The Book in a Nutshell
The Road to Serfdom is the seminal work of Friedrich Hayek, a British-Austrian economist and philosopher regarded as one of the leading classical liberal thinkers of the 20th century. The book contends that socialist ideals can ultimately only be achieved by totalitarian means. Written during World War II, Hayek reflects on the patterns of socialism which led to Nazism, the illusion of democratic socialism and how early signs in other parts of the western world warned at a similar trajectory.
Book Summary: The Key Ideas
#1: The Illusion of Democratic Socialism. As the complexity of central economic planning is realised, confidence in democratic assemblies diminishes. This results in louder calls for governments and individuals to act on their own responsibility. Central planning inevitably becomes undemocratic and worse, often ends up totalitarian.
#2: Central Planning Isn’t Inevitable. Central planners often argue that planning is an inevitable response to technological advances. But economy of size doesn’t necessitate monopoly, nor is the complexity of technology best solved in a non-competitive setting.
#3: The Problems with Economic Control. There is no such thing as planning that only relates to “economic matters”. Economic planning, by extension, relates to all aspects of human choice.
#4: How the Worst Get on Top and Stay on Top. Totalitarianism isn’t an unfortunate byproduct of some evil people rising to powerful positions. It is collectivism itself that attracts such people to power. This power is then sustained through effective propaganda and the psychology of groups.
#5: Planning, the Rule of Law and International Order. The Rule of Law is a necessary and permanent framework upon which individuals can go about their business. Planning, by contrast, discriminates to current circumstances. As the world became more international in the mid-1900s, Hayek called for a framework of international Rule of Law, but warned of the risks of this becoming an economic authority rather than a political one.
Book Notes: The Key Ideas in Detail
The below are more detailed notes on the key ideas from The Road to Serfdom by Friedrich Hayek, along with some quotations that caught my eye. These notes do not by any means cover the full breadth of ideas within the book. They are instead intended to serve as an introduction to some of the key ideas, from which to decide whether the book is worth further attention.
Key Idea #1: The Illusion of Democratic Socialism
Written in 1944, Hayek reflects on how the western world was abandoning a formula of political freedom that spurred unprecedented advances in economic prosperity, security, independence and science.
As impatience with the slow progression of liberalism grew, Hayek highlights that our attitudes towards societies changed. The idea of free trade was exported towards the East, but gradually the West began to import socialist ideas. Our great liberalisation that came in the decades before came to be a considered a “rationalisation of selfish interests”.
In its place, socialism began to rise. And the movement utilised its greatest propaganda weapon: the promise of a “new freedom” in the form of “democratic socialism”.
But Hayek argues that this concept is nothing more than an illusion. While democracy increases individual freedom, socialism by definition restricts it. Indeed, history underscores how socialism, far from fostering freedom, serves to undermine freedom and create fertile ground for totalitarianism.
“That democratic socialism, the great utopia of the last few generations, is not only unachievable, but that to strive for it produces something so utterly different that few of those who now wish it would be prepared to accept the consequences, many will not believe till the connection has been laid bare in all its aspects.”
The erosion of democracy through socialism follows several sequential steps.
First, while agreement on planning for a “common social goal” may be achieved democratically, it is not supported by agreement on the complex steps needed to achieve it. As the complexity of central planning becomes apparent, “democratic socialism” reveals the inability of democratic assemblies to carry out the planning. Inevitably, technical tasks are delegated to separate bodies, relinquishing democratic power.
The agreement that planning is necessary, combined with an inability of democratic assemblies to produce a plan, leads to louder calls for governments and even individuals of government to act on their own responsibility, free from cumbersome democratic procedure.
As Hayek puts it:
“The cry for an economic dictator is a characteristic stage in the movement towards planning.”
The end result, in short, is that central economic planning destroys democracy. Far from producing the “democratic socialism” advertised, it often ends up producing totalitarianism.
“It is now often said that democracy will not tolerate “capitalism”. If “capitalism” means here a competitive system based on free disposal over private property, it is far more important to realise that only within this system is democracy possible. When it becomes dominated by a collectivist creed, democracy will inevitably destroy itself.”
Key Idea #2: Central Planning Isn’t Inevitable
Hayek points out that central planners argue not that central planning is desirable but that it is “inevitable” as a response to technological changes making competition impossible. Central planners tend to put forward this view based on three core arguments:
- Technologies will lead to monopolies. This is partly founded on the Marxist idea of “concentration of industry”. But Hayek contends that economy of size doesn’t necessitate monopoly. More commonly, monopoly is the result of collusive activities in collaboration with the state.
- Complexities require state planning. Hayek argues that the reality is the precise opposite: it is the complexity of new technologies which can only be solved by competition and decentralization, not conscious control.
- The technology needs protection from competitors. Hayek counters this argument by contending that if the technology is truly revolutionary it would be capable of standing up to competition on its own.
In summary, Hayek concludes that the move towards central planning is a deliberate action, not the result of external necessity. Moreover, the reason that many technological specialists support planning is because they believe it will secure more attention to the objectives that they care about most.
“While there is nothing in modern technological developments which forces us towards comprehensive economic planning, there is a great deal in them which makes infinitely more dangerous the power a planning authority would possess.”
Key Idea #3: The Problem with Economic Control
Central planners often argue that planning will only relate to “economic matters”. But this is a false idea that seeks to disconnect the inextricable bind of freedom in economic activities to all aspects of human choice.
“Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends.”
In its most common form, socialism seeks redistributive goals aimed at economic security for all. Here Hayek argues that we must draw an important distinction between two types of economic security:
- Basic physical security: a minimum standard of food, shelter and clothing.
- Security of a given standard of life.
There is no reason, Hayek notes, why a wealthy society cannot achieve the first kind of security for all. Indeed, there is no reason why the state shouldn’t assist if needed. Even in smoothing the employment impacts of business cycles through timing public investment, Hayek does not strongly object.
The problem, where the case for economic security erodes freedom, is when we pursue the second type of security. When, without merit, we provide security of income and protection against losses. The result of such endeavours is the distortion of competitive price discovery and the distortion of incentives, resulting in a loss of discipline.
“When security is understood in too absolute a sense, the general striving for it, far from increasing the chances of freedom, becomes the gravest threat to it.”
Ultimately, these measures paradoxically increase insecurity and the gap between the privileged and underprivileged.
“Nothing is more fatal than the present fashion among intellectual leaders of extolling security at the expense of freedom.”
Key Idea #4: How the Worst Get on Top and Stay on Top
The worst features of totalitarianism are not accidental byproducts brought about by evil people. Rather, totalitarianism systems tend to suit these people because the system of central control ultimately forces leaders to choose between failure and a disregard of ordinary morals. To paraphrase Hayek, there is an extremely low probability that a person who dislikes the possession and exercise of power ends up in a position of power.
“Collectivism has no room for the wider humanitarianism of liberalism but only for the narrow particularism of the totalitarian.”
Totalitarianism climates tend to breed strong groups in support of negative and even historically shocking ideas. Hayek suggests there are 3 main reasons why these ideas gain united support:
- The lowest common denominator unites the largest number of people. With low moral and intellectual standards, this group is not a majority but it is the largest group in agreement.
- It is easy to obtain the support of the docile or gullible. With no strong convictions, this group are malleable when regularly presented with new views.
- They unite around a common “enemy” / Us vs. Them. The common fight against those outside a group is an essential ingredient for common action. It is human nature for it to be easier to agree on a negative programme than a positive one.
Having established this large group, Hayek argues that this frees dictators from the moral restraints which previously controlled their behaviour.
“What is called economic power, while it can be an instrument of coercion, is in the hands of private individuals never exclusive or complete power, never power over the whole life of a person. But centralised as an instrument of political power, it creates a degree of dependence scarcely distinguishable from slavery.”
In order to sustain these and further these ideas, totalitarianism requires that people believe their common goal is their own. Centralised propaganda is therefore a potent weapon of choice.
“To make a totalitarian system function efficiently, it is not enough that everybody should be forced to work for the same ends. It is essential that the people should come to regard them at their own ends.”
The most effective technique is to convince people that they are serving values they have always held. Totalitarian governments best achieve this by using old words and changing their meaning.
“Freedom” and “liberty” become their opposites, but planners tell us we are working for “collective freedom”. The same happens with “justice” and “law”, and “right” and “equality”. It is a slow and gradual process, hard to imagine without first-hand experience of it.
“Wherever liberty as we understand it has been destroyed, this has almost always been done in the name of some new freedom promised to the people.”
Controlling public thought extends, of course, to the institutions that seek to cultivate it. The arts and sciences begin to serve the common goal. Science serves the interest of the state instead of truth.
“Once science has to serve, not truth, but the interests of a class, a community, or a state, the sole task of argument and discussion is to vindicate and to spread still further the beliefs by which the whole life of the community is directed.”
As central planning impedes individuals’ capacity to influence their own life outcomes, Hayek argues that independent thinking inevitably suffers:
“Independence of mind or strength of character are rarely found among those who cannot be confident that they will make their way by their own effort.”
Key Idea #5: Planning, the Rule of Law and International Order
When considering the impacts of central economic planning, we must distinguish between the “Rule of Law” and central planning. The former provides a long-term framework of laws in which to conduct productive, individual efforts. It provides certainty around the terms of play. Central planning, by contrast, is the opposite. Planners don’t centrally plan in advance. It depends on the current circumstances.
“While every law restricts individual freedom to some extent by altering the means which people may use in the pursuit of their aims, under the Rule of Law the government is prevented from stultifying individual efforts by ad hoc action.”
Liberalism/individualism benefits from the Rule of Law precisely because the rules are independent of circumstance. By extension, this also means that planning necessarily discriminates, while the Rule of Law does not.
“The more the state “plans” the more difficult planning becomes for the individual.”
Many forms of economic planning only work in practice by shutting off extraneous influences. But the real problem in the international context is that economic transactions between socialist states tend to end in clashes of power.
Many therefore draw the conclusion that economic planning should be “international”, e.g. through a super-national authority. But as Hayek argues, international economic planning simply magnifies the problems of national economic planning.
Clashes of economic interests between nations would likely lead to a point of force. Moreover, such institutions could end up dominated by one single predominant power, diminishing the political sovereignty of smaller nations.
Hayek instead argues instead that there is a need for an “international political authority”, not an international economic authority. Its task would be simply to restrain nations from actions that damage others, but with no power to direct people otherwise.
Hayek recognizes that its constitution would need to prevent it from becoming tyrannical, focused strictly on international Rule of Law:
“Any international economic authority, not subject to a superior political power, even if strictly confined to a particular field, could easily exercise the most tyrannical and irresponsible power imaginable.”
On the unintended consequences of socialism:
“Is there a greater tragedy imaginable than that in our endeavour consciously to shape our future in accordance with high ideals, we should in fact unwittingly produce the very opposite of what we have been striving for?”
On the illusions of totalitarianism:
“The contention that only the peculiar wickedness of the Germans has produced the Nazi system is likely to become the excuse for forcing on us the very institutions which have produced that wickedness.”
On planned societies:
“In a planned society, we shall all know that we are better or worse off than others, not because of circumstances which nobody controls, and which it is impossible to foresee with certainty, but because some authority wills it.”
On the moral value of decisions:
“Only where we ourselves are responsible for our own interests and are free to sacrifice them, has our decision moral value.”
On planning and competition:
“Planning and competition can be combined only for planning for competition, but not by planning against competition”.
On the destruction of reason:
“The tragedy of collectivist thought is that while it starts out to make reason supreme, it ends by destroying reason because it misconceives the process on which the growth of reason depends.”
On the socialist roots of Nazism:
“It was the unison of the anti-capitalist forces of the right and the left, the fusion of radical and conservative socialism, which drove out from Germany everything that was liberal.”
On the elimination of war:
“As is true with respect to other great evils, the measures by which war might be made altogether impossible for the future may well be worse than even war itself.”
You can buy the book here or you can find more of our book notes here. For further related reading, try Capitalism and Freedom by Milton Friedman and The General Theory of Employment, Interest and Money by John Maynard Keynes.