Hayek: A Collaborative Biography

Part V, Hayek's Great Society of Free Men

R. Leeson

• Verlag: Palgrave Macmillan
• Jahr: 2015
• ISBN:
  9781137478245
• Thema: Economics
• Thema: Econometrics

F.A. Hayek (1899-1992) was a Nobel Prize winning economist, famous for his defense against classical liberalism. This volume xamines Hayek's relationship with the Chicago School, and looks at The Consitution of Liberty - Hayek's vision of the wealthy. The study highlights the paradox that arises from the spontaneous order of trade unions.

1

Introduction

Robert Leeson

Hayek and Friedman: conflicting visions

In the second edition of Capitalism and Freedom, Milton and Rose Friedman (1982, viii) reflected on the

transition from the overwhelming defeat of Barry Goldwater in 1964 to the overwhelming victory of Ronald Reagan in 1980 – two men with essentially the same programme and the same message.

Friedman openly – and Friedrich von Hayek covertly – played party political roles for the Republican and Conservative Parties – as public policy intellectuals are entitled to do. One difference is that Hayek’s disciples appear to be dependent on maintaining a fund-raising image that is inconsistent with the evidence: ‘Hayek himself disdained having his ideas attached to either party’ (Caldwell 2010).¹

Since 1931, Friedman’s wife had waited for her ‘dream’ of living in San Francisco to ‘come true’. But Rose Friedman, née Director, had to wait 46 years, because her husband ‘could not really face deserting the intellectual climate at Chicago ... much to Rose’s disappointment’. In 1977, the Friedmans joined the Hoover Institution on War, Revolution and Peace (Friedman and Friedman 1998, 370, 373–374).

The Hoover director, W. Glenn Campbell, also recruited the intensely aristocratic Hayek (1978):

The robber baron was a very honored and honorable person, but he was certainly not an honest person in the ordinary sense. The whole traditional concept of aristocracy, of which I have a certain conception – I have moved, to some extent, in aristocratic circles, and I like their style of life. But I know that in the strict commercial sense, they are not necessarily honest. They, like the officers, will make debts they know they cannot pay.²

Campbell was reared with his six siblings on a Canadian farm ‘without running water and indoor plumbing’. Twenty-six of his Hoover Fellows served in Reagan’s second administration (Martin 2001).

Hayek was anti-Semitic; the Goldwaters and the Directors were refugees from the ‘oppressive’ anti-Semitism of the Romanov Tsars (Goldwater 1979, 17; Friedman and Friedman 1998, 2). In a 1961 letter to Goldwater, Friedman traced the lineage of the Bretton Woods fixed exchange rate ‘coalition’ back to Hjalmar Schacht and the Nazis (Leeson 2003, chapter 12). Hitler acquired anti-Semitism in Habsburg Vienna from a culture which had been co-created by proto-Nazi and later card-carrying Nazi families like the von Hayeks (Leeson 2014, chapter 1).³

Richard Nixon defeated Reagan for the 1968 Republican Party nomination six years after declaring, following defeat by John F. Kennedy for the presidency (1960) and Pat Brown for the governorship of California (1962): ‘you won’t have Nixon to kick around anymore because, gentlemen, this is my last press conference’.⁴ Following his 1964 endorsement speech for Goldwater, in 1966 Reagan succeeded in California where Nixon had failed: his ‘Time for Choosing’ speech led to an election platform organized around sending the ‘welfare bums back to work’, and cleaning ‘up the mess’ at the anti-Vietnam war University of California, Berkeley campus (Hall 2011, 134).

In the 1973 Saturday Night Massacre, Acting Attorney General Robert Bork (2013, chapter 5) sacked Watergate Special Prosecutor Archibald Cox (who had subpoenaed the White House tapes) in return for a promise from Nixon: ‘You’re next when a vacancy occurs on the Supreme Court.’ In disgrace, Nixon retreated to the Western White House, San Clemente, not far from Los Angeles.

The first incarnation of Hayek’s Great Society of Free Men collapsed during the Great War; the Great Depression – which Hayek and Ludwig von Mises sought to intensify – provided an opportunity to re-establish a version of it (Leeson 2015). Unintentionally, Arthur Burns, one of Hayek’s Mont Pelerin Society recruits, used his power as Chair of the Federal Reserve to initiate the Great Inflation of the 1970s (Friedman cited by Leeson 2003, chapter 19). Ironically, it seems likely that the dislocations associated with this Mont Pelerin-initiated stagflation played a part in the decision-making of the 1974 Nobel Prize Selection Committee which, as the University of California Los Angeles economist and Society President, Deepak Lal (2009) explained, implicitly led to the ‘complacency’ about financial sector deregulation that initiated the Global Financial Crisis.

Henry Simons (1935, 1421) wrote sarcastically of the ‘strange human behavior induced latterly by the combination of economic depression and the California climate’. Nixon told David Frost (1978): ‘When the president does it, that means it is not illegal’. In the 1978 UCLA tapes, Hayek was asked by Bork if

you yourself have a preference for a certain kind of a society, which has a maximum amount of freedom in it. And I suppose you wouldn’t call that a socially just society, but what general term would you use to describe it?

Hayek (1978) replied: ‘Well, I think I would just stick to “The Free Society,” or “The Society of Free Men” – “free persons”. ’ Bork continued: ‘But doesn’t the demand for social justice merely mean – it’s a shorthand for a preference for a different kind of society’; to which Hayek replied: ‘Well, it’s used like that, no doubt, but why then speak about justice? It’s to appeal to people to support things which they otherwise would not support. ’ This enlightened Bork: ‘I see. Your objection really is that it’s a form of fraudulent rhetoric –’ to which Hayek replied: ‘Yes.’⁵

Twelve days later in an interview with Leo Rosten, Hayek (1978) elaborated on these thoughts:

There is still the strong innate need to know that one serves common, concrete purposes with one’s fellows. Now, this clearly is the thing which in a really Great Society is unachievable. You cannot really know. Whether people can learn this is still part of the emancipation from the feelings of the small face-to-face group, which we have not yet achieved. But we must achieve this if we are to maintain a large, Great Society of Free Men. It may be that our first attempt will break down.⁶

Hayek (1978) explained:

You see, I believe [Joseph] Schumpeter is right in the sense that while socialism can never satisfy what people expect, our present political structure inevitably drives us into socialism, even if people do not want it in the majority. That can only be prevented by altering the structure of our so-called democratic system. But that’s necessarily a very slow process, and I don’t think that an effort toward reform will come in time. So I rather fear that we shall have a return to some sort of dictatorial democracy, I would say, where democracy merely serves to authorize the actions of a dictator. And if the system is going to break down, it will be a very long period before real democracy can reemerge.⁷

Hayek (1978) outlined his social philosophy:

My present aim is really to prevent the recognition of this turning into a complete disgust with democracy in any form, which is a great danger, in my opinion. I want to make clear to the people that it’s what I call unlimited democracy which is the danger, where coercion is not limited to the application of uniform rules, but you can take any specific coercive measure if it seems to serve a good purpose. And anything or anybody which will help the politician be elected is by definition a good purpose. I think people can be made to recognize this and to restore general limitations on the governmental powers; but that will be a very slow process, and I rather fear that before we can achieve something like this, we will get something like what [J. L.] Talmon [1960] has called ‘totalitarian democracy’ – an elective dictatorship with practically unlimited powers. Then it will depend, from country to country, whether they are lucky or unlucky in the kind of person who gets in power. After all, there have been good dictators in the past; it’s very unlikely that it will ever arise. But there may be one or two experiments where a dictator restores freedom, individual freedom.

Rosten appeared horrified by Hayek’s Great Society of Free Men: ‘I can hardly think of a program that will be harder to sell to the American people. I’m using “sell” in the sense of persuade. How can a dictatorship be good?’; to which Hayek replied: ‘Oh, it will never be called a dictatorship; it may be a one-party system.’⁸

Volume overview

Chapter 2 offers a testable hypothesis: Hayek’s and Mises’ behaviour and their Great Society of Free Men corresponds with their universal behavioural postulate – amoral self-interest. Their objective – to restore an updated version of the neo-feudal order – resembled a constrained optimization problem.

The propertied alliance which expanded the franchise did not survive:

Middle class liberalism had little appeal to a mass-electorate; and it fell to pieces in Germany as in every other country within a generation of the establishment of universal suffrage. (Taylor 1955, 150)

Austrians first enlisted ‘Ludendorff and Hitler’ and other ‘fascists’ to protect ‘civilisation’ and ‘property’ (von Mises 1985 [1927], 44, 51, 19); and then von Hayek (1978a; 2010 [1960]), ‘anxious to put it in a more effective form’,⁹ enlisted – for the same purposes – the authority and ‘spontaneous’ order of those with inherited wealth.

Four years after the demise of the Habsburg spontaneous order, von Mises (1922, 435; 1951, 443) promoted ‘consumer sovereignty’: ‘the Lord of Production is the Consumer’ (‘Der Herr der Produktion ist der Konsument’). The ‘masses’, equipped with their ‘consumer sovereignty’, had to be persuaded of the importance of aristocratic intergenerational entitlements:

it is only natural that the development of the art of living and of the non-materialistic values should have profited most from the activities of those who had no material worries. [emphasis added] (von Hayek 2011 [1960], 190–193)

Underpinning this ‘spontaneous’ order was the Great Society of Free Men:

we owe our freedom to certain restraints on freedom. The belief that you can make yourself your own boss – and that’s what it comes to – is probably destroying some of the foundations of a free society, because a free society rests on people voluntarily accepting certain restraints¹⁰ ... After all, our whole moral world consists of restraints of this sort, and [Freud], in that way, represents what I like to call the scientific destruction of values, which are indispensable for civilization but the function of which we do not understand. We have observed them merely because they were tradition. And that creates a new task, which should be unnecessary, to explain why these values are good. [emphasis added] (von Hayek 1978)¹¹

With this purpose in mind: the masses must learn that

(a)they are ‘inferior and all the improvements in you...

Inhaltsverzeichnis

• Cover
• Title
• 1  Introduction
• 2  You Just had to Raise your Finger
• 3  Hayek and the Chicago School
• 4  Wealth and the Intellectuals: Nietzsche, Hayek, and the Austrian School of Economics
• 5  Hayek, Hutt and Trade Unions
• 6  Hayek and Me : A Personal and Professional Journey
• 7  Some Recollections of Hayek and Bill Bartley
• Index