September 2024 marks the eightieth anniversary of the publication of the British edition of Friedrich Hayek’s great book The Road to Serfdom. In the book, Hayek makes a powerful argument in defense of the rule of law, the principle that the same legal rules must be applied to everyone who is in a given situation and that the application of the rules must not be subject to governmental discretion. Unfortunately, he also argues that several parts of the welfare state can be made compatible with this requirement.
Hayek provides and eloquent and succinct characterization of the rule of law in this passage:
Nothing distinguishes more clearly conditions in a free country from those under arbitrary government than the observance in the former of the great principle known as the Rule of Law. Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and expressed beforehand—rules which make it possible to foresee with fair certainty how the authority will use its coercive power in given circumstances and to plan one’s individual affairs on the basis of that knowledge.
In brief, Hayek argues that if the state follows a fixed rule, you can plan what you want to do without fear that state officials will arbitrarily interfere with you. In this connection, he remarks that almost any rule is better than none. (Is this true? If the Nazi government enacts a rule that all Jews will be sent to concentration camps, is this better than a situation in which Jews are sent to concentration camps arbitrarily? Somehow, “At least the Jews will be able to know that they shouldn’t make long term plans that depend on their being free” seems an inadequate response.)
Unfortunately, Hayek thinks that several welfare state measures are compatible with the rule of law, as long as the government follows fixed rules. He says:
That hodgepodge of ill-considered and often inconsistent ideals which under the name of the Welfare State has largely replaced socialism as the goal of the reformers needs very careful sorting out in its results are not to be similar to those of full-fledged socialism. This is not to say that some of its aims are not both practicable and laudable. . .The increasing tendency to rely on administrative coercion where a modification of the general rules of law might, perhaps more slowly, achieve the same object...is still a powerful legacy of the socialist period...
How far is Hayek prepared to accept welfare state measures that rely on the fixed implementation of bureaucratic rules? Quite far, it transpires:
There is no reason why in a society which has reached the general level of wealth which ours has attained [i.e., England in 1944], the first kind of security [i.e., limited, not absolute] should not be guaranteed to all without endangering general freedom...there can be no doubt that some bare minimum of shelter and clothing can be assured to everybody... The case for the state’s helping to organize a comprehensive system of social insurance is very strong...there is no incompatibility between the state’s providing greater security in this way and the preservation of individual freedom.
Suppose, for example, that the government wants to give money to the poor. Then, in his view, a law that declared everyone who earned below a specified amount is entitled to aid is better than one that leaves it to government bureaucrats to determine whether an applicant for the money is genuinely needy. People could not complain that they were being taxed according to the whims of government bureaucrats. They would be able to know the rule in advance and plan their spending with this in mind.
Hayek is well-aware that welfare state measures are dangerous; they could lead to a completely planned economy by a slippery slope. But he did not think his own proposals were liable to have this effect. Ludwig von Mises disagreed with him. Mises’s review of The Constitution of Liberty, in which Hayek elaborated on his welfare state ideas, was generally laudatory, but his comments on those ideas were decidedly otherwise:
In fact, the Welfare State is merely a method for transforming the market economy step by step into socialism. The original plan of socialist action, as developed by Karl Marx in 1848 in the Communist Manifesto, aimed at a gradual realization of socialism by a series of governmental measures. The ten most powerful of such measures were enumerated in the Manifesto. They are well known to everybody because they are the very measures that form the essence of the activities of the Welfare State, of Bismarck’s and the Kaiser Wilheim’s German Sozialpolitik as well as of the American New Deal and British Fabian Socialism. The Communist Manifesto calls the measures it suggests “economically insufficient and untenable,” but it stresses the fact that “in the course of the movement” they outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely “revolutionizing the mode of production.”
Later, Marx adopted a different method for the policies of his party. He abandoned the tactics of a gradual approach to the total state of socialism and advocated instead a violent revolutionary overthrow of the “bourgeois” system that at one stroke should “liquidate” the “exploiters” and establish “the dictatorship of the proletariat.” This is what Lenin did in 1917 in Russia and this is what the Communist International plans to achieve everywhere.
What separates the Communists from the advocates of the Welfare State is not the ultimate goal of their endeavors, but the methods by means of which they want to attain a goal that is common to both of them. The difference of opinions that divides them is the same as that which distinguished the Marx of 1848 from the Marx of 1867, the year of the first publication of the first volume of Das Kapital.
