Totalitarians Control The Economy As Hayek Points example essay topic

From The Road to Serfdom, how and why does F.A. Hayek denounce all forms of planning or collectivism? What is so superior to laissez faire or capitalism and why? Do you agree with Hayek's thesis? If so, yes; if not, why not? Collectivism's main argument is that society should not be controlled by people who are irresponsible.

Hayek counters that point by stating that collectivism is nothing more than totalitarian in which individual freedoms are lost. He also states that the welfare and happiness of the society cannot be satisfied by a single plan (Hayek 63-64). This is especially true in countries that are very diverse in their people's education and culture. Collectivism also has the dilemma of!

SS who plans whom, who directs and dominates whom, who assigns to other people their station in life, and who is to have his due allotted by others? These become necessarily the central issues to be decided solely by the supreme power. !" (Hayek 119). Typically, it is the bottom of society that makes up this supreme power. Hayek's believes that since the bottom of society typically has low values and moral standards, they can reach out to the greatest number of people for their message. Another way that this group can get power is the belief that the gullible people will follow any message they convey and that people will follow a message of hate rather than any positive message (152-153).

A perfect example of this would be the Nazis in Germany where Hitler relied upon his message of nationalism and his hatred of Jews. Hayek properly lays out the foundation to support his reasoning for supporting capitalism. He points out that capitalism cannot succeed without a proper legal framework. With legal laws and enforcement in force, classical liberalism believes that capitalism and its forces of competition will coordinate human efforts best rather than relying on a total laissez fare policy (Hayek 41). Other factors needed for capitalism to succeed are the organization of!

SS money, markets, and channels of information!" (43). Those three factors are the basis for competition which is most effective in determining allocation of resources and generating the maximum amount of marginal utility. When prices and / or output are controlled, the central planners are interfering with free markets which distort the true view of the marketplace. In addition, Hayek believes that combining capitalism and central planning is a recipe for disaster.! SSA mixture of the two means that neither will really work and that the result will be worse than if either system has been consistently relied upon! Planning and competition can be combined only by planning for competition but not by planning against competition.

!" (Hayek 48). The planning that Hayek refers to goes back to an enforceable legal system in addition to the tools needed for a free marketplace. Hayek states that even with a capitalistic society, there should be a safety net. He points out that new technology often displaces workers from their jobs. Part of this safety net would include unemployment benefits which would provide a basic standard of living. Hayek believes in this type of security for the people since the economy can oscillate greatly.!

SS! Kthe very necessary efforts to secure protection against these fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom. !" (Hayek 135). If we were to rely only on central planning, Hayek points out that! SS!

Kthe growth of our industrial system! Would never have reached the degree of differentiation, complexity, and flexibility it has attained. !" (Hayek 56). The key to capitalism is that it allows the existence of division of labor, which would effectively be able to convey all of the relevant facts (Hayek 55). This type of decentralization will allow all individuals needs and wants to be considered which would not occur if there is central planning involved (55).

Hayek states that progress in technology will ultimately lead to monopolies, which destroys competition and then will result in central planning. However, he believes that it is government planning and collusion that results in monopolies, and not in economies of scale. He believes that once public policy has been corrected, and collusion has been eliminated, competition can flourish once again (Hayek 51). A perfect example of collusion to create a monopoly is Standard Oil. Rockefeller's collusion with the railroads enabled it to compete with the smaller players on price and not based on economies of scale resulting in their failures and thus, removing Standard's competition.

Finally, Hayek main argument against economic socialism is that it not possible without socialism in all other policies. This would result in totalitarianism as has been evidenced by Hitler and Mussolini. Hayek states that individualism is not as evil as the socialists make it out to be. He believes that!

SS! Individuals should be allowed, within defined limits, to follow their won values and preferences rather than somebody else's; ! KIt is this recognition of the individual as the ultimate judge of his ends, the belief that as far as possible his own views ought to govern his actions, that forms the essence of the individualist position. (Hayek 66). The freedoms that individuals enjoy in a capitalistic society can not be obtained when totalitarians control the economy as Hayek points out (110).

Central planning would control all aspects of life since every part of one's life is the livelihood of someone else's economic life. This means that totalitarians would control every part of life including pleasures and free time (110). Hayek even states that Karl Marx recognized that! SS the evolution of private capitalism with its free market had been a precondition for the evolution of all our democratic freedoms.

!" (116). Without the free market, these freedoms would disappear as a result of central planners trying to run the country. Given how Hayek does stipulate his views on laissez faire policy, I tend to agree with his thesis since it can be shown that the social benefits outweigh the costs of such policies. Also, since all forms of planning have practically vanished from the world, it shows how Hayek's thesis has stood the test of time 60 years later and that I am a firm believer as well. Question Two From The Fatal Conceit, what are Hayek's objections to Socialist thought? How and why does he Socialist thought is inaccurate and flawed about history, human nature etc.

Hayek's views on Socialist thought can be explained by relating together economics, religion, and history. From his observations and conclusions, Hayek believes that Socialism has been a grand failure. His view against Socialist thought centers on how civilization was brought upon us through market forces and not through centralized distribution. Hayek states that market forces such as pricing, specialization, and private property help to establish morals and traditions, which continue to this day.

These market forces have allowed the world to expand its population base faster than relying on self-sufficiency. With Socialist thoughts however, none of these forces would come into play, which would result in a lack of spontaneity and specialization. He states, ! SS! K differences among individuals increase the power of the collaborating group beyond the sum of individual efforts! Specialization releases and encourages the development of a few individuals whose distinctive contributions may suffice to provide them a living or even to exceed the contributions others make to the total.

Civilization is, ! Based on! yen human development in its richest diversity! |!" (Hayek 80). This type of specialization creates efficiencies that help lower costs which in turns, helps to lower prices which in turns, helps to create trade.

I agree with Hayek's thesis since all of the empirical data shows that socialism has failed on a grand scale throughout the world. Hayek properly observes that socialism would not even exist without the creation of civilization first. The failures of Eastern Europe, the Soviet Union, China, and Vietnam demonstrate how their economies were so inefficient due to Socialist polices. The Soviet Union and China are perfect examples of how lack private property and centralized control can deter! SS! Kthe generation of and use of more information than is possible under central direction.

!" (Hayek 86). Even their transition to a market based economy has been a struggle, which can be comparable to Hayek's analysis to the shantytowns surrounding the cities. This can be attributed to the people's behavior from their previous way of life. Hayek says that these newcomers to capitalism have not adapted to the advanced ways of civilization in which they can be compared to as living like villagers or hunters. Their slow adaptation is painful as he suggests but in the long run, it is beneficial as they are able to gain a bigger piece of the pie. (Hayek 130).

This example can be illustrated from Russia's and China's transition to a market economy. Mass unemployment, hyperinflation, and famine ruled the scene following the Soviet breakup and the Cultural Revolution respectively. Hayek also talks about how capital is needed in order to maintain and grow a capital society. Empirically, China has drawn in hundreds of billion of dollars of foreign investment which allows for continued expansion of their specialization of labor. Hayek maintains that capital creates the bridge between the present production and future demand. The ability to accumulate capital allows an individual to hire other people for their own needs or to trade with others.

By allowing this opportunity of employment, more people are able to support themselves. (Hayek 124).! SS Thus property, contract, trade, and the use of capital did not simply benefit a minority. !" (124). All of those factors provide the framework towards developing a capitalistic society. Socialist thought is also flawed since it cannot sustain the growth of the human population.

Hayek properly points out that without market forces, we would not have been able to sustain such a population explosion within the last 2 centuries. Hayek also states that with a working model of capitalism, humans will not procreate as much due to the lack of the old custom of producing many children as possible to help them be sufficient at old age (Hayek 129). It is this type of example of cultural evolution that helps to create the modern civilization. Finally, Hayek addresses how humans have been able to pass down traditions and values to the next generation. Sometimes, these traditions and values go against instinct and reasoning. This is where the role of religion comes into play.

Hayek believes! SS! That beneficial traditions have been preserved and transmitted at least as long enough to enable those groups following them to grow, and to have the opportunity to spread by natural or cultural selection. !" (136). By following these morals and traditions by using religion, people can understand and follow them which will enforce the development of civilization and therefore capitalism through the process of group selection (136-137). We can see how after only after 3 to 4 generations, socialism is for the most part dead in the world showing how capitalism has survived and thrived.