Is the US teetering on brink of socialism?

Every economist has his day.

The Second World War was the era of John Maynard Keynes, who taught that a few great minds can improve an economy. The 1990s were the era of Milton Friedman (pictured), when markets proved they had the capacity to slip past government and regulatory obstacles.

The next few years? They belong to Hayek, and for that we can thank the effort to pass the US health care bill.

Friedrich von Hayek literally was an Austrian, born in Vienna in 1899. But Hayek also was a member of the Austrian school of economics, that group of scholars who built models that tried to explain the business cycle.

As the First World War came to end, Hayek penned an apocalyptic tract, The Road to Serfdom. His thesis was that war gets people used to national planning. So the planners continue to plan, even in peacetime.

These incremental expansions of the social-welfare state aren't benign. They foster the creation of ever- more-powerful interest groups.

Pitfalls

The economy becomes less productive. Political corruption in turn gives rise to dictators. Foreign-policy tension or economic crisis accelerates the trend. Hayek's central thought stressed that the economic damage is subtle and is evident only over time.

The health care bill that House Speaker Nancy Pelosi and Senate leaders are trying to ram through is part of a vastly expanded public health programme.

The various health care bills, with their proposed mandates on individuals and their new taxes on wealthy earners or on gilded health-insurance policies, are probably something Lyndon Johnson himself never envisioned.

But Hayek did. Hayek understood that a good decade where government expansion seems to stall— the 1990s — doesn't mean government won't expand when the next crisis comes.

Socialist trap

The US is on the road if not to serfdom then to less growth, less innovation, more rationing and more political corruption. Recognition of this has shown up in the spate of Hayek blogs and discussions; one economist, Don Boudreaux, has created a virtual Hayek Cafi.

Even those of us with serious concerns at seeing a great portion of the economy tip into the public sector were buoyed by the anniversary of the fall of the Berlin Wall. If a big thing like the Wall can come down, then surely it won't be impossible to kill off a small thing like the surtax on gold-plated health plans.

I and plenty of others think that Hayek is wrong. The US won't necessarily tip into socialism. It will eventually again embrace markets. Too bad we'll all have to endure the long wait to find out if we're right.