Hannes Richter

A Twist of Irony?

Hannes Richter
Friedrich von Hayek’s Early Letters

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Friedrich von Hayek

To the layman his name may be unfamiliar, but the effects of his theories are found in everyday pursuits. For students of economics and social thought, Friedrich August von Hayek is an icon. He was a dominant figure in his day and an adherent of the Austrian School of economic thought, which dated back to the 1871 publication of Carl Menger's Principles of Economics (Grundsätze der Volkswirtschaftslehre).

An apologist for the ‘American way of life’ with its tradition of liberal economics which permeated all walks of life and culture, von Hayek spent a lifetime advocating a free market economy and limited government intervention. His Road to Serfdom (1944), outlined his arguments as to why socialism was bound to fail and it became a popular classic. In 1974 he received the Nobel Prize in Economic Science.

Hayek’s support of laissez-faire capitalism was not, however, the result of love at first sight. A rare collection of more than a dozen letters recently found by Richard Zundritsch, his grand nephew, reveals an outspoken young man writing to his parents of his initial reactions to capitalism embodied by the city of New York. Here are some excerpts from this important discovery from the years 1923-1924.

"(...) Oh, this America, magnificent and outrageous, the latter
perhaps even more. In the long term,
I think it is unbearable for Europeans (...) I’d rather die than be a New
Yorker my whole life. For that, I’m not enough of a businessman (here even
the intellectual has his own busi-
ness!), and I still don’t love the dollar enough."

In 1923, when Hayek was twenty-four, he left Vienna for the United States. With a ticket to New York and twenty-five dollars in his pocket, he intended to study at New York University. Although he came from a prominent intellectual family, he received little financial support from his father, a physician and professor of botany.

Hyperinflation was rampant, and the political climate was slowly worsening in Austria and Germany. Hayek was faced with a financial dilemma when his professor in New York left for Florida in order to write books. Lacking a sponsor, Hayek contemplated taking the path of the classic immigrant by seeking a job:

"I was seriously considering looking for a position as a waiter or something similar and would have probably landed a job washing dishes, the fate of all immigrants. By the way, this wouldn’t have been the worst of all things. Manual labor here is better paid than intellectual work. And after eight hours one is usually finished and ready to do some studies on the side. I don't know, but I somehow abhor the idea."

Hayek’s professor returned just in time to help him obtain a modest scholarship. The problem of money, however, remained and on May 12, 1923 he wrote to his parents:

"Weather: humid and rainy
Appetite: far above financial means
Socks: beginning to have holes
Mending talents: growing
Bank account: $45"

The frugal conditions under which Hayek was forced to live introduced him to other unfamiliar aspects of American life, toward which he felt a gnawing ambivalence:

"I am happy to have finished my wash, (costing $4.56). To have to wash one's own handkerchiefs is disgusting (...) But America offers many practical things for people without servants. One can, however, live here only if one has a lot of money. But even then, I would return to Europe. Despite all the wonderful practical facilities that are available to everyone here, when it comes to the fulfillment of greater needs exceeding everyday basics, the American lives a more than paltry life compared to us."

In a passage revealing more ironies of American life, he wrote of the anonymity of the individual and of the contradiction between the freedom of the person and a society of regimented masses:

"The whole thing is a machine with people as exchangeable parts, one just like the other. Even when unwillingly caught up in it, one has to go along with the flow because it becomes difficult and costly to live any other way since everything is tailored to the same interests. Ice cream, candy, chewing gum, movies, newspapers are all cheap because they are mass produced. A book, or a theatre ticket is exorbitant because they are meant only for a few….so, there is little else one can do other than join the masses, pushing to get into the subway, taking sometimes up to many hours to arrive at one’s job and returning home exhausted in the evenings after having travelled in the same packed subway."

That the critical young man writing from New York eventually became a champion of 20th century liberal economic theory is the ultimate twist of irony. Or is it? If truth lies on the razor’s edge somewhere between the dynamics of two strongly opposing forces, then von Hayek’s letters may have even greater significance. His commitment to free market theory cannot be interpreted as negating his earlier reflections. They only underscore his belief that solutions cannot be reduced to a mathematical equation with a one-size-fits-all and that every truth has its qualifying moment.

Friedrich von Hayek received one of the world’s highest honors, the 1974 Nobel Prize in Economics, for his theories of money and his illumination of the interdependence of economic, social, and institutional phenomena. Many years later, on November 25th, 1991, six months before his death, the ninety-two year-old Hayek received the U.S. Medal of Freedom from the elder George Bush. With the collapse of Communism in Eastern Europe and the rise of new economic powers in the 21st century, his views have been substantiated and are indicative of the wave of the future.

One of the sources of this essay is a newspaper article by Michael Prüller for Die Presse (11/12/04). An official English translation of von Hayek's early correspondence is not yet available.