I am always amazed by the faith that people have in government. Scour the newspaper any day of the week and you will read stories detailing the many failures of the federal, state, and local governments or agencies, and of their stupendous ability to commit the same mistakes over and over again. Yet these agencies are the one that people turn to in times of troubles or needs.Astonishing.Take the June 26th edition of the Wall Street Journal. There you’ll find a piece on how the Small Business Aid program has a significant fraud risk, according to the Government Accountability Office. That’s unfortunate for a program riddled with implementation problems that leave many small businesses unable to apply, while many large ones had no problems getting one of the available small-business loans.And then there’s the report about how the IRS paid $1.4 billion in stimulus payments to dead people. That’s correct: dead people. According to the report, “The IRS, which was trying to get the money out quickly, didn’t use death records from the Social Security Administration as a computerized filter in the first three rounds of payments, according to GAO.”One common reaction to these two stories is that Congress was rushing, everyone was panicking, and pundits were clamoring that we must go big or even bigger than big. But if that’s the problem, how to explain the $137 billion in improper payments made in 2018? For the record, this staggering level of improper payments happens every year. And then there’s the fact that we can’t even measure how many improper payments take place in the Department of Defense because that agency fails its audits on a regular basis—hence no one really knows where all the money goes.Yet here we are, always trusting the same government to somehow do better this time around.On that same page in the Journal you can also read how “Battered U.S Wine Importers Brace for Higher Tariffs.” As the Journal reports, “The U.S. Trade Representative’s office, which imposed 25% tariffs on wine, cheeses, olives and other products from the European Union in October, is now considering raising levies to 100%, citing a lack of progress in negotiating a settlement and eliminating subsidies for Airbus SE.” Never mind that the president has finally hinted that he knows full well that Americans—the same Americans who have nothing to do with the Boeing-Airbus dispute—are paying the tariffs.Yet, President Trump, and pretty much everyone in the Democratic Party, happily contributes to this new protectionist wave. Sadly but predictably, barely anyone in the Republican party is pushing back against the president and his protectionism sidekicks, Peter Navarro, Robert Lighthizer, and Wilbur Ross.Scanning further down the page of the Wall Street Journal report you learn that thanks to government-imposed lockdowns, “140,000 Businesses Listed on Yelp are still Closed Because of Covid-19 Pandemic.” Depressingly, you read, “A large minority of that set, 41%, has shut for good, according to Yelp.”It is not surprising: businesses cannot be kept closed for months and then survive having done nothing. Yet many states haven’t reopened fully in order to allow businesses to survive by reorganizing their activities to keep consumers and employees safe.That’s in spite of the academic evidence that lockdowns were a mistake. In fact, upon hearing that the number of cases—which as Don Boudreaux points out is quite different from the number of deaths— is increasing, some states are now announcing that they’ll pause reopening.Yet, the fact that the number of cases will go up as the economy reopens was fully expected since as a share of the population few people have actually been exposed to the virus. If a rising number of cases is reason enough to stop everything – reason enough to again coerce the economy and life into deepfreeze – while we await a vaccine quickly that might, or might not, arrive, what do we think is going to happen?Governors around the country should end the lockdown and give businesses a shot at saving their businesses by reinventing some of the ways they serve their customers. Full reopening is no guarantee at all that consumers will come back quickly, of course.New data confirm what we already knew; namely, that many people did not wait for the governments to lock down the economy to stay home and shelter in place. Such fear-based behavior contributed much to the economic collapse. That means that most consumers will be careful and watch out for their health and that of others without government decrees telling them to do so this time around too. But at least give consumers and businesses a chance to find what works for them once the economy is reopened.
I conclude with a report from the Washington Post. One is about Trump’s refusal to encourage people to wear masks. This, of course, comes on the tail of Dr. Fauci’s admission that he had intentionally misled the public about the usefulness of wearing masks so that they could be directed to health-care professionals.
And here is Fauci explaining how and why he lied: “He also acknowledged that masks were initially not recommended to the general public so that first responders wouldn’t feel the strain of a shortage of PPE. He explained that public health experts “were concerned the public health community, and many people were saying this, were concerned that it was at a time when personal protective equipment, including the N95 masks and the surgical masks, were in very short supply.”
It’s interesting that Americans started wearing self-made masks long before this Fauci admission showing that maybe they were buying it. However, for the most part, Americans continue to trust Fauci. David Henderson, though, does not.
Seriously, reading the newspaper on a daily basis should make everyone question government’s intervention in our lives. But based on the support for both a populist protectionist Republican like Trump and his Democratic opponent for the presidency, Joe Biden, it doesn’t. So what are we to do?
I believe we should continue fighting the battle of ideas because when we are deep into the mess that both parties, and their underlying ideologies, are creating, some people will look for answers and for solutions outside the state. As Milton Friedman once said, “That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”
I take that task seriously.
Finally, I certainly feel obligated to intellectuals of the past who have fought for our freedoms in what were arguably even more depressing times. For that reason, I dedicated my professional life to answering Friedrich Hayek’s call to action that
“We must make the building of a free society once more an intellectual adventure, a deed of courage…. Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost.”
This, I believe, is why we continue fighting
AIER Senior Fellow Veronique de Rugy is also a Senior Research Fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. This article first appeared at aier.org.
May 8 marked Friedrich Hayek’s birthday. Called “the most prodigious classical liberal scholar of the 20th century,” Milton Friedman explained his importance:
“Over the years, I have again and again asked fellow believers in a free society how they managed to escape the contagion of their collectivist intellectual environment. No name has been mentioned more often as the source of enlightenment than Friedrich Hayek’s.”
One cannot compactly summarize Hayek’s contributions of 130 articles and 25 books. However, a good place to start is with his classic “The Road to Serfdom,” from which the Friedman quotation above is taken, and which passed its 75th anniversary last year. And given that many liberties we are allowed currently seem to extend no farther than the doormat outside our homes, its insights into liberty, from one who has argued powerfully for “that condition of men in which coercion of some by others is reduced as much as possible in society,” are particularly worth noting.
We are fighting for freedom to shape our life according to our own ideas.
We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.
Wherever the barriers to the free exercise of human ingenuity were removed, man became rapidly able to satisfy ever widening ranges of desire.
The fundamental principle is that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion.
To the great apostles of political freedom the word had meant freedom from coercion, freedom from the arbitrary power of other men.
The argument for freedom is precisely that we ought to leave room for the unforeseeable free growth.
The very men who are most anxious to plan society [are] the most intolerant of the planning of others.
Under the Rule of Law, the government is prevented from stultifying individual efforts by ad hoc action. Within the known rules of the game the individual is free to pursue his personal ends and desires, certain that the powers of government will not be used deliberately to frustrate his efforts.
Economic freedom … is the prerequisite of any other freedom.
The system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not. It is only because the control of the means of production is divided … that nobody has complete power over us.
Those who are willing to surrender their freedom for security have always demanded…it should also be taken from those not prepared to do so.
The more we try to provide full security by interfering with the market system … the greater becomes the contrast between the security of those to whom it is granted as a privilege and the ever-increasing insecurity of the under-privileged.
The competitive system is the only system designed to minimize … the power exercised by man over man…an essential guaranty of individual freedom.
The “substitution of political for economic power” … means necessarily a substitution of power from which there is no escape for a power which is always limited.
There is no other possibility than either the order governed by the impersonal discipline of the market or that directed by the will of a few individuals.
A community of free men must be our goal.
A policy of freedom for the individual is the only truly progressive policy.
Hayek once observed that “It used to be the boast of free men that, so long as they kept within the bounds of the known law, there was no need to ask anybody’s permission or to obey anybody’s orders. It is doubtful whether any of us can make this claim today.” He was one of very few pillars in the battle against eroding liberty in our affairs. And as we have chosen to move along the wrong road in many ways since, Hayek’s insights into freedom remain central to our ability to defend it from efforts that would eviscerate it.
Download Center For Individualism’s New Perspective On The Road To Serdom a free e-book, here.
Our 10-point manifesto for Individualism, based on Hayek’s writings, is here.
Steve Jobs was a great visionary. But just how far did his vision extend? If you examine the history of the iPhone, it turns out his vision didn’t extend as far as we might think.
In his book Digital Minimalism, computer science professor Cal Newport reveals that the original vision Jobs had for the iPhone was an iPod that could make calls. At the time, iPods were ubiquitous; with the iPhone, you’d no longer need to carry two devices—a phone and an iPod.
In his 2007 keynote introducing the iPhone, Jobs began by saying, “Every once in a while, a revolutionary product comes along that changes everything.” Apple aimed to make the iPhone “way smarter than any mobile device has ever been and stupid easy to use.” Listening to his talk, it’s clear that Jobs had only a partial view of all that would change.
As Newport observes, Jobs thought he had built a better iPod:
Accordingly, when Jobs demonstrated an iPhone onstage during his keynote address, he spent the first eight minutes of the demo walking through its media features, concluding: “It’s the best iPod we’ve ever made!”
Newport points out that Jobs was also “enamored of the simplicity with which you could scroll through phone numbers, and the fact that the dial pad appeared on the screen instead of requiring permanent plastic buttons.”
“The killer app is making calls,” Jobs exclaimed during his keynote.
At about 13 minutes into his presentation, Jobs introduced, to tepid applause, a rear-facing camera. The first iPhone had no video recording capability, and it was not until the iPhone 4 that a front-facing camera was introduced. No one in the audience that day imagined the role smartphones would play in the social media revolution.
Not until he was about 31 minutes into his presentation did Jobs demo text messages. At about 36 minutes he highlighted, to more tepid applause, the phone’s Safari web browser and integration with Google Maps.
In short, neither Jobs nor the audience had the vision to anticipate what would become the dominant uses for the phone.
Isn’t that extraordinary? Jobs was Apple’s greatest cheerleader. He was said to “cast spells” on audiences, and yet there was mere tepid applause for what was truly revolutionary—a powerful minicomputer in a handheld device at a fraction of the cost of a much larger device a mere generation ago.
Fast forward a mere seven years. Bret Swanson noted that “the computing power, data storage capacity, and communications bandwidth of an iPhone in 2014 would have cost at least $3 million back in 1991.”
In short, neither Jobs nor the audience had the vision to anticipate what would become the dominant uses for the phone. The real revolution would unfold. Jobs and the audience could mostly see what was already known and most visible—an iPod that made calls.
Newport confirmed Jobs’s limited vision by speaking with one of the iPhone’s developers:
To confirm that this limited vision was not some quirk of Jobs’s keynote script, I spoke with Andy Grignon, who was one of the original iPhone team members. “This was supposed to be an iPod that made phone calls,” he confirmed. “Our core mission was playing music and making phone calls.” As Grignon then explained to me, Steve Jobs was initially dismissive of the idea that the iPhone would become more of a general-purpose mobile computer running a variety of different third-party applications. “The second we allow some knucklehead programmer to write some code that crashes it,” Jobs once told Grignon, “that will be when they want to call 911.”
We’ve Just Started
In his seminal work The Constitution of Liberty, Nobel laureate F.A. Hayek challenges our assumptions about how civilization develops:
Man did not simply impose upon the world a pattern created by his mind. His mind is itself a system that constantly changes as a result of his endeavor to adapt himself to his surroundings. It would be an error to believe that, to achieve a higher civilization, we have merely to put into effect the ideas now guiding us.
Hayek continued, “If we are to advance, we must leave room for a continuous revision of our present conceptions and ideals which will be necessitated by further experience.”
Jobs probably never read Hayek, but shortly after 21 minutes into the presentation, Jobs wryly smiles and says, “We’ve just started.”
Little did Jobs know.
Did Jobs direct consumers or did consumers direct Apple as their use of text messaging and mobile browsing began to dwarf the use of the iPhone as a better iPod? Hayek explained that human reason cannot stand outside of experience:
The conception of man deliberately building his civilization stems from an erroneous intellectualism that regards human reason as something standing outside nature and possessed of knowledge and reasoning capacity independent of experience.
“The mind can never foresee its own advance” is one of Hayek’s most quoted lines. Hayek adds, “Though we must always strive for the achievement of our present aims, we must also leave room for new experiences and future events to decide which of these aims will be achieved.”
Politicians Know Nothing of the Future
If Steve Jobs couldn’t imagine how the use of his iPhone would morph, he was smart in learning from what users would teach him. And if he were ever tempted to impose his will, the 2008 introduction of Android with an open-source operating system would have disabused him of such folly. Android’s open-source operating system allowed for rapid innovation.
Every day, evidence of how society advances is overlooked by voters and politicians. Many people, voters and politicians alike, imagine the mind can foresee its own advance. Voters rally behind politicians claiming to know just what society needs to advance and promising to lead us step-by-step into their envisioned future. Little do voters understand how little politicians can “foresee.”
The future is largely unforeseeable. For that reason, Hayek explains, liberty is essential to advancing civilization:
Liberty is essential in order to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.
“We rarely know which of us knows best,” so why would we want to vote for politicians who proclaim they do?
It is no shortcoming of Steve Jobs that he could not foresee the advances made possible by the iPhone. Politicians couldn’t even conceive of an iPhone.
Because each of us has a limited view of the future, Hayek instructs us that “the case for individual freedom rests chiefly on the recognition of the inevitable ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depends.”
Dee Hock, the legendary founding CEO of Visa, fostered innovation to grow a global credit card company by decentralizing control around simple rules. Hock led from this belief: “From no more than dreams, determination, and the liberty to try, quite ordinary people consistently do extraordinary things.”
The case for liberty is hidden in plain sight in our phones and a million other things our lives depend on.
Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism.”
Claudio Grass continues his interview with José Niño.
Claudio Grass (CG): We have all seen the striking photos of basic necessities and groceries next to the mountains of cash needed to purchase them and the devastating effects of hyperinflation in the economy are well documented. A rise in physical gold hoarding has also been documented among the citizens. Was gold always part of the culture or did it just recently become a necessity, as the Bolívar collapsed?
José Niño (JN): Venezuela had a gold standard and didn’t get into the central banking game until the late 1930s. In fact, the Bolívar was one of Latin America’s most stable currencies for quite a while, up until the 1980s. Since then, it’s been devalued and it has now become worthless due to the current hyperinflation.
Gold possession has been on the rise for those in the upper middle class and higher, especially for those with international connections. We’ve also seen the emergence of cryptocurrencies like Bitcoin become somewhat popular due to the hyperinflationary crisis and Venezuela possessing a surprisingly high number of tech savvy young professionals.
However, a lot of people go straight to dollars, because of how powerful the dollar remains relative to the Bolívar and the fact that so much of the Venezuelan economy, economic crisis notwithstanding, still depends on U.S. commerce. Venezuela is effectively going through a de facto dollarization in the black market.
CG: Staying on the topic of gold, the gold reserves of the Venezuelan central bank have been dropping steadily, with more massive sales earlier this year despite the sanctions. Meanwhile, we saw the Bank of England block the withdrawal of Venezuela’s gold holdings, as Nicolas Maduro tried to repatriate about $550 million in gold from the bank. Given the multiple pressure points suffocating the nation’s economy, what do you think of its central bank’s capacity to provide any relief?
JN: Monetary policy in Venezuela has been quite loose for the past three decades. The government bought a majority stake in its Central Bank during the 1970s, so it has been effectively politicized. I personally don’t see any changes coming internally. With how much Venezuela has floated into Russia’s and China’s geopolitical orbits, it’s probably going to receive certain “pragmatic” pieces of advice from these actors to reform its economy and at least give it some breathing room in the short-term. In summary, the future looks bleak for Venezuela.
CG: The current troubles of Venezuela and the daily struggle of its people might be distressing to watch and absolutely tragic, but it can be argued that they were largely predictable, as yet another failure of socialism. Is that a fair assessment or might it be that “this wasn’t real socialism”?
JN: Venezuela might not be as hardcore socialist as say Cuba, North Korea, and the Soviet Union, but it does feature many of the planks of the Communist Manifesto. Its controls, expropriations, and central banking policies have been utterly destructive—which are all features of oligarchical collectivist economic systems. Venezuela is definitely the current poster child of interventionist failure.
CG: Given the recent rise in popularity of hard-left policies and economic proposals in Europe and also in the US, from the Green New Deal to Modern Monetary Theory applications, do you think there are lessons to be learned or warnings to be heeded from Venezuela’s case?
JN: I think that the old school garrison state model of socialism largely died with the collapse of the Soviet Union. You have a few holdouts like Cuba, North Korea, and Venezuela. On the other hand, the West is mostly threatened by globalism and the managerial state. These policies include Third World mass migration, the politicization of all facets of civic society, hate speech laws, destruction of freedom of association, Big Tech thought-policing, and mass surveillance.
This kind of social engineering will obviously have central banking and bureaucracy buttressing it. These policies, in tandem with the welfare state, will gradually neuter non-state institutions like the church and the family unit, thus leaving powerful entities like politically-collected corporations and the government in a strong position to lord over our lives. Central banking will definitely be playing a role in fomenting high time preference consumption activities in the midst of all this.
But this whole process is definitively under a boiling frog approach. It’s not like the accelerationist industry expropriations we’ve seen in countries like Cuba or Venezuela. Demographics (aging population and mass migration drawn by welfare magnets) will likely collapse the U.S. and the rest of the West for that matter.
I think this process will definitely be drawn out and it’s best that we recognize the threats we face and confront them right off the bat. Failure to act in time could prove fatal in the long term.
“Venezuela is the current poster child of interventionist failure”
When looking at the quality of the media coverage of Venezuela’s crisis and the interpretations of the factors that caused it, the superficiality of most analyses quickly becomes apparent. The explanations offered by many “experts” and commentators largely ignore the country’s history and fail to take into account the pre-existing political and economic dynamics that heavily contributed to, if not predetermined, Venezuela’s current predicament.
To understand these factors and the long road that led to the present crisis, I turned to José Niño, a Venezuelan-American writer, political operative and policy analyst, whose extensive research and deep understanding of the country’s history have armed him with the right tools to separate fact from fiction and political wishful thinking from hard economic realities.
Interview with José Niño:
Claudio Grass (CG):Mainstream international coverage of the crisis in Venezuela earnestly started only about 3-4 years ago. Most analyses blamed declining oil prices and provided very little context as to the status quo before the escalation of the crisis, to the point that the average news consumer couldn’t be blamed for thinking it was all a flash-crash mainly caused by external factors that couldn’t be helped. Do you believe this narrative is accurate?
José Niño (JN): I don’t believe it at all. Contrary to many conventional narratives, Venezuela’s problems go back decades, even before Hugo Chávez and Nicolás Maduro came into the picture. The problem is that people have very short-sighted analyses and interpretations of political events.
Based on my research over the years, I can say that Venezuela’s institutional and cultural decline began in the 1970s with the nationalization of its oil industry and the state’s rapid encroachment into the economy. The last 50 years of Venezuelan economic history have been filled with sub-optimal economic interventions.
However, the recent abuses under Chávez and Maduro were much more profound and accelerationist in nature, hence the country’s recent implosion. Nevertheless, we can’t ignore previous decades of abuses. We have to remember that Venezuela was classified as an economic growth disaster by Charles Jones in his “Introduction to Economic Growth”. It was one of the few countries that actually got poorer from the late 1950s until the late 1990s. In fact, the average per capita GDP in Venezuela was higher in 1958 than in 1998.
Source: IMF, CSIS
CG:Many people, lacking the historical understanding of Venezuela’s story, might find it surprising, but there was a time when the country was a formidable economic leader and it wasn’t that long ago. After the end for WWII until the 70s, the levels of prosperity, productivity, growth and overall wealth accumulation were enviable, without the support of skyrocketing oil prices. What drove this economic boom and what does this period say about the conventional understanding of the “resource curse”?
JN: Pre-oil nationalization, Venezuela was quite market-oriented. Taxes were relatively low, spending was in check, and there was a very small managerial state. Obviously, there were no wholesale expropriations of industries as well. Interestingly enough, Venezuela was late to the central banking party. It launched its Central Bank in 1939. These factors also attracted skilled European labor from countries such as Italy, Portugal, and Spain from the 1930s until the 1960s.
From the 1910s until 1970, Venezuela went through a profound economic transformation that nearly put it in First World status. Funny enough, oil prices were not very high during these periods, especially the 1950s, where Venezuela enjoyed tremendous growth.
Once government intervention came into the picture, the country slowly started to go off the rails. When we look back, Venezuela’s decline has more of a “government curse” than a “resource course”. A good deal of oil-rich states have not suffered the same fate as Venezuela and that is no coincidence. Policy matters and collapses are the outcomes of deliberate policies.
CG:What role did the Hugo Chávez years play in setting the stage for today’s economic deterioration? Did his reforms make it inevitable or do you think it could have been avoided?
JN: Chávez represented the accelerationist phase of the Venezuelan collapse story.
Ironically, he campaigned on a relatively centrist, anti-crony capitalism platform in 1998. He denounced the excesses of the post-1958 social democratic order and even described Cuban leader Fidel Castro as a dictator.
However, once in power, things started to change. The failed 2002 coup attempt against his government really radicalized him, especially when rumors emerged that the CIA assisted in this coup. He had the perfect boogieman to mobilize his radical force and so began the next radical phase of the Venezuelan economy.
The nature of the Venezuelan state was fundamentally altered in the 1970s, as the government nationalized the oil industry and turned the country into a petro state. Since then, government intervention in all facets—central banking, controls, subsidies, wage policies, etc.—grew unchecked. The 90s saw half-hearted attempts to make certain reforms from the IMF—marginal spending cuts, new VAT tax, and tariff reductions— but they did not go far enough in terms of oil privatization, spending cuts, or at the least the creation of a sovereign wealth fund. Institutional inertia and a culture that was dependent on the petro state made any type of market reform impossible.
In fact, the president conducting the IMF reforms, Carlos Andrés Pérez, was impeached for corruption by his own party as he was trying to liberalize the economy. The radicals within Pérez’s party where that scared of those lukewarm market reforms.
Also, it did not help that inflation was never tamed during the late 1980s and 1990s. Fun fact, the last time inflation was in the single digits in Venezuela was in 1983. All in all, Chávez continued the previous economic errors, but also introduced authoritarian governance into the equation.
CG:Let’s turn to the state of civil liberties in the country for a moment. Numerous reports clearly show the spike in authoritarian measures, confiscations, violations of property, civil and human rights and the government’s brutal suppression of dissent. Do you believe that this deterioration happened quickly, as the Maduro government suddenly recognized the urgent threats to its authority? Or was it more of a frog-in-boiling-water process, where the gradual limitations to civil liberties and property rights began long before the current crisis?
JN: The Chávez-Maduro era was the most repressive phase of Venezuela’s economic collapse, given the authoritarian nature of the Chavista coalition. There’s a really huge authoritarian streak among Chavistas and they do have a visceral hatred for the upper-middle and upper classes. Chávez took a more boiling frog approach, but the Maduro regime has been more dramatic in certain respects given challenges to his authority and increased international pressure.
Venezuela also has a lot of internal problems with crime and overall lawlessness. So, the government will respond authoritatively at times to demonstrate that it’s still boss.
That being said, the Venezuelan regime is probably one of the least repressive socialist regimes when comparing them to their 20th-century predecessors. I think social media and phone access have kept the government in check and limited their ability to commit repressive acts.
In the upcoming second part of this interview, we turn to the topic of hyperinflation and we also discuss the lessons that Venezuela’s story offers for the increasingly polarized Western democracies going forward.
Defining the problem as the very survival of the Western Civilization that has sustained us for hundreds of years, F.A. Hayek tells us that our prospects are dire.
Writing in the 1970’s and looking back on two savagely destructive World Wars that human beings fought with each other, he wondered how human beings had ever found a way to live together in peace.
He found the answer in “rules of conduct” by which we could live together to our mutual advantage “without having to agree on common concrete aims”. This is the capitalist system – “the greatest discovery mankind ever made”. (Law, Legislation and Liberty, Volume 2, Chapter 11.)
The opposite system is totalitarianism – where common concrete aims are forced on citizens from above by a coercive regime.
Crucially, he identified “social justice” as the trojan horse via which totalitarianism enters the system of Western Civilization to destroy it from within. The social justice warriors, as we call them today, actively make the destructive choices about which Hayek warned:
Social Justice versus Reality.
There is no such thing as social justice. It misunderstands the definition of justice, which concerns how individuals behave towards one another in free economic exchange. Justice is breached by individual violence towards another individual, or by failing to keep the promise made in a contract, or by violating another’s private property. Social justice can never be about one group within society, because of a feeling of envy, demanding that another group compensate them for an outcome they don’t like. Social justice, says Hayek, is merely an unjustified claim by one social group on another. It is destructive and divisive.
Social Justice versus Truth.
The left prioritizes social justice over free speech, respect for facts and the marketplace of ideas. Cries of “racism”, name calling, unverified accusations, “politically correct” speech codes, safe spaces, bans on “microaggressions”, and censorship are all evidence of this rejection of truth. Uncorroborated accusations of personal misconduct are merely a political weapon for the social justice warrior crowds.
Social Justice versus Individual Identity.
The left sees people not as individuals, with all the ideas, effort and industry that individuals can collaboratively bring to bear, but as members of groups defined by race, class, income, gender and sexual orientation. The contribution of individuals is de-emphasized (or denied, as in “You didn’t build that”). The left insists that unequal outcomes must be evidence of inherent bias that requires state remediation. Someone must be to blame, and someone must be punished.
Social Justice versus Economic Growth For All.
Social justice warriors prefer redistribution of private property to a growing economy that can lift all boats. In their envious emotional state, they’d rather see others lose than everyone gain. They oppose policies that would unleash the individual effort that will generate greater economic growth. They are against the entrepreneurship, innovation and dynamism that produces the truly just society that only individual economic creativity can bring about.
Social Justice versus Individual Morality.
The modern left is increasingly secular and hostile to concepts of individual morality, whether based on faith or reason. Morality, to Hayek, is a set of unspoken (he called them “abstract”) rules of conduct which have emerged over ages of individual interactions through which humans came to identify and understand the behaviors that enable us to live together in peace, to our mutual advantage, without having to agree on common concrete aims. This emergent system of morality builds social consensus over the very long term. Justice warriors aim to end it violently in the short term.
Social Victimhood versus Personal Responsibility and Self-Reliance.
In their envious refusal to accept the outcomes of the system of individual economics, the warriors insist that someone must be to blame, and that someone (them) must be victims of the guilty parties’ criminal behavior. As victims, they feel that they can justify violent and predatory behavior. They ignore – in fact oppose – the notions of hard work, persistence, and present sacrifice for future return that characterize entrepreneurial capitalism. They promote immediate gratification over deferred gratification, in total contradiction of the first principles of morality, responsibility and self-reliance.
Hayek’s Vision.
Hayek hoped we would reject calls for tribal loyalty – what the politicians and talking heads on TV News broadcasts have attempted to frame as “unity” – and, instead, pursue our individual ends, defined by our unique needs and life circumstances. He conceived of a system that relies on general rules of conduct, rather than special rules serving the needs of special groups. That system was based on personal morality. But many fail to comprehend how such a system works for everyone.
At Center For Individualism, we strive to promote comprehension through education, by producing works like this: summaries of the thinking of our greatest philosophers of everyday life, and of American values, and how to preserve both. We call it “classic content made simple”, and hope you will find it illuminating, and that it will arm you for the kind of informed discussion that can change minds.
We are reverting to tribal conceptions. Socialism and nationalism represent a reassertion of tribal ethics, the desire for a visible common purpose. This is our inheritance from our tribal past and, every time we think we have defeated it (such as in our defeats of Hitler and Mussolini in Europe in the middle of the twentieth century), it continues to break back through.
Society Is Not An Organization.
Hayek blames what he calls organizational thinking. By this he means that a growing proportion of us work for large organizations, like business and government. These great administrative bureaucracies lead us to believe that their internal structures and processes are the way to accomplish all goals. When we accept employment in an organization, we agree to be bound by the ends of that organization; we become merely a means to that end. We submit to their authority and we suppress our personal goals and instincts. The adoption of effective large scale processes, methods and technologies by these organizations lead us to think that there is nothing they can’t achieve. The administrative bureaucracy keeps on adding more and more rules aimed at achieving the organization’s purpose, and the individual employee can lose sight of the fact that society does not operate in this manner.
Society can never be such an organization. Society operates by a process of trial and error in a network of collaborative units (families and households) joined together in a market. The trial and error process generates experience over decades and ages – more accumulated experience than any living person or organization could be aware of – and from this experience there emerges tried and tested principles for the collaborative life in a society. There is no foreseen purpose in mind. We are not united in a single, shared goal.
Common Law Versus Manufactured Law.
Now, the shared experience that was generated by trial and error and captured as common law is being replaced by public law – the manufactured rules of organization. Individuals become increasingly subject to the commands of authority, with growing technological methods of control. We are told that it is morally superior for us as members of society to serve a single hierarchy of ends. We must be united! The concept of social justice has been the trojan horse through which totalitarianism has entered.
The Threat To The Greatest Discovery Mankind Ever Made.
That people can live together in peace and to their mutual advantage without having to agree on common goals (in fact, because they do not share common goals and therefore pursue their own interests through trial and error), was the greatest discovery mankind ever made. Capitalism is its economic expression.
But the attempt to secure for each person what he or she is thought to “deserve” (i.e. social justice) by imposing upon all a system of common ends towards which their efforts are directed by authority deprives us of the utilization of individual knowledge, and thereby of the advantages of a free civilization. Socialism is based on an intellectual error, with crushing consequences.
To preserve our civilization, it is impossible to enforce the rules of social justice. No particular groups who hold their own common views about what they are entitled to should be allowed to enforce those views on other groups, and prevent those others from operating in a free and open market. This is simply a struggle for power between organized interests in which arguments of justice serve merely as pretexts. Attempts to “correct” the results of the market in the direction of “social justice” produce more injustice in the form of new privileges, new obstacles to mobility and new barriers to the alleviation of poverty.
Any Group That Is Dissatisfied Can Claim A “Social Problem”.
The warriors tend to label as a “social problem” anything which causes dissatisfaction in any group, and suggest that the legislature must “do something”. Social justice is a mere pretext for claims of privilege by special interests. It’s a slogan for all groups whose status tends to decline – farmers, steelworkers, the “middle class”, and so on.
Misfortune for some cannot create a claim for protection against risks which society has to run (i.e. trial and error) to attain the general elevation of living standards and quality of life. The protection of expectations can not possibly be granted to all in anything but a stagnant society. The only just principle is to grant it to none.
Attempts To “Correct” The Market Order Lead To Its Destruction.
Government intervention to “correct” the results of the market result in constant clashes between the demands of some groups seeking protection or special privilege, and the requirements of free collaboration between individuals. The deliberate aim at a concrete common purpose – such as “equality” – will destroy the larger order of the market in which everyone is treated equally but outcomes for special interest groups are not guaranteed. The only rules for society must be universally applicable rules.
Political parties accelerate the destruction of civilization. So long as particular – rather than universal – purposes are the foundation of these political organizations, then the result is the creation of enemies. Society becomes dominated by the friend-enemy relation.
The market does not serve visible needs. Market participants succeed by satisfying the wants of people whom they do not know, through the processes of indirect exchange. Monetary returns to their effort are the indicator of the satisfaction of others. It is better, for example, to work hard at innovation that reduces costs and makes it possible for greater productivity, than it is to redistribute income to the poor. Capitalism caters to the needs of millions of unknown people, rather than provide for the few known neighbors that we know. It is our prime moral duty to pursue a self-chosen end as effectively as possible, without paying attention to the role it plays in the complex network of human activities. We generally do the most good by pursuing our own gain. The invisible hand of the market brings the succor of modern conveniences to the poorest homes that the entrepreneur does not even know.
Tribal Loyalties And The Call For Unity Must Be Resisted.
Tribal loyalty is the greatest obstacle to the application of these universal principles for the good of all. When general rules of conduct rank ahead of special rules serving the needs of special groups, society as whole can progress. The system is impersonal and comprehensive. But many of us are not mature enough to comprehend it. Comprehension requires a degree of insight into the working of a spontaneous order which few persons have yet attained.
We are always told that to live in harmony, people must strive for a common end. We must be “united”. This is the device that has been effectively employed by all dictators. To preserve civilization, we must resist the call to unity and pursue our individual ends.
Hayek finds that the errors of the social justice warriors are in their thinking, which is highly influenced by their misuse of language and their misunderstanding of terms. He devoted a lot of his energies to trying to find and introduce better and clearer terms with fully-agreed meanings, but it was a vain pursuit.
Earlier in The Mirage Of Social Justice, he pointed out that there is no such thing as “society”. It does not have shared aims, it does not have needs or opinions, and does not make decisions or wield authority. It doesn’t exist. It is a collectivist mirage.
Similarly, Social Justice Warriors make a mistake when they refer to “the economy”. There is no such thing as the economy of a country or a society. The word “economy” can be applied to a system like a household or a farm or a factory, allocating means among competing ends according to their relative importance. Such an economy can be directed according to a plan based on economic decisions to serve a single set of ends that all participants agree on.
But a society is not an economy. A country is not an economy. What social justice warriors are trying to direct is what Hayek calls the market order, or what we might call the free market system. It is not a system that can be managed according to a single plan or governed by a single scale or a hierarchy of ends. In fact, it’s a network of many interlaced systems, serving the many different ends of all its individual and separate members. It can’t be governed by a single end, such as “equality”. It can not be a complex of deliberately controlled actions serving a single scale of ends.
Hayek Tries To Get Us To Use New Terminology, Since The Old Is Broken.
Hayek attempts to create a name other than economy, and came up with catallaxy. It stems from Greek meaning exchange but also “to admit to the community” and “to change from an enemy to a friend”. That’s exactly what a free market exchange does – welcomes everyone who wants to trade and makes them voluntary collaborators. Social Justice Warriors do the opposite: they change friends into enemies by seeing everything through the lens of envy.
Good luck with getting the word catallaxy to catch on, however.
Catallaxy is the special kind of spontaneous order produced by the market through people acting within the rules of the law of property tort and contract. A free society is a pluralistic society without a common hierarchy of particular ends. That it lacks agreed ends is a merit not a fault – people can live together in peace and mutually benefit each other without agreeing on particular individual aims. Each individual gains from the skill and knowledge of others whom he need not know and whose ends could be wholly different. When two individuals transact, there is no need to agree on the purposes of the transaction, so long as an individual need is satisfied. One might be contributing to the achievements of ends he would disapprove of if he was aware of them. If I buy a tie-died T-shirt from a hippie, I am happy to have the shirt; if the seller spends the dollars from the transaction on marijuana, even though I may disapprove, I am indirectly supporting the behavior. The catallaxy reconciles different knowledge and different purposes.
Unity Is Not A Goal To Strive For.
The market order has nothing to do with “solidarity” or “unity” and is, in fact, irreconcilable with these concepts in the sense of the pursuit of common goals. The two greatest threats to the market order are nationalism and socialism, collectivist arrangements which enforce a common goal or set of goals on all participants.
The relations that hold us together are not relations of solidarity or unity or sentiment, they are purely economic relations. Many people have an emotional negative reaction to this – it sounds cold, impersonal, lacking empathy.
Hayek’s Game Analogy.
Hayek suggests it may help people’s understanding to think of these economic relations as a game we all come together to play. A wealth-creating game. One that leads to an increase in the stream of goods and services and the prospects for all participants to satisfy their needs. “A contest played according to rules and decided by superior skill, strength or good fortune”. (OED)
This analogy probably does not work as well as Hayek had hoped, but let’s play it out.
Like any game, a mixture of work rate, skill and chance will determine the outcome. Wealth is created based on marketplace feedback. The individual plays the game by making an effort to serve others – applies for a job, or opens a store, or manufactures a product – and gets a response in return, either positive or negative: gets the job or makes a profit. A positive signal is the incentive to continue providing the service, or to do more. A negative signal is the necessary information to change course and try something different, or to change pricing, or both.
The rules provide information for all, but can’t determine what use any individual makes of the information, and so do not eliminate uncertainty. The results of any individual’s use of the information from the market also depend on what others do.
Rules determine that everyone has a chance in the game, and luck plays a role. There is no need to try to morally justify specific distributions of income or wealth, or specific outcomes. By analogy, there is no moral implication when Houston beats Boston, or vice-versa (whatever the game they are playing). The rules of the game do not treat people differently and everyone is respected equally. The market signals to everybody when there is an opportunity.
Everyone acts on their own knowledge and for their own purposes to discover if they can be rewarded within this game. They are guided by their own moral beliefs. The aggregate effects can not be judged on some ideal of distributive justice, but as the result of a process which improves the chances of all. There is no guarantee that the goods and services which an individual has to offer will have a particular value, only that he will be allowed to obtain for them what price he can. Trial and error involves constant disappointment to some expectations. Negative feedback is the response to differences between expected and actual results so that these differences will, in time, be reduced.
We Have A right To Our Property, But Not To Its Value.
Nor can individual expectations be based on past positions. If circumstances change and customers or employers find new partners, an individual may lose their job or their profit or their position. Do they have a right to retain their old position? No. Because the change is a result of the same process that rewarded them earlier. The market adapts and changes without regard to the past. Society may benefit as a whole, even though some individuals and groups feel a loss. There are no special privileges for groups threatened with the loss of positions they achieved in the past. Market values are not protected – we each have a right to our property but not to its value.
Winners And Losers.
Rules determine chances, but they don’t determine results. Even in a game with equal chances for all players, there will be some winners and some losers. Undeserved disappointments are unavoidable. They are bound to cause grievances. They may cause a feeling of having been treated unjustly, but no-one has acted unjustly. Those affected will make claims for remedial measures but it is essential that government should not possess the power to accede to such demands. Even if members of a large group share the sense of grievance – and it comes to be called a “social problem” – this is no less true. There is always the opportunity to play the game again.
Hayek has spent 3 chapters of The Mirage Of Social Justice explaining that true justice resides in rules of just conduct which govern individual behavior and the way we interact with other individuals. The rules are negative – they tell us what we must not do. They leave us freedom to be creative and entrepreneurial so long as we abide by the rules of just conduct. None of us can guarantee the results we will achieve as a consequence of exercising our individual freedoms. We simply try our best.
Yet, out of nowhere, the children of the welfare state have developed the feeling that “society” owes them particular things, and that “society” must act to provide them with those things, whether it’s a free education or free healthcare or a job. Hayek insists that the claim that these rights are due to them has nothing to do with justice, and that there is no way such a claim can be satisfied in a free society.
Misunderstanding Of The Term “Rights”.
Firstly, there is a complete misunderstanding about the term “right”. Claims of rights make sense only when they can be directed to an individual or an organization that can act within the rules of just conduct to deliver them. In contract law, a contract declares one party to have rights and one party to have a duty to make good on those rights. This is not an abstract but a specific concept. No-one has the right to a particular state of affairs unless someone else has the duty to secure it. We have no right that our houses don’t burn down, or that our products and services can find a buyer, or that any particular goods and services be provided to us. It is meaningless to speak of a right in the sense of a claim on society.
What about the so-called Bill Of Rights? These articles do not constitute a claim on government. They are a demand that, so far as the power of government extends, it ought to be used justly, i.e. applied the same to everyone. The Articles in the Bill Of Rights could easily be replaced by a single formula requiring government to use no coercion, and to follow rules that apply to everyone equally. The organization for coercion that we call government can not and should not be used to determine the particular material possessions of individuals or groups.
Social And Economic Rights Will Destroy The Old Civil Rights.
Social justice warriors have built on the negative civil right to be free from government coercion a new set of positive “social and economic” human rights, for which an equal or higher dignity is claimed. These are claims to particular benefits to which every human being is presumed to be entitled without any understanding of who is under the obligation to provide them, or how they might be provided. It’s meaningless to describe them as claims on “society” because “society can not act or value or treat anyone in a particular way. The only way this could be accomplished is to replace a free society with a totalitarian organization that can tell everyone in it what to do. The old civil rights and the new social and economic rights are in direct and complete incompatibility with each other. The new social rights can only be achieved by destroying the old civil rights.
A Lot Of It Started With FDR.
One major impetus for all this crazy thinking was the proclamation by the uber-socialist Franklin Delano Roosevelt of the “four freedoms”, which included “freedom from want”, and “freedom from fear”, together with the old “freedom of worship” and “freedom of speech”. No individual, no government, no organization can be given the duty of delivering freedom from want or freedom from fear. One is economically open ended and the other is emotionally open ended. Like social justice, these terms can not be defined, and can not be turned into action, and so they are empty and meaningless rhetoric. Roosevelt set an awful precedent, and worse was to come.
And Then The United Nations Took Crazy Thinking To A New Level.
The Universal Declaration Of Human Rights adopted by the General Assembly of The United Nations in 1948 adds seven further guarantees intended to express the new “social and economic” rights.
Everyone, “as a member of society”, is assured the satisfaction of positive claims to particular benefits, without anyone having the duty or burden of providing them, and without an attempt to define the legal meaning of the words in the Declaration.
What, for example, can be the legal meaning that “everyone is entitled to the realization….of the economic, social and cultural rights indispensable to his dignity and free development of his personality” (Article 22)?
Against whom is “everyone” to have a claim to “just and favorable conditions of work” (Article 23-1)? And to “just and favorable employment” (Article 23-3)?
What are the consequences of the requirement that everyone have the right “freely to participate in the cultural life of the community and to share in the scientific advances and its benefits” (Article 27)?
“Everyone” is even said to be “entitled to a social and international order in which the rights and freedoms set forth in this Declaration are fully realized” (Article 28) – implying that not only is this possible but that there exists now a known method by which these claims can be satisfied for all.
It is clear that all these “rights” assume a “society” that is an organization, run by the UN, in which “everyone” is “employed”. Sounds like a world government. Hayek calls it “totalitarian in the fullest sense of the word”. The UN and their sympathizers have become “total strangers to the basic ideals of a free society”. Hayek terms this “tragic”.
If we wish everyone to be well off, we shall get closest to our goal, not by commanding by law that this should be achieved, or by giving everybody a legal claim to what we think they ought to have, but by providing inducements for all to do as much as they can that will benefit others. What the UN declares as rights are simply aspirations that only a voluntary system can fulfill.
“Social” justice will not permit individual freedom. Social justice warriors observe that the results of the spontaneous order of the market are not distributed equally. “Someone” must be to blame. Therefore, they must be punished. Their property must be involuntarily transferred to others.
To Hayek, this is primitive thinking by immature minds. Why? Because they can not comprehend the impersonal process of the market – one which brings about a greater satisfaction of human desires than any deliberate human organization could achieve. Instead, they “anthropomorphize” or “personalize” the market – they think of it as the deliberate acts of some individuals who are “in charge”, and must be brought to heel.
Social Justice Will Lead Straight To Socialism.
This conception of “social justice” says Hayek, leads straight to full-fledged socialism. It requires a social organization to assign particular shares of the product of the economic system to particular individuals or groups. It assumes the moral duty to create a power that can achieve an approved pattern of distribution.
Social justice is the most widely used and most effective argument in politics. Every claim for government action on behalf of particular groups is advanced in its name. Opposition is weakened when social justice is invoked. This is so much the case that socialists have abandoned the government ownership of the means of production as their preferred redistribution vehicle, and substituted heavy taxation based on the promise of social justice.
This represents a complete revolution in social order: from a society based on principles of just individual conduct to a society based on government satisfying the demand for social justice, and placing the duty on authorities with the power to command people what to do. Worse, government authority is supplemented and reinforced by other social groups such as the church. Social justice has become a quasi-religious superstition. But, like the superstitious belief in witches and ghosts in earlier historical times, near universal acceptance does not prove validity.
Social Justice Overturns American Values.
Society will become fundamentally different if we succumb to the superstitions of the social justice warriors. We will be forced to abandon individual responsibility, self-reliance, and traditional moral values, and replace these principles with dependence, collectivism and the high time preference of instant gratification.
We will not be able to preserve the benefits of free markets if we impose the requirements of social justice. There will be self-accelerating decline. A dependent group insists on more government action to achieve distributive justice; the government discovers that to achieve the desired outcome, groups must be subject to more and more government control, and the system progressively approaches totalitarianism.
Social Justice Requires Central Control.
If we maintain a system in which everyone is free to choose their occupation, there can be no control over whether or not the results will correspond to the wishes of the social justice warriors. Social justice can only be realized in a centrally controlled system that limits free choices and free action of individuals. Justice can only refer to the way free competition is carried on, not to its results. And we could never decide on the remuneration “deserved” by different activities. When we ask what ought to be the relative remunerations of a nurse or a butcher or a coal miner or a judge, or a deep sea diver or a cleaner of sewers, or the creator of a new industry or computer programmer or a jockey or the jet pilot or the professor, the appeal to social justice does not give us the slightest help in deciding. It must be left to the market.
The word “social” implies that “society” ought to hold itself responsible for the particular material position of all its members and for assuring that each receives what is “due” to them. This implies that “society” has a conscious mind that can be guided by these principles. Ultimately, social justice implies some kind of equality in earnings, and the use of government power to move in the direction of material equality. This is fatal because, to achieve equal outcomes, government can not treat everyone equally. It must tell people what to do, and must take on the arbitrary power to do so. A claim for equality of material position can be granted only by a government with totalitarian powers.
Anyone who is assured remuneration according to some principle that is accepted as constituting “social justice” can not be allowed to decide what he or she is to do. They can’t be allowed to find another occupation or profession; they must stick to the occupation they are assigned for the remuneration assured to them. This is not a system of individual freedom. The rules of social justice are those of the conduct of superiors to their subordinates. The citizens must be subordinate to authority.
We Have No Moral Entitlement To Stable Results From The Market.
Another belief of the social justice warriors is the supposed “social injustice” of losing an economic position that they have been accustomed to. Coal mines and steel mills close, employers downsize or go out of business or move production to another place. There is a “strong and almost universal belief that it is unjust to disappoint legitimate expectations of wealth.” We all prefer that no very great changes will be made to our condition. These changes may look like undeserved strokes of misfortune but they are an indispensable part of the steering mechanism of the market. Negative feedback is the most important data keeping the market dynamic. Constant adaptation to changing circumstances is critical in directing effort to the highest and best use. We have no moral entitlement to stable results from the market. If we were to protect individuals from these market changes, then there would be stasis, and no-one could ever be upwardly mobile or successful.
In the end, the gospel of “social justice” preaches the sordid sentiment of dislike of people who are better off than oneself, or simply envy, the “most anti-social of all passions”. It has nothing to do with justice.
STAY IN THE KNOW
Fill out the form below to get the CFI Newsletter delivered to your inbox.
Leave us your contact information below to recieve a free copy of CFI's 10-Point Manifesto for Individualism
Join the CFI Mailing List using the form below to recieve a free Sample Chapter of Hunter Hastings' The Interconnected Individualism
Leave us your contact information below to recieve a free copy of Reliving We The Living
Source: IMF, CSIS
