Perhaps even more "glaring" is the absence of any real argument on the question as to why a collectivist regime must be a despotism. Even in a book of this sort, intended for a wide audience, it is somewhat jarring to have it simply asserted as the proclamation of an "inexorable law" (or a plain dogma), not merely that collectivism means tyranny but apparently that it is impossible, or at least theoretically incompatible with social life above the level of savagery. We read: "The really inexorable law of modern society is the law of the industrial revolution, that nations must practise the division of labor in wide markets or sink into squalor and servitude." ...... And again, "There is no way of practising the division of labor, and of harvesting the fruits of it, except in a social order which preserves and strives to perfect the freedom of the market" (pp. 206 and 207).--Frank Knight (1938) reviewing Walter Lippmann's The Good Society in the Journal of Political Economy. 867 [Ht Ross Emmett]
Frank Knight, who is now primarily known as author of Risk, Uncertainty, and Profit and the Godfather of Chicago economics, was also one of the first, prominent Weberians Stateside. (Among other things he published a translation of Weber's Wirtschaftsgeschichte (General Economic History)—as Ross Emmett (the greatest Knight scholar) taught me --,the first book by Weber to appear in English in 1927.) I return to Weber below.
Knight is clear that by 1938, by then then in the second FDR administration, the sense of the state of crisis in liberalism had not been abated. The idea of crisis frames the review; and as he puts it near the end of his review, "It is not too much to say that the history of modern democratic systems leaves the issue unsettled as to whether representative machinery of any kind, or government based in any way on popular discussion, can meet such a crisis and survive." (271) On the very page cited by Knight above (207), Lippmann himself speaks of "the debacle of nineteenth-century liberalism." According to Lippmann (this is not in Knight), liberals started to loose the battle of ideas from 1848 onward, and subsequently to loose political battles, too.* It was not at all obvious, subsequent the first world war, the Russian revolution, and the great depression, that liberalism would survive the century. It is no surprise that much of the most arresting writing of the period is so illiberal in character.
In the review, Knight treats liberalism as primarily characterized by three features: the rule of law (an "effective legal order"), representative democracy, and government by "popular discussion." Contemporary readers may suspect that "the rule of law" is primarily about property rights, but Lippmann is explicit that he thinks of something more expansive with an "effective legal order;" that is, it involves commitment to the idea that "individuals have equal and reciprocal rights and duties." (The Good Society, 267) In fact, Lippmann is extremely critical of late nineteenth century liberal jurisprudence which, disguising the role of power and utility in generating property rights, had turned property rights into a universal law (e.g Good Society, 258). I mention this because both Lippmann (and Knight) are notable among liberals of the crisis-ridden age for their continued adherence to democratic norms.**
Knight's response to Lippmann's book is notable because he calls attention to (what we may call) the road to serfdom before Hayek thesis he attributes to Lippmann. I am not just making a joke. Hayek read The Good Society (he participated in a famous colloquium on the book in 1938 in Paris). And as scholars have noted he engaged with Lippmann's writings in the period prior to the Road to Serfdom (1944). Lippmann almost wrote the preface to the Road to Serfdom. And Hayek almost added a "postscript to The Road to Serfdom, written in 1948," in which Hayek noted that "although he had written the book chiefly on the basis of his knowledge of Britain and Germany, he was aware that American writers had made similar points about the situation in the United States, including ‘‘such well known books as Mr Walter Lippmann’s Good Society, which of course I knew and to which I ought to have acknowledged greater indebtedness.’’"+
I take the 'road to serfdom thesis' to entail that once one switches to an extensively planned economy ('collectivism" in Knight's and Lippmann's terminology), the needs of planning and stability will ensure that a dictatorship will follow. I read Knight as attributing a version of this thesis to Lippmann. [There are passages that suggest Hayek may have flirted with the idea that even the welfare state would inevitably generate dictatorship (as Andrew Farrant and Edward McPhail argue), but for present purposes I remain agnostic on that more expansive version of thesis.]
What's striking about Knight's interpretation of Lippmann is that the road to serfdom is taken to be immanent in the New Deal policy of organizing interest/pressure groups. In Lippmann's book, however, pressure groups precede the New Deal by "sixty years."His main example of the role of pressure groups in what he calls "gradual collectivism" is the tariff of the Hawley-Smoot Bill in 1930. It is the case, however, that Lippmann claims that "the one certain thing is that in a democratic society the granting of some privileges must be followed by the granting of more privileges." (116) This suggests an open-ended process to ever more collectivism.
Even so, the thrust of Knight's review is peculiar because after thanking Mises and Hayek, Lippmann writes in his acknowledgments of his indebtedness to "John Maynard Keynes, who has done so much to demonstrate to the free peoples that the modern economy can be regulated without dictatorship." (viii) That is to say, from the start of his book Lippmann thinks democracies can find ways to prevent the road to serfdom.
In fact, the very pages in The Good Society that Knight cites and quotes also claim "the renascence of liberalism may be regarded as assured." And Lippmann thinks this is the case because he thinks (i) something like liberalism is the natural accompaniment of an economy with advanced division of labor (206); (ii) he thinks collectivism, "in practice" (that is peace-time) is impossible and leads to a decline in living standards, terror ("brutality" 2o6). In addition, (iii) he thinks the collectivist states become "prey" and risk "conquest." (207)
Somewhat striking, and ironically, Lippmann's confidence that collectivism in practice is impossible (ii) is grounded in the apparent retreats from communism by Lenin and Stalin (205-8). Knight clearly suspects (867), however, that Lippmann's confidence is influenced not just by these historical developments in Russia, but also, and primarily, by Mises' contributions to the socialist calculation debate ,which Lippmann had discussed earlier in the Good Society and had praised (94ff; in fact, Lipmann's accompanying footnote treats Hayek and Weber as fellow contributors to this argument. (It is the only mention of Weber and one of two mentions of Hayek in text of the The Good Society.)
Knight uses the occasion of the review to lampoon Mises's argument ("wishful thinking"). The core point of Knight is that Mises argument is entirely too abstract, and that science lacks the expertise to make any claims about what is possible or not in reality: "No one knows at all definitely what is politically possible....There is practically no science in terms of which any fairly certain prediction can be made as to how a government will operate under any given conditions." (868) While I do not want to imply that Hayek read the review, what is striking about Hayek's great breakthrough in the social calculation debate in "the use of knowledge in society" is to turn away from questions of possibility, and, instead, to turn the attention to the nature of the "a process by which knowledge is constantly communicated and acquired" (Hayek 1945: 530). [We might say the debate went from metaphysics/modality to epistemology.]
Knight, by contrast, thinks there is no reason to be sure that collectivism is impossible. So, in this respect he is much more pessimistic than Lippmann. And he is confident that full blown collectivism must devolve into dictatorship (868-869). So, Knight clearly holds a point of no-return version of the road-to-serfdom. However, he does not think that point has been reached yet or that reaching that point is especially likely.
So, here's my hypothesis. The road to serfdom thesis was if not inspired by Lippmann, at least prompted, in part, by him. But Lippmann did not hold the thesis; it is articulated by Knight in his review of Lippmann and (mistakenly) ascribed to Lippmann. Knight, however, thinks there is nothing inevitable about the thesis because he thinks the future is still very much open. I cannot prove that Hayek read Knight's review of Lippmann. (Knight was later a somewhat ambivalent referee for The University of Chicago Press of Road to Serfdom.) But Knight articulated several major challenges to liberal self-reflection in his review of Lippmann. And some of Hayek's major contributions to the liberal self-imagine, for good and ill, can be fruitfully interpreted as responses to that review.
This Digression is somewhat long. But even so, I promised a comment on Knight's Weberianism. It can be discerned in the following passage:
It might have been thought self-evident, if anything in the field of politics can be called such, that the first essential function and task of government is to preserve unthreatened its own monopoly of political power, and that this means prevention of the development of dangerous power groups outside itself.
Knight has turned Weber's "monopoly of legitimate violence/force" (in Politics as a Vocation) into a "monopoly of power." The substitution may be thought innocent given that one may reasonably hold that power equals possible violence. But in Knight's hand the state does not tolerate what we may call ([recall]) following Bagg) concentrated power. And so one of the tasks of the state is to prevent the growth of concentrated power and doing so without devolving in fascism.
*"It may be said, I believe, that between, say, 1848 and 1870 the intellectual climate of western society began to change. At
some time in that period the intellectual ascendancy of the collectivist movement began. A phenomenon of this sort cannot,
of course, be dated precisely, but it is fairly clear that after 1870 liberal philosophy was on the defensive in theory, and that in
practice the liberals were fighting a losing rear-guard action." (Lippmann, The Good Society, 46)
**At the Paris Colloquium devoted to Lippmann's book, several participants expressed considerable reservations about democracy when it goes beyond nineteenth century liberal boundaries (see Castillejo (p. 112): Rougier (173)); Baudin (175). Here I ignore Hayek's own (ahh) ambivalence about the risks associated with democracy.
+I am quoting Ben Jackson (quoting Hayek) "Freedom, the Common Good, and the Rule of Law: Lippmann and Hayek on Economic Planning" Journal of the History of Ideas 73.1 (2012) p. 59
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