Friedrich August von Hayek (1889-1992) was an economist of the Austrian School noted for his defense of free-market capitalism against left-wing economic thought. Hayek and his close associate Ludwig von Mises were seen as the counter-point to the prevailing economics of John Maynard Keynes in the immediate post-war era, who was seen by them as a 'socialist'.
The interest here for SourceWatch readers, is that Hayek and von Mises became elevated to the level of (almost) infallible gurus among the Libertarian think-tanks which grew exponentially from the 1980s on through the financing of millionaires like Antony Fisher (Buxted Chickens and the Institute of Economic Affairs) and other wealthy free-market fanatics and large corporations.
Hayek turned in 1944 to the political arena with his Road to Serfdom, a polemical defense of laissez-faire capitalism against socialism, which influenced people across the political spectrum. His subsequent political activities include the foundation of the libertarian Mont Pelerin Society with von Mises in 1947, whose original membership included several socialists.
Hayek's work was initially ignored in the Keynesian mainstream which then dominated economics, but interest in his writings began to increase after his 1974 Nobel award and became prominent during the 1980s and 1990s with the triumph of economically neo-liberal right-leaning governments and leaders in the United States (Ronald Reagan) and Great Britain's (Margaret Thatcher, the British prime minister from 1979 to 1990 (she was an outspoken devotee of Hayek's writings).
Hayek's work has had huge political impact, serving as the intellectual underpinning of many of the right-wing and libertarian think tanks that have formed since 1947. However, Hayek sought to distance himself from the political right in his essay Why I am not a Conservative (1960): he was politically progressive, but believed fervently in less government and particularly in less power for the government regulatory agencies. Libertarians believe that market-forces should determine what is sold, and that it is the buyer's responsibility to check before buying.
More importantly, the ultra-freemarket philosophy that emerged under the names of Hayek and von Mises, became used by large corporations and industries with poisoning and polluting problems as a rationale for less regulation and the emasculation of the US regulatory agencies (EPA, OSHA, CPSP and FDA).
Most notably was the network of libertarian think-tanks known as the Atlas Group established by the UK millionaire Sir Antony Fisher in the USA, following his success with the Institute of Economic Affairs in London. It now claims to have over 400 associated corporate-funded think-tanks around the world.
Hayek's work has inspired the establishment of The Hayek Center. and there was a Ludwig von Mises Institute established in 1982 by Llewellyn Rockwell, Burton Blumert and Murray Rothbard. Rothbard, had been one of the founders of the Cato Institute.
Organisations with close ties to Hayek, either via the Mont Pelerin circle, or less directly, include:
- Atlas Economic Research Foundation & Atlas Group
- State Policy Network
- Competitive Enterprise Institute
- Cato Institute & Heritage Foundation
- Institute of Economic Affairs
- Fraser Institute & Institute for Humane Studies
Persons with close ties to Hayek
Hayek has been subject to many biographies, but there is one outstanding comparison between Keynes and Hayek in Keynes - Hayek: The Clash that Defined Modern Economics, by Nicholas Wapshott.
Hayek's father was a doctor of medicine and part-time university lecturer in botany at the University of Vienna, and his father-in-law was Franz von Juraschek, a prominent Austrian economist. Hayek was inducted into the Austrian army in March 1917 towards the end of World War I, and after the armistice (Nov 11 19818) he returned to Vienna suffering from malaria. This was at a time when the old Austro-Hungarian empire was breaking up, and the League of Nations enforced the separation of Austria from Germany.
Along with most Austrians he became an enthusiastic supporter of John Maynard Keynes, who, as economic advisor to the British government, led the fight against the draconian reparation payments that the victorious Allies tried to extract from the defeated Central Powers. These reparation payments made it almost impossible for Austria to reconstruct industry or re-establish their old society after the devastation of war, and led to a long period of hyper-inflation, as Keynes had predicted. [See The Economic Consequences of the Peace].
In 1921-20 when the University of Vienna was closed during the winter (they couldn't afford the required heating), he moved to Switzerland, which gave his some temporary relief from the poverty of Austria and some experience with an economy not destroyed by war. He then came under the influence of Ludwig von Mises, a lecturer in economics at the University of Vienna who promoted a form of market-economics which held that the amount of money in the economy determined the inflation rate. Von Mises was also stridently against the prevailing socialist ideas that were developing in Hungary and Eastern Europe.
Von Mises found Hayek a job with the government body established to settle the war debt in late 1921 where he had first-hand experience as runaway inflation; ie second monthly salary was 3-times that of his first just to compensate for 40 days of hyperinflation. He had 200 pay-rises in the first eight months.
In 1922 he was introduced to Professor JW Jenks a visiting economist from the New York University, and was invited to visit New York and act as a researcher and translator on a project to help the German economy get back on its feet. He arrived there in March 1923 (and stayed a year) and began to develop his ideas on what led to business cycles of boom and bust. The business cycle became the foundation of his later theories.
- Wikipedia entry on Hayek
- Bruce Caldwell, Hayek's Challenge: An Intellectual Biography of F.A. Hayek, The University of Chicago Press, 2003
- Curriculum Vitae, Nobel e-museum, accessed January 2004
- What academics and supporters of Hayek say about his legacy: http://www.hayekcenter.org/friedrichhayek/hayekquote.htm
An important new addition to the current explosion of Hayek-inspired scholarship is Bruce Caldwell's Hayek's Challenge.
Resources and articles
- "Keynes - Hayek:The Clash that Defined Modern Economics" by Nicholas Wapshott
- The Economic Consequences of the Peace, by John Maynard Keynes.