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Hayek on Social Insurance

By Dylan Matthews

Jennifer Schuessler has a great short essay in the New York Times Book Review looking at the reception of Friedrich Hayek's "The Road to Serfdom" over the years, including this can't-be-made-enough point:

But unlike some of his champions in 2010, Hayek didn’t oppose all forms of government intervention. “The preservation of competition,” he wrote, is not “incompatible with an extensive system of social services — so long as the organization of these services is not designed in such a way as to make competition ineffective over wide fields.” This qualification, however, was left out of a comic-book version of “The Road to Serfdom” printed in Look magazine in 1945 (and distributed as a pamphlet by General Motors), which showed well-intentioned regulation giving way to more sinister forms of control.

As a side note, that Look magazine comic adaptation is hilarious, and includes great lines such as, "If you're fired from your job, it's apt to be by a firing squad," and imagery like an agent of the socialist state oppressing citizens by snapping their golf clubs in half.

Going further than Schuessler, it's worth noting that Hayek does not only accept a limited welfare state, but specifically singles out health care as an area where the state should provide a safety net:

There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.

Emphasis mine. Now, Hayek obviously isn't an idol of liberal economic policy folks for a whole batch of reasons, not least the central premise of Road to Serfdom that the sorts of social democratic policies being pursued in the United Kingdom and elsewhere in Europe during and after World War II would open the door to totalitarianism. But it's more than a little jarring to hear him invoked in opposition to a health care bill that's, if anything, less ambitious than the sort of thing he's talking about here.

-- Dylan Matthews is a student at Harvard and a researcher at The Washington Post.

By The Washington Post editors  |  July 9, 2010; 2:57 PM ET
Categories:  Books , Europe , Government , Health Reform , International Health Care  
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Comments

There is something of a weak corollary to Godwin's Law, which is that the likelihood that a reference to those passages in Hayek's "Road to Serfdom" will appear in a "liberal" blog rises with the span of time since the last appearance. I won't say it's fishy, but it is sort of Poisson.

I actually posted the passages myself in other "liberal" blog at times in what now seems like the distant past.

Posted by: bdballard | July 9, 2010 3:31 PM | Report abuse

...and you read page #7 in the comic book version, right? You know, the one about the propaganda machine...

Many tend to overlook the all-important "without endangering general freedom" caveat mentioned in Hayek's discussion regarding tolerable subsidies: no subsidy which endangers general freedom is tolerable and the PPACA is a perfect example of an intolerable act. Why would any thinking person accept an "individual mandate" of any sort in order to facilitate the subsidization of another? It's perhaps the second clearest example of totalitarianism in American history, topped only by the Sedition Acts.

Moreover, the pattern of deception is clear. If I said to you that I demand you buy a pair of shoes at double price today because 75 years from now, if I am alive, I will give you a 2% discount off of the price currently charged for shoes, you'd probably turn down the deal; conversely, today's propagandists hail the same deal when offered by the Obama/Pelosi Regime. Only an citizenry educated enough to reject the failed Progressive schemes can break the downward spiral towards serfdom.

Posted by: rmgregory | July 9, 2010 3:34 PM | Report abuse

There's a big difference between social insurance for the indigent and making multi-million dollar courses of treatment available to everyone. I think you will find that most conservatives do agree with Hayek on social insurance, but disagree on who should get it, with the insipid methods used pay for health care which distort the market, with forced sets of coverages, and other coercion of people that don't want to participate. Social insurance for life's failures is fine, the learned helplessness that comes from the demand "free health care" is just people fooling themselves and creating dependence on redistributionary policies.

Posted by: staticvars | July 9, 2010 3:36 PM | Report abuse

We don't care that he's a Harvard student; we care that he writes interesting and well-researched blog posts for The Washington Post.

Which he does!

Why is the university named? Why, for the love of god? If there is a reason, I really want to know.

Posted by: ajw_93 | July 9, 2010 4:08 PM | Report abuse

Absolutely correct, Dylan, but the mouthbreathers will never get it. They'll complain how it's totalitarianism, while also not complaining for a second about warrantless wiretaps and "free speech zones". They'll complain about the cost, while also supporting massive tax cuts for the wealthy that will explode the budget.

Posted by: jldarden | July 9, 2010 4:20 PM | Report abuse

@Staticvars, Hayek wasn't talking about basic care for the indigent, he was talking about social health insurance to protect against the hazards of life against which most people cannot adequately save. Hayek says: "Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance - where, in short, we deal with genuinely insurable risks - the case for the state's helping to organize a comprehensive system of social insurance is very strong... Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken," - The Road To Serfdom (Chapter 9).

There is no "free health care" in the ACA. It is health insurance that has to be purchased, some of which (for some people) is subsidized by the government if it is not subsidized through work.

Posted by: StokeyWan | July 9, 2010 4:27 PM | Report abuse

And by the way, what's the statute of limitations on Hayek's thesis, anyway? How many more decades with Western, capitalist democracies with strong social safety nets are needed to show that perhaps our good friend Mr. Hayek just got his prediction wrong?

Posted by: StokeyWan | July 9, 2010 4:30 PM | Report abuse

@StokeyWan: You're kidding, right? Have you been ignoring the steady collapse of Western Europe that has based its economic models entirely on those very "strong social safety nets"? Hayek didn't say, "Adopt welfare and you'll be Nazi's within a few months," his warning is about long-term economic stability and prosperity.
@jldarden: You're being obnoxious. Plenty of fiscal conservatives are also appalled (and rightfully so) at the loss of civil liberties under Bush. Stop lumping people together into black and white categories in an attempt to avoid real discussion on policy issues.

Posted by: chadreese | July 9, 2010 4:52 PM | Report abuse

"Have you been ignoring the steady collapse of Western Europe..."

I guess I have been. Germany, with its social insurance, is doing great. France, the UK, Norway, Sweden etc. are toddling along. Iceland took a header, Greece is broke, Ireland (the tiger of Europe!) is in bad shape, and Spain isn't doing so hot. Mixed bag.

Posted by: efblevins | July 9, 2010 4:58 PM | Report abuse

Plenty? The small members of the Paul brigade did, but by and large, conservatives didn't care about the loss of civil liberties. They also didn't care about the reckless spending. If they did, they would have said something.

Posted by: jldarden | July 9, 2010 5:00 PM | Report abuse

@chadreese Yeah, I haven't seen any tend toward totalitarianism. All of the movement has been in the other direction.

Posted by: StokeyWan | July 9, 2010 5:01 PM | Report abuse

@efblevins: The problem with looking at WE as a "mixed bag" is that the EU is a conglomorate, and it's not about how many countries are "successes" and how many are "failures" but the net values of economic metrics. When The Economist writes, "WHEN Europeans fear for their jobs and their savings, when their governments and companies cannot easily borrow money, when banks fail and the single currency trembles, then the European Union is facing not just an economic crisis, but a political crisis, as well," I don't think you can just shrug and say, "It's fine," especially with an aging population and a severe lack of innovation that make their current troubles look like the tip of the iceberg.

Posted by: chadreese | July 9, 2010 5:02 PM | Report abuse

@StokeyWan: I actually agree with you. While I share the concern of fellow libertarians about our deficit and unsustainable spending, I look at an American past wrought with racism, sexism, and even slavery and believe we're much better off overall than we used to be.
I think the simple fact that we don't have slaves anymore should make many self-proclaimed "conservatives" more optimistic than they seem to be.

Posted by: chadreese | July 9, 2010 5:04 PM | Report abuse

@jldarden: You're right in that most Republicans just nodded and went along with Bush's anti-terrorism witch hunt, but that doesn't give you an excuse to dismiss anyone who complains about spending and government interference. Even those who are hypocrites about it for not calling Bush on his spending still have a point when they say our spending is unsustainable. Being a hypocrite doesn't make that person's argument wrong, and to dismiss the concern outright because of the person voicing it is irresponsible and irrational.

Posted by: chadreese | July 9, 2010 5:10 PM | Report abuse

Yes, our long-run deficit is a major concern. However, these critics are just not credible. If they really cared about deficits, they would have spoken out before. If they really cared, they'd have serious ideas about how to tackle the deficit, instead of meaningless buzzwords like "waste".

Posted by: jldarden | July 9, 2010 5:16 PM | Report abuse

Note well.

Hayek's father worked for the government health service as a doctor, in Vienna.

Hayek's son worked as a doctor and microbiological expert for the government health service in Britain.

Hayek lived in Britain before and after the transition to the national health care system in that country.

Hayek undoubtedly knew more about government health care than Ezra will ever even pretend he knows.

Note also:

Hayek's son was a critic of the British system.

And Hayek in his 1976 edition of TRtoS said he made concessions to statism in the book which he had learned over time were actually more pathological than he'd been able to imagine at the time.

Posted by: gregransom | July 9, 2010 6:16 PM | Report abuse

Hayek's more detailed and well considered views on social insurance and the welfare state can be found elsewhere, in his

The Constitution of Liberty

and in

Law, Legislation and Liberty

Lefties who want to do more than gas need to read these books and deal with substance, not pathetic and brain-dead rhetoric.

Posted by: gregransom | July 9, 2010 6:18 PM | Report abuse

Here's one to make the collectivists howl, from the 'Road to Serfdom' link given by Harvard boy:

"[T]here is particularly the important question whether those who thus rely on the community should indefinitely enjoy all the same liberties as the rest."

That's a consideration, all right. If a working person is going to be forced to "sacrifice" on behalf of some unfortunate, should the unfortunate not owe some sort of recompense, or be beholden in some meaningful way, and be likewise forced to honor the debt as best as possible, or otherwise "sacrifice" some of the blessings of the country's liberties? And if not, why not?

Posted by: msoja | July 9, 2010 7:15 PM | Report abuse

"I think you will find that most conservatives do agree with Hayek on social insurance, but disagree on who should get it"

Bismarck, of course, doesn't count as sufficiently conservative in the view of our modern-day extremists. If US right-wingers weren't too dumb and ignorant to know who the father of modern social insurance was, they would attack Bismarck as an ultra-Marxist, if not an Obamaist.

Posted by: carbonneutral | July 9, 2010 7:32 PM | Report abuse

Hayek was talking about that form of socialism in which the government takes control of many industries, not the kind of social/democracy common today where the market is pretty free but there is a good deal of wealth redistribution. Hayek made this distinction himself in the intro to a later edition. The book doesn't have much to say about the common current form of "socialism".

Posted by: TomCantlon | July 11, 2010 12:37 AM | Report abuse

GregRansom writes "Hayek's more detailed and well considered views on social insurance and the welfare state can be found elsewhere, in his The Constitution of Liberty"

He means where Hayek says "most of those who retire at the end of the century will be dependent on the charity of the younger generation” and would end up in “concentration camps for the aged" (297).

TomCantlin writes: "Hayek was talking about that form of socialism in which the government takes control of many industries, not the kind of social/democracy common today where the market is pretty free but there is a good deal of wealth redistribution. Hayek made this distinction himself in the intro to a later edition. The book doesn't have much to say about the common current form of "socialism"."

In the 1976 edition Hayek says "socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state."

The welfare state leads to dictatorship "more slowly, indirectly, and imperfectly." The "ultimate outcome tends to be very much the same, although the process by which it is brought about is not quite the same as that described in this book”

Posted by: Berne1 | July 11, 2010 3:05 PM | Report abuse

Quote: "it's more than a little jarring to hear him invoked in opposition to a health care bill that's, if anything, less ambitious than the sort of thing he's talking about here."

You forgot the bit about "without endangering general freedom". The Left cannot accept a social safety net unless it impinges on personal freedom, otherwise they would have expanded medical savings accounts instead of creating huge bureaucracies and forcing tens or hundreds of millions into government programs.

So do not pretend that Hayek would be a fan of ObamaCare or any of the other new or expanded programs that the Dems are pushing. We could use a few thousand more Hayeks right now -- and a few thousand more Orwells too, to debunk the propagandists of the Left who peddle garbage like this.

Posted by: JBaustian | July 12, 2010 9:17 AM | Report abuse

rmgregory: "no subsidy which endangers general freedom is tolerable and the PPACA is a perfect example of an intolerable act."

First, who determines what is "tolerable"? And what is "general freedom"? If I'm inhibited from changing jobs because I'd lose my insurance, am I not less "free" because of that system? If I might die because I can't get insurance due to a preexisting condition, am I not less free?

"Why would any thinking person accept an 'individual mandate' of any sort in order to facilitate the subsidization of another?"

Taxes are individual mandates. They go to subsidize others, such as the education of those who couldn't otherwise afford it. So does public education the superhighway to serfdom?

And a thinking person can consider an individual mandate as a form of rational social insurance, a program I might make use of should certain circumstances befall me. I willingly spend a small amount to subsidize others because it increases my security that I will be subsidized if I need it. It's just applying Rawls's "veil of ignorance" regarding our inability to determine where we'll wind up in the future. Really, it's not that hard.

And if one believes in a society where people shouldn't die because they can't get health insurance and families shouldn't go bankrupt because someone got sick, then you pretty much need an individual mandate. At least no other country has figured out how to meet those standards without one. Now, it's perfectly coherent to say that we shouldn't have that kind of society, but then one should at least admit the consequences that follow.

Posted by: dasimon | July 12, 2010 1:08 PM | Report abuse

I think Ezra or Matthews or whatever idiot who wrote this article to get laid could learn a thing or two about quoting others, particularly out of context. The key quote is "in such a way as to make competition ineffective over wide fields". I think the current health reform missed it on this criteria. As a pharmacist, health economist and avid reader of the man, I believe Hayek would respond in his Austrian accent, "Scheiße!"

Posted by: damon1 | July 12, 2010 6:53 PM | Report abuse

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