Chapter Ǵǵ: Hayek on the Psychology of Socialism and Freedom ȃǿȄa “stabilization” of particular prices (or wages), which, while securing the
income of some, makes the position of the rest more and more precarious.
(ȀȈȃȃ/ȀȈȄȅ, p.ȀȁȈ; cf. p.ȃȄ).Hayek’s warning that socialism endangers freedom is widely recog-
nized as valid nowadays. Already in the foreword to hisȀȈȄȅedition, Hayek
recognized that “hot socialism is probably a thing of the past” and that a
“hodge-podge of ill-assembled and often inconsistent ideals” labeled the
Welfare State had “largely replaced socialism as the goal of the reform-
ers” (p. ix). Few prominent English-speaking economists actually advocate
socialism any longer. Exceptions like J.K. Galbraith and Robert Lekach-
man do come to mind, but it is not clear—not to me, anyway—just what
they mean by socialism. Politicians still advocating socialism in developed
countries, like François Mitterrand in France, no longer mean full-fledged
socialism, but rather a welfare state, with redistributionist measures and
only limited nationalization of industry. Hayek is right: hot socialism
is dead.
I do not say that people now reject socialism because they have directly
absorbed Hayek’s message. Rather, his arguments have been in the air
and have worked indirectly. Experience at first or second ornth hand
has oozed into people’s consciousness. In the forty years sinceȀȈȃȃ, the
world has observed socialism in Soviet-bloc and third world countries.
But it has not seen personal freedom coexisting with full-fledged social-
ism. As Hayek wrote already inȀȈȃȃ, “‘liberal socialism’ as most people in
the Western world imagine it is purely theoretical, while the practice of
socialism is everywhere totalitarian” (p.ȀȃȀ). Failure to observe freedom
under socialism is no mere accident.
If we in the developed countries eventually wind up socialist after
all, we will have done so unintentionally. Especially in his later writ-
ings (HayekȀȈȆȇandȀȈȆȈ), Hayek has foreseen how this might hap-
pen. Ļe irresponsibility flourishing in democratic politics could accom-
modate excessive demands for special governmental favor and protection
against competition, hamper enterprise, swell government budgets and
deficits, bring debt monetization and price inflation, and bring counter-
productive attempts to fight inflation with direct controls. Capitalism
could seem to have failed, and opportunistic politicians would offer gov-
ernmental remedies. Actually, what would have failed would be the infla-
tion-prone, intervention-ridden economy and the political system respon-
sible for those ills.