Hayek’s Critique of Socialism

Hayek’s Critique of Socialism

June 27, 2021 Off By Felso

Democratic socialism is an impossible thing and not only that. While striving for this utopia, such a different situation emerges that few of those who support democratic socialism today will dare to put up with this outcome.

Hayek’s warning lies with democratic socialist intellectuals who believe that moderate socialism can be achieved and made the basis of a stable society. It is not possible to achieve this and make it the basis of society. The power of the socialist should not be limited, because for him only the result is important. In short, the socialist is completely opposed to the rule of law.

a) Planning According to Hayek

The decision on the ‘optimal scale’ of a firm cannot be determined by politicians or economists. By testing demand in the market, the firm can only reveal the most efficient scale and adjust itself to that level. The strategy of most sane corporate planners is to distribute and spread their risk across many markets. The power of large firms to control prices is often exaggerated in this regard.

The center can take a decision on the production or use of a product that seems useful and cheap today. However, products can quickly become obsolete and expensive.

According to Hayek, technology does not compel us to comprehensive economic planning, but it confers terrible power on a central authority to control it. This is why Hayek believes in being particularly vigilant.

The other argument in favor of planning is the following. The modern economy is so complex today that only central planning can solve the problem of resource allocation.

Hayek, on the other hand, believes that the situation is completely different. The social and economic process is so complex today that it completely exceeds the comprehension capacities of any planner or planners. But this is not against the working and using market order, which contains more information than a single mind can take; situation that supports it.

To think that all knowledge can be given to a single mind is to be out of the question and ignore everything that matters in the real world.(1)

The market order is not something designed or designed with conscious planning. The market order is the product of the mold/pattern of millions of individuals pursuing their own ends by cooperating with others for their mutual benefit. This order is not designed to manage resources, it is the pattern of the economic activities of the people, the pattern of their individual activities.

The general rules that guide the activities of the people, such as the laws of property and contract, make it possible for a very complex general order to emerge. This order is so complex that it is beyond the comprehension of a single mind (2).

Hayek exaggerated the central planning of the production and consumption relations and flows of the market structure more than the planners. However, while carrying out the works related to planning, a single person in the center will not undertake this task. It should not be surprising that the people or committees that will ultimately make the planning come to office through democratic means. When it comes to the fact that these individuals or committees cannot make the right decisions, it is obvious that the majority does not always make the right decision, as Hayek mentioned in his criticism of democracy. The fact that there is always an environment of unlimited freedom in the society – although this environment of freedom is regulated by the principles of the free market – does not mean that the society is not coordinated and the course is not determined so that it does not cause very abnormal injustices.

However, Hayek’s criticism of central planning in parallel with the Marxist economic order (which it is), that is, his thinking of ‘central planning’ as separate from the logic of management shows that his criticisms are largely justified. But we can say that Hayek went too far even in these criticisms.

The situation in which people agree only on the need for central planning without agreeing on the purpose of the plan is similar to when a group of people attempt to travel together without agreeing on where they want to go. The result is this: All of these people will be compelled to make a journey that most of them do not want at all. (3)

In a society of central planning and socialist ideals, the first thing to collapse is the classical liberal principle that government itself must be restrained.

Planners have to allocate certain resources to certain purposes in order to achieve their goals. It is not based on the functioning of general rules such as a planned economy, a market economy, but on the conscious allocation of resources to obtain specific results. As planners shift resources from one sector to the other, they must constantly decide whose opinion should be taken into account most, whose proposals should be accepted, and who is appropriate to employ in the accepted plan.

… a seemingly perfectly innocent form of government control of industrial development.