Socialism boogeyman

A little more than 30 years ago an upstart Republican Study Committee met with F.A. Hayek, the economist, political philosopher and Nobel laureate. Today, both Hayek and the RSC are exceedingly relevant during the nation’s slow trek through its bailout odyssey.

Largely overlooked during the bailout passage several weeks ago was the essential role that a number of RSC members had played. Of the committee’s 102 members listed earlier this fall, 29 voted for the bill when it failed the first time, nearly half of the 65 Republican “aye” votes.

Then, 40 RSC members voted for final passage, nearly half of the 91 GOP votes in favor.

Let’s also remember that the RSC simultaneously showcased the bailout’s loudest and most intense opponents, their reasoned arguments operating through the mode of visceral socialist fear-mongering, best encapsulated by RSC Chairman Jeb Hensarling (Texas), who called the bill “a slippery slope to socialism” and equated it with the ominous prospect of lessened freedom for his children.

And after Treasury Secretary Henry Paulson’s declaration that TARP funds would be used for direct capital injection instead of purchasing mortgage-backed securities, detractors signaled the end of Hayekian capitalism.

Most recently, Michelle Malkin wrote in National Review Online that lawmakers who changed their vote in favor of the bailout fell for Hayek’s “fatal conceit,” investing more faith in a government actor than the free market, while referencing the reticence of banks to lend bailout funds. She added that the switch represented “the biggest case of buyer’s remorse in U.S. history.”

Not so fast.

Hayek, an intellectual rock star of the Cold War anti-communist movement, traced the very real line between state economic planning and its tyrannical endpoint. For Republicans during the 1980s, the Reagan White House in particular, Hayek became an article of faith in the inherent supremacy of Western capitalism.

When the Cold War ended, however, the GOP retrofitted its ’90s policy agenda to Hayekian proportions, transforming him from socialist bulwark into a thoughtful insurgent against progressive taxation and social spending.

Former House Speaker Newt Gingrich (R-Ga.) invoked Hayek in arguing for a flat-tax policy; former House Majority Leader Dick Armey (R-Texas) for a balanced budget amendment and welfare reform; and former Sen. Rod Grams (R-Minn.) for Social Security reform. This year, Rep. Marsha Blackburn (R-Tenn.) suggested Hayek’s seminal work, The Road to Serfdom, while opposing the budget bill.

But in fitting the Hayekian square peg in the post Cold-War round hole, the GOP reduced his philosophies to a simple endorsement of unequivocal laissez-faire capitalism. This leads to a reading of an important though less-noted work, The Constitution of Liberty.

Hayek argued that core rights need to be free from interference or “coercion” in order to experience them in the present and plan for them in the future. The key was the creation of a large “private sphere” where the individual could reliably enjoy these rights, far from government coercion.

For Hayek, private property represented “the first step in the delimitation of the private sphere.” If citizens didn’t rely on the government for property, then the government could never use this power to transform their private spheres into public ones. Hayekian capitalism doesn’t stand for an absolute firewall between state and markets in order to maximize profits and economic growth rates.

So it’s hard to argue that the bailout signaled either a Hayek defeat or capitalism’s day of reckoning. At $13 trillion, not only is our economy too big to fail, but it’s too big to even consider subsidizing with a trillion-dollar TARP.

(Incidentally, you can’t really argue against government intervention while citing participating banks sitting on bailout funds when, as Britain has shown, it’s government intervention that ensures this very lending.)

Paulson clearly hasn’t earned the notice of the Obama transition team. But the fact that the bailout triggered a necessary global response; that this strategy was mirrored by the EU and China; that global credit markets are farther from the precipice of utter disintegration than they previously were; and that full-blown economic depression has been, for now, taken off the table mean that remorse is far from the sensation that bailout supporters should be feeling.

Part of the solution to this crisis will have to involve foreign capital to supplement tax dollars. But as we face the concurrent challenge of reviving American influence, we will have to figure out how to regain power on the world stage if we are more a debtor nation than a creditor one.

Our greatest challenge is not creeping socialism. Let’s stop sullying the debate.

Mikhail is a former staff writer for The Hill. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it .