Fredrich von Hayek warned us that any government intervention in the economy will lead to a ‘Road to Serfdom’. However, as history has shown us, government interviention in the economy does not inevitably lead to totalitarianism. For example, Sweden has one the biggest state-sectors in the world and still retains an ultra-liberal society. In addition, socially-just government internvention in the economy does not reduce economic efficency; as Jeffery Sachs puts it: “Von Hayek was wrong. In strong and vibrant democracies, a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness“. Historically speaking, the opposite is true; protecting capital from the masses, more often than not, leads to totalitarianism and authoritarianism and economic stagnation—Nazi Germany, Fascist Italy, Bureaucratic Authoritarianism in Latin America, etc. What is more disturbing is that Hayek himself was part and parcel, an ‘organic intellectual’, of one of the most repressive authoritarian regimes of the 20th century: Pinochet’s Chile. In order to understand this paradox, we have to understand what Hayek meant by ‘freedom’ and ‘liberty’.
To Hayek the market system is freedom, and any interuption in that system is totalitarian. However, Hayek goes further by arguing that only in the market system can reason emerge, as Frank Cunningham points out:
Yet another argument connecting catallaxy and neoliberalism proceeds by an historical, evolutionary argument of Hayek’s that links market competition and rationality. On the story he sketches, the few people who are skillful at taking appropriate means to achieve their given ends (that is, skilful at rational thought) will make gains in competition thus obliging others to ‘emulate them in order to prevail’ so that ‘rational methods will progressively be developed and spread by imitation’: it is not ‘rationality which is required to make competition work, but competition....which will produce rational behaviour.
Of course, this ignores that what counts as ‘success’ is determined by the hegemonic ideology and values embedded in the system; ergo, what Hayek is essentially saying is that ‘profit’ is reason, as if 'profit' is the only definition of reason. However, as we have seen with the current crisis, at the micro-level, profitability and the herd-mentality of the markets leads to a risky game where one can lose it all and indeed, banks would have lost it all, if it wasn’t for the public baling them out; and secondly, it leads to irrational macro-economic and social crises that undermine the future expansion of “rationality”/profit, contradicting Hayek’s thesis--Keynes and Marx's critique of neoclassical economics over-emphasis on the micro-level. Nevertheless, to Hayek, any intrusion on the market system, as defined by microeconomics, is an attempt to stop human reason from flourishing.
In addition, democracy is not—to Hayek or neoliberals—an inherently positive thing; it exists in order for the machinery of government to change hands peacefully and to prevent any one government from turning into an authoritarian government by subjecting them to popular referendums. In addition, Hayek is also a strong constitutionalist, arguing that the constitution is essential to preventing a authoritarian regime from emerging and also, as a check against the ‘tyranny of the majority’—problematically for this line of argumentation is that the inverse is also true; those who draft the constitution, since it does not come from God, impose a tyranny of the minorty on the majority.
The fundamental fear that all liberals share is that democracy has the potential to create a subjectivity that seeks greater and greater democraticization of life and equalization of power. Democracy, deprived of its liberal baggage within a class divided society was unacceptable for capital and liberals, as C.B. Macpherson writes: “Democracy originally meant rule by the common people, the plebians. It was very much a class affair: it meant the sway of the lowest and largest class” (The Real World of Democracy 5). What they, liberals, want to prevent, at the very least, is a ‘radical demoracy’, as elucidated by Mouffe and Laclau, who argue that “the moment when the democratic discourse becomes available to articulate the different forms of resistence to subordination that the conditions will exist to make possible the struggle against different tpes of inequality” (Hegemony and Socialist Strategy, 154). Therefore, what must be created first place is the liberal state, then democratization. As Macpherson argues, “In our Western societies the democratic franchaise was not installed until after the liberal society and the liberal state were firmly established. Democracy came as a top dressing...It was the liberal state that was democratized, and in the process, democracy was liberalized” (Real World of Democracy 5).
Hayek sought a means to protect liberalism from the encroachment of democratic subjectivity that was certainty in the ascendency during most of the twentieth century. The logic for equalization, via democratic subjectivity, was simple; as pointed out by de Tocqueville, “It is impossible to believe that equality will not finally penetrate as much into the political world as into other domains. It is not possible to conceive of men as eternally unequal among themselves on one point, and equal on others; at a certain moment, hey will come to be equal on all points”. As the twentieth century lagged on, new and increasginly more complex demands were being exacted on the state from the popular classes that had, in Gramscian terms, had become an ‘integral state’—welfare state—that increasingly took on the responsibilities for correcting social and economic ills.
However, within a capitalist system, capital cannot create what Gramsci calls an ‘expansive hegemony’, where the hegemonic bloc is able to articulate and represent the interests of all into a “genuine ‘national-popular will’ ” (Mouffe); it relies on a ‘passive revolution’, or ‘transformism’ of demands into the system, which Mouffe describes as. “...a bastard form of hegemony and the consensus obtained with these methods was merely a ‘passive consensus’. In fact, the process whereby power was taken was termed a ‘passive revolution’ by Gramsci, since the masses were integrated through a system of absorption and neutralization of their interests in such a way as to prevent them from opposing those of the hegemonic class” (Mouffe).
By mid-century, especially the 1960s and 1970s, demands were beginig to surpass the ability of the state to ‘transform’, or institutionalize demands, because they were beginning to radically challenge the class and ideological hegemony of the system, by taking the ‘democratic revolution’ seriously. As David Harvey argues,
Discontent was widespread and the conjoining of labour and urban social movements throughout much of the advanced capitalist world appeared to point towards the emergence of a socialist alternative to the social compromise between capital and l abour that had grounded capital accumulation so successfully in the post-war period. Communist and socialist parties were gaining ground, if not taking power, across much of Europe and even in the United States popular forces were agitating for widespread reforms and state interventions. There was, in this, a clear political threat to economic elites and ruling classes everywhere, both in the advanced capitalist countries (such as Italy, France, Spain, and Portugal) and in many developing countries (such as Chile, Mexico, and Argentina). In Sweden, for example, what was known as the Rehn–Meidner plan literally offered to gradually buy out the owners’ share in their own businesses and turn the country into a worker/share-owner democracy. But, beyond this, the economic threat to the position of ruling elites and classes was now becoming palpable...The upper classes had to move decisively if they were to protect themselves from political and economic annihilation.
To be continued...