What did trust, cooperation, progressive taxation and the interventionist state bequeath to western societies in the decades following 1945? The shor… - Tony Judt

The three quarters of century that followed Austria’s collapse in the 1930s can be seen as a duel between Keynes and Hayek. Keynes, as I was saying, begins with the observation that under conditions of economic uncertainty we would be imprudent to assume stable outcomes and therefore had better devise ways to intervene in order to bring these about. Hayek, writing quite consciously against Keynes and from the Austrian experience, argues in the The Road to Serfdom that intervention—planning, however benevolent or well-intentioned and whatever the political context—must end badly. His book was published in 1945 and is most remarkable for its prediction that the post–World War II British welfare state already in the making should anticipate a fate similar to that of the socialist experiment in post-1918 Vienna. Starting with socialist planning, you would end with Hitler or a comparable successor. For Hayek, in short, the lesson of Austria and indeed the disaster of interwar Europe at large boiled down to this: don’t intervene, and don’t plan. Planning hands the initiative to those who would, in the end, destroy society (and the economy) to the benefit of the state. Three quarters of a century later, this remains for many people (especially here in the U.S.) the salient moral lesson of the twentieth century.

Fascism and war were thus the bridge linking heterodox, marginal and often controversial notions of economic planning with mainstream post-war economic policy. Yet this compromised heritage had little impact on planning's appeal— whatever its associations with far Right, far Left, occupation or war, planning was quite distinctly not associated with the discredited politics of the inter-war years, a point widely held in its favour. What planning was really about was faith in the state. In many countries this reflected a well-founded awareness, enhanced by the experience of war, that in the absence of any other agency of regulation or distribution, only the state now stood between the individual and destitution. But contemporary enthusiasm for an interventionist state went beyond desperation or self-interest.

In important respects Italy’s condition after the war stood comparison with that of Austria. Both countries had fought alongside Germany and had suffered accordingly after the war (Italy paid a total of $360 million in reparations to the Soviet Union, Greece, Yugoslavia, Albania and Ethiopia). Like Italy, Austria was a poor and unstable country whose post-war renaissance could hardly have been predicted from her recent past. The country’s two dominant political groupings had spent the inter-war years in bitter conflict. Most Austrian Social Democrats had regarded the emergence in 1918 of a truncated Austrian state out of the ruins of the Habsburg Empire as an economic and political nonsense. In their view the German-speaking remnant of the old Dual Monarchy ought logically to have joined its fellow Germans in an Anschluss (union), and would have done so had the self-determination clauses of the Versailles agreements been applied consistently.