Back on the Road to Serfdom

by Thomas E. Woods, Jr.

What follows is the introduction I wrote to Back on the Road to Serfdom, a just-released collection of esays on the resurgence of statism. (Ignore Amazon's claim that the book is shipping in 1–4 months; it is shipping now.)

It was not difficult to predict a major consequence of the Panic of 2008: disparaging the market economy and the free society is now more chic than it has been in half a century. In light of recent events, the argument runs, only a hopeless naïf would champion these things. What we need now is greater supervision by our public servants, and less adherence to the discredited dogmas of the past.

Just how much the free market was in fact responsible for the crisis, or the extent to which government itself and its central bank may have been the culprits (and thus whether the "free market" could have been to blame in the first place), is the subject of one of the essays in this volume. The unifying theme of this book, though, is the brute fact that a shift toward statism is indeed occurring, and that it will not end happily. History is littered with foreign and domestic crises that became pretexts for the expansion of government power, and the present instance appears to be no exception.

When we argue that the winds are blowing in the direction of an ever-larger role of the state in American life, we must be careful not to imply that prior to 2007–8 a broad consensus in favor of the free market and against state coercion had taken root. Even during the 1980s, when free-market ideas were said to be sweeping the country, the net effects were modest. Larry Schwab makes a persuasive case in his overlooked study The Illusion of a Conservative Reagan Revolution that the transformation that was supposed to have overtaken America during the 1980s was rather more limited than either liberals or conservatives have been willing to admit. There is little evidence of a lasting ideological shift among the population, and government grew rather than shrank, with the federal budget doubling over the course of the decade.

The failure of conservatives to make significant inroads into the federal apparatus was symbolized by the Contract with America, the series of proposals Republicans promised to support on the eve of their off-year landslide in 1994. What was portrayed as a bold array of policy initiatives was in fact a timid and insignificant list of changes that would have left the federal apparatus for all intents and purposes unchanged. The Brookings Institution correctly observed: "Viewed historically, the Contract represents the final consolidation of the bedrock domestic policies and programs of the New Deal, the Great Society, the post–Second World War defense establishment, and, most importantly, the deeply rooted national political culture that has grown up around them."

The GOP Pledge of 2010 promised to eliminate an unspecified $100 billion from the federal budget at a time of skyrocketing debt, record deficits, and a budget approaching $4 trillion. History seemed to be repeating itself.

In mid-2010, though, F. A. Hayek’s 1944 book, The Road to Serfdom, soared to the number-one slot on Amazon.com; in a single week it sold, incredibly, upwards of forty thousand copies. Although not the radical libertarian tract its critics claimed at the time, it had a profound effect on many readers, who found in it an intelligent critique of central planning and its effects on individual liberty. Was it a sign of the times that interest in a book like this would suddenly be revived? Had a critical mass of the American public grown concerned that their own country faced a watershed moment in its history involving freedom and the state?

That remains to be seen.

Hayek never expected his small book to become an international sensation, or to wind up on lists of the seminal works of the classical liberal canon. Prior to the book’s release, Hayek had been a professor at the London School of Economics, where he earned a reputation as one of the world’s great economic theorists. His work developing the Austrian School’s theory of the business cycle won him the Nobel Prize in 1974, four decades after he wrote it. His works in economics were technical and difficult for a lay audience, though, so the popular reception of The Road to Serfdom added a new dimension to his career.

The genteel Hayek dedicated his book "to socialists of all parties" – people he believed were guilty of nothing more than intellectual error. He proceeded to state his case firmly but without acrimony or invective. (If anything, he may have been too accommodating, conceding that certain interventions in the economy were acceptable or even desirable.)

Some of Hayek’s book can seem dated today, since few now call for state ownership of the means of production or for the kind of central economic planning to which his criticisms apply – a welcome development for which Hayek himself may take some share of the credit. The problems we face stem from the mixed economy, as opposed to the fully socialist ones that Hayek criticized. All over the world, the impossible promises governments have made to their populations are beginning to unravel. Millions of people have arranged their lives in the expectation of various forms of government support that will be mathematically impossible to provide.

Aggravating this problem are the demographic trends at work across the developed world, which faces an aging crisis that will strain its welfare states to the breaking point. (As Foreign Policy magazine reported, "The global population of children under 5 is expected to fall by 49 million as of midcentury, while the number of people over 60 will grow by 1.2 billion.") At the very moment that some Americans are calling for a single-payer health-care system in the United States, pointing to the alleged successes of such systems in Europe, the finance ministers of those countries privately concede that of course those programs are going to implode, and that the collapse is only a matter of time.

What the rising generations across the developed world are facing is a genuine road to serfdom. They will have to work harder and longer than did their parents just to tread water, if they can find work at all in artificial economies battered by years of "stimulus" and misdirected resources. Retirement will seem like something out of science fiction. And to add insult to injury, they will be putting in this effort on behalf of transfer programs that are going to collapse anyway – Social Security, Medicare, pensions, and so forth.

The economic consequences of an expanded government presence in American life are of course not the only outcomes to be feared, and this volume considers a variety of them. For one thing, as the state expands, it fosters the most antisocial aspects of man’s nature, particularly his urge to attain his goals with the least possible exertion. And it is much easier to acquire wealth by means of forcible redistribution by the state than by exerting oneself in the service of one’s fellow man. The character of the people thus begins to change; they expect as a matter of entitlement what they once hesitated to ask for as charity. That is the fallacy in the usual statement that "it would cost only $X billion to give every American who needs it" this or that benefit. Once people realize the government is giving out a benefit for "free," more and more people will place themselves in the condition that entitles them to the benefit, thereby making the program ever more expensive. A smaller and smaller productive base will have to strain to provide for an ever-larger supply of recipients, until the system begins to buckle and collapse.

We should recall, though, that when the French classical liberal Frédéric Bastiat spoke of "legal plunder," he was not thinking exclusively of the use of state power to expropriate the rich on behalf of the poor. He was thinking of all forms of state violence employed to benefit one group at the expense of the rest of society. The greater the scope of the state over the economy, the more entrepreneurial energy will be misdirected into lobbying for special privileges and loot, and less into ongoing efforts to please the consumer.

The more functions the state usurps from civil society, the more the institutions of civil society will atrophy. Once supplanted by coercive government, tasks that people used to perform on a voluntary basis come to be viewed as impossible for civil society to manage in the absence of government – even though civil society did indeed perform these functions at one time. This spiritless population comes, in turn, to look for political solutions even to the most trivial problems.

The more the market is supplanted by a system of crony capitalism, the more the very phenomenon of profit appears disreputable. How, apart from some grant of privilege or other underhanded means, could someone have grown wealthy? Journalist Hedrick Smith, in his study The New Russians, found that this was the effect of decades of Communism – anyone who seemed to be prospering became a target of suspicion and envy. Entrepreneurship can scarcely function in such an atmosphere.

Spanning history, economics, religion, and the arts, the essays in this collection constitute both a warning about and a corrective to these trends.

Back on the Road to Serfdom begins by considering how we got here. Brian Domitrovic leads off with a look at what happened in the twentieth century to give the federal government such broad sway over the economy. In examining this development, he shows that the historical record is clear: the more the authorities try to steer the economy, the more erratic it becomes.

Carey Roberts goes back even earlier than Domitrovic, to the era of the American Founding. He traces the present resurgence of statism to the seminal conflict between Thomas Jefferson and Alexander Hamilton, and sets forth a refreshingly revisionist account of Hamiltonian economic policies, which Americans are expected to revere as self-evidently sensible and wise.

Per Bylund then looks beyond America’s shores to show how the welfare state became the dominant model of government throughout the Western world. He also punctures the myths of the welfare state that Americans have been lectured about for decades. A native of Sweden working on his doctorate in the United States, Bylund reveals that the so-called Swedish model is hardly a dream for modern civilization. In so doing, he rules out the default position of so-called progressives, which is to claim that large welfare states are compatible with long-run prosperity, and that there is nothing about the American situation that higher levels of wealth confiscation cannot solve. Moreover, he demonstrates that the welfare state harms not only the economy but also individual liberty and civil society.

With Domitrovic, Roberts, and Bylund having established the broader context for the government’s accelerating intrusions into the economy, Antony Mueller looks at the more immediate causes of the recent financial crisis. His essay is a valuable corrective to the standard account of the economic downturn that has fueled so much of the recent resurgence of statism. Professor Mueller’s interpretation of the crisis, which is informed by the Austrian School of economics, also accounts for why the proposed remedies are likely to prolong the economic malaise in those countries adopting them.

Free trade has come under renewed attack across the political spectrum over the course of the past generation. While some of the older arguments in favor of domestic protection continue to be made, new ones have recently been added to the traditional arsenal. We hear repeated claims these days that unhampered trade is not in fact mutually beneficial, and that although the overall number of widgets may indeed increase under free trade, the interests of the working classes in the developed world are grievously harmed. Mark Brandly uncovers the flaws in these arguments in his robust defense of the international division of labor.

Dane Stangler discusses another vital element of the economy and society that is threatened by state encroachment: entrepreneurial activity. When we understand what entrepreneurship is, we realize how foolish it is to expect the state to foster it, except perhaps by removing barriers to economic activity.

Tim Carney’s essay builds on an area in which he has made such important contributions: the relationship between government and big business. The superficial account with which American schoolchildren are familiar conceives of these two forces as antagonists. Both theory and history suggest that the true nature of their interaction is rather more interesting, and often involves collusion against the public interest rather than the righteous regulation of private malefactors by wise public servants.

Western religious leaders have as a rule been scandalously naïve about the nature of the state and sanguine about its expansion. Two of our essayists subject the unexamined premises behind these arguments to critical and fruitful scrutiny. John Larrivee deftly responds to some of the more common criticisms of the free market that may be heard in religious circles. Such criticisms, he shows, undermine the role of values, faith, and civil society while opening the door to more government intervention. In the next essay, Gerard Casey of University College Dublin considers whether some Christians’ social-democratic views of wealth redistribution, the state, and the market are justified in light of tradition and the Bible

The University of Virginia’s Paul Cantor, who attended Ludwig von Mises’s seminar at New York University in the early 1960s, has done much groundbreaking work on markets and the arts, a tradition he continues in the final essay of this volume. Here he explores the bureaucratization of culture, and finds that this form of government planning, just like all the others, grossly oversimplifies the phenomenon it is attempting to control, and involves the hopeless task of substituting top-down direction for the spontaneous and dispersed origins of real culture.

Americans are taught a great deal of civics-book nonsense about the nature of the state, the benefits it confers, and the unbearable difficulties we would face without its careful custodianship of society. In reality, Americans are ruled by a patchwork of self-perpetuating fiefdoms, which beneath a veneer of public-interest rhetoric seek to pursue their own power and resources.

There is, one would think, another way for human beings to live than this. Ironically, it is government itself that is about to teach that very lesson. When its grandiose schemes and promises inevitably unravel, all that will be left is civil society managing its own affairs, the very thing we have been taught to believe is impossible.