Trump’s economic policy: A Hayekian critique

There are few more influential right-wing scholars than the economist Friedrich Hayek — and few whose work is less compatible with the right’s ascendant Trumpian strain.

Born in Austria in 1899, Hayek spent his career developing a wide-ranging libertarian social theory. Societies, for Hayek, emerge from the interplay of countless different systems and logics — creating an order so complex that no single entity, not even a government, can fully understand how it all operates. He believed that any attempt to transform such a thing by policy would invariably break part of this system, leading to unintended and often disastrous consequences.

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This isn’t a good argument against all government interference in the marketplace (as a shallow read of Hayek might suggest). But it is a powerful insight into how societies work, one that provides an especially clear explanation for why planned economies failed so badly during Hayek’s lifetime.

It also helps us understand why there’s an authentic strain of right-wing resistance to Trump’s “tariffs and deportations” economic agenda — one that attentive liberals could learn from.

Hayek’s “spontaneous order” and the case against regulation

For Hayek, there were basically two different types of system or order. The first is an organization, meaning a top-down planned effort where one person or entity lays out the rules for everyone to follow. The second is a “spontaneous order,” a bottom-up system in which the rules are determined over time by enormous numbers of micro-interactions.

Take, for example, the ecosystem of the American West. No one person set the rules by which bison, wolves, moose, prairie dogs, and the like breed and interact; in fact, no one dictated that this particular place needed to have those particular species at all. Instead, a system emerged out of thousands of years of interactions between flora and fauna, prey and predator. It has predictable rules and outcomes, but no hand at the tiller.

Hayek believed that humanity operated in a similar, but even more complex, fashion.

Our own social order, according to Hayek, reflects centuries of interactions between hundreds of millions of different people and an impossibly diverse set of institutions, ranging from organized religion to different economic sectors to artist collectives. What we call “society” is the spontaneous order that emerges from individuals and organizations interacting and developing oft-unwritten rules that govern those interactions.

“The structure of human activities constantly adapts itself, and functions through adapting itself, to millions of facts which in their entirety are not known to anybody,” he wrote in Law, Legislation, and Liberty, Volume 1.

Government, Hayek argued, plays a special role in spontaneous order: It “becomes indispensable in order to assure that [social] rules are obeyed.” The state both protects people’s rights to participate in their corner of the spontaneous order and, at times, can even guide the order toward adopting a different (and perhaps better) set of rules.

What the state cannot do well, in Hayek’s eyes, is interfere with discrete and specific interactions inside the spontaneous order.

When the government issues “commands” telling people where and for how much they can sell their goods, for example, it is engaging in an enterprise that bureaucrats and politicians cannot and never will have sufficient knowledge to do adequately. Most economic regulation, for Hayek, is akin to the mass slaughter of wolves in the American West — a shortsighted move with destabilizing long-term consequences. (Recent efforts to reintroduce wolves have been an extraordinary success.)

“The spontaneous order arises from each element balancing all the various factors operating on it and by adjusting all its various actions to each other, a balance which will be destroyed if some of the actions are determined by another agency on the basis of different knowledge and in the service of different ends,” Hayek wrote.

Hayek versus Trump

It is very easy to take this pro-market line of thinking too far.

We know that certain elements of the economy, like the money supply, can in fact be effectively managed by governments. Hayek’s skepticism of government could bleed over into paranoia, as with his argument in The Road to Serfdom asserting that social democracy would invariably bleed into authoritarianism. In fact, he even went so far as to endorse Augusto Pinochet’s dictatorship in Chile on grounds that its free-market policies were worth the loss of political liberty.

Yet Hayek’s argument is essential to understanding why some government projects, like Soviet-style command economies, tend to fail so spectacularly. When an economic policy aims at fundamental transformation, one in which humans are put in charge of managing a vast swath of ordinary economic activity, the potential for the state to exceed the bounds of its knowledge is obvious.

Hayek did not believe that this was only a problem for socialists. In The Constitution of Liberty, Hayek argued that conservatives’ emphasis on preserving tradition and the nation inclined them toward dangerous forms of state control over society.

“It is this nationalistic bias which frequently provides the bridge from conservatism to collectivism: to think in terms of ‘our’ industry or resource is only a short step away from demanding that these national assets be directed in the national interest,” he wrote.

So despite unquestionably being a man of the right, Hayek rejected the label “conservative” for his politics (he preferred “liberal” on grounds that “libertarian” was too clunky). Conservatives, he argued, were dogmatic and nationalistic — useful allies against the left, but skeptical enough of liberty that they posed their own set of collectivist dangers.

Were Hayek still alive, he would see the vindication of his concerns in the person of Donald Trump. The former president’s two most consistent policy proposals — deporting millions of migrants and imposing a 10-percent tariff on all foreign-made goods — are far more aggressive efforts at reshaping America’s spontaneous order than any tax-and-spend proposals offered by the Harris campaign. Each, in its own way, amounts to a fundamental revision of how the American state and economy operate.

Indeed, there’s a reason that some of the most effective critics of Trump’s trade and immigration policies work for the libertarian Cato Institute. Hayek’s heirs, at least those who take his ideas seriously, understand that Trump represents something anathema to their tradition.

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Source: vox.com