Road to Serfdom, The - Hayek, F. A. & Caldwell, Bruce [8]
Mobilization for war requires a massive reallocation of resources away from the production of peacetime consumer goods and capital toward the production of war materials. Factories are commandeered, their machines retooled for wartime production, and decisions about what to produce are made at the center. With fewer consumer goods being produced, the prospect of inflation looms (particularly harmful during wartime, because it hurts debtors, just when the government is trying to convince its citizens to become debtors by buying war bonds). To avoid inflation further intervention is necessary, and the standard policy response is to fix prices and institute a system of rationing. This essentially does away with a freely adjusting price system for basic consumer goods. Bluntly put, during war the market system is more or less abandoned, as many parts of the economy are placed under central control. Hayek’s fear was that socialists would want to continue such controls in peacetime.
There was precedence for such a fear. Even before the First World War had begun, the philosopher Otto Neurath had been touting the doctrine of “war economy” in Eugen von Böhm-Bawerk’s economics seminar in Vienna, much to the chagrin of seminar participant Ludwig von Mises. Neurath claimed that central planning under wartime conditions provided an exemplar for how to run an economy in peacetime. His and others’ proposals for the socialization of the postwar economy provoked Mises to formulate his initial critique of socialist planning. Interestingly, Neurath was still on the scene when Hayek was writing: when hostilities started in earnest Neurath had fled Holland and would spend the war in Oxford.36
The British were not Continental socialists, but still, the danger signs were there. Clearly, the nearly universal sentiment among the intelligentsia in the 1930s that a planned system represented “the middle way” between a failed capitalism and totalitarianisms of the left and right was worrisome. The writings of what Hayek called the “men (and women!) of science” could not be ignored. Look at this message from the weekly magazine Nature, taken from an editorial that carried the title “Science and the National War Effort”:
The contribution of science to the war effort should be a major one, for which the Scientific Advisory Committee may well be largely responsible. Moreover, the work must not cease with the end of the war. It does not follow that an organization which is satisfactory under the stress of modern warfare will serve equally well in time of peace; but the principle of the immediate concern of science in formulating policy and in other ways exerting a direct and sufficient influence on the course of government is one to which we must hold fast. Science must seize the opportunity to show that it can lead mankind onward to a better form of society.37
The very next week readers of Nature would find similar sentiments echoed in Barbara Wootton’s review of a book on Marxism: “The whole approach to social and political questions is still pre-scientific. Until we have renounced tribal magic in favour of the detached and relentless accuracy characteristic of science the unconquered social environment will continue to make useless and dangerous our astonishing conquest of the material environment.”38 Progressive opinion was united behind the idea that science was to be enlisted to reconstruct society along more rational lines.
There were also more overtly political forces to be reckoned with, forces whose hopes for the postwar world became increasingly clear as the conflict began to turn in favor of the allies. In early 1942 the Labour Party issued a pamphlet, The Old World and the New Society, that laid out the principles for reconstruction after the war. Here are some of its key claims:
There must be no return to the unplanned competitive world of the inter-War years, in