Wednesday, April 18, 2012

The Road to Serfdom

The Road to Serfdom by F. A. Hayek



I bought the definitive version of this classic, published by the University of Chicago Press.  It is to be used as an academic text book.  Besides the main text, there are numerous additions including an introduction, five very long forwards/prefaces to five different editions, plus some reviews by famous readers.  This makes the pages 43% more than the original text.  The additional materials give a detailed background to the political environment at the time of writing of the book.

It is a difficult book to read.  Besides the difficult theories, the language is written in a very academic style, aggravated by long sentences which must be read twice to understand.  I took two years to complete reading, on and off during long flights on vacation trips.  At the end, I was not very sure if I understood it correctly.  I then searched for reviews and critics of the book, and found two interesting references: one is a  condensed version, and the other is a picture book further condensing it.  This finally confirmed that my understanding of the book was correct.  Democracy could be our greatest enemy leading us to serfdom.  We are in the danger of going down to serfdom and surrendering our freedom under the chaotic democratic system.

The time was the Second World War.  The greatest enemies to the British were Germany and the Soviet Union.  These were the main thrust of the book: British individualistic ideology against the Communist Soviet Union and the National Socialist Germany.  This further boiled down to personal freedom against a collectivist approach to freedom.  The Soviet Union was blamed of her planned economy, while the nationalist Germany of her fascist governance of national freedom.

The book pointed out that the democracies of UK and USA after the Second World War were going down the same path as national socialist Germany and were in the danger of leading her people to serfdom; a totalitarian government could be born.

At that time, UK after the war was plagued by inflation, taxation and the labour movement.  Taking the advantage of such resentment, the Conservative Party ordered 12,000 copies of the abridged version of this book and distributed them as election propaganda.  This showed that the ideology of Hayek was deployed to campaign against the policies of the Liberal Party.

In short, democracy is the governance by the public, hence the theory of public choice and the respect for public opinion.  The reality is that the public is the population comprises of many millions of individuals.  There could be many millions of different opinions.  The rule of governing by a majority means that many individuals are competing to be the majority.  To further complicate the problem, there are opinion leaders forming political parties whose main function is to become the majority and win elections.  This is the core characteristic of democracy where groups of individuals are organized just for that purpose.  It is no wonder in many democracies, rivalry between political parties in all fora is a common sight. This eventually leads to ineffective governance.

Ineffective governance is something not easily tolerated.  It is therefore tempting, when a good leader emerges, the public is willing to confer to him greater power so that he is in a more favourable position to govern.  This is the starting point of the path to a totalitarian government.

Hayek observed early signs where a deadlock of democracy created islands of power.  The elected government would be constantly under pressure from the legislative institution where a considerable number, though a marginally minor, would be present to block government initiatives.  Both sides would distrust the other.  On essential elements of policy where a deadlock could have serious consequences, a compromise could be the delegation of power to an independent agency hosted by professionals.  Thus many such agencies with swift power in specific areas were created.  We are seeing the same thing in Hong Kong where many essential services are under the control of high-powered agencies outside the government, incorporated by law passed by the legislature. They now include the Monetary Authority, Airport Authority, Hospital Authority, Housing Authority, Urban Renewal Authority, etc.  This list is very long.  These are pseudo totalitarian governance in miniature.

He did not stop at the intrinsic weakness of democracy.  In fact, Hayek considered at depth the path of communism and national socialism.  These two ideologies were actually the fruit of liberal thinking emerging from the awakening from feudal and theological governance.  The liberal thinking was on liberty and equality, and both the Soviet Union and Germany had an elected government claiming just that.  The problem as Hayek saw it was in organizing and planning.  Both countries were planning for the good of the nation and a fair distribution of resources.

Organizing and planning are the activities in our daily life.  We all hope things will happen as we wish towards a goal we like.  They are the bread and butter of the work of a manager, and are the core competencies of an EO.  However, Hayek saw that a plan has a tendency of moving in a fixed direction.  The planner will do what they can to make sure that it happens that way.  A powerful planner will use his power to do so.  When done in the Soviet Union and Germany, the planner actually made the citizens follow the plan, sometimes against their free will.

Hayek thought the democracy in UK and US were leading their citizens towards serfdom.  Many other democracies would also head down the same path through planning for the nation and eventually planning for the citizens.  He thought of a society where the citizens would be free from the control of the nation.  Government intervention should be kept at the absolute minimum.  The goal of governance should be one which would enable a fair playground so that citizens could exercise their free will.  However, the main problem of such governance would be a free or chaotic market where freedom of individuals could be clashing with each other.  This could be left to conciliation effort or judicial tie-breaker.  The worst that could happen would be government intervention using coercive method on the behaviour of individuals which were supposedly undesirable.  The most criticized approach is the Pigovian Tax, or sin tax, which is a kind of taxation aimed at punishing taxpayers on undesirable behaviour and changing them against their will.  In Hong Kong, we are seeing more and more such legislation.  They include the famous plastic bag tax and the now proposed garbage tax, taking away personal choice and freedom for the collective benefit.  More such measures could be taken on any behaviour considered undesirable by the government or the majority.  This is a negative approach leading to serfdom.  We should instead put our effort to positive approach in persuading people to change their behaviour under their free will.


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