From: Contending with Hayek
On Liberalism, Spontaneous Order and the Post-Communist Societies in Transition
Christoph Frei / Robert Nef (eds.)
Political pragmatists like to base their arguments on principles. They proclaim the preservation and promotion of freedom and human dignity, of general welfare and social justice. They cham- pion market economy, sustainable growth, education, and culture. Yet few politicians take the time to probe the meaning and importance of these axioms. Often their reference to such principles remains vague; a thorough discussion of fundamental issues does not take place.
The Liberales Institut in Zurich was founded in 1979 as a foundation under private law. It provides a platform where – away from the hustle and bustle of daily life – the basic values and concepts of our political culture can be debated and questioned in light of the liberal tradition. The Institute furnishes a meeting place for practitioners and theoreticians from different walks of life and professions. The aim is to examine issues in an open atmosphere of inquiry and experimentation. Our think tank is not associated with any political party. Its purpose is to foster the development and dissemination of liberal ideas in the classical European sense – ideas about personal freedom, limited government, and free markets.
The Institute’s primary activity is the sponsorship of various lectures and seminars. A group of patrons support these activities through contributions and donations. Membership is not contemplated, so as to preserve the character of an open forum. Interested individuals, institutions, and companies are invited to participate in all activities free of charge and without any obligations or commitments.
The essays in this volume are the result of a Colloquium that was held in Zurich in the Fall of 1992. Under the auspices of the Institute, thirteen well-qualified experts from around the world were invited to contend with F.A. Hayek – to re-examine critically main tenets of his social and political philosophy, and to discuss the continuing pertinence of his ideas. All essays were written for the Colloquium; most of them have been revised and updated in light of the discussions. I would like to acknowledge with gratitude the efforts of the contributors; they have given generously of their time and expertise. I also thank all those who were involved in the careful preparation of the manuscripts for publication.
Dr. Peter Forstmoser
Chairman, Board of Trustees Liberales Institut
Zurich, September 1994
Market Economy as “The Road out of Serfdom”
150 years ago Switzerland was one of the poorest countries in Europe, without raw materials, without access to the sea, without powerful friends; an emigration country with occasional famines. Today it is one of the richest countries in the world. Above all in the 19th century, during which the foundations for this success were laid, the liberal economic order combined with a willingness to work and the propensity to save brought about a sort of “economic miracle”. In the 20th century Switzedand owes its prosperity to the further development of these qualities and the fact that Switzerland remained untouched by two world wars.
Success always has at least three components: background conditions, efficiency, and luck. The first two can be influenced; one has to hope for the last, recognise the favourable moment and grasp it. Liberals should have enough intellectual honesty to admit to the importance of luck in the sense of a happy constellation and its influence in a spontaneous set-up. The prosperity of nations depends on the quality of their people – but not just on that.
This glance at the economic history of Switzerland allows us to draw one optimistic and one pessimistic conclusion about the present. We tend to be optimistic because it is clear that a liberal economy can be a success. Experience shows us that it works precisely because it is a developing phenomenon which can overcome setbacks and losses. At the same time, we should beware of excessive optimism, because the creation of an economy based on liberal principles as a road out of serfdom is never the work of a single generation. It requires much time and patience’ And precisely these two resources are especially scarce today in the former eastern bloc.
When Moses led the children of Israel out of the bondage of Egypt and into the promised land, the passage through the desert also took an entire generation. The important elements were not just the character of Moses as a leader but also the Ten Commandments and patience – tried and tested but renewed again and again by Hope. We can only hope that the most important of these prerequisites can be fulfilled in today’s eastern bloc.
There are too many intellectuals who travel to central and eastern Europe nowadays to distribute good economic advice, which they themselves do not practise at home or with regard to others. We do not wish to lend our voice to this chorus. Economics is always a shared learning experience in the course of which – for example – customs duties and import restrictions are dismantled. The same applies to the exchange of ideas.
Diversity, envy and need
One of the most difficult hurdles in the current transformation process lies in the area of social psychology, namely in the transition from equality in serfdom to inequality in diversity, which of necessity brings with its substantial differences in income and wealth. Diversity is one necessary factor in the survival of freedom, but every liberal system rests on a minimal basic consensus – on the majority acceptance of inequality. Envy must not be allowed to undermine the basis of trust for exchange and competition and the commitment to diversity must be permanently supported.
One emphatic symbol of diversity was not invented by a classical liberal but by a mathematician; it is the famous Gaussian distribution curve. For liberals it also has a political aspect, because it expresses the fact that good and bad characteristics in a society always occur in a normal distribution. If one wants to do away with the negative aspects, one is in immediate danger of destroying the positive aspects. That which is ‘well meant’ is very often the opposite of good. The Gauss curve also plays a part in social politics. It is impossible for everyone to help everyone else – indeed it is not even desirable for everyone to help everyone else – instead one must ensure that the needy – perhaps 5% – but certainly no more than 10 % are not left in the lurch. A society which goes beyond this upper limit of collective help, overreaches itself and eventually loses the ability to survive.
Evolution and revolution
Under socialist rule the idea of socialist progress was propagated for decades. The population was to do without freedom and prosperity in the present in order to achieve it in the future. Today’s scepticism about the idea of progress is understandable against this background, but it should not degenerate into cynicism. We are not in fact simply going round in circles. There is evolution, but it is slow. People are not easily educated, but they do not entirely lack educatability. Progress is evolution and innovation, continuity mixed with spontaneity. The idea of evolution may bring some relief to the current problem in the former eastern bloc. The contrast between the principle of gradual evolution and spasmodic revolution is rather a matter of speed than of principle. It is well known that evolution consists of a multitude of small revolutions. The idea of evolution connects with the past, but does not subordinate the present to an uncertain future. To this extent it is different from utopian concepts, which always sacrifice the present for a desired future – a future which does not take place anyway. These methods suffocate in continual disappointments the grudging but necessary readiness to make sensible sacrifices for common progress.