Hayek's Slippery Slope

Hayek's Slippery Slope

Mini Teaser: Friedrich Hayek's ideas,  particularly those set out in The Road to Serfdom, have been subject to extraordinary ups and downs in learned, as well as in popular and political, estimation.

by Author(s): Neil McInnes

This was the conclusion that Hayek, for his part, drew from an arcane
debate between economists about whether socialist managers could
calculate least-cost production in the absence of market prices. The
"socialist calculation" debate began in the last century, but Mises
brought it into focus in 1920 and Hayek thereafter played an active
role in it. Mises was not satisfied with the conclusions Hayek drew,
saying Hayek put too much emphasis on recent information and too
little on property owners' calculations of future prices. (So bigger
and better computers would be no help.) But Hayek's achievement was
to show that the upshot of this highly technical dispute told against
many current proposals for social reconstruction, planning, and
government regulation. Socialism would not work, not because citizens
were not virtuous enough but because there was a knowledge deficit at
the center, and there always would be. Those who were reluctant to
accept Hayek's case against the unified central plan were left to be
convinced by the grotesque misallocation of resources in the Soviet

Equally convincing was Hayek's demonstration of how and why the
central plan is incompatible with political and cultural freedoms. A
plan requires, imperatively, prior agreement on what and how to
produce, and subsequent agreement to stick with it and accept its
outcomes. Such agreement is not to be found, and there arises the
temptation to fudge it, by propaganda and eventually by repression of
disagreement, and by delegating decisions from divided parliaments to
arbitrary bureaucrats. This part of the book is written with a
passionate eloquence (written, incidentally, by a foreigner composing
his first book in English) that drew the admiration of critics like
Keynes, and the dismay of nominated targets like Harold Laski, Karl
Mannheim, and E.H. Carr.

What drew much incredulity was Hayek's strange choice of Nazi Germany
as the type of serfdom produced by economic planning. He had little
else to say against it except that it practiced planning, and he
ascribed the spread of planning ideas in Britain to the influence of
Germans such as Sombart, Plenge, Lensch, and Moeller van den Bruck.
Most of his readers had never heard of them, and the British Left and
U.S. liberals were, reasonably enough, offended by the suggestion
that they got their policies from the sorry bunch whom Fritz Stern
was later to describe in The Politics of Cultural Despair (1961). The
implication that the regimes of Hitler and Mussolini were the end
result of dabbling in state planning, of gradual and piecemeal
departures from free markets, was seen to be absurd by those who had
read Elie Halevy's demonstration, in L'Ère des tyrannies (1938), that
the dictatorships were born of violent revolution. Pigou said in his
1944 review that Hayek's history was all wrong: Hitler's and
Mussolini's resort to central planning was a means, not the cause, of
tyranny. To be sure, Nazi ideology rejected the free market of
Western liberalism and the calculating rationality of economic man,
but it was not for all that to be defined as an economic heresy.

In deploring the regimentation of wartime, Hayek said, "During the
war we all had to go to some extent totalitarian." So it should have
been evident that a regime whose whole purpose was war would practice
a command economy, Wirtschaft unter Zwang. Trying to frighten naughty
little socialists by saying they would grow up to be wicked Nazis was
poor rhetoric and it put many critics off the book. The Soviet regime
was a better target, and its moral, economic, and political
affiliation with Nazism had already been established by Franz
Borkenau. Hayek was right to dismiss the leftist myth that Nazism was
capitalism's answer to communism, for they were in many ways birds of
a feather, given to imitating each other. But even so, it would have
to be admitted that Bolshevism began with the aim of a central plan,
to be implemented by ruthless coercion. That was its ideological
starting point, not the end result of cumulative government
intervention in free markets. As it was, Hayek had little to say
about the Soviet Union, possibly because it was still a wartime ally.

All of this could be disregarded as an inept presentation of his
case. Not so the dogma of the slippery slope, which was at the heart
of Hayek's argument and probably the real reason he wrote the book.
The epigraph of The Road to Serfdom is David Hume's line, "It is
seldom that liberty of any kind is lost all at once", a counterverity
that shows how much less they knew in 1770 about revolutions and
coups d'état than we do. It prefigures the slippery slope, of which
Hayek's teacher Mises had said (in the 1940 Geneva edition of Human
Action), "Every step a government takes beyond the fulfilment of its
essential functions of protecting the smooth operation of the market
economy against aggression, whether on the part of domestic or
foreign disturbers, is a step forward on a road that directly leads
into the totalitarian system where there is no freedom at all."
Furthermore, in 1944 Hayek said of that road, "Yet, though the road
be long, it is one on which it becomes more difficult to turn back as
one advances." He offered to explain why government interventions in
the economy were cumulative and eventually irreversible. Central
allocation of resources meant that labor had to be directed, like
other factors, so the state began to control individuals, notably in
their role of producers. Planners got drawn into detailed economic
decisions, rather than setting general rules, so they inevitably
started favoring some interests, disadvantaging others. When one
intervention failed (e.g., price controls), further intervention was
resorted to (say, requisitions or rationing or subsidies).

It was because of this tendency to cumulative involvement that Hayek
insisted there could be no halfway house between competition and
planning, no social democratic mixed economy. The middle way, says
John Gray, became "the principal target" of The Road to Serfdom. As
Eamonn Butler said in his Hayek (1983), "One of the most powerful
themes of The Road to Serfdom is that even modest economic planning
has the effect of slowly but inexorably eroding the values and
attitudes which are vital if freedom is to exist." Hayek even argued
that attempts to combine competition and planning produced the worst
effects of both, the benefits of neither. When he wrote a new
introduction to a 1976 edition of the book, Hayek admitted that
socialism no longer meant central planning but "chiefly the extensive
redistribution of incomes through taxation and the institutions of
the welfare state", but he added defiantly that "the ultimate outcome
tends to be very much the same."

Critics protested from the start that to go from saying that central
planning is a disaster to condemning interventionist policies is a
non sequitur. Such policies would indeed have unintended
consequences, notably market impairment, but "none of the arguments
mentioned here demonstrates that what lies at the bottom of the slope
is socialism" (Frank Van Dun). Paul Samuelson asked in his 1948
economics textbook whether it was true that each step away from the
market system and toward the social reforms of the welfare state is
inevitably a journey that must end in a totalitarian state with
neither efficiency nor liberty? The opposing view, held by such
evolutionists as Roosevelt, Churchill, and Nehru is that gradual
reforms are the only way to prevent a cataclysmic descent through
revolution into a communist dictatorship. If the evolutionists are
right, Hayek is quite wrong.

Samuelson evidently thought he was. Lionel Robbins said the dangers
Hayek foresaw might happen, but Hayek was alarmist to say they must
happen. Welfare, for example old age pensions, could become a burden
but why say it must lead to "social disintegration and the
concentration camp"? Some interventions do have cumulative effects,
like price controls, but not all taxes and subsidies or all forms of
government ownership and control do. There is therefore no logical or
historical reason to fear for the stability of the mixed economies.

Raymond Aron told an audience at Berkeley in 1963 that the
proposition that intervention inexorably leads to total planning and
totalitarianism was so manifestly false that Hayek could not have
meant it. The trouble is he said it. When challenged, Hayek would say
that he was issuing a warning, not a prophecy (and promptly return to
prophesying with all the confidence of a Marxist). This cavalier
attitude to political discussion is common among those who come to it
only occasionally. It is negligent to say that X must happen (a
prophecy) without saying whether such and such circumstances might
avert it. But it is positively thoughtless to say that X can happen
(a warning) and not bother to specify the conditions of its
appearance and non-appearance. Of course in the present case most of
those conditions would be political: all the social forces, political
institutions, traditions, customs, and moralities that defend freedom
(more precisely, exemplify and practice it) ensure there is no
slippery slope--and they are not waiting for an outsider's "warnings"
or "prophecies" to play their role.

Essay Types: Book Review