On May 1, a handful of pathetic demonstrators celebrated May Day, the day of socialist solidarity, in Moscow and a few other cities around the world. It was a far cry from the great days of socialism. Socialism is dead.
On May 8 there will be small and quiet celebrations around the world marking the 100th birthday of one of the men who buried socialism, F. A. Hayek. Although a distinguished scholar and a winner of the Nobel Prize for economics, Hayek may have made his greatest contribution to the fight against socialism and totalitarianism with his best-selling 1944 book, The Road to Serfdom. In it, Hayek warned that state control of the economy was incompatible with personal and political freedom and that statism set in motion a process whereby “the worst get on top.”
But not only did Hayek show that socialism is incompatible with liberty, he showed that it is incompatible with rationality, with prosperity, with civilization itself. In the absence of private property, there is no market. In the absence of a market, there are no prices. And in the absence of prices, there is no means of determining the best way to solve problems of social coordination, no way to know which of two courses of action is the least costly, no way of acting rationally. Hayek elaborated the insights of the Austrian economist Ludwig von Mises, whose 1922 book Socialism offered a brilliant refutation of the dreams of socialist planners. In his later work, Hayek showed how prices established in free markets work to bring about social coordination. His essay “The Use of Knowledge in Society,” published in the American Economic Review in 1945 and reprinted hundreds of times since, is essential to understanding how markets work.
Building on his insights into how order emerges “spontaneously” from free markets, Hayek turned his attention after the war to the moral and political foundations of free societies. The Austrian-born British subject dedicated his instant classic The Constitution of Liberty “To the unknown civilization that is growing in America.” Hayek had great hopes for America, precisely because he appreciated the profound role played in American popular culture by a commitment to liberty and limited government. While most intellectuals praised state control and planning, Hayek understood that a free society has to be open to the unanticipated, the unplanned, the unknown. As he noted in The Constitution of Liberty, “Freedom granted only when it is known beforehand that its effects will be beneficial is not freedom.” The freedom that matters is not the “freedom” of the rulers or of the majority to regulate and control social development, but the freedom of the individual person to live his own life as he chooses. The freedom of the individual to break old molds, to create new things, and to test new paths is the mark of a progressive society: “If we proceed on the assumption that only the exercises of freedom that the majority will practice are important, we would be certain to create a stagnant society with all the characteristics of unfreedom.”
Although sometimes characterized by his critics as a “conservative,” Hayek always maintained that he was in fact an old-fashioned liberal, a believer in individual liberty, constitutionally limited government, and the free market of ideas and of goods. A progressive society must always be open to innovation, at the same time that it rests on a stable foundation of rights and rules of just conduct. He entitled the postscript to The Constitution of Liberty “Why I am not a conservative.” While friendly to many conservatives, Hayek pointed out that the conservative “has no political principles which enable him to work with people whose moral values differ from his own for a political order in which both can obey their convictions. It is the recognition of such principles that permits the coexistence of different sets of values that makes it possible to build a peaceful society with a minimum of force. The acceptance of such principles means that we agree to tolerate much that we dislike.”
Hayek’s views on the free society’s openness to innovation was also a part of his own life. I vividly recall a lecture he gave in Washington, D.C. when he was in his 80s. A questioner indicated his disagreement with Hayek on a philosophical matter. Hayek’s response was striking: “I, too, held that view for about fifty years. But lately I have been thinking about it a great deal, and I have come to believe that it was a fundamental mistake.” Most of us never change our views after the age of thirty, but Hayek was always open, questioning, trying new approaches, just like the free society he spent his life defending.