Friedrich Hayek published The Road to Serfdom in 1944, a classic book on economics for the ages. We would do well to understand his message, because it reads today less like a theory and more like a warning. What Hayek described is unfolding right before our eyes, yet it is so gradual and insidious that few recognize it is happening.
Hayek believed prosperity and freedom are inseparable. In The Road to Serfdom, he warned about what happens when government begins to control economic decision-making through central planning. The result, he argued, is the slow erosion of freedom. When societies abandon individualism and classical liberal economics, the power of the state expands and the liberty of the citizen contracts. Eventually, this evolves to government control.
Hayek argued that systems as different as fascism, Nazism and state socialism share the common root of central economic planning and empowerment of the state over the rights of the individual.
We can see America is unmistakably traveling down that road.
Our Founding Fathers understood this danger well. They were students of political philosophy and economics, understanding thinkers such as John Locke and Montesquieu. From these ideas, they derived a simple but powerful conclusion that concentrated government power inevitably threatens liberty.
Accordingly, they crafted a solution in the United States Constitution that was revolutionary. They created a federal government with limited powers and a system of checks and balances designed to prevent the accumulation of authority in any single institution.
The Founding Fathers were so committed to this principle that they later ratified the Tenth Amendment to the United States Constitution, explicitly stating that all powers not specifically delegated to the federal government belong to the states or the people.
When asked what kind of government the Constitution had created, Benjamin Franklin famously replied: “A republic, if you can keep it.” The uncomfortable truth is that we have not kept it.
What the Founders designed worked extraordinarily well. With freedom and limited government, Americans innovated, built, invested and created. The result was the most dynamic and prosperous nation in the history of the world. But the trend has been moving steadily in the opposite direction.
Perhaps the turning point began in 1913 with the ratification of the Sixteenth Amendment to the United States Constitution, which authorized a federal income tax, and in that same year, the creation of the Federal Reserve. Perhaps it accelerated during the sweeping expansion of government under Franklin D. Roosevelt’s New Deal. Or perhaps it deepened during Lyndon B. Johnson’s Great Society and the War on Poverty.
Each era added new programs, new regulations and new spending, often well-intentioned, but collectively expanding the reach of the federal government into more areas of American life, well beyond what our Founders intended. The result today is a federal government of staggering size and influence, increasingly involved in decisions once left to states, communities and individuals. Alongside that expansion has come something equally troubling: a level of federal debt that continues to grow with no serious plan to reverse it.
Most economists agree that long-term prosperity rests on a simple formula: limited government, fiscal discipline and economic freedom. History bears that out.
In the decades after World War II, the federal government was far smaller relative to the economy than it is today, and budgets were largely balanced for nearly two decades. Economic growth averaged close to six percent annually.
During the war, federal debt had surged to roughly 114 percent of the nation’s economic output. But with strong growth and responsible fiscal policy, that burden steadily declined to less than 50 percent of the economy, a manageable level.
Today, federal debt stands around 125 percent of the economy, and it was not caused by a single national emergency like a world war. Instead, it is the accumulated result of decades of expanding programs, entitlements and spending commitments that were never intended to fall within the federal government’s limited constitutional role.
Even more troubling, current projections show deficits of trillions of dollars per year stretching indefinitely into the future. Economic growth has slowed. The government has grown. Debt continues to mount.
Hayek warned that the road to serfdom is not a sudden collapse into tyranny. It is a gradual process in which freedom is traded away piece by piece until citizens eventually find government in control, rather than being free.
The question now is whether we will heed Hayek’s warning and reclaim the principles of limited government and individual freedom that made America exceptional in the first place, before we reach the end of the road – and become serfs again.
Les Rubin is the Founder and President of Main Street Economics.