Written during the darkest days of World War II, F.A. Hayek’s Road to Serfdom was an intellectual repudiation of economic central planning, a condemnation of Socialism, Communism and Authoritarianism, and a defense of free market economics, democracy and individual liberty.
More than two months ago, we started zooming down a new Superhighway to Serfdom. Policy reactions to a pandemic have pushed western civilization closer to government control of nearly all aspects of our lives faster than almost anyone could have ever imagined. If we do not reverse those policy errors, we will see the destruction of free market capitalism, individual liberty and democracy as we currently know it.
To be clear, the pandemic (the virus itself and its health effects) did not create or cause the current economic pain that we are experiencing. Rather, it was reactionary government policies based on models that have since been proven to be fundamentally flawed.
In the blink of an eye, the US has gone from record low unemployment to 36 million unemployed and counting. Policies intended to save jobs and maintain payrolls have instead created incentives for many to not work and collect benefits that are greater than returning to their previous jobs.
Government policies have created breadlines where we had none previously. They have created disruptions in supply chains, resulting in the insane combination of higher food prices for consumers and lower prices for producers, forcing farmers to literally pour milk down the drain and cull livestock while store shelves sit empty like something out of the Soviet Union in the 1980s. Not a single dairy cow has died from the virus, but we can only buy one gallon of milk at the store. Government policies have shuttered hospitals for routine procedures, resulting in 150,000 cancer diagnoses NOT happening per month, and they have created the current situation in California where 2 out 3 children are not getting routine vaccinations.
Indeed the number of people that needlessly die indirectly from these policies will likely greatly eclipse the number that die from the disease itself.
Let’s use a simple real-world example that demonstrates how these policy decisions have already created an unnecessary scarcity: toilet paper (TP). To summarize from Will Oremus’ great article on the subject: People are not hoarding TP, or suddenly starting to use more TP; rather government restrictions (lockdowns) have resulted in people using much more TP at home than in public. As we all know from personal experience, consumer TP and commercial TP are very different products. But most people do not know that the two products have two different sets of producers, distributors and purchasers. The two products are made from different materials, manufactured into different sized rolls, use different shipping pallets, delivered out of different distribution points, and have much different cost profiles.
They are not readily interchangeable. So while our free-market economy could have easily adjusted for an uptick in demand, this policy change has drastically altered the entire economics of consumption behavior – resulting in an immediate 40% increase in demand for consumer TP. While it is easy to understand how such policy decisions can disrupt an industry like TP, it is much harder to calculate the enormous ripple effect these policies will have on the entire world.
Policy overreactions now threaten to TP the entire economy. The US is spending trillions of dollars on relief in response to the tens of millions of people now unemployed. This massive printing of money is effectively implementing MMT (Modern Monetary Theory, aka Make-believe Monetary Theory, or Magical Monetary Theory, which Hayek and any other real economist would dismiss as fantasy. MMT certainly was not taught at GMU where I earned my Economics degree).
Plans to spend trillions more could lead to hyperinflation, and skyrocketing levels of debt will become impossible to service, ultimately leading to complete collapse. Some of the “solutions” being considered today – including techniques already implemented by Communist China — call for the monitoring and tracking of all individuals through a partnership of government and big tech companies, which would erase many individual rights, undo any presumption of personal privacy and create a surveillance state by fiat.
Governments must choose policy paths that restore economic and individual liberties rather than continuing to limit them, or “flattening the curve” with draconian governmental overreach (lockdowns) will have been a pointless slog on the Superhighway to Serfdom, resulting only in the economic suicide of western civilization.
Burton Gray, entrepreneur and advocate for freedom, currently operates Banks Mountain Cattle Company and serves as Investment Committee Chair at The Washington Home.