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Jun 19, 2019

Hayek vs. Beveridge on the Welfare State: Hayek’s The Road to Serfdom

In The Road to Serfdom F. A. Hayek warned that allowing the government the powers needed to enact a welfare state risked undermining political liberty.

Friedrich Hayek dedicated The Road to Serfdom to “the socialists of all parties.” In part, the book was an extension of his 1933 memorandum to Beveridge asserting the socialist origins of Nazism. Hayek argued that the idea of German National Socialism came from the writings of Johann Fichte, Johann Rodbertus, and Ferdinand Lasalle, all prominent socialist thinkers in the mid-nineteenth century. Further, the founders of European fascism were often themselves former left-wing socialists, like Mussolini, Laval, and Quisling. According to Hayek, the National Socialists happened to be the victors in the interwar struggle between various German socialist parties. While left wing socialists appealed to the working class, the National Socialists represented lower middle class workers. Although different classes supported the various socialist parties, all the socialist parties shared an antipathy to liberalism. Once triumphant, Nazism favored corporatism, tight state regulation of monopolized industry. Hayek thought that the theory that Nazism was a pro-capitalist reaction was pernicious because it created an artificial divide between socialism and fascism. Instead, Hayek argued “that the rise of facism and naziism was not a reaction against the socialist trends of the preceding period but a necessary outcome of those tendencies.” Hayek was not proposing that socialism necessarily turned into facism, but that socialist planning inevitably led to some form of totalitarianism.[i]

Hayek was concerned that British socialists would imitate their German counterparts. He noted the prewar admiration that many left wing intellectuals had for fascist economic organization and believed that the intellectual climate in Britain in the 1940s was similar to that in Germany during the 1910s and 1920s. Hayek feared that the popular consensus on the desirability of central economic planning would put Britain on the slippery slope toward totalitarianism, “the road to serfdom.” He was particularly alarmed by statements from Labour Party leaders, like Harold Laski, who was willing to ask “whether in a period of transition to Socialism, a Labour Government can risk the overthrow of its measures as a result of the next general election.” Hayek did not doubt the sincere desire of socialists to improve the wellbeing of their fellow citizens, but he questioned whether socialism and democracy were compatible in fact as well as in theory. After electoral victory, parliamentary bickering and partisan gridlock would quickly frustrate socialists, leading to calls for someone who could mandate socialism, a popular dictator. “The whole system will tend toward that plebiscitarian dictatorship in which the head of the government is from time to time confirmed in his position by popular vote, but where he has all the powers at his command to make certain that the vote will go in the direction he desires.”[ii]

Certainly, socialists in the twentieth century overwhelmingly used a rhetoric of freedom and articulated their belief in democratic culture, but Hayek suspected that socialism would revert to its anti-democratic roots. In the early nineteenth century, socialist thinkers, like Henri Saint-Simon, favored authoritarian styles of government and were hostile toward democracy. Under the influence of the democratic fervor preceding the revolutions of 1848, socialists adopted a rhetoric of freedom in order to “harness to its car the strongest of all political motives—the craving for freedom.” Hayek accused socialists of using the language of democracy and freedom but turning the words into “empty shells deprived of any definite meaning.” Socialists proposed a “new freedom” by which they meant “economic freedom,” a freedom from necessity. Hayek believed that “the demand for the new freedom was thus only another name for the old demand for an equal distribution of wealth. But the new name gave the socialists another word in common with the liberals, and they exploited it to the full.” Hayek feared that the socialist pursuit of economic freedom would destroy true “political freedom,” which he defined as “freedom from coercion” and “the arbitrary power of other men.”[iii]

Socialists would abolish the “despotism of physical want” by erecting despotism of state in its place. Socialists would try to distribute power equally by centralizing its exercise under the aegis of the state for the benefit of the people. Hayek feared this centralization of power and quoted Lord Action, “Power tends to corrupt, and absolute power corrupts absolutely.” Despite the socialist desire for a dictatorship of the good, the corrupting nature of power ensured that the worst sort of people would rise to the leadership of an authoritarian government. Hayek claimed that property was the traditional source of power. When the means of production remained divided among many private owners, no single person had absolute power over another. By negating the right of private property, socialism undermined the basis for all other democratic freedoms.[iv]

To make this point, Hayek relied upon the first-hand testimony of a former communist activist, Max Eastman. While visiting the Soviet Union during the 1920s, Eastman became disillusioned with Stalin’s autocratic government; he supported Trotsky until Stalin’s agents murdered the Russian expatriate. By the 1940s, Eastman had renounced communism and become an advocate for Friedrich Hayek and other libertarian intellectuals (it was Eastman, then working for Reader’s Digest, who abridged The Road to Serfdom for the Book-of-the-Month Club). Eastman asserted that Marx “was the one who informed us…that the evolution of private capitalism with its free market had been a precondition for the evolution of all our democratic freedoms.” Unfortunately, “it never occurred to him…that if this was so, these other freedoms might disappear with the abolition of the free market.”[v]

In order to ensure the survival of democratic freedoms, Hayek believed that private property had to remain sacrosanct and the economy unplanned. Central planning prevented effective competition and created an all-encompassing state wielding “coercive power.” Instead of competing in the marketplace, people would be forced to lobby the state for “a share in the exercise of this directing power,” which would become “the only power worth having.” For Hayek, socialism created a new aristocracy of state planners and bureaucrats who decided who would receive government largesse and who would pay for it. Hayek argued that the socialist goal of giving people the security they needed so that they could confidently take risks would actually create a risk-averse culture. The British state would become like the old German beamtenstaat (“bureaucratic state”); people would search for security rather than entrepreneurial opportunity. Social security would have debilitating effects on the British psyche.[vi]


[i] Hayek, The Road to Serfdom, 36, 59, 80, 144-5, 182-3. The 2007 reissue of The Road to Serfdom starts with the successive prefaces written by Hayek in 1944, 1956, and 1976. In the 1956 preface, Hayek asserted that the actions of the postwar Labour government confirmed his argument that socialism required coercion. In the much briefer 1976 preface, Hayek regretted that in the first edition he had not yet “wholly freed myself from all the current interventionist superstitions.” In general, the successive prefaces show Hayek’s growing skepticism toward the possibility of wholesome state economic intervention; “Naziism” and “Nazism” were used interchangeably at the time.

[ii] Ibid., 59, 74, 105, 109-10, 208-9.

[iii] Ibid., 76-7, 175.

[iv] Ibid., 77-8, 157-8.

[v] Ibid., 136. Eastman’s Russian disillusionment was similar to that of Emma Goldman. Both were socialist activists bothered by the dictatorial Stalinist state, although the effect on Eastman’s politics was more radical. Then again, Eastman continued to ascribe to Marxism until after the death of Trotsky in 1940, the same year that Goldman died. It is interesting to wonder if Goldman might have moved toward anarcho-libertarianism had she lived longer. See Emma Goldman, My Disillusionment in Russia (New York: Doubleday, 1923). Indeed, I think there is a paper to be written on the political trajectories of British and American socialists disillusioned by visits to the Soviet Union.

[vi] Ibid., 138, 155.

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