|Peter Boettke|

In the most recent issue of The Review of Political Economy, Andrew Farrant and Edward McPhail continue their scholarly examination of the historical record on Hayek and Pinochet. The abstract from their article reads as follows:

Commenting on the Pinochet regime, Friedrich Hayek famously claimed in 1981 that he would prefer a ‘liberal’ dictator to ‘democratic government lacking liberalism.’ Hayek's defense of a transitional dictatorship in Chile was not an impromptu response. In late 1960, in a little known BBC radio broadcast, Hayek suggested that a dictatorial regime may be able to facilitate a transition to stable limited democracy. While Hayek's comments about Pinochet have generated much controversy, this paper neither provides a blanket condemnation of his views (he did not advocate dictatorship as a first-best ‘state of the world’) nor tries to excuse his failure to condemn the Pinochet junta's human rights abuses, but instead provides a critical assessment of Hayek's implicit model of transitional dictatorship.

A couple of things are important to stress here before I start. Farrant and McPhail are not joining the bandwagon of irresponsible critics of neo-liberalism, but instead are critics of poor scholarship on any side of the ideological spectrum. The reality is that Hayek went to Chile twice, he was there primarily in academic settings and abstract theorizing about the structure of government and the operation of a free market economy.* He was called upon to talk about economic policy and in doing so he gave general advice about how to get out of the interventionist mess and toward a free market system that would generate long run economic growth and development. In the process, he made errors of judgement about the situation around him and the biases in the reporting about that situation from those in the mainstream of intellectual life. What he insisted on in this context was the primacy of liberalism as a philosophical guiding principle in the structure of government, not democratic procedures, and the necessity of free market economic policies for long run economic growth and development.

The question I think folks should be asking about Hayek is: "How could an individual who devoted his entire life to questions about constraining the coercive powers of government be blind to the abuse of that power in the hands of dicator?" Farrant and McPhail suggest the answer might be found in Hayek's theory of the transitional dictator. Now as a matter of empirical examination, I always thought of this position as similar to the pattern that Robert Barro identified in his paper on "Democracy and Growth". But now I consider that not quite right on my part, and actually a facile reading of both Hayek and Barro. It should be obvious, however, that serious analysis of non-democratic governments is an important area of study -- see, e.g., my review of Ronald Wintrobe's The Political Economy of Dictatorship in the JEL; also consider the more recent work of North, Wallis and Weingast, as well as Acemoglu and Robinson. In short, more scholars need to be working on the analytics and the empirical examination of the political economy of non-democratic governments.

So this now brings me to my thought experiment inspired by the discussion in Farrant and McPhail and reflecting on Hayek's writings from The Road to Serfdom to Law, Legislation and Liberty. First, I think it is important to stress important categories from Hayek's writings. Hayek is a "rule of law" theorist. As he puts it in The Constitution of Liberty (1960, 206): "The rule of law is therefore not a rule of the law, but a rule conerning what the law ought to be, a meta-legal doctrine or a political ideal. It will be effective only in so far as the legislator feels bound by it. In a democracy this means it will not prevail unless it forms part of the moral tradition of the community, a common ideal shared and unquestioningly accepted by the majority."

The achievement of a social order characterized by freedom under the law -- a system which restrains coercion to the maximum extent possible -- is only possible under Liberalism. "Liberalism," Hayek writes, "is concerned mainly with limiting the coercive powers of all government, whether democratic or not, whereas the dogmatic democrat knows only one limit to government -- current majority opinion. The difference between the two ideals stands out most clearly if we name their opposites: for democracy it is authoritarian government; for liberalism it is totalitarianism." (1960, 103) It is the condition of equality before the law, and the generality norm -- e.g., a political system that exhibits neither discrimination nor dominion -- where the liberal and democratic traditions align. But, Hayek stressed, it is important to remember that: "Liberalism is a doctrine about what the law ought to be, democracy a doctrine about the manner of determining what will be law."

So in Hayek's rendering we have four permutations, and I am going to rank them as I believe he would:

1. Liberal/Democratic

2. Liberal/Authoritarian

3. Totalitarian/Democratic

4. Totalitarian/Authoritarian

It is #2 that is getting Hayek in trouble in the context of the current discussion. Keep in mind that this is a conceptual category, not any real-world one. To any reader of Hayek, however, the clear superiority of #1 should be obvious. But lets walk through how we gets to opening up the door for the possiblity of a transitional dictator.

I think it is important to remember that in his debate with market socialist in England -- so thinkers such as H. D. Dickinson -- the claim was made that they were socialists in their economics because they were individualists in their political philosophy. Part of Hayek's agenda in writing, was to disabuse them of this notion. The high ideals of democracy and the rule of law, Hayek argued in The Road to Serfdom, were incompatible with the organizational logic of socialist economic planning. This is why, in his intellectual framework, #3 is not a sustainable option, but collapses overtime into #4 -- the outcome that must be avoided. This is why The Road to Serfdom is a warning about a tragic tale of high ideals and aspirations being crushed by the logic of the economics and political economy of socialism.

Hayek wants to salvage the ideals of democracy, but that can only be accomplished within Liberalism. As he argues in Law, Legislation and Liberty, Vol. 3 -- The Political Order of a Free People -- democracy was meant to describe the ideal of equal law for all. However, Hayek argues, if we are to preserve this ideal for our time, we must re-examine existing political arrangements and the abuse of the term democracy. In the modern age, rather than democracy meaning equal law for all, it has been employed to designate political systems that "lead to the creation of new priviliges by coalitions or organizing interest." (p. 40) In other words, current democratic governments world wide violate the generality norm and thus have produced systems where the rule of law is part of mythology, but not a governing principle. This transformation has dire consequences not just for economic freedom, but ultimately our political freedoms.

The question then turns to how do you break this log-jam in the political order and estable a regime of freedom, peace and prosperity. First, the population must become disillusioned with the current system. But in their disillusionment they need to correctly identify the source of their frustration. Second, a new "constitution of liberty" must be established and freedom under the law must be embedded in the very structure of government. Only in that establishment of the "machinery" can a free society be cultivated and maintained.

Social change to Hayek is primarily a by-product of intellectual activity, but it does also entail constitutional craftsmanship and the establishment of binding constraints on the coercive powers of government such that principle may prevail against the constant threat of expediency. The debilitating consequences of special interest group politics is not something uniquely Hayek -- all classical liberal economists recognize the problem from Mises to Tullock (with Buchanan, Coase, Friedman, Olson, etc. in-between). One of my favorite books in political theory and policy that is relevant for this point is Vincent Ostrom's The Meaning of Democracy and the Vulnerabilities of Democracies, and if you haven't read it -- I cannot recommend it highly enough.

But I think Hayek had an intellectual failing of sorts in that he didn't apply the same logic of economics and political economy that he deployed to demonstrate by #3 would not be a sustainable system and would collapse overtime into #4, to why #2 would more likely result in #3-#4 than #1. This is to a considerable extent what William Easterly has demonstrated in his work on autocracy and development, see my earlier discussion of this at CP. Frank Knight had a great line in his work where he stated that when folks say: "I want power to achieve X, Y, and Z", he stops at "I want power" because that is the only thing he believes from them. So just as it is conceptually possible to imagine "democratic socialism", it is possible to imagine a "liberal authoritarian" -- but when that thought experiement is constrained by the logic of economics and political economy, the conceptual must be re-thought.

The conceptual rethinking isn't all that radical to Hayek's thought in general, consider this signature discussion from "Individualism: True and False":

Since it has become fashionable to deride Smith and his contemporaries for their supposedly erroneous psychology, I may perhaps venture the opinion that for all practical purposes we can still learn more about the behavior of men from the Wealth of Nations than from most of the more pretentious modern treatises on "social psychology." However that may be, the main point about which there can be little doubt is that Smith's chief conern was not so much with what man might occasionally achieve when he was at his best but that he should have as little opportunity as possible to do harm when he was at his worst. It would scarcely be too much to claim that the main merits of the individualism which he and his contemporaries advocated is that it is a system under which bad men can do least harm. It is a social system which does not depend for its functioning on our finding good men for running it, or on all men becoming better than they now are, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid. Their aim was a system under which it should be possible to grant freedom to all, instead of restricting it, as their French contemporaries wished, to "the good and the wise." The chief concern of the great individualist writes was indeed to find a set of institutions by which man could be induced, by his own choice and from the motives which determined his ordinary conduct, to contribute as much as possible to the needs of all others; and their discovery was that the system of private property did provide such inducements to a much greater extent than had yet been understood.. They did not contend, however, that this system was incapable of further improvement, and still less, as another of the current distortions of their arguments will have it, that there existed a "natural harmony of interests" irrespective of the positive institutions. They were more than merely aware of the conflicts of individual interests and stressed the necessity of "well-constructed institutions" where the "rules and principles of contending interests and compromised advantages" would reconcile conflicting interests without giving any one group power to make their views and interests always prevail over those of all others. Hayek, Individualism and Economic Order, 1948, 11-13.

#1 is the ideal -- especially if we understand as Vincent Ostrom stressed that the meaning of democracy is about ways of relating to on another, not merely the act of political expression through voting. #2 is untrustworthy, #3 is unsustainable, and #4 is horrific. The unsustainability of #3 is tragic, but untrustworthiness of #2 is to be expected by anyone familiar with the logical analysis and historical experience with #3 and #4.

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*Bruce Caldwell and Leonidas Montes have a working paper that does an excellent job in my opinion of contextualizing Hayek's mind-set and the intellectual climate of the late 1970s early 1980s when Hayek made his trips to Chile.