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F. A. Hayek (1899-1992), recipient of the Medal of Freedom in 1991 and co-winner of the Nobel Memorial Prize in Economics in 1974, was a pioneer in monetary theory and a leading proponent of classical liberalism  in the twentieth century. He taught at the University of London, the University of Chicago, and the University of Freiburg.

F. A. Hayek (1899-1992), recipient of the Medal of Freedom in 1991 and co-winner of the Nobel Memorial Prize in Economics in 1974, was a pioneer in monetary theory and a leading proponent of classical liberalism  in the twentieth century. He taught at the University of London, the University of Chicago, and the University of Freiburg.

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The Road to Serfdom

Text and Documents-The Definitive EditionBy F. A. Hayek

University of Chicago Press

Copyright © 2007 The University of Chicago
All right reserved.
ISBN: 978-0-226-32054-0

Chapter One

The Road to Serfdom is F. A. Hayek's most well-known book, but its origins were decidedly inauspicious. It began as a memo to the director of the London School of Economics, Sir William Beveridge, written by Hayek in the early 1930s and disputing the then-popular claim that fascism represented the dying gasp of a failed capitalist system. The memo grew into a magazine article, and parts of it were supposed to be incorporated into a much larger book, but during World War II he decided to bring it out separately. Though Hayek had no problem getting Routledge to publish the book in England, three American publishing houses rejected the manuscript before the University of Chicago Press finally accepted it.

The book was written for a British audience, so the director of the Press, Joseph Brandt, did not expect it to be a big seller in the States. Brandt hoped to get the well-known New York Herald Tribune journalist and author Walter Lippmann to write the foreword, noting in an internal memo that if he did, it might sell between two and three thousand copies. Otherwise, he estimated, it might sell nine hundred. Unfortunately, Lippmann was busy with his own work and so turned him down, as did the 1940 Republican presidential candidate Wendell Wilkie, whose 1943 book One World had been a best-seller. John Chamberlain, the book review editor for the New York Times, was ultimately recruited for the job.

One hopes for his sake that Brandt was not the sort who bet money on his hunches. Since its first publication in 1944, the University of Chicago Press estimates that more than 350,000 copies of The Road to Serfdom have been sold. Routledge added many thousands more, but we do not know how many exactly: that press was unable to come up with any reliable numbers. There is also no good count on the number of copies that appeared in translation, not least because a portion were samizdat copies produced and distributed behind the Iron Curtain during the cold war.

Not everyone, of course, liked (or likes) the book. The intelligentsia, particularly in the United States, greeted its publication with condescension and, occasionally, vitriol. Then a diplomat in the British Embassy in Washington, Isaiah Berlin wrote to a friend in April 1945 that he was "still reading the awful Dr. Hayek." The economist Gardiner Means did not have Berlin's fortitude; after reading 50 pages he reported to William Benton of the Encyclopaedia Britannica that he "couldn't stomach any more." The philosopher Rudolf Carnap, writing to Hayek's friend Karl Popper, apparently could not muster even the stamina of Means: "I was somewhat surprised to see your acknowledgement of von Hayek. I have not read his book myself; it is much read and discussed in this country, but praised mostly by the protagonists of free enterprise and unrestricted capitalism, while all leftists regard him as a reactionary."

Those who, like Carnap, have not read Hayek but think that they already know what he is all about should be prepared for some surprises. Those on the left might preview their reading with a peek at chapter 3, where Hayek expounds on some of the government intervention that he was prepared to accept, at least in 1944. Those on the right might want to have a look at his distinction between a liberal and a conservative in his 1956 foreword to the American paperback edition. Both will be surprised by what they find.

In this introduction I trace the origins of Hayek's little book, summoning up the context in which it was produced and showing how it gradually came to its final form. The reactions, both positive and negative, that ultimately turned it into a cultural icon will then be documented. Because it is a controversial work, I will comment upon some of the most persistent criticisms that have been levied against it. Not all of these, I argue, are warranted: Hayek's book may have been widely, but it was not always carefully, read. In my conclusion I will reflect briefly on its lasting messages.

Prelude: The British, Naziism, and Socialism

Friedrich A. Hayek, a young economist from Vienna, came to the London School of Economics (LSE) in early 1931 to deliver four lectures on monetary theory, later published as the book Prices and Production. The topic was timely-Britain's economy, stagnant through the 1920s, had only gotten worse with the onset of the depression-and the presentation was erudite, if at times hard to follow, owing to Hayek's accent. On the basis of the lectures Hayek was offered a visiting professorship that began in the Michaelmas (fall) 1931 term, and a year later he was appointed to the Tooke Chair of Economic Science and Statistics. He would remain at the LSE until after the war.

The summer before Hayek arrived to teach was a traumatic one in Britain and across Europe. In addition to the deepening economic depression, financial crises on the continent led to a gold drain in Britain, and ultimately to the collapse of the Labour government, the abandoning of the gold standard, and, in autumn, the imposition of protectionist tariffs. Hayek's entrance onto the London stage was itself accompanied by no little controversy. In August 1931 he caused a stir with the publication of the first half of a review of John Maynard Keynes's new book, A Treatise on Money, which drew a heated reply from Keynes a few months later. His battle with Keynes and, later, with Keynes's compatriot Piero Sraffa, would occupy no small amount of Hayek's attention during the 1931-32 academic year.

By the following year, however, Hayek had secured his chair, and for his inaugural lecture, delivered on March 1, 1933, he turned to a new subject. He began with the following question: Why were economists, whose advice was often so useful, increasingly regarded by the general public as out of step with the times during the perilous years that had followed the last war? To answer it Hayek drew upon intellectual history. He claimed that public opinion was unduly influenced by an earlier generation of economists who, by criticizing a theoretical approach to the social sciences, had undermined the credibility of economic reasoning in general. Once that had been accomplished, people felt free to propose all manner of utopian solutions to the problem of the depression, solutions that any serious study of economics would show were infeasible. Toward the end of his talk Hayek cited the new enthusiasm for socialist planning in Britain as an example of such misguided ideas. The economists who had paved the way for these errors were members of the German Historical School, advisors to Bismarck in the last decades of the nineteenth century.

Hayek's choice of the German Historical School economists was significant on a number of levels. First, the German Historical School had before the war been the chief rival of the Austrian School of Economics, of which Hayek was a member. Next, though the German Historical School economists were conservative imperialists, cheerleaders for a strong German Reich and opponents of German social democracy, they also were the architects of numerous social welfare reforms. Bismarck embraced these reforms while at the same time repressing the socialists; indeed, the reforms were designed at least in part to undermine the socialist position and thereby strengthen the Empire. Hayek probably hoped that his audience would see certain parallels to the present day. Only a month before Adolf Hitler, who detested democracy and favored instead the reconstitution of another (third) Reich, had become Chancellor of the Weimar Republic. Within days he had convinced President Hindenburg to sign a decree prohibiting meetings and publications that could endanger public security, a measure aimed squarely at the communists and socialists. The morning before Hayek's address the world had learned that the Reichstag building had been set on fire and burned; the Nazis were quick to blame the act on the communists and used it to justify further acts of repression. A half century before, Bismarck had used an attempt on the Emperor's life to put his own antisocialist laws in place.

After Hayek's speech the situation in Germany continued to deteriorate. In March there were wholesale arrests of communists and harassment of the social democratic leadership. Opposition newspapers were closed, constitutional protections swept away, and a notorious "enabling law" passed that gave Hitler virtually dictatorial powers. On April 1 a nationwide boycott against German Jews was called, and later in the month action against the trade unions began. In May students on university campuses across Germany held book-burning celebrations, cleansing their libraries of suspect volumes. One such event was staged in the Berlin Opernplatz on May 10, 1933, and the martial songs and speeches of the participants were broadcast live across Germany. It was a horrific spring.

Hayek's criticisms of socialism in his address were not well received. He would later recall that, following the talk, "one of the more intelligent students had the cheek to come to see me for the sole purpose of telling me that, though hitherto admired by the students, I had wholly destroyed my reputation by taking, in this lecture, a clearly anti-socialist position." But even more disquieting for Hayek was the interpretation of events in Germany that was emerging among the British intelligentsia. Certain prominent members of the German industrial class had initially supported Hitler's rise, and others had acquiesced in it. This, together with the Nazi party's evident persecution of the left, led many in Britain to see Naziism as either a capitalist-inspired movement or, alternatively (if one were a Marxist, and believed that capitalism was doomed to collapse), as a last-ditch attempt by the bourgeoisie to deny the inexorable triumph of socialism. As Hayek recalled, his director at the LSE was one of the ones propagating such an interpretation:

A very special situation arose in England, already in 1939, that people were seriously believing that National Socialism was a capitalist reaction against socialism. It's difficult to believe now, but the main exponent whom I came across was Lord Beveridge. He was actually convinced that these National Socialists and capitalists were reacting against socialism. So I wrote a memorandum for Beveridge on this subject, then turned it into a journal article....

In his reminiscence Hayek got the date wrong: given his reference in his memorandum to the Berlin student demonstration, and given that it carries the date "Spring 1933," he probably wrote it in May or early June of that year. The memo, titled "Nazi-Socialism," is reproduced for the first time in the appendix of this volume. In it, Hayek rebuts the standard account with the claim that National Socialism is a "genuine socialist movement." In support of this interpretation he notes its antagonism to liberalism, its restrictive economic policy, the socialist background of some of its leaders, and its antirationalism. The success of the Nazis was not, he asserted, due to a reactionary desire on the part of the Germans to return to the prewar order, but rather represented a culmination of antiliberal tendencies that had grown since Bismarck's time. In short, socialism and Naziism both grew out of the antiliberal soil that the German Historical School economists had tended. He added the chilling warning that many other countries were following, though at a distance, the same process of development. Finally, Hayek contended that "the inherent logic of collectivism makes it impossible to confine it to a limited sphere" and hinted at how collective action must lead to coercion, but he did not develop this key idea in any detail.

As Hayek noted in his reminiscence, he ultimately turned his 1933 memo into a magazine article, published in April 1938, titled "Freedom and the Economic System." The following year he came out with an expanded version in the form of a public policy pamphlet. If one compares the two articles one can trace an accretion of ideas that would later appear in The Road to Serfdom. In the 1938 version, though he continued to stress the links between fascism and socialism, Hayek began to expand on what he saw as the fatal flaw of socialist planning-namely, that it "presupposes a much more complete agreement on the relative importance of the different ends than actually exists, and that, in consequence, in order to be able to plan, the planning authority must impose upon the people that detailed code of values which is lacking." He followed with a much fuller exposition of why even democratic planning, if it were to be successfully carried out, eventually requires the authorities to use a variety of means, from propaganda to coercion, to implement the plan.

In the 1939 version still more ideas were added. Hayek there drew a contrast between central planning and the planning of a general system of rules that occurs under liberalism; he noted how the price system is a mechanism for coordinating knowledge; and he made several observations concerning economic policy under a liberal regime. All of these ideas would be incorporated into The Road to Serfdom.

On the one hand, Hayek had developed some of his new arguments in the course of fighting a battle against socialism during the middle years of the decade. On the other hand, some of the arguments were not actually new at all. Another debate on the feasibility of socialism had taken place immediately following the First World War, and Hayek's mentor, Ludwig von Mises, had contributed a key argument. This earlier controversy had taken place in mostly German-language publications. When Hayek came to England and encountered similar arguments in favor of planning being made by his academic colleagues and in the press, he decided to educate them about the earlier discussion. In 1935 he published the edited volume, Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism. The book contained translations of articles by others, including von Mises's seminal piece "Economic Calculation in the Socialist Commonwealth," as well as introductory and concluding essays by Hayek. In the former Hayek reviewed the earlier Continental debates on socialism; in his concluding essay, titled "The Present State of the Debate," he identified and assessed a number of more recent proposals, among them the idea of reintroducing competition within a socialist state, dubbed "pseudo-competition" by Hayek, which later came to be called "market socialism." This drew a response from the socialist camp, the most prominent being that of the Polish migr economist Oskar Lange, whose defense of market socialism in a journal article was later reprinted in a book, On the Economic Theory of Socialism. Hayek would respond in turn to Lange and to another proponent of socialism, H. D. Dickinson, in a book review a few years later.

Hayek's three essays noted previously constitute the written record of his early arguments against socialism. But the battle was also taking place in the classrooms (and doubtless spilling over into the senior commons room, as well) at the LSE. Beginning in the 1933-34 summer term (which ran from late April through June) Hayek began offering a class entitled "Problems of a Collectivist Economy." The socialist response was immediate: the next year students could also enroll in a class titled "Economic Planning in Theory and Practice," taught first by Hugh Dalton and in later years by Evan Durbin. According to the LSE calendar, during the 1936-37 summer term students could hear Hayek from 5 to 6 PM and Durbin from 6 to 7 PM each Thursday night! This may have proved to be too much: the next year their classes were placed in the same time slot on successive days, Durbin on Wednesdays and Hayek on Thursdays.

By the time that World War II was beginning, then, Hayek had criticized, in books, learned journals, and in the classroom, a variety of socialist proposals put forth by his fellow economists. The Road to Serfdom is in many respects a continuation of this work, but it is important to recognize that it also goes beyond the academic debates. By the end of the decade there were many other voices calling for the transformation, sometimes radical, of society. A few held a corporativist view of the good society that bordered on fascism; others sought a middle way; still others were avowedly socialist-but one thing all agreed on, that scientific planning was necessary if Britain was to survive.

(Continues...)

Excerpted from The Road to Serfdomby F. A. Hayek Copyright ©2007 by The University of Chicago. Excerpted by permission.
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