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“Free Market�� Liberalism 101��

Preamble:
--I’m addressing my past self in this review, in hopes that others find this process insightful��
--Believe it or not, but I started with “free market�� economics:
i) Growing up in an immigrant family seeking assimilation, we obviously lacked sociopolitical/cultural ties, so “economic freedom�� was a priority and an easy sell.
ii) Despite seeking assimilation, there was still some recognition of Western imperialism from where we left.
...So, the first politician I read was Republican “libertarian�� Ron Paul, whose 2008 US presidential campaign featured anti-intervention foreign policy rhetoric. Paul blamed “the state��/“the government�� for imperialist crimes, another easy sell when the state happens to be an empire.
...Paul’s alternative was a peaceful and prosperous “free market��, introducing me to the first economist I read, “Austrian school�� economist Ludwig von Mises (even more market fundamentalist than Hayek). I still remember reading (with conviction) Mises to my dad, and his feedback: you should probably do more reading��

…Fast forward 17 years:
--My geo-political economy prof, Jim Glassman, refers to Antonio Gramsci’s insistence that the strongest arguments require directly confronting your opposition’s strongest arguments.
…The inverse of this, be it only picking the lowest-hanging fruits or making extreme caricatures of your opposition or using sneaky evasions (ex. “straw man fallacy��), etc. are signs of incompetence (of your content and/or delivery).
…So, I will start with:
i) charitability: assume Hayek is very much sincere in his love of individual freedom (and specifically equality of opportunity) and hatred of oppression.
ii) agreement: parts where I have shared concerns (even if my diagnosis differs)
iii) direct quotes: to avoid distortions
-- video series reveals the confusion caused by debates where foundational definitions are not established. So, I will next test Hayek’s presumably-sincere assumptions to consider their tragic implications.

Shared Concerns:

1) Anti-Fascism:
--Hayek’s book was written during WWII (1940-43, published 1944) as a warning to British socialists for their supposed misdiagnosis of fascism. Socialists diagnosed fascism as a capitalist reaction to capitalist crisis/threat of socialism rather than blaming themselves.
--Obviously, I also prioritize accurate diagnoses of fascism in order to oppose it. We’ll return to fascism at the end, as we need to first walk through Hayek’s assumptions of capitalism/liberalism, socialism, etc.

2) Critiques of Conservatism:
--Hayek writes:

Conservatism, though a necessary element in any stable society, is not a social program; in its paternalistic, nationalistic, and power-adoring tendencies it is often closer to socialism than true liberalism; and with its traditionalistic, anti-intellectual, and often mystical propensities it will never, except in short periods of disillusionment, appeal to the young and all those others who believe that some changes are desirable if this world is to become a better place. A conservative movement, by its very nature, is bound to be a defender of established privilege and to lean on the power of government for the protection of privilege. The essence of the liberal position, however, is the denial of all privilege, if privilege is understood in its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others. […]

That the advances of the past should be threatened by the traditionalist forces of the Right is a phenomenon of all ages which need not alarm us. But if the place of the opposition, in public discussion as well as in Parliament, should become lastingly the monopoly of a second reactionary party [i.e. socialists], there would, indeed, be no hope left. […]

The guiding principle that a policy of freedom for the individual [liberalism] is the only truly progressive policy remains as true today as it was in the nineteenth century.

…well, I obviously agree with Hayek’s critique that conservatism is often a barrier to progress (“some changes are desirable if this world is to become a better place��).

3) Critiques of State Central Planning:
--Hayek’s definitions:
i) “socialism��: synonymous with state central planning/collectivism.
ii) “liberalism��: the inverse, i.e. competitive free markets/individualism (19th century Classical liberalism).
--I agree there are some socialists who prioritized state central planning, although Hayek omits the other motive of centralization: defense against capitalist reaction, i.e. “siege socialism��: ex. Blackshirts and Reds: Rational Fascism and the Overthrow of Communism
--I agree there are many valid critiques of state central planning and its crude assumptions (technological determinism due to complexity/economies of scale); indeed, many critiques come from socialism/leftism, which Hayek omits entirely:
-Understanding Power: The Indispensable Chomsky
-The Democracy Project: A History, a Crisis, a Movement

4) Uses of Markets:
--I agree competitive markets have their uses, as a mechanism for relatively-decentralized instantaneous-exchange between strangers. Indeed, Varoufakis�� Another Now: Dispatches from an Alternative Present takes Hayek’s liberal priority of decentralized competitive markets and uses this to dismantle capitalist property rights.

Conflicting Diagnoses:

1) Binary: Markets vs. State?:
--I'll now quote Hayek extensively to give a fair representation of his single hammer (competitive markets), although in his attempt to see a world of nails he still has to acknowledge exceptions. Once again, Hayek's binary definitions (liberal markets vs. socialist state) leaves only one fallback option (state planning):

The liberal argument is in favor of making the best possible use of the forces of competition as a means of coordinating human efforts, not an argument for leaving things just as they are. It is based on the conviction that, where effective competition can be created, it is a better way of guiding individual efforts than any other. It does not deny, but even emphasizes, that, in order that competition should work beneficially, a carefully thought-out legal framework is required and that neither the existing nor the past legal rules are free from grave defects. Nor does it deny that, where it is impossible to create the conditions necessary to make competition effective, we must resort to other methods of guiding economic activity. […] And it regards competition as superior not only because it is in most circumstances the most efficient method known but even more because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority. […]

This is precisely what the price system does under competition, and which no other system even promises to accomplish. It enables entrepreneurs, by watching the movement of comparatively few prices, as an engineer watches the hands of a few dials, to adjust their activities to those of their fellows. […]

It is necessary in the first instance that the parties in the market should be free to sell and buy at any price at which they can find a partner to the transaction and that anybody should be free to produce, sell, and buy anything that may be produced or sold at all. And it is essential that the entry into the different trades should be open to all on equal terms and that the law should not tolerate any attempts by individuals or groups to restrict this entry by open or concealed force. […]

To believe that the power which is thus conferred on the state is merely transferred to it from others is erroneous. It is a power which is newly created and which in a competitive society nobody possesses. So long as property is divided among many owners, none of them acting independently has exclusive power to determine the income and position of particular people—nobody is tied to any one property owner except by the fact that he may offer better terms than anybody else.

What our generation has forgotten is that the system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not [Hayek omits the history of capitalism, where state violence's dispossessions created and maintain capitalist markets]. It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us, that we as individuals can decide what to do with ourselves. […]

This is no less relevant because in a system of free enterprise chances are not equal, since such a system is necessarily based on private property and (though perhaps not with the same necessity) on inheritance, with the differences in opportunity which these create. There is, indeed, a strong case for reducing this inequality of opportunity as far as congenital differences permit and as it is possible to do so without destroying the impersonal character of the process by which everybody has to take his chance and no person’s view about what is right and desirable overrules that of others.

The fact that the opportunities open to the poor in a competitive society are much more restricted than those open to the rich does not make it less true that in such a society the poor are much more free than a person commanding much greater material comfort in a different type of society. Although under competition the probability that a man who starts poor will reach great wealth is much smaller than is true of the man who has inherited property, it is not only possible for the former, but the competitive system is the only one where it depends solely on him and not on the favors of the mighty, and where nobody can prevent a man from attempting to achieve this result [well, if it's only between markets vs. state...]. [...]

This is not necessarily true, however, of measures merely restricting the allowed methods of production, so long as these restrictions affect all potential producers equally and are not used as an indirect way of controlling prices and quantities. […] To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition. The only question here is whether in the particular instance the advantages gained are greater than the social costs which they impose. […]

[…] the destruction of stocks of raw materials [famously portrayed in The Grapes of Wrath] or the suppression of inventions, for which competition is blamed, though they are precisely the sort of thing which could not happen under competition and which are made possible only by monopoly and usually by government-aided monopoly. […]

An effective competitive system needs an intelligently designed and continuously adjusted legal framework as much as any other. Even the most essential prerequisite of its proper functioning, the prevention of fraud and deception (including exploitation of ignorance), provides a great and by no means yet fully accomplished object of legislative activity. […]

Nothing, indeed, seems at first more plausible, or is more likely to appeal to reasonable people, than the idea that our goal must be neither the extreme decentralization of free competition nor the complete centralization of a single plan but some judicious mixture of the two methods. Yet mere common sense proves a treacherous guide in this field [Hayek is insisting on laws for free competition]. […]

There are, finally, undoubted fields where no legal arrangements can create the main condition on which the usefulness of the system of competition and private property depends […]. Where, for example, it is impracticable to make the enjoyment of certain services dependent on the payment of a price, competition will not produce the services; and the price system becomes similarly ineffective when the damage caused to others by certain uses of property cannot be effectively charged to the owner of that property. […] some method other than competition may have to be found to supply the services in question. Thus neither the provision of signposts on the roads nor, in most circumstances, that of the roads themselves can be paid for by every individual user. Nor can certain harmful effects [pollution] of deforestation, of some methods of farming, or of the smoke and noise of factories be confined to the owner of the property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism. But the fact that we have to resort to the substitution of direct regulation by authority [note: binary options!!!] where the conditions for the proper working of competition cannot be created does not prove that we should suppress competition where it can be made to function.

--Curiously, the end of the book shifts to the international scale, where Hayek lets slip:

Nowhere has democracy ever worked well without a great measure of local self-government, providing a school of political training for the people at large as much as for their future leaders. It is only where responsibility can be learned and practiced in affairs with which most people are familiar, where it is the awareness of one’s neighbor rather than some theoretical knowledge of the needs of other people which guides action, that the ordinary man can take a real part in public affairs because they concern the world he knows.

…This passage is funny because Hayek is referring to “small countries like Holland and Switzerland��, so he is still assuming national state planning and omitting the obvious alternative of Commons/consensus/direct democracy (as opposed to electoral democracy) which are foundational to human sociability:
-The Democracy Project: A History, a Crisis, a Movement
-Governing the Commons: The Evolution of Institutions for Collective Action

…see comments below for rest of the review��
2) “Socialism�� and Fascism?
3) “Western Civilization�� vs. History of Capitalism
4) Colonialism and Fascism