Nazi-Socialism 1
Spring 1933
Incomprehensible as the recent events in Germany must seem to anyone who has known that country chiefly in the democratic postwar years, any attempt fully to understand these developments must treat them as the culmination of tendencies which date back to a period long before the Great War. Nothing could be more superficial than to consider the forces which dominate the Germany of today as reactionary—in the sense that they want a return to the social and economic order of 1914. The persecution of the Marxists, and of democrats in general, tends to obscure the fundamental fact that National Socialism is a genuine socialist movement, whose leading ideas are the final fruit of the anti-liberal tendencies which have been steadily gaining ground in Germany since the later part of the Bismarckian era, and which led the majority of the German intelligentsia first to “socialism of the chair” and later to Marxism in its social-democratic or communist form.
One of the main reasons why the socialist character of National Socialism has been quite generally unrecognized, is, no doubt, its alliance with the nationalist groups which represent the great industries and the great landowners. But this merely proves that these groups too—as they have since learnt to their bitter disappointment—have, at least partly, been mistaken as to the nature of the movement. But only partly because— and this is the most characteristic feature of modern Germany—many capitalists are themselves strongly influenced by socialistic ideas, and have not sufficient belief in capitalism to defend it with a clear conscience. But, in spite of this, the German entrepreneur class have manifested almost incredible short-sightedness in allying themselves with a movement of whose strong anti-capitalistic tendencies there should never have been any doubt.
A careful observer must always have been aware that the opposition of the Nazis to the established socialist parties, which gained them the sympathy of the entrepreneur, was only to a very small extent directed against their economic policy. What the Nazis mainly objected to was their internationalism and all the aspects of their cultural programme which were still influenced by liberal ideas. But the accusations against the social-democrats and the communists which were most effective in their propaganda were not so much directed against their programme as against their supposed practice— their corruption and nepotism, and even their alleged alliance with “the golden International of Jewish Capitalism.”
It would, indeed, hardly have been possible for the Nationalists to advance fundamental objections to the economic policy of the other socialist parties when their own published programme differed from these only in that its socialism was much cruder and less rational. The famous 25 points drawn up by Herr Feder, 2 one of Hitler’s early allies, repeatedly endorsed by Hitler and recognised by the by-laws of the National-Socialist party as the immutable basis of all its actions, which together with an extensive commentary is circulating throughout Germany in many hundreds of thousands of copies, is full of ideas resembling those of the early socialists. But the dominant feature is a fierce hatred of anything capitalistic—individualistic profit seeking, large scale enterprise, banks, joint-stock companies, department stores, “international finance and loan capital,” the system of “interest slavery” in general; the abolition of these is described as the “[indecipherable] of the programme, around which everything else turns.” It was to this programme that the masses of the German people, who were already completely under the influence of collectivist ideas, responded so enthusiastically.
That this violent anti-capitalistic attack is genuine—and not a mere piece of propaganda becomes as clear from the personal history of the intellectual leaders of the movement as from the general milieu from which it springs. It is not even denied that many of the young men who today play a prominent part in it have previously been communists or socialists. And to any observer of the literary tendencies which made the German intelligentsia ready to join the ranks of the new party, it must be clear that the common characteristic of all the politically influential writers—in many cases free from definite party affiliations—was their anti-liberal and anti-capitalist trend. Groups like that formed around the review “Die Tat” have made the phrase “the end of capitalism” an accepted dogma to most young Germans. 3
That the movement is more anti-liberal than anything else is closely connected with another important aspect of it—the anti-rational, mystical and romantic sentiment, which has been growing for years among the youth of Germany. The protest against “liberal intellectualism” which was recently so strongly voiced by the students of the University of Berlin, was not an isolated aberration but a true expression of the feeling of great masses of the people. 4 It would be too long a story to go into all the different intellectual sources of these anti-rational tendencies in art and literature which have all converged—often to the amazement and consternation of their originators—in the Nazi movement. But it must be said that here again the main influence which destroyed the belief in the universality and unity of human reason was Marx’ teaching of the class-conditioned nature of our thinking, of the difference between bourgeois and proletarian logic, which needed only to be applied to other social groups such as nations or races, to supply the weapon now used against rationalism as such. How completely this Marxian idea has permeated German thought can be seen from the fact that, during the past few years, it has actually been promoted, as “sociology of knowledge” to the rank of a new branch of learning. 5 It is obvious that, from this intellectual relativism, which denied the existence of truths which could be recognised independently of race, nation, or class, there was only a step to the position which puts sentiment above rational thinking.
That anti-liberalism and anti-rationalism are so intimately bound up with one another is easy to understand, and is, in fact, inevitable. If rule by force by some privileged group is to be justified, its superiority has to be accepted for it cannot be proved. But what is less easily understood—thought of immense importance—is the fact illustrated by German and Russian developments that the anti-liberalism which, when confined to the economic field, today has the sympathy of almost all the rest of the world, leads inevitably to a reign of universal compulsion, to intolerance and the suppression of intellectual freedom. The inherent logic of collectivism makes it impossible to confine it to a limited sphere. Beyond certain limits collective action in the interest of all can only be made possible if all can be coerced into accepting as their common interest what those in power take it to be. At that point, coercion must extend to the individuals’ ultimate aims and ideas and must attempt to bring everyone’s Weltanschauung into line with the ideas of the rulers.
The collectivist and anti-individualist character of German National Socialism is not much modified by the fact that it is not a proletarian but a middle class socialism, and that it is, in consequence, inclined to favour the small artisan and shop keeper and to set the limit up to which it recognises private property somewhat higher than does communism. In the first instance, it will probably nominally recognise private property in general. But private initiative will probably be hedged about with restrictions on competition so that little freedom will remain. Artisans, shop-keepers and professional men will, in all likelihood, be organised in guilds, like those of the mediaeval crafts, which will regulate their activities. In the case of the wealthier capitalists, state control and restriction of income will leave little more than the name of property, even while the intention of correcting the undue accumulation of wealth in the hands of individuals has not yet been carried out. Even at the present moment, state commissioners have been put in charge of many important industries and, if the more radical wing of the party has its way, the same is likely to happen in many other cases. 6 At the present time, when the National Socialist party has grown to such an enormous size, and accordingly embraces elements with very divergent views, it is, of course, difficult to say which view will predominate. But if, as seems increasingly probable, the more radical views on economic policy hold the field, it will mean that the scare of Russian communism has driven the German people unawares into something which differs from communism in little but name. Indeed, it is more than probable that the real meaning of the German revolution is that the long dreaded expansion of communism into the heart of Europe has taken place but is not recognised because the fundamental similarity of methods and ideas is hidden by the difference in the phraseology and the privileged groups. For the present, the German people have reacted against the treatment received from the community of democratic and capitalistic countries by leaving that community.
Nothing, however, would be less justifiable than that the nations of western Europe should look down on the German people because they have fallen victims to which, in this country, seems a kind of barbarism. What must be realised is that this is only the ultimate and necessary outcome of a process of development in which the other nations have been for a long time steadily following Germany—albeit at a considerable distance. The gradual extension of the field of state activity, the increase in restrictions on international movements of both men and goods, sympathy with central economic planning and the widespread playing with dictatorship ideas, all tend in this direction. In Germany, where these things had gone furthest, an intellectual reaction, which will now hardly survive, had been definitely under way. The fact that the character of the present movement is so generally misjudged makes it seem likely that the reaction in other countries will speed up, rather than weaken, the operation of these tendencies which lead in the direction in which Germany is now going. So far, there seems little prospect that the reversal of these intellectual tendencies elsewhere will come in time to prevent other countries from following Germany in this last step also.
Reader’s Report by Frank Knight 7
December 10, 1943 To: General Editor and Committee on Publication, University of Chicago Press From: Frank H. Knight
The Road to Serfdom, by F. A. Hayek, is a masterly performance of the job it undertakes. That job is to show by general and historical reasoning, the latter primarily with reference to the course of events in Germany, two things: first, that any such policy as socialism, or planned economy, will inevitably lead to totalitarianism and dictatorship; and second that such a social order will inevitably fall under the control of “the worst” individuals. The argument is naturally political rather than economic, except in the indirect sense that the problems solved, the functions performed, by the open-market system of organization are economic and they cannot be solved, or performed by government under a free political order, nor the open-market system itself maintained under a democratic political regime. There is little or no economic theory in the book. The fifteen short chapters ably describe the old liberalism and contrast it with current tendencies which are virtually antithetical and discuss such problems as individualism, democracy, the rule of law, security and freedom, the place of truth in political and social life, the relation between material conditions and ideal ends, and the problem of international order.
When I say that the argument is well stated, compact and conclusive, I should add that the position defended is in accord with my conviction before reading this work. Highly intelligent opinion can be found against this view and it might be well to get a report from someone who holds this contrary position. Such persons are to be found in this faculty and in the Economics Department.
From the standpoint of desirability of publishing the book in this country, I may note some grounds for doubt. The author is an Austrian refugee, a very able economist, who has been a professor at the London School of Economics since the middle thirties. He writes from a distinctly English point of view, and frequently uses the expression “this country” with that reference. While there is some treatment of American conditions, and citation of American writings, this is secondary in scope and emphasis. This fact in itself might limit the appeal in “this country” to a fairly cultivated, even academic, circle of readers. Moreover, the whole discussion is pitched at a quite high intellectual and scholarly level and the amount of knowledge of central European conditions and history assumed is rather large for even the educated American audience. It is hardly a “popular” book from this point of view.
In addition, there are limitations in connection with the treatment itself, both as to the theoretical and the historical argument. In the latter connection, the work is essentially negative. It hardly considers the problem of alternatives, and inadequately recognizes the necessity, as well as political inevitability, of a wide range of governmental activity in relation to economic life in the future. It deals only with the simpler fallacies, unreasonable demands and romantic prejudices which underlie the popular clamor for governmental control in place of free enterprise. It does not discuss the problems set by the serious shortcomings of an economic system based on the degree of economic freedom which was regarded as desirable and was allowed, say, around the turn of the century. And it does not attack fallacies in a very dramatic way, in comparison with the character of the thinking and argument on which they are actually based.
The author’s treatment of the course of events leading to the Nazi dictatorship in Germany also strikes me as open to attack on the ground of over-simplification. He practically attributes everything to the Socialist movement and state paternalism toward labor and industry, including the cultivation of an attitude of contempt for business enterprise, in comparison with esteem for bureaucratic status on a salary. He explicitly relegates the militaristic tradition to a minor role. It seems to me that there are many factors in German history which would call for consideration in a balanced treatment. One thinks of the late survival of feudalism, retarding of national unification and industrialization, and the special circumstances surrounding these changes and the establishment of responsible government after the first World War. These last surely had much to do with the breakdown of parliamentarism, an undoubted fact and a vital factor in the establishment of the Hitler regime. I recall only a brief mention of anti-Semitism, which has a long history in Germany. These matters do not in my own mind invalidate the author’s general conclusion but they weaken the argument as a presentation of his case.
In sum, the book is an able piece of work, but limited in scope and somewhat one-sided in treatment. I doubt whether it would have a very wide market in this country, or would change the position of many readers.
Reader’s Report by Jacob Marschak 8
December 20, 1943
The current discussion between advocates and adversaries of free enterprise has not been conducted so far on a very high level. Hayek’s book may start in this country a more scholarly kind of debate.
The book will appeal to friends of free enterprise and give them new material: Hayek’s interpretation of the modern English scene (labor and industrial monopolist driving jointly toward a collective economy) will be new to all American readers except those who have read or listened to William Benton’s impressions; while Hayek’s German background enables him to give new support to the contention that socialism is the father of Nazism.
Those who are not convinced in advance of Hayek’s thesis will probably learn from his argument even more than those who are. Hayek (Chapter IV) has a wholesome contempt for the quasi-scientific method of “trends,” “waves of tomorrow.” Those who love planning because they love the inevitable will, perhaps, after reading Hayek revise either their faith or their tastes. Perhaps they will start to think in terms of ends and means instead of in prophecies.
It is true that Hayek himself gives little food for such concrete thinking. As he says himself at the end of the book (pages 177, 179) 9 the book is almost exclusively critical not constructive. Its technique is black-and-white. It is impatient of compromises (page 31). It is written with the passion and the burning clarity of a great doctrinaire. Hayek has the sincerity of one who has had the vision of a danger which the others have not seen. He warns his fellowmen with loving impatience.
Accordingly, the best chapters of the book are negative or formal. There is an excellent and truly inspiring chapter on the “Rule of Law” (Chapter VI); but Hayek has little to say as to how the Rule of Law (i.e., the avoidance of administrative decisions ad hoc ) might be applied to create instruments for mitigating unemployment by monetary means, or for combating monopolists. On such points he gives only vague hints (page 90, 147). Since in this country the terms “plan” and “socialism” have often been used to include monetary and fiscal policies, social security, and even progressive income tax the American reader will possibly expect from Hayek a more concrete demarcation between what the book calls “planning in the good sense” and the (undesirable) planning proper. In fact, the non-economic chapters (that on “The End of Truth,” for example) are more impressive than the economic ones.
Those who read Walter Lippmann, Stuart Chase, 10 or the Fortune’s discussions on the postwar world will also read Hayek. He is often less concrete than Lippmann or Chase; but his thinking is somewhat sharper, just because it is more abstract. Hayek’s style is readable and occasionally inspiring.
This book cannot be by-passed.
J. Marschak
Foreword to the 1944 American Edition by John Chamberlain
The shibboleths of our times are expressed in a variety of terms: “full employment,” “planning,” “social security,” “freedom from want.” The facts of our times suggest that none of these things can be had when they are made conscious objects of government policy. They are the fool’s-gold words. In Italy they debauched a people and led to death under the burning African suns. In Russia there was the first Five-Year Plan; there was also the liquidation of the three million kulaks. In Germany there was full employment between 1935 and 1939; but six hundred thousand Jews are now deprived of their property, scattered to the ends of the earth, or lying in mass graves in the Polish forests. And in America the pump never quite filled up after the successive primings; war alone saved the politicians of “full employment.”
To date, only a handful of writers has dared to trace a connection between our shibboleths and the terror that haunts the modern world. Among these writers is F. A. Hayek, an Austrian economist now living in England. Having watched the congealing of the German, the Italian, and the Danubian social and economic systems, Hayek is horrified to see the English succumbing by degrees to the controlled-economy ideas of the German Walter Rathenau, the Italian syndicalists—yes, and Adolf Hitler, who had the courage to draw conclusions from the less forthright statism of his predecessors. 11 This book of Hayek’s— The Road to Serfdom —is a warning, a cry in a time of hesitation. It says to the British and by implication to Americans: Stop, look and listen.
The Road to Serfdom is sober, logical, severe. It does not make for ingratiating reading. But the logic is incontestable: “full employment,” “social security,” and “freedom from want” cannot be had unless they come as by-products of a system that releases the free energies of individuals. When “society” and the “good of the whole” and “the greatest good of the greatest number” are made the overmastering touchstones of state action, no individual can plan his own existence. For the state “planners” must arrogate to themselves the right to move in on any sector of the economic system if the good of “society” or the “general welfare” is paramount. If the rights of the individual get in the way, the rights of the individual must go.
The threat of state “dynamism” results in a vast, usually unconscious fear among all producing interests that still retain a conditional freedom of action. And the fear affects the springs of action. Men must try to outguess the government as yesterday they tried to outguess the market. But there is this difference; the market factors obeyed at least relatively objective laws, while governments are subject to a good deal of whim. One can stake one’s future on a judgment that reckons with inventories, market saturation points, the interest rate, the trend curves of buyers’ desires. But how can an individual outguess a government whose aim is to suspend the objective laws of the market whenever and wherever it wishes to do so in the name of “planning”? Shrewdly, Peter Drucker once remarked that the “planners” are all improvisers. 12 They create not certainty but uncertainty—for individuals. And, as Hayek demonstrates, the end result of this uncertainty is civil war, or the dictatorship that averts civil war.
The alternative to “planning” is the “rule of law.” Hayek is no devotee of laissez faire; he believes in a design for an enterprise system. Design is compatible with minimum-wage standards, health standards, a minimum amount of compulsory social insurance. It is even compatible with certain types of government investment. But the point is that the individual must know, in advance, just how the rules are going to work. He cannot plan his own business, his own future, even his own family affairs, if the “dynamism” of a central planning authority hangs over his head.
In some respects Hayek is more “English” than the modern English. He belongs, with modifications, to the great Manchester line, not to the school of the Webbs. 13 It may be that he is also more “American” than the modern Americans. If so, one can only wish for the widest possible United States audience for The Road to Serfdom.
John Chamberlain New York, NY July 1944
Letter from John Scoon to C. Hartley Grattan 14
Hayek: THE ROAD TO SERFDOM
May 2, 1945 Mr. C. Hartley Grattan 6 White Hall Road Tuckahoe, New York
Dear Mr. Grattan:
I have been in the office about five minutes a day since I returned to Chicago, or you certainly would have heard from me before this. The reviews were sent to you over a week ago, however, and for your purposes they tell the main story.
THE ROAD TO SERFDOM came to us in December 1943, was read by two scholarly readers outside of the Press, and was approved by our Publications Committee (made up of faculty members from various departments of the University) at the end of that month. It was in page proofs when we first saw it, and about to be published by Routledge in England. The idea of the Press’s publishing it in this country was suggested by a member of the Department of Economics at the University who had previously known Hayek and his work; 15 almost simultaneously another friend of the author’s, 16 once at the University but then in Washington with the government, suggested the book to us and got us the page proofs.
The first report, a copy of which I am enclosing marked “A,” was from a man who is very reliable, pretty middle-of-the-road in his political stand, and respected by both sides. He says in his report that he was on Hayek’s side in this matter even before reading the book, so he recommended that we get another report from the opposition. This we did, and the report labeled “B” came from one of the most definitely “progressive” economists in the country, whose name you would recognize immediately if it were not our long-standing policy never to reveal readers’ names. In other words, we simply could not have given the book a more objective trial: we didn’t know a thing about it at that time, so we got reports from two opposing points of view and then laid them before a committee composed of thirteen men of differing shades of opinion. They approved publication of the book by the Press.
That was all before Mr. Brandt and I came to the Press at the beginning of January, 1944. We found this project in the vault with many others, part of the probable program for the year just beginning then. As the Press started to make up its new list, THE ROAD TO SERFDOM looked far from world-shaking. Then we read the page proofs ourselves, and decided to ask the author to be specific about the book’s application to the United States, explicitly mentioning this country where he included it in his thought instead of slanting the book directly at an audience limited to England—“making no promises as to publication which might influence his judgment on this point,” my memo read. It went on to say: “If he agrees, let’s take it on. It will stir up trouble, but the author has a point and evidently has had excellent experience.” (I should explain here that the committee’s “approval” of a manuscript is not mandatory, so the question of publication had not yet been completely decided.)
This process was agreed upon by all parties, and we, a colleague of the author’s, 17 and Mr. Hayek himself all set to work suggesting possible revisions. Specific changes were eventually agreed upon, Mr. Hayek of course having the final say about what was added, what was deleted, and the specific wording in each spot. Meanwhile we at the Press were worrying about a possible new title, the sort of sales the book would have (it was taken on purely as a scholarly work, and we knew it would either fall pretty flat or catch on very widely), and how best to introduce this work by a foreign author without much of a name in this country. After much conferring we decided to leave the title (a paraphrase of Bertrand Russell’s ROADS TO FREEDOM), 18 to ask John Chamberlain to write an introduction to the book, and to have a first printing of 2,000 copies. This figure was definitely influenced by the competition the book faced in the previously published OMNIPOTENT GOVERNMENT, by Ludwig Von Mises, Hayek’s one-time teacher in Vienna. 19
About the time the contract for American rights was signed—the beginning of April—we began to hear about the book in England, which had been published there on March 10. The first printing in England was only 2,000, but it was sold out in about a month. It began to be quoted in Parliament and in newspapers, and a few newspapers over here began mentioning it now and then—but of course we were still uncertain as to how it would appeal to the United States. As a matter of fact, right up until publication date we couldn’t get a bookstore even in New York excited about the book, although Joe Margolies, of Brentano’s, did allow it some sales possibilities.
Into June the author was correcting our proofs, and publication, which we had hoped for in July, was delayed until September 18, by which time the English edition was in its third printing. We sent out more advance copies and review copies than usual, and from the response we knew that the book would have a good chance of catching on: the first review that we saw was Orville Prescott’s in the NEW YORK TIMES of September 20, which was neutral and called it “this sad and angry little book,” but by the time we had seen Henry Hazlitt’s front page review in the Sunday TIMES BOOK REVIEW we had ordered a second printing of 5,000 copies. In a few days we had requests for German, Spanish, Dutch and other translation rights, and on September 27 we ordered a third printing of 5,000 copies, upping it to 10,000 the next day. Requests for magazine rights came from several sources, but the READER’S DIGEST was first and made the best offer.
By the first week of October many stores were out of stock and we had a tremendous and intricate job of printing, binding, shipping and allotting to customers in both this country and Canada—by this time we had made an arrangement with Routledge to take care of Canadian orders too. From the start there was great enthusiasm for the book but the sales went by ups and downs and our advertising agency had a real headache getting space at the right times. A few book programs on the radio boosted the book, toward the end of October, but we knew that its sales would fall off after Christmas so we began casting about for something to do with it this year. Mr. Brandt got the idea of bringing Mr. Hayek over here; he called the departments of economics at several universities about the possibility, and all were very enthusiastic. As soon as definite arrangements had been made and it became known that Mr. Hayek was coming to this country, organizations and individuals of all sorts overwhelmed us with efforts to get hold of him and we had to turn the trip over to the National Concert and Artists Corporation.
The rest of the story you know. The book, now in its seventh printing, has sold nearly 50,000, but orders are coming in so fast that we don’t know the exact total. Actually it has had one of the most eccentric sales careers a book ever had, and it has been very difficult to know what to do next with it: the DIGEST condensation caused a great spurt, but the spurt did not hold—very likely because of the Book-of-the-Month Club’s distribution of the condensation, which has now reached a figure above 600,000.
Bitterness about the book has increased as time has gone by, rising to new heights as the book has made more of an impression. (People still tend to go off half-cocked about it; why don’t they read it and find out what Hayek actually says!) You also know how the author feels about this: one of his regrets is that in a way his conclusions are down on paper, but not the process by which he arrived at them, and we are all wondering whether some day we should not bring out a fully annotated edition of the book. (This edition is being used as collateral reading in political science and similar courses at a number of universities.) Meanwhile Hayek has many other projects on hand, none of which we should talk about now.
I hope that this will suffice for your needs—I have gathered the material out of the files and may have lost something in perspective. If there is anything more that you would like to know, we will try to supply it.
Yours sincerely,
John Scoon Editor
Introduction to the 1994 Edition by Milton Friedman
This book has become a true classic: essential reading for everyone who is seriously interested in politics in the broadest and least partisan sense, a book whose central message is timeless, applicable to a wide variety of concrete situations. In some ways it is even more relevant to the United States today than it was when it created a sensation on its original publication in 1944.
Nearly a quarter of a century ago (1971), I wrote an introduction to a new German edition of The Road to Serfdom that illustrates how timeless Hayek’s message is. That introduction is equally relevant to this fiftieth anniversary edition of Hayek’s classic. Rather than plagiarize myself, I herewith quote it in full before adding a few additional comments.
“Over the years, I have made it a practice to inquire of believers in individualism how they came to depart from the collectivist orthodoxy of our times. For years, the most frequent answer was a reference to the book for which I have the honor of writing this introduction. Professor Hayek’s remarkable and vigorous tract was a revelation particularly to the young men and women who had been in the armed forces during the war. Their recent experience had enhanced their appreciation of the value and meaning of individual freedom. In addition, they had observed a collectivist organization in action. For them, Hayek’s predictions about the consequences of collectivism were not simply hypothetical possibilities but visible realities that they had themselves experienced in the military.
“On rereading the book before writing this introduction, I was again impressed with what a magnificent book it is—subtle and closely reasoned yet lucid and clear, philosophical and abstract yet also concrete and realistic, analytical and rational yet animated by high ideals and a vivid sense of mission. Little wonder that it had so great an influence. I was impressed also that its message is no less needed today than it was when it first appeared—on this more later. But its message may not be as immediate or as persuasive to today’s youth as to the young men and women who read it when it first appeared. The problems of the war and postwar adjustment that Hayek used to illustrate his timeless central thesis, and the collectivist jargon of the time that he used to document his assertions about the intellectual climate, were familiar to the immediate postwar generation and established an immediate rapport between author and reader. The same collectivist fallacies are abroad and on the rise today, but the immediate issues are different and so is much of the jargon. Today we hear little of ‘central planning,’ of ‘production for use,’ of the need for ‘conscious direction’ of society’s resources. Instead the talk is of the urban crisis—solvable it is said only by vastly expanded government programs; of the environmental crisis—produced it is said by rapacious businessmen who must be forced to discharge their social responsibility instead of ‘simply’ operating their enterprises to make the most profit and requiring also, it is said, vastly expanded government programs; of the consumer crisis—false values stimulated by the selfsame rapacious businessmen seeking profits instead of exercising social responsibility and of course also requiring expanded government programs to protect the consumer, not least from himself; of the welfare or poverty crisis—here the jargon is still ‘poverty in the midst of plenty,’ though what is now described as poverty would have been regarded as plenty when that slogan was first widely used.
“Now as then, the promotion of collectivism is combined with the profession of individualist values. Indeed, experience with big government has strengthened this discordant strand. There is wide protest against the ‘establishment’; an incredible conformity in the protest against conformity; a widespread demand for freedom to ‘do one’s own thing,’ for individual lifestyles, for participatory democracy. Listening to this strand, one might also believe that the collectivist tide has turned, that individualism is again on the rise. As Hayek so persuasively demonstrates, these values require an individualistic society. They can be achieved only in a liberal order (I use the term liberal, as Hayek does— in the original nineteenth-century sense of limited government and free markets, not in the corrupted sense it has acquired in the United States, in which it means almost the opposite), in which government activity is limited primarily to establishing the framework within which individuals are free to pursue their own objectives. The free market is the only mechanism that has ever been discovered for achieving participatory democracy.
“Unfortunately, the relation between the ends and the means remains widely misunderstood. Many of those who profess the most individualistic objectives support collectivist means without recognizing the contradiction. It is tempting to believe that social evils arise from the activities of evil men and that if only good men (like ourselves, naturally) wielded power, all would be well. That view requires only emotion and self-praise— easy to come by and satisfying as well. To understand why it is that ‘good’ men in positions of power will produce evil, while the ordinary man without power but able to engage in voluntary cooperation with his neighbors will produce good, requires analysis and thought, subordinating the emotions to the rational faculty. Surely that is one answer to the perennial mystery of why collectivism, with its demonstrated record of producing tyranny and misery, is so widely regarded as superior to individualism, with its demonstrated record of producing freedom and plenty. The argument for collectivism is simple if false; it is an immediate emotional argument. The argument for individualism is subtle and sophisticated; it is an indirect rational argument. And the emotional faculties are more highly developed in most men than the rational, paradoxically or especially even in those who regard themselves as intellectuals.
“How stands the battle between collectivism and individualism in the West more than a quarter of a century [now half a century] after the publication of Hayek’s great tract? The answer is very different in the world of affairs and in the world of ideas.
“In the world of affairs, those of us who were persuaded by Hayek’s analysis saw few signs in 1945 of anything but a steady growth of the state at the expense of the individual, a steady replacement of private initiative and planning by state initiative and planning. Yet in practice that movement did not go much farther—not in Britain or in France or in the United States. And in Germany there was a sharp reaction away from the totalitarian controls of the Nazi period and a major move toward a liberal economic policy.
“What produced this unexpected check to collectivism? I believe that two forces were primarily responsible. First, and this was particularly important in Britain, the conflict between central planning and individual liberty that is Hayek’s theme became patent, particularly when the exigencies of central planning led to the so-called ‘control of engagements’ order under which the government had the power to assign people to occupations. The tradition of liberty, the liberal values, were still sufficiently strong in Britain so that, when the conflict occurred, central planning was sacrificed rather than individual liberty. The second force checking collectivism was simply its inefficiency. Government proved unable to manage enterprises, to organize resources to achieve stated objectives at reasonable cost. It became mired in bureaucratic confusion and inefficiency. Widespread disillusionment set in about the effectiveness of centralized government in administering programs.
“Unfortunately, the check to collectivism did not check the growth of government; rather, it diverted its growth to a different channel. The emphasis shifted from governmentally administered production activities to indirect regulation of supposedly private enterprises and even more to governmental transfer programs, involving extracting taxes from some in order to make grants to others—all in the name of equality and the eradication of poverty, but in practice producing an erratic and contradictory mélange of subsidies to special interest groups. As a result, the fraction of the national income being spent by governments has continued to mount.
“In the world of ideas, the outcome has been even less satisfactory to a believer in individualism. In one respect, this is most surprising. Experience in the past quarter century has strongly confirmed the validity of Hayek’s central insight—that coordination of men’s activities through central direction and through voluntary cooperation are roads going in very different directions: the first to serfdom, the second to freedom. That experience has also strongly reinforced a secondary theme—central direction is also a road to poverty for the ordinary man; voluntary cooperation, a road to plenty.
“East and West Germany almost provide a controlled scientific experiment. Here are people of the same blood, the same civilization, the same level of technical skill and knowledge, torn asunder by the accidents of warfare, yet adopting radically different methods of social organization-central direction and the market. The results are crystal clear. East Germany, not West Germany, had to build a wall to keep its citizens from leaving. On its side of the wall, tyranny and misery; on the other side, freedom and affluence.
“In the Middle East, Israel and Egypt offer the same contrast as West and East Germany. In the Far East, Malaya, Singapore, Thailand, Formosa, Hong Kong, and Japan—all relying primarily on free markets—are thriving and their people full of hope; a far call from India, Indonesia, and Communist China—all relying heavily on central planning. Again it is Communist China and not Hong Kong that has to guard its borders against people trying to get out.
“Yet despite this remarkable and dramatic confirmation of Hayek’s thesis, the intellectual climate of the West, after a brief interlude in which there were some signs of the resurgence of earlier liberal values, has again started moving in a direction strongly antagonistic to free enterprise, competition, private property and limited government. For a time, Hayek’s description of the ruling intellectual attitudes seemed to be growing somewhat obsolete. Today, it rings truer than it did a decade ago. It is hard to know what explains this development. We badly need a new book by Hayek that will give as clear and penetrating an insight into the intellectual developments of the past quarter century as The Road to Serfdom does of earlier developments. Why is it that intellectual classes everywhere almost automatically range themselves on the side of collectivism—even while chanting individualist slogans—and denigrate and revile capitalism? Why is it that the mass media are almost everywhere dominated by this view?
“Whatever the explanation, the fact of growing intellectual support of collectivism— and I believe it is a fact—makes Hayek’s book as timely today as it was when it first appeared. Let us hope that a new edition in Germany which of all countries should be most receptive to its message—will have as much influence as the initial edition had in the United States and the United Kingdom. The battle for freedom must be won over and over again. The socialists in all parties to whom Hayek dedicated his book must once again be persuaded or defeated if they and we are to remain free men.”
The penultimate paragraph of my introduction to the German edition is the only one that does not ring fully true today. The fall of the Berlin Wall, the collapse of communism behind the Iron Curtain, and the changing character of China have reduced the defenders of a Marxian-type collectivism to a small, hardy band concentrated in Western universities. Today, there is wide agreement that socialism is a failure, capitalism a success. Yet this apparent conversion of the intellectual community to what might be called a Hayekian view is deceptive. While the talk is about free markets and private property—and it is more respectable than it was a few decades ago to defend near-complete laissez-faire—the bulk of the intellectual community almost automatically favors any expansion of government power so long as it is advertised as a way to protect individuals from big bad corporations, relieve poverty, protect the environment, or promote “equality.” The present discussion of a national program of health care provides a striking example. The intellectuals may have learned the words but they do not yet have the tune.
I said at the outset that “in some ways” the message of this book “is even more relevant to the United States today than it was when it created a sensation … half a century ago.” Intellectual opinion then was far more hostile to its theme than it appears to be now, but practice conformed to it far more than it does today. Government in the post-World War II period was smaller and less intrusive than it is today. Johnson’s Great Society programs, including Medicare and Medicaid, and Bush’s Clean Air and Americans with Disabilities acts were all still ahead, let alone the numerous other extensions of government that Reagan was only able to slow down, not reverse, in his eight years in office. Total government spending—federal, state, and local—in the United States has gone from 25 percent of national income in 1950 to nearly 45 percent in 1993.
Much the same has been true in Britain, in one sense more dramatically. The Labour Party, formerly openly socialist, now defends free private markets; and the Conservative Party, once content to administer Labour’s socialist policies, has tried to reverse, and to some extent under Margaret Thatcher succeeded in reversing, the extent of government ownership and operation. But Thatcher was unable to call on anything like the reservoir of popular support for liberal values that led to the withdrawal of the “control of engagements” order shortly after World War II. And while there has been a considerable amount of “privatization” there as here, government today spends a larger fraction of the national income and is more intrusive than it was in 1950.
On both sides of the Atlantic, it is only a little overstated to say that we preach individualism and competitive capitalism, and practice socialism.
Note on Publishing History 20
Hayek began working on The Road to Serfdom in September 1940, and the book was first published in England on March 10, 1944. Hayek authorized his friend Dr. Fritz Machlup, an Austrian refugee who pursued a distinguished academic career in the United States and was employed, in 1944, at the Office of Alien Property Custodian in Washington, DC, to sign up the book with an American publisher. Before it was submitted to the University of Chicago Press the book was turned down in the United States by three publishers—whether because they believed it would not sell or, in at least one case, because they considered it “unfit for publication by a reputable house.” 21 Undeterred, Machlup showed the page proofs of the British edition to Aaron Director, a former member of the University of Chicago Economics Department who was to return to the university after the war as an economist in the Law School. Subsequently, Frank H. Knight, a distinguished economist at the university, received a set of proofs and presented them to the University of Chicago Press with Director’s suggestion that the Press might want to publish the book.
The Press signed a contract with Hayek for American rights in April 1944, after persuading him to make some changes—“to be specific about the application to the United States … instead of slanting the book directly at an audience limited to England,” as John Scoon, then editor at the Press, later recalled.
“About the time the contract for American rights was signed—the beginning of April—we began to hear about the book in England, which had been published there on March 10. The first printing in England was only 2,000 but it was sold out in about a month. It began to be quoted in Parliament and in newspapers, and a few newspapers over here began mentioning it now and then—but of course we were still uncertain as to how it would appeal to the United States. As a matter of fact, right up until publication date we couldn’t get a bookstore even in New York excited about the book.”
The Chicago edition was published on September 18, 1944, in a first printing of 2,000 copies, with an introduction by John Chamberlain, then as now a well-known writer and reviewer of books on economic subjects. “The first review that we saw,” Scoon went on to say, “was Orville Prescott’s in the New York Times of September 20, which was neutral and called it ‘this sad and angry little book,’ but by the time we had seen Henry Hazlitt’s front page review in the Sunday Times Book Review we had ordered a second printing of 5,000 copies. In a few days we had requests for German, Spanish, Dutch and other translating rights, and on September 27 we ordered a third printing of 5,000 copies, upping it to 10,000 the next day… .
“By the first week of October many stores were out of stock and we had a tremendous and intricate job of printing, binding, shipping and allotting to customers in both this country and Canada… . From the start there was great enthusiasm for the book but the sales went by ups and downs… .
“Bitterness about the book has increased as time has gone by, rising to new heights as the book has made more of an impression. (People still tend to go off half-cocked about it; why don’t they read it and find out what Hayek actually says!)” Scoon’s comment is still true today.
The Reader’s Digest published a condensation in April 1945, and more than 600,000 copies of the condensed version were subsequently distributed by the Book of the Month Club. 22 In anticipation of the Digest ’s condensation and also of a lecture tour that Hayek was scheduled to make in the Spring of 1945, the Press tried to arrange for a large seventh printing. However, a paper shortage limited the press run to 10,000 and forced the Press to reduce the size of the book to a pocket-size version. It is a copy from that printing, incidentally, that is in my personal library.
In the fifty years since its publication, the Press has sold over a quarter of a million copies, 81,000 in hardback and 175,000 in paperback. Chicago’s first paperback edition was published in 1956. Hayek’s son, Laurence, reports that nearly twenty authorized foreign translations have been published. In addition, underground, unauthorized translations circulated in Russian, Polish, Czech, and possibly other languages, when Eastern Europe was behind the Iron Curtain. There is little doubt that Hayek’s writings, and especially this book, were an important intellectual source of the disintegration of faith in communism behind the Iron Curtain, as on our side of it.
Since the fall of the Berlin Wall it has been possible to publish the book openly in the countries and satellites of the former Soviet Union. I know from a variety of sources that there has been an upsurge of interest in Hayek, in general, and The Road to Serfdom in particular in those countries.
Since Hayek’s death in 1992 there has been increasing recognition of the influence that he exerted in both communist and noncommunist regimes. His publishers can confidently look forward to continuing sales of this remarkable book for as long as freedom of the press prevails—which, despite some erosion since he wrote, is nonetheless more secure than it would otherwise be precisely because of this book.