Monday, 11 May 2009

The Road to Serfdom

I don't know why, but I'd never got around to reading this, so in my latest Amazon order I thought I'd take a punt. I'm about two-thirds of the way through, and what really strikes me about it is the elements that really aren't that controversial. With the benefit of 60 years of hindsight it's clear that a key part of his argument - that planning leads to totatilitarianism - was wrong. Lots of states tried it to a greater or lesser extent whilst managing to maintain political freedoms. Given that the book was aimed at a UK audience, his predictions look particularly wide of the mark.

That said, some of his arguments about the drawbacks of planning, including the impact on individual freedoms, ring true. In addition it's notable that Hayek is clearly not a loony libertarian, as he stresses the need for a state to carry out core services, including the provision of a minimum income and (so far not very well defined) social services. He also makes a clear argument for the need for regulation in order to address externalities (I might actually use one of the passages when he discusses this in order to wrongfoot Rightie opponents of environmental legislation).

I haven't got onto the section about 'the socialist roots of Nazism' yet, so maybe I'll dramatically shift my opinion, but so far I'm surprised by how uncontroversial I'm finding it, even where I don't agree with him. From the pespective of early 21st century capitalism, where central planning by the state has been removed from many areas, it looks like he has won at least part of his argument. And there is no serious expectation of a rematch.

One final thought occured to be whilst I've been reading it. I genuinely don't get the rather Hayekian liberal Rightie attacks on the NHS for being obsessed with 'targets' and the extended criticism that it is too centralised. It's not that I don't think that these points have some validity, it's that I don't think that they apply solely to the public sector. In my experience private sector organisations are just as capable of measuring the wrong things, and creating perverse incentives by setting targets. What's more they often seem to spend a lot more money learning this lesson. Therefore don't Hayek's criticisms of the inefficiency of planning apply to any large organisation, not just the state?

6 comments:

Falco said...

"What's more they often seem to spend a lot more money learning this lesson. Therefore don't Hayek's criticisms of the inefficiency of planning apply to any large organisation, not just the state?"

Of course they do, which is why many large companies split themselves up into smaller more managable units.

The big difference between public and private is that a company has to learn the lesson sooner or later or go bankrupt. The government just keeps soaking the taxpayer to fund their inefficiency.

Tom P said...

"Of course they do, which is why many large companies split themselves up into smaller more managable units."

equally many do the exact opposite.

Charlie Marks said...

"The big difference between public and private is that a company has to learn the lesson sooner or later or go bankrupt."

The problem with this is that many people who are affected by a company going under were in no position to rectify the situation - and for customers and suppliers suddenly left in the lurch it can be very inefficient for companies to cease operating.

Getting back to Hayek, his claims about the socialist roots of Naziism are a bit odd - we'd have to ignore the fact that both the German social democrats and communists were opposed to Naziism, if not, sadly, united in their opposition.

I've read similar arguments about Mussolini - which take the idealist position that because he was a socialist before becoming a fascist, we should ignore the reality of Il Duce being backed by Italy's capitalists in crushing unions and cooperatives...

Falco said...

"equally many do the exact opposite."

and pay the price. The problem with over large government is that it does not.

"The problem with this is that many people who are affected by a company going under were in no position to rectify the situation - and for customers and suppliers suddenly left in the lurch it can be very inefficient for companies to cease operating."

A company being badly run is, quell suprise, a bad thing. However, this is not a bug but a feature of the market. Instead of propping up a bad company, the market allows more efficient competitors to take over. Change is always disruptive but it is better than continuing down the wrong path.

"we'd have to ignore the fact that both the German social democrats and communists were opposed to Naziism"

The Menshevics opposed Bolshevism, that doesn't mean they weren't both communists.

Tom P said...

Hi Falco

Apologies for not replying fully previously. Work a bit hectic this week.

I'm not sure large companies necessarily do pay the price actually, depending on what industry they are in. Realistically, no new company is going to break into the oil industry for example, and set up its own new infrastructure etc, so the existing companies are in a strong position to dictate the terms of the game.

Charlie Marks said...

Tom makes a good point. I'd like to hold you on this question:

"The big difference between public and private is that a company has to learn the lesson sooner or later or go bankrupt. The government just keeps soaking the taxpayer to fund their inefficiency."

This assumes that the best thing to do is to replace the company rather than try to get it to improve. We can, as citizens, put pressure on elected politicians to improve services like the police, NHS, schools, etc.