brigades for massive public works projects, mostly improvised…Mao’s steel targets had been implemented so literally as to encourage the melting down of useful implements as scrap to fulfill the quotas…From 1959 to 1962, China experienced one of the worst famines in human history, leading to the deaths of over twenty million people“]** and (3) Cuba [“An INRA (National Institute for Agrarian Reform) delegate, accompanied by a couple of armed soldiers, usually appears at a farm and announces that INRA is taking over everything but a certain portion. He may return later and cut the former owner’s allotment in half. Though the law says nothing about farm machinery or cattle, they are also appropriated. The whole transaction is completely informal; there are no hearings, no inventories, no receipts.”]^

Hayek wore no rose-coloured glasses about capitalism. He could see clearly enough the excesses that could arise through monopolistic practices (albeit these are often a first step towards socialism: vide the socialistic tendencies of contemporary giant monopolies such as Facebook, Amazon, Google et al), narrow vested interests, selfishness and materialism, the bruises from competition and the like. But he also saw clearly that there was no other way than to accept the myriad spontaneous forces of society, with appropriate safeguards to allow individuals equality of opportunity but not of outcome (“To produce the same result for different people, it is necessary to treat them differently“), through fair competition not arbitrary direction.  Capitalism did not emanate from a textbook: pursuit of happiness, division of labour and free exchange are organic and so is the market – and while the market can be a moron, it is the only sure way to establish prices and incomes (Australia should abolish the Fair Work Commission, and its ideas of a “just wage,” and try it).  As opposed to “the impetus of the movement toward totalitarianism [that] comes mainly from the two great vested interests: organized capital and organized labor.”

As Hayek points out, “…because all the details of the changes constantly affecting the conditions of demand and supply of the different commodities can never be fully known, or quickly enough be collected and disseminated, by any one center, what is required is some apparatus of registration which automatically records all the relevant effects of individual actions and whose indications are at the same time the resultant of, and the guide for , all the individual decisions. This is precisely what the price system does under competition, and which no other system even promises to accomplish.”  And one synthesis that enhanced these natural processes was money, “one of the greatest instruments of freedom ever invented by man“, which gave serf and slave alike the chance to get on a footing with their masters.

These freedoms require a rejection of the false cul-de-sacs of ‘market’ or ‘competitive’ ‘socialism’ that some who ought to know better try to propound as a “fair” (favourite weasel word of the left Intelligentsia), third or middle way. “Either both the choice and the risk rest with the individual or he is relieved of both.” Ultimately, Hayek plumped for individual liberty, and with the end of WWII in sight, he feared that the world would commit the error of maintaining peacetime governance on a war footing, tilting the balance in favour of planned and dictatorial crisis-management against freedom. Whilst he had a coat of hard mittel – European varnish, Hayek was, at heart, a 19th century liberal – as Orwell described Charles Dickens, “a free intelligence, a type hated with equal hatred by all the smelly little orthodoxies which are now contending for our souls.”

Serfdom Crossroad – Now

It is salutary to pick up Hayek’s text, tweak it and revivify his warning:

When the government has to decide how many pigs are to be raised or how many buses are to run, which coal mines are to operate, or at what prices shoes are to be sold, these decisions cannot be deduced from formal principles or settled for long periods in advance. They depend inevitably on the circumstances of the moment…In the end, somebody’s views will have to decide whose interests are more important; and these views must become part of the law of the land, a new distinction of rank which the coercive apparatus of government imposes upon the people.”

Whilst this can be pasted ready-to-wear on China under the modern CCP, you could attach parts to parts of western social democracies with relative ease.  (Hayek notes a 1939 estimate that “the upper 11 or 12 per cent of the Soviet population now receives approximately 50 per cent of the national income.”)

The conviction grows that if efficient planning is to be done, the direction must be “taken out of politics” and placed in the hands of experts – permanent officials or independent autonomous bodies.”

You couldn’t get a pithier statement that can be directly applied to the response of various democracies to the Covid-19 pandemic. In Australia, parliaments virtually shut down. The Prime Minister formed an ad hoc body
styled as a ‘National Cabinet’ to implement policy but the various State governments were more-or-less free to do as they chose within their sovereign borders. This they did, and a policy of plague management
transmogrified – without articulation, explanation or consultation – into an eradication policy: eradication of individual liberties on an hysterical, disproportionate and unprecedented scale.  On this aspect, Hayek warned that “some of the men who during the war have tasted the powers of coercive control…will find it difficult to reconcile themselves with the humbler roles they will then have to play.” One might substitute “plague” for “war” and apply that alert to the State Premiers of Victoria, Queensland and Western Australia; in fact, in varying degrees, to the other States and Commonwealth Government as well.  As does this: “What are the fixed poles now which are regarded as sacrosanct…? They are no longer the liberty of the individual, his freedom of movement, and scarcely that of speech. They are the protected standards  of this or that group, their ”right” to exclude others from providing their fellowmen with what they need. Discrimination between members and nonmembers of closed groups, not to speak of nationals of different countries, is accepted more and more as a matter of course; injustices inflicted on individuals by government action in the interest of a group are disregarded with an indifference hardly distinguishable from callousness; and the grossest violations of the most elementary rights of the individual, such as are involved in the compulsory transfer of populations, are more and more often countenanced even by supposed liberals.”

In this plague year of 2020, we saw Australians banned from returning to their own country; banned from leaving it; banned from crossing state lines, in apparent/arguable breach of section 92 of the Constitution; locked in their homes unless adjudged by a bureaucrat as ‘essential workers’; arrested on beaches, golf courses, parks (and in the case of one pregnant woman in Victoria, handcuffed at home in her pajamas for suggesting the State government was overreaching); denied necessary and in some cases life-sustaining medical treatment; forced to close businesses; forced from hospital beds into Aged Care Homes to die; quarantined, hectored, lectured, and harassed, all often to the accompaniment of confused, contradictory and opaque edicts based on the highly spurious guesses of so-called experts.

Others, it is true, believe that real success [in addressing unemployment] can be expected only from the skillful timing of public works undertaken on a very large scale…remuneration would soon cease to have any relation to actual usefulness.”

Prime Minister Rudd’s $14 billion primary school building program that failed to meet construction deadlines, was inflexible, often superfluous and had inadequate yet unnecessarily onerous reporting requirements*^ comes to mind.

A movement whose main promise is the relief from responsibility cannot but be antimoral in its effect, however lofty the ideals to which it owes its birth.”

Because socialism obsesses over ends rather than means, with its only moral base being the sacrifice of the individual for the ultimate good of the whole – a conundrum that effectively puts its hierarchy at war with its underlings, and requires the state to smite the individual who dares to differ – its totalitarian imperative will tend toward and provide “special opportunities for the ruthless and unscrupulous.” (Hayek cites the famous dictum of Lord Acton; “Power tends to corrupt, and absolute power corrupts absolutely.”) One need look no further than Top People in various socialist regimes, with an affinity for central planning, to gauge their human worth: Hitler, Stalin, Mao, Pol Pot, Castro, Enver Hoxha, Robert Mugabe, Hugo Chávez, Kim Jong-un… As a concomitant to rule by scoundrels, the truth must, inevitably, be suppressed, or even more effectively, transformed. So language, the outer clothing of ideas, is stripped of colour and design and replaced with a dead grey uniform devoid of nuance (e.g. ‘social justice’, that ‘empty phrase with no determinable content‘), brilliantly identified in Hayek’s chapter, “The End of Truth” and of course even more brilliantly in Orwell’s Nineteen-Eighty-Four.

In a chapter, “The Totalitarians in our Midst,” Hayek cites the English communist historian, E. H. Carr: “The victors lost the peace, and Soviet Russia and Germany won it, because the former continued to preach, and in part to apply, the once valid, but now disruptive ideals of the rights of nations and laissez faire capitalism, whereas the latter, consciously or unconsciously borne forward on the tide of the twentieth century, were striving to build up the world in larger units under centralized planning and control.”

This was a crypto-syndicalist analysis of Europe after Versailles: to see such views in our contemporary society, take out “Soviet Russia,” “Germany” and “twentieth”, insert in lieu “Democratic Socialists”, “People’s Republics” and “twenty-first” and you have the corporate view of the Australian Broadcasting Corporation and its Sinophile running dogs.  On this, Hayek is also apt: “The Left intelligentsia, indeed, have so long worshipped foreign gods that they seem to have become almost incapable of seeing any good in the characteristic…institutions and traditions. That the moral values on which most of them pride themselves are largely the product of the institutions they are out to destroy, these socialists cannot, of course, admit.” But as with Dutschke’s and Gramsci’s Long March Through the Institutions, the flabby and flaccid guardians of western freedom and thought have dropped their guard, and allowed a creeping collectivism and diminution in cultural value to mug, tranquilize and convert Western Civilisation into an irrational confusion, a project that continues apace. As Milton Friedman said in his 1971 introduction to The Road to Serfdom, “we preach individualism and competitive capitalism, and practice socialism.”

Winnie-the-Pooh and the Bleak Prospects of International Order

While not central to his thesis, Hayek in 1944 could not ignore the world’s conflagration or the challenge of reconstruction that lay ahead. At that stage, the future of Europe was in hazard, and the Allies had a knotty problem: one of theirs was not one of them. The period 1945 to 1990 thus became an existential threat between the old liberal nations with their open markets and individual liberties, and the Communist Monolith with its attendant strengths and weaknesses. The so-called ‘end of history’ with the fall of the Communist bloc in Eastern Europe was merely a presage of new struggles and power-shifts: the religious nihilism of the Islamic schism and its debris turned-out to be a sideshow to a much greater threat to individual liberty: the rising imperialism of Communist China, particularly under Xi Jinping from 2012.

Whilst the United States remained the world’s leader after 1990 in terms of military capacity and economic might, there has been, within the same period as the ascension of Xi, a sense of American decline, notable for the timid foreign policy of President Obama, the aggressive ‘America-First’ pivot of President Trump and the uncertain footing of the imminent administration of President-elect Biden. As to the latter, Mr. Biden’s age and possible debt to the left-wing of his party, make it difficult to predict with much certainty how the increasingly bellicose CCP will be addressed. For example, while at Kyoto, and Paris, and beyond, China continues (with help from its international socialist functionaries) to be styled a ‘developing country’ and increase carbon emissions, there are those in the U.S. Democratic Party – now in control of the White House, Congress, and perhaps after 5 January 2021, the Senate (and thus the Supreme Court) – who propose socialism for America, in the forms of policies such as the Green New Deal (Wage fixing and job guarantees, public housing and free education, 100% renewable energy with an energy guarantee to all citizens, junking the fossil fuel industries, ‘weatherizing’ all public buildings and infrastructure, or by construction anew, to achieve maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability, including through electrification, fully subsidising transportation systems in the United States to eliminate pollution and greenhouse gas emissions, spurring massive growth in clean manufacturing in the United States and removing pollution and greenhouse gas emissions from manufacturing and industry as much as is technologically feasible, working collaboratively with farmers and ranchers in the United States to eliminate pollution and greenhouse gas emissions from the agricultural sector as much as is technologically feasible, and forcing recalcitrant countries to ratify and legislate zero-emissions targets.  It sounds a bit like Moses the raven’s Sugarcandy Mountain from Animal Farm).

In the meantime, Europe is in flux in the wake of the recent Brexit deal. Whilst one can understand and even sympathise with Britain’s decision to leave, it will tend to weaken both the UK (riven by guilt and anti-colonialism, which will now have its own constituent countries, such as Scotland, agitate to leave) and Europe, which struggles with the economic fetter of a single currency spread over a disparate polity. International Authorities – the United Nations, the WHO, the IMF – have fallen foolishly in love with socialistic ideas, abandoned the defence of Western Civilisation formed since the Renaissance and enlightened capitalism, lost their power or even inclination for ‘distributive justice,’ and are now yoked or owned by China after succumbing to Robert Conquest‘s Second Law of Politics: Any organization not explicitly right-wing sooner or later becomes left-wing.  Which makes Hayek’s statement so prescient: “...while the great powers will be unwilling to submit to any superior authority, they will be able to use those “international” authorities to impose their will on the smaller nations within the area in which they exercise hegemony.”

Which is what the CCP is doing. Sheer bald-faced lies about the provenance of Covid-19; boycotts, intolerable tariffs and sanctions against nations calling for an international investigation into the pandemic’s origins; the ‘annexation’ and subjugation of Hong Kong; their ‘Company Store’ debt-trap diplomacy under the auspices of ‘collaborative’ belt-and-road programmes; the oppression of Tibet and religious and ethnic minorities; the lack of a rule of law; the suppression of a free press, free speech, freedom of movement and other individual rights; the sabre-rattling in the South China Sea and elsewhere; the patronage of terrorist states; the industrial espionage and cyber-war; the racial-supremacy and imperial arrogance; the nauseating disregard for human (and animal) rights.  Cato the Elder, before the Third Punic War, admonished that Carthago delenda est (“Carthage must be destroyed”).  Rather than adopt the warlike mantra ‘CCP delenda est‘, it might be more constructive to re-visit Hayek’s great book, and take up the defence of the principle there espoused, when the world – at least, our current age – “takes it for granted and neither realizes whence the danger threatens nor has the courage to emancipate itself from the doctrines which endanger it.”

How Xi sees the world

[# Willhelm Roepke, cited by Hayek at p.p. 151-152.] [* John Barron, KGB (1974) p. 55.] [** Henry Kissinger, On China (2011) p. 183-4.] [^ Nathaniel Weyl, Red Star Over Cuba (1960) p. 202.] [*^ Report in the “Sydney Morning Herald” by Dan Harrison (5/10/2010).]


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