Gustav Klimt, Philosophy, Ceiling Panel for the Great Hall of Vienna University, credit Wikipedia
Hayek A Life, 1899-1950, Bruce Caldwell & Hansjoerg Klausinger, University of Chicago Press, Chicago & London, 2022, 840pp, HB, reviewed by Leslie Jones
Introduction.
Friedrich August Hayek’s family was conservative, “culturally German” but only nominally Christian. Both parents belonged to the Viennese lower nobility or “second society”. His father August (1871-1928) was a district physician. August’s grandfather Heinrich had squandered the family fortune. The upshot was that August’s academic ambitions (his “passion was botany”) were thwarted, although he was awarded an extraordinary professorship in 1916, albeit unpaid. Friedrich (henceforth Hayek) evidently owed his love of German literature and of the theatre to his father – ditto his interest in natural science. He became a convinced Darwinian in his middle teens. His mother Felicitas von Juraschek was the daughter of a wealthy university professor and civil servant. Her inherited wealth helped pay for the servants, private schooling etc considered obligatory in these circles.
Hayek was intellectually precocious. Easily bored, his performance at school was dismal. Like other members of the Viennese bourgeoisie, he attended a gymnasium. At the Franz-Joseph Real Gymnasium, where he was enrolled from 1909-1911, scientific subjects were emphasised. Ancient Greek and Latin had been replaced by modern foreign languages.
In November 1918, Hayek enrolled in the faculty of law at the University of Vienna. He eschewed both racist nationalism (the race war) but also Marxism (the class war). With his close friend Herbert Fürth, he helped organise the German Democratic Student’s Union (DDHV). Jewish students were active therein. Hayek, then, was aligned with the progressive/liberal elements in the Viennese bourgeoise. In this context, his involvement in an informal discussion group in the early 1920’s, nicknamed the Geistkreis (‘circle of the spirits’) was pivotal. Its members “belonged mostly to the best type of Jewish intelligentsia…” (Hayek, quoted C & K, p152).
The growth of fin de siècle anti-Semitism in Austria-Hungary, facilitated by the extension of the franchise leading to the rise of mass parties, is a prominent theme in Hayek a Life. Georg von Schönerer’s pan-German party excluded those of Jewish descent, as did Karl Lueger’s Christian Social Party. Anti-Semitism, supposedly now scientific, was rife in Austrian universities. Indeed, August Hayek was a founder member of a section of the Verein deutscher Ärzte in Österreich (Association of Doctors). The Verein’s Aryan paragraph restricted membership to those of “German lineage”. Caldwell and Klausinger (henceforth C & K) acknowledge the anti-Semitism at the heart of Hayek’s family but they magnanimously conclude that August was not irredeemably tainted. Note, however, that both Hayek’s mother and his brother Heinz subsequently supported Hitler. Even Hayek himself was not entirely immune to anti-Semitism. Interviewed in 1983 by W. W. Bartley 111, in preparation for a prospective biography of Hayek, the latter described his onetime psychology lecturer Siegmund Kornfeld as “…a rather comic Jewish figure…” (C and K, p. 130). In similar vein, in 1939, Hayek wrote to Beveridge, the former Director of the LSE, on behalf of economist Karl Forchheimer, dismissed from his position in the Austrian Ministry of Social Affairs, stating that although Forchheimer was “I understand, fully Jewish, he is not pronouncedly so and I should have hardly known he was a Jew” (C & K, p. 396).
Hayek turns to economics.
Appropriately enough, Hayek A Life was showcased at the Adam Smith Institute on 26 April 2023. On August 1, 1932, Hayek became Tooke Professor of Economic Science and Statistics in the University of London. In his inaugural lecture delivered at the LSE on March 1, 1933, Hayek lauded Adam Smith for identifying “a mechanism that coordinates economic activity” but which arose spontaneously. This was the so-called “invisible hand”, referred to just once in Wealth of Nations (vol II, restraints upon importation). Carl Menger, appointed Professor of Political Economy at Vienna in 1879, was the founder of Austrian School of Economics and a critic of the Historical School of Economics. In his Grundsätze or Principles of Economics (1871) Menger elaborated an idea analogous to the “invisible hand”, to wit, the “spontaneous generation of institutions”. Hayek read the Grundsätze in 1921 and said that the conception of the “spontaneous generation of institutions is worked out more beautifully there than in any other book I know” (quoted C & K, p138).
In his Observer review of Hayek’s The Road to Serfdom (1944), George Orwell pithily opined, “Capitalism leads to dole queues, the scramble for markets, and war. Collectivism leads to concentration camps, leader worship, and war”. C & K’s contention, however, is that Hayek sought a middle way between these extremes. For them, The Road was ultimately a defence of the beleaguered liberal values which he shared with his mentor, Ludwig von Mises – notably reason and tolerance – rather than a celebration of laissez-faire per se. Given that “scarcity will always be with us” (the economic problem) whose needs are to be satisfied and what is a just wage for any given occupation? Thus, the economic problem is also a social and political problem. For Hayek, socialism, whether of the left or right, cannot be combined with freedom because it has dispensed with “decentralisation plus automatic coordination”. Socialism must eventually impose as arbitrary set of values in order to address the economic problem.
“Toutes les familles heureuses se ressemblent”. C & K understandably hesitated to deal with Hayek’s acrimonious divorce of his wife Hella, the mother of his two children, and his subsequent marriage to Linerl, his first love. Volume 1 of Hayek, a Life concludes with this episode, painful for all concerned, but nonetheless a compelling read.
Alumni of the London School of Economics will enjoy the depiction of the Senior Common Room in the 1930’s. Professor Lionel Robbins, for one, recalls in his autobiography the “friendly badinage between Tawney and Gregory on the merits and demerits of the free-enterprise system…” . Anthropologist Bronislaw Malinowski and historian Elie Halévy, likewise, occupied what Hayek called the “Sardonic Corner”, expatiating on “the folkways of English academics”. When the planned second volume is complete, this will become, as the authors intended, “the definitive full biography of F A Hayek”.
Klimt, Medicine, Hygieia, credit Wikipedia
Dr Leslie Jones, PhD LSE, is the Editor of Quarterly Review.
F. A. (von) Hayek was perhaps best known for, or at any rate initially established, by “The Road to Serfdom” (1944), which argued that the government planning necessary to win the war should be discontinued afterwards in the interest of “free market” capitalism. He described fascism and communism not as two opposites of the same coin but virtually the same metal, and lumped Spengler’s Beamtenstaat in with Hitler’s Nationsozialismus. The victorious Labour Party’s “welfare-state” and albeit clumsy “nationalisation” dashed his hopes for his adopted country.
Economic theories are matters of considerable complexity, overlap, and fluctuation according to perceived circumstance. V. I. Lenin noted the change in capitalism from the export of goods to the export of finance, while related politics have become more complicated by terminological ambiguities; for example, the meaning of “liberalism” changing from “libertarian individualism” to “social democracy”, and the postwar weaponization of the label “fascism” as an insult. The onset of the cashless society and AI robotics make the complaint that the (notional) owners of production have much more undeserved power than their hired wage-earners less relevant than claimed by current revivalists of one K. H. Marx, who died 140 years ago, even before diesel engines, aeroplanes and television.
The economist J. M. Keynes has been unfairly blamed by “free marketeers” for global and local “inflation” incorrigibly pursued by governments and banks for decades past, with devastating consequences for everyone else, and recently described by Baron Hannan as a vastly greater threat to Britain than Chinese cyber attacks, or the Israel and Ukraine wars (“Sunday Telegraph”, 29.10.23). In short, the real “fault” of Baron Keynes however was to advocate public works to mitigate unemployment, instead of mendicity, dole-queue pittance or battlefield accommodation. As his ablest biographer Baron Skidelsky quipped, Dr Hayek agreed with his polymathic English rival that debt-based capitalism was inherently unstable, “only with this difference – that nothing could be done about it”. Or should?
Any UK “return” to minimal “government” and “free” trade anyhow rings rather hollow today in the volatile world of Vladimir Putin, George Soros, Kim Jong-un, Joseph Robinette Biden Jr and Mohammed bin Salman bin Abdulaziz al-Saud.
Are nations compatible with “classical liberalism” and/or “free trade”; and if not, should they disappear? This question, raised by Hayek’s work, is still a live issue, at any rate among libertarian theorists.
See e.g. the Mises Institute review by David Gordon of David Conway’s “In Defence of the Realm” (December 2004, online) & Tim Congdon, “The Balance of Power” (The Critic, July/August 202o, online) to see what confusions can arise from “pure” economics as a prime factor in evaluating events in the real world, and worth mentioning is Mr Pangloss of Global Trade, Hamish McRae, for whom every cloud has £s of silver linings if indeed there are any.
I looked up the 20-year old article on the interesting Mises website. Surprisingly it recommended a major work by William McDougall, which was hardly an endorsement of laissez-faire economics and was among the sources consulted by Adolf Hitler for “Mein Kampf” as a close study of both books will reveal — unlike Oswald Spengler’s tour de force which infuriated the NS Leader, inundated with copies from admirers when temporarily imprisoned, who told Rudolf Hess to dump them.
David Conway has argued that free trade capitalism and national sovereignties are compatible, at least when governments are constituted (along early-Hayek lines) to keep out of economics and welfare. This contention is surely refuted by the way that our political “systems” have been hollowed out by foreign competition and ownership, a danger in its demographic migration aspects long foreseen by MacDougall, Spengler and others. The notion of writers from Frederic Bastiat to Henry Hazlitt that the inflow of cheap goods that undermined native producers was OK, because the money saved by consumers could be spent on something else instead, has been too simple not only for words but for worlds. The contentious view of this “school of thought” is that slumps are caused by state interference not by intrinsic features of unregulated capitalism.
David Conway has written a good critique of Marxism, though bypassing its chief point that the private owners of production are in an “unfairly” stronger position that their disposable hired hands, especially if workers lack union protection. There is an amusing passage where he ironically invokes Hazlitt against Keynesian “fallacies” to demonstrate, by an unrealistic factory situation, that cuts in wage rates increase aggregate demand, and then follows the assertion that “classical political economy” is not an “ideology” with a paean to the ideology of Arthur Schopenhauer, one of several philosophers, incidentally, regarded as an “anti-Semite” (David Nirenberg) and “one of Hitler’s favourites” (Robert Wistrich).
In his latter years Hayek came to focus on support for the traditional family and other values, and to allow for some minor social interventions, though never fully appreciating the adverse impact of unrestrained finance-capitalism could and does have on those values hitherto linked to nationhood. He regarded money as a means of access to cultural variety, but failed to see the dangers of its “immoral” use. His able exposition of commodity price calculation in a market system as a superior alternative to comprehensive statist planning oddly matched the critique of price-fixing under fascism by John Strachey when he left Oswald Mosley for Karl Marx.
Apart from defence, nations cannot prosper without sure and sufficient access to food and raw materials. Fascism recognised this primary requirement, though exchanging a battle for markets by a battle for territory in the case of Italy, Germany and Japan. In contrast, Britain of course already had an Empire, while the USA (by no means protection-averse) and USSR had continental space (with climate handicaps countered by slave camps). Comparative advantage in supply turned into competitive disadvantage in labour-costs, accelerated in our own geopolitical experience since a decade after WW2 – out of a host of references I recommend Bernard Semmel, “Imperialism and Social Reform” (1960), Andrew Gamble, “Britain in Decline” (1994) & Alex Brummer, “Britain for Sale” (2015).
What worked for Richard Cobden’s imperial island as workshop of the world in 1850 may not necessarily work for Tim Congdon’s offshore island by 2050.