Taking Hayek Seriously

Yang Jisheng’s 2013 Manhattan Institute Hayek Prize lecture:

In the space of four years, from 1958 to 1962, China experienced a disaster of historic proportions – the death by starvation of more than 30 million people. This occurred in a time of peace, without epidemic or abnormal climatic conditions. A confluence of historical factors caused China’s leadership clique to follow the path of the Soviet Union, which was supposed to make China strong and prosperous. Instead, it brought inconceivable misery, bearing witness to what Friedrich Hayek wrote in The Road to Serfdom: “Is there a greater tragedy imaginable than that, in our endeavor consciously to shape our future in accordance with high ideals, we should in fact unwittingly produce the very opposite of what we have been striving for?”

Why did Mao Zedong’s great ideals create such great tragedy? The answer can be found in Hayek’s writings. China’s revolutionaries built a system based on what Hayek called “the Great Utopia,” which required “central direction and organization of all our activities according to some consciously constructed ‘blueprint’” and for a “unitary end” while “refusing to recognize autonomous spheres in which the ends of the individuals are supreme.” In China’s case, this “unitary end” was the “Great Utopia” of communism.

In order to bring about this Great Utopia, China’s leaders constructed an all-encompassing and omnipotent state, eliminating private ownership, the market and competition. The state controlled the vast majority of social resources and monopolized production and distribution, making every individual completely dependent on it. The government decided the type and density of crops planted in each location, and yields were taken and distributed by the state. The result was massive food shortages, as the state’s inability to ration food successfully doomed tens of millions of rural Chinese to a lingering death.

The designers of this system expected an economy organized under unified planning to result in efficiency. Instead, it brought shortage. Government monopoly blunted the basic impetus for economic function – personal enthusiasm, creativity and initiative – and eliminated the opportunity and space for free personal choice. Economic development ground to a halt. The extreme poverty of Mao’s China was the inevitable result.

An economy with “everything being directed from a single center” requires totalitarianism as its political system. And since absolute power corrupts absolutely, the result was not the egalitarianism anticipated by the designers of this system, but an officialdom that oppressed the Chinese people.

Hayek championed classical liberalism based on the principle that “in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion.” In today’s China, such liberals are found either among the very old or the very young, skipping a generation in between. I happen to belong to the skipped generation that had little exposure to liberalism under Mao. Up until I was 40 years old, I still believed in collectivism, which fettered my thinking and confined my insight. Reading The Road to Serfdom gave me a new perspective on economics, politics, the state and society. Hayek helped me understand China’s tragedy; my research into the disasters China suffered helped me understand Hayek.

Whether or not Beijing will admit it, China is beholden to Hayek’s thinking in relinquishing the highly centralized planning of its economy in favor of competitive markets and private enterprise. This choice is making China prosperous and has elevated it to the world’s second largest economy.

Yet, while China has accepted some of Hayek’s thinking on markets, it continues to insist on “socialism with Chinese characteristics.” The powerful run and control the market in a system I call the “power market economy.” The greatest problem with a power market economy is its inequity. Hayek noted that “a world in which the wealthy are powerful is still a better world than one in which only the already powerful can acquire wealth.” In today’s China, only the well-connected can acquire great wealth; society’s riches are concentrated among those in power. This is the source of the current popular resentment against officialdom and the wealthy elite. A power market economy cannot possibly meet the Chinese government’s vaunted objective of a stable and harmonious society.

China’s path to harmony and stability is to reject this system and instead to heed Hayek’s call to avoid government coercion, respect individual freedom and allow further economic and political liberalization. Will it? Li Shenzhi, one of China’s great proponents of liberalism, voiced a generally held pessimism to me in 2001, two years before his death: “We’ve entered a new century, and liberals face a hard winter. Even so,” he continued, quoting the poet Shelley, “if winter comes, can spring be far behind?”

The fate of liberalism in China is the fate of Hayek’s teachings, which must endure a harsh and bitter winter but could yet see a resplendent spring.

Yang Jisheng is the author of Tombstone, an account of the Great Famine in China during the Great Leap Forward.  Yang and his book were awarded The Manhattan Institute’s 2012 Hayek Prize, honoring the book published within the last two years that best reflects F.A. Hayek’s vision of economic and individual liberty.