The Road To Serfdom

Hayek finds three reasons why central planning must become dictatorial, even within a democracy.

First, the aim of collectivism—“the deliberate organization of the labors of society for a definite social goal” (100)—is undefined and morally suspect. Millions of people have countless competing preferences, and there is no generally-accepted set of values that all have agreed to obey. Collectivist planners sweep aside individual choices and replace them with a unitary purpose; thus, “they are totalitarian in the true sense of this new word” (100). The historical trend toward greater and greater freedom would be reversed under central planning.

Second, legislating a unitary purpose involves so many minute adjustments to an economy, and so many compromises between competing interest groups, that it becomes effectively impossible. Democracies and legislatures are designed to make decisions involving issues where the public already agrees substantially on the fundamentals. Central planning of an economy, on the other hand, involves countless points of disagreement, which quickly overwhelm the decision-making process. It is one thing for a military leader to gather decision-making into his hands, as his purpose is simple; it is quite another for a government to try to take the reins of an entire economy with its many conflicting players and their multiple purposes.

Third, central planning must lead to dictatorial effects, even if such plans begin in a democratic process. For one thing, a rule issued in one domain could limit freedom in another. Hayek cites the German government of 1928, which controlled more than half its economy, effectively dictating how the rest of the economy would function. Lawmakers will sidestep the complexities of central-planning and pass simplified laws that leave most decisions to the discretion of bureaucrats. These officials issue fiats, which in turn conflict with other bureaus’ dictates, until the public cries out for a single official who will make all the decisions.

Thus, “a socialist government must not allow itself to be too much fettered by democratic procedure” (105). No matter how well-intentioned, economic planning will become a tyranny.

Up to now, Hayek has focused on how collectivist economic planning tends to limit freedom. Now he turns to the damage that planning does to another fundamental principle of democratic societies: the Rule of Law.

Hayek defines the Rule of Law as the principle “that government in all its actions is bound by rules fixed and announced beforehand” (112). Those charged with fulfilling the laws of the land must not act arbitrarily but instead follow the guidelines set out by the legislature.

Without this restriction, governments can become arbitrary, but “under the Rule of Law the government is prevented from stultifying individual efforts by ad hoc action” (112). The difference between the Rule of Law and rules laid down by central planners is like the difference “between providing signposts and commanding people which road to take” (113).

Hayek reminds us that central planning requires countless arbitrary decisions made by bureaucrats: “When the government has to decide how many pigs are to be raised or how many busses are to be run, which coal mines are to operate, or at what prices shoes are to be sold, these decisions cannot be deduced from formal principles” (113). Bureaucrats must decide between competing interests on the fly, which privileges one group over another, leading to “a new distinction of rank” (113). This arbitrariness violates the Rule of Law.

Under the Rule of Law, the government sets forth general guidelines that it will enforce. This allows people to make plans, knowing more or less how the government will behave. Rules must be simple and fair and “given the form most likely on the whole to benefit all the people affected by them” (114).

Doubters complain that the Rule of Law doesn’t permit us to foretell outcomes, as with a system of central planning. Hayek responds that the limits imposed by the Rule of Law are superior because “only the individuals concerned in each instance can fully know these circumstances and adapt their actions to them” (114). Otherwise, the state becomes tyrannical.

Planners in a given industry argue that their own work is fairly straightforward, so why can’t governments plan for an entire economy? Hayek answers that industrial planners have a simple set of concerns limited to the specific needs of their industry, whereas central planners must consider the endless competing wants and needs of the citizenry.

The daily restrictions and unfairness that people suffer under planning, “allowing one man to do what another must be prevented from doing” (116), will cause citizens, over the decades, to lose respect for law and legislature, until—as in the case of Germany—they seek refuge in a dictator like Hitler.

Hayek deduces that political equality, as promoted by the Rule of Law, conflicts with the needs of central planning, which instead reverts to the older “rule of status” that confers arbitrary privileges upon one group over another (116).

Some argue that the state should act more forcefully to remedy various ills. Hayek counters that a Rule-of-Law nation-state, “controlling weights and measures (or preventing fraud and deception in any other way) is certainly acting, while the state permitting the use of violence, for example, by strike pickets, is inactive” (118).

To those who protest that the Rule of Law gives governments the right to perform any action so long as it is duly constituted by legislation, Hayek points to Hitler, who arguably obtained his dictatorial powers through a democratic process: “By giving the government unlimited powers, the most arbitrary rule can be made legal; and in this way a democracy may set up the most complete despotism imaginable” (119).

Many intellectuals argue both for planning and for individual human rights, which Hayek declares “pathetic” and a “muddle” (121). He cites H.G. Wells’ planning-centric “Declaration of the Rights of Man” as shot through with contradictions: “The individual rights which Mr. Wells hopes to preserve would inevitably obstruct the planning which he desires” (121).

More forthright are progressives who directly oppose human liberty in favor of government power. Hayek grants that their position, though it completely violates the Rule of Law, is at least logically consistent. Their view, however, leads directly to ruthless suppression of freedom, especially of national minorities who stand in the way of government plans.