Saule Omarova and Friedrich Hayek
Three-quarters of a century ago, Friedrich Hayek warned that the West was on “the road to serfdom.” President Biden’s nomination of Ms. Saule Omarova as Comptroller of the Currency is another illustration that the peril has not receded.
A graduate of Moscow State University in 1989 on the Lenin Personal Academic Scholarship, Omarova has not apparently understood that the state cannot run the economy without tightly—and in fact, savagely—controlling individual lives. In the 2oth century, Communism gave what we would think was a definitive illustration. Other sorts of totalitarianism came close: at the forefront was National Socialism, which was both nationalist and socialist as its name confirmed. Hayek saw all that, as you can see in my review of The Road to Serfdom (University of Chicago Press, 1944) in the Fall issue of Regulation.
The Wall Street Journal devoted an editorial to Omarova (“Comptroller of the Economy,” September 29, 2021). Now a law professor at Cornell University (Hayek has many things to say about the concept of “law” she must adhere to), she has argued for powerful central agencies, including a “National Investment Authority” and, to determine where in heaven the “public interest” is, a “Public Interest Council” of “highly paid” academics with broad subpoena power.
A few quotes from the Wall Street Journal editorial, which is well worth reading at length:
“Until I came to the US, I couldn’t imagine that things like gender pay gap still existed in today’s world. Say what you will about old USSR, there was no gender pay gap there. Market doesn’t always ‘know best,’” she tweeted in 2019. After Twitter users criticized her ignorance, she added a caveat: “I never claimed women and men were treated absolutely equally in every facet of Soviet life. But people’s salaries were set (by the state) in a gender-blind manner. And all women got very generous maternity benefits. Both things are still a pipe dream in our society!” …
In two papers, she has advocated expanding the Federal Reserve’s mandate to include the price levels of “systemically important financial assets” as well as worker wages. As they like to say at the modern university, from each according to her ability to each according to her needs. …
In a recent paper “The People’s Ledger,” she proposed that the Federal Reserve take over consumer bank deposits, “effectively ‘end banking,’ as we know it,” and become “the ultimate public platform for generating, modulating, and allocating financial resources in a modern economy.”
What ideologues like Omarova don’t understand is, at the basis, the following: individuals have different preferences and values (not to mention different circumstances), and only the power of the KGB can force them into the same matrix. And read about the necessity for a socialist state to control remunerations in my Regulation review.
How can a Cornell professor be so ignorant or naïve? How can she be as intellectually lacking as Trump was on the other side of the statist continuum? (Caveat: I haven’t read the Omarova articles quoted by the Wall Street Journal.) Why do we observe this rise of ignorance in the political class? There again, Hayek foresaw that. To quote my Regulation review:
Perhaps the direst prediction of The Road to Serfdom and the one that seems the closest to current concerns comes in the chapter (fittingly) titled “The End of Truth.” A totalitarian government must make people believe its propaganda about its values and goals, as well as the wisdom of the chosen means to those ends. Bringing people to approve the means involves peddling causal relationships whether they are true or not.
The propaganda of totalitarian governments is thus “destructive of all the foundations of all morals,” which lie in “the sense of and respect for truth.” Both in the Soviet Union and Nazi Germany, the ruling party was presented as the source of all truth. This generates a “spirit of complete cynicism as regards truth” and “the disappearance of the spirit of independent inquiry and of the belief in the power of rational conviction.” It is true that, in the West, government propaganda and censorship have not grown to that point. In America, on the contrary, First Amendment protections were strengthened in the last three quarters of the 20th century. However, even here, governments and political parties have contributed to the debasement of the notion of the truth. The latest U.S. political developments reflect this.
Whether the rulers of a limited state are knowledgeable or ignorant, wise or idiotic, might not matter much because the extent of the damage they could do would be limited. It’s a different matter under Leviathan.