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When I read Dick Armey's Feb. 5 op-ed, "Washington Could Use Less Keynes and More Hayek," I had just finished re-reading Hayek's famous book on the errors of socialism, "The Fatal Conceit." This first volume of his collected works was published in 1988, just before the Cold War ended with what was widely called an unequivocal triumph of capitalism. As a result of the financial crisis, the merits of the capitalist free market have become less clear again, and many politicians are inclined to embrace Keynesianism once more.
In fact, "The Fatal Conceit" is a must-read for all politicians dealing with economic affairs. What struck me most is that Hayek was much more a conservative than a liberal (even in the European sense).
In one sense, however, "The Fatal Conceit" may belong to anthropology or sociology rather than economics. The differentiation of private property from collective property is best at home with traditional moral precepts -- especially those found in monotheistic religions. For Adam Smith this may have been self-evident but Hayek, too, emphasized it several times. Though he was an outspoken agnostic himself, he believed that traditional morality enhanced the ethos of personal responsibility. Didn't Aristotle say that marital fidelity was beneficial for the economic life of the polis?
Socialism, on the contrary, is essentially a kind of nostalgia for the noble savage who hides behind some collective responsibility -- which in practice means no responsibility at all. Hayek repeatedly quoted Keynes's words, "In the long run we are all dead," and called him an immoralist because of that.
In his op-ed, Mr. Armey wrote about "the perverse form of fiscal child abuse that heaps massive debts on future generations." Republicans are not free from this vice, but Democrats are generally more inclined to it. In view of skyrocketing unemployment, politicians do not want to disappoint their voters by doing nothing. So they prefer to take a lot of spectacular measures, while hoping for the best.
Hayek would support the current calls for a "moralization" of global capitalism, since the core of the crisis seems to be exactly the loss of moral constraints in the blind pursuit of as many quick bucks as possible. But he would still oppose the idea that politicians know better how to stimulate the economy than the market does. Carefully selected infrastructure projects can be of some help to keep things going, but without a reinforcement of traditional morality it will all be in vain.