In recent years, the political divide in America has grown ever stronger as the conservative vs. liberal schism becomes increasingly wide; however, while this feels incredibly prevalent now, such disagreements are nothing new. The battle between political ideologies is as ingrained in America’s history as its Bill of Rights, with the first political parties (the Federalists and Democratic-Republicans) dating back to the 1790s. Though the names may have been different, they still debated over many of the same issues, including that of government intervention in daily life. Whether free-markets or centrally planned structures are more efficient has been a long-standing issue, one in which economist F.A. Hayek takes a strong stand against any form of central planning, as explained in his essay “The Road to Serfdom.” However, in order to understand his arguments and apply them to a more modern discussion, his original essay must be analyzed with regards to its initial publication.
Rebuilding From War
Hayek was an Austrian-born economist who taught in both the United States and England and later won the 1974 Nobel Prize in economics. His essay “The Road to Serfdom” was initially published in the April 1945 edition of Reader’s Digest, and it heavily criticized the growing favor in America towards centralized, government planning. In the 1920s, America had become incredibly decentralized and deregulated, leading to some of the highest economic growth and prosperity in the nation’s history. However, following the Stock Market Crash of 1929, the country entered an economic depression so great that it soon depressed economies world-wide for the next ten years in a time period known as the Great Depression. Millions across America were without jobs, so they looked to the government to provide them with work opportunities and safety nets (many of these programs, including social security, still exist today). Then, once America became involved with World War II, central planning of rations and quotas for factories turned the nation into a wartime producing machine.
By the time the war had ended, the government had been dictating the order of its economy for over 10 years, and there was a growing sentiment that government regulation was the future of continued economic growth in the country. Through this context, Hayek’s primary concern can be examined, as he argues that central planning is the foundation for a totalitarian government akin to Nazi Germany, and to enable it strips individuals of their liberties.
Centralization Vs. Totalitarianism
As Hayek explains, central planning is, by definition, the government control of the production process and economic outputs, which is entirely antithetical to the capitalist perspective. Under a capitalist system, competition and resource scarcity is in the consumer’s best interest, as it drives lower costs at higher prices - societal benefits are felt universally. As the government begins to step in, some of this innate competition begins to get stripped away as industries become streamlined, reducing drive for competition. This inhibits innovation and leads to stagnation in both value and price, harming the consumer. As centralization grows and this impacts more areas of life, it leads to an oppressive society which allows no room for development, personal expression, or independent thought.
When arguing for centralization, proponents are quick to point out that its predestined nature eliminates greed and the corruption of money, thus freeing society from its monetary shackles placed by capitalism. However, Hayek raises an interesting point in that we only view money as evil due to the necessary limited nature of it. Taken at face value, currency gives us the power to pursue whatever we want, and through it, we can attain virtually anything we desire, so long as we are willing to sacrifice as necessary for it. Money is not the chain holding back the human spirit, it is the key, and by removing it through universal centralization, you eliminate the boundless possibilities it presents.
Going back to the previously discussed context of the Stock Market Crash, it was not because of the availability of capital and free-market practices that led to the eventual Depression, but government protectionism of corporations and monopolies. Forcing the economic hand of society will always result in some friction and monetary loss, resulting in a perpetual net negative anytime its implementation is attempted.
Slippery Slope
Thus far, I have largely agreed with Hayek’s thesis, and yet, I do have a slight criticism of his concerns. As mentioned previously, Hayek lays centralization as the key foundation to the development of a totalitarian state and gives a detailed explanation as to how this occurred in Nazi Germany and will occur in America should it be left unchecked. While this is a compelling hypothetical, it is just that - a hypothetical. Hayek makes many if/then statements to reach his conclusion that centralization must lead to totalitarianism, thus playing on the convincing, yet erroneous, slippery slope fallacy. Each step of his process that he outlines cannot be guaranteed to occur in every scenario, and while I do not object that this is the process that occurred for Nazi Germany, it is unfair to definitively say it is the rule rather than the instance.
For instance, modern countries have collectivized certain key industries, most notably being the United Kingdom’s universal healthcare system. While this system is certainly flawed, that is not the issue of this argument, as by Hayek’s reasoning, the UK should be on the road to an oppressive, totalitarian society, and yet, that has not at all been observed. Hayek certainly has interesting ideas that, taken by themselves, I believe most Western economists are keen to agree with; however, his inevitable snowball from centralization to serfdom (hence his essay’s title) is too overgeneralized for all society, thus undermining what is otherwise a fairly sound argument.