 He's the author of many articles and monographs, co-author with Bob Shootinger of 40 Centuries of Wage and Price Controls, and also his latest work, Hayek, his contribution to the political and economic thought of our time, which Dr Butler will be pleased to sign at the back if you'd like to hurry along after the talk. He's due to speak to us upon the subject of, let's get it right here, are we still on the road to Surfton, Dr Raymond Butler? Christine has just informed me of the various delights that are available to people who didn't want to come to the boring talk after lunch. These, I note, include a visit to Hampson Court, and I must say I'm outraged if there was anywhere that is more of a symbol of the outrageous intoxication of power of British monarch and the demise of the rules of law and the building up of vast empires of personal gain, it is Hampson Court. So you're far more edifying to be here, I think. If it had been written by a lesser man, Hayek's Road to Surfton, I think, would have been dismissed simply as another war book. Fortunately, it turned out instead to be a classic piece of historic explanation, historical explanation, which alerted the people of the nations who were actually fighting Nazi Germany that they were by no means immune from the same virus that had caused such awful horrors in that country. Since he was fluent in the culture of Britain and Germany, fluent in both languages, Hayek was particularly well placed to look at these trends. And he told the British in his book in 1944 that there was nothing congenitally vicious about the Germans that made them go into this peculiarly wicked way. In fact, the prevailing wartime assumption that some deep ethical division existed between the Germans and other nations served only to disguise the fact that the same things could happen in other countries. And Hayek's great contribution, of course, is to remind us that we are all potentially susceptible to travel down that road to Surfton. Well, the book itself constitutes a clear, logical, linear argument of how totalitarianism can develop without needing a revolutionary episode to bring it about. And that was something new at the moment in time. The tragedy of this, of course, is always those with the highest ideals, the democratic socialists, the people who want to see equality without undermining democratic institutions. These are the very people who regrettably pipe us down those first few steps along the road to Surfton. Before they realized that the achievement of their ideals actually is only possible if they resort to more and more coercive methods that the idealists themselves would be the first to reject. But, of course, by the time one is on this road it's too late. The surging traffic is all one way and it's very difficult to backtrack. Well, Hayek's belief was that the same processes under which, rather, some men stand a little taller than others, Hayek's belief was that the same processes under which high-minded men, leaders into considerable horrors that were no part of their original intention were becoming plain in the very countries that were actually trying to defeat Nazi Germany. And his pinpointing of the symptoms caused widespread shock. Many socialist intellectuals like Lord Keynes, you'll remember, said that he was not only in agreement with what Hayek had written, but in deeply moved agreement. And other people like George Orwell, who actually reviewed the road to Surfton in the Observer newspaper, went on from there to write Animal Farm in 1984. And to criticize the same trend in his own way. Well, are we still on the road to Surfton? To find out, I think it's useful, if you'll indulge me, just to go very quickly through the argument of the road to Surfton so that we can see whether we're in fact on that road and how many milestones we have passed. Of course, Surfton could come from many routes and it may be that we will find ourselves on another route which Hayek didn't chart. But Hayek has given a fairly clear logical argument, I think, of how it's possible to slowly slip into a totalitarian regime. And so I think it's a very useful guide. The first point that Hayek makes is that there were special circumstances in the case of Germany. Special circumstances, in other words, could make the dissent into totalitarianism more or less likely. In Germany he talks about the last 70 years, meaning presumably the period since 1878, in which you've had, of course, the decline of imperial Germany, you've had massive unprecedented rates of inflation, you've had various other circumstances, an electoral system that gave disproportionate say to minorities and so on, all of these things are obviously important factors in the case of Germany. The second thing is that Hayek thinks that the intellectual confusion between power and freedom is a crucial one and is one which is at the roots of totalitarian ideas. A world in which power is concentrated in a few hands is one that is ripe to be plucked by totalitarians. It's easy to convince the masses that who have little to spend and scant hope of making very much political contribution or many political decisions, it's easy to convince them that they are being denied freedom when what they're actually short of is power, they're short of purchasing power, they're short of political power. And so it's easy to make this point, even fairly liberal intellectuals have made the same confusion between power and freedom and so changes that have nothing to do with the advancement of liberty and everything to do with the concentration of power and political might in new hands, these come to be given a high moral justification that they do not, in fact, deserve. Well, all this is preparation for the road to serfdom. The third thing is really the first step downwards. Hayek says that this comes when we've come to believe in the inevitability of economic planning. One source of that is the presumption that our prodigious power over the physical world can be translated into a similar control over social and economic fears. The idea that the market can generally be improved if the aimlessness of the free market is replaced by the crisp, clear, straight turnpike of a planned economy. Well, another is the reason, of course, is the theory that capitalism tends to become increasingly concentrated, that industries become larger and larger until they eventually grow into monopolies. This is basic to Marx's analysis, of course. And so it seems quite reasonable to say that if industry is bound to become more monopolistic as time goes on, it would be very wise if we had that power wielded by some representative body of the public rather than a few capitalists who happen to be particularly lucky. Well, the fourth stage, I think, is that once we've decided that we can improve this market and that we can wield these massive globules of power in the public interest, we then face the knotty problem of exactly what the public interest is. And, again, Hayek says that it's rather as if we set off on a journey. There are several of us on the journey. We've all agreed that this is something that we ought to undertake. But when we start on the journey, we find that nobody's actually agreed as to where we are actually going to. So we've all bought a ticket, but none of us has any idea as to where we want to go. And we end up going nowhere that any of us really wanted to start in the first place. So since there's no agreement on the precise ends of our brave new planning regime, and far less, I think, on the choice of means that should be employed to achieve any particular aim, the legislature degenerates into a talking shop. It never gets anything done. And that means, of course, that there's always a discomfort among the public who want to see a stronger government, and they urge that government to become more strong. But the more important thing, perhaps, is the fact that the legislature, because it is so overworked trying to run the affairs of a complete nation, the legislature is bound to have to delegate some of its authority, some of its powers to administrators. And this, the fifth stage, is where Hayek says the rule of law really starts to break down. The decisions of the new army of administrators, arbitrary though they are, these are the things that now control our lives. And secondly, of course, the old laws must be discarded anyway if we're to marshal the resources of a nation towards a particular end. If we're aiming at a particular end, then the old rules of morality can't stand up. We must scrap them if they stand in the way. And so we discover that the property, the liberty, and even the life of nobody can be spared if it is needed to help build that brave new world. But then Beatrice Webb said of the murders of the white Russians during the revolution, you can't make an omelette without breaking eggs. Control of the economy, of course, says Hayek, this is the next step, means that you have control over all aspects of an individual's life, because money is simply a medium, it's simply a tool by which you achieve the things that you want to achieve. If you earn money, you can spend it in taking holidays, any of the things that are going to arts, theatre, any of the non-monetary things. So the decision to work or to enjoy more leisure, to have a necessary operation rather than take a holiday, to buy a new car or move to a bigger house, all of these things can be controlled by someone who controls the earning and spending of money. And so it's possible for a government thereby to control every aspect of human life, including the aesthetic aspects and so on, and that takes us a step nearer to the road to serfdom. The next stage, I think, is that inequality now becomes a major government problem. If the government is controlling everything, or seem to be in control of everything, then those who think that they're not getting a good deal will naturally complain. If, on the other hand, things are left to the market, people realise that by working harder they tend to get paid more, that the government doesn't control wages or prices, then they can't really blame the government if they're badly off. They're more inclined to blame themselves or dismiss it as being simply bad luck or poor circumstances. But if the government is consciously in power, consciously controlling everything, then plainly people are going to attack the government and try to get out of it what they can. And one thing which we in Britain know is that one thing that people do like to get out of a government that apparently controls the entire labour market is security. Instead of the prospect of losing their job, they would much prefer the government to guarantee them a job. And so you've got all the problems about incentives. If you pay incentives, surely you have the same inequalities that this great revolution is supposed to end. If you don't have incentives, why should anyone work at all? And in the end what you get is a static, ossified labour market, an ossified economy really. Well, if you're going to try to work this ossified economy, this static economy, you've really got to have something of a military-style operation to do it. You've got to have some strongmen who can stand up and can cut through the sticky glue that surrounds the economy and make it work. And it's at this point, of course, which you'll be familiar with, that the dictator tends to emerge. And the dictator, of course, always tends to be the worst sort of person. High-ex-chapter heading is why the worst to get on top. Well, the answer is simple. You have to be ruthless in such a state in order to get ahead. You have to have a clear-sighted goal as to where you're aiming for in order to convince people that they too should channel their resources and energies and efforts to that goal. Somebody who's mealy-married about it, somebody who thinks that the old rules of morality really ought to stand up, these people are very unlikely to get into positions of power, simply because of the contradiction between the old rules of law and the new marshalling of resources to a particular end. Of course, good dictators know that they have to get all of the residents of a large and populist nation working together in order to achieve their single objective. And if so, it's not sufficient to control their values alone. The facts too must be controlled if those who are capable of making their own decisions are not to come to the wrong conclusion. And so a mighty propaganda machine has to be brought into being to provide official reports on every subject. And while the resources of the nation are being directed to the new goals, sources of doubt or discontent can't possibly be allowed to continue. If you're aiming at a particular goal, particular economic plan, you're certainly not going to allow people to express doubts and maybe slow that plan down or maybe force people into rethinking and abandoning a whole project. So these sources of doubt or discontent must, of course, be silenced. However, a dictator usually doesn't have very much... Well, he certainly has the stomach to do that and quite frequently has the predilection to do that as well. Anyway, this, then, is the ultimate destination of high ex-view of the road to serfdom when all activity is directed towards a single end where the rule of law is perverted to that end and where even those of independent mind can't be sure what is true and what is false, assuming that they survive at all. So without the whim of the dictator, there is no art, no letters, no society, and, which is worst of all, a continual fear and danger of violent death and the life of man, solitary, poor, nasty, brutish and short. Well, how many of these milestones I hear you cry have we asked, have we passed, and how many are still in sight? Or have we in fact stepped off, as I believe the road to serfdom, as Hayek himself believed would be possible if we abandoned the original mistakes that got us on in the first place? Well, let's go through the points again. Firstly, turning to the special circumstances that do encourage us onto the road, it's clear that the liberal democracies have proved themselves remarkably resilient. Where totalitarian regimes have grown up, essentially been as a byproduct of a more general war, as in Eastern Europe, through conquest, by totalitarian powers, as in South Vietnam, or by the sudden granting of imperial power almost to nations who have no history or tradition of wielding it, as in, let's say, Zimbabwe. It remains an open question, of course, whether the liberal democracies will possess a sufficient reserve to avoid the road to serfdom, but we will see. I think there is considerable optimism justified on that particular point. The special circumstances of the present era have produced a widespread inclination, I think, away from the idea of the planned economy, rather than towards it. It's completely different from wartime Germany. The failure of planned economies to deliver their promised land of plenty, their universal tendency to foster oligarchy or dictatorship, their unpleasant habit of dealing with dissidents by dumping them at best in psychiatric hospitals and at worst in mass burial pits, these things have actually been noticed by the ordinary man in the street, and they do stand as a warning sign alongside the road to serfdom. Even modest attempts to control an economy have been such a complete mess that people have begun to... well, they've been inclined to argue that they should be ended rather than extended. It's completely the opposite to what it was in the Germany that Hayek was talking about. So, in summary, I would say, on that first point that Hayek makes, that the circumstances of the last 70 years through most of the globe here has left our minds disposed against the dangerous ideals of collectivism rather than in favour. Well, what about this confusion of power and freedom that I mentioned? Certainly, I think that there has been a continual error. However, the power of the argument that what you're really short of is freedom give me the power and I will make sure you have the freedom. The falsity of that argument has been opened up by many things. Firstly, opportunities have extended very much more widely to the ordinary man in the street. Education has opened up prospects that our parents could hardly have dreamed of. Well, no, that they wouldn't dare hope for and that our grandparents could, in fact, never have dreamed of. Women, minorities, self-made men, all of these people are in much more social esteem now than they were, say, 40 years ago when Hayek wrote. So what I'm saying there is that ordinary individuals today have far greater freedom to better themselves and with it they acquire more power to acquire what it is that they really seek, whatever that might be. And therefore they have more power, they're less susceptible to that argument. Secondly, I think greater economic equality and the devolution of economic power progressively into the hands of ordinary individuals. And away from a limited class of capitalists has reduced the obvious divide in society. Those who do best in market economy are the poor people and I think that they're beginning to realize that. The market economy gives them things, again, that they could never have dreamed of a few years ago, more quickly, more cheaply. And that tendency of the market to raise the well-being of those at the bottom produces, necessarily, an important counterbalance to the discontent that Marx thought was inevitable in a capitalist economy. Well, for all these, well, there's another reason as well, of course, which is that the freedom promised by revolutionaries has turned out to be a nightmare of power and that we've all read Animal Farm and we all recognize that what was advertised as an expansion of freedom simply turned out to be a transfer of power from one set of hands into another. A slightly less liberal set of hands, too. Anyway, on the third point that Hayek makes, I would say then that the heyday of the planned economy ideal is actually passed. It's an old idea. It was a product of the 19th century where the world did seem to be coalescing into large industrial megaliths and the economies of scale that were possible in all of the old 19th century industries seemed to have no limit. But those things are very rapidly changing. I suppose if you regard economic planning as an art form, I imagine it's heyday must have been in the 1920s where you had Le Corbusier planning these vast machines for living in, in neat rows connected to the industrial centres by rapid, publicly owned, of course, mass transit systems. Well, when that was actually tried, as it was after the devastation of the war, we saw that for the nightmare rather than the dream that it really was. So I think that the planning ideal has lost some of its enchantment and it is in fact failing with increased speed. It's failing partly because of Hayek himself and economic theorists like him. It's failing also because the structure of industry and I think this is the crucial point, the structure of industry in the developed world is changing remarkably rapidly and has changed in the last few decades. In 1944 it seemed as if the big, huge industries coalescing into monopolies and therefore requiring state control that these things would continue forever. But look at the industries today. They're smaller, they're lighter and they're in the hands of a much more widespread group of people. The heavy industry that produces large enterprises is on the decline and with it the threat of monopolistic power and therefore the need to take those jobs into public ownership. We've actually exported in the developed world a lot of the old dirty jobs, the big heavy manufacturing jobs, we've exported those into the third world and probably it's there that the next steps onto the road to serfdom are likely to occur. The future in the developed world is in smaller industries. It's in cold storage, packaging, distribution, consultancy, scientific research, finance, publishing, banking, theme park, discos, gardening, garden centers. All of these things, many of them service industries, these are the things that are growing most rapidly in the developed world. And by their nature, those industries lack any large economies of scale. So industries are actually becoming less concentrated. There's much less need to take it into public ownership. And that again I think is being understood. There's another important trend as well, almost equally important, absolutely important, and that is the rapid advance in communication and data processing and so on. What that means is that things that could formally be done only by huge, great bureaucracies, which meant that firms had to be of a large size to sustain them, these things can now be done on desktop computers. What would have taken a room of clerks this big, writing letters, copying letters and so on. Well, we don't do that anymore, everybody has a Xerox. Or writing letters by hand. You don't need a dozen clerks to do that. You can type it yourself on a typewriter. Or doing the accounts and so on. Well, that can be done in every branch on an ordinary, very cheap computer. It doesn't need a big central overhead. And so again, there's this great tendency for industry to fragment much more than it used to be. Well, let's move on, I think, to Hayek's next point. The post-war growth of government functions on their piecemeal and haphazard path has led to more decisions being placed in the hands of bureaucracy. I actually write that has happened. The opportunity for administrative fiat by government servants, particularly environmental planners, is universally known. But it's also universally hated. And the dangers of the administrative octopus are being resisted. As the administrators have made more embarrassing mistakes, as the inspectors have compounded the obvious and evident injustices, and as the planners have inflicted even more hideous monstrosities upon the landscape, the days of these officials are actually numbered. Television and radio and a much more active press are all developments which has brought home to us very clearly the dangers of the worst results of this administrative despotism. And so today I would say that the new political capital is to be made by ending this despotism and not by extending it and putting more power in the hands of officials. Well, even so, I think that the attack on bureaucracy is one of the most difficult parts of the state to roll back. It requires politicians to deal effectively with people who are themselves very efficient political organisers. Civil servants are past masters at resisting change, particularly when it involves removing them from their jobs. Marx was absolutely right. They follow their class interests. I've got great sympathy for Marx. He was right on many things. He just didn't go far enough. But the self-interest of the government classes is one thing which he hadn't anticipated. Anyway, to overcome these great intransigences means that the government propaganda has got to be pretty good, that the propaganda of the organisational classes has to be overcome, their arguments and their organisational power, very important, has to be defeated. And to be credible, I think you have to have a fairly well thought out program as to how you're going to replace these services that look necessary, these services that require so many administrators before you can actually start. So it's a very long job. So I don't think that we should be over-optimistic about the abilities or desire of politicians to pursue that too rapidly. But the assault on the bureaucracy has begun. Well, Marx's next point that economic planning invariably means control over political and moral life in every field of human aspiration has, of course, become a commonplace. But again, people, I think, are very much more aware of it today than they are when Hayek wrote. We've got world travel, which is cheap and quick. When we see British trade unions becoming an equal partner with the government, when we see them deciding whether patients should be admitted to hospital or not, when we see them leaving the dead unburied, these things, people can travel to Britain, they can see in the radio and TV what is happening, and the effect is noticed. Or again, when a repressive regime builds a wall around itself or decides to persecute its Jewish population, we can go there, we can actually, in that case, go through the wall and talk to the people on the other side fairly cheaply, very much more opportunity for that kind of relationship between different people than existed before. So what I'm saying is that improved communication, improved travel, which is going to increase as we get more leisure and cheaper travel, all of this brings home the message of how repressive some of these regimes are. And of course, the spread of wealth to ordinary people has had its effect. Ordinary people today have very much more of a stake in their own economic life. They don't want to see it nationalised. I would say also that the ossification of the labour market is something which people have woken up to. They've seen the effects of a complete guarantee, government guarantee on employment, for example. They see the awful aura of self-interest in which appeals for job security or government subsidies are always ramped, and that again, I think, has its effect. Now, you'll remember that the highest next point is that because the economic planning rapidly gets you into such a mess, there's a great popular belief that we really need strong government. Well, I think that is true today, but the strong government that people are seeking today, this strong government is going to cut through this nonsense rather than to extend it even further. People don't want to get deeper into this quagmire. They want someone who's going to take us out. So again, I think that that motive is extremely strong. And Hayek, of course, was right when he said that in a dictatorship one has to control the very facts themselves. You've got to control information. And I feel very optimistic on this particular score, I must say, because information today, fortunately, is almost impossible to control. There's so much of it. It circulates cheaply, efficiently, and indeed instantaneously in so many forms that it's beyond the power of one government to control at all. The Soviet Union, for example, you might have read in the papers, is presently debating whether it should allow in ordinary home microcomputers. Why is the problem with that? I hear you cry, but it's simple. If you have a microcomputer, all you've got to do is push a button and it will produce you 20 copies of any pamphlet that you happen to have written attacking the Soviet authorities. Now, when you can do that, when you've got that, or push another button and you can communicate it automatically to somebody down the road, now, when you've got that kind of information power, there's very little that the central authorities can do to resist it. And so the authorities in the Soviet Union correctly see that as a great threat to the Soviet system and they're very worried, what do they do? Do they stop computers coming in? Do they have them all plugged into a central bureaucracy that monitors everything that's put on them? I hope they do that, that's going to be brilliant. Or, you know, do they restrict the supply of home computers to those who really need them? Well, they've got real problems and I can see what's going to happen is the information gap between them and the West is going to increase at a great rate. And of course, another thing which worries the repressive powers is the tremendous increases in communication via satellite. Once you can get a satellite, putting out ordinary British or American, you know, Dallas TV shows into the heart of the Soviet Union, a satellite with a big enough footprint so that anybody in the Soviet Union can put a small bit of chicken wire on his roof and pull down those programs and see what life in the West is really like. That's really going to shake them. And of course, one or two stations creeping over from the West you can dismiss as being simple propaganda. When you've got hundreds of competing systems all over the United States and Western Europe, all of which are accessible to people behind the Iron Curtain, I think that's a very different thing. So I think I'll wind up by concluding that I'm very optimistic because the nature of society is changing. Marx again was right to some extent. The social relations are to some extent dependent upon the means of production and the means of production are allowing us to insulate ourselves in the state much more. We're becoming very much more small scale in our operations and we're able to insulate ourselves by doing for ourselves what would formally require the massive coercive empire of a large business or state enterprise. And so my conclusion from all this is that the past has shown us the follies of state control. The present is making it possible for ordinary people to escape that state control and the future will leave the state even more impotent. Looking at the past, attempts to produce planned economies in the past have not yielded the promised harvest. The mild attempts have just produced confusion while the most stringent have produced the most unacceptable horrors. And this experience dogs every footstep of those who would wish to take us down the road to service. Looking to the present, the benefits of a diverse and competitive economy are being appreciated. People have greater wealth to acquire those benefits and they're more reluctant to give up their stake in it. They're demanding alternatives to state services and they have the means and the technology to escape state services and control. In the future, economic units will I think continue to get smaller and smaller. Self-employment will replace the factory proletariat and with it will go the last vestige of Marxist theory. Communication will continually improve making it ever more possible to do at the level of the individual what once required the kind of centralization that is prey to collectivism. New service industries with few economies of scale and little inclination towards monopoly will emerge as the old industrial jobs are exported to other countries. Well, David Hume who is quoted by Hayek on the title page of the road to service said that it is seldom that liberty of any kind is lost all at once. I think it's perhaps even more rare to find liberty restored all at once. It happened about once in recent years that I can think of. But the point is that having stepped off the road to serve them it would be a mistake to suppose that our way back would be at all easy or at all quick. It will be many decades before the attitudes that brought us so far will actually be completely overcome. But fortunately past experience and future technology will keep us traveling in the right direction. And Mr Chairman in my judgment the first few and perhaps faltering steps back have already been made. Thank you.