Thursday, February 26, 2009

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.

6 comments:

lichanos said...

The rules are always changing, that's called history. People only complain when they change in a way they don't like. More important than the economic rules are the meta-rules, the rules for changing rules. That's called democracy. We still have a little of it.

History, life, the economy is not a board game that started, say, in 1700, with rules that everyone agreed upon. If you're really interested in rule-switching, check out the enclosure movement and primitive accumulation. That set the stage for English capitalist industrialization.

BTW, you really ought to say what you mean by "liberal fascism" rather than just linking to some popular screed on Amazon. To me, it's just a mindless smear, like when people I know call people like you Nazis.

A Wiser Man Than I said...

BTW, you really ought to say what you mean by "liberal fascism" rather than just linking to some popular screed on Amazon.

I've read Goldberg's book, and, popular or not, it's not just a screed. It's polemical nature can be frustrating, and he's a bit repetitive, but it bears reading.

People have tended to assume, incorrectly, that fascism is some sort of right-wing phenomenon. But if by right-wing one means an anti-statist ideology, such a phenomenon cannot exist. Only when right-wing groups embrace the state in their move leftward may the become fascistic.

My point here was that we have a very good chance of seeing fascism develop, along lines not identical to, but not completely different from those defined by Mussolini.

More important than the economic rules are the meta-rules, the rules for changing rules. That's called democracy. We still have a little of it.

Hayek's point, if I may, was that, democracy or no, we are seeing rules applied by committee, rather than by legislative decision. The bailouts of Citibank are good examples of the essential arbitrariness that we now see in American society.

There is certainly nothing wrong with changing the rules. But the rules can not simply be changed subjectively in the midst of transactions. Some stability must exist for society to avoid the very chaos which the laws were enacted to oppose.

troutsky said...

I'm not here to defend bail=outs but I believe State capitalism only becomes fascistic when it adopts other characteristics, chauvinist, nationalist. authoritarian. This is hardly "liberal" in any sense of the word, although those professing liberalism have used this ideology to advance their own agenda. Yes, the threat certainly exists, just as left wing totalitarianism is a threat and anarchy is a threat.

No one has the stomach for free markets, the brutality of such a "just" system requires a hardness that is soul-killing and reduces life to a transaction. Rather than Goldberg, try Dickens or The Gangs of New York.

lichanos said...

...we are seeing rules applied by committee, rather than by legislative decision

There was an election. People seemed to want more such rules applied.

If the real fascists ever take over, it will be the liberals who are out there trying to protect "conservative" numbskulls like you from getting murdered for speaking your mind, however silly your ideas. You are way too hung up on nomenclature.

Mussolini, indeed!

A Wiser Man Than I said...

Rather than Goldberg, try Dickens or The Gangs of New York.

I adore Dickens. I'm certainly not hear to defend the excesses of capitalism unchecked by anything. But I hesitate to believe that only the State may check these excesses.

If, armed with Dickens, we all refrained from purchasing from manufacturers who mistreated their workers, regulation would, do a large degree, become superfluous.
Nor is there proof that regulation will check these excesses. Sometimes bureaucrats either look the other way or observe abuses insufficiently.

In short, I advocate something akin to laissez-faire because I find a relatively unregulated market to pose a smaller risk than a system in which the State rules above all.

A Wiser Man Than I said...

If the real fascists ever take over, it will be the liberals who are out there trying to protect "conservative" numbskulls like you from getting murdered for speaking your mind, however silly your ideas.

Nonsense. It wasn't conservatives who are attempting to revive the fairness doctrine, and it was Wilson and FDR who jailed dissident journalists.

Classical liberals possess no such threat, but the left no longer bears any resemblance to their intellectual forbears. If the State is to reign supreme, speech must be squelched. Now who believe the State should reign supreme?