Book Review: The Road to Serfdom - for Managers | Managing Leadership

The Road to Serfdom - for managers

Certainly F.A. Hayek’s The Road to Serfdom is a classic contribution to the political dialogue of the latter half of the 20^th century. As such, it is worth reading. But why should a manager read it? How will doing so help you be better at managing? Consider this:

Hayek argued for economic freedom - capitalism. Aside from being the best way to assure the greatest prosperity for society and the fairest distribution of it throughout the community, he believed it to be the fundamental prerequisite to all individual liberties. Conversely, he feared that if our economic freedom was taken from us, we would first have to have been deprived of all others.

The key enemy of liberal economics was the progressive instinct for imposing upon us “that deadly blight of centralization.” So, the contest is between central planning and individual liberty. Put another way, it is between central planners and the individual hand of self-interest.

What kind of a manager are you? Are you a central planner? Do you assemble and control all information and meter it out to the organization only as necessary to ensure the twin goals of execution of and compliance with the plan? Or, are you more like a central banker? Yes, you gather information, but you guide execution through manipulation of key operational factors.

Before you answer, let’s consider another related matter. In the 10 October 2006 post, “The Invisible Hand of Leadership,” on these pages, I discussed an essay published that same day in the WSJ by Professor Edmund Phelps, the winner of the 2006 Nobel Prize for Economics (see also a supplemental discussion of this in another essay by Professor Phelps in today’s WSJ). He compared capitalism - the economic system employed in some Western nations, principally the US, the UK, and Canada - with what he politely called the “Continental” system of mainland Europe.

Phelps’s main argument is that capitalism is designed to generate dynamism, and the continental system is designed to suppress it. A related point was made in another WSJ essay, as discussed in our post of a week earlier, on 4 October 2006, by Johan Norberg, a senior fellow at the Center for the New Europe. In the course of his defense of global capitalism, he made the telling point that virtually every advantage and blessing we enjoy today - healthier, longer lives filled with greater diversity and generally fewer hours committed to generally more fulfilling work (and this advancement has penetrated to one degree or another to people of all socio-economic conditions in virtually every corner of the world) - result from the scientific, economic, commercial, and general technological innovations of individuals inspired by an entrepreneurial spirit or enabled by their living in an entrepreneurial system. Put another way, they weren’t invented by government bureaucrats. They arose from individual self-interest, not from centrally planned efforts at social justice.

Both of these essays, from different perspectives, make points that are relevant today and that were made first by Hayek in “The Road to Freedom.” Indeed, Professor Phelps’s original essay draws extensively and directly from Hayek - and he even extends the benefits of capitalism generally into better workplace organization and individual satisfaction in work than exist in the modern continental systems of Europe.

So, capitalism promotes dynamism and innovation, and central planning suppresses it. How about you? As a manager, do you promote creativity, esprit, and energy in your organization, or do you centrally plan and control to the point that you impede these?

As Hayek says, “We have no intention, however, of making a fetish of democracy.” And businesses certainly can’t afford to do that. Managers must be held responsible for planning, they must cultivate and exercise some decisive degree of control and power over their organizations.

But how much, and by what means? Just because businesses aren’t democracies doesn’t mean they aren’t societies, and that their characters aren’t affected by the degree of central or decentralized control present in them.

With ideas like these in mind, read The Road to Serfdom. You will find it provoking new thinking about what the fundamental principles of management really are. Among them, you may find that the innovative spirit and energy of your organization don’t arise from you (any more than leadership does) - they arise from within an organization that has been designed to release people to focus on their work, not one that has yoked them to a central plan.

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