After constructing my response to the question “Can True Freedom be Found in Socialist Countries?” I started to think more about how economic freedom translates to overall wellbeing. In my response, I discussed how having economic freedom can give citizens the opportunity to succeed and gain wealth, but I never touched on the opposite side of the spectrum, and I think that in Road to Serfdom, by Friedrich Hayek, he explains it perfectly.
Hayek discusses the two kinds of economic security and its differences. The first kind being basic physical security, providing the essentials to life, and the second being security of a given standard life. Hayek claims that any successful society, like the United States, should be able to guarantee a minimum of basic essentials; food, clothing, shelter, etc., to help preserve health. It gets dangerous though when a society guarantees a given standard of life. It can do multiple things to the mentality of the citizens in that society. For one, it can promote extremely risky economic endeavors, knowing that there is a safety net waiting for them if they fail. Another thing it can do is make citizens overly complacent in their lives, not wanting to work or strive for anything greater because they know they can do the minimum amount of work, or no work at all for that matter, and still be guaranteed a given standard of life. Both of these possibilities are negatives that can lead to dangerous outcomes for a society, and history shows this.
One loose example that shows how security can negatively affect a society was the 2008 Financial Crisis. Wanting to push people to become homeowners and spur the economy, the government essentially guaranteed banks that they would pay them for the mortgages that they gave out if the homeowners did not pay. Both feeling pressure from the government and having the security blanket, the banks gave out outrageous mortgages to people who simply could not afford the houses they were buying. In short, this led to the banks foreclosing on way to many houses than the government expected after people could not pay their mortgages, which was one of the reasons for the economic collapse. It goes to show how having that blanket from the government can lead to people and businesses making extremely risky investments that they normally would not do if they didn’t have that blanket.
In an economically free society, citizens are given the freedom to both succeed and fail, which is what makes it so great. In socialist societies, citizens are all on an equal playing field with no room to grow or fail individually. It is impossible to have the best of both worlds, where there is no risk and possibly immense rewards.