BOOK REVIEW:

THE ROAD TO SERFDOM

Presented By

Vitalis I Nujimem

Outline:-

Topic Sentence: Central planning leads to dictatorship because planning gives an

absolute power to a single person.

o Planning demands that all knowledge that exists in every individual be brought

together in a single person.

o Central planning is a path to a totalitarian state due to its use of force.

Topic Sentence: Hayek believed that a planned system would destroy personal freedom,

but not in all situations.

o In wartime planning, individuals who give up freedom are not in danger, but in

peacetime, their freedom is at risk.

o In peacetime, the arbitrary intervention of authority is coercive to individual

choice.

Topic Sentence: Central planning in the public sector is hard to agree on and suggests

that private sector planning is better for the economy.

o Hayek believes that in order for planners to achieve their ends they must create

power – power over other men

o The reason Hayek favor private sector is because it reduces power and at the same

time make individuals autonomous

Topic Sentence: Hayek argued that central planning is a movement to abolish

competition. He refers to this type of central planning against competition as

"Competitive Socialism."

o The enmity against competition is a path to a planned economy as well a union of

socialists of the left and socialists of the right.

o Competitive Socialism is a type of planning that avoids the problems caused by

central planning - "This statement is not true".

o Hayek believed Competitive Socialism cannot work because it is contradicting.

o Hayek argued that, once a Competitive Socialism is achieved, the only way to

bring back competition is for the state to take control of the monopolies.

Topic Sentence: Hayek knew that central planning was less efficient than a competitive

economy in terms of development and distribution of wealth, yet he wonders why many

people favored central planning.

o Hayek believed people want central planning because of its difficulty and horror

in society.

o People also think a planned economy is more efficient than a free enterprise.

o Maybe because they think that it is possible to find some middle ground between

competition and central planning.

Topic Sentence: Precisely speaking, I think Hayek is right when he said competition and

central planning cannot work hand in hand.

o One reason competition and central planning cannot work is that they are

alternative principles.

o Secondly, mixing competition and central planning makes it self-contradicting.

o More importantly, I think central planning undermines individual preferences.

Topic Sentence: This paragraph of the paper is a description of Hayek's The Road to

Serfdom setting.

o I talked about the different versions of the book, the time they were published,

and the rationale behind the book and Hayek's argument.

Conclusion:-Finally, I signal conclusion, restate the thesis statement or argument, restate

the supporting details, and lastly, state the lesson drawn from the reading.

o For us to be personally, economically, and politically free, central planning should

be abolished.

o Central planning is irreversible. That is, ending central planning leads to a

socialist state due to state control of the monopolies and socialism cannot work

with a laissez-faire economy.

o The one lesson drawn is that a planned society is not only a road to serfdom, but

also a road to servitude.

Central planning will not only bring about dictatorship, it robs individuals of their

freedom, it is very difficult to agree on, it destroys competition, and it is less efficient in terms of

allocation of wealth. In The Road to Serfdom, Hayek explains both the political and economic

consequences of central planning. He believes that central planning demands that the knowledge

of all be brought together in a single body. This makes central planning a path to a totalitarian

state. As we all know, a totalitarian economy exploits individual freedom. Hayek quoted Saint-

Simon who predicted that, "Those who did not obey his proposed planning boards would be

treated as cattle" (Hayek Pg.76). Hayek believes planning leads to dictatorship because

dictatorship is the most effective instrument of coercion and, as such, essential if central planning

on a larger scale is to be possible." The questions here is this: Is it reasonable that we give up all

our knowledge and follow the intuition of one single person?

The Road to Serfdom condemns the idea of the Italian, Russian, and German

governments, as Hayek stresses that a planned economy would destroy individual freedom and

liberty. To support his point Hayek's compared wartime planning with peacetime planning. In

wartime planning, Hayek argues that it is reasonable and also important to sacrifice for the

government in order to secure liberty more in the future. On the contrary, it is quite a different

thing to sacrifice liberty permanently in a planned economy. Hayek says, "The one thing modern

democracy will not bear without cracking is the necessity of a substantial lowering of the

standards of living in peacetime or even prolonged stationeries of its economic conditions"

(Hayek Pg. 216). From a personal point of view, the argument Hayek made here is very powerful

in two ways. On the one hand, it is similar to Milton Friedman's argument about income tax

withholding during wartime. And, on the other hand, it shares the same element with Adam

Smith's Laissez-faire philosophy of minimal restriction on individual freedom.

Hayek believes that central planning on a larger scale such as that of the public sector is

hard to agree on and suggests that private sector planning is better for the economy. For Hayek,

central planning on a larger scale makes power more extreme, but in a private sector power is

reduced because of competition. As Hayek put it, "It is entirely fallacious to argue that the great

power exercised by a central planning board would be no greater than the power collectively

exercised by private boards of directors" (Hayek Pg. 165). The main take away here is that a

competitive society or system is the only system designed to minimize the power exercised by

one man over his fellow man. Additionally, Hayek says, "It would be impossible for any mind to

comprehend the infinite variety of different needs of different people which compete for the

available resources and to attach a definite weight to each" (Hayek Pg. 102). Hayek refute

planning because planners achieve their goal by creating power distance. Thus, creating power

means depriving private individuals of the power they possess.

Hayek warns that the movement for central planning is a movement to oppose

competition and as such, it is a new type of planning the socialist parties have agreed on. Hayek

believes that resisting competition helped unite socialists of the left and socialists of right.

According to Hayek, "Planning therefore is wanted by all those who demand that production for

use be substituted for production for profit" (Hayek Pg. 84). Hayek called such planning a

"Competitive Socialism". Hayek's says, "Competitive Socialism which they hope will avoid the

difficult and dangers of central planning and combine the abolition of private property with the

full retention of individual freedom" (Hayek Pg. 88). For me, I think this new kind of practice or

thinking is a delusion and will not work because it is contradicting. As Hayek puts it, "It is

impossible to assume control over all the productive resources without also deciding for whom

and by whom they are to be used" (Hayek Pg. 88). Hayek points out that Competitive Socialism

will have somewhat of a roundabout form. That is, once a competitive socialism stage is reached,

the only way for competition to return is for the state to take control of the monopolies.

Hayek knew that central planning was significantly less efficient than a competitive

system in terms of development and distribution of wealth, but he wondered why people still buy

into the idea of central planning. For Hayek, the idea of directing economic activities still appalls

most people not only because of the stupendous difficulty of the task, but because of the horror

inspired by the idea of everything being controlled by a single entity. More importantly, Hayek

says, "Even a good many economists with socialist views who have seriously studied the

problems of central planning are now content to hope that a planned society will equal the

efficiency of a competitive system; they advocate planning no longer because of its superior

productivity but because it will enable us to secure a more just and equitable distribution of

wealth" (Hayek Pg. 131). They also argue that the economy is not moving in the direction which

Hayek had envisioned. Hayek says, "If we are nevertheless, rapidly moving toward such a state,

that is largely because most people still believe that it must be possible to find some middle way

between "atomistic" competition and central direction" (Hayek Pg. 89).

I think Hayek is right when he says that the mixture of competition and central planning

cannot work. First and foremost, the reason I say so is because competition and central planning

are tools used to solve the same problem (Hayek Pg. 90). So therefore, mixing both of them

makes both less productive. However, if for some reason we manage to do so, I believe the result

would be worse than if they were applied separately. From my own understanding, the only way

central planning and competition may work as one, in any given society be it in Asia, Africa,

America, or in Europe, is only when we plan for competition and not when we plan against

competition. With an owl look into the real world, I think central planning is not used for means

that satisfy individual preferences despite the fact that socialists claim that it is more efficient in

the distribution and allocation of wealth. Thus, as rational beings, we should cultivate and

encourage competition and self-interested individualism. To illustrate, if company A, for

example, fails to satisfy our needs and wants either by offering high price or destructible

products; as ration beings, we can turn to company B.

The Road to Serfdom is Hayek's well-read book with several editions as well as a cartoon

version. This book remains one of Hayek's most likely to appeal to the general public. The Road

to Serfdom was originally published in 1944 with later editions in 1956 and 1976. The book uses

empirical reasoning rather than theoretical or moral principles. The core of the book is a

historical account of Hayek's perception of the global political economy and the political systems

that dominated it. Prominent in the letter context is the rise of Nazism in Germany,

totalitarianism in Russia, and fascism in Italy. It also deals with Hayek's personal experience

from Vienna to the London School of Economics (LSE) in 1931. Unlike many other political

books, what made The Road to Serfdom different were its arguments as a "theme of warning". As

Bruce Caldwell put it, "Those who see Hayek as issuing a prediction of an inevitable trend would

view this history as refuting his claim. Those who see him as providing a warning might consider

thanking him for saving them from disaster" (Pg. 30).

To conclude, The Road to Serfdom is made up of sixteen chapters with the main idea

directed toward competition rather than central planning. This is because central planning can

lead to dictatorship, hard to agree on the end goal, destroy freedom and competition, and it is

inefficient in the distribution of resources. More importantly, central planning is not good for the

economy because it creates monopolies. Thus, monopoly is an irreversible trend. Even though

socialists believe central planning and laissez-faire can be mixed, it is not hard to see that central

planning cannot work with free enterprise without giving up personal freedom. Nonetheless, in

some situations such as wartime, central planning can elevate liberty as it helps secure it more in

the future. As Milton Friedman pointed out, tax withholding in wartime is reasonable than in

peacetime because it is temporary rather than permanent. If there is one lesson drawn from the

reading, it is that government planning, central planning, economic planning, and competitive

socialism in peacetime are all roads to serfdom.

Annotated Bibliography

Goldberg, Jonah. “Automatic tax withholding." www.aei.org. The Washington Post, 2 May

2013. Web. 4 April. 2015.

In the above article, the author talked about Friedman's view on tax withholding during

wartime and peacetime. The author pointed out that Friedman supported central planning

in wartime because it plays a unique role despite harming democracy, but in the latter, it

is a total corrosive measure.

Hayek, A. Friedrich. “The Road to Serfdom with The Intellectuals and Socialism." www.iea.org.uk.

The Institute of Economic Affairs, April 1999. Web. 4 April. 2015.

This is Hayek's condensed version of The Road to Serfdom. The material was simplify

and published in Great Britain in 1999 by The Institute of Economic Affair (iea).