Britain can learn from China

Of all the insights that Friedrich August von Hayek bequeathed to us, one in particular shines out today. It is that running through the ideological and political divisions of human history are two distinct and different ways of looking at the world. One Hayek called constructivist rationalism; the other evolutionary rationalism.

Hayek spent a lifetime arguing that constructivist rationalism is economically and philosophically flawed because it assumes that ‘all social institutions are, or ought to be, the product of deliberate design’. He later called this The Fatal Conceit.

Those who follow this route believe they have it within their power to build, organise and mould society so that it conforms to their concept of what is just and efficient. But it leads, argued Hayek, to economic decline, poverty, social regression and, in extremis, famine, starvation and the collapse of civilisation. Historic examples, said Hayek, included Sparta, Revolutionary France, Soviet Russia, Nazi Germany — and all the tyrannies that blighted the 20th century. Constructivist rationalism is The Road to Serfdom.

Hayek favoured ‘evolutionary rationalism’ which understands that there ‘exists orderly structures which are the product of the actions of many men [and women] but are not the result of human design’. He believed this was the right approach because it is compatible with the teachings of economic science and goes with the grain of human nature; for these reasons, he thought, it leads to prosperity, progress and the flourishing of humanity.

Evolutionary rationalists such as Hayek argued that the liberal market economy — for all its apparent duplication, unfairness, inequalities and instability — leads to wealthier, freer and fairer societies than all the great plans of constructivist rationalism. Indeed, he argued, it was the only way to run and sustain a successful advanced economy, a matter of some relevance, we shall see, as Europe struggles to cope with the rise of Asia.