The failure of the Full Employment Bill confirmed the political stalemate that had begun with the elections of 1938. It also revealed the renewed intellectual respectability of fears that economic planning represented a threat to liberty. When the New Republic spoke of full employment as the “road to freedom,” it subtly acknowledged the impact of The Road to Serfdom (1944), a surprise best-seller by Friedrich A. Hayek, a previously obscure Austrian-born economist. Hayek claimed that even the best-intentioned government efforts to direct the economy posed a threat to individual liberty. He offered a simple message—“planning leads to dictatorship.” Coming at a time when the miracles of war production had reinvigorated belief in the virtues of capitalism, and with the confrontation with Nazism highlighting the danger of merging economic and political power, Hayek offered a new intellectual justification for opponents of active government. In a complex economy, he insisted, no single person or group of experts could possibly possess enough knowledge to direct economic activity intelligently. A free market, he wrote, mobilizes the fragmented and partial knowledge scattered throughout society far more effectively than a planned economy.

Unlike many of his disciples, Hayek was not a doctrinaire advocate of laissez-faire. His book endorsed measures that later conservatives would denounce as forms of socialism—minimum wage and maximum hours laws, antitrust enforcement, and a social safety net guaranteeing all citizens a basic minimum of food, shelter, and clothing. Hayek, moreover, criticized traditional conservatives for fondness for social hierarchy and authoritarian government. “I am not a conservative,” he would later write. But by equating fascism, socialism, and the New Deal and by identifying economic planning with a loss of freedom, he helped lay the foundation for the rise of modern conservatism and a revival of laissez-faire economic thought. As the war drew to a close, the stage was set for a renewed battle over the government’s proper role in society and the economy, and the social conditions of American freedom.

If you find an error or have any questions, please email us at Thank you!