Hayek and the Coronavirus

Friedrich Hayek was a 20th-century Austrian-British economist who was an infamous defender of the free market and free institutions at large. Today, Hayek is considered a controversial figure given his alignment with Fascist regimes in the past, such as Pinochet's dictatorship in Chile. However, his fundamental economic doctrines and classical liberalism, it should be noted, were supported and used by such figures as John Maynard Keynes, Margaret Thatcher, and Ronald Reagan. His 1944 book The Road to Serfdom may provide a roadmap during these troubling times insofar as preventing excessive government control/institutional control is concerned. Hayek famously wrote;

"Emergencies have always been the pretext on which the safeguards of individual liberty have been eroded"

---

The coronavirus has seen the introduction of authoritarian measures all across the globe, with 'social distancing' and 'lockdown' measures becoming the norm for most countries. Hayek didn't oppose government control and authoritarianism in this respect (as is otherwise suggested by his critics), in fact, he, like most rational people, realized the necessity of such policies during trying times. Hayek wrote The Road to Serfdom on the cusp of the end of World War 2 and recognized the necessity of 'total' government control in order to vanquish the enemy. What he was concerned about, however, was the inability of governments to distance themselves from such a level of control after the war was over; a prophecy that came into fruition, as the Cold War and Eisenhower's 'military-industrial complex' attests to. We now have a similar crisis on our hands. The coronavirus has substantially expanded government power, and to extend Hayek's analysis, has expanded the power of large firms and bureaucracies. Government control is easy to measure quantitatively and can be checked by a strong constitutional framework, however, the power of bureaucracies and large MNC's tends to fly under the radar.

---

Our increasing dependency upon the 'gig economy', and economic shutdowns position large firms in a perfect position to distort economic signals. Due to their cash reserves and size, they are able to adapt to the economic status quo and drive out smaller enterprises that are simultaneously experiencing revenue shocks. This has the effect of creating a not so free free-market that deprives individuals of their liberty in a comparable manner to the central planning regimes that Hayek so despised. Robert Reich in his book Saving Capitalism offers an example of an industry that has already managed to accomplish this feat, namely the telecommunications and software industry. Due to the fact that we are all practically dependent on mobile phones and the internet in our modern-day and age, the development of an oligopoly in such an industry effectively nullifies the free market as demand-side variables, whilst present, are fairly consistent, and supply-side variables are practically fixed, thereby undermining individual agency as the direction of the central planning oligopoly is the direction in which individuals will have to follow. The coronavirus has the potential to extend this pattern to other industries, which is why I argue that partial economic opening as has been seen in Spain, the US, and Malaysia, combined with economic stimulus for small and medium enterprises can help normalize the growing power asymmetry between firms and stabilize the economic landscape.

---

Whilst some may argue that bureaucracies around the world have been failing due to the heightened burden placed upon them incident to the coronavirus, I believe, in a similar fashion to Hayek, that the growing power of said bureaucracies, as a means to compensate for their inefficacy, may result in permanent damage to a free and democratic society. The use of monitoring apparatuses necessitated by contact tracing, the consolidation of healthcare efforts, and the centralization of information flow to improve elasticity and flexibility in dealing with the coronavirus, whilst certainly improving government transmission mechanisms also has the inherent potential to subordinate the individual to an efficient system in a Kafkaesque dystopia. For example, the new National Security Law passed by China's parliament gives China a greater bureaucratic hold over Hong Kong. This is a perfect example of bureaucratic expansionism during a time of crisis, which of course has grave political consequences when the crisis eventually dies down. Of course one could argue that due to the pre-existent authoritarianism of China, it doesn't serve as the best example of how democratic governments could slide down a similar slippery slope, but if Hayek's predictions are any indication, the probability of the same happening is not impossible.

---

Overall, the coronavirus has presented serious challenges to nations all around the world, with responses varying from quasi-totalitarian policies in China, morally questionable herd immunity policies in Sweden, and variations on lockdown/social distancing policies everywhere else. In every case, a government must weigh the democratic cost against the social cost and find a balance that is suitable, such is the nature of a democracy. We are fortunate however that most democratic nations have yet to sacrifice the foundations of their democracy in pursuit of a 'total' solution to combating the virus, but we should be wary of political shifts that are slowly starting to appear. As Hayek would have noted, an emergency is a time when everything static suddenly becomes fluid. Emergencies necessitate changes to society on a massive scale, shifting its power relations accordingly. It is a time where agents can seize gaps in power and a time where others lose power. Although Hayek, as a firm Liberal, would caution us solely against government power, an adaptation of Hayek's philosophy, applied to this current context, can advise us to guard ourselves against drastic shifts in power, wherever they may lie. Based on effective coronavirus response in countries like Norway and Taiwan, it becomes clear that the decisive factor to prevent the spread of the virus is the response time. Developed countries already have the healthcare capacity and the contact tracing methods, their failure lies in the time lag responding to the crisis. Accordingly, after the crisis is over governments (developed) should not expand social welfare nets and healthcare, nor should political campaigns use that motif as a catch-all trick to win votes. It is an exercise in folly as it serves to increase government power by increasing the central planning function of the government in lieu of rolling back government involvement by focusing solely on future responsivity. A similar line of reasoning can be employed with respect to interest groups that may utilize the virus as a scapegoat to promote their socio-political agenda. We must guard against all forms of potential tyranny that arise out of our crumbling society.