2 May 2018

‘The New Serfdom’ is a road to nowhere


The Labour Party hasn’t looked especially thoughtful in recent years. With a once-great party now in the hands of conspiracy theorists and increasingly hostile to internal dissent, even vaguely sensible ideas are in short supply.

It is in this climate that Labour MP Angela Eagle and former Labour adviser Imran Ahmed have tried to articulate a 21st century philosophy for their party. Their book, The New Serfdom, is being touted as a “battle cry for democratic socialists everywhere.”

With a title derived from Friedrich Hayek’s The Road to Serfdom, Eagle and Ahmed seek to refute many of the key tenets of Hayek’s seminal work, which they argue has directed Conservative policy since its publication in 1944.

The Road to Serfdom was a classic straw man argument,” they argue, “in which Hayek built up and then smashed down a caricature of socialism.” This claim becomes deeply ironic after a few pages, however, because by that point it is clear that building up and knocking down straw men is exactly what Eagle and Ahmed spend the book doing.

They start by questioning Hayek’s motives when he warned against the overreach of central planners. In comparing socialism to fascism, they claim, Hayek was guilty of deliberate provocation, equating him with — in common parlance — an “epic troll”. That could not be further from the truth. The reality of life under a centrally planned economy was one Hayek understood all too well. His reluctance to return to his native Austria following the Anschluss with Nazi Germany in 1938 kept him a refugee in wartime Britain, at the time of writing The Road to Serfdom. In other words, Hayek’s aversion to an all-planning state wasn’t mere bluster.

This may seem like quite a small quibble, but it is part of a much wider tendency to mischaracterise Hayek’s thinking. Tellingly, Hayek is rarely (if ever) quoted directly in the book. Instead, Eagle and Ahmed build up field after field of straw men — some of them almost laughably off the mark.

The first, and most obvious, of these is labelling Hayekian ideas “conservative”, in the book’s subtitle: “The Triumph of Conservative Ideas”, and implying that this philosophy naturally favours the economic status quo.

“Market fundamentalists conveniently assert that the ownership of great wealth is a sign of merit in itself”, they claim.

Do they? Putting to one side the term “market fundamentalists” (more on this later), this is a long way off what free market capitalists actually believe. As Hayek observed in his defence of competition, true liberals are decidedly uncomfortable with the idea of entrenched privilege: “It is by no means regularly the established entrepreneur, the man in charge of the existing plant, who will discover what is the best method [for efficient production].”

Unleashing competition and market forces often has precisely the opposite effect of transferring funds and privileges to the currently rich — and we can see this play out in public policy as well as theoretical philosophy. Many Thatcherite reforms involved huge losses for incumbent, established groups. The “Big Bang” of 1986, for instance, transformed the City of London from a closed shop for the elites, in which the ‘Old Boys Network’ reigned supreme, into a dynamic marketplace which was open to new arrivals. Not for nothing was she so despised by much of the paternalistic Conservative establishment in the 1970s and 80s.

The accusation of “free market fundamentalist” is levelled at Hayek throughout the book. According to Eagle and Ahmed, Hayek is a slave to the market, viewing public service as “always bad”, the private sector as “always good”, believing that “people are solely motivated by financial reward and not ‘what is beneficial to society’”. These are gross mischaracterisations.

Though Hayek argued that central planners lack the information needed to plan an economy — and, indeed, to determine “what is beneficial to society” in the first place — he never argued that markets are infallible. On the contrary, Hayek viewed the search for “truth” through market interaction as a fallible process of discovery, trial and error, as he made clear in his postscript to The Constitution of Liberty, “Why I am Not a Conservative”. (The clue’s in the title, Angela!)

They repeat the myth of “trickle-down” systems of economic governance — which should be an immediate red flag. As Thomas Sowell has explained, “trickle-down” economics is a lazy caricature invented by the Left — a non-existent theory which no free marketeer has ever used to describe what they believe.

Whatever your views on free market principles, it is clearly dishonest to imply that those who support tax cuts, lower government spending and greater economic freedom do so in the belief that some wealth will belatedly “trickle down” to the poorest in society or because they view entrenching wealth amongst the privileged as an end in itself.

Free marketeers would instead argue that allowing people to pursue all the opportunities they can through free exchange, with the minimal amount of government interference, will lead to generalised wealth creation. The virtue of cutting taxes is not that it benefits the rich, but that it benefits everyone.

Of course, those of a free market disposition are unlikely to arrive at the same policy solutions as a left-leaning Labour MP and former Labour advisor. This is hardly surprising. The real issue with The New Serfdom is that much of their arguments and broader characterisation of free marketeers is conducted in bad faith. If you’re going to critique a philosophy — even to name your book after it — the least you could do is get to grips with what Hayek actually said.

Another classic straw man is their commentary on healthcare, where they rehash the convenient myth that the debate over healthcare provision consists of a binary choice between the US system and the NHS model. “We know from other countries that when you do privatise services like healthcare, the outcomes are terrible”, they write.

Which countries? Eagle and Ahmed give only the dysfunctional US healthcare system as an example — ignoring the multitude of examples in the developed world which show how markets can be compatible with universal healthcare, including such “free-market fundamentalists” as Sweden, where 20 per cent of healthcare is privately provided (compared to around 6 per cent in the UK).

The New Serfdom commits atrocities of revisionism, as well as fatal sins of omission, and this applies to historical as well as contemporary examples. The Brexit vote is seen as catastrophic, and compared with the rise of far-right parties like Alternative fur Deutschland and the Front National. Donald Trump is not only described as the “natural successor” to Thatcher and Reagan, but a Hayekian liberal to boot. Quite what Hayek would have made of Trump’s protectionist trade agenda is another story.

Perhaps most egregious is their whitewashing of Britain’s industrial past. Eagle and Ahmed describe the post-war consensus as a healthy combination of a “vibrant, regulated and managed private sector”, combined with a “large and redistributionist” public sector; ignoring the punitive taxes — including an eye-watering 98 per cent levy on investment income – which quashed private enterprise for many years.

Unsurprisingly, they condemn Thatcher for breaking the union stranglehold on industry. But there is no mention of the climate which preceded it: exchange controls, double-digit inflation, constant strikes and power cuts — nor the fact that, in the post-War years, Britain lagged behind every other country in Europe. Arguably, we were the true serfs when the Unions effectively ran the country in the 1970s.

But for all their criticism of free market ideas, it is unclear exactly how far they would actually go in remodelling society. Though they talk in non-specific terms about the need for the rich to pay their “fair share”, they do not appear to advocate undoing Thatcherite trade union reforms, or returning to the punitive tax rates of the 1970s, when the “large and redistributionist public sector” was predominant.

This begs the question: If not, why not? Perhaps it’s because — as history proves time and again — that way lies real Serfdom.

Madeline Grant writes about politics and economics.