The plan to end planning

National Review, June 16, 1997 by Ralph Harris

IN the aftermath of World War II, when Friedrich Hayek assembled some three dozen like-minded American and European scholars on the slopes of Mont Pelerin above Lake Geneva, the outlook for freedom could hardly have been more bleak. Churchill had coined the phrase "Iron Curtain" to mark the apparently permanent division of Europe between East and West. Some of the German participants at this first Mont Pelerin Society meeting had difficulty getting travel passes to Switzerland. Marshall aid had yet to be launched for the reconstruction of shattered economies. In April 1947 the new Deutsche Mark was more than a year away, and cigarettes still served as the general medium of exchange. As a grim omen for the future, Hayek's new classic The Road to Serfdom (1944) was banned throughout Germany, not only in the Soviet zone, but also by the three Western powers of occupation.

Exactly 50 years later, some eighty of the now five hundred members of the society gathered at Mont Pelerin, a few hundred yards from the smaller hotel at which the first meeting was held, to mark the anniversary and review progress. On the face of it, the world around had been transformed in a direction that would have rejoiced our anxious founders. How far can we conclude, therefore, that the objectives of the Society are well on their way to being fulfilled?

An objective observer at that first gathering in 1947 must surely have marveled at Hayek's dream and mocked his tiny band of economists, philosophers, and historians cocooned in Switzerland, remote from the ugly realities throughout the rest of Europe. After all, their purpose was to launch an intellectual crusade aimed at reversing the rising tide of postwar collectivism already signaled by the swamping Labour majority that had swept Churchill aside in Britain -- Hayek's chosen home since he quit Vienna in 1931.

It was one thing for the monetary experts at that 1947 gathering to chart the way from rationing, price control, and barter to a new German currency that was brilliantly imposed the following year by Ludwig Erhard, a friend of Hayek's. But Hayek's aim was far more ambitious. It was nothing less than to reconstruct the essential framework of a free society, with limited government under the rule of law, guaranteeing private property rights but permitting "the possibility of establishing minimum standards by means not inimical to initiative and functioning of the market." In short, Hayek's war aim was to reverse the tide of collectivism sweeping across Europe after 1945 from the Soviet Union westward to Britain, already being converted into a socialist laboratory. So did the whole enterprise amount -- as a cynic might scoff -- to a self-contradictory project of formulating a plan to end planning? And if so, the second question asks itself: Has the plan worked?

The first question is easier to dispose of than the second. Hayek would not have been discomforted by the quip that he was indulging in planning in order to end planning. As market economists never tire of emphasizing, there's nothing wrong with "planning" in everyday behavior, since it means no more than seeking to act rationally with as much foresight as an individual or group can muster. The planning which those early Mont Pelerinians sought to dethrone referred to ambitious projects devised by politicians, financed from "public" money, and imposed by coercion on a defenseless public.

So what was the big idea -- the (private) plan -- which Hayek proposed to his fellow plotters in 1947? The bare bones will be found in one of his most important essays, first published two years later as The Intellectuals and Socialism. It is none the worse for echoing the concluding paragraphs of The General Theory, where Keynes argues that it is the ideas of economists and philosophers ("both when they are right and when they are wrong") that rule the world. Hayek shrewdly spreads his net wider by defining "intellectuals" as going beyond academics, journalists, broadcasters, ministers, etc., to include opinionated doctors, scientists, and professional men who "because of their expert knowledge of their own subjects are listened to with respect on most others."

All such intellectuals Hayek defines as "professional second-hand dealers in ideas" who are attracted to socialism by the benevolence of its intentions and the excitement of its sweeping Utopian aspirations. Hence, to win the war of ideas, anti-socialists must project their own liberal Utopia. Said Hayek: "We must make the building of a free society once more an intellectual adventure, a deed of courage." The message of hope for all Mont Pelerinians was this: "Once the more active part of the intellectuals have been converted to a set of beliefs, the process by which these become generally accepted is almost automatic and irresistible."

This was the plan Hayek proposed setting in motion with the establishment of the Mont Pelerin Society. It was to be a kind of dispersed worldwide academy of uncompromising liberal scholars and students. It was a mobile, almost phantom academy. It had no base or permanent staff. Instead, over the next half-century, a growing number of carefully vetted members would meet in private conclave every year or two, at agreeable venues around the world -- from Cambridge, Berlin, Paris, and Madrid to Princeton, Hong Kong, Sydney, and Prague. The program rings the changes on a single unvarying theme, that of exploring -- without regard for what might be thought expedient or "politically possible" -- both the philosophical foundation of the free society and the legal/institutional setting within which people are permitted maximum scope for freedom, peace, and prosperity. At every meeting expert papers would be read, followed by vigorous discussion, on all the endemic disorders of modern societies, from inflation, monopoly, protectionism, trade-unionism, lobbying, and state "welfare," to the cumulative growth of government, taxation, regulation, and all the other mischiefs to which "majoritarian democracy" is prey.