It took me months to finish the book. Not that I want to rush it. I would like to read the book slowly and ponder the questions deliberately. Reflect on Hayek’s ideas, pose questions from my perspective, and apply them to modern society. Search through others’ reviews and perspectives on his book and the subject of his political thoughts. Hence, I postponed my review further till now, for me to jot down my thoughts and accumulate my questions and ideas from the book, and better grasp the context and ideas.
Man has come to hate, and to revolt against, the impersonal forces to which in the past he submitted even though they have often frustrated his individual efforts. This revolt is an instance of a much more general phenomenon, a new unwillingness to submit to any rule or necessity the rationale of which man does not understand; it makes itself felt in many fields of life, particularly in that or morals; and it is often a commendable attitude. But there are fields where this craving for intelligibility cannot be fully satisfied and where at the same time, a refusal to submit to anything we cannot understand must lead to the destruction of our civilisation…..The world around us becomes more complex, our resistance grows against the forces which, without our understanding them, constantly interfere with individual hopes and plans, it is just in these circumstances that it becomes less and less possible for anyone fully to understand these forces….necessarily based on individual adjusting himself to changes who cause and nature he cannot understand…..it will always be connected with such a multitude of circumstances that no single mind will put all the blame on an obvious immediate and avoidable cause, while the more complex interrelationships which determine the change remain inevitably hidden to them.
To quote the words from Hayek himself, the connotation of the above sentence already summarizes his philosophical view on the liberty of individual human rights and the futility of central planning on economic activities. He believes that an individual will not have freedom of choice in life if the government is too reliant on the central planning of the economy and resource distribution. He says: “Individual freedom cannot be reconciled with the supremacy of one single purpose to which the whole society must be entirely and permanently subordinated.” He even argues further that the government refuses to surrender and emphatically emphasizes the rationalization of the market and forcefully implies intellectual activities to central planning. He says: “The refusal to yield to force which we neither understand nor can recognize as the conscious decisions of an intelligent being is the product of an incomplete and therefore erroneous rationalism. It is incomplete because it fails to comprehend that the co-ordination of the multifarious individual efforts in a complex society must take into account that no individual can completely survey.” And the further warning about the transition from a democratic state into a totalitarian state, which only focuses on the outcome:
But they are mistaken when they carry the comparison further and argue that we must learn to master the forces of society in the same manner in which we have learnt to master the forces of nature. This is not only the path to totalitarianism, but the path to the destruction of our civilisation and a certain way to block future progress.
From my understanding, there are two main camps in the modern economic school. The Liberal (Heterodox) and the Keynesian (Classical), which focus on different approaches to managing society. One heavily focuses on the “Supply” and the other, on the contrary, on the “Demand”. It has been a long debate since the foundation of the modern economy was established by Adam Smith. Argument of “Market Driven” approaches or “Government Intervention” and which one is the best approach to manage a complex society where the nation can prosper, be more prepared, and maximize the nation’s GDP. But one thing that bothers me a lot throughout the book is – what’s the role of the government left if there’s no central planning for the economy in the state? Let the “Invisible Hand” decide? I doubted it. I guess I found someone who shared my confusion and idea – John Maynard Keynes.
John Maynard Keynes wrote a famous letter to Friedrich Hayek regarding his book, The Road to Serfdom, on June 28, 1944. Keynes wrote the letter while traveling to the Bretton Woods conference in the United States, and in it, he expressed his “deeply moved agreement” with the book on a moral and philosophical level, calling it a “grand” book. In the book, he pointed out:
“I come finally to what is really my only serious criticism of the book. You admit here and there that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere and that the logical extreme is not possible. But you give us no guidance whatever as to where to draw it. In a sense, this is shirking the practical issue. It is true that you and I would probably draw it in different places. I should guess that, according to my ideas, you greatly underestimate the practicality of the middle course. But as soon as you admit that the extreme is not possible, and that a line has to be drawn, you are, on your own argument, done for, since you are trying to persuade us that so soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice.”
His criticism of the book seems aligned with my thoughts, and it bothers me. The reason behind this is that it does not provide any definite solutions or answers. It is merely a suggestion, and the suggestion of where to draw the line seems like a point that is supposed to be discussed thoroughly, especially on the moral value and the role of the government. (Perhaps I should read Hayek’s next book – “The Constitution of Liberty.”) Furthermore, John’s criticism doesn’t stop there; he thinks the lack of planning is the problem of the government. He says:
“I should therefore conclude your theme rather differently. I should say that what we want is not no planning, indeed I should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers, wholly share your own moral position. Moderate planning will be safe if those carrying it out are rightly oriented in their own minds and hearts tho the moral position. This is infract already true of some of them. But the curse is that there is also an important section who could almost be said to want planning not in order to enjoy its fruits but because morally they hold ideas exactly the opposite of yours, and wish to serve not God but the devil. Reading the New Statesman & Nation one sometimes feels that those who write there, while they cannot safely oppose moderate planning, are really hoping in their hearts that it will not succeed, and so prejudice more violent action. They fear that if moderate measures are sufficiently successful, this will allow a reaction in what you think the right and they think in the wrong moral direction. Perhaps I do them an injustice, but perhaps I do not.”
I am in utmost agreement with John’s suggestion on the role of government, which should have moderate planning. Because the curse of total freedom would be almost easily exploited by people who have an exact opposite moral value that serves their selfish, evil intentions. But paradoxically, I also agree with Hayek’s idea that planning by the government will only benefit those who decide which policy to go for. In the book, Chapter 8. He says: “What these people forget is that in transferring all property in the means of production to the state, they put the state in a position whereby its action must, in effect, decide all other incomes. The power given thus given to the state and the demand that the state should use it to “plan” means nothing else than that it should use it in full awareness of all these effects.” It basically sums up another moral paradox for me to ponder more about the fundamentals of the role of government again. He even argues that: “If all the means of production were vested in a single hand, whether it be nominally that of “society” as a whole, or that of a dictator, whoever exercises this control has complete power over us.”
There’s another quote from Hayek that resonates with me, and it also has the reminiscence of the Chinese State-owned enterprise that has the power to control the lives of individuals, and the decision of the State is far more important than the lives of the citizens. He says: “A state which is entangled in all directions in the running monopolistic enterprise, while it would possess crushing power over the individual, would yet be a weak state in so far as its freedom in formulating policy is concerned. The machinery of monopoly becomes identical with the machinery of the state, and the state itself becomes more and more identified with the interests of those who run things than with the interests of people in general.” I find this statement very true, as a citizen of Malaysia, we’ve seen how corruption drama is unfolding on the global stage, where billions of dollars are being squandered in the development of the state-owned enterprise, 1MDB. Our prime minister, Najib Razak, has established 1Malaysia Development Berhad (1MDB), a sovereign wealth fund, which sought to make strategic investments and alleviate poverty, as part of his economic liberalisation policy and trademark 1Malaysia program. The 1MDB scandal has cost our nation $7.8 billion, and more than $4 billion was stolen from the 1MDB fund and spent by perpetrators on art, diamonds, and property. Just because the “State” thinks it is best for the country’s development. For this, I should jot down the words from Hayek, which serve as a reminder for our people in Malaysia to remember the exploitation of state planning over our people. He says:
A system in which large privileged groups profit from the gains of monopoly may be politically much more dangerous, and monopoly in such a system certainly is much more powerful than in one where profits go to a limited few….. the impetus of the movement towards totalitarianism comes mainly from the two great vested interests, organized capital and organized labour….two most powerful groups point in the same direction…and it is this tendency which is the great immediate danger.
The adaptation of State central planning has been thoroughly dissected and criticised in every aspect of the book. It has made me wonder, what’s the use of government? Hayek is indeed advocating a state without government? Apparently, he is not. He believes the government plays an important role in society. But under the right circumstances. He says: “Within the known rules of the game, the individual is free to pursue his personal ends and desires, certain that the powers of government will not be used deliberately to frustrate his efforts.” To achieve this, he pointed out two important frameworks that distinguish the difference. First, the government confines itself to fixing rules determining the conditions under which the available resources may be used, leaving to the individuals the decision for what ends they are to be used. Second, the government directs the use of the means of production to particular ends. To put it in a simpler analogy, he says: The difference between the two kinds of rules is the same as that between laying down a Rule of the Road, as in the Highway Code, and ordering people where to go; or better still, between providing signposts and commanding people which road to take.” The essence of the distinction is between enabling autonomy through guidance versus enforcing strict compliance through direct orders. The quote suggests that the former (providing a framework or information) is generally more effective or preferable, as indicated by “better still.” (I suggest reading Nassim Taleb’s Antifragile, which is another way to get an in-depth of this systematic approach.)
That our present society lacks such “conscious” direction towards a single aim, that its activities are guided by the whims and fancies of irresponsible individuals, has always been one of the main complaints of its socialist critics.
Recalled the first quotes at the start of my review. The various kinds of collectivism, communism, fascism, etc., differ from each other in the nature of the goal towards which they want to direct the efforts of society. In short, all the efforts that society is trying to achieve in a single end or goal are futile and impossible to grasp. It is incomplete because it fails to comprehend that the coordination of the multifarious individual efforts in a complex society must take into account that no individual can comprehend. The welfare and the happiness of millions cannot be measured on a single scale of more and less. It cannot be adequately expressed as a single end. In Chapter 5, “Planning & Democracy” is the whole linchpin idea of Hayek’s work. Quote his work: “The fundamental fact on which the whole philosophy of individualism…it does not assume, as is often asserted, that man is egoistic or selfish, or ought to be. It merely starts from the indisputable fact that the limits of our powers of imagination make it impossible to include in our scale of values more than a sector of the needs of the whole society…..scales of value can exist only in the individual minds, nothing but partial scales of values exist, scales which are inevitably different and often inconsistent with each other.” In fact, he believes each individual will have a very vast direction of view in the social ends, which people are most likely to agree on common action where the common end is not an ultimate end to them, but a means capable of serving a great variety of purposes. In short, he summarizes: “When individuals combine in a joint effort to realise ends they have in common, the organizations, like the state, that they form for this purpose, are given their own system of ends and their own means.”
From the above, Hayek’s assumptions are based on his preference that each of the individual is rational and intelligent enough to decide what they want in social ends. But I assume his statement will be strongly opposed by Plato if he were to be alive in this modern society. Plato believes only Philosophers are capable of loving and, through education, ultimately achieving knowledge of what is authentically and fully Good. Thus only they are capable of governing action according to its true end; without such knowledge, political and ethical decisions are doomed to be mistaken, perhaps catastrophically so, thus, with a greater view in Good than the ordinary “good” sought by the greedy and ambitious, philosophers can bring unity, harmony and order to the city and those within the community. Plato does not believe in “Democracy”; he thinks the people do not know what they want to achieve in life, nor do they know what is “Good” for themselves. Only a philosopher or the “Guardian” knows the truth: the true “Happiness” and “Good” for the people.
On the contrary, Hayek fights for Liberalism and individual rights. He believes the economic force isn’t the primary motive for the individual, but a force that shapes the decisions of our daily lives. He says: “The ultimate ends of the activities of reasonable beings are never economic. Strictly speaking, there is no ‘economic motive’ but only economic factors conditioning our striving for other ends. What in ordinary language is misleadingly called the ‘economic motive’ means merely the desire for general opportunity, the desire for power to achieve unspecified ends.” In short, it means that if we strive for money, it is because it offers us the widest choice to enjoy our efforts in the end. In defense of Capitalism, Hayek argues that it would be more true to say that money is one of the greatest instruments of freedom ever invented by man. It is money that, in the existing society, opens an astounding range of choices to the poor man, a range greater than that which not many generations ago was open to the wealthy. So the money is a medium for individuals to choose the ends they seek to exchange their wants and needs in life. It is not the economic perspective as we assume.
“Central planning means that the economic problem is to be solved by the community instead of by the individual; but this involves that it must also be the community, or rather its representatives, who must decide the relative importance of the different needs.
While Plato envisioned a static Utopia partitioned into three distinct functional classes, the modern global economy has fundamentally outgrown such a rigid structure. We have transitioned from a system of isolated ‘Merchants,’ ‘Guardians,’ and ‘Auxiliaries’ into a highly integrated global society characterized by complex interdependence. In this modern landscape, production and consumption are no longer localized; they rely on a transnational web of capital and labor, where job roles are blurred by the sophisticated demands of globalization. If we were to adopt the approach as Plato’s idea of the state being run by a philosopher king, the authority directing all economic activity, would control not merely the part of our lives which is concerned with inferior things; it would control the allocation of the limited means for all our ends. And whoever controls all economic activity controls the means for all our ends, and must therefore decide which are to be satisfied and which not. 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. If such a statement is true, then the individual would more than ever become a mere means, to be used by the authority in the service of such abstractions as the “social welfare’ or the “good of the community”.
To quote the words from Hayek to end my sentences and thoughts: “It is often said that political freedom is meaningless without economic freedom…it must be the freedom of our economic activity which, with the right of choice, inevitably also carries the risk and the responsibility of that right.”
Lone Wong | Things to remind in the journey of life 