In 1943, Friedrich von Hayek published The Road to Serfdom. In this little book he explained how collectivist (i.e. socialist) theories and thinking destroy humanity when applied in practice. But first, this book was more of an essay than a clear exposition and second, it was focused primarily on economic policy (i.e. the issue of central planning in collectivism).
So, in 1959, Hayek decided to publish another book on the same subject; this time a comprehensive and very broad book, spanning more than 400 pages. This is The Constitution of Liberty.
I'd like to start my review with mentioning the downsides of The Constitution of Liberty. Hayek isn't a gifted writer, the subject matter is abstract and dry, the topics involved require much background knowledge and the scope (and hence length) of the book is immense. Therefore, this book cannot be recommended to read for fun; one has to be truly committed to understand Hayek's thoughts in order to read this book. (In other words, if one wants to read an accessible statement against socialism, read The Road to Serfdom).
But, why the four stars? Because The Constitution of Liberty is the bible of liberalism. In it, Hayek explains all the pros and cons of liberalism; and does so in a much more nuanced way than is commonly understood (Hayek is commonly seen as one of the founders of the radical neoliberalism movement of the 1970's and 1980's).
Hayek's message can be summarized in a few sentences. Liberalism sees individual freedom as the guiding principle for politics and ethics. Making it specific: liberalism strives to minimize coercion and violence in the personal sphere. Basically, this individual freedom can only be accomplished if two conditions are established. First, the rights of the individual, which centre around life and property, should be limited only insofar as the freedom of some individual limits the freedom (of life and property) of some other individual. In other words, one should be free of violence and coercion. This is as radical as liberalism can get. Second, there has to be a coercive power that enforces this liberalism on society - the state. The state translates the coercive restrictions into general laws, according to the guiding principle of individualism. Hence, the state is subject to the same principles as the people; this is penned down in a constitution.
This, therefore, is the only legitimate form of coercion with in a society, and its legitimacy lies in the fact that (1) even the enforcer (i.e. the state) is subject to it, and (2) it is general (i.e. not particular or arbitrary) in nature.
So, the state, as well as the people, are subject to the consitution, which is itself based on the principles of liberty and individualism. The state legislates according to these principles, and the laws it makes take the form of general laws (i.e. no arbitrariness). The state is checked by the judicial power; each citizen is equal before the law and in his/her dealings with the state.
One thing has to be remarked here. Hayek promotes liberalism (i.e. radical individual freedom), not democracy. Democracy is only a means of government; type of government is not that important when dealing with the limits of government as such. Of course, when compared to monarchy, aristocracy or tiranny, democracy is the best type of government. It ensures the channeling of the opinions of the people into policy and law, but democracy is no sinecure.
As a matter of fact, democracy can be viewed as an enemy of indiviual freedom. Democracy slides easily into the rule of the majority, but this is opposed to individual freedom. One only has to look at Hitler's rise to power, via democracy, to get Hayek's point. Only a constitution that garantuees the freedom of individual people - independent of current majority opinions - is the solution to tiranny and oppression. As Hayek mentions himself, a constitution is a prerequisite for a functioning democracy; without it, oppression, and hence stagnation and decline, will follow.
The principle of individual freedom is not only applied to ethics and rights, but (more importantly) Hayek also applies it to economics. There has to be a free market to allocate to each his own. Only individual freedom will ensure that the laws of supply and demand will funtion. You decide how (and if) you want to earn your money, and how to spend it. This, in effect, is the translation of human desires into economics.
Of course, this will lead to inequality, but at least it's inequality based (primarily) on merit. According to Hayek, all other systems - especially socialism - presuppose an all-knowing authority who will redistribute the wealth of a society. All redistribution presupposes norms and standards; and all norms and standards are as varied as there are people. In other words, there will - by definition - be no consensus on redistribution, leading to favoritsm and arbitrariness, and destroying the incentives for individual people to better their lifes.
In a free market (i.e. radical individual freedom), Hayek says, the economic elite will, because of their better position, pave the way technologically, socially and culturally for the betterment of the rest of society. In other words, the economic elite will spend their money on new fashions and technologies, and thereby make the products (over time) cheaper, so the rest of society can benefit. According to Hayek, if you take away the inequality in society (for example by applying collectivism) you will put a brake on development and society will suffer as a whole.
This economic liberalism shows interesting parallels with Darwin's theory of evolution by natural selection. Evolution happens because individuals differ from each other in traits and characteristics; the most suited will procreate, at the cost of the rest of the population; since these successful traits are inherited by offspring, these traits will spread numerically in populations, gradually changing populations (and thereby species) over eons of time.
Why the comparison? According to Hayek, society needs progress, since stagnation or decline will lead to immense suffering (wars, starvation, diseases, etc.). Progress can only happen if their is money to make it happen. If everybody earns the same amount, their is not enough surplus money to spend on innovation and technology, the drivers of economic progress. Hence, ecnomic progress feeds on economic inequality, like evolution feeds on biological ineqality.
But here the parallel stops. It is important to realize that Hayek describes the mechanism, he doesn't promote it, and he certainly is no radical libertarian, who only sees safety and order as the tasks of (a very small) government. Hayek even says there is a role for the government to ensure a just economic game: the government should promote competition and prevent monopolies (if at all) and other un-economical trends of the free market.
Hayek goes even further, and says it is absolutely possible for a government to ensure all of its citizens (i.e. the unlucky ones) a minimum level of subsistence and protection. This minimum, moreover, can be decided democratically. Hayek only points out that the more egalitarian society becomes, the more it costs the society in terms of progress, and hence an increase of suffering. There has to be a balance between freedom and humanity, preferably democratically decided.
I stress Hayek's point because he is often cited as being one of the founding fathers of modern neoliberalism or (even) libertarianism. This is simply untrue, and it doesn't help in serious debates if there is (a deliberate?) misrepresentation of Hayek's points. It is a common strategy of scare tactics, used by so-called progressives, to lure the masses into believing that liberalism and capitalism are bad (or even the same thing).
So, to sum up all of the above: we need individual freedom - economically and (!) politically. This principle of freedom has to be translated into a constitution, which limit and guides government in making general laws, and citizens in obeying the law. The more a government tries to promote radical egaliterianism, the more the government will encroach on and endanger the individual freedom of its citizens. In that sense, social welfare is a clear and present danger to society ("The road to hell is paved with good intentions") and Hayek uses the third part of his book to apply his principle of liberalism to social issues of the welfare state like trade unions, social security, monetary planning, etc.
Social welfare has to be viewed as a democratic compromise to ensure citizens a minum level of subsistence. This is not an argument against social welfare, but an argument for carefully weighing the importance of freedom and the importance of helping those who need it. Freedom is not buying all you want, freedom is deciding - as far as possible - over your own life. When it comes to social welfare, we need to be careful about centralizing this in the national government, which tends to grow unlimited in power. We also need to be very careful about progressive taxation as a principle. Hayek (convincingly) argues that progressive taxation can be used for ever-increasing taxes. This is dangerous, according to Hayek, because it is based on emotion, is ineffective in alleviating the poor and is a threat to the progression of society. It is better to agree on a minimum of subsistence, and leave social welfare to local politics (for example, townships), which are much less prone to usurping power and dominating society.
For the 'progressives' among us: Hayek argues that a decentralized system of social welfare (albeit one that purely caters to the needy) is fully compatible with a society based on liberal principles (i.e. preventing coercion of and violence to individuals).
Liberalism needs inequality, but it is an illusion to think that alternative systems, like socialism or facism, do away with inequality. A strong case can be made - as Hayek does - that liberalism is the system that offers the best system for society as a whole. At least liberalism is the only political system that makes inequality random (i.e. based on individual characteristics) instead of arbitrary (i.e. based on the relationship between individual and ruler). In that sense, liberalism (to paraphrase Churchill) is the worst political system possible, except all the rest that have been tried.
I think, anno 2017, The Constitution of Liberty should be mandatory reading for schoolchildren. We see the hun for radical euality all around us. Genders are said to be constructs, sexuality is declared to be preference, unwelcome political ideas are told to be facism, traditional cultural values are proclaimed to be boursgious oppression, etc. The progressives, who - ironically - call themselves left-liberals, are a threat to the existence of Western culture as we know it. They promote radical equality and declare biological and cultural differences to be non-existent.
In other words, every individual should be (forced to be) the same. This is marxism 2.0, applied to culture - cultural marxism -, and I cannot help but wonder if these spoiled brats -they are mostly young students - have any historical insight. Hence, my plea to make Hayek's works mandatory reading: it would do well to remember ourselves the importance of individual freedom, its consequent inequalities and the dangers that threaten it. This realization will let us make informed decisions about how to conquer inequality and promote a better world, without falling into the same traps as our ancestors.
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After writing this review, I'd like to add a personal remark. I consider myself a liberal and I value much of what Hayek argues. I agree on liberalism as a principle for society, and I (even more) agree on the totalitarian tendency of government - any government - that is built on social engineering. Nevertheless, I have personal problems with liberalism's underlying assumption of humanity. Hayek's system looks, from a rational point of view, perfect; yet, I see serious humanitarian problems with his system.
Science has progressed a lot ever since the Scientific Revolution of the seventeenth century. Not only do we know more about the universe we live in, we know a lot more about ourselves. Neuroscience and psychology (and much else) tell us that we are not the rational beings that liberalism presupposes - even so called rational thinkers cannot deny David Hume's conclusion "reason is a slave of the passions."
It is common knowledge that we share a common ancestor with chimpanzee's and bonobo's. Most of our current psychological functions and feelings have been shaped by the process of evolution by natural selection. A human being is primarily primed to save his own skin and to look out for number one; there is only a small circle of relatives, family and friends for which we care (less). Also, we use our emotions to guide our actions; without feeling there's no incentive to ever do something.
Liberalism, especially in combination with capitalism, pushes our worst buttons. It incentivizes us to compete with the rest (endlessly if necessary), and because inequality is inevitable, it leads us to envy the success of others. This sets us up for social problems. We cannot deny these feelings; they exist and have to be dealt with, one way or another.
Hence, we do not accept the 10% of the population owning 90% of the capital, leaving the remaining 90% to fend for themselves. This is injustice in our eyes, and only the people belonging to the 10% - or the ones aspiring to get there - will accept this state of economics as a status quo. For most of us - the 90% - we feel resentment and unfairness. "How is someone able to buy an umteenth car while my neighbor cannot pay his medical bills?" This is only a logical outcome of our biological make-up, but it's something radical liberals tend to overlook or ignore.
Not all people are equal, and these (biological!) differences in equality have a practical outcome: some earn more than others. So far, all is good. But some people will not be able to fend for themselves, while others will be visited by disasters or bad luck. It is easy to accept this, until it happens to you, or someone you care about. At that moment you expect them to be helped. This is also a logical outcome of our biological make-up, and it too is overlookd or ignored by most liberals.
So, I will make a bold assertion and claim there is absolutely no evidence that in a fully functioning free market and liberal society, suffering is less than in a socialist (or any other) society. There will be just different winners and losers. If you look at the World Happiness Index (as an example), you'll see the most happy (and happiest) people living in Scandinavian countries - countries with a huge social welfare system and a heavy redistribution of wealth. These same countries are among the most competitive economies of the world and are, relatively speaking, rich.
So, the countries with the most intense redistributive mechanisms, contain the most happy and happiest people in Earth. Is this a paradox? Only if you adhere rigidly to Hayek's system. Once you take into account human nature, the paradox resolves. We do not like to see suffering in our streets, and we certainly don't like to see our family and friends being treated unfairly or left to themselves in times of despair. In the end, most of us want a safe, happy and fulfilled life. And to ensure that the maximum amount of people lead such lives, one requires the redistribution of wealth. Human beings are not rational robots, they have feelings - feelings that are not calculated in rigidly applied liberalism.
Hence, I'd advocate liberalism, but policies have to be scientifically informed, and with the aim of maximizing the alleviation of suffering. And NOT to aim at preventing people becoming rich or climbing in society! We establish a certain minimum of health care and security, higher than in a radical liberalist society, but above this anything goes.
(Of course, one could argue among the following lines. In a fully functioning liberal society, people can use their money to help their friends and family, so the need for a system of social welfare is non-existent. This a much-heard objection, but not such a serious one. First, there are many people who don't have friends or family who are willing or able to care for them. This includes people who, due to their psychological make-up (i.e. mental diseases and such) cannot establish social relations. Second, along similar lines, not all people are able to pay in order to help the people they care about. Third, capitalism has led to the accumulation of masses of people in the cities, destroying the old family and regional networks. There is no bond between the city dwellers that will make sure that people donate money to help complete strangers.
So far the practical (very real) arguments, the fourth is a moral one. The rich, or those that are becoming rich, have profited from the social capital that was built by preceding generations. For example, they can earn money because they enjoyed a decent education. This creates a moral obligation to uphold these institutions. If not, then these people may legitimately be labeled parasites and hence the society as a whole has no obligation towards them.
The last argument is not so much practical or moral, but an inductive one. There is absolutely no evidence that rich people care for poor people. In other words, a historical induction leads us to observe that Hayek's arguments on this point are not valid. But let us grant him this point. Even then, we would trade in a system of relative objectivity for one of complete arbitrariness. Now the law decides who gets what help; in a fully liberal society it is up to the whims of the rich who gets what. This cannot function as a stable system of society.
So in general, I do agree with Hayek on most of his points. In his economics, there is a serious flaw: it uses an idealized conceptions of a human being. Hence, radical free market politics will not work in practice; people have feelings (of envy, of hate, of suffering, of justice, etc.). Only a system that recognizes these feelings (not bows to these feelings!) will work.
In that sense, contemporary neuroscientist and philosopher Sam Harris might have a solution. In The Moral Landscape, he argues, on the basis of the scientific knowledge of what makes us happy and what makes us suffer, to develop an ethics that caters to these human traits. If we extrapolate his ethical system to economics, we could argue for an economic policy that ensures the greatest happiness and the least suffering for society as a whole. In other words, we should make informed economic decisions on how to alleviate suffering as much as possible. This doesn't require the need for a totalitarian government; it can be democratically decided and applied in a decentralized way. At least it sounds to me much more realistic than Hayek's system.)