Hayek: A Collaborative Biography

Part IV, England, the Ordinal Revolution and the Road to Serfdom, 1931-50

R. Leeson, R. Leeson

• Editorial: Palgrave Macmillan
• Año: 2015
• ISBN:
  9781137452603
• Categoría: Economia
• Categoría: Teoria economica

This fourth volume examines his time in Vienna and Chicago (1931-1950), when Hayek held the prestigious University of London Tooke Professorship of Economic Science and Statistics. Between Vienna and Chicago (1931-1950), although his business cycle work was apparently defeated, this study takes a closer look at Hayek's successes.

1

Introduction

Robert Leeson

White Terror

Friedrich August Hayek (1899–1992) was born a Habsburg ‘von’ – and died a Nobel Laureate (1974), a House of Windsor Companion of Honour (1984) and a recipient of President George W. H. Bush’s Medal of Freedom (1991). In The Road from Serfdom, Erik ‘Ritter von’ Kuehnelt-Leddihn (1992) explained:

with the exception of Fritz Machlup, the original Austrian school consisted of members of the nobility. ... [Hayek] descended from a family ennobled at the end of the eighteenth century by the Holy Roman Emperor.

Hayek (1978) grew up in Vienna, which had been at the heart of the Holy Roman Empire: ‘one of the great cultural and political centers of Europe’. When he was 19, the Habsburg Empire collapsed: the Great War was ‘a great break in my recollected history’. It also broke the Habsburg nobility: on 3 April 1919, what Hayek (1978) called ‘a republic of peasants and workers’ abolished coats of arms and titles (Adelsaufhebungsgesetz, the Law on the Abolition of Nobility).¹

Republics transform ‘subjects’ into ‘citizens’: the status of ‘“German Austrian citizens” equal before the law in all respects’ was forcibly imposed on Austrian nobles (Gusejnova 2012, 115). In the 17th century, The World Turned Upside Down during the Civil War (or English Revolution) (Hill 1972); after 1919, those previously at the top of the Habsburg social and political edifice and still claiming intergenerational entitlements (‘von’, ‘Archduke’, ‘Count’ etc), faced fines or six months’ jail.

The neo-feudal century (1815–1914) was an unstable equilibrium: Hayek (1978) reflected that

the world which ended either in 1914 or, more correctly, two or three years later when the war had a real impact, was a wholly different world from the world which has existed since. The tradition died very largely; it died particularly in my native town, Vienna.²

Between 1917 and 1922, almost two-and-a-half millennia of order imposed by four wealthy families ended: the Romanovs (1613–1917), the Hohenzollerns (1061–1918), the Habsburgs (1276–1918) and the Ottomans (1299–1922). After 1919, two wealthy beneficiaries of one of those systems – Hayek and his patron, Ludwig Mises – sought to reconstruct a ‘spontaneous’ order.

The upward mobility of Hayek’s family (1994, 37) illustrates the process of neo-feudal social advancement. His great-great-great-grandfather, Laurenz Hayek, had ‘served one of the great aristocratic landowners of Moravia’. Laurenz’s son, Josef Hayek (1750–1837),

followed the landowner to Vienna as secretary when he was appointed to high government office, and after returning with him to Moravia became steward of the estate. In this capacity Josef Hayek developed two new textile factories in Moravia and Lower Austria, which in turn led to two new villages. He eventually also became a partner in these factories and acquired a substantial fortune. This was a significant achievement in the Austria of 1789, and it was this that led Kaiser Josef II to ennoble him ... the minor title of nobility (the ‘von’) which the family still bears.

Simultaneously, the Mises family became ‘wealthy merchants’ and in 1881 were rewarded with a ‘von’ (Hülsmann 2007, 6, 15). The Habsburgs allowed such families to turn business success into intergenerational entitlements. This led to concerns about the consequences of democracy for the sanctity of ‘property’ (Mises (1985 [1927], 19; see also Rothbard 1992; Greenspan 2008, 52; Rand 1943, 1957, 1964).

Hayek’s (1978) Austrian School mentor, Friedrich von Wieser ‘floated high above the students as a sort of God’;³ Wieser (1983 [1926], 226) also reflected on the consequences of the Great War:

When the dynastic keystone dropped out of the monarchical edifice, things were not over and done with. The moral effect spread out across the entire society witnessing this unheard-of event. Shaken was the structure not only of the political but also of the entire social edifice, which fundamentally was held together not by the external resources of power but by forces of the soul. By far the most important disintegrating effect occurred in Russia.

During the French Revolution, the muscadin – dandyish, musk perfume-wearing mobs – were the street-fighters of Thermidorian Reaction (the First White Terror); the return of the Bourbon King Louis XVIII led to the Second White Terror (directed at those with links to the former regimes). The Romanovs had long tolerated anti-Semitic pogroms: ‘the Jews’ were blamed for the 1881 assassination of Alexander II, Emperor and Autocrat of all the Russias. The resulting repressive May Laws (1882–1917) further restricted the civil rights of Jews. According to Peter Kenez (1991, 347), in 1919 alone 100,000 Jews were liquidated in the White Terror response to the Russian Revolution.

Mises (1881–1973) was born a ‘von’, and lived with ‘great chagrin’ because of his status as an academic market failure (Hayek 1978) – yet he died a Distinguished Fellow of the American Economic Association (1969).⁴ In his Memoirs, written in 1940 from the safety of neutral America (where he had fled to from neutral Switzerland), Mises (2009a [1978], 62–63) explained:

The most important task I undertook during the first period, which lasted from the time of the monarchy’s collapse in the fall of 1918 until the fall of 1919, was the forestalling of a Bolshevist takeover. The fact that events did not lead to such a regime in Vienna was my success and mine alone. Few supported me in my efforts, and any help was relatively ineffective.

After three-and-a-half years as a prisoner-of-war in Russia, Otto Bauer, the Social Democratic Workers’ Party of Austria (Sozialdemokratische Arbeiterpartei Österreichs) Foreign Minister of ‘German-Austria’, negotiated a union with the defeated Germany, with Vienna as the second city after Berlin. On 5 March 1919, the Austrian president declared in parliament: ‘The Entente cannot limit the right of free disposition which is undoubtedly ours’ (New York Times 1919). However, this ‘Teutonic Union’ was prohibited by the peace treaties. According to Mises (2009a [1978], 62–63):

I have already mentioned the success of my influence with Otto Bauer in this regard. I alone convinced Bauer to abandon the idea of seeking union with Moscow ... When this danger had been overcome, I directed all of my efforts toward putting an end to inflation.

On 1 March 1934, Mises joined the Austro-Fascist Patriotic Front and their Werk Neues Leben social club (Hülsmann 2007, 677, n149). He had White Terror allies:

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.

The ‘similar movements’ of ‘bloody counteraction’ that Mises (1985 [1927], 42–51, 19, 44) referred to included the anti-Semitic ‘l’Action Française’ plus ‘Germans and Italians’. (‘Italians’ obviously refers to Mussolini’s 1922 March on Rome; ‘Ludendorff and Hitler’ obviously refers to the 1923 Ludendorff-Hitlerputsch or Munich Beer Hall putsch.)

John Maynard Keynes (1919) resigned from the British government over the peace treaties that created the resentful environment in which fascism could emerge and thrive. In his ‘A Plea for the Statement of Allies’ Terms’, his co-leader of the third generation British Neoclassical School, A. C. Pigou (1916), stated:

I have seen the shattered ruins of Ypres cathedral; I have watched the mud-stained soldiery staggering homeward from their trenches; I have been nearby when children in Dunkirk have been maimed and killed from the air. And the sorrow, terror, and pain that these things represent – the pitiful slaughter of the youth of seven nations, the awful waste of effort and organising power, the dulling and stunting of our human sympathies.

In continental Europe, the search for alternative, post-neo-feudal social and political foundations were undermined by the Austrian ‘liquidation’ policies that turned the bursting of an asset price bubble into the Great Depression (Galbraith 1975, 173; Haberler 1986, 425; Hoover 1952, 30).⁵ Adolf Hitler, with his understanding about the ‘great lie’, created political disorder so as to present himself as the ‘order’-based saviour, and then justified his dictatorship with völkisch folklore. In Mein Kampf, Hitler (1939 [1925], 161, 165–166, 518) reported that an October 1918 British gas attack at Ypres ended his war: soldiers

lay gasping and choking during gas attacks, neither flinching nor faltering, but remaining staunch to the thought of defending the Fatherland ... Has all this been done in order to enable a gang of despicable criminals to lay hands on the fatherland? ... I then decided that I would take up political work ... At the beginning of the war, or even during the war, if 12,000 or 15,000 of these Jews who were corrupting the nation had been forced to submit to poison gas ... then the millions of sacrifices made at the front would not have been in vain.

Two years later, the Jewish-born Mises (1985 [1927], 49) predicted:

The deeds of the Fascists and of other parties corresponding to them were emotional reflex actions evoked by indignation at the deeds of the Bolsheviks and Communists. As soon as the first flush of anger had passed, their policy took a more moderate course and will probably become even more so with the passage of time.

Misesian liberals and Fascists were allies but differed in tactics:

What distinguished liberal from Fascist tactics is not a difference of opinion regarding the use of armed force to resist armed attackers, but a difference in the fundamental estimation about the role of violence in a struggle for power.

Violence was ‘the highest principle’ and must lead to

civil war. The ultimate victor to emerge will be the faction strongest in number ... The decisive question, therefore always remains: How does one obtain a majority for one’s own party? This however is purely an intellectual matter.

Fascism would have to embrace Mises’ (1985 [1927], 50, 19) liberalism to achieve their common aims: if Fascism ‘wanted really to combat socialism it would oppose it with ideas’. Mises would provide these ideas: ‘There is however only one idea that can be effectively opposed to socialism, viz, liberalism’. Mises provided a historicist inevitability justification:

Fascism will never succeed as completely as Russian Bolshevism from freeing itself from the power of liberal ideas ... The next episode will be the victory of communism.

Mises’ justification for this tactical embrace was that fascists would protect property – which he saw as the ve...