Jason Soon has more on the debate over Nordic social democracy and Friedrich Hayek’s road to serfdom thesis. It began with an article in the Scientific American where Jeffrey Sachs annoyed Hayek fans by saying:
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.
In an article for the Wall Street Journal William Easterly responds :
Mr. Sachs disses the great Hayek by repeating the old canard that Hayek thought any attempt at taxpayer-funded social insurance would put us all on the "Road to Serfdom." This is an especially strange charge, since Hayek (while certainly opposed to the social engineering that proponents of a full-blown welfare state usually have in mind) himself calls for some form of taxpayer-funded social insurance against severe physical deprivation on pages 133-34 of "The Road to Serfdom." Mr. Sachs, currently best known for his star-driven campaign to end world poverty, has apparently spent more time studying the economic thinking of Salma Hayek than that of Friedrich.
While Sachs is wrong about Hayek, is he wrong that the Nordic countries do a better a job of preventing poverty than Anglo-Saxon countries? Easterly offers a few remarks about America’s "tortured history of a black underclass" and openness to impoverished immigrants but doesn’t make much of case beyond that.
For many of those on the left, Hayek personifies the nightmare of neoliberalism and unrestrained corporate capitalism. According to Henry Giroux, neoliberalism is fanatical ideology that steals from the poor and gives to rich, undermines democracy, and destroys the welfare state. In the imagination of its enemies, neoliberalism roams the world like a monster — crushing community, devastating the environment, and suppressing free expression. Along with Milton Friedman, Hayek is the monster’s Dr Frankenstein.
With this vision in mind, it might come as a surprise to discover that Easterly is right — Hayek did support some welfare state institutions. I’ve quoted Hayek on this before, but I might as well do it again.
In The Constitution of Liberty he wrote "though a few theorists have demanded that the activities of government should be limited to the maintenance of law and order, such a stand cannot be justified by the principle of liberty" (p 257). He went on to say that:
All modern governments have made provision for the indigent, the unfortunate, and disabled and have concerned themselves with questions of health and the dissemination of knowledge. There is no reason why the volume of these pure service activities should not increase with the general growth of wealth. There are common needs that can be satisfied only by collective action and which can be thus provided for without restricting individual liberty (p 257).
In Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice he supported both government funded education and income support. On education he wrote::
There is also much to be said in favour of the government providing on an equal basis the means for the schooling of minors who are not yet fully responsible citizens, even though there are grave doubts whether we ought to allow government to administer them (p 84).
On income support he wrote:
There is no reason why in a free society government should not assure to all protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organized community, those who cannot help themselves. So long as such a uniform minimum income is provided outside the market to all those who, for any reason, are unable to earn in the market an adequate maintenance, this need not lead to a restriction of freedom, or conflict with the Rule of Law (p 87).