The Road to Serfdom

In 1944, during World War II, Frederick Hayek wrote The Road to Serfdom in England. Hayek was an Austrian economist who started teaching in England in the 1930s. He remained in England after Germany took over Austria in 1938, initially as a refugee, and then became a British subject. Starting in the 1920s, central planning, best expressed in socialism, became the rage in academic circles in England, as well as throughout Europe, and especially so in Germany from even before that. Academics believed the use of science in central planning achieved better and more just economic results than the chaotic and random free markets ever could. They thought central planners could gather more information, and thus make more intelligent choices for society.

Hayek challenged the belief in central planning, and thereby socialism, head on. He argued that central planners could never gather enough information to take into account all the numerous and varied factors involved in the production, distribution, and price setting of any one product or service, much less for an entire economy. The free market was much better suited for this. Though no one person in the market could gather the necessary information, the entire market, made of numberless individuals collectively gathered the information and made the decisions to decide what and how much to produce, distribute, and set prices, not only for one product or service, but for an entire economy. Moreover, prices provided the primary means for communicating information throughout the market to individual producers, investors, distributors, and consumers.

In fact, the choices made by individuals continually and inevitably frustrates central planners, since central planning requires the central planners to make decisions and set goals for everyone, regardless of the decisions or goals of individuals. Central Planners would also tire and be frustrated with democratic institutions, where decisions and goals have to be compromised in an often laborious and tedious fashion. At the very least, they would want the democratic institutions to delegate absolute authority to make decisions to the central planning experts. Inevitably, central planners want more and more authority in order to carry out their central planning mandate. The more central planning that exists, the greater the loss of freedom and choices for individuals, and the more democracy becomes endangered. Worse still, the more central planning, the more the markets become distorted, and the more the economy deteriorates, usually leading to the call for even more central planning.

The logical end of central planning is tyrannical government, though Hayek did not claim this would always happen. The forces of freedom could push back in a country depending on the circumstances and background of each country, and if pushed back hard enough, those forces could roll back the central planning. However, Hayek did point out that both Russia and Germany, from a socialist start, did go all the way to tyranny, with the accompanying loss of freedom. Hayek foresaw the inevitable collapse of the Soviet empire at a time when many academicians were singing the praises of the socialist experiment in Russia.

As a result, academicians ostracized Hayek for years. He was finally recognized and won a Nobel Prize in economics in 1974. He was vindicated as both the United States and England made a strong turn back to the free markets in the 1980s with leaders often citing his book as their guide. He was further vindicated not only with the collapse of the Soviet Union in the 1990s, but also as even Communist China started turning to free markets. While the term central planning is no longer in vogue, big government programs have much the same effect to varying degrees. He died in Germany in 1992.