Politics from the Palouse to Puget Sound

Monday, January 29, 2007

Hayek and What's at Stake in Our Debate Over Growth

By popular demand, some more quotes from Nobel prize winning economist Friedrich Hayek's The Road to Serfdom. When you read these, think about Matt Saavedra and how he wants government to choose between "good corporations" and "bad corporations." Think about Alex McDonald's accusation that Wal-Mart's "millionaire" owners "steal" from their employees. Think about Mark Winstein's argument that the city of Moscow should determine how people work, live and commute to preserve the "small-town college atmosphere."

Hayek warns us that all this central planning leads to collectivism, and collectivism leads to totalitarianism:
Most of the people whose views influence developments are in some measure socialists. They believe that our economic life should be "consciously directed," that we should substitute "economic planning" for the competitive system. Yet 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?

In order to achieve their ends, the planners must create power—power over men wielded by other men—of a magnitude never before known. Their success will depend on the extent to which they achieve such power. Democracy is an obstacle to this suppression of freedom which the centralized direction of economic activity requires. Hence arises the clash between planning- and democracy.

There is, in a competitive society, nobody who can exercise even a fraction of the power which a socialist planning board would possess. To decentralize power is to reduce the absolute amount of power, and the competitive system is the only system designed to minimize the power exercised by man over man. Who can seriously doubt that the power which a millionaire, who may be my employer, has over me is very much less than that which the smallest bureaucrat possesses who wields the coercive power of the state and on whose discretion it depends how I am allowed to live and work?

Our generation has forgotten that the system of private property is the most important guaranty of freedom. It is only because the control of the means of production is divided among many people acting independently that we as individuals can decide what to do with ourselves. When all the means of production are vested in a single hand, whether it be nominally that of "society" as a whole or that of a dictator, whoever exercises this control has complete power over us. In the hands of private individuals, what is called economic power can be an instrument of coercion, but it is never control over the whole life of a person. But when economic power is centralized as an instrument of political power it creates a degree of dependence scarcely distinguishable from slavery. It has been well said that, in a country where the sole employer is the state, opposition means death by slow starvation.

"Planning" owes its popularity largely to the fact that everybody desires, of course, that we should handle our common problems with as much foresight as possible. The dispute between the modern planners and the liberals is not on whether we ought to employ systematic thinking in planning our affairs. It is a dispute about what is the best way of so doing. The question is whether we should create conditions under which the knowledge and initiative of individuals are given the best scope so that they can plan most successfully; or whether we should direct and organize all economic activities according to a "blue-print," that is, "consciously direct the resources of society to conform to the planners' particular views of who should have what."

Although competition can bear some admixture of regulation, it cannot be combined with planning to any extent we like without ceasing to operate as an effective guide to production. Both competition and central direction become poor and inefficient tools if they are incomplete, and a mixture of the two - means that neither will work. Planning and competition can be combined only by planning for competition, not by planning against competition.

What is promised to us as the Road to Freedom is in fact the Highroad to Servitude. For it is not difficult to see what must be the consequences when democracy embarks upon a course of planning. The goal of the planning will be described by some such vague term as "the general welfare." There will be no real agreement as to the ends to be attained, and the effect of the people's agreeing that there must be central planning, without agreeing on the ends, will be rather as if a group of people were to commit themselves to take a journey together without agreeing where they want to go: with the result that they may all have to make a journey which most of them do not want at all.

Democratic assemblies cannot function as planning agencies.They cannot produce agreement on everything — the whole direction of the resources of the nation-for the number of possible courses of action will be legion. Even if a congress could, by proceeding step by step and compromising at each point, agree on some scheme, it would certainly in the end satisfy nobody.

Planning leads to dictatorship because dictatorship is the most effective instrument of coercion and, as such, essential if central planning on a large scale is to be possible. There is no justification for the widespread belief that, so long as power is conferred by democratic procedure, it cannot be arbitrary; it is not the source of power which prevents it from being arbitrary; to be free from dictatorial qualities, the power must also be limited. A true "dictatorship of the proletariat," even if democratic in form, if it undertook centrally to direct the economic system, would probably destroy personal freedom as completely as any autocracy has ever done.

Individual freedom cannot be reconciled with the supremacy of one single purpose to which the whole of society is permanently subordinated.

Collectivism means the end of truth. To make a totalitarian system function efficiently, it is not enough that everybody should be forced to work for the ends selected by those in control; it is essential that the people should come to regard these ends as their own. This is brought about by propaganda and by complete control of all sources of information.

The most effective way of making people accept the validity of the values they are to serve is to persuade them that they are really the same as those they have always held, but which were not properly understood or recognized before.
And the most efficient technique to this end is to use the old words but change their meaning. Few traits of totalitarian regimes are at the same time so confusing to the superficial observer and yet so characteristic of the whole intellectual climate as this complete perversion of language.

If we are not to destroy individual freedom, competition must be left to function unobstructed. Let a uniform minimum be secured to everybody by all means; but let us admit at the same time that all claims for a privileged security of particular classes must lapse, that all excuses disappear for allowing particular groups to exclude newcomers from sharing their relative prosperity in order to maintain a special standard of their own.
The Road to Serfdom is available at WSU's Holland Library. If you're too lazy, the Reader's Digest condensed version is here. Read it and learn what's going on before it's too late.

As I told Scotty today on The PES, PARD has every right to protest against Wal-Mart. They have every right to be critical of Wal-Mart. They can choose not to shop there and actively encourage others not to shop there either. I would fight to the death for their free speech rights.

Where they, and the other Wal-Mart opponents are dead-wrong is advocating that the government must get involved. PARD wants the government to plan AGAINST competition and not plan FOR it. Their approach is misguided. Worse, it is un-American and frankly, evil. That path will lead to totalitarianism and ruin. And as Hayek predicted, PARD uses proaganda constantly to convince others that PARD's arguments are the same arguments that others, whose opposition is not as politically motivated, have against Wal-Mart. Hence the "kitchen sink" approach that Scotty always mentions.

In essence, regardless of whether Wal-Mart opens in Pullman or not, PARD has won. The decision about Wal-Mart will be made by three judges in a Spokane courtroom, not the free market. PARD has used the judicial process to accomplish what they couldn't do legislatively, "central planning by lawsuit" if you will. We all have a little less individual freedom as a result.

That's what the battle over growth on the Palouse is all about. There's a lot more than money at stake.

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Sarcastic Housewife #1 said...

I was reading an interesting article on Athenian democracy in 5th century BC. In looking at its demise, the author stated the very same thing. Rather than taking care of the freedoms and liberties they had, the Greeks began instead to look towards a collective state and this author went so far as to say in some senses it bordered on Communism and Fascism. It was these very things that destroyed what most consider to be the first experiment in democracy.

Sarcastic Housewife #1 said...

Forgot to ask...any word on the lawsuit getting moved up?

hector314 said...

Following the blogs, apparently Wal-Mart by itself is the World's 20th largest economy. Wal-Mart, is huge...and centrally planned and controlled. While Hayek is philosophically opposed to collectivism, a prime source of its historic failure was the complexity of information. Given Wal-mart's investment in technology, it is now able to gather accurate information quickly and accurately.

How would Hayek view Wal-mart as an entity?

We may see within our lives a resurrection of the Communist ethos, armed with new talents and abilities...after all, down with those elitists who don't shop at Wal-Mart!

Tom Forbes said...

Hayek said democracies and central planning are incompatible. A corporation is hardly a democracy.

Are you saying Nazi Germany and the Soviet Union failed because they didn't have computers or the Internet? Hayek said it was because of the immoral and unscrupulous people that are attracted to totalitarianism.

I love how Wal-Mart critics accuse it of being an all-controlling monopoly and yet will quickly point to its stock price drops and failures to meet quarterly sales goals vis a vis Target and Costco.

Speaking of monoplies, Hayek though they came from the government and not technology:

"The growth of monopoly, however, seems not so much a necessary consequence of the advance of technology as the result of the policies pursued in most countries."

What would Hayek think of Wal-Mart? I think he would celebrate it. I know what he would think of Wal-Mart critics:

"...to weld together a closely coherent body of supporters, the [collectivist] leader must appeal to a common human weakness. It seems to be easier for people to agree on a negative programme – on the hatred of an enemy, on the envy of the better off – than on any positive task...Intolerance
of opposing ideas
is openly extolled."

Sound familiar?

hector314 said...

Yes it is familiar, on both sides.

Tom Forbes said...

You're right. I'm viciously intolerant of left-wing primadonnas who cost city taxpayer's $36,000 for publicity stunts.

April E. Coggins said...

Hector: I am not aware of anyone trying to force people to shop at Wal-Mart. However, I am very aware of a movement trying to force people to stop shopping at Wal-Mart. See the difference?

andrew k said...

As an urban planning student, I'm intrigued by Roberts' and Hayek's ideas, but I can't say that I completely agree with the practical extension of his ideas. Markets cannot fully rely on competition; there is no apparatus to completely integrate into markets the externalities that we planners claim justify our existence.
I'm considering going into economic planning. How would you define the concept of "planning for competition?"
An idea of mine, as a social conservative who also studies planning, is to encourage quality education as much as possible. I've found that access to quality education makes a significant difference in economic competitiveness, whether we're talking about an individual or a large city, like my hometown of Phoenix, Arizona.
What do you (or your readers) think about planning FOR competition?