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Friedrich Hayek

Nobel prize-winning economist Professor Friedrich Hayek (1899-1992), who some consider the 20th Century godfather of right-wing economics, pictured at the age of 84 during a presentation ceremony at which he received the Aims of Industry organization's first International Free Enterprise Award. (Photo: PA Images via Getty Images)

Was Frederick Hayek a Bernie Sanders Socialist?

Let's be very clear at this point in history: It is free-market ideologues—not democratic socialists—who are killing democracy.

Les Leopold

Of course not! 

Friedrich Hayek’s The Road to Serfdom (1944) is the political bible of the American right precisely because it slams socialism in all its forms, claiming it will always lead to totalitarianism. Hayek’s best-selling book provides the justification for the incessant conservative attack on government programs and the incessant claim that less government leads to more individual freedom. Prosperity for all, too. Free markets preserve and enhance democracy, the right claims, while government social programs lead to dictatorial collectivism. As Ronald Reagan put it in a 1961 article attacking government programs like the Veterans Administration, Social Security, federal education spending, and farm subsidies: “We can lose our freedoms all at once by succumbing to Russian aggression, or we can lose it gradually by installments. The end result is slavery.”

"Today, the proselytizers of unfettered markets have given us a Wall Street and corporate-dominated system that is leaving behind as many as 100 million Americans who earn less than a living wage."

But conservatives like Reagan obviously had not read Hayek or they would have noticed that their hero wrote many passages they would call “socialistic.” Each and every one of the Hayek passages below would be considered anathema to today’s Republican Party, their think tanks, and their “news” empires, as well as to a goodly number of corporate Democrats. 

But our commentary is not just about playing ‘gotcha’ with free-market charlatans, as satisfying as that might be. More crucially, the overlaps between Hayek and Sanders provide important clues as to how a new path to authoritarianism, not freedom, has been paved by the incessant calls for less government regulation, lower taxes on the wealthy/corporations, more privatization, and fiercer attacks on unions. Free-market ideologues, not Sanders socialists, are killing democracy.

F. A. Hayek (1899-1992) wrote The Road to Serfdom as an explicit intellectual assault on socialists of every stripe, many of whom he knew personally. He went so far as to blame the entire European socialist movement for the rise of Hitler, Mussolini, and Stalin. As a leader of the Austrian school of economics, he argued forcefully against government centralized economic planning and became a major critic of John Maynard Keynes, the English economist who argued that government involvement in the economy was necessary to overcome depressions and mass unemployment. 

Sanders Socialism

Of course, Sanders has no use for anyone who claims that democratic socialism is anathema to individual liberty. To the contrary, Sanders sees his program as the key to enhancing freedom and prosperity. Sanders put democratic socialism on the map during his two runs for president, not only highlighting growing economic inequality, but also the trials and tribulations of those working people who have been left behind. His socialist platform draws heavily on New Deal-type programs that support the common good. Sanders calls for a new economic bill of rights that includes:

  • The right to a decent job that pays a living wage
  • The right to quality health care
  • The right to a complete education
  • The right to affordable housing
  • The right to a clean environment
  • The right to a secure retirement

Of course, Republicans today never tire of referring to such ideas as Marxist and totalitarian. (See here and here.)  Hayek, however, did not.

(Trigger Warning: We are about to quote directly from Hayek which means putting up with his convoluted writing style.  As the arch conservative, William F. Buckley put it, “The first thing I intend to ask the Lord, if a meeting can ever be contrived, is Why does their side get economists who write like Keynes and our side get them who write like Hayek?” All Hayek citations are from the paperback University of Chicago edition edited by Bruce Caldwell, The Collected Works of F. A. Hayek, Volume II)

Right to a Job? 

Hayek recognized that mass unemployment could not be ignored. Discussing the economic transition in England from WWII to a peacetime economy, he says that “the one aim which everybody now agrees comes in the front rank: the conquest of unemployment.” 

But how should mass unemployment and hardship be addressed? Hayek certainly understood that some kind of welfare state was necessary. While always cautioning against going down a slippery slope to total centralized economic planning, he writes, “…but there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody.” (Like food stamps and Section 8 housing vouchers?) 

Similarly, he argues for assistance for “…victims of such ‘acts of God’ as earthquakes and floods. Whenever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken.” (FEMA?)

National Health Insurance?

Republicans despise it. But Hayek does not object to what is the most popular plank of the Sanders platform. As Hayek states:   

“Whereas in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance—where, in short, we deal with genuinely insurable risks—the case for the state’s helping to organize a comprehensive system of social insurance is very strong.”

A Green New Deal?

The environment, perhaps, poses the most difficult problem for those who worship Hayek’s free marketeering and detest Sanders’ efforts to tackle climate change. Rather than deny a role for government when dealing with difficult market externalities, Hayek argues that as long as the regulations apply to all enterprises, they may enhance the welfare of society even if they somewhat reduce narrow economic efficiency. He writes, 

“To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours, or to require certain sanitary arrangements, is fully compatible with the preservation of competition.” 

Not only does Hayek appear to sanction “sanitary arrangements” like mask mandates, he also anticipates that free-markets on their own may be unable to prevent serious ecological damage and suggests that alternative mechanisms, like contemporary proposals for a carbon tax, could be needed:

“Nor can certain harmful effects of deforestation, or some methods of farming, or of the smoke and noise of factories be confined to the owner of property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism.”

It is not possible, of course, to know how Hayek would approach the world-altering problems posed by climate change. But if we take him at his word, he would adhere to scientific analysis that emerged from free and open debate among climatologists. His chapter entitled “The End of Truth” strongly suggests he would reject the big lies told by self-interested deniers. Even in 1944, Hayek drew a sharp distinction between free-market ideologues and his own opposition to centralized economic planning when he wrote: “It is important not to confuse opposition to this kind of planning with a dogmatic laissez fair attitude.”  

End Capitalist Monopolies?

For Sanders, democratic socialism also means taking on the big financial institutions that now dominate the economy. In 2018, Sanders introduced a bill that would break up the six largest banks saying, “If an institution is too big to fail, it’s too big to exist.” 

"The authoritarianism Hayek dreaded is spreading rapidly, not because of the democratic socialists, not because of Green New Deal liberals, not because of Sanders’ young socialists who seek Medicare for All, but rather because of the reckless actions of the “dogmatic free-market” true believers who have sold their souls to the rich and powerful."

Conservative pundits are stuck with a debilitating dilemma: Under free-market theory, no corporation should be so large as to be able to control market prices for products or for labor. Because, markets are supposed to set prices, not large corporations, for-profit monopolies are to be broken up or tightly regulated to preserve the competitive marketplace. Alas, only government has sufficient power to protect markets from unfair monopoly competition. But free marketeers detest government interference in the economy so they have to twist themselves into intellectual pretzels to justify monopoly power. (See here.) Not so with Hayek who writes:

“The probability is that whenever monopoly is really inevitable the plan, which used to be preferred by Americans of strong state control over private monopolies, if consistently pursued, offers a better chance than state management.” 

To be clear, Hayek is not just advocating milquetoast regulation. He wants “stringent price control which leaves no room for extraordinary profits….”

Furthermore, even if these highly regulated enterprises become less efficient because of tight regulation, Hayek wants real protection from privately-owned, profiteering monopolies: 

“Personally, I would much prefer to put up with some such inefficiency than have organized monopoly control my ways of life.”  

Preserve Democracy?

Hayek believes that democratic socialism is an oxymoron. No matter how hard well-meaning socialists try, inevitably, he argues, the socialism part will lead to government control. And the exercise of that control will always undermine democracy itself.

Nevertheless, Hayek was not blind to the linkages between generalized prosperity and democracy. If the economy did not deliver, those left behind would surely turn against democracy:  

“The one thing modern democracy will not bear without cracking is the necessity of a substantial lowering of the standard of living in peacetime or even prolonged stationariness of its economic conditions.”

Today, the proselytizers of unfettered markets have given us a Wall Street and corporate-dominated system that is leaving behind as many as 100 million Americans who earn less than a living wage (as defined as 185% of the poverty line for a family of four.) These are the working people who have yet to experience the bounties promised by the past forty years of neo-liberalism. These are the people most prone to what economists Angus Deaton and Anne Case have labeled “deaths of despair,” epitomized by the opioid crisis. These are the people who may no longer see decent paying jobs anywhere near where they live. As Hayek understood oh so well, when democracy fails to have a meaningful connection to the daily needs of large sections of the population, demagogues will emerge. Today’s free-market ideologues don’t seem to care.

Here’s one more fact that should give pause to the free-market freedom lovers: We have the largest prison population in the world, both in absolute number (2.1 million - 2019) and by population rate (670 per 100,000 residents – 2021) This is un-freedom of the highest order, something to be expected of totalitarian regimes, not free-market democracies. The one feature uniting our massive multi-racial prison population (a majority of whom are white) is that they are economically deprived. The only way for right-wing pundits to justify this is to blame the poor for breaking the law instead of rising up the free-market ladder. We are told this is this the price of liberty. Or is it rather priceless liberty lost when a police state is needed to contain those left behind?  

"Where the free-market ideologues have failed us most is their willful blindness to the perils of runaway wealth and income inequality."

The authoritarianism Hayek dreaded is spreading rapidly, not because of the democratic socialists, not because of Green New Deal liberals, not because of Sanders’ young socialists who seek Medicare for All, but rather because of the reckless actions of the “dogmatic free-market” true believers who have sold their souls to the rich and powerful. In the name of “free-markets” it’s now quite okay to create profitable enterprises that peddle and profit from lies.  It’s quite okay to press for more incarceration to fill our private prisons. It’s quite okay to feed at the trough of massive military contracts. It’s quite okay to finance politicians who undermine elections. And it’s quite okay to secure welfare for the rich (when the free market means free money) while paying little or no taxes.  

Where the free-market ideologues have failed us most is their willful blindness to the perils of runaway wealth and income inequality. When the power and financial imbalance between the very few and the many reaches such extremes, any and all government functions are for sale. They can be easily molded to the needs of the well-heeled and well-connected. The more the Republican right justifies its pillage through palliatives about the wonders of unfettered markets, the more that faith in government and the common good will collapse. Little wonder that democracy, the number one bragging point about the wonders of free markets, is now under overt assault.


Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.
Les Leopold

Les Leopold

Les Leopold, the director of the Labor Institute in New York is working with unions, worker centers and community organization to build a national economics educational campaign. His latest book, "Runaway Inequality: An Activist's Guide to Economic Justice" (Oct 2015), is a text for that effort.  His previous book is "The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It" (Chelsea Green/2009).

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