Liberalism’s Last Man: Hayek in the Age of Political Capitalism, by Vikash Yadav (University of Chicago Press, 288 pp., $35)

According to one of Italo Calvino’s 14 definitions, “a classic is a book which has never exhausted all it has to say to its readers.” F. A. Hayek wrote The Road to Serfdom during World War II. Hayek, an Austrian economist born in 1899, migrated to England in the 1930s. A genuine Anglophile, he was raised in Central Europe and knew its culture inside out. He understood that ideas travel and detected a worrisome consonance between some of the German sentiments that fueled the Nazi regime and the dominant motives of the English intelligentsia in the 1930s. Published in 1944, The Road to Serfdom has been criticized as implying that “standard regulatory interventions in the economy have an inherent tendency to snowball into ‘serfdom’” (Robert Solow). Yet Hayek did not believe that this process was historically inevitable: if it was, why bother to write a book cautioning against it? He certainly shared the desperate feelings of a Cassandra: part of the British (and indeed, of the Western) ruling class was oblivious to how it was preaching solutions not unlike those that totalitarian regimes were applying. How could the result be different?

Hobart and William Smith College professor Vikash Yadav reads The Road to Serfdom as a man of the 2020s, keen to understand the competition between what he calls, following economist Branko Milanovic, “liberal democratic meritocratic capitalism,” as practiced in most of the West, and “political capitalism,” or the system at work in countries like China, Vietnam, and Singapore. He maintains that, in this context, “a Cold-War style strategy of ideological and military containment to limit the spread of political capitalism makes little sense, given the ideological diversity of states that seem to adhere to the model.” Plus, political capitalism becomes attractive insofar as it seems to perform well economically and as its Western counterweight “comes to be associated with political incompetence and instability, mediocre economic performance, highly concentrated ownership of capital, and a lack of intergenerational social mobility.” Liberal democratic meritocratic capitalism needs a revival if it is to restore the appeal it once held for the world.

Yadav believes that Hayek can show us how to make the city on the hill shine again. The Road to Serfdom remains a book that can help “to recover the enduring insights that will permit a robust defense and restatement of liberalism in the contemporary era.” To make his case, Yadav examines Hayek’s book chapter by chapter. Each chapter of his own book opens with quotes that frame the corresponding chapter in Hayek’s. Yadav makes parsimonious use of historical literature and often indulges in anachronisms in his effort to establish The Road to Serfdom as relevant for today, as persuasive in its case against “political capitalism” as it was against full-fledged socialism. Yadav’s key premise may be this:

Liberalism is unable to compete with the levels of sustained, longterm economic growth one finds in political-capitalist regimes. Even if one is skeptical of the reliability of data from China or critical of the aggregated data . . . from Singapore, it is undeniable that these countries have dramatically changed their economies in the last few decades. The remaining attraction of liberalism, then, is mainly that it protects individual freedom . . . while generating modest economic growth over time.

This assumption, not unique to Yadav, has underpinned the debate over industrial policy in recent years: the idea being that, since “politically capitalist” states boast robust economic growth, Western states should imitate them. And, in fact, that is happening: consider the Biden administration’s Inflation Reduction Act, which has little or nothing to do with inflation, or the flows of subsidies the European Union is directing to foster a “green transition.” Over the last decade, calls for an industrial policy (beginning with Marianna Mazzucato’s 2013 book The Entrepreneurial State) have left a mark on economic policy around the world.

Citing Zhang Weying, author of the remarkable 2010 book The Logic of the Market, Yadav acknowledges that China may “succeed economically, in large part, in spite of industrial policy and massive investment in fixed capital by the state.” Indeed, he writes that “it is not clear that political capitalism’s use of bureaucratic guidance and state-structured competition was the actual catalyst for a sustained acceleration in growth.” One wishes he had devoted more space to this important insight.

One lesson of political capitalism may be that even a hint of economic liberty, if given after years of economic oppression, can be enough to unleash substantial economic growth. Such growth is the result not of government or the state but of individuals acting to improve their lot. One can also look at demography and see how globalization, by uplifting millions, multiplied opportunities that enabled growth. “Complete” liberty, if such a thing exists, was not necessary to produce growth—human beings are enterprising enough that just a little elbow room goes a long way.

Is Yadav mistaken in hoping that liberalism can be revived in the West? Milanovic distinguishes between different kinds of capitalism because he maintains “that the entire globe now operates according to the same economic principle —production organized for profit using legally free wage labor and mostly privately owned capital, with decentralized coordination.” That definition is rigorous and meaningful enough. But in the part of the world that allegedly embraces liberal democratic capitalism, the recent trend is to keep property formally private, yet dictate to the owners of the means of production how to use them.

“Hayek argues,” Yadav reminds us, “that the virtue of market competition is precisely that one cannot know in advance who will succeed and who will fail.” Government programs, subsidies, and regulations, both in the U.S. and in Europe, are expanding at a tremendous pace, precisely to change this state of affairs. In the past, in mixed economies, government may have picked winners, but it restricted such interventions only to portions of the economy. Now, it seems to see a duty to intervene across the board. In a market economy, people make decisions based on prices: they will often go for the cheaper dwelling, car, or hamburger. But what if governments decree that they should instead be nudged to choose what it finds more desirable—say, more environmentally minded options? Or perhaps they should be pushed to buy goods and services produced by geopolitical “allies,” even if these are pricier and perform less well than those produced in nations deemed unfriendly. The idea of competition as an open field in which the novel and the unexpected can emerge is increasingly confined to areas that governments consider trivial.

In 1898, sociologist William Graham Sumner wrote an essay titled “The Conquest of the United States by Spain.” The U.S. had just emerged victorious from the skirmish in Cuba with Spain, but though the Americans had “beaten Spain in a military conflict,” they were “submitting to be conquered by her on the field of ideas and policies.” Spain was a symbol “of the modern imperialistic states,” Sumner wrote, while the United States, by virtue of “its historical origin, its traditions, and its principles, is the chief representative of the revolt and reaction against that kind of a state.” And yet, the war’s winner was absorbing the core ideas of the loser and transforming into a modern military state itself. This was not a new phenomenon: conquered Greek culture had blossomed in conqueror Rome. But Sumner was not speaking of theater or sculpture. Political ideas travel, too.

One wonders if this is not the ultimate outcome of the current obsession for political capitalism, beginning with the so-called Chinese model. Has liberal democratic capitalism surrendered to an idea that “economic systems” (whatever these are) should be structured around government-defined missions and goals? Capitalism has the capacity to survive in interstitial spaces, while producing tremendous wealth that the government can then plunder. One problem has stayed the same from Hayek’s time to ours: the public fixation with capitalism’s ills has very often to do with things that are not capitalistic in the slightest, but—being widely practiced in the West—are seen as falling under the label.

Yadav is no specialist in history of ideas nor economics, but he is an amateur in the best sense of the word; his analysis may be questionable at times, but it is well constructed and comes with a refreshing perspective. He reads Hayek with genuine curiosity—a rare and valuable thing.

Photo by PA Images via Getty Images


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