The extent to which we should embrace economic freedom and self interest
Friedrich von Hayek is a classical liberal free market capitalist whose strong belief in the principles of economic freedom and self interest are clearly demonstrated in the provided source. The source demonstrates von Hayek’s disagreement with an economy which is directed by a socialist government. He also disagrees with the idea that the government should determine the status of each individual within a society, leaving no room for the individual to pursue their own self interest in order to move up or down on the ever-changing economic ladder.
There have been many problems caused in the US and the Soviet Union by either too much or not enough embrace of economic freedom and self interest in combination with human greed. In the United States during the Great Depression, these two principles of classical liberalism were fully embraced, essentially resulting in the collapse of their economy. The Soviet economy also suffered, but unlike the US, it was due to their complete rejection of these two principles. Canada’s economy combines economic freedom and self interest with some additional principles of modern liberalism in order to achieve an effective system. The best amount of support of economic freedom and self interest in an economy is somewhere in the middle of the spectrum; we should neither completely accept nor reject these principles, but rather modify and add to them in order to gain optimal results.
In the United States, the Great Depression caused many Americans to re-evaluate their thoughts on their country’s economic system. The United States is known for its unregulated, capitalist economy. This horrible economic depression demonstrated that a completely free market can be very harmful when it gets out of hand, or rather in the hands of the greedy. Some government regulation is necessary. The cause of the great depression was influenced by many factors, the biggest of which was an unregulated market in combination with uncontrollable debt and irresponsible investments. The condition of the United States’ economic system prior to the Great Depression displayed the principles of classical liberalism that Friedrich von Hayek supported in the source. The lack of any government control with regards to economic freedom and self interest is consistent with von Hayek’s views, but it is ultimately what caused the Great Depression. The responses to the Great Depression were to implement more regulation in the market, introduce a form of welfare capitalism, and stimulate the economy by creating public projects such as the construction of the Hoover Dam. These responses all demonstrate the obvious need for more government intervention in a free market economy, and the necessity to move away from classical liberalism and towards modern liberalism.
The Soviet Union was the first country to adopt the system of an entirely directed economy. Under the control of Stalin, the Soviet Union suffered the consequences of this socialist economic structure. As Friedrich von Hayek implied in his quote, the rejection of economic freedom and self interest by a government striving toward equality results in just the opposite, “an officially enforced inequality”. Similar to the Great Depression in the United States, the main problem with the Soviet economy was caused by human greed. People have the tendency to want more than what they already have; to continuously strive for more power and money. This basic human trait is essentially the reason that Stalin, after successfully following the first two steps of Marxist Socialism, did not graciously retire to leave behind a self-governing, equal society. Stalin’s burning desire for more power sourced the ineffectiveness of the Soviet Union’s directed economic system. Stalin used his power to benefit himself and the people closest to him, eliminating any semblance of economic freedom or self interest in the country. In the provided source, Friedrich von Hayek was expressing the negative aspects of a socialist economic system like the one in the Soviet Union. Human greed causes neither the system of a directed economy, nor that of a free market economy to work effectively all of the time.
After exploring both extremes of the economic spectrum and learning why neither one is completely effective, the conclusion can be made that an economic system which combines certain highlights from each system would work best. The Canadian economy combines the classical liberal principles of self interest and economic freedom, supported by von Hayek, with modern liberal principles such as welfare capitalism and labour standards and unions. Canada’s mixed economy works well to eliminate the consequences of the greed factor seen in the United States and the Soviet Union. For instance, during the 2007/2008 recession that hit North America as well as the rest of the world, Canada fared better than the US. Parameters have been implemented in the Canadian economic system to limit the effect that human greed has on society, where the United States’ system does not have any regulations. The lack of government control in the US economy caused the banks and big corporations there to require a bailout in order to prevent bankruptcy. In Canada on the other hand, the big corporations and banks were able to stay afloat without billions of dollars due to the policies in place which limited banks from giving out risky loans or lending money irresponsibly. Canada’s mixed economic system that combines principles of unregulated and directed economies nearly eliminates the consequences of the manipulation of the system due to human greed.
Optimal results will be achieved when an economic system employs the classical liberal principles supported by von Hayek of self interest and economic freedom, but with slightly more government regulation and intervention. Ultimately, a successful economic system will shift away from the extremes – a completely unregulated economy in the United States or an entirely directed economy in the Soviet Union – towards a system that eliminates the greed factor and combines the best of both worlds. Ideally, there should be a mixed economy – such as in Canada – in which the principles of self interest and economic freedom are regulated by the government. This system allows the factor of human greed to be removed in order to achieve the most favorable economic system.
