Andrew Gamble, author of Hayek: The Iron Cage of Liberty, talked with Martin Thomas from Solidarity about the recent new biography Hayek: A Life, 1899–1950, by Bruce Caldwell and Hansjoerg Klausinger. Friedrich Hayek was an economist who in 1944, and for the rest of his life, especially in the Thatcher years 1979-90, became the leading writer of the free-market right.
This new biography gives more detail and context to the change that Hayek made during the 1940s, switching his main interests from economics to politics, ideology and philosophy. After he moved to Chicago in 1950, his career in economics was effectively over.
The biography shows some of the contingency involved. If Hayek hadn’t been Austrian, then he would have got what he wanted during the war: to work for the government and help on propaganda and advising about Nazi thinking. He was rejected because he was Austrian, but escaped internment. The London School of Economics [where he worked] moved to Cambridge, but as most of the students had been called up, he didn’t have very much to do during the war years.
He decided to help the war effort by showing (as he saw it) how socialist economic policies led to Nazism. The Road to Serfdom was a departure for him. It was deliberately intended to be a popular book. His previous economics books were only intelligible to specialists. Reader’s Digest did an abridged version which sold huge numbers of copies in the United States. Altogether since publication The Road to Serfdom has sold about 2.5 million copies.
It changed Hayek’s life and made him famous.
Bruce Caldwell has written quite a lot before on Hayek. He shares the same economic liberal free market position. In the biography he and Klausinger lay out the criticisms which the book received from a range of people when it was first published, George Orwell, Alvin Hansen and others. But they tend to dismiss most of these criticisms, arguing that the book has been seriously misunderstood.
The biggest misunderstanding, they say, is the charge that Hayek believed in a “slippery slope”, the idea that once a country introduced a little bit of planning, one thing would lead to another until it became fully totalitarian. Hayek identifies totalitarianism entirely with socialism, the attempt to substitute a planned economy for a free market economy. For him Nazism arises out of socialist ideas. It’s not anything to do with a response to capitalist crisis, or an intervention on behalf of capitalism. It is a form of socialism.
In 1944 he did not seem to believe that setting up a welfare state risked the slippery slope to serfdom and totalitarianism. His focus was on central economic planning. But in later writings, for example in his new 1976 introduction to The Road to Serfdom, he says that Sweden is heading for totalitarianism on account of its welfare state. He clearly seems to subscribe to the “slippery slope” argument that any form of state intervention is risky, and in fact the idea of a slippery slope is there in the very title of the book: The Road to Serfdom.
Audience
But his biographers claim that the book was really addressed to socialists, social democrats and interventionist liberals, to persuade them that going down the road of economic planning would risk totalitarianism, not that it would make it inevitable. He was horrified, his biographers say, when the book received a very cool reception from social democrats and socialists, but also from liberals. Two of the leading organs of liberal opinion, The Banker and The Economist, were very sniffy about The Road to Serfdom when it first appeared.
In the United States, it became an instant bestseller because it was seized on by parts of the American right who saw it as a godsend for attacks upon, firstly, Roosevelt and the New Deal, and secondly, socialism and any form of state intervention.
In Britain it was taken up opportunistically by Winston Churchill, who made his famous crack that if Labour was elected in the 1945 election, it would set up a Gestapo — an accusation against people he’d been working with for the previous four years in the War Cabinet.
Both in the British and in the American context Hayek was lauded by the right and vilified by the left, and that fixed him forever in the ideological landscape. He never did communicate very much with people on the left.
Part of the confusion is that in 1944 Hayek was ambivalent about planning. He only hardened his position later. In 1944 he conceded there was a case for collective social insurance and other, even if fairly minimal, forms of intervention, but forms of intervention nonetheless. What he was never clear about was just how much intervention is possible in a capitalist economy before you start going down the road to serfdom.
The extreme libertarians in the United States like Ayn Rand denounced the book as pure poison and said it was a social democratic theory of government. The anarcho-capitalists in the States have always rejected Hayek on the grounds that he abandoned the idea of the minimal state.
Tug of war
I think there was a sort of a tug of war going on in his head, between a fundamentalist market liberalism and political realism. The first was represented by Ludwig von Mises, the person his biographers quote Hayek as saying had the most influence upon him. Mises’s position was much firmer than Hayek’s ever was. As the authors recount, Mises stormed out of one of the meetings of economic liberals at the first Mont Pèlerin conference [put together by Hayek in 1947] saying that all the other people at the conference were “socialists”.
Hayek said he didn’t want to go back to the laissez faire of the 19th century. But Mises asked him pointedly: why are you criticising laissez faire? For him it was the essence of free market liberalism. Hayek does at times accept the argument that capitalism needs some state interventions in order to make it secure both economically and politically for the future. And that is where he becomes much more interesting than someone like Mises, in that he is trying to identify the ways the state needs to intervene to make sure capitalism can survive.
In his later work, for example, a crucial issue became trade unions and the threat they posed to a capitalist market order. He becomes much more concerned about confronting trade union power than with confronting the power of companies or employers (as in classical free market approaches). He finds excuses for capital exercising “private power”, but no excuse at all for labour doing the same. He wants to see the power of organised labour weakened as much as possible.
Judging Hayek’s work as a whole, it is hard to see much wrong with the “slippery slope” interpretation of The Road to Serfdom. The new biography tries to sanitise Hayek a little in that respect but it is unconvincing. If he wasn’t intending a “slippery slope” argument, why write the book in that form? It is written as a warning, connecting all forms of planning with totalitarianism and the horrors of the police state in Nazi Germany.
Interestingly, there are almost no references in The Road to Serfdom to the Soviet Union, where economic planning was much more advanced than it ever became in Nazi Germany. It seems the publishers wouldn’t accept criticism of the Soviet Union while it was a war-time ally: an irony of history, though of course they made up for it later.
The biographers are good on Hayek’s personal background and the intellectual currents in Vienna in the early twenties. They tell us about people like Othmar Spann, who are almost completely forgotten now, but who were very influential for a short time. Hayek was considered by Spann as his star pupil. Spann later became an advocate of the corporate state and supported Austrian fascism, but fell foul of the government after the Anschluss.
The book gives much more than just the familiar story of how Hayek came back from the war, enrolled in the University of Vienna, and met von Mises, who turned him into an Austrian economic liberal setting his path for the rest of his life. That story remains an important fact of his biography. But it’s also important to understand the broader intellectual background which shaped Hayek.