What would Hayek say?

In the past month, Australian intellectual life has been made somewhat livelier by a sideshow featuring the ideas of Austrian-born Nobel prize-winning economist and social philosopher Friedrich Hayek. It would not matter much for most people except that those slugging it out are the nation’s two political leaders, John Howard and Kevin Rudd. What would Hayek have made of all this?

He would have been pretty unimpressed, but he would have been unfailingly polite. On his visit to Australia in 1976, he responded to a hostile critic: “I don’t wish to trade discourtesies with you, sir.”

Rudd claims that Howard is in thrall to this mysterious Austrian and that government policy is marching along the free-market road Hayek surveyed. Perhaps Rudd has decided if he uses the term market fundamentalist long enough the label will stick. Like “fork in the road” and most slogans, however, there’s no substance to the Rudd charge.

Two great economists had the better of the argument in the 20th century, the best known being Milton Friedman who died last month. The other was Hayek, who died in 1992. Both won the Nobel prize for economics and both lived into their 90s.

Friedman was also a great populariser and Hayek unexpectedly became one. His 1944 book The Road to Serfdom sold millions of copies, much to his surprise. His book gave voice to concerns about planning by governments and intervention in markets and their consequent effect on individual freedoms, concerns shared by many others. This understanding that markets were likelier to reach positive outcomes for a society than the imagined genius of a bunch of bureaucrats with political objectives to satisfy had become, by the 1980s, conventional wisdom.

Politicians across the world now pay more than just lip service to markets. Some even implement forward-looking market-oriented policies, the common ingredient being: governments, get out of the way.

So how do Howard and Rudd stack up in a Hayekian universe?

Not too well, sadly. Hayek was a constant critic of monopolies of all kinds and was especially aware that governments were prone to capture by producer interests.

The Howard Government seems to try to steer a correct path but too often, when participants in the market feel the pinch, it is willing to hand over some of the cash it has extracted from the pockets of the public or make arrangements ever so slightly in favour of an incumbent group. Its ears have never been totally deaf when some of the dinosaurs of Australian industry come begging.

But apparently the Labor leader can do better with some vague, prescriptive industry policy in mind, overseen by a socialist-left warrior of the 20th century who has a predilection for such stuff.

Talk about fundamentalism.

On this page, my colleagues Barry Maley, Peter Saunders and I recently implored the Government to step back and consider the consequences of making ever larger numbers of Australians dependent on it for a growing proportion of their income.

We have argued the Government is effectively nationalising the family, even with the best of intentions. Hayek would be horrified by these trends.

It is absurd to accuse Hayek, as Rudd does, of saying that “any form of altruism is dangerous”. He never said that and he never believed it. Hayek’s life was dedicated to refining ideas that would support a free society and so enlarge opportunities for individuals. He argued that altruism was an important instinct in days long past when, to survive, people had to co-operate in close, often family, networks.

Through time it transcended into what he called the extended order, where rules began to develop by learning and imitation (such as private property and the rule of law), which allowed complete strangers to trade and co-operate peacefully without having to know or care for each other.

It is no surprise that high trust market societies such as ours are not only free but prosperous on any measure.

Altruism survives, though. Just look at what people do in this country voluntarily to try to help others within and beyond the family, and beyond the country. Indeed, the true altruistic impulse is what we see today, in our advanced free market and as a result of it, rather than the instinctive one that self-survival required in the past.

Rudd’s accusations are bizarre and serve no purpose. Perhaps he is confusing Hayek with Ayn Rand. There seems no other sensible explanation.

Australia now has, it seems, two big-government conservative political parties vying for the affections of voters. Hayek worried for most of his life about this particular problem and tried to devise all sorts of constitutional means to put curbs on unlimited democracy. Democracy, he believed, was the best way of ridding a country of an incompetent or unpopular government, but it was also, potentially, a path to economic ruin and demagoguery if not constrained.

It would be more useful for Howard and Rudd to reconsider Hayek on some of these important issues. I am not for a minute suggesting that a Hayekian world is utopia or that nobody should contest his ideas. Neither would he. But caricaturing the ideas of the man The New Yorker magazine — among others — declared the winner of the 20th century’s ideas contest serves nobody’s interest and makes its protagonists look pretty foolish. We have higher expectations of our leaders.

It is the 21st century. We should be building on what we have learned in the 20th century. Hayek is a good place to start. We can all thank Rudd for giving us the opportunity to reflect on this.

Greg Lindsay is the executive director of the Centre for Independent Studies in Sydney. Last month he was elected president of the Mont Pelerin Society at its general meeting in Guatemala. Hayek founded the society in 1947.