The Fatal Conceit: The Errors of Socialism (The Collected Works of F. A. Hayek Book 1)

by Friedrich A. Hayek

For there is no known way, other than by the distribution of products in a competitive market, to inform individuals in what direction their several efforts must aim so as to contribute as much as possible to the total product.

The demands of socialism are not moral conclusions derived from the traditions that formed the extended order that made civilisation possible. Rather, they endeavour to overthrow these traditions by a rationally designed moral system whose appeal depends on the instinctual appeal of its promised consequences.

The dispute between the market order and socialism is no less than a matter of survival. To follow socialist morality would destroy much of present humankind and impoverish much of the rest.

Almost all of us serve people whom we do not know, and even of whose existence we are ignorant; and we in turn constantly live on the services of other people of whom we know nothing. All this is possible because we stand in a great framework of institutions and traditions – economic, legal, and moral – into which we fit ourselves by obeying certain rules of conduct that we never made, and which we have never understood in the sense in which we understand how the things that we manufacture function.

Competition is a procedure of discovery, a procedure involved in all evolution, that led man unwittingly to respond to novel situations; and through further competition, not through agreement, we gradually increase our efficiency.

Man became intelligent because there was tradition – that which lies between instinct and reason – for him to learn.

I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.

Product of property

What led the greatly advanced civilisation of China to fall behind Europe was its governments’ clamping down so tightly as to leave no room for new developments, while, as remarked in the last chapter, Europe probably owes its extraordinary expansion in the Middle Ages to its political anarchy (Baechler, 1975:77).

The morals of the market do lead us to benefit others, not by our intending to do so, but by making us act in a manner which, nonetheless, will have just that effect.

Perhaps the main force behind the persistent dislike of commercial dealings is then no more than plain ignorance and conceptual difficulty. This is however compounded with preexisting fear of the unfamiliar: a fear of sorcery and the unnatural, and also a fear of knowledge itself harking back to our origins and indelibly memorialised in the first few chapters of the book of Genesis, in the story of man’s expulsion from the Garden of Eden. All superstitions, including socialism, feed on such fear.

The history of government management of money has, except for a few short happy periods, been one of incessant fraud and deception. In this respect, governments have proved far more immoral than any private agency supplying distinct kinds of money in competition possibly could have been. I have suggested elsewhere, and will not argue again here, that the market economy might well be better able to develop its potentialities if government monopoly of money were abolished

Following John Locke’s similar claim in the Second Treatise (1690/1887), the American historian James Sullivan remarked, as early as 1795, how the native Americans had been displaced by European colonists, and that now five hundred thinking beings could prosper in the same area where previously only a single savage could ‘drag out a hungry existence’ as a hunter (1795:139).

I have been contending that socialism constitutes a threat to the present and future welfare of the human race, in the sense that neither socialism nor any other known substitute for the market order could sustain the current population of the world.

It is, then, not simply more men, but more different men, which brings an increase in productivity. Men have become powerful because they have become so different: new possibilities of specialisation – depending not so much on any increase in individual intelligence but on growing differentiation of individuals – provide the basis for a more successful use of the earth’s resources.

As the capitalist became able to employ other people for his own purposes, his ability to feed them served both him and them. This ability increased further as some individuals were able to employ others not just directly to satisfy their own needs but to trade goods and services with countless others. Thus property, contract, trade, and the use of capital did not simply benefit a minority.

Most individuals who now make up the proletariat could not have existed before others provided them with means to subsist. Although these folk may feel exploited, and politicians may arouse and play on these feelings to gain power, most of the Western proletariat, and most of the millions of the developing world, owe their existence to opportunities that advanced countries have created for them.

Capitalism also introduced a new form of obtaining income from production that liberates people in making them, and often their progeny as well, independent of family groups or tribes. This is so even if capitalism is sometimes prevented from providing all it might for those who wish to take advantage of it by monopolies of organised groups of workers, ‘unions’, which create an artificial scarcity of their kind of work by preventing those willing to do such work for a lower wage from doing so.

We have become civilised by the increase of our numbers just as civilisation made that increase possible: we can be few and savage, or many and civilised.

First, the spectre of a population explosion that would make most lives miserable appears, as we have seen, to be unfounded. Once this danger is removed, if one considers the realities of ‘bourgeois’ life – but not utopian demands for a life free of all conflict, pain, lack of fulfilment, and, indeed, morality – one might think the pleasures and stimulations of civilisation not a bad bargain for those who do not yet enjoy them.