European Union and Hayek

At last I’m blogging again on the topics I raised in my 1st June post, ‘Europe and Liberalism: Beyond the Clichés’.  I was much more dominated by the task of completing a draft of a book (Kierkegaard and Political Community) which I sent to a publisher yesterday.  I didn’t try to get a contract for the book while writing it, so I have no ides who it will publish it, or when I can reach agreement with a publisher.  Anyway, back to criticisms of the way Hayek is brought up in relation to the European Union, and other criticisms of standard issue American libertarianism, from the point of view of a moderate libertarian who is often irritated by movement  libertarianism and the writers who use its clichés.

I made some numbered points in that initial posts.  In this post, and several more coming soon, I’ll paste one point from the original post into each new post and expand on that point.

So, original comment 1.

Hayek’s comments on constructive rationalism are trotted out regularly in relation to the European Union and have achieved the status of cliche rather than interesting use of Hayek’s thought.

No time right now to dig through Hayek for the best quotes and references on this topic.  Maybe another time.  Those quotes would refer to the issue of constructive rationalism rather than the European Union, anyway.  Though a lot of people think they know what Hayek would have thought about the European Union and the Euro, and that is he would have hated them.  We’ll return to that shortly, but first Hayek and constructive rationalism.  Hayek argued that liberty and economic prosperity are deeply tied up with the capacity of humans to produce wealth, culture,political institutions and so on, through evolution or emergence, rather than grand rational constructions, based on reflection and planning.  The most important example in Hayek is that of the price mechanism.  Changing prices in the economy signal preferences and scarcity, which keep adjusting due to changes in individual preferences, reactions to higher and lower prices, decreasing or increasing price of inputs, reactions to increasing or decreasing demand and so on.  The whole market economy and all prices in are an unplanned system of information, which cannot be replaced by planning, however much effort planners might go to in discovering preferences and costs, and their interactions.  Price controls, along with over forms of economic intervention, try to replace spontaneous order with rational constructivism that always fails, because it can never model, let alone track in reality,  so much change in so many heads and so many formal and informal agreements between individuals.

Hayek died in 1992, but did not comment publicly on the European Union, which was still known as the European Community until the following year.  If he did comment publicly no one seems to have noticed, because no one ever quotes him on the subject   What we do now is that at least in the 1940s he favoured federation between European democracies, and a possible federal union between a wider group of democracies.  He says so in The Road to Serfdom and ‘The Economic Conditions of Interstate Federalism’.  What he means by federation is a level of government largely concerned with promoting free trade and preventing war, so he means something with more modest ambitions than the EU, though we should also say that while there is largely free trade within the EU it’s no as free Hayek would have liked.  Anyway, self styled libertarians and classical liberals who like to refer to Hayek in their bashing of the European Union rarely note that Hayek was in favour of European federation in some form for at least a few years in his, life and maybe longer since he never renounced the idea.  In fact I’ve never seen that kind of EU basher acknowledge that complicating reality.

Moving onto the Euro, it is true that Hayek is unlikely to have approved of it, since he did move towards favouring privatisation of currency, that is abolishing nation state monopoly of provision of currency.  However, the EU bashers, again, rarely mention this.  How much they leave out of account!  They generally focus on condemning the EU currency rather than national currencies.  In that case, we can reasonably assume that many of these people are sovereigntist-nationalists at heart, and that this is just as dear to them as classical liberal or libertarian ideas.  If people have a good rant about how Hayek would be against the Euro, but don’t mention the support for federalism of some kind or the support for privatised currency, we can certainly wonder whether they are more sovereigntist or more liberal.

The issue of currency is not the only one where Hayek is against ‘constructive rationalism’ and it is not just something he mentions in relation to economics.  His view on law is that it should be evolutionary, based on judge’s interpretations of laws and previous cases, and he thought of law as emerging from custom and from generally held standards of justice.  He found it worth distinguishing between ‘legislation’ made by states, and ‘law’ based on shared rules of justice outside the political process.  Political institutions that work well emerge from that foundation.  That is not realistic to my mind.  Our ideas of ‘law’ are just as much an outcome of the political process as the shared unwritten standards Hayek loves.  That is definitely true of the United States and Britain, which the fans of anti-design elements in Hayek tend to deny, labouring as they do under the absurd and fantastical belief that laws and institutions in Britain emerged from the primordial ideas of justice of the Medieval English, and that this was transplanted to the United States in pure form, and  the American Revolution was about preserving that.  More on this in other posts, but it is a feeble sided comprehension of history.  That is the basis of a lot of Euro bashing, the EU currency did not ’emerge’ in the way that the US dollar, the pound sterling and other national currencies supposedly did.  This is more fantasy.  These national currencies were adopted as state monopoly currencies as part of a political process, and did not ’emerge’ from the market, they played a large role in defining the nurture of a market economy under a system of nation state laws.  That is economic integration in the US, UK and so on is partly a result of adopting those currencies and enforcing their monopoly status.  The monopoly has not always existed.  There were private currencies issued by private banks in pre-Civil War America and in 18th century Scotland.

It’s possible to argue about whether the European economies were close enough before the Euro was launched, but it is also important to acknowledge that the closeness of the Scottish and English economies, or the economies of the various American state is in some degree a product of design, planning, calculation and political processes at state level.

The summary.

I don’t trust people who use Hayek’s arguments against rational design purely, or largely against the European Union, without acknowledging the implications for the American Republic, the United  Kingdom and so  on.

Hayek said a lot of different things at different times.  The moments  when he made his most radical claims that law, state institutions economies and so on, can and should emerge through pure spontaneity free of the slightest taint of politics and autonomous state action, are deeply implausible.  Implausible or not, I don’t trust people who use that aspect of Hayek for polemical purposes and don’t acknowledge just how radical and universal the consequences are.  The most plausible way to take Hayek is to combine that emphasis on spontaneous orders with acknowledgement of how those orders have always been influenced by ‘rational constructivism’, or actually often in practice, crazy irrational constructivism.

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