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This Week’s Applied Hayek: Socialism vs. “Socialism”

I’m back in Ohio today for my Monday class for the honors students at the Ashbrook Center, and though tonight’s class is devoted, for the second week in a row, to examining property rights in detail, I am transfixed today by a portion of The Constitution of Liberty that isn’t part of the assigned readings—Hayek’s chapter on “The Decline of Socialism and the Rise of the Welfare State.”  It is astounding how well this 1961 book reads as the perfect commentary on Obama and his social philosophy.

Critics of Obama like to call him a “socialist,” but his acolytes push back and say, “this isn’t socialism—look at us!  We’re bailing out the banks and car companies rather than nationalizing them!  We’re working with the private sector!  Even Obamacare relies on private insurance companies!”  Leaving aside Obama’s “crony capitalism” or what might be called, in less pejorative terms, “corporatism” (which is a fancy value-free name for something that looks like Swedish social democracy), Obama’s defenders are right: Obama isn’t a classic “state ownership of the means of production” socialist.  But Hayek was way ahead of them.

It is worth reading the entire chapter, but here are a few of the most relevant excerpts:

The great change that has occurred during the last decade is that socialism in this strict sense of a particular method of achieving social justice has collapsed.  It has not merely lost its intellectual appeal; it has also been abandoned by the masses so unmistakably that socialist parties everywhere are searching for a new program that will ensure the active support of their followers.  They have not abandoned their ultimate aim, their ideal of social justice.  But the methods by which they had hoped to achieve this and for which the name “socialism” had been coined have been discredited.  No doubt the name will be transferred to whatever new program the existing socialist parties will adopt. . .

And that program, Hayek notes, is what we today call the welfare state, or “social democracy.”  He continues a couple pages later:

But, though the characteristic methods of collectivist socialism have few defenders left in the West, its ultimate aims have lost little of their attraction.  While the socialists no longer have a clear-cut plan as to how their goals are to be achieved, they still wish to manipulate the economy so that the distribution of incomes will be made to conform to their conception of social justice.

From here Hayek goes on to describe the exact predicament we find ourselves facing with the arrival of Obama:

The current situation has greatly altered the task of the defender of liberty and made it much more difficult.  So long as the danger came from socialism of the frankly collectivist kind, it was possible to argue that the tenets of the socialists were simply false: that socialism would not achieve what the socialists wanted and that it would produce other consequences which they would not like.  We cannot argue similarly against the welfare state, for this term does not designate a definite system.  What goes under that name is a conglomerate of so many diverse and even contradictory elements that, while some of them may make a free society more attractive, others are incompatible with it or may at least constitute potential threats to existence.

And then, almost as though in 1961 Hayek could anticipate the individual mandate of Obamacare, Hayek warned:

If, instead of administering limited resources put under its control for a specific service, government uses its coercive powers to insure than men are given what some experts think they need; if people thus can no longer exercise any choice in some of the most important matters of their lives, such as health, employment, housing, and provision for old age, but must accept the decisions made for them by appointed authority on the basis of its evaluation of their need; if certain services become the exclusive domain of the state, and whole professions—be it medicine, education, or insurance—come to exist only as unitary bureaucratic hierarchies, it will no longer be competitive experimentation but solely the decisions of authority that will determine what men shall get.

Okay, that was one long sentence, but you can fill in your own blanks, going beyond Obamacare to the nationalization of student loans, etc.  But finally, Hayek isn’t just concerned with the economic effects of this kind of social policy.  He notes the serious political consequences of this kind of rule:

It is sheer illusion to think that when certain needs of the citizen have become the exclusive concern of a single bureaucratic machine, democratic control of that machine can then effectively guard the liberty of the citizen.  So far as the preservation of personal liberty is concerned, the division of labor between a legislature which merely says that this or that should be done and an administrative apparatus which is given exclusive power to carry out these instructions is the most dangerous arrangement possible. . .  It would scarcely be an exaggeration to say that the greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with that they regard as the public good.

Amen, Freddie!  There’s lots more great stuff here (and I’ll share more in the days and weeks ahead), but that’s enough for today.  Except to add that I recall that Hayek said he was inspired to write The Road to Serfdom partly by reading Tocqueville’s Democracy in America, and these passages of Hayek’s remind of nothing so much as Tocqueville’s chapter on “What Sort of Despotism Democracies Have to Fear,” in which Tocqueville warns that despotism could be imposed that would have all of the surface trappings of liberty.  Behold, Obamacare and its progeny.

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