Happy Birthday, F. A. Hayek

Today is the 116th anniversary of the birth of F. A. Hayek, one of the greatest scholars of the 20th century.

Back in 2010, as the tea party movement was on the verge of delivering an electoral rebuke to President Obama’s big-government policies, the New York Times derided the movement for reviving “long-dormant ideas [found in] once-obscure texts by dead writers.” They meant Hayek especially. But a more astute journalist might not have regarded Hayek as obscure.

Who was Hayek? He was an economist born and educated in Vienna. After the Nazi conquest of Austria, he became a British citizen and taught there and at the University of Chicago for most of his career. He was awarded the Nobel Prize in Economics in 1974. President Ronald Reagan called him one of the two or three people who had most influenced him, and so did some of the dissidents behind the Iron Curtain. President George H. W. Bush awarded him the Medal of Freedom. Margaret Thatcher banged his great book “The Constitution of Liberty” on the table at Conservative Party headquarters and declared “This is what we believe.” Milton Friedman described him as “the most important social thinker of the 20th century.”

Today is the 116th anniversary of the birth of F. A. Hayek, one of the greatest scholars of the 20th century.”

But respect for Hayek extended far beyond libertarians and conservatives. Lawrence H. Summers, former president of Harvard and a top economic adviser to Presidents Clinton and Obama, called him the author of “the single most important thing to learn from an economics course today” — that markets mostly work without plans or direction. He is the hero of “The Commanding Heights,” the book and PBS series on the battle of economic ideas in the 20th century. His most popular book, “The Road to Serfdom,” has never gone out of print and saw its sales explode during the financial crisis and Wall Street bailouts. John Cassidy wrote in the New Yorker that “on the biggest issue of all, the vitality of capitalism, he was vindicated to such an extent that it is hardly an exaggeration to refer to the 20th century as the Hayek century.”

In much of his work Hayek explored how society can best make use of “the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

When we see an orderly process, we naturally assume that someone has designed or planned it. Hayek says that we fail to distinguish between two kinds of orders: the “made” or planned order, such as a business firm or other limited organization, and the “grown” or spontaneous order, such as the whole society or market process. It is crucial to make this distinction, however, because the two kinds of orders are very different. Notably, the made order is designed for a specific purpose, while the grown order reflects the different and often competing purposes of many individuals and enterprises.

Hayek’s last book, The Fatal Conceit, published in 1988 when he was approaching ninety, returned to the topic of the spontaneous order, which is “of human action but not of human design.” The fatal conceit of intellectuals, he said, is to think that smart people can design an economy or a society better than the apparently chaotic interactions of millions of people. Such intellectuals fail to realize how much they don’t know or how a market makes use of all the localized knowledge each of us possesses.

The failure to absorb that lesson leads to many of our modern policy problems, from the financial crisis to the inner-city chaos wrought by the war on drugs to the failed attempt to use the U.S. military to “build nations” overseas.

Reagan and Thatcher admired Hayek, but he always insisted that he was a liberal in the classical sense, not a conservative. The last chapter of “The Constitution of Liberty” was titled “Why I Am Not a Conservative.” He pointed out that the conservative “has no political principles which enable him to work with people whose moral values differ from his own for a political order in which both can obey their convictions. It is the recognition of such principles that permits the coexistence of different sets of values that makes it possible to build a peaceful society with a minimum of force. The acceptance of such principles means that we agree to tolerate much that we dislike.” He wanted to be part of “the party of life, the party that favors free growth and spontaneous evolution.” I recall an interview in a French magazine in the 1980s in which he was asked if he was part of the “new right,” and he quipped, “Je suis agnostique et divorcé.” (“I am agnostic and divorced.”)

Hayek was more than just an economist. He also published impressive works on political theory, psychology, and the methodology of the social sciences.

He’s like Marx, only right.

Posted on May 8, 2015  Posted to Cato@Liberty

Can Rand Paul Turn America into Less of a Global Busybody?

Senator Rand Paul’s presidential campaign is drawing new attention to his “libertarian-ish” views and his less-interventionist foreign policy. His preference for avoiding new wars may set him apart from most of the other Republican candidates, as well as from former secretary of state Hillary Clinton, but it’s in keeping with traditional American foreign policy.

The classical liberals whose ideas shaped America always regarded war as the greatest scourge that government could visit upon society. They abhorred the killing that war entailed, and they understood something else as well: War destroyed families, businesses, and civil society. Preventing kings from putting their subjects at risk in unnecessary wars was one of their major goals. Adam Smith argued that little else was needed to create a happy and prosperous society but “peace, easy taxes, and a tolerable administration of justice.”

The American founders, happy to be free of endless European wars, made peace and neutrality a cardinal principle of the new government. In his farewell address, George Washington told the nation: “The great rule in conduct for us, in regard to foreign nations, is in extending our commercial relations to have with them as little political connection as possible.” And Thomas Jefferson described American foreign policy in his first inaugural address this way: “Peace, commerce, and honest friendship with all nations — entangling alliances with none.”

Our never-ending military involvements around the world are enormously expensive and make us less safe.”

In the 20th century, however, the United States became entangled in world affairs and foreign wars, from World War I through Korea and Vietnam. For 50 years U.S. foreign policy was directed at defeating two totalitarian powers, first Nazi Germany and then Soviet Russia. That great crusade ended with the disintegration of the Soviet Union in 1991; no other superpower remained to threaten U.S. sovereignty or world peace. But the huge diplomatic and military establishment that grew up during World War II and the Cold War refused to declare victory and return to peacetime status.

The American military remained large and expensive. Instead of celebrating the nation’s peaceful triumph, American policymakers expanded their ambitions. Even before the terrorist attacks of September 11, 2001, we were told that the post–Cold War world was even more dangerous and unstable than the world that had been threatened by the Soviet Union and its 30,000 nuclear warheads. American troops remained deployed in Europe, Japan, Korea, and the Middle East. Washington drew up new justifications for maintaining each outpost in the nation’s global archipelago of military bases and outposts. We didn’t merely retain the Cold War alliances; we actually expanded them by adding new members, primarily from the former Warsaw Pact countries, and then countries from the former Soviet Union, thus extending our potential military involvement to vast new territories.

The United States remained most actively involved in the Middle East, especially with the 1990–91 Persian Gulf War and the heavy U.S. military presence in Saudi Arabia afterward. The presence of U.S. troops in the Muslim holy land, and U.S. meddling in the region, from the coup against Iranian prime minister Mohammad Mosaddegh in 1953 through support for repressive regimes in Egypt and Saudi Arabia, inflamed Islamic fundamentalists.

The huge diplomatic and military establishment that grew up during WWII and the Cold War refused to declare victory and return to peacetime status.

American officials understood that problem. A Department of Defense report in 1997 noted, “Historical data show a strong correlation between U.S. involvement in international situations and an increase in terrorist attacks against the United States.” Indeed, the attempt by associates of Osama bin Laden to blow up the World Trade Center in 1993 and the African embassy bombings of 1998 kept U.S. officials well aware of the hostility being engendered by our global intervention.

But they could not conceive of extricating the United States from the Middle East. According to foreign-policy scholar Andrew Bacevich, this is because of “an abiding conviction” among America’s bipartisan foreign-policy establishment that “international peace and order require the United States to maintain a global military presence, to configure its forces for global power projection, and to counter existing or anticipated threats by relying on a policy of global interventionism.” Even if a hands-off policy would reduce the risks faced by Americans at home, interventionism in the Middle East would persist.

In the end, bin Laden and al-Qaeda carried out another, far more devastating attack that left 3,000 Americans dead. In response, the United States launched two wars that lasted longer than World War II. We created the Department of Homeland Security and imposed huge costs on banks, air travelers, and other Americans. We transferred yet more power to the president and the executive branch. We erected vast, hidden surveillance systems. We undermined fundamental principles of individual rights, due process, and the rule of law. Economic costs of these measures will easily exceed $2 trillion, possibly several times that. These are just the sorts of costs of war that classical liberals and libertarians have long warned about.

It’s time for a debate about global interventionism, and we should hope that Rand Paul can start to generate that long-overdue discussion.

Posted on May 6, 2015  Posted to Cato@Liberty

Roger Milliken’s Company Joins the Global Economy

Roger Milliken, head of the South Carolina textile firm Milliken & Co. for more than 50 years, was one of the most important benefactors of modern conservatism. He was active in the Goldwater campaign, and was a founder and funder of National Review and the Heritage Foundation. He dabbled in libertarianism, too. He was a board member of the Foundation for Economic Education and supported the legendary anarchist-libertarian speaker Robert LeFevre, sending his executives to LeFevre’s classes.

But he parted company with his free-market friends on one issue: free trade. Starting in the 1980s, when Americans started buying a lot of textile imports, he hated it. As the Wall Street Journal reports today,

Milliken & Co., one of the largest U.S. textile makers, has been on the front lines of nearly every recent battle to defeat free-trade legislation. It has financed activists, backed like-minded lawmakers and helped build a coalition of right and left-wing opponents of free trade….

“Roger Milliken was likely the largest single investor in the anti-trade movement for many years—as though no amount of money was too much,” said former Clinton administration U.S. Trade Representative Charlene Barshefsky, who battled with him and his allies….

Mr. Milliken, a Republican, invited anti-free-trade activists of all stripes to dinners on Capitol Hill. The coalition was secretive about their meetings, dubbing themselves the No-Name Coalition.

Several people who attended the dinners, which continued through the mid-2000s, recall how International Ladies’ Garment Workers Union lobbyist Evelyn Dubrow, a firebrand four years younger than the elderly Mr. Milliken, would greet the textile boss, who fought to keep unions out of his factories, with a kiss on the cheek.

“He had this uncanny convening power,” says Lori Wallach, an anti-free-trade activist who works for Public Citizen, a group that lobbies on consumer issues. “He could assemble people who would otherwise turn into salt if they were in the same room.”…

“He was just about the only genuinely big money that was active in funding trade-policy critics,” says Alan Tonelson, a former senior researcher at the educational arm of the U.S. Business and Industry Council, a group that opposed trade pacts.

But the world has changed, and so has Milliken & Co. Roger Milliken died in 2010, at age 95 still the chairman of the company his grandfather founded. His chosen successor, Joseph Salley, wants Milliken to be part of the global economy. He has ended the company’s support for protectionism and slashed its lobbying budget. And as the Journal reports, Milliken’s executives are urging Congress to support fast-track authority for President Obama.

American businesses are going global:

But as business becomes more international, American industries that once pushed for protection—apparel, automobiles, semiconductors and tires—now rarely do so. The U.S. Fashion Industry Association, an apparel trade group that wants to reduce tariffs, says that half the brands and retailers it surveyed last year used between six and 20 countries for production. Only two of the eight members of the main U.S. tire-industry trade group, the Rubber Manufacturers Association, even have their headquarters in the U.S….

“There’s a new generation of CEOs,” says Dartmouth College economic historian Douglas Irwin.“It’s part of their DNA that they operate in an international environment.”…

While Mr. Milliken saw China is a major threat to the industry—he said in 1999 he was “outraged, totally outraged” by Congress clearing the way for China’s entrance into the WTO—his successor sees the company’s future there. Milliken opened an industrial-carpet factory near Shanghai in 2007. It has a research-and-development center there and a laboratory stuffed with machinery where Chinese customers can check out the latest additive for strengthening or coloring synthetics.

Globalization is bringing billions of people into the world economy and into prosperity. Even in South Carolina.

Posted on May 5, 2015  Posted to Cato@Liberty

David Boaz discusses his book ‘The Libertarian Mind’ on KPRL’s Sound-Off with Dan Del Campo

Posted on May 4, 2015  Posted to Cato@Liberty

About David Boaz

Click here to learn more.