Is planning ‘inevitable’?

Is planning ‘inevitable’? 

FRIEDRICH A. HAYEK 

It is revealing that few planners today are content to say that cen- 

tral planning is desirable. Most of them affirm that we now are 

compelled to it by circumstances beyond our control. 

One argument frequently heard is that the complexity of mod- 

ern civilization creates new problems with which we cannot hope 

to deal effectively except by central planning. This argument is 

based upon a complete misapprehension of the working of com- 

petition. The very complexity of modern conditions makes com- 

petition the only method by which a coordination of affairs can be 

adequately achieved. 

There would be no difficulty about efficient control or plan- 

ning were conditions so simple that a single person or board could 

effectively survey all the facts. But as the factors which have to be 

taken into account become numerous and complex, no one centre 

can keep track of them. The constantly changing conditions of 

demand and supply of different commodities can never be fully 

known or quickly enough disseminated by any one centre. 

Under competition– and under no other economic order– the 

price system automatically records all the relevant data. Entre- 

preneurs, by watching the movement of comparatively few prices, 

as an engineer watches a few dials, can adjust their activities to 

those of their fellows. 

Compared with this method of solving the economic problem 

– by decentralization plus automatic coordination through the 

price system– the method of central direction is incredibly 

clumsy, primitive, and limited in scope. It is no exaggeration to say 

that if we had had to rely on central planning for the growth of our 

industrial system, it would never have reached the degree of differ- 

entiation and flexibility it has attained. Modern civilization has 

been possible precisely because it did not have to be consciously 

created. The division of labour has gone far beyond what could 

have been planned. Any further growth in economic complexity, 

far from making central direction more necessary, makes it more 

important than ever that we should use the technique of competi- 

tion and not depend on conscious control. 

It is also argued that technological changes have made compe- 

tition impossible in a constantly increasing number of fields and 

that our only choice is between control of production by private 

monopolies and direction by the government. The growth of 

monopoly, however, seems not so much a necessary consequence 

of the advance of technology as the result of the policies pursued 

inmost countries. 

The most comprehensive study of this situation is that by the 

Temporary National Economic Committee, which certainly 

cannot be accused of an unduly liberal bias. The committee 

concludes: 

The superior efficiency of large establishments has not been 

demonstrated; the advantages that are supposed to destroy 

competition have failed to manifest themselves in many 

fields ... the conclusion that the advantage of large-scale 

production must lead inevitably to the abolition of 

competition cannot be accepted ... It should be noted, 

moreover, that monopoly is frequently attained through 

collusive agreement and promoted by public policies. When 

these agreements are invalidated and these policies 

reversed, competitive conditions can be restored. 

Anyone who has observed how aspiring monopolists regularly 

seek the assistance of the state to make their control effective can 

have little doubt that there is nothing inevitable about this devel- 

opment. In the United States a highly protectionist policy aided 

the growth of monopolies. In Germany the growth of cartels has 

since 1878 been systematically fostered by deliberate policy. It was 

here that, with the help of the state, the first great experiment in 

‘scientific planning’ and ‘conscious organization of industry’ led to 

the creation of giant monopolies. The suppression of competition 

was a matter of deliberate policy in Germany, undertaken in the 

service of an ideal which we now call planning. 

Great danger lies in the policies of two powerful groups, orga- 

nized capital and organized labour, which support the monopolis- 

tic organization of industry. The recent growth of monopoly is 

largely the result of a deliberate collaboration of organized capital 

and organized labour where the privileged groups of labour share 

in the monopoly profits at the expense of the community and par- 

ticularly at the expense of those employed in the less well orga- 

nized industries. However, there is no reason to believe that this 

movement is inevitable. 

The movement toward planning is the result of deliberate ac- 

tion. No external necessities force us to it. 

The Road to Serfdom 

FRIEDRICH A. HAYEK 

The condensed version of The Road to Serfdom 

by F. A. Hayek as it appeared in the April 1945 

edition of Reader’s Digest