My favourite passage from The Road to Serfdom

https://twitter.com/acskemp/status/1030586063259983872

Murray Rothbard: Under Socialism, all life becomes politicized

Milton Friedman on Hayek’s ‘Road to Serfdom’ 1994

George Orwell on the Road to Serfdom

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Hayek (1976) on why the Road to Serfdom was wrong on socialism leading to totalitarianism

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Source: 1976 Monday Conference transcript featuring Hayek « Economics.org.au.

Milton Friedman on Hayek’s "Road to Serfdom" 1994

https://www.youtube.com/watch?v=15idnfuyqXs#t=44

Hayek on why he got his key prediction right in the Road to Serfdom

This summary by Hayek of the contemporary meaning of socialism in the 1930s and 1940s was relatively accurate.

You must remember that clause 4 of the British Labour Party’s manifesto  committing that party to the socialisation of the means of production, distribution and exchange was only dropped relatively recently at the impetus of Tony Blair.

The Australian Labor Party  still includes the socialisation of the means of production, distribution and exchange as one of its objectives.

There were stronger  divisions in the inter-war labour parties in Britain, Australia and New Zealand about  whether the party should be committed to full socialism, Christian socialism or social democracy. It has been forgotten that the labour parties of Britain, Australia and New Zealand had many fall on the socialists within that party.

The Labour Party of Michael Foot in the 1983 British general election ran on a hard left manifesto, with Tony Benn and the Trotskyist entryist group Militant Tendency, which had several MPs,  wanting a full socialist agenda in 1980s Britain.

Hayek’s spotty record as a prophet in the Road to Serfdom – part 2: what about the post-colonial Third World?

Gordon Tullock used Sweden to argue that  the problem with The Road to Serfdom was:

“that it offered predictions which turned out to be false. The steady advance of government in places such as Sweden did not lead to any loss of non-economic freedoms.”

But was socialism good for democratic consolidations in the post-colonial third world? Was that not a better hunting ground for Hayek’s fears?

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The people and parties, very often with a socialist hew, who won the election after the colonial government left town are not always all that keen to give up the reins of power.

Remember Huntington’s Two Turnover Test: when a nation moves from an emergent to a stable democracy, it must undergo two democratic and peaceful turnovers of ruling parties.

After an emerging democracy’s first turnover, the new administration often reverts to authoritarian rule. Russia under Yeltsin and Putin are examples.

Would Singapore be an example of central planning and state ownership leading to serfdom and a one-party state?

The state controls and owns firms that comprise at least 60% of the GDP through government entities. The vast majority (more than 80%) of Singaporeans live in public housing;

Although initially styling itself an anti-Communist and Social Democratic, the People Action Party (PAP) was expelled from the Socialist International in 1976 because it suppressed dissent and jailed opposition leaders. Hayek would be vindicated?!

The Index of Economic Freedom says that Singapore is a nominally democratic state ruled by the PAP since the country became independent in 1965, and that certain rights, such as freedom of assembly and freedom of speech, remain restricted

The Freedom House 2010 country report notes that Singapore is not an electoral democracy despite elections free of irregularities and mentions that all domestic newspapers, radio stations, and television channels are owned by government-linked companies, which limits free speech. The PAP has used the Government’s extensive powers to place formidable obstacles in the path of political opponents.

Daron Acemoglu has written on the role of institutions on post-colonial development in his why nations fail research agenda.

  • In Africa, Central America, the Caribbean and South Asia, European powers set up extractive states. These institutions did not introduce much protection for private property nor did they provide checks and balances against government expropriation. The explicit goal of the Europeans, in one form or another, was the extraction of resources from these colonies.
  • This colonization strategy contrasts with the institutions that the Europeans set up in colonies in which they settled in large numbers, e.g., the United States, Canada, Australia and New Zealand. In these colonies, life was modelled after that in the home country; the emphasis was on the enforcement of property rights for a broad cross-section of society, especially smallholders, merchants and entrepreneurs.

The same British colonists established different institutions in very different parts of the world:

  • If Europeans settled in a colony, institutions were developed for their own future benefits.
  • If Europeans did not settle in a colony, they set up a highly centralized state apparatus and other similar institutions to oppress the native population and to facilitate the extraction of resources in the short run

Acemoglu has written on Singapore as a stable non-democracy that can persist without significant repression.

Singapore was able through industrialization in the post-colonial period to ease social tensions and thus eliminate the need for democratic consolidation and also the need for repression. China’s ruling elite has the same current goal.

Why has Singapore not democratized? Acemoglu suggests is it is because Singapore is a very equal society. There is no traditional wealthy landed elite and the economy relies on external capital and businesses.

Most people appear to be relatively happy with the status-quo, at least not so unhappy that they want to engage in serious, and potentially costly, collective action to induce a major change in political institutions.

All and all, political economy has come on in leaps and bounds since 1944. Hayek should be judged against the other predictions of his times. Few socialist countries in the post-colonial Third World stayed democratic for long.

Hayek’s spotty record as a prophet in The Road to Serfdom – Part 1

Gordon Tullock used Sweden to support his argument that the basic problem with The Road to Serfdom was:

“that it offered predictions which turned out to be false. The steady advance of government in places such as Sweden did not lead to any loss of non-economic freedoms.”

Hayek discusses the Road to Serfdom

When looking back longingly at the mixed economies of 1950s and 1960s, people often forget who won elections much of the time back then.

The period that managed to combine a large degree of state ownership and control of the UK economy with a free and diverse media and political pluralism was often under Tory rule (1951 to 1964) with the Labor governments (1964-1970) often with a margin of a few seats.

Then there was the Menzies era in Australia with Liberal party rule from 1949 to 1972; and then 1975 to 1983. Much the same in New Zealand. The Left rarely held power in the mid-20th century.

The Christian democrats usually ran both Italy and Germany in coalitions, as I recall, up until the late 1960 or the early 1970s. Gaullist France? The LDP in Japan?

That is where Hayek got it wrong. The left-wing parties were not the face of the future.

Power rotated in Schumpeterian sense. Governments were voted out when they disappointed voters with the replacement not necessarily having very different policies.

The right-wing parties won many western European elections by that well-proven old trick of being slightly to the right of the left-wing parties. Hayek failed to predict this.

Hayek was himself a major critic of detailed predictions:

“We can build up beautiful theories which would explain everything, if we could fit into the blanks of the formulae the specific information; but we never have all the specific information.

Therefore, all we can explain is what I like to call “pattern prediction.”

You can predict what sort of pattern will form itself, but the specific manifestation of it depends on the number of specific data, which you can never completely ascertain. Therefore, in that intermediate field — intermediate between the fields where you can ascertain all the data and the fields where you can substitute probabilities for the data–you are very limited in your predictive capacities.”

“Our capacity of prediction in a scientific sense is very seriously limited. We must put up with this.

We can only understand the principle on which things operate, but these explanations of the principle, as I sometimes call them, do not enable us to make specific predictions on what will happen tomorrow.”

Hayek’s warnings in The Road to Serfdom was against a background where democracy was still young and insecure in Europe and peacetime democratic governments were, up until then, not much bigger than a post office and a military. The big governments of his day were not democratic.

As Popper and Kuhn understood it, bold, risky hypotheses are at the heart of great advances in the sciences and scholarship generally.

Roger Pielke Jr.

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