The Road From Serfdom
Skidelsky, Robert
BOOKS IN REVIEW - "The Road From Serfdom" Keynes Meets Hayek The Road From Serfdom: The Economic and Political Consequences of the End of Communism Robert Skidelsky Allen Lane—Viking Penguin 214 pages / $26.95 REVIEWED...
...His aim was simply to ensure a level of aggregate demand sufficient to enable market-clearing real wages to be established without price inflation...
...They imposed economic plans on themselves, spent billions on "infrastructure," 62 May 1996 • The American Spectator and systematically ran up deficits...
...As the central state weakened its grip on its magnates, they began to hoard local revenues for themselves...
...The author describes here a Keynes who sounds very much like Friedrich Hayek: Nothing was more contrary to Keynes's intentions than that governments should run permanent budget deficits...
...Western inflation, by raising the price of Russian raw materials on world markets and slashing the cost of borrowing Western funds, temporarily protected the Soviets from the consequences of their insane economic system...
...The victims of those jolts may turn to dark and irrational solutions for the troubles — it's not just the United States that is afflicted by Buchanans...
...Skidelsky's account of the collapse of Communism occupies just twenty pages, and it is a marvel of compression...
...What does worry Skidelsky is the vulnerability of capitalism to the mood swings of a democratic polity...
...what's needed now, Skidelsky argues, is what might be dubbed Hayekian means for Keynesian ends...
...With Communism dead, collectivism ought to be discredited and freedom triumphant...
...The market itself, he claims, "creates the communities needed to socialize it: firms and households will come together to pursue the aims common to each...
...Under the guise of explaining the rise and fall of Communism, Robert Skidelsky has produced nothing less than a vindication of the ideal of freedom —and at a time when it is under unremitting attack from some of the very people who used to defend it...
...The crimes of Nazi Germany—and its abject defeat—discredited right-wing collectivism...
...Impoverished and humiliated, the losers of the First World War rolled the dice again—and this time persuaded export-dependent Italy and japan to join them...
...Ai The American Spectator • May 1996 63...
...The governments of the 1970's responded to the failure of the 1960's collectivist experiments with still more collectivism: Nixon's wage and price controls, even more elaborate controls in Britain and Canada, more inflation, more regulation, and import restrictions in the name of solving the energy shortage...
...The newly empowered Soviet firms and republics didn't become any more efficient...
...That's something the United States must understand as the Republican Party makes heartbreaking flirtations with the narrow, stupid economic nationalism that doomed the world economy in the 1920's...
...His theory was deliberately designed to make the microeconomic interventions favoured by the planners, regulators and corporatists irrelevant...
...The Western world was coming to a harsh choice: retrace its steps away from collectivism or charge ahead toward a centrally planned economy...
...Unemployment rates began to rise, and inflation accelerated...
...ColDAVID FRUM is the author of What's Right, to be published in June by Basic Books...
...as artificial creations that existed only because of state-enforced irrationality, they collapsed immediately afterward...
...BOOKS IN REVIEW Keynes Meets Hayek The Road From Serfdom: The Economic and Political Consequences of the End of Communism Robert Skidelsky Allen Lane—Viking Penguin 214 pages / $26.95 REVIEWED BY David Frum put down this magazine, pick up the phone, call your favorite bookstore, and buy this book...
...And then something miraculous happened: Margaret Thatcher...
...Thatcher in 1979, Britain became the first big country to reverse its steps on the road to serfdom, to take the way back home...
...Skidelsky concludes by taking note of the widespread disillusionment with the new free global economy at what ought to have been its moment of glory...
...The United States followed...
...lectivism, in turn, caused a new war...
...For his answer, Skidelsky returns to Keynes—but not the Keynes of the 1960's...
...Skidelsky regards inflation as something much more than an economic problem...
...But the relaxation of Stalinism under Khrushchev caused many Westerners to fear—or hope—that left-wing collectivism might work after all...
...Dutch protectionism shut Japan out of markets in what's now Indonesia...
...But the story does not end so happily...
...Perhaps during the Depression, government spending programs were a way to redress the instability that Keynes diagnosed...
...The story begins with the failure of the self-equilibriating world economy of the nineteenth century to recover fully from the First World War...
...National markets need national institutions...
...By electing Mrs...
...Soviet Communism deprived Germany and Central Europe of their old eastern trade...
...Nor was it Keynes's aim to redistribute income, nationalize the economy, or direct investment or the location of industry...
...Specifically, Skidelsky wants to re-create for the whole world the economic conditions from which the North Atlantic community and Japan profited in the 1950's and 1960's: stable exchange rates, trade agreements, and international lenders of last resort...
...I'm amused by the irony that Keynes's greatest student is publishing under a title that pays tribute to Keynes's greatest critic...
...Although, as Skidelsky points out, the "development strategies" adopted by Third World governments in the 1960's and 1970's bore a much closer resemblance to fascist economic techniques than Soviet central planning...
...The Soviet economy had never made sense: although it squeezed the living standards of its people in order to invest huge portions of its national income, the abolition of prices and profits made it impossible to know whether all that investment was being allocated rationally...
...But that responsibility need not entail endless and huge government expenditure...
...So Western governments turned left in the 1960's in a desperate attempt to grow as fast as their gullible intelligence services told them the Soviets were growing...
...Skidelsky quotes a pessimistic 1957 assessment offered by Richard Crossman, editor of the anti-Communist classic, The God That Failed...
...American protectionism bottled up Europe...
...but I'm not sure that Skidelsky himself sees anything funny about it...
...this "marketization" of the Soviet economy was fatal...
...Suddenly, the collectivist ideas that had amused a handful of intellectuals in the years before 194 dominated politics...
...The entry of Latin America, the Far East, and Eastern Europe into the free-trading economy of the North Atlantic has jolted local economies all over the developed world...
...But he remains undaunted...
...Communism went bankrupt...
...As the Western world conquered inflation and corrected its course, it drove the Communist bloc into bankruptcy...
...The left turn failed, of course...
...Of course it wasn't...
...That's funny, but it doesn't make Skidelsky's prescriptions any less right...
...America's return to protectionism in the early 1920's doomed all hopes of European economic recovery, and—after a few years of wobbly prosperity—the whole world collapsed into depression...
...Written by a great historian who is John Maynard Keynes's biographer, The Road From Serfdom is a deft and subtle study of the economic and ideological currents of our blood-soaked century...
...Judged in terms of national security, scientific and technological development, popular education, and finally, even of mass living standards, free enterprise is losing out in the peaceful competition between East and West...
...How do we persuade voters to ride out those jolts...
...He is unimpressed by the complaints that free markets undermine nations and shatter communities...
...But the next step on the road to serfdom didn't work any better than the previous step had...
...Gorbachev tried to cope with that crisis by offering Soviet enterprises more freedom to contract with each other...
...He is a senior fellow of the Manhattan Institute, with which Robert Skidelsky is also affiliated...
...So did the bogus economic statistics churned out by the Soviet Union, which convinced President Kennedy, Prime Minister Harold Wilson, and other democratic leaders that Communism was winning the Cold War...
...Skidelsky ingeniously compares what happened next to the fall of the Roman empire...
...The book is already heroically brief, but here in summary—minus Skidelsky's subtlety and mastery of statistics—is his story of the renaissance of economic liberty...
...Crossman was appalled by "the terrifying contrast between the drive and missionary energy displayed by the Communist bloc and the lethargic, comfortable indolence of the Western democracies...
...As Skidelsky now sees it, the essence of Keynesianism is the belief that free-market economies tend to be cyclically unstable and that the state has a responsibility to avert these cycles...
...But4 Robert Skidelsky has produced nothing less than a vindication of the ideal of freedom...
...they just stopped remitting money to Moscow...
...international markets need international institutions...
...But what was true then is not true now...
...But when inflation was halted, the crisis of the Soviet economy was exposed even to the intoxicated eyes of the Politburo...
...Okay...
...Let's never again make the mistake of underestimating the importance of personality in history...
...It is a vital warning signal that a society is in trouble, that its government is trying to do too much...
...But if this really is Keynesianism for the nineties, then Keynes's last defender is the editor of the Wall Street Journal...
...But the giant enterprises that had starved the center to death did not benefit...
Vol. 29 • May 1996 • No. 5
