This analysis is the tenth installment in a series of chapter analyses of Friedrich Hayek’s The Road to Serfdom. Prior installments in this series can be found by clicking the “CRG” tab at the top of this page.
The ninth chapter of Friedrich Hayek’s 1943 book, The Road to Serfdom, is concerned with an issue pertinent to many subjects in the study of political economy as well as, indirectly, modern questions about national security, defense, immigration, and other areas of public policy. It is the perceived trade-off, alleged by many, between liberty and security—between individual rights and the preservation of society. In Hayek’s case, of course, he is focused on the exchange of these two variables in the context of economic policy. Hayek’s analysis of this subject is again mixed in its merits, offering some valuable economic insights and valuable historical observations on the history of European socialism and the rise of statism in certain twentieth-century powers. To that extent, the chapter is valuable. However, his failing in this effort arises from the refusal or inability to challenge the statist concepts of “security”, to morally reject the fundamentals of a welfare state, and to wholeheartedly extol capitalism (a term he still foregoes) as the greatest source of security attainable to man. He passes up a golden opportunity to denounce socialism as the cause of such numerous and monumental instabilities as to forbid it any claim to being a source of security. As a result, the feeling that his arguments inspire is not so much the frustration of previous chapters as it is repeated disappointment that the best cases to be made are foregone in favor of morally neutral efficiency arguments and non-fundamental points based on history—valid though they may be.
In the first paragraph of “Security and Freedom”, Hayek writes, “Like the spurious ‘economic freedom,’ and with more justice, economic security is often represented as an indispensable condition of real liberty. In a sense, this is both true and important” (p. 147). He follows this by stating the importance of economic security to the maintenance of “independence of mind or strength of character” in society. True as this is, one must begin by connecting the dots of Hayek’s statements and identifying his premises.
He appears to be suggesting that security is a precondition of independence of mind and strength of character, and that these moral qualities are then indispensable to the sustenance of liberty. Thus, in Hayek’s formulation, economic security fosters a moral condition that promotes liberty; liberty then promotes economic security; and, finally, the tripartite cycle continues with economic security again reinforcing popular moral sentiments and values. The relationship as he describes it is quite valid and descriptive. There is considerable irony, considering Hayek’s dismissal of moral arguments for capitalism, in the fact that he should view moral character as so central to the preservation of liberty, even going so far as to name which particular values are required for its preservation. He seems to view morality as necessary for liberty but incapable of sustaining an argument in favor of liberty. It is another of his eccentric inconsistencies, but not to be dwelt upon too heavily; ideological treatises are rarely dangerous for their hypocrisies but rather for the wrong ideas that they hold consistently throughout.
In this case, it is another aspect of these same points that poses considerably greater dangers. Hayek, in his first sentence, inverts the relationship between liberty and security, describing security as he does as an “indispensable condition of real liberty” when the truth is quite to the contrary. Economic security is the product of liberty—not in the sense that liberty provides man an automatic guarantee of success, but rather that true and lasting security is only possible through liberty. Liberty guarantees that an individual’s success is the product of his own labor and abilities and not—as under statism—subject to the favor of a bureaucrat, party, or politician. As the history of socialism has shown, placing a man’s economic safety in the hands of the state will not ward him against chance occurrences or the unforeseeable; it will only add to the existing risk the additional hazard that his well being might be destroyed by the machinations of pull-peddlers motivated primarily by their own political agendas, job security, or ideological crusades. Hayek’s assertion that economic security is a condition of liberty may seem to some a harmless inversion, but as he is wont to do, it concedes far too much to the statist viewpoint and accepts their basic conception of freedom. Unsurprisingly, this leads him to later support certain statist policies that would seem uncharacteristic for the alleged paragon of libertarian thought.
From there, Hayek proceeds to note the vagueness of the idea of “economic security” and the different meanings that various parties ascribe to it based on their respective beliefs and ideologies. He thus sets out to provide two definitions of economic security: one that he calls “limited” and another that he calls “absolute.” That which Hayek calls “limited” security is the kind provided in a mixed economy or perhaps mostly-free economy that (presumably) interferes only minimally in markets (except, perhaps, in the ways that Hayek has advocated in previous chapters). It does, however, provide certain guarantees for all citizens, including security against what Hayek calls “severe physical privation” and the certainty of a given minimum sustenance for all. Again, one sees in this the roots of certain modern libertarians’ baffling newfound love of a minimum income guaranteed by the federal government. The other form of security that Hayek acknowledges is what he calls “absolute” security:
“the security of a given standard of life, or of the relative position which one person or group enjoys compared with others; or, as we may put it briefly, the security of a minimum income and the security of the particular income a person is thought to deserve” (p. 147).
These, according to Hayek, are the only two existing forms of economic security. Both forms are, incidentally, provided by the government. Should a reader who believes in laissez-faire or who has previously understood Hayek as an unyielding advocate for free markets be holding their breath, waiting for a third conception of security that extols the balancing effects of the price system, hails the justice of the market, and indicts state controls as the source of widespread, lasting economic catastrophes, I beg of you: exhale, for no such defense is coming. According to Hayek, the only true security is state-provided security.
Furthermore, despite his failing efforts to parse out a fundamental difference between these two types of security—“limited” and “absolute”—they are, in reality, only a difference of degree. Their respective advocates, were they to debate the issue openly (and they do in Washington every day), would only be haggling over numbers and not, as Hayek wants us to believe, warring over contrary principles. He writes,
“There is no reason why in a society which has reached the general level of wealth which ours has attained that security should not be guaranteed to all without endangering general freedom. There are difficult questions about the precise standard which should thus be assured” (p. 147)
In reading this passage, any number of objections come to mind, but the four words that most stand out and draw a truly capitalist readers ire are these: “without endangering general freedom.” Much of modern welfare statism and the workings of mixed economies turns on certain fundamental evasions, not least of them the question, “What happens if one does not pay?” For most, the question is blacked out completely from their minds, too honest and unpleasant to acknowledge. The answer, of course, is that if a citizen of a country maintaining a redistributive system such as is described and endorsed here by Hayek does not pay to support the life of another, they go to prison. They lose their freedom. Thus, when Hayek speaks of a “guarantee” to some, he speaks of a threat to others and an utter abrogation of their “general freedom.”
‘I do not think of it that way,” defenders of redistribution often reply, or, “I do not like to think of it that way”—as if thinking or liking made it otherwise. The reality is that in a redistributive society a man’s freedom is entirely dependent on the surrender of his wealth to the well being of another, and the terms under which he should do so or the conditions under which another man is qualified to receive his surrender are not a matter of fundamentals but of policy, not a question of theory but of practice. What is the fact that gives rise to one man’s indebtedness to another or the collectivist assertion (so ironic in light of previous chapters) that ‘society’—meaning only some members of society—should be physically forced or threatened into surrendering their wealth to others? The “general level of wealth” that has been attained by that society. That is: it is indebted because it has succeeded, and it is made unworthy by the value it has produced. This is the logic of redistributors, and Hayek is no exception.
He goes on to offer a defense of social security programs and, in passing, even state-provided healthcare.
“Nor [he writes] is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance— where, in short, we deal with genuinely insurable risks—the case for the state’s helping to organize a comprehensive system of social insurance is very strong.” (p. 148)
As he does, he persists in arguing that there is no contradiction between being an advocate of free markets and supporting widespread social safety net programs. He concedes that “it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatibility in principle between the state’s providing greater security in this way and the preservation of individual freedom” (p. 148). Again, Hayek earns his merit badge as an economist by acknowledging the potential economic danger (mildly though he presents it) of social welfare programs while failing as a political theorist to recognize that the very nature of government action in all of its manifestations is one underwritten by the use of force and that the “provision of greater security” of which he writes is assured by a threat against those who produced the wealth he aims to redistribute.
Expanding this to a categorical statement, Hayek writes, “Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken” (p. 148). How to define in what circumstance an individual “can…attempt to guard himself [or] make provision for the consequences” is not objectively established, and in the context of his previous statements it appears as though he conceives of this state broadly enough to allow for the provision of a “given minimum of sustenance” no matter what. We are thus led to believe that Hayek is giving considerable leeway to questions of when “communal action”—that is, state action—is a suitable response.
Surely, one might think, Hayek follows this with thorough rebukes of some forms of social welfare programs. If he holds strong reservations, however, he has minimized them here or kept them to himself. Indeed, he proceeds from here into a conciliatory address of what would broadly be called Keynesian policy responses to business cycles and economic fluctuations. Stronger though his economic writings may (hopefully) be on this subject, in The Road to Serfdom Hayek reveals his weakness in addressing them as matters of political theory and philosophy. To those who suggest that we address the challenge of “combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them” with “the skillful timing of public works undertaken on a very large scale”, Hayek counsels that we must “watch our step if we are to avoid making all economic activity progressively more dependent on the direction and volume of government expenditure.” That is all that is offered by the libertarian economist against Keynesianism: be careful doing that. And in case one might be left to believe that Hayek was being understated but, in fact, held stronger objections not fully developed here, he follows this by saying that such Keynesian policy approaches (though he does not name them as such) “are neither the only nor… the most promising way of meeting the greatest threat to economic security.” But, “in any case,” he writes, “the very necessary efforts to secure protection against these fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom” (p. 149).
There seems to exist for Hayek some invisible, undefined point at which using government force against citizens to achieve economic goals mystically becomes a violation of their rights and freedoms but short of which no such violation exists. Continuing to evade strict definition or conceptualization, this practice has been maintained throughout all of his defenses of state intervention thus far and, short of an epiphany on the part of the author more than halfway through the book, it appears unlikely to abate any time soon.
The remainder of Hayek’s writing here on security is a generally rational and well-made case for the dangers of the “absolute” concept of security, as he terms it. Not coincidentally, it is also the segment in which he focuses most heavily on economics and the distortive effect of statist redistributive policies and guarantees on the functioning of markets. He rejects guaranteed incomes (one imagines only those guaranteed incomes higher than those guaranteed incomes he supported earlier) as obscuring the social value of certain professions and forms of labor. He eloquently condemns the way in which managers of companies become more and more politicians under statism, seeking favor from the state rather than focusing on production. He writes, “There has never been a worse and more cruel exploitation of one class by another than that of the weaker or less fortunate members of a group of producers by the well-established which has been made possible by the ‘regulation’ of competition” (p. 154). The point is excellent, but it further confounds our understanding of his earlier support for antitrust laws based precisely upon the alleged necessity of regulating competition. In what ways he sees one as dangerous and the other as indispensable we cannot know.
He argues for the impossibility of maintaining the freedom to choose one’s own profession in the presence of “guaranteed incomes”, showing that where state guarantees emerge so follow state controls. He asserts that policymakers and advocates should not let arguments as to the inherent value of certain professions lead them to disregard the price that a free market offers to those who enter them, e.g. that no matter how much we may value the contributions of teachers their pay should be determined by market forces and not by abstract and baseless guesses at what amount best expresses the spiritual value of their work. On these points, his logic is unassailable except to note a glaring omission that would seem, upon recognition, to overwhelm other valid contentions that he makes.
In discussing the subject of determining wages, Hayek turns his attention to the question of occupations rendered obsolete by new innovations: the carriage driver or horse trader whose business is run out by the invention of the automobile, the telegraph operator made obsolete by the telephone, the fletcher put asunder by the invention of the rifle, etc. He rightly denounces state schemes to support those whose occupations have been rendered obsolete, noting the injustice of such a system, writing, “Certainty of a given income can, however, not be given to all if any freedom in the choice of one’s occupation is to be allowed. And, if it is provided for some, it becomes a privilege at the expense of others whose security is thereby necessarily diminished” (p. 149). He decries the way that such systems breed a culture of dependency and the arbitrariness of the resulting system, writing,
“If those whose usefulness is reduced by circumstances which they could neither foresee nor control were to be protected against undeserved loss, and those whose usefulness has been increased in the same way were prevented from making an unmerited gain, remuneration would soon cease to have any relation to actual usefulness. It would depend on the views held by some authority about what a person ought to have done, what he ought to have foreseen, and how good or bad his intentions were. Such decisions could not but be to a large extent arbitrary” (p. 150)
This is quite right, but as he approaches what one might think to be his natural conclusion, he remains narrowly focused on the issue of wages, writing that,
“The application of this principle would necessarily bring it about that people doing the same work would receive different remuneration. The differences in remuneration would then no longer present an adequate inducement to people to make the changes which are socially desirable, and it would not even be possible for the individuals affected to judge whether a particular change is worth the trouble it causes” (p. 150).
Again: true. However, on the scale of an economy, human innovation, and the historical significance of such a set of incentives, Hayek skirts around the most caustic effect of such a system: it destroys innovation! Innovation simply ceases to progress, either piecemeal or altogether. Such a system would establish a policy deliberately favoring those who refused to learn new skills and punish innovators for every degree of advancement they achieve, enshrining what Ayn Rand once called the ‘Divine Right of Stagnation’—the idea that, by virtue of need and the refusal to progress or improve oneself or to adapt to new technologies, one is entitled to the product of others’ labor. Nothing could be more disastrous to human innovation or have more explanatory power in understanding the technologically remedial qualities of socialist countries. When one recognizes the life-giving, wealth-producing qualities of the tens of thousands of technological developments that each of us in a developed, Western country enjoys every day, the significance of this point can be seen as immense. The author takes a mild step in the direction of acknowledging this when he writes that “in the world as it is men are, in fact, not likely to give their best for long periods unless their own interests are directly involved” (p. 151). However, the point to be made is bigger than this. It is not simply that statism detaches the interests of producer from his remuneration but that it actively discourages it in both implicit and overt ways. It does not simply fail to encourage; it encourages failure.
Granted: Hayek cannot be faulted for what he does say on this topic, and his observations are all excellent. There is simply the problem of the glaring gap in the page where this broader effect might be explained—all the more important given the time of Hayek’s writing and the widespread belief that socialism—or, laughably, communism—was somehow superior at innovation. Including it would have rounded out the picture of the process that he is detailing and, perhaps, offered some theoretical perspective to those at that time who would listen.
In summation, the true failing of Hayek’s ninth chapter is his refusal to challenge from the start the statist claim to providing any form of security at all. He distinguishes between his “limited” security and the statist’s “absolute” security, but this appears to only further concede that the statist incarnation is security at all. One wishes desperately and without answer that he would state once and for all that statist systems offer nothing resembling security and are deceitful in claiming otherwise, that their record in managing economies is dismal, and that they are the only power great enough in society to condemn nations to years of unrelenting hardship through destructive arrogations of power and poisonous systems of control. In the end, he does no such thing—a fact that is frustrating until one recognizes that it could not have been otherwise, for Hayek’s preferred alternative expressed in these same pages is for a limited form of redistribution and a moderated version of the same definition of security. This critique is not meant purely to repudiate or to dismiss Hayek but, as always, to dig deeper toward the fundamental arguments needed to defend capitalism and to discern what lessons might be offered in The Road to Serfdom—both in its positive qualities and its shortcomings. Perhaps the most significant take-away from “Security and Freedom”, despite Hayek’s efforts, is the importance of fully and adequately defining one’s concepts when taking on an ideological struggle; should we fail in this, we may not only fall short in defending our own ideals but concede to our enemies far more than is their due.