“Our freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another. But if we face a monopolist we are at his absolute mercy. And an authority directing the whole economic system of the country would be the most powerful monopolist conceivable…it would have complete power to decide what we are to be given and on what terms. It would not only decide what commodities and services were to be available and in what quantities; it would be able to direct their distributions between persons to any degree it liked.”
Nobel Laureate and a popular face of the Austrian school of economics, Friedrich A. Hayek's legendary work 'Road to Serfdom' was a monumental piece against the socialist and communist movements of the world and against the growing government control over the businesses - big and small. This book is a strong critic of collectivist thought, but we have to see it in the light of the time when it was written. The book was written post World War 2 when the world has seen the dictatorial National-Socialist regime of Germany under Hitler or communist rule in USSR under Stalin. Hayek, a classic liberalist, to be distinguished from those who believe that democracy can survive in a full-fledged socialist state, warned the world of the dangers of excessive, and in some cases absolute, government control. He was praised by later day successful free-market champion governments which brought sweeping reforms like that of Margaret Thatcher. Hayek lived long enough to see his theory turning true in some countries and some other taking corrective steps.
In initial few chapters of the book, Hayek argues against economic planning, till then existing in the form of Five Years Plans of Soviet rule and many other states pitching for central planning. Hayek's opposition to centralised planning was based on two reasons. First, that the centralised planning is too big a task to be executed efficiently by any authority. Any authority cannot decide for all sectors of industry keeping in mind the welfare of all sectors. It is bound to promote interests of a group or an industry and in the process neglecting all others. Thus effectively driving out entrepreneurship from the state because people will have to follow what planning authority have decided for them instead of acting as per the requirements of the market. The second point that Hayek raises against planning is that it creates too powerful a structure against which public can hardly go. This is logical also because whatever planning authority has decided is to be implemented and if someone does not accept the decision taken for him, then force has to be used. This force is what leads to totalitarian regimes.
The biggest challenge that a socialist or communist state puts before an individual, in words of Hayek, is freedom or liberty. To quote Hayek himself,
”Democracy and socialism have nothing in common but one word: equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.”
He cites the example of the right to acquire land which was not given in communist regime of USSR. Hayek says that in that case an individual is always at the mercy of the state. There is no incentive to work. Also in a collectivist rule, a person cannot choose his field of interest as his way of livelihood earning. Hayek says that although the chances of a very poor becoming a very rich person in a free market economy are very less but that there is a chance is no mean achievement in itself. In a collectivist state only those favoured by people higher up in administration and hand-picked by them can become part of the influential class.
Hayek also argues against the notion of security that a collectivist state is thought to offer. Consider a case where a person has acquired a skill by hard work over the years and then a scientific innovation leaves his skill redundant or a natural calamity roots out an already set up business or industry. Although humanitarian side says that government should come to the rescue of the concerned individuals but Hayek advises against that. He says that job security provided to an individual is a loss for others. For another person whose skill was rendered unrequired after an innovation and who now masters a new art for the living is inherently at a loss and that too because he adjusted to changed scenario. He also says that a situation of complete job security does not let an individual to give his best and hampers innovation.
In one of the chapters, it is discussed how dictators rise from the society. Hayek says that initially that leader has a small following who see their benefit in the rise of that leader. With this set of followers, the leader cannot rise to the top, so they require an issue to get a mass following. Most of the time this issue is emotional one like the humiliating defeat of Germany in First World War and consequent signing of pacts which added to humiliation was used by Hitler to further National-Socialist rule in Germany. When the leader has a mass following and acquires authority, he will enact laws and create authorities to curtail individual freedom necessary for his unchallenged rule and survival of regime becomes the most important task of leader who by now has become a dictator because he cannot tolerate a single voice of dissent.
Many issues raised in this book may seem trivial because the world has moved since then and most of the communist and socialist regimes have fallen since this book was written and at many points this book becomes monotonous but we have to keep in mind that this book was written in 1945 when the danger of collectivist takeover of the economies was real. Hayek also emphasized the role of government in ensuring competition in the market like governments have to check predatory marketing, and also ensuring that competition does not affect the sustainability of the ecosystem. What Hayek could not see was that whenever a powerful authority is created, it will curtail individual freedom irrespective of whether that authority was created by cronyism or collectivism.