Greece, Malpass, and Hayek

by Don Boudreaux on May 24, 2012

in Civil Society, Hayek, Reality Is Not Optional, Seen and Unseen

Here’s a letter to the Wall Street Journal:

Few diagnoses of the eurozone’s woes are as compelling as that offered today by David Malpass (“Greece’s False Austerity“).  Key is this line: “Europe’s battle comes down to government-guaranteed wages and benefits versus labor flexibility.  Europe’s failing governments simply won’t allow competition.”  Mr. Malpass here echoes the concern that prompted F.A. Hayek to write The Road to Serfdom.

Contrary to much misunderstanding, Hayek never argued that the slightest deviation from laissez-faire capitalism launches a society on an unstoppable march toward tyranny.  Instead, he reasoned that tyranny is the inevitable result of government policies aimed at preventing market competition from ever threatening anyone’s economic prospects.  As long as voters demand that government protect them from all downsides of economic change, governments can oblige them only by shutting down, one after another, all avenues for economic change.  Competition; entrepreneurship; innovation; consumer sovereignty; workers’ freedom to change or to quit their jobs; even changes in demographics.  Government must obliterate these and all other sources of change if no one is to be exposed to the risk of losing a job or of having her wages or benefits cut.

Obviously, in reality governments cannot produce such a petrified paradise.  But in the course of trying they will create hell on earth unless people come to accept the fact that widespread material prosperity is impossible without genuine change – and that change is impossible without some people suffering economic disappointment.

The Greeks – and, indeed, all of us – would be wise to learn this lesson ASAP.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

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