There is a crippling hubris in Friedrich Hayek’s political project. It was explained well by John Gray:
Keynes’s own experience told against Hayek’s theories. As one of the 20th century’s most successful speculative investors, playing the markets on behalf of his college from a phone at his bedside before he got up for the day, he understood—in a way that the inveterately professorial Hayek did not—the ineradicable uncertainty of economic life. As a member of the British delegation at the Paris Peace Conference in 1919, Keynes had been horrified at the punitive conditions imposed by the Allies, which he forecast would destroy the German economy and lead to an upheaval that would “submerge civilisation itself”. Keynes had an acute sense of the risks posed to social stability by misguided economic policies. In contrast, Hayek consistently ignored these hazards.
Hayek’s blind spot with regard to politics was clear in the early 1980s when the first Thatcher government, in an attempt to reduce inflation and bring the public finances closer to a balanced budget, was raising interest rates and cutting public spending. As he had done during the 1930s, Hayek attacked these policies as not being severe enough. It would be better, he told me in a conversation we had around this time, if Thatcher imposed a more drastic contraction on the economy so that the wage-setting power of the trade unions could be broken. He appeared unfazed by unemployment, which was already higher (more than three million people) than at any time since the 1930s, and would rise much further if his recommendations were accepted.
Though he witnessed at first hand the collapse of liberal civilisation in interwar Europe, Hayek had little sense of the fragility of freedom. He observed how the Habsburg regime was destroyed, first by war and economic ruin and then by nationalism, but his response was to look for what he called in his book Individualism and Economic Order (1949) “a permanent legal framework”, which could serve as a guarantor of liberty in the economy and society. Here Hayek disregarded the principal lesson of the interwar years, which is that a liberal regime cannot be secured by legal diktat.
Geopolitical conflict and war, economic upheavals and new social movements have repeatedly damaged or destroyed liberal regimes. No ideal constitution can overcome the permanent threats to liberal values.
Yet throughout his writings Hayek invoked the mirage of a legal order in which vital freedoms are protected by being insulated from the political process. Something like this protection was provided by the Austro-Hungarian empire during the reign of the emperor Franz Joseph, and it is almost as if Hayek were trying to reconstitute the Habsburg realm in a new form that would last for ever.
The same objection should be made against what Gray called “anti-political liberalism,” which is “the ruling illusion of the current generation of progressive thinkers.” Gray made this argument (and convinced me) in his book Two Faces of Liberalism. If you want to know why the tag line for this blog is “liberal, but not progressive,” read his book.