To serfdom we will go

I recently started reading The Road to Serfdom by F.A. Hayek. It's a prescient book en lieu of the liberal fascism we're seeing from Washington.

On pages 93-4, he points out in a footnote:

The conflict is thus not, as it has often been misconceived in nineteenth-century discussions, one between liberty and law. As John Locke had already made clear, there can be no liberty without law. The conflict is between different kinds of law—law so different that it should hardly be called by the same name: one is the law of the Rule of Law, general principles laid down beforehand, the ‘rules of the game’ which enable individuals to foresee how the coercive apparatus of the state will be used, or what he and his fellow-citizens will be allowed to do, or made to do, in stated circumstances. The other kind of law gives in effect the authority power to do what it thinks fit to do. Thus the Rule of Law could clearly not be preserved in a democracy that undertook to decide every conflict of interests not according to rules previously laid down but "on its merits".

Critics of the free market, like Obama, and indeed, most politicians, insist that the government must produce order out of the essentially anarchic system. To a certain extent, this is true. If there were no government, for instance, to enforce contracts, no such market could exist. Free exchange depends on rules, known to all parties beforehand, by which buyers and sellers are to be bound, and without which neither has any guarantee that such exchanges will produce the intended results. But there are limits by which government itself must be bound; without these, government becomes an arbitrary judge; the market becomes a muddled mess, as buyers and sellers haven't the slightest ideas about which rules will be enforced and which will be overthrown.

The arbitrary nature of the governmental authorities is less a cause of the financial meltdown than it is a certitude which shall perpetuate the misery. There are other reasons bailouts and stimuli are improper responses for government, which I have examined before; I am concerned here with the effects of unpredictable interventions by the government. While the stock market should never be confused with the economy, its wild swings in recent months are indicative of the effects of this unpredictability. No one doubts that the government will act; but no one has the slightest clue how that action will manifest itself. Acting at random is sure to prolong the return to economic normalcy, as buyers and sellers haven't the slightest idea of how purchases should be made in the present clime. Not without reason, both behave conservatively, eschewing investment with any perceived risk for surer things. Thus the wild injections of capital have an unintended, but not unforeseen effect: namely, reducing the willingness of creditors to borrow money in the midst of such volatility.

Now, it is theoretically possible that the internal contradictions of capitalism will eventually emerge to undermine it, and that any attempts to save capitalism are thus futile. But if we are to accept this interpretation, we need one of two things. Either we must see a capitalist system collaspe by itself, and not because government strangled the producers until the system expired after a spell of depotism.

Or, we must change the formulation to run, somewhat cumbersomely, along these lines. Capitalism has not yet been proven capable of affecting its own destruction, and in fact, in the midst of the totalitarian system of the Soviet empire, a system of free economic exchanged emerged, keeping always in the shadows. But it may be that man cannot ignore the siren song forever; he rejects the dull freedom of the market for a system in which government begins, gradually at first, to gain control of the means of production, until whatever is left of the market must retreat again to the shadows.

There have been, of course, no explicit calls for control of the means of production; no politician would ever use those words unless the situation became dire enough that he forgot his vocation. Moreover, the coercion will become more pronounced as the failure of the stimulus becomes apparent. For now, I'll only point out that the administration's attempts to harvest alternative energy by the application of billions in bribe money, demonstrate clearly how much faith they have in entrepreneurs working freely in the marketplace. It is but a small step to insist that other sectors begin producing whatever goods the administration can imagine, irrespective of whether or not such production is economically feasible. And when the whole economy seems to be having trouble producing, given the president's predilection to find his supply of blood in turnip fields, we begin to see clearly the road Hayek implored us not to take.