The Superhighway to Serfdom: Part 1

April 3, 2013

What may be the most important book for understanding today’s economy was written in 1944.

Having witnessed the rise of Nazism firsthand, F.A. Hayek, recognized that socialism inevitably leads to fascism.  He wrote The Road to Serfdom as a warning to the United States and the United Kingdom, which were becoming increasingly socialistic.

Hayek, a Nobel prize-winning economist, noted that Western democracies had “progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.”

Socialism, while presented as a means of assuring equality, does so through “restraint and servitude”, while “democracy seeks equality in liberty.”

He writes that “when economic power is centralized as an instrument of political power it creates a degree of dependence scarcely distinguishable from slavery. It has been well said that, in a country where the sole employer is the state, opposition means death by slow starvation.”

Since The Road to Serfdom was published, the road has been paved and extra lanes have been added.  And there’s apparently no speed limit.  Consider:

  • The federal government funds 80 different programs for “low-income assistance.”  Together with state spending welfare payments topped $1 trillion a year in 2011.
  • Mitt Romney was right.  Nearly half of America – that 47% he mentioned – pay no income tax. 
  • Food stamps are more popular than postage stamps.  According to the Congressional Budget Office, the budget for food stamps grew 135% between 2007 and 2011.
  • Even before the fiscal cliff agreement, the wealthiest 1% of U.S. taxpayers paid 36.73% of all income taxes, while the bottom 50% paid 2.25%. In other words, 1% of the country shouldered a tax burden that was more than 16 times as large as the taxes collected from half of the country.

If you’re the President and Congress, do you tax wealthy people more or ask the half of the country that doesn’t contribute to pay something?  You go after the wealthy, of course.  The fiscal cliff agreement increased a whole host of taxes, including adding a 3.8% investment tax on taxpayers making more than $200,000 and an increase in the top income tax rate from 35% to 39.6% for taxpayers making more than $400,000.

  • The Heritage Foundation reported that 67.3 million Americans, from college students to retirees to welfare beneficiaries—depend on the federal government for housing, food, income, student aid, or other assistance once considered to be the responsibility of individuals, families, neighborhoods, churches, and other civil society institutions.

Certainly, even Hayek would agree that government should provide a safety net for those who truly need it.  But something is clearly wrong when the safety net is catching half of the population of the country.

We’re the wealthiest country in history, thanks to the opportunities provided by the free enterprise system.  Government should help create more opportunities.  Instead, it’s creating more serfs.

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