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“The Road to Serfdom”: Exploring F.A. Hayek’s Key Concepts in Economic Freedom

The Road to Serfdom Exploring F.A. Hayeks Key Concepts in Economic Freedom

Celebrating its 80th anniversary since initial publication, “The Road to Serfdom” continues to remain relevant in today’s discourse when it comes to economic freedom and political governance. This year, the Austrian Economic Center, through its annual Free Market Road Show (FMRS), has collaborated with universities to distribute a translated version of the cartoon booklet summarizing Hayek’s ideas from “The Road to Serfdom” in a number of foreign languages. This booklet tells the story of a community coping with wartime economic decline and the emergence of authoritarianism, showing how control over political issues gradually grows to control the entire economic freedom and eventually leads to poverty. With this publication, FMRS will this year be able to present Hayek’s timeless concepts to students in a simplistic yet entertaining way not only in English and German, but also in Estonian, Hungarian, Montenegrin, and Slovakian.

Through his work, Hayek clarifies the core ideas of classical liberalism in a way that makes it easy for readers of all backgrounds to understand where the problems with central planning lie and why classical liberalism is necessary for economic growth. Beginning with the lofty goals of equality and the idea of treating everyone fairly, Hayek highlights the enormous power that comes with socialism while pointing out how democracy serves to establish clear guidelines rather than provide equality by making decisions on behalf of individuals. Meanwhile, alternative systems like socialism, which try to “liberate” the individual from making choices and thus make them on their behalf, actually have greater power than one might think. According to Hayek, when power is centralized, its effects are amplified to levels beyond human comprehension. To illustrate this, he explains the dependence of society on bureaucrats who have the power to make decisions on how we live and work, whereas in a free market capitalist society, individuals have at least some power to take action, walk away, and change their position no matter in what hierarchical order they might find themselves in. This idea is important to highlight, especially now when social-democratic governments are trying to sell the sentiment of equality to the next generations, as this emotional link gives them access to influence and control people, and in this way, they win over the majority’s sympathy and acceptance.

Today, as we see populism rise once again, classical liberalism is unfairly condemned to be a brutal philosophy that provides no security or stability for people. But in reality, that is not the case! Hayek highlights this point clearly when he writes about the Laissez-Faire mentality, which refers to providing guidance rather than planning when it comes to economic activities, he makes this argument quite evident. People tend to misunderstand liberty and become afraid of it because they think that if markets are allowed to operate freely, there will be chaos and anarchy will erupt. However, The Road to Serfdom claims that while the economy is stable and expanding, the liberal method of planning actually contains rules and regulations that ensure the provision of social security and other services as well as the prevention of exploitation, the creation of negative externalities, etc. While Hayek opposes centralized planning and control of economy, when it comes to welfare policies, he makes a distinction between the kind of planning that directs the whole economy, which he opposes, and the more limited planning that suggests providing a safety net. The main idea here is that as long as extensive government intervention is avoided, providing certain social safety nets, such as welfare policies, can ensure a basic level of security for individuals in need. But he stresses the importance of maintaining a balance in order to avoid escalation from a minimal social safety net to excessive planning and control.

The promise of freedom and economic equality that socialism brings is an unsustainable fallacy sold by leaders who want to seize power in politics. In line with Hayek’s views, socialism’s wealth redistribution through centralized planning will always lead to unintended consequences like economic inefficiencies and long-term unsustainability. Hayek takes this critique further by noting that socialism, in its various forms, is just another form of not yet fully developed totalitarian ideologies, which easily progresses to lead to communism, fascism, and Nazism. He suggests that these ideologies, despite differences in scale and development, offer the promise of general welfare while presenting a potential threat to individual freedoms. The collectivist manipulative strategies employed by socialist leaders to assemble a sizable following are predicated on identifying a basic flaw shared by the masses; after all, it is difficult to rule an intellectual, morally-aware group of people. In the chapter “Why the Worst Get on Top,” Hayek explains the dynamics in centrally planned economies that pave the way for the rise of authoritarian dictators. He argues that the concentrated power structure of central planning attracts control-hungry individuals. These kinds of structures provide opportunity for those who are prepared to subvert morality, violate ethics, and silence opposition. Fear, whether of chaos or economic instability, becomes a tool for justifying the concentration of power. Hayek warns of unintended consequences, such as stifled diversity of thought and the elevation of bureaucrats over merit, highlighting the dangers of authoritarianism within centrally planned structures.

Hayek highlights a clash between planning and the rule of law, emphasizing how planning, with its subjective decision-making, challenges the fair and consistent principles of the rule of law. The rule of law, based on predictable and universal rules, protects individual freedoms and prevents arbitrary government actions. In contrast, planning may seem tempting for solving societal issues, but planning actually only leads to unpredictability and risks the abuse of power, undermining the foundations of justice in society, as by generalizing needs and making them uniform, they only lead to discrimination. This only proves that planning misunderstands the dynamic nature of societies so instead of achieving its goals, it only leads to even more inequality as the so-called regulations (market interventions) only protect the well-established players that end up exploiting the rights of other smaller players entering the developing industry. What Hayek suggests instead is the embrace of spontaneous order within clear frameworks governed by the rule of law so that rigid planning is not possible but there is enough room for the promotion of adaptability.

When examining the idea that planning promises security and eliminates worries, Hayek raises the concern that the pursuit of complete security through planning can inadvertently restrict individual freedom and creativity, leading individuals to the unbearable situation where no efforts of them can change their stance. Hayek concludes his work by highlighting the difference between the traditional and modern concept of security. He goes on to suggests that a balance must be struck between the two, favoring the principles of traditional security rooted in the rule of law to maintain a just and free society while addressing the legitimate concerns for the modern alternative of security that is more associated with centralized planning and seeks to provide assurances but may compromise individual liberties in the process.

In light of all mentioned considerations, it becomes evident that classical liberalism and the principles of free-market economics stand out as the most pragmatic, secure, and efficient choices – even in the face of the utopian economic system presented by populism and totalitarianism. Classical liberalism remains the most pragmatic framework that not only guards against the pitfalls of populist temptations but also ensures a sustainable and effective approach to governance and economic prosperity.

Author

  • Alberta Bikaj

    Alberta Bikaj is an intern at the Austrian Economics Center and a master's student in Economic Policy at Central European University (CEU). She holds a bachelor's degree in International Economics, Finance, and Business and is passionate about economic policy, finance, blockchain, and digital transformation.

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The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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