Friedman and Hayek's neo-liberal political economy - Research Paper Example

? Number and of the Friedrich von Hayek was an Australian economist who discredited the economic regulations in his country. Much of his works on neoliberal political economy are reflected in The Road to Serfdom (1994) and to some existent his other like The Constitution of liberty .The American Republican Party used his theory about minimum state to oppose the Soviet Marxism as well as the Democrat’s new deal. Milton Friedman was an ardent supporter of liberating policies and approach to governance and argued for running a neoliberal political economy whereby the government largely kept off from market issues and played a minimum regulatory and facilitative role. In both of his works, Free to choose (1990) and Capitalism and freedom (1982) he argued that involvement of the government in private affairs and running of the market is inconsistent with a free society. Milton Friedman According to Friedman (1982, 1990), the government control of the market and restrictions or limitations that the government may impose should be very minimal, to the extent that it facilities smooth running of the market. Much as he largely criticized communism, he argued that what matters is not the question of capitalism or communism, but rather the question whether or not the extent to which the government is involved in the market and whether government’s involvement served to improve the conditions of the people. It is for this reason that he found error in military rule as well as aspects of socialism. The government should always keep off from the market and leave individuals to participate freely. The government should only provide the public goods that the private individuals cannot provide or are not best suited to provide, as the case with security. However the rest should be left to private individuals in the context of a free market. For instance, in Capitalism and Freedom he argued as thus: There is no way to justify our present public monopoly of the post office. It may be argued that the carrying of mail is a technical monopoly and that a government monopoly is the least of evils. Along these lines, one could perhaps justify a government post office, but not the present law, which makes it illegal for anybody else to carry the mail. If the delivery of mail is a technical monopoly, no one else will be able to succeed in competition with the government. If it is not, there is no reason why the government should be engaged in it. The only way to find out is to leave other people free to enter. (Friedman 1982, p. 29) He therefore disapproves of the idea of the government monopolizing many fields where the private sectors would be able to participate in. Where there is an involvement by the government, because it is necessary, then it should be a legal monopoly, whereby the private sector is prohibited by the law to participate. Hayek Friedrich von Hayek and The neo-liberal political theory Hayek, while continuing with Adam Smith’s liberal traditions, comes to define the concept of minimal state. The most vital contributions include the radical opposition to social justice system which in his opinion disguises the defending of the middle class’ corporate interest. It promotes the complete removal of economic and public social intervention. The idea of the minimal state was just a means of breaking away from middle class’ power which was known to be controlling the democratic processes with an intention of using the public treasury to redistribute wealth. Hayek’s views on neo-political economy as presented in the constitution of liberty (Hayek 1960) and advocates for elimination of ruling, privatization, elimination of housing, fighting of unemployment through the limitation of the number of programs, , reduction of the total social security expenditures, subsidies and rent control and lastly to remove the power of the trade unions. Redistribution cannot be ensured by the state to serve social justice system. Its function is to provide the legal means that ensures the primary regulations of exchange. Hayek even recommended in the year 1960 that currency nationalization should be removed. This means that the national central banks will be privatized to give the world markets the money produced. Bearing in mind Hayek’s position, one can assume he is contradicting himself in his Socialists ideas. This is because, one of his stands give different points of view to radical ideas which are rooted in liberalism, such as the minimal income establishment. Nevertheless, Hayek’s proposed program should be regarded as an amendment of British laws that support indigents but not a custom of Hayek mode of socialism. The theory that Hayek develops is founded on a belief shared mostly by the liberals. This belief can be traced back to the classics and involves the ones that favor Austrian thesis. There is an invisible hand which according to the theory of Adam Smith, guarantees for a better relation existing between demand and offer in various kinds of markets. Therefore there is a perfect illustration of the general believe which people attempt to illustrate using various kinds of theories. For example, the equilibrium of Walras which was a creation Pareto, the Austrian school’s catalaxy also known as the spontaneous market orders, the externalities of non-concerted action instead of the consequences from conscientious projects. It is not what one wants; it just comes without planning for the market. The economy implies this concept to give a reason of why interventionism is criticized as what can result in imbalances and issues in catalaxy. In the opinion of Hayek, Keynesians had changed the state into a dictator of the economy. In the long run, Hayek’s political philosophy is quiet similar to Lock thesis. The state ensures that there are property rights. In addition, the state is also limited by the clauses of individual hypothetical originating contract. The law becomes the instrument of protecting the spontaneous market order. Therefore what is originally important is to protect the economic liberalism. Any elements of politics therefore is equally absorbed and taken care of. The ideas of the democrats shift to a second place, to criticize the statements by Hayek with indications of provocation. According to the words of Hayek, democracy does not necessarily involve a perfect political system. Therefore it basically means a programmed procedure with a goal and mission of ensuring there is freedom of individuals and internal peace. It is better to have a regime which not democratic to planning democracy but ensures that spontaneous order exist in the market. This are the kind of reasoning that made the Chicago boys to be present in Chile. The idea of Hayek is a combination of conservadurism and Adam Smith’s liberism. Conservadurism in this case refers to the critics of a kind of democracy with inspiration of denouncing the Edmund Burke’s French Revolution. It brings to attention to unlimited democracy which automatically results into a totalitarian democratic kingdom. Indeed, Hayek is fanatical with the middle income classes who have control over the democratic regimes. He is particularly reported to have said that some truth does exist in the formula which states that National Socialism and fascism at large are middle income class type of socialism. In contrast, Hayek fears the poor in that there response cannot be predicted. He supports an income which is minimum by adding that it is just in the favor of the people acting as if they are protected by desperado responses of the poor people. Hayek develops some justice despite having rejected the social justice notions. This justice that he develops is liberal in a way while on the other hand seems to be conservative as indicated in his editorials. The ideas of Hayek are radical; the attacks that he creates on economic interventionism cannot be comprehended unless reference is made to the post-war times when a new kind of liberalism was drafted amid major criticism from Keynesianism. Hayek is seen to be getting inspiration from the thinking of the likes of Mises on economy. Therefore he rejects the capitalist society’s way of intervening in the economy. In addition, he also rejects collectivism which has been approved by people like State Marxism. By referring to the ideas of Mises Hayek is simply seen to reject the economy being planned given the notion that it is too complex to be rationslly planned for. Further Assessment Both Hayek and Milton Friedman defend neo-liberal economy on grounds that it is rational and an inherently free way that people may relate to one another, by removing undue obstacles that the state often imposes on the exchange of goods and services. Neoliberal political economic theory therefore goes beyond identification of the market as a mere place for production of goods and services but as a place that is tangential top the interaction of people. This conception of market economy issues being closely intertwined with socio-moral issues and social relations have equally been raised by the classical liberal theorist. Robins (1961, 1967), for instance, stresses the value of inherent morality that underlies ensuring free exchange in the market. He asserts that the ultimate value of liberal political economy is liberty, and not just the market or private ownership. Liberty is very important to the society, in order that every member of the society may be in a position to optimize his or her social contribution. When the government gets too much into controlling the private individuals, their optimal contributions will be greatly minimized by the systematic obstacles that the state put in place, such as limitation as to quotas, quantity of exports, price fixing and so on. Such erosion of liberty in the manner an individual deals with one’s products in the market would be a great disincentive to the spirit of enthusiasm, which sustains production. Neoliberal political economy is therefore central to enhancing justice in market relations as well as the long term sustainability of production and distribution of good to entire society, as a disincentive to one member of society and subsequent withdrawal from the market, due to governmental limitations trickles down to the larger society. Apart from issues of morality and inherent justice, neo-liberal political economy in the context of Hayek and Friedman is central to market prosperity. To Hayek, markets are not to be seen as just tools to deliver the goods, but “perhaps the greatest discovery mankind ever made” (Hayek , 1960). Generally speaking, in any social setting and in a market, people have diverse purposes and seek to achieve diverse ends. As such, intervention buy the state in the name of leveling the market playing field even if consistent with a group’s purpose, will definitely infringe on another groups ends and purposes. Allowing people to proceed liberally on their undertakings is therefore a means of ensuring that people peacefully and freely cooperate with one another in a bid to fulfill their diverse ends and purposes. This will be ensured as a neoliberal market ensures respects the choices of individual entities within the state. Because the market is essentially free, the individuals will be in the best position and have the most ample opportunities to legitimately express their different rational decisions. They will be able to legitimately take into account their competing ends, values and goods. Neoliberal political economy is central to safeguarding the market as an instrument of ensuring distribution of societal goods. It ensures that the market largely regulates itself without artificial and state interruptions through regulations, legislations and policies that may jeopardize market growth. Conclusion Running a neoliberal political economy is equally vital to ensuring a good relationship amongst the market players: private individuals and the government. It is consistent with the aspects of liberty, voluntary and free market choices, respect of an individual’s decisions which allow them to take their values and interests into account. Rejecting a neoliberal approach to any political economy is therefore opens a room for a dubious market and which suppresses the aforesaid merits. Of course there are times when the government may need to intervene and impose controls and limitations, but these should be very minimal and to the extent that they facilitate running of an effective market environment and relationships. They should not serve to undermine liberty and choices of individuals in the market. However, too much liberalism may open room for exploitation of the public through market malpractices, cartels and intentional skewing of prices and manipulation of market. It may also encourage concentration of resources on the few wealthy individuals at the expense of the larger population References Friedman, M. & Rose D.( 1982). Capitalism and Freedom. Chicago: University of Chicago. Press. Friedman, M.; (1990). Free to Choose: A Personal Statement. Harvest Books. Galeotti, A. E. (1987) Individualism, social rules and tradition: the case of Fredrich A. Hayek, Political Theory, 15(2), pp. 163-181. Hayek, F.A. (1960) The constitution of liberty .London, Routledge & Kegan Paul. Hayek, F.A. (1994). The Road to Serfdom. Fiftieth Anniversary Edition. Chicago: University of Chicago Press . Robbins, Lord. (1961).The Theory of Economic Policy in Classical English Political Economy. London: Macmillan. Robbins, L. (1977). Political Economy: Past and Present. London: Macmillan . Read More