Thursday, 4 April 2013

The road not taken

I've been reading Hayek's Road to Serfdom this Easter and hugely enjoyed it, despite a couple of significant holes in the argumentative structure.

He does a great job bringing out the positive aspects of maintaining a liberal political structure in the face of totalitarian regimes.  And I mean great.  But he is incredibly weak on the possibility of what he refers to as a Middle Way between a liberal and a planned political economy.  He gives a corking definition of a liberal social order as follows : " the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion".  This is a great definition and works really well if you are confident in the constancy and benign effects of those spontaneous forces (benign in the sense that their benefits outweigh the benefits of benign planning).

He traces the intellectual roots of this liberal view of his through Cicero, Tacitus, Montaigne, Hobbes (implicitly), Hume, Locke, Henry Sidgwick, John Stuart Mill.  But I also read him as a pessimist, in line with Schopenhauer, who lines up in direct opposition to all things Hegelian.  This is somewhat ironic given his view that liberalism died when it hit Germany.  The other ironic point here is that he tries to come up with a reason why the collectivist socialism which was born, he claims, in Germany should have had such an effect.  He says that the ideas were ".. supported .. by the great material progress of Germany .." among other things.  But he doesn't chase this potential connection any further - perhaps the ideas themselves stimulated a successful form of post-liberal social democratic capitalism which worked quite well.  This is all apposite in the current (2013) European crisis, I thing, insofar as that particular form of German capitalism which took such a hit in the 1940s and 1950s is once again demonstrating its ongoing robustness.  At some point, if not now already, this evidence of economic success may justifiably cause a re-valuation of the forms of post-liberal social democracy and stakeholder capitalism they represent.

Whereas Hayek tries his best to demolish the alleged benefits of centralised planning by criticising even idealised forms of it, you can see how Buchanan later comes in to point out the detail of the painful reality of central planning with public choice theory.  But Hayek's generalised arguments against the planning function are quite rich and varied.

He resists a movement in the meaning of 'freedom' away from the freedom from "..the arbitrary power of
other men" to "freedom from necessity".  This is the essence of his resistance and pits him as Schopenhauer against Bismarckian Hegelian Prussia.  The social democrats see it as an evolution up the hierarchy of wants, but Hayek sees it as a wrong turn.  This is a loss of power for you - the power for an other to order a re-distribution of your wealth for an end decided externally to you.  His is a literal and metaphorical refusal to travel down a Hegelian road which he thinks always (inevitably, I'm tempted to say only it would sound too Hegelian) leads to a bad destination.

His key line: "..competition ...cannot be combined with planning to any extent we like without ceasing to operate as an effective guide to production".  This is how he argues against the 'middle way'.    Just for now, leave out 'to any extent we like' and you have a statement which is plain wrong.  How did liberalism evolve in the first place?  And in the dozens of places where it did evolve, surely it managed precisely this combination.  It kind of reminds me of William Paley's famously wrong argument against evolution with its metaphor of the perfection of the eye's design.  I think Hayek sees  liberalism a bit like this.  Now the phrase I left on the side 'to any extent we like'.  Well, when you add that back in, the claim becomes incredibly weaker, merely stating that some limits must exist for the combination of liberalism and central planning you're now considering.

On that same page as the above quote, he suggests the two approaches are, when combined "..poor and efficient tools if they are complete", a classic Paley-like comment.  He goes on: "they are alternative principles used to solve the same problem, and a mixture of the two means that neither will really work and that the result will be worse than if either system had been consistently relied on".  This is, it seems to me, utterly unjustified by him anywhere.

The book makes wonderful contrasts between this artificially black and white choice and does so at precisely a moment in recent world history where the blackness and whiteness seemed most justified, mid-way through the second world war.

In chapter 4, he does a decent job of knocking out collectivist arguments by debunking the so-called inevitability of the breakdown of competition as capitalism evolves through accumulated technological progress.  I think it is one of his strongest chapters.

He's on shakier grounds in dealing with planning and democracy, in chapter 5.  He bemoans the vagueness of collectivist political ends whilst failing to notice precisely the same vagueness of a Sidgwickian utilitarianism.  He thinks he can see a withering or failure of a complete ethical code, something he says the collectivists need, but one argument for this withering is a reduction in the number and generality of ethical rules.  But their number and generality are neither here nor there.  What matters surely is the quantity of their real effect.  His pessimism on our own natural tendency to understand and favour our own kind, our own community leads him to happily abandon hope of any kind of collectivist planning, but he's happy to see the possibility of a liberal-inspired international federated political order.  Though, to be fair to him, he does distinguish between the kind of economic planning collectivists seek and the liberal 'negative' Rule of Law based planning which sees the creation of international federated political institutions.

For him the Rule of Law  ".. means that government in all its actions is bound by rules fixed and announced beforehand".  I could imagine middle way social democrats as happy to sign up to this with no fear of logical contradiction.  However when he claims that collectivist planning ".. necessarily involves deliberate discrimination  between particular needs of different people, and allowing one man to do what another must be prevented from doing" my first thought was that this is what a market also does.

He's back on form in the chapter on economic control and totalitarianism which a large number of on-target criticisms of some of the collectivist's favourite arguments.

A key point in his chapter 'Who, whom?' is the choice he thinks which we have to make in two systems around who does the planning of whom.  Either a small set of planners, versus a combination of our own individual enterprise together with a large dose of randomness.  But the success of individual enterprise is itself a function, partly, of capital, so we're right back to a small set of lucky planners.  And surely, at the macroeconomic level, if you actively chose option 2, namely randomness and enterprise, then institutionalising randomness like this we're forcing it to remain forever random.  Spelled out, it is like saying: do not try to fathom the business cycle as any attempt to understand it with a view to mitigating it is necessarily impossible.  This stationary position didn't win him too many friends going into the great depression, it is true, but chimes with his generally much more pessimistic view of the limits of human reasoning.  He spells out the likely psychological and economic consequences of a planned collectivist society well here too.  However, having argued in favour of randomness and enterprise picking winners, by chapter 9, on security, he's arguing that mitigating business cycles via the good kind of planning is something worth doing.  However he's withering on other forms of economic security or protectionism, and he tackles these by showing their unintended consequences which are, he believes, self-defeating in the long run.  This Schumpeterian view does strike the modern reader as harsh.  Ignatief's 'The needs of strangers' is an old favourite of mine and makes a decent case for a degree of economic security for citizens.

As I've pointed out, Hayek doesn't deliver on knock out arguments against a third way between liberalism and a splash of collectivist planning, something which seems a priori worth much deeper investigation by him.  

Secondly, his anti-Hegelian spirit may have left him with too static a view of the ideal of liberalism.  Surely he ought to be more pragmatic in the Rortian sense of avoiding such a historically rooted final vocabulary?  

Third, he appears to be peculiarly anti-Fractal in his implicit raising of the nation state to a level of importance which he doesn't justify. He clearly loves the individual and sees societies of individuals working best when there's no centralisation or concentration of power.  And this reasoning he extends to nation states, then finally to supra-national federations.  But why those boundaries?  Couldn't he work 'inwards' to fiefdoms and cliques below the level of nation states?  He talks often of collections of 'small nations' and perhaps this is implicit in his position - the deconstruction of the larger states into many more mini-states and state-lets.  But he would prefer his aggregated collections of humans to reflect precisely the same kind of liberalism?  Or variants?  Or other forms, including totalitarianism?  How does the variance of political structure compare to the variance amongst real individuals' motivations?  And on a galactic scale?  What if planet earth was one instance of a form of political life, against a whole universe of alternative forms?  Wouldn't nation state-hood seem somewhat parochial in this context?  You certainly need to see nineteenth century British liberalism in a historical context.  Seeing it as such of course doesn't force you to abandon liberal principles, but you may need to argue harder for them.

But for all that, Hayek's message is powerful - we are often tempted by the social utopia of collectivism but it pays us to look beyond our emotional response to the desirability of these utopias to the unintended consequences they may bring.  This scepticism we must keep, but balanced with optimism and what Rorty called called solidarity.