The neoliberal mantra, expressed in Friedrich Hayek’s The Road to Serfdom and The Constitution of Liberty, has seen a damaging policy of deregulation which has abandoned the mechanisms of the state that had once addressed the inherent inclination towards speculative financial transactions in sensitive areas of the economy. A thorough engagement with the work of Hayek, widely considered the father of the contemporary economic framework, illustrates neoliberalism’s exclusionary framework through the normative value system that presides over it. Neoliberalism has placed humanitarian values as subordinate to what it considers to be the highest arbiter of morality; the profit motive.
Hayek’s argument for limited government intervention to create the conditions for competition rather than management, where the pursuit of liberty operates within the realm of unrestrained market forces, is grossly orientated towards the interests of capital. The government’s peripheral role in society has allowed for political power to find its expression amongst those who have accumulated the greatest economic weight; creating a system that is far from neutral. By forsaking the premise of equality in society as utopian and state direction towards it as inherently incompatible with liberty, the power which government has abandoned in the name of liberalism has merely been expropriated by those who have come to yield the greatest economic power. As Australian Prime Minister Kevin Rudd described to a Hayekian think-tank, society must not be forced to choose between two opposing extremes; between the dogmatic “ideological straitjackets…of Friedrich von Hayek and Leonid Brezhnev.”
Avoiding dogmatic constructs would help to establish a relative framework of economic development that addresses the Hegelian dialectic principle of a thesis and antithesis; capitalism and centralised planning; and reconciling it with the logic of a synthesis which addresses both social constructs. The failure to address the limitations of the neoliberal paradigm with a more balanced approach has seen the emergence of an autocratic form of capitalism that prevails in both Russia and China, both of which yield enormous geo-political power. Francis Fukuyama describes the contemporary political order as far “more dangerous because capitalist autocrats can grow much richer and therefore more powerful than their communist counterparts…[where] growth depend[s] more on raw power and accidents of geography than on good institutions.”
The neoliberal global structure reflects the Hayekian conception of the rule of law which underlies the global economic consensus and the contemporary international framework. The model of globalisation envisaged by global monetary institutions, such as the WTO and the IMF, has allowed for corporations to exist as supra-national entities, which exercise disproportionate power over the direction of the global economy. The only viable option that has become available to countries is to adhere to the structural framework of neoliberal capitalism. The failure to conform to this model results in capital flight which has become a tool in which democratic government policies can be challenged by multinational corporations, “[where] highly concentrated financial capital imposes its own social policies on reluctant populations, and punish[es] governments that deviate by capital flight”;
Hayek makes the far-reaching argument that all forms of government-sponsored programs will inevitably lead us to an irreversible road to serfdom. He argues that “the British National Health Service has no relation to reality…[where its] introduction is the kind of politically irrevocable measure that will have to be continued, whether it proves a mistake or not.”
Hayek evades ethical constructs in the formation of his approach to universal health care and instead offers a Darwinian explanation as to why he is unyieldingly opposed to it. Hayek argues that for those who no longer satisfy their utilitarian function in the economic field, they are no longer ‘fit’ enough to warrant the provision of health care; abandoning ethical constructs in the face of economic utilitarianism. Instead, a triage selective approach of the ‘survival of the fittest’ is taken towards those who are economically expedient. In Hayek’s eyes, the problems of a free health service lie in the tendency of medicine “to increase its efforts not on restoring working capacity but toward the alleviation of suffering and the prolongation of life. These, of course, cannot be justified on economic but on humanitarian grounds…It may seem harsh, but it is probably in the interest of all that under a free system those with full earning capacity should often be rapidly cured of a temporary and not dangerous disablement at the expense of some neglect of the aged and mentally ill.”
The deficit of ethical considerations in his arguments are also evident in his notions of freedom of choice in which he puts forward, where he argues strongly against citizens “not having any choice in some of the most important matters of their lives, such as health.”
By arguing for a social safety net in The Road to Serfdom, which naturally involves redistribution by government, Hayek raises a fundamental flaw in his central argument by failing to indicate at which point government interference becomes a form of totalitarian governance. The premise of his argument fails to reconcile itself with his aversion towards government planning based on long-term projections, which are also inherent in his attempt to introduce a competitive order; “[where] both the creation and monitoring [of a competitive order] presuppose a fundamental political decision and reflect a deliberate institutional choice.”
British economist John Maynard Keynes convincingly describes that although Hayek is in favour of government intervention in areas where the market cannot adjust itself, he “gives us no guidance whatever as to where to draw it…[he is] in [his] own argument done for, since he is trying persuade us that as soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice.”
Remarkably, Hayek’s approach to education in fact requires a level of planning far more sophisticated and pre-determined than that which state-sponsored education would require, as it involves a significant measure of ‘reverse distribution’ by government. Hayek suggests that government planning should adopt a socio-economic conditioning of an exclusive elite that is receptive to a level of education that would yield it economic benefits at the expense of the majority. Hayek asserts that “a society that wishes to get a maximum economic return from a limited expenditure on education should concentrate on the higher education of a completely small elite…rather than prolonging education for large numbers.”
Hayek justifies his argument of providing this exclusive education by alluding to the political agitation that could stem from an unemployed population that is educated enough to understand the economic condition that determines its fate. In views reminiscent of the most repressive form of government, Hayek warns that “the problem of having more intellectuals than we can profitably employ…[is that] there are few greater dangers to political stability than the existence of an intellectual proletariat who find no outlet for their learning.”
Contrary to Hayek’s central thesis, that “governments everywhere and at all times have been the chief cause of the depreciation of the currency,”
The breakdown of the Bretton Woods system and the subsequent rise of neoliberalism has resulted in the erosion of the regulatory functions governing the international monetary system. Keynes, one of the chief architects of the system, had considered that its primary role lies in its capacity to reflect government action to it as a measure of its democratic function; through “establishing the right of governments to restrict capital movement…[where] limits on capital mobility substituted for limits on democracy as a source of insulation from market pressures.”
There also exists the fundamental issue today of climate change, which goes beyond the traditional ‘left-right’ political paradigm, where neoliberalism fails to offer any guiding principle for addressing this concern. This is reflective of the failure of the Hayekian model, where instead of creating the conditions necessary for an exponential growth in human prosperity and freedom, it has began to infringe on them by placing irreversible effects on the environment in which human beings reside.
Hayek is of the opinion that the conservation of natural resources “should be judged by precisely the same criteria as all other investment” and is justified only when “there is no other economic use for preserving any one kind of resource.”
The decision-making process that has presided over this issue has been undemocratically shaped by those who have exploited the Hayekian edifice of unregulated market access and its consequent effect on the direction of the political economy. The response to the changes in the environment needs to occur within a democratic framework, where governments begin to act as autonomous bodies far removed from the interests of global capital and within the paradigm of environmental and societal realities.
The legacy of the experiment in social engineering has taught the world to be cautious of dogmatic thought processes and to be wary of ‘prophets’ (or should we say ‘profits’) surrounding political and social thought. It is through this framework that the neoliberal global consensus must be reviewed, otherwise society risks marching towards a form of governance that negates democratic practices; albeit through a different road from that which Hayek envisaged.