A Life Lived For Liberty

16 January 2024
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A new biography of F A Hayek provides inspiration for the ongoing fight against socialism, writes IPA Executive Director Scott Hargreaves.

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
– Friedrich Hayek

I originally sat down to read this biography out of a sense of obligation to the free-market tradition that has influenced the IPA and me personally so much. I had it on pre-order for when it was published in late 2022. But I found myself completely drawn in by the character of this very interesting and occasionally brilliant man, and by the sense that the problems he was grappling with feel very much like those of the present day. It pushed aside other books and was read within a few weeks.

Friedrich von Hayek was a relatively normal young man of the Viennese lower middle class who did his duty in the (Great) war on the Italian front. After, through his studies at the University of Vienna, he became enamoured of a very British classical liberalism, with his technical economics building on the local Austrian ‘school’. But then his lot was to see his own country become less-and-less liberal, his cosmopolitan outlook challenged by the rise of Aryanism and anti-Semitism, and the free market approach to creating prosperity shunted aside by the central planning and Big State ambitions of left and right.

For most of Hayek’s adult life his battle was to earn his academic stripes and develop his theories of economics, while also making an impact in the world. Perhaps the apogee of his early career was the famous battle with Keynes in London in 1931, over the nature of the business cycle and limits that should be set for government intervention—but that was also the nadir as whatever the intellectual points he scored, the societies and governments of the UK and the USA were set to embrace a bastardised form of Keynesian economics as the basis for central planning, socialism, and the growth of the State. Everything Hayek had rejected.

Meanwhile, he was continually under pressure from the less worldly and more doctrinaire economists of the Austrian school—notably Ludwig von Mises. Unlike Mises, Hayek explicitly rejected laissez-faire as the rallying cry for defenders of freedom as it limited the ability to deal with certain practical problems of economics, and was more-or-less unsaleable as an alternative to socialism and central planning.

The socialist calculation debate and the knowledge problem remain (for me) his enduring and unassailable contribution to epistemology, the science of what we know. In the 1930s, as now, it was thought the growth of computing (or AI) would lead to a world in which technocrats could just ‘pull the levers’ to smooth out economic shocks, while maintaining full employment and steady growth. But, as paraphrased by the economist and (here) biographer of Hayek, Bruce Caldwell:

The dispersion of knowledge is not some temporary condition that gets eliminated by a movement to equilibrium. It is a permanent condition. If everyone always has privileged access to different bits of information, in a world of constantly changing data, the question becomes: how can the fragments of knowledge that exist in different minds ever get coordinated?

That is a critique not just of socialism and the conceits of central planners, it is also a rejection of the then dominant conceptions of mainstream economics which idealised ‘perfect competition’ and the state of equilibrium. Even before the arrival of Keynesianism, Hayek saw the slippery slope of ‘assume an equilibrium state’ and what became known as ‘comparative statics’.

This is an official biography and Caldwell, Director of the Center for the History of Political Economy at Duke University in North Carolina, does a masterful job anchoring his narrative in the contemporary documentary sources, ably assisted by the economist Hansjoerg Klausinger who also undertook the translation duties for the benefit of Caldwell and the reader. We live through Hayek’s struggles in the years to 1950, without the foreshadowing of any ‘triumphs’ of the eventual Nobel Prize. As an intellectual biography, the closest we get to the omnipotent biographer is identifying the moment of key insight—and the initial fragments of thought, sometimes published—that may not have been fully developed or ready to share with the world until many years later. London was a small place and at the London School of Economics (LSE)—where he took refuge as first the one-party regime of the fascist-inspired Fatherland Front and later the actual Nazis took over Austria—he worked, taught, and debated cheek by jowl with the apostles of Big Government. When the LSE was evacuated to Cambridge during the War (the London offices being commandeered for War work), the lifestyle was better but the pressures intensified.

This rap-inspired re-enactment of the 1931 debates on the business cycle has been viewed more than eight million times on YouTube. See: ‘Fear the Boom and Bust: Keynes vs Hayek – The Original Economics Rap Battle!’

It was absolutely fascinating and very relevant to the foundation of the Institute of Public Affairs to read of the role played in Hayek’s life, and wider intellectual milieu, by William Beveridge, LSE Director from 1919 until 1937. After that he took up the role of Master of University College, Oxford, and was commissioned by the wartime coalition government to produce what became the ‘Beveridge Report’ of 1942, the blueprint for the post-War welfare state, Social Insurance and Allied Services. As Caldwell notes, this catapulted this otherwise obscure academic figure to public standing and acclaim that Hayek himself was not to match until the publication of The Road to Serfdom in 1944.

Hayek understood the need for liberals to put forward a positive program.

This thunderbolt of the Beveridge Report would also have struck Earth in Australia, then under an ALP Government also looking ahead to the ‘peace dividend’. I have no doubt it would have been this, allied to the vision of Soviet-style central planning proselytised by yet another high-profile LSE figure, Harold Laski, that would have (rightly) so alarmed the businessmen who later came together to form the Institute of Public Affairs. Seen in that light, the visit to the IPA by Hayek in 1976 could be seen to close the loop on that history, while writing the first page in what became a repeat of the struggle to combat central planning of markets, in the 1980s and 1990s. The IPA Review reported:

Although 77 years of age, Professor Hayek willingly undertook a programme of engagements in his month in Australia which would have taxed the resources of a man in the prime of life. The IPA was privileged to participate in the sponsorship of his visit and in the arrangements for the Victorian end of his programme.

It went on, presciently, to outline the battle for freedom—or, at very least, the battle to allow the private sphere room to operate—that was to be waged over the following two decades:

Hayek’s eminence as an economist undoubtedly derives, in part, from the exceptional range and depth of his intellectual interests. As he has said himself, “An economist who is only an economist is not a good economist”. Professor Hayek came to Australia at a peculiarly appropriate time. It is clear that this country has reached a grand climacteric, a fateful parting of the ways so far as its political and economic future is concerned. The momentous question is whether, in the years ahead, libertarian values are to prevail, enterprise, both corporate and individual, is to be properly rewarded, and the market is to be allowed to perform its traditional function of allocating the resources of the community in the most effective manner in the interests of all; or whether Government as such is to assume an ever larger role in the distribution of resources and income, in the provision of so-called Welfare and in the general direction of the lives of the people. In short, what is ultimately at stake is the survival of individual freedom.

A remarkable essay from 1945, Individualism: True and False, reveals both Hayek’s British sensibilities and keen understanding of the main current of Western philosophy:

The true individualism which I shall try to defend began its modern development with John Locke, and particularly with Bernard Mandeville and David Hume, and achieved full stature for the first time in the work of Josiah Tucker, Adam Ferguson, and Adam Smith and in that of their great contemporary, Edmund Burke—the man whom Smith described as the only person he ever knew who thought on economic subjects exactly as he did without any previous communication having passed between them. In the 19th century I find it represented most perfectly in the work of two of its greatest historians and political philosophers: Alexis de Tocqueville and Lord Acton.

The contrast was with Descartes and those influenced by the French rationalist tradition, including the physiocrats who in turn influenced Bentham and the Mills (James and his son, John Stuart).

Intervention is a ‘slippery slope’.

For me this distinction is absolutely critical. It informs the structure of the work I commissioned from IPA Adjunct Fellow Dr Brad Bowden, in The Enlightenment and the Advance of Liberty (1689–1815). Many of the criticisms based on the ills ascribed by socialist and social conservatives alike to ‘unbridled individualism’ are justified only insofar as they reflect the influence of the ‘individualism false’. As Caldwell describes, this essay was meant to be part of an even larger ‘Abuse of Reason’ project which would further “justify such distinctions, showing how one tradition led to liberal democracy, the other towards scientism, planning, and ultimately totalitarianism”. That reference to totalitarianism takes us to the development of The Road to Serfdom, the work conceived by Hayek precisely to reach a wider audience and combat socialism, central planning, totalitarianism, and—along the way—the purist versions of laissez-faire. Hayek understood the need for liberals to put forward a positive program, and not simply critique socialism. He succeeded in part with The Road to Serfdom, but the title itself helped ensure it is remembered mainly for the idea that interventionist measures are a ‘slippery slope’; that every error introduced by government action and interference with market exchange simply leads to great clamour for ever-greater controls. This, moreover, required a profoundly anti-democratic view of the role of government, as by definition it ignores the preferences of the individuals who otherwise may have expressed those preferences by their free choice. This, in extremis, leads to totalitarianism.

Even at the time this was seen as a little extreme. Hayek himself was willing to modify the inevitability of that turn. But his point was made, and it is valid. Ironically, it was thought to have been negated by the turn back towards markets in the 1980s, as the political system appeared to have an inbuilt ‘pendulum’. But now, as the progressives, socialists, and technocrats have found the long march through the non-government institutions of society a conducive way to achieve the same ends, it will be some time before we know whether Hayek was right the first time. This is a biography of the man as well as his intellectual development, and so it covers his sometimes excruciating private life. He missed the moment to propose to the love of his life in Vienna, but then maintained a special relationship with her even after both married other people. The efforts to (eventually) divorce his first wife and make the move to the US (necessary in part so he could afford to maintain two families) take up the latter part of the book, and are anything other than a joy to read. He also had to deal with the problems of the family left behind in Austria, including a brother who became a Nazi (how active, how committed, was the million-dollar question, at least for Hayek and the post-War authorities). That said, he was in company a more relaxed, almost clubbable version of the English gentleman he so valued. He valued good friends and seemed to have quite a few of them.

Relevantly, Caldwell describes Hayek’s desperate efforts over many years to maintain intellectual and social links—and friendship—across Europe in the pre-War years and even during the War. He had refused to repudiate his Jewish friends even as Austria was Aryanising, and his vision of the Western intellectual milieu was undiminished despite what the Nazis and Soviets were attempting. It is important Caldwell lays this out so well, as it informs that later chapter on the formation of the Mont Pelerin Society (MPS) in 1947.

Hayek was instrumental in rounding up the remainders of European liberal political, philosophical and economic thought, and the American money that enabled gathering for a conference at the Mont Pelerin Hotel on the shores of Lake Geneva. MPS, which has boasted luminaries such as Hayek, Friedman, and Mises, continues to operate as a source of intellectual strength for intellectuals, think tankers, and academics who then take its galvanising ideas into the world.

This book is the proverbial damned fat square, running to 730 pages of text. Those looking to be inspired in the struggle against socialism should read The Road to Serfdom. To cast aside the detritus of wasted years at university read The Use of Knowledge in Society. But if you are struggling to see the path forward for liberalism, and fearful for the survival of individualism and the market order in the 21st century, then you might take up this book to see how one man—brilliant, but of flesh and blood—battled through very similar challenges quite a few generations ago. And perhaps hope also for the moment in the sun that the resurgent ideas of freedom achieved a bit later, which will be the subject of Caldwell and Klausinger’s second volume.

This article from the Summer 2023 edition of the IPA Review is written by IPA Executive Director Scott Hargreaves.

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