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Wednesday, May 8, 2019

Why We Need Hayek Today

Hayek argued that we should embrace the idea of a society based on the liberty of its members to find fulfillment in their lives by themselves.

Image Credit: Flickr-Levan Ramishvili | Public Domain (

One hundred and twenty years ago today, on May 8, 1899, Friedrich August von Hayek was born in Vienna. The 1974 Nobel Prize winner in economics would go on to live, as Peter Boettke puts it in his recent edition of Great Thinkers, quite the life. 

… one filled with up close witnessing of man’s inhumanity in World War I, the economic ruin of the Great Depression, and a dangerous game of brinkmanship with respect to Western civilization itself, with the rise of fascism and communism in the 1930s and 1940s.

In the end, he would become one of the most influential thinkers of the century, providing the intellectual ammunition for the likes of Margaret Thatcher, Ronald Reagan, and Ludwig Erhard and serving as a hero for classical liberals and conservatives alike around the globe. Likewise, he was one of the main orchestrators of the creation of a movement in favor of classical liberal ideas, trying to bring together often antagonistic schools of thought, including the Austrians, the Chicagoans, and the German ordoliberals, particularly through the creation of the Mont Pelerin Society.

And yet, today, most people do not even know who Hayek is or what his main teachings are. Even more disturbingly, some parts of the movement he helped found see him, at worst, as a “socialist”—a good monetary economist, perhaps, but of no use on any other issues—and at best, a lesser Ludwig von Mises, a copycat who ultimately stole his mentor’s Nobel Prize. All of this is quite tragic. Especially in today’s world—with threats to our liberties arising right and left (quite literally)—Hayek’s incredibly deep system of thought, which spans across economics, law, culture, politics, and philosophy, is crucial.

Ideas of centralization are more en vogue in the West today than at any other point since the fall of the last ultra-centralized state, the Soviet Union, in 1989. One could perhaps assume that the 20th century overwhelmingly showed that mega-states and collectivism of any kind don’t work. Nonetheless, these utopian dreams have returned once more in recent years.

Centralization Doesn’t Work

On the left, Bernie Sanders and Alexandria Ocasio-Cortez in the US, Jeremy Corbyn in the UK, and activists all across Europe hail the dream of socialism, all while its most prominent real-world example, Venezuela, is burning down in front of their eyes. The youth leader of the center-left Social Democrats in Germany proposed just last week that corporations such as BMW should be nationalized despite the fact that another socialist experiment, Eastern Germany, burned down right in front of his eyes (he was born in West Berlin). All of these disasters were not “real” socialism, of course (it never is), but the next attempt will surely work. To defeat the greed of the free market, it needs to be replaced by a powerful government.

More centralization cannot be the answer, regardless of who is proposing it.

The right is not much better at this point. Nationalists around Europe, from Marine Le Pen in France to Matteo Salvini in Italy, attack capitalism as ferociously as the left does. But unlike in socialism, the economy isn’t really that important. The nation itself is on the line, and everything needs to make way for its survival—regardless of whether it’s free trade, immigrants, or even the rule of law, as in Hungary. 

In all of this, it is easy to forget that the status quo—the current political establishment—is not in favor of individual liberty and the market economy, either. Ever more centralization, for instance at EU institutions in Brussels but also far beyond the Belgian capital, is highly popular. A powerful government is yet again the answer.

Hayek’s work offers a powerful response to all these different demands that still sound so dangerously similar. More centralization cannot be the answer, regardless of who is proposing it. Jonah Goldberg was on point in a recent article when he called on conservatives to read Hayek once more: on the right,

the new proponents of “economic nationalism,” no longer think elites can’t run the economy—just that liberal elites, or “globalists,” can’t run it. Part of this stems from the often-paranoid conviction that liberal elites have brilliantly rigged the system in their favor. So, the thinking goes, if they can pull that off, so can we. It doesn’t work that way.

The Power of True Liberalism

Demands for a powerful government, responsible for all areas of life, are misconstruing the world we are living in. For centuries, ever since industrialization put liberalism fully on the map, our world has grown more complex. Largely locally organized economies have grown into today’s global economy, where everyone can trade freely with one another (as long as governments don’t interfere).

Hayek called this international world the “Great Society.” And while this extended order certainly brought with it major breakdowns in communities and identities and always delivered (temporary) negative economic effects for some, it also brought forth the immense wealth and prosperity we enjoy today.

This complex order, if left to itself, can take care of its own functioning.

What can be difficult to understand is that this order is so complex that no single mind could direct it. With billions of people interacting with each other across thousands of miles every day, involved in economic processes in which products are created by millions without anyone knowing each other, this order is difficult to comprehend. But it is the daily reality.

Who could ever take care of this all by him or herself without destroying the structure itself? Who could know every little detail on the ground, know what every individual, from the farmer to the factory worker to the Silicon Valley engineer, thinks and does at every moment in time? This complex order, if left to itself, can take care of its own functioning. All small parts of this fabric work together, and if one falls apart it will be replaced by another. But could any one human being alone take care of it all (or even produce something so simple as a pencil for that matter)?

A benevolent dictator—or president or even parliament—in charge could try to organize all of these activities. But he would fail. And with it would perish the complex order itself. It would be impossible to still function by itself, being intruded upon constantly. Individuals could not do what they want to do anymore. It would only be the wise man or woman making the decision. Poverty and a significant loss in liberties would be the result.

Outcomes over Intentions

Yes, the intentions of those in charge may be well and good, but the actions would prove disastrous. Bernie Sanders, while trying to help the poor in the US, would impoverish them, along with “The 1 Percent,” by taking away all their means to prosper.

Marine Le Pen, while trying to protect the French nation, would create a wholly different, autarkic France, which would, from there on, merely follow the road to serfdom until authoritarianism eventually fully prevailed because everything that is not furthering France, in her mind, would have to be eliminated.

As Hayek wrote,

Once you admit that the individual is merely a means to serve the ends of the higher entity called society or the nation, most of those features of totalitarian regimes which horrify us follow of necessity.

Instead, Hayek argues, we need to let go of these dreams. We should instead embrace the idea of a society based on the liberty of its members to find fulfillment in their lives by themselves. Instead of central planning by one, the individual planning of each member of society, coinciding with one another, would prevail. Hayek saw the role of the government in this as one of an English gardener: one who lays the groundwork and prevents any clear and damaging breaches of the overall structure but does not interfere actively in its processes—or tries to design it all by himself.

This does not mean that the economy could simply do whatever it wants. Indeed, as Hayek pointed out, a free economy would also need the moral foundations that supplement the economy and prevent it from going rogue. Social institutions, mores, traditions, and habits, which have been developed over decades and centuries not by government but by the actions of individuals themselves interacting with one another, would act as a check against those results of the market we do not like. That is, a free society would need a healthy civil society next to a free economy.

It is here where many of today’s classical liberals can also still learn something from Hayek. A society that is not allowed to critically examine any outcomes in the economic realm, even if there are clearly adverse consequences in other orders of the society, such as a further breakdown of social institutions, would fail completely—and it possibly does at the moment.

Orders are created spontaneously, and traditions, social rules, and institutions—that is, culture—do matter.

It does not have to be this way. Liberalism can survive. It is what Hayek coined “true individualism,” based on the view that free individuals are born into a society, a family, and other institutions and that human relations will influence individuals at every point in their lives as much as individuals influence their surroundings. Humans are social animals, not rationalistic animals striving for their maximum economic gain.

This individualism is based on the belief that orders are created spontaneously, not centralized, and that traditions, social rules, and institutions—that is, culture—do matter.  And that humans, because they are social animals, sometimes prioritize other things in life more than simply economics. That they have an innate need for a sense of belonging, for an identity that goes beyond oneself, and for strong communities that can help in times of personal crises. And yet, it is also based on the realization that a free economy, undisturbed by constant government intervention, can be pure dynamism for one’s own community or country but also humanity at large—and for every member of society.

Decentralism and localism on one hand, the market and the global on the other. They might seem contradictory at first. But what Hayek showed is that with the right mix of the two, they prove most successful. It is liberalism that is both attractive as well as sustainable. And it is the kind of liberalism we need today.

A version of this article appeared at the Austrian Economics Center.