John Gray: The Friedrich Hayek I knew, and what he got right – and wrong
the 1980s, when F A Hayek was one of the intellectual icons of the New Right, some of the more doctrinaire members of that complicated and fractious movement used to say that for him a minimal government was one that provided three things: national defence, law and order, and a state opera. It was an observation made only partly in jest.
.. The destruction of this order after the Great War by the forces of nationalism – which the US president Woodrow Wilson inflamed by insisting that Europe could be rebuilt only on the basis of popular self-determination – framed a dilemma with which Hayek struggled for the rest of his long life (he died in 1992).
.. How could liberal values be renewed in a time of political tribalism? It was a question Hayek could not answer.
.. A major reason for Hayek’s shift into social philosophy was that he believed – correctly – that he had lost the debate with John Maynard Keynes about the causes of the Great Depression.
.. The fundamental reason for the failures of central economic planning is that economic knowledge cannot be centralised. More than the love of power or the inevitability of corruption, it is the limitations of human knowledge that make socialist planning an impossible dream. Here Hayek’s argument was unanswerable.
.. Because no central authority could grasp the shifting pattern of relative scarcities and prices, only the market could determine the right allocation. Accordingly, believing that misguided investments had to be liquidated, Hayek argued in the 1930s for policies that were more contractionary than those that were actually pursued. The task of government was to get out of the way and let the process of adjustment run its course.
.. If they had been adopted while the crash was under way, Hayek’s prescriptions would have made the Depression even worse than it proved to be – a fact he later admitted.
.. at the Paris Peace Conference in 1919, Keynes had been horrified at the punitive conditions imposed by the Allies, which he forecast would destroy the German economy and lead to an upheaval that would “submerge civilisation itself”.
.. “Why I am not a Conservative”, in which Hayek explains that he rejects conservatism because it lacks a vision of human progress.
..What he failed to understand is that these values cannot be renewed by applying any formula or doctrine, or by trying to construct an ideal liberal regime in which freedom is insulated from the contingencies of politics.