Outline:
1st Introduction
2nd Representatives
3rd Constituting principles
4th Regulating principles
5th Instability of mixed systems
6th The principle of market conformity
7th Interdependence of orders
8th The social question with Eucken
9th The role of the state
10th Hayek's variant
5th Instability of mixed systems
Walter Eucken, in contrast to his student K. Paul Hensel, believed that efficient central planning within the framework of a centrally administered economy was not possible at all, so that essentially only one satisfactory economic order was conceivable: the transaction economy. Incidentally, this radical view is similar to the ideas of Karl Marx, who famously tried to prove that capitalist society would necessarily develop into a socialist economy. Both authors thus assume that in the long run there could only be one economic order, that the socialist society with Karl Marx, respectively the transaction economy with Walter Eucken.
This thesis is based on the fact that it was quite impossible for a planning authority to create the knowledge of all market-wide price relations that is necessary for an optimal allocation of resources. On the one hand, the final prices could only be determined if the prices of the production factors were known beforehand, but on the other hand, the price of the individual production factors themselves depended on the price of the final products. Only a simultaneous market process was able to provide this information.
Furthermore, computer technology was in its infancy during Walter Eucken's lifetime and third-degree functions, which are assumed for both the production functions and the utility functions, could by no means be calculated by machine at that time.
In the meantime, computer technology has advanced to such an extent that it is certainly possible to determine functions of a higher degree. It should also be remembered that in the aftermath K. Paul Hensel, Walter Eucken's student, tried to prove that these evaluation processes could also be solved principally within the framework of an administration.
However, Walter Eucken was also of the opinion that mixed systems, i.e. market economy systems with interventionist influence, were unstable. One intervention entailed others, with the consequence that this process would eventually end one day in a centrally administered economy.
Now, one must certainly admit that interventions do indeed lead to further interventions. Several factors are responsible for this. Initially, there are substitution relations and complementarity relations between individual goods. These relations mean that in general several areas must be included in the intervention in order to be successful. We take the case of substitution goods. For example, the state wants to curb drug use, but would only ban some of the drugs. In this case, it would be expected certainly that demand would shift to the drugs that are still allowed, with the result that overall drug use would be reduced only slightly.
As a second example, let us take two markets that are in a complementary relation to each other: bread and spread. We assume that the state intends to subsidise the purchase of bread in order to enable even the lowest income recipients to consume sufficient bread. The price of bread would therefore fall due to the subsidy and this in turn would have the desired effect of increasing demand. However, it must be expected that the demand for spreads would also increase with the further consequence that the price of spreads would rise and thus would again compensate the positive effect on the price of bread.
But there are also further connections that lead to the fact that one intervention entails others. If the state decides to dynamise old-age pensions (e.g. to adjust them to wage increases), it will very soon see itself obliged, for reasons of justice, to dynamise accident pensions as well. Furthermore, a government that grants subsidies or other benefits to a certain industry will very soon find itself under pressure from the interest groups of other industries, since they see distortions of competition in this measure.
Thus, we must indeed assume that in most cases it will not remain with individual interventions in the market process, that in fact mostly further interventions in neighbouring areas will be necessary to avoid defeating the success of this measure. This does not mean, however, that this process will always continue and must necessarily end in a total state planned economy. The development of the market economy at the beginning of the Federal Republic shows a completely different picture. Initially, when the most important markets were liberalised, important sectors of the economy, such as the housing market, were excluded. In other words, we began our market economy in the FRG with a mixed system. Over time, it became possible now to free up the sectors that had previously been excluded from the market economy as well. The thesis formulated by Walter Eucken had claimed exactly the opposite.
6th The principle of market conformity
Liberalism in its original form rejected any state intervention in the economic process, since it was based on the idea that a free-market economy would produce the best possible results without or especially without state intervention. Walter Eucken judged this issue in a much more differentiated way. On the one hand, he assumed that the free market does not lead always to socially satisfactory results, that under certain conditions state measures were definitely needed. On the other hand, he believed that not every state intervention was detrimental to the preservation of the market. It was only important that the state refrained from measures that endangered the market.
To clarify the question of which government measures are not dangerous and which other measures should be avoided in any case, Walter Eucken formulated the criterion of market conformity. A state measure is considered market compliant as long as the state limits itself to influencing only the data of the economic process but leaves the actual economic decisions to the private market participants. The most important economic decisions include the determination of the supply and demand quantities of goods and production factors, the formation of the price, the choice of production technology and the determination of the production location.
Thus, when the state imposes prices - perhaps only in the form of minimum prices - it intervenes in the market process, it adopts part of the economic decisions which should be left to the private market partners. However, if the state obliges entrepreneurs or even employees to pay part of their income to the state in the form of an income tax, this is a change in the data on which economic decisions indeed depend, but which do not represent these decisions as such.
This is therefore a market-compliant measure that influences the outcome but not the actual market mechanism. Although the state exerts coercion here, each individual market participant is in principle still free to decide whether to maintain its supply or demand and under what conditions it is willing to this market participation.
The question of whether a state measure can be classified as market conform is clearly measured here by whether and to what extent freedom of contract is preserved. A market conform measure may reduce the number of possible alternatives, but as long as several alternatives remain and the individual is not forced to make a very specific decision in exercising his supply or demand, there is still a free decision by the market participant.
Now - as already mentioned - freedom of contract is one of the constituent principles of a market economy formulated by Walter Eucken. Walter Eucken named further, altogether 7 such principles, without which a market economy cannot function smoothly and satisfactorily. In his criticism of the determination of the criterion of market conformity, B. Steinmann criticised that this criterion was one-sidedly limited to one of these 7 constituent principles, and he suggested that conformity with the market should also be measured by the extent to which the other 5 constituent principles are also violated.
For example, if one focuses on the principle of open markets, one can get to a somewhat different assessment of tariffs. Tariffs do not directly intervene in the market process and are thus considered by Walter Eucken to be in conformity with the market; however, they can be set so high that they have a prohibitive effect and prevent any potential competition. In this way, however, the functioning of the markets is impaired at least severely. But critically, it must be added that then, if one were to check every political measure for conformity regarding all constituent principles, the intended advantage of this criterion, namely its simplicity, would be lost.
K. C. Talheim objected to the criterion of market conformity, arguing that it did not consider sufficiently quantitative features of political measures. He suggested distinguishing between measures that are necessary to the system, those that promote it, those that are neutral, those that damage it and those that ultimately destroy it. The monopolisation of the creation of banknotes was necessary for the system. Competition between enterprises is not indispensable for the functioning of the market economy, but it is beneficial to the system. A general sales tax is regarded as market-neutral since it leaves price relations and with them allocation largely untouched. Prohibitive tariffs must continue to be regarded as damaging to the market, since they prevent international competition and thus eliminate otherwise effective productivity incentives. Hyperinflation triggered by an expansionary monetary policy would ultimately lead to the destruction of a market economy.
Theodor Pütz criticises that the criterion of market conformity formulated by Eucken regards too little the fact that the effect of a measure depends often decisively on the closer circumstances. In the case of a severe depression, an intervention in the price process could be desirable and thus beneficial to the system in order to end a dangerous downward price-wage spiral, irrespective of the fact that interventions in the market process must generally be regarded as market-inconsistent.
Secondly, Pütz points out that while some policies would generally have to be described as market-inconsistent, they may nevertheless be desirable in very specific markets. This applies, for example, to allowing a monopoly, which will generally disrupt the functioning of a market economy, but which appears to be economically necessary when issuing banknotes.
Finally, Pütz points out that the assessment of a measure certainly depends also on the extent of the respective use of funds. A slight increase in money can, under certain circumstances, get a faltering economy moving again, whereas a sudden doubling of the money supply could result in the danger of a collapse of a market economy.
7th Interdependence of orders
Especially Walter Eucken drew attention to the fact that orders had to be interdependent, that the individual orders of the social subsystems had to correspond to each other. Walter Eucken assumes that a market economy can only function smoothly if there is a liberal democratic order at the political level. Conversely, a centrally administered economy can only function if a dictatorship is established at the political level.
Walter Eucken limited his considerations
on interdependence to the relations between economic and political subsystems.
Now we generally distinguish between three subsystems of our modern secondary
society; in addition to the economy and politics, a third distinction is made
in the cultural spheres. In this sense, the problem of interdependence could
also be extended to the relations between cultural and economic orders.
Christianity in the Middle Ages, for example, had a ban on interest, since it was assumed that money could be lent without work and that therefore no payment was allowed to be demanded for it. We encounter similar ideas in the Islamic economies, where a state of God has been established. Here also, believers are forbidden for religious reasons to demand interest for an offer of capital. Finally, communism knew a ban on interest, here guided by the conviction that only the use of labour creates value and therefore only labour is entitled to remuneration.
It is obvious that a clear prohibition of interest rates impairs the efficiency of any economic activity. The price relations between wages and interest reflect the scarcity relations between labour and capital. If no price is paid for capital, the demand for capital is greater than the supply, the capital intensity of production is too high, the demand for labour is too low, and this leads to unemployment.
The thesis of the interdependence of orders can now be understood firstly in the sense that the individual orders, especially in their ideal-typical form, are based on very specific guiding principles and that therefore the same societal guiding principle also requires very specific types of order at the individual levels of the subsystems. The guiding principle of a market economy is the greatest possible realisation of individual freedom; at the political level, however, this ideal of freedom is only realised in a constitutional democracy.
Conversely, it applies that both within the framework of a centrally administered economy as well as in its political equivalent of a dictatorship, the supreme goal lies in the subordination of the individual citizens to the goals of society as a whole, whereby these goals are formulated by state representatives. Finally, in the feudal system, the will of the community was formed by the interaction of the individual population groups (the estates), so that here the economic order of the negotiated solution corresponds best to this objective.
Secondly, the thesis of interdependence can also be understood in the sense that the proper functioning of an economic order is only guaranteed if a very specific order is realised at the political level. While in the first case we speak of a normative connection, in the second case we think of a factual connection; in order for welfare to be maximised in a market economy, a very specific order is also required in the political sphere.
A political dictatorship generally leads to an impairment of a market economy. This is because the dictatorship can only enforce its goals if these cannot be thwarted by allowing individuals freedom in a market economy. Thus, above all, free trade with other economies entails the danger that individual citizens can compare the performance of their own government with the performance of the foreign government, citizens also learn through free trade with foreign countries on which points their own government has failed; there is a danger here that criticism of the own government will get out of hand and that in this way the position of the own government will be endangered in the long term.
In recent decades there have also been attempts by communist states which have chosen the political form of dictatorship to allow market-economy relations in the economic sphere. The reason for this was primarily that in the competition of systems (capitalism versus socialism) the centrally administered economy proved to be inferior to the market economy and that the communist rulers therefore felt compelled to adopt methods of the market economy in the economic field. On the one hand, the danger of a revolution could only be prevented by adapting the standard of consumption to that of free democratic states; on the other hand, the readiness to defend against foreign states could only be maintained by adopting the efficiency of market economy systems.
In a similar way, however, the goals of a market economy (the increase in the welfare of individuals) would also be endangered if a dictatorship was realised at the political level. A dictator will intervene in the market to best achieve his political goals and correct market outcomes whenever the political goals appear to be at risk. Since the dictator has certain ideas about how the individual should behave, what is good for him and what is bad for him, it requires numerous corrections of the free market on the part of the state.
The thesis of interdependence can thirdly also be understood in such a way that the forms of order of the individual societal subsystems have effects on other subsystems, which either endanger the orders of the respective other subsystems or, conversely, strengthen their stability.
Therefore, particularly the attempts of politics to correct the market can eventually lead to a collapse of the free-market system in the first place. In this context, Walter Eucken - as we have already discussed - put forward the thesis that mixed systems are unstable and must eventually necessarily entail that the economic system ultimately ends in a total central administrative economy.
Consequently, we must assume that political systems have negative effects on the economic order and that these negative effects are to be expected to a greater extent from a political dictatorship than from a democratic order. However, what about the reverse connection, do we also have to expect that, for example, a free market would by itself lead to the collapse of dictatorial systems? Certainly, in the past, communist dictators suppressed free-market systems mainly because they feared that free markets threatened the political system. Conversely, it was the hope of Western governments that the introduction of market-based elements would trigger the collapse of communist systems.
But what about the reverse connection, can we also expect that the introduction of a liberal democracy will enforce the implementation of market economy structures? Experience does not seem to confirm this connection. Politicians repeatedly attempt to influence elections in their favour by means of planned economic interventions in the market. Especially in times of need, politicians get under strong pressure to become active at all, whereby the question of whether these measures are also suitable to solve the current problems (e.g. unemployment or inflation) recedes into the background. This is especially true when it is only possible to determine whether the policy measures have been successful after a very long time has passed since they were introduced.
8th The social question with Eucken
It corresponds to a widespread prejudice that neoliberalism would neglect the social question. This judgement applies neither to neoliberalism in general, nor to Walter Eucken, the founder of neoliberalism, particularly. In his Principles of Economic Policy, the social question is not only dealt with in detail but it is even at the centre of the principles of economic policy.
Within the framework of this criticism, it is overlooked that it was essentially the lines of thought developed by Walter Eucken that led to the introduction of the 'social' market economy in the immediate period after the Second World War, that furthermore in the regulating principles demanded by Eucken an income policy is demanded that guarantees a minimum standard of living for all people, and that even if an anomalous behaviour of the supply on the labour market had to be feared, state intervention is considered necessary.
W. Eucken acknowledges that it was not surprising that among the social grievances present when industrialisation was introduced in the 19th century, the idea of a free order, which initially brought de facto no freedom to workers, met with resistance. What was decisive, however, was that these shortcomings had arisen on the labour markets because of a demand monopoly and not, as K. Marx had claimed, because workers had lost their ownership of the means of production in the course of industrialisation.
Since the middle of the 19th century, the situation of the workers had improved considerably. Not because the separation of workers from the property of the means of production had been reversed, but because the productivity of labour had increased due to increasing mechanisation, and because the monopoly of demand on the labour markets could be largely overcome.
The dependence of income levels on the market can certainly lead to injustice, but the dependence on central bodies of power was even more dangerous. In the transition to a state planned economy, one form of insecurity was only replaced by another.
History had shown that neither collectivisation of the ownership of the means of production nor central planning had brought a satisfactory solution to the social question, but rather that in this way the lack of freedom had been increased and it was precisely in this expansion of lack of freedom that the new social question was situated.
The solution to the social question should not be sought in the abolition of private property. Private property could lead to grievances, but collective property had to lead to them. The collective could avoid unemployment, but it conjured up the much more serious danger of personal insecurity. A transaction economy, on the other hand, could provide people with economic security, but only if it ran smoothly.
Social policy was necessary, but it was not allowed to override the market, it rather consisted by itself in a policy of order. It was precisely competition that helped to reduce one-sided monopolistic takeovers and thus enabled a balanced distribution of material goods between enterprises and households, between employers and employees. In this respect, competition not only contributed to an allocation that is as efficient as possible and oriented towards consumer interests, it also enabled a thoroughly satisfactory distribution of the social product at the same time.
Conversely it applied that wherever the market had led to results that were regarded as highly unjust, it had almost always been due to the fact that competition had been impeded and that unsatisfactory distribution results were realised.
9th The role of the state
Neoliberalism demands a strong state, which, however, restricts itself to measures that are in line with the market. While old liberalism, with few exceptions, rejected any intervention by the state in the market economy, Walter Eucken considered it quite necessary for the state to take economic policy measures, which, however, always had to be in line with the market.
State intervention is necessary in particular to prevent the formation of monopolies in the markets, which on the one hand weaken the efficiency of the market economy and on the other hand lead to social exploitation.
However, the state can only take on this task if it is strong enough and if it can act regardless of the interest groups. Such independence of the state organs can, however, only be achieved if politicians do not depend on financing their election campaigns with funds which are granted as donations by the large interest groups. The interest groups will only be willing to make generous donations if they also receive concessions from the state organs in return. In this context, it is important that politicians are provided with funds by the state itself and can thus run their election campaigns without such donations.
10th Hayek's variant
We would like to conclude this chapter by briefly discussing the work of Friedrich von Hayek. We mentioned at the beginning that von Hayek is sometimes attributed to the Freiburg School. From a formal point of view, this may be true since von Hayek also taught in Freiburg - albeit years after Walter Eucken's death. However, if one looks at the teaching content of the two scholars, they differ considerably.
While Walter Eucken, as shown, assigned the state a decisive role in shaping the economy and was convinced that every market requires a regulatory framework set by the state, Friedrich von Hayek followed the basic ideas of the older English liberalism much more closely. However, he limited himself by no means to reviving and defending these older principles, but also developed liberalism in decisive points, above all on the basis of social-philosophical explanations. In his later works, von Hayek dealt not only with economic questions but also with problems of information theory, epistemology, cultural theory and the philosophy of law, as well as theoretical questions of psychology.
Von
Hayek's concept of freedom
As a convinced follower of liberalism, von Hayek's considerations are almost always concerned with the preservation of freedom, whereby freedom as a general principle of politics and also as the original goal of all liberal movements consisted exclusively in the absence of arbitrary compulsion.
The freedom of individual citizens is secured above all by the fact that the exercise of state compulsion is limited and may only take place according to general rules, but never arbitrarily. It is never a question of who is allowed to rule over whom, but only of how much rule the rulers are allowed to exercise at all.
The
concept of a spontaneous order
A decisive difference between Eucken and von Hayek can be determined by how both describe the basic object to be examined: the market economy. Walter Eucken spoke of a market economy and distinguished it from a centrally administered economy. Von Hayek, on the other hand, spoke of spontaneous order and contrasted it with man-made order.
Eucken, too, placed the preservation of the price mechanism at the centre of his demands; after all, the price mechanism is the pivot of all constituent principles, to which the other six constituent principles must be subordinated. And for Eucken, too, this price mechanism develops from the free decisions of the market participants, so that both scholars are basically aiming at the same occurrence.
Nevertheless, decisive differences can be discerned in the different designations for the same object 'market economy'. In von Hayek's case, an abysmal distrust of any planning outside of enterprises can be detected, while Walter Eucken acquired these aversions for state planning mainly against the selective interventions during the Weimar Republic; basically, he was very much of the opinion that there was a need for state activity, just not direct interventions in the market, but still active regulative policy-making.
Competition
as a discovery process
Also, regarding the concept and task of competition, considerable differences can be found between Eucken and von Hayek. Both authors assign a decisive role to competition in the market economy. Von Hayek, however, accused Eucken's approach of being too static and oriented towards superficial conditions since Eucken was primarily concerned with whether in reality the morphological structure of markets exhibited characteristics of competition.
Von Hayek saw in competition rather a dynamic development, for him competition is first and foremost not only a system that finds the right prices, an essentially static problem, but a discovery process that is responsible for the constant development of new ideas that help to increase general welfare. It is competition that puts enterprises under permanent pressure to look for innovations in order to avoid the danger of being driven out of the market by competing enterprises.
This characterisation of competition as a dynamic element also includes Hayek's reproach of Eucken for asking too much about the extent to which monopoly positions were actually built up in the sense that one enterprise alone dominated the entire market.
Von Hayek considered it sufficient to ensure that competition was possible in reality. The beneficial effects of competition could also be achieved if, formally speaking, monopolies existed within an economy in the morphological sense, but if these enterprises had to reckon permanently with the danger that competition from abroad would arise if they pursued a monopolistic pricing policy. In this case, the monopolists within a national economy would behave like enterprises which had to produce under actual competitive conditions.
In order for such potential competition to become effective, it would be sufficient for the state to refrain from imposing import restrictions on foreign countries in the form of import duties and import quotations, thus preventing the monopoly position of domestic enterprises from arising in the first place.
Even if it is true that Eucken probably
never spoke of potential competition and measured the existence of monopolies
primarily by the morphological market structures, it is important to remember
that in the matter itself Eucken and von Hayek did not differ so much from each
other. After all, the postulate of open markets was one of Walter Eucken's
constituent principles.
The
presumption of knowledge
Von Hayek was convinced that market activity was guided by an invisible hand, as Adam Smith had already formulated. The market was always the unintended result of human action. Von Hayek doubted that the planning authorities of the state would have the knowledge necessary to meet the abilities and needs of individuals. Only the market, through an overly complex, diverse and simultaneous process, would provide all the knowledge necessary to achieve the allocation of resources that would best meet the needs of the population. A single planning authority could never have this wealth of information at its disposal. The relevant knowledge necessary for a satisfactory allocation could not be centralised. Only the free market would reflect all relevant information in the price system and lead to sensible allocations.
Very early on in the 1920s, von Hayek drew attention to the fact that in a society based on the division of labour, knowledge is also divided up and that the individual planner of a state authority could never have an overview of the entire system down to the last detail, i.e. that a centrally administered economy was already non-functional in its approach and was therefore far inferior to a market economy.
Degree
of complexity of social processes
As already mentioned, von Hayek tried to support his statements about the workings of a market economy with information-theoretical, epistemological, cultural-theoretical and legal-philosophical questions, especially in his later works. In his theory of complex phenomena, for example, he took the view that economic processes could only ever be recognised in the sense model prognoses; it would never be possible to explain the effect of individual political measures in terms of a natural science. The reason for this was the extraordinary complexity of all processes that take place between people.
It was also valid that political values did not emerge, or only to a limited extent, as a result of human design and reason. Rather, they originated from three different roots: the biologically "inherited", the culturally "tested" and only thirdly and the least far-reaching, the rationally "planned" processes. One must therefore assume that the evolved traditions are particularly effective both reproductively and adaptively. They are therefore underestimated by most social theorists, while conversely the feasibility of an "ideal society" is overestimated by far.
The
competition of the currencies
Von Hayek belongs to the very few economists who distrust central banks and start from the idea that it was precisely the state monopoly of issuing banknotes that led to the value of money being highly unstable and permanently deteriorating over time.
In general, particularly liberal academics assume that currency stability can only be achieved by monopolising the issue of banknotes. Although liberal scholars are convinced that economic tasks can only be solved satisfactorily under competitive conditions, they are at the same time convinced that this principle cannot apply to the money market and not to the issue of banknotes. These theorists saw the reason for the fact that banknotes may not be produced by private enterprises under competitive conditions primarily in the fact that the commodity value of banknotes is extremely low, so that if banknotes were produced freely, there would be to fear a tendency that banknotes would be produced far in excess of their needs and thus endanger the stability of money.
In contrast to this view, von Hayek advocated the demand, especially in his later works, that the issuing of banknotes should also be left to the free competition of private providers. He denied the danger that in this way the value of banknotes would fall drastically. In mutual competition between banks, the banknotes of banks that did not pay attention to scarcity when issuing their goods would very quickly be punished by the fact that their banknotes would no longer be in demand. In competition with each other, those banks would prove themselves which, when issuing banknotes, would always ensure that their banknotes retained their value.
Even von Hayek was well aware that it was completely utopian to hope that at the national level the issuing of banknotes would ever be transferred to the free competition of private banks. However, he saw his ideas already realised to a certain extent when competition between the individual currencies was allowed within Europe. Also here, he said, one could hope that because the most stable currency would prevail in each case as the most important currency reserve, there would be incentives to promote the stability of the currency. He was therefore firmly opposed to the creation of a single currency (Euro) valid in Europe.
Social - a weasel word?
Also well-known became the attacks which von Hayek made against the use of the word 'social' in connection with the goals of social justice, a social market economy or a social democracy. In this context, he spoke of a weasel word. The weasel is said to be able to suck all the contents out of an egg in such a way that from the outside you cannot see that the egg actually had no contents at all.
In the field of science and especially politics, terms are also used in the sense of a weasel word, here too without any content, in which basically only an empty phrase is used for a content that is not precisely defined. Von Hayek raises this accusation especially for the concept of the social. No one knows what is hidden behind this term, or one could also say that everyone understands something different under this term. Thus, in his last works, von Hayek directed his attention and criticism above all against the socialist fighting concept of "social justice".
Now, it may well be true that both in the literature on social problems and in everyday politics the word social is used all too carelessly, imprecisely and ambiguously, so that it is not clear at all to what extent the discussants are actually dealing with the same problem.
We have repeatedly encountered these dangers in the historical presentation of economic doctrines in this lecture. As is well known, Hans Albert had raised the accusation of model platonism against neoclassical theory. He understood this to mean the efforts of some neoclassicists to derive from given assumptions, which are not to be investigated further, solely by means of logical conclusions, theses which are then stated as genuine theories about empirical regularities.
And also in the critical examination of scientific socialism we could see that the concept of immiseration was repeatedly reinterpreted in the course of history, that immiseration was understood in quite different ways, that at first Marx meant an absolute immiseration of the industrial workers, and when this thesis could no longer be reconciled with the actual development, this concept was transformed into a relative immiseration, which only referred to the wage rate, until finally there was spoken of an export of immiseration to the colonial countries, since the wage rate in the long-term average had in no way decreased. In fact, the concept of immiseration was used like an empty phrase here.
It is also true that in everyday politics terms such as 'social' or even 'democracy', precisely because they had obviously worn out and become implausible, should be strengthened by reinterpreting them in their meaning. Why is a party not satisfied with the label 'social' and must call itself 'socialist', or why was the dictatorship in the GDR called people's democracy, although the word democracy is already used for the concept of people's rule? In the vernacular, it was then also said that in these states everyone was equal, just some were a little more equal.
But doesn't this criticism of catch-all terms actually apply to almost all noble goals of politics, doesn't this accusation also have to be leveled against concepts such as freedom, equality, fraternity? After all, there are also very serious works on the goal of justice, I only mention the theory of justice by John Rawls, a scientist to whom Hayek was quite close.
In this context, Hayek pleads for a procedural justice in which the same rules apply to all people. Hayek rejects a justice of outcome, as demanded by "social justice", since it can be achieved with unequal people only if some people are favoured and others disadvantaged. However, this would violate the principle that all people should be equal before the law.
Despite all the justified criticism against this language usage, for me the real danger in these discussions in literature and in public was rather that ideological argumentation is being used here. I understand an ideological position to mean two things: firstly, the fact that many social politicians are not willing to distinguish between ends and means. They fight for a goal that is usually widely accepted and undisputed anyway but want to force the introduction of this goal simply by law.
They are not ready to accept that, regardless of the extent to which a goal is recognised, there are means that clearly fail to achieve the goal. For example, science has always pointed out that a strict distinction must be made between those who pay a tax and those who ultimately bear that tax. In reality, there occur always passing-on processes, and financial science even assumes that almost 100% of sales taxes are passed on from the paying enterprises to the respective customers in the form of price increases. Why do many politicians do not take note of these findings?
Such an approach becomes particularly questionable when those who point out that the stated goals cannot be achieved at all with certain means - especially when the goals are introduced by law - are then reproached for speaking out against the goals as such.
By ideological argumentation I also understand the widespread view that certain political activities are already classified as reprehensible because those acting politically are acting out of self-interest. Here, it is important to note that a political action can only be judged according to the extent to which it benefits or harms the common good, but not according to the motives for which these actions were committed. Older liberalism has clearly shown that not every act committed out of self-interest harms the common good, just as not every act committed out of altruistic, morally superior motives actually promotes the common good. Rather, how the individual acts affect the general good, always depends on the order.