Hayek: A Collaborative Biography

Part IX: The Divine Right of the 'Free' Market

Robert Leeson

• Publisher: Palgrave Macmillan
• Year: 2017
• Print ISBN: 9783319607078
• eBook ISBN: 9783319607085
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

F. A. von Hayek (1899-1992) was a Nobel Prize winning economist, famous for promoting an Austrian version of classical liberalism. This multi-volume biographyexamines the evolution of his life and influence. In this ninth volume of Leeson's collaborative biography ofFriedrich August von Hayek, a variety of well-known contributors discuss Hayek's views on the divine right of the market taking democratic and free-market principles into account.

© The Author(s) 2017

Robert Leeson (ed.)Hayek: A Collaborative BiographyArchival Insights into the Evolution of Economicshttps://doi.org/10.1007/978-3-319-60708-5_1

Begin Abstract

1. What Is ‘Hayek’?

Robert Leeson^{1, 2}

(1)

Department of Economics, Stanford University, Stanford, CA, USA

(2)

Notre Dame Australia University, Fremantle, Australia

Robert Leeson

End Abstract

‘The Victory of Fascism in a Number of Countries Is Only an Episode in the Long History of Struggles over the Problem of Property.’

From campfire ‘Dreamtime’ through seventeenth century witch-burning to flying planes into the World Trade Centre, religious ‘knowledge’ has defined the structure of human thought—either through oral traditions or through sacred texts such as Heinrich Kramer’s Malleus Maleficarum (‘Hammer of the Witches’). Although the Enlightenment promoted secular objectives within the residual context of these structures, ‘Church’ became increasingly separated from ‘State.’ In the physical universe, ‘God’ was no longer required (by scientists, at least) to explain ‘order’; while in the social universe, religion appeared to be retreating to the sphere of private belief. After almost 120 years of taking up arms against fellow Christians (1517–1648), the intellectual structure of the quasi-religious ‘Invisible Hand’—which explained and promoted social harmony—created the economic foundations of Classical Liberalism.

Political Classical Liberalism developed simultaneously. In the seventeenth century, the arrow of service was reversed—at least intellectually. The feudal order maintained that both Emperor and Pope were God’s (often feuding) representatives; but after the Reformation, the divine right of kings promoted the service of ‘God’ through ‘His’ representative: the nation-based King and Church. In the seventeenth-century England, the House of Stuart lost its head (Charles I), was replaced by a Republic and then by a quasi-hereditary monarchy (the ‘Lord Protector’), and then invited to return as constitutional rather than divine monarchs. When the death-bed Catholic Charles II was succeeded by the Catholic James II (who then fathered a son and heir), two Tories and five Whigs (the ‘Immortal Seven’) wrote the 1688 ‘Invitation to William,’ the Dutch Stadtholder, inviting him to invade. James II (1633–1701) thus kept his faith but lost ‘his’ property (throne)—two of his daughters reigned in his place: Mary II (1689–1694) and Anne (1702–1714).

Anne’s closest Protestant relative was then chosen to become George I (1714–1727)—of a diminished monarchy: Britain began the transition to the system of ‘Prime-Minister-in cabinet,’ not regal, government. Sir Robert Walpole (1676–1745) is generally regarded as the de facto first prime minister (1721–1742); and two centuries later—as Friedrich ‘von’ Hayek (1978) bemoaned that post-Habsburg Austria was governed by democracy—‘a republic of peasants and workers’ ¹ —Ramsey MacDonald (1866–1937), the illegitimate son of a farm labourer and a housemaid, became the 43rd and 45th British prime minister (1924, 1931–1935).

In the sixteenth century, the King of Spain and Habsburg Holy Roman Emperor of the First Reich, Charles V , ‘inherited’ the Burgundian Netherlands and became the sole feudal overlord—the Stadtholder represented his interests. After the 1581 Dutch Revolt , the Stadtholder (which continued only in the Republic of the Seven United Netherlands) became the highest executive official, appointed by the States of each Province. To reinforce this expectation, the English Parliament presented to the victorious William and his wife Mary, the Bill of Rights —which limited the powers of the monarch and specified the rights of Parliament (including the requirement for regular parliaments, free elections, and freedom of speech in Parliament).

In 1607, the British Empire began in Jamestown, named after James I, the first Stuart King, capital of the colony of Virginia (1616–1699); but in 1688, his grandson, James II, fled to become a pensioner of the absolutist Bourbon Sun King of France, Louis XIV (reigned 1643–1715). In 1614, Louis XIII (reigned 1610–1643) had called a Parliament; his son is attributed with the phrase ‘L’état, c’est moi.’; and after his grandson Louis XV’s reign (1715–1774), his great-grandson became Louis XVI (reigned 1774–1791). These four Kings could have ruled France for two centuries—had there been more deference towards superstition: what Hayek (1978) praised as the ‘traditional element, the element of surrounding rules.’ ² His family had been elevated from the Third to the Second Estate in 1789—an inauspicious year for the nobility.

Louis XV’s mistress, Madame de Pompadour, is attributed with the phrase ‘Après nous, le déluge.’ Hayek (1978) described both the déluge that washed away the legal basis of Habsburg inherited titles and privileges and the ‘intellectual activity ’ to which he devoted his life: ‘The whole traditional concept of aristocracy, of which I have a certain conception—I have moved, to some extent, in aristocratic circles, and I like their style of life.’ The ‘Great’ War between the dynasties undermined the ‘spontaneous’ order: ‘The tradition died very largely; it died particularly in my native town Vienna, which was one of the great cultural and political centers of Europe but became the capital of a republic of peasants and workers afterwards. While, curiously enough, this is the same as we’re now watching in England, the intellectual activity survives this decay for some time.’ ³

In March 1917, Nicholas II, the Emperor of Russia , was forced to abdicate. In the same month, Kaiser Wilhelm II’s Gotha G.IV began bombing London: on 17 July 1917, King George V changed the name to his ‘House’ from ‘Saxe-Coburg and Gotha’ to ‘Windsor.’ Hayek (1978) reflected: ‘Once I got to England, it was just a temperamental similarity. I felt at home among the English because of a similar temperament. This, of course, is not a general feeling, but I think most Austrians I know who have lived in England are acclimatized extraordinarily easily. There must be some similarity of traditions, because I don’t easily adapt to other countries.’ Four years after the demise of the Habsburgs, Hayek left the ‘republic of peasants and workers’ for another republic: ‘I had been in America before I ever came to England, I was here as a graduate student in ’23 and ’24, and although I found it extremely stimulating and even knew I could have started on in an assistantship or something for an economic career, I didn’t want to. I still was too much a European and didn’t the least feel that I belonged to this society. But at the moment I arrived in England, I belonged to it.’ ⁴

A few years later, Hayek told Bartley that his love affair with England had begun in America in 1923–1924: ‘It was then that I discovered my sympathy with the British approach, a country I did not yet know but whose literature increasingly captivated me. It was this experience which, before I had ever set foot on English soil, converted me to a thoroughly English view on moral and political matters, which at once made me feel at home when I later first visited England three and a half years later…. In the sense of that Gladstonian liberalism, I am much more English than the English’ (cited by Caldwell 2008, 690–691).

According to Hayek (1997 [1949], 224), there was a crucial distinction between the ‘real scholar or expert and the practical man of affairs’ and non-propertied intellectuals, who were a ‘fairly new phenomenon of history,’ and whose low ascribed status deprived them of what Hayek regarded as a central qualification: ‘experience of the working of the economic system which the administration of property gives.’ This led Hayek (1978) to complain about the ‘intellectual influence’ of those who challenged his ‘civilisation’: ‘On the one hand, people no longer learned the old rules; on the other hand, this sort of Cartesian rationalism , which told them don’t accept anything which you do not understand.’ These two effects ‘collaborated and this produced the present situation where there is already a lack of the supporting moral beliefs that are required to maintain our [emphasis added] civilization. I have some—I must admit—slight hope that if we can refute the intellectual influence, people may again be prepared to recognize that the traditional rules, after all, had some value.’ ⁵

Those who promote religion see the world as a battle between God and the Devil; Hayek (1992a [1977]) saw the social universe as a battle between superstitions: ‘The gold standard was based on what was essentially an irrational superstition . As long as people believed there was no salvation but the gold standard, the thing could work. That illusion or superstition has been los...

Table of contents

• Cover
• Front Matter
• 1. What Is ‘Hayek’?
• 2. Faith-Based Economics
• 3. Hayek, Mises, and the Iron Rule of Unintended Consequences
• 4. Accelerating the Climate of Hate: The Austrian School of Economics, Hayek, and ‘The New Hate’
• 5. Christian Reconstructionism and the Austrian School of Economics
• 6. The Genealogy of Jaime Guzmán’s Subsidiary State
• 7. Hayek, Thatcher, and the Muddle of the Middle
• 8. Economics and Religion, What Is the Relationship?: A Case Study of Nordic Social Democracy
• 9. Clerical Fascism: Chile and Austria
• 10. Clerical Fascism: Portugal, Spain, and France
• 11. Austria, the Past and Anti-Semitism
• Back Matter