WEBVTT NOTE Hayek on 'Meet the Press' 1 00:00:00.000 --> 00:00:04.000 Our guest is Dr. Friedrich von Hayek, one of the world's leading economists. 2 00:00:04.000 --> 00:00:07.000 You just met Irving R. Levine of NBC News. 3 00:00:07.000 --> 00:00:12.000 The other questioners on our panel today are George F. Will of the National Review, 4 00:00:12.000 --> 00:00:20.000 Hobart Rowan of the Washington Post, and Eileen Shanahan of the New York Times. 5 00:00:20.000 --> 00:00:23.000 We'll continue the questions now with Mr. Will. 6 00:00:23.000 --> 00:00:29.000 Dr. von Hayek, in the 30 years since World War II, some nations' economies have done very much better than others. 7 00:00:29.000 --> 00:00:39.000 What is the secret to success and the secret to problems? 8 00:00:59.000 --> 00:01:08.880 Dr. Von Hayek, we have a basically conservative administration in the United States today, 9 00:01:08.880 --> 00:01:13.960 but even it is facing planned deficits, more or less planned deficits, exceeding perhaps 10 00:01:13.960 --> 00:01:19.280 $100 billion in the next two years. Do you think this will cause a renewed and perhaps 11 00:01:19.280 --> 00:01:21.280 socially destructive inflation? 12 00:01:21.280 --> 00:01:34.280 It is not unlikely, I am afraid, and so long as the governing people are persuaded that inflation of this sort is even beneficial in its effect, 13 00:01:34.280 --> 00:01:37.280 the tenders in that direction will be very great. 14 00:01:37.280 --> 00:01:44.280 And I think it all depends on persuading the responsible people of the danger of inflation. 15 00:01:44.280 --> 00:01:45.280 Mr. Rowan. 16 00:01:45.280 --> 00:01:52.920 Dr. van Hayek, you talked in response to Mr. Levine of a painful adjustment of the unpleasant 17 00:01:52.920 --> 00:01:58.360 effects that we would have to endure in order to beat inflation. 18 00:01:58.360 --> 00:02:04.400 With all due respect, sir, aren't your theories somewhat unrealistic in a political sense? 19 00:02:04.400 --> 00:02:09.160 You visualize governments today being able to take such steps as you recommend? 20 00:02:09.160 --> 00:02:39.140 Well, to be specific, what rate of unemployment do you think that this country ought to be 21 00:02:39.140 --> 00:02:48.140 It's not a question what the country is willing to tolerate. 22 00:02:48.140 --> 00:02:53.140 The longer you have inflation, the greater unemployment becomes inevitable. 23 00:02:53.140 --> 00:02:54.140 You will have no choice. 24 00:02:54.140 --> 00:03:03.140 It's not a matter that government can avoid the unemployment which is caused by the previous misdirection of labor which inflation has produced. 25 00:03:03.140 --> 00:03:15.140 But when you speak of unpleasant effects, just what are you talking about that the country would have to endure? It must be some level of unemployment that you're thinking of that would result if we do cure inflation. 26 00:03:15.140 --> 00:03:31.140 For a period of inflation, not a lasting inflation, when if you want to achieve a tolerably stable position, you will have to go through a period of unemployment which may well last more than a year. 27 00:03:31.140 --> 00:03:46.140 and how high could that get? I couldn't say, we would have to know much more about specific conditions, but it would not exclude a temporary rise to 13-14% or something of the sort. 28 00:03:46.140 --> 00:03:54.140 Do you think the social fabric of this country could tolerate a 14% rate of unemployment? For a few months certainly. 29 00:03:54.140 --> 00:03:56.140 Ms. Shanahan. 30 00:03:56.140 --> 00:04:00.140 Professor von Hayek, you're a fellow Nobel Laureate. 31 00:04:00.140 --> 00:04:06.140 Professor Leontief is an advocate of planning and two of our prominent senators, Humphrey and Javits, 32 00:04:06.140 --> 00:04:14.140 have introduced legislation to implement his idea, which is largely a matter of study by various government agencies 33 00:04:14.140 --> 00:04:18.140 and recommendations, nothing compulsory. 34 00:04:18.140 --> 00:04:24.140 Do you see in that kind of planning the same dangers that you see in a more mandatory form? 35 00:04:24.140 --> 00:04:30.140 Well, if it's really not incompatible, it will also be completely ineffective and therefore we do no harm. 36 00:04:30.140 --> 00:04:32.140 I think that's a very simple answer. 37 00:04:32.140 --> 00:04:37.140 He really imagines that somehow people are being made to do what he is planning. 38 00:04:37.140 --> 00:04:45.140 The thought, I believe, that they have expressed is that such things as foreseeing shortages of industrial productive capacity could be highlighted. 39 00:04:45.140 --> 00:04:52.140 and the industries encouraged to go ahead with building new plants, that sort of thing. 40 00:04:52.140 --> 00:04:55.140 Do you encompass that in your thought that it would be completely ineffective? 41 00:04:55.140 --> 00:05:01.140 But I call that planning, if you can give industry better information, by all means do. 42 00:05:01.140 --> 00:05:06.140 Can we then say you support that legislation despite your fears of planning? 43 00:05:06.140 --> 00:05:08.140 Well, nothing to do with planning. 44 00:05:08.140 --> 00:05:13.140 Dr. Van Hayek, did I understand you to say in answer to Mr. Levine's question 45 00:05:13.140 --> 00:05:18.020 question that the way to stop inflation is to stop the printing presses. Now are you 46 00:05:18.020 --> 00:05:22.380 suggesting that that's what we're doing here, that we're just printing money and that's 47 00:05:22.380 --> 00:05:26.220 the way this inflation has started and that's the way this is continuing and that's the 48 00:05:26.220 --> 00:05:27.220 way it will continue? 49 00:05:27.220 --> 00:05:33.220 In a sense, stopping the printing press is a figurative expression because it's being 50 00:05:33.220 --> 00:05:39.220 done now by creating credit by the Federal Reserve system. But this government action, 51 00:05:39.220 --> 00:05:44.740 All inflation is ultimately the product of activities which the government determines 52 00:05:44.740 --> 00:05:51.580 and can control, and all inflation has been stopped in the past by the government stopping 53 00:05:51.580 --> 00:05:55.620 creating money or preventing central banks from creating more money. 54 00:05:55.620 --> 00:06:01.460 May I just say one thing, since all inflation has been stopped by people who believe in 55 00:06:01.460 --> 00:06:07.380 a very naive form of the quantitative theory and acted on them, it may be wrong, but it 56 00:06:07.380 --> 00:06:12.060 is adequate, the only adequate theory effective to stop an inflation. 57 00:06:12.060 --> 00:06:15.540 Well, now you've been a student, I'm sure, of the United States because you taught here 58 00:06:15.540 --> 00:06:20.900 for many years. What do you think has started our inflation? We've had inflation for a number 59 00:06:20.900 --> 00:06:25.780 of years, and I don't think that we were printing money at that time or that the Federal Reserve 60 00:06:25.780 --> 00:06:30.220 was necessarily dumping a great deal of money. What do you think was responsible for the beginning 61 00:06:30.220 --> 00:06:31.220 of our inflation? 62 00:06:31.220 --> 00:06:46.220 The belief in deliberate increase of aggregate demand as a means of creating employment and, in effect, what's popularly called belief in Keynesian policies to create employment. 63 00:06:46.220 --> 00:06:47.220 Mr. Levine. 64 00:06:47.220 --> 00:06:55.220 Dr. von Hayek, the general belief among administration economists now is that we are near or at the bottom of the recession that we've been going through. 65 00:06:55.220 --> 00:07:12.220 Do I understand you to be saying that we should be willing to experience a continuation of this period of low economic activity for another year or so rather than to take the kind of efforts that the government has taken of a tax cut in order to stimulate the economy? 66 00:07:12.220 --> 00:07:24.220 Because the method of a tax cut again aims at increasing aggregate demand and the present difficulty is not due to a deficiency of aggregate demand. 67 00:07:24.220 --> 00:07:36.220 It is due to the fact that without continued inflation, you cannot maintain the people in those employments in which they have been drawn by the inflation of the past. 68 00:07:37.220 --> 00:07:39.220 I would like to pursue the first part of my question. 69 00:07:39.220 --> 00:07:53.220 Do you see a necessity in order to avoid a resurgence of inflation that the government undertake policies which will continue us at the present low level of economic activity for a period of a year or more? 70 00:07:54.220 --> 00:08:01.220 Well, not necessarily at the low level, but we should not produce more than a very slow recovery. 71 00:08:01.220 --> 00:08:07.220 I would like to add, the slower the recovery is, the better are the chances that it will last. 72 00:08:07.220 --> 00:08:19.220 In a speech before a congressional group not long ago, you said that the threat to the free enterprise system of our society has never been more imminent than it is now. 73 00:08:19.220 --> 00:08:21.220 What did you mean by that? 74 00:08:21.220 --> 00:08:49.220 30 years ago, Dr. Von Hayek, you stressed and have subsequently stressed that political and economic liberties must either flourish together or perish together. 75 00:08:49.220 --> 00:08:58.220 Do you see signs, specifically in the United States today, or in Great Britain, with which you're familiar, that political liberty is endangered? 76 00:08:58.220 --> 00:09:15.220 In Great Britain, certainly, when it is quite clear that by the established democratic process, you cannot conduct that kind of economic policy the present governing party wants to conduct. 77 00:09:15.220 --> 00:09:24.980 The danger of a reduction of political liberty in the Great Britain is considerable. 78 00:09:24.980 --> 00:09:32.540 This country is not so imminent, very largely for the reason that the efforts have not been 79 00:09:32.540 --> 00:09:41.160 directed so much towards nationalization and direct government controls of industries, 80 00:09:41.160 --> 00:09:47.860 But the attempts have been made by redistribution of incomes by taxation, and there is a much 81 00:09:47.860 --> 00:09:49.360 slower process. 82 00:09:49.360 --> 00:09:54.240 I think it tends in the same direction, but much more slowly than the other one. 83 00:09:54.240 --> 00:09:55.240 Mr. Rowan. 84 00:09:55.240 --> 00:10:02.840 Dr. von Hayek, how do you rate the impact of market power wielded by either unions or 85 00:10:02.840 --> 00:10:05.560 corporations as a factor in inflation? 86 00:10:05.560 --> 00:10:11.560 You seem to be putting all of the stress on the quantity of money in the printing press. 87 00:10:11.560 --> 00:10:14.960 Isn't part of our inflation and part of the inflation in some other parts of the world 88 00:10:14.960 --> 00:10:20.560 due to the excessive market power of labor unions and corporations? 89 00:10:20.560 --> 00:10:28.560 Never directly, when it may well be and frequently happens that because of the power of the unions, 90 00:10:28.560 --> 00:10:33.560 perhaps all the corporations, government feels compelled to inflate. 91 00:10:33.560 --> 00:10:49.800 Well now, returning to the crisis in Great Britain, the Chancellor of the Exchequer told 92 00:10:49.800 --> 00:10:57.240 me on Wednesday that the Cabinet will consider a return to a formal wage price incomes policy. 93 00:10:57.240 --> 00:11:02.800 What effect, if any, do you think that would have on the very high level of British inflation 94 00:11:02.800 --> 00:11:16.800 I don't think it will help at all. It might be necessary as a temporary measure at the moment when you are in a position to stop the increase in the quantity of money. 95 00:11:16.800 --> 00:11:24.800 I do not see any prospect at all in the near future the British government effectively stopping an increase in the quantity of money. 96 00:11:24.800 --> 00:11:29.800 In that situation you just disguise the effects of inflation for the time. 97 00:11:29.800 --> 00:11:33.800 What would be your prescription for the ills that afflict Great Britain? 98 00:11:36.800 --> 00:11:47.800 Well, it's a problem of first persuading the public that in the present situation the pressure of the trade union does not deserve public support. 99 00:11:48.800 --> 00:11:54.800 That you must achieve before you can do anything by legislation reducing the powers of the trade unions. 100 00:11:54.800 --> 00:11:58.800 It must be a long process. I don't see any immediate cure. 101 00:11:59.800 --> 00:12:01.300 Ms. Jenahan. 102 00:12:01.300 --> 00:12:11.300 Professor Hayek, you have always stressed government actions that inflate and government planning and controls as the great dangers to our political freedom. 103 00:12:11.300 --> 00:12:23.300 Many Americans see another scenario for loss of freedom in this country, which is economic policies that now have unemployment in the center cities among black youths over 40%, 104 00:12:23.300 --> 00:12:32.300 and that their anger and frustration can lead to violence, which in turn will lead to repressive governmental action. 105 00:12:32.300 --> 00:12:38.300 What do you say to that scenario? Can we just sit idly by and let that happen? 106 00:12:38.300 --> 00:12:45.300 No, but it goes back to the same cause, the unemployment of which you speak, which is the initial cause, 107 00:12:45.300 --> 00:12:53.740 is due to labor being temporarily directed into places or activities or industries where 108 00:12:53.740 --> 00:13:00.220 they cannot be maintained without further inflation, therefore you can only cure that 109 00:13:00.220 --> 00:13:08.580 by achieving a new redistribution of labor between employments, adaptation to a condition 110 00:13:08.580 --> 00:13:15.260 in which aggregate demand need not progressively to increase to maintain their employment. 111 00:13:15.260 --> 00:13:20.340 But you have said, and everything you've written said lately, that this is a lengthy process, 112 00:13:20.340 --> 00:13:23.700 that we won't get back to stable money quickly. 113 00:13:23.700 --> 00:13:30.100 Meanwhile, what do you do with these urgent problems and human hardships? 114 00:13:30.100 --> 00:13:35.060 Well, you mustn't assume that all problems are solvable in the short instant, the short 115 00:13:35.060 --> 00:13:47.540 But in the meantime, what do you do with the human hardship and the mounting rage that 116 00:13:47.540 --> 00:13:48.820 is certainly building up? 117 00:13:48.820 --> 00:13:53.180 Well, I don't think there's anything I can do about it. 118 00:13:53.180 --> 00:13:57.420 We have to tide over the storm which may be threatening. 119 00:13:57.420 --> 00:14:04.820 Dr. Van Hayek, may we get a bit specific on one particular thing, and that is Great Britain. 120 00:14:04.820 --> 00:14:09.820 You're a citizen of Great Britain. You taught there, and I think you know something about the economy there. 121 00:14:09.820 --> 00:14:15.820 I understand that their inflation rate may hit as high as 50%. 122 00:14:15.820 --> 00:14:23.820 What is the consequences of something of that kind? What do you see is going to happen in the country of which you're a citizen? 123 00:14:23.820 --> 00:14:33.820 When you get a very severe economic crisis, with fairly extensive unemployment, the moment inflation stops, 124 00:14:33.820 --> 00:14:42.820 We will probably have repeated attempts to restart the process by returning to inflation. 125 00:14:42.820 --> 00:14:49.820 We'll probably combat the wrong thing, the effects of inflation on prices by price controls 126 00:14:49.820 --> 00:15:00.820 that will lead to a centrally directed economy which will weaken the international economic position of Britain even worse. 127 00:15:00.820 --> 00:15:11.820 On that we probably decide in a position that somebody may decide that the direction of economic policy has to be completely changed. 128 00:15:11.820 --> 00:15:19.820 I almost hope that the severe crisis we consume, there won't be a long, dragged out process of misery. 129 00:15:19.820 --> 00:15:25.820 But I don't see any immediate chance, with the present political situation in England, 130 00:15:25.820 --> 00:15:30.820 of such a complete change in economic policy as would be required. 131 00:15:30.820 --> 00:15:36.820 Well, are you saying that England is either going to go bankrupt or that England is going to become a dictatorship? 132 00:15:36.820 --> 00:15:41.820 What specifically do you mean is going to happen in Great Britain? 133 00:15:41.820 --> 00:15:46.820 You know that the English people will be beginning to experience, which they hardly have yet, 134 00:15:46.820 --> 00:15:51.820 that they have become very much poorer and are rapidly getting poorer still. 135 00:15:51.820 --> 00:15:59.820 And that will lead to the resolution or the recognition that the policy of the past was wrong. 136 00:15:59.820 --> 00:16:08.820 The amazing fact is that a great majority of the British people are not yet consciously aware that they are living in a very severe economic crisis. 137 00:16:08.820 --> 00:16:14.820 And for that reason they are not willing to consider themselves a complete change in policy. 138 00:16:14.820 --> 00:16:24.820 What do you think is going to happen since you believe that? What's going to happen there? Are they going bust or are they going into dictatorship? 139 00:16:24.820 --> 00:16:30.820 All that happens is that the economic conditions of daily life are getting much worse. 140 00:16:30.820 --> 00:16:37.820 There will be scarcity. People will find that their income is no longer sufficient to maintain their standard of life. 141 00:16:37.820 --> 00:16:47.820 And we've come to distrust both the present government and present policies, and may then be willing to return to altogether different systems. 142 00:16:47.820 --> 00:16:50.820 But I'm no prophet, I can't say how soon... 143 00:16:50.820 --> 00:16:55.820 And do you think that if we follow along our present footsteps, the same thing is going to happen to us? 144 00:16:55.820 --> 00:17:00.820 Yes, but in 10 or 20 years' time, there's a problem for the immediate future. 145 00:17:00.820 --> 00:17:01.820 Mr. Levine? 146 00:17:01.820 --> 00:17:07.140 Dr. von Hayek, to try to translate some of the things that you've been saying into the 147 00:17:07.140 --> 00:17:12.420 terms of the pocketbook of the average American, what advice would you give an American with 148 00:17:12.420 --> 00:17:17.500 savings of 20, 30, maybe $100,000? 149 00:17:17.500 --> 00:17:22.460 What should he do with that money to protect it against the problems of inflation that 150 00:17:22.460 --> 00:17:23.460 you've been discussing? 151 00:17:23.460 --> 00:17:28.620 Well, I still believe there's nothing better than putting into equities, although that 152 00:17:28.620 --> 00:17:44.260 Dr. von Hayek, these theories that you've gained such recognition for over a period of years 153 00:17:44.260 --> 00:17:50.200 have worn consistently, as has been pointed out, of the dangers and threats of inflation 154 00:17:50.200 --> 00:17:54.020 and yet this country has undergone inflation for a great many years and the standard of 155 00:17:54.020 --> 00:17:57.860 living has consistently increased. 156 00:17:57.860 --> 00:18:02.860 Does this lead you to question in any way your thesis? 157 00:18:02.860 --> 00:18:06.860 Not in the least, because the dangers of inflation are very different ones. 158 00:18:06.860 --> 00:18:10.860 They're exactly the kind of unemployment which is now arising. 159 00:18:10.860 --> 00:18:14.860 I mean, in the usual discussion, there's quite a wrong emphasis. 160 00:18:14.860 --> 00:18:21.860 There are many bad effects of inflation, but the worst is that it draws labor into employment, 161 00:18:21.860 --> 00:18:26.860 where they can be kept employed only by accelerating inflation. 162 00:18:26.860 --> 00:18:34.860 The point is inevitably arises where inflation cannot be accelerated sufficiently fast to keep them in that inflation. 163 00:18:34.860 --> 00:18:40.860 We just make one point. The situation is like overeating and indigestion. 164 00:18:40.860 --> 00:18:48.860 Overeating is very pleasant, so is inflation. The indigestion comes only afterwards, and therefore people do not see the connection. 165 00:18:48.860 --> 00:18:50.860 We have less than two minutes, Mr. Well. 166 00:18:50.860 --> 00:19:06.860 Dr. von Hayek, capitalism, and particularly American capitalism, would seem to have a good record at giving people a rising standard of living. Why are so many intellectuals, and particularly so many economists, skeptical about and even hostile to capitalism? 167 00:19:06.860 --> 00:19:16.860 Well, I've been puzzling about for a long time, particularly about the economists who ought to understand better, and it's very difficult to know why they don't. 168 00:19:16.860 --> 00:19:33.860 I think it's an attraction of a system which you can, the intellectual attraction of a system you can deliberately control, which is fascinating to the intellectual. Mr. Rowan? 169 00:19:33.860 --> 00:19:40.660 Dr. Menhaier, coming back quickly to Great Britain, isn't it possible that if we pursued your philosophy and theory, 170 00:19:40.660 --> 00:19:47.780 that we might destroy capitalism there rather than save it, looking at the analogy of the Italians? 171 00:19:47.780 --> 00:19:55.860 No, it's not likely to become worse. The present tendency would destroy capitalism inevitably. 172 00:19:55.860 --> 00:20:00.900 I think the important thing is that people are given a chance to change their mind, 173 00:20:00.900 --> 00:20:11.900 I'm sorry to interrupt, but our time is almost up and we won't be able to get in another question and another answer. 174 00:20:11.900 --> 00:20:14.900 Thank you Dr. Ben Hayek for being with us today on Meet the Press.