Von Hayek's other Predictive Failures
Under von Hayek's theories, progressive and socialist candidates should be the great enemies of public education, for education would dramatically reduce their core "uneducated" group. For the same reasons, they should avoid at all costs teaching students how to engage in critical thinking and should instead spread nationalism/patriotism memes (such as American "exceptionalism" and flag pins) and spread racist propaganda attacking racial and ethnic minorities. The opposite is true. They should oppose legal protections, e.g., against job and housing discrimination. It is conservatives and European-style "liberals" who fought against public elementary and secondary education and the land grant colleges. It is conservatives who wear flag pins and claim that any acknowledgement of U.S. misconduct is unpatriotic. It is U.S. conservatives who to this day adopt variants of the racist "Southern strategy," engage in state-sponsored homophobia, and oppose anti-discrimination laws. Von Hayek predicted that progressives would deny science. The cartoon version of his book portrays the government as preaching that the earth is flat. The reality is that it is corporate CEOs who lead the anti-science campaigns such as global climate change denial.
If you object to an economic system in which "the worst get on top" you are not "envious"
Von Hayek tips his hand and dogmas when he uses the phrase "envy of those better off" and conflates it with virulent racism. Von Hayek assumes away the reality that all too often in business "the worst get on top" by the foulest means. Opposing their becoming "better off" through leading "control frauds" is not "envy" -- it is justice, and it is essential to a well-functioning economy, society, and polity.
Von Hayek implicitly assumes that corrupt CEOs will not control and abuse any political system. Assume solely for purpose of analysis that von Hayek were correct that it demagogues can manipulate the three unethical groups he identifies and seize control of government. Under his own logic CEOs can use the seeming legitimacy, power, and wealth of "their" corporations to serve directly as these demagogues or fund and control proxy demagogues that will serve their interests. They have vastly greater economic resources and they have the expertise that comes from advertising to run propaganda campaigns. They also had tremendous expertise in the era von Hayek was describing in "divide and conquer" strategies in the colonies that would be easily translated into efforts to split workers along ethnic lines. The alliance of elite and poor whites in the U.S. South against the freed slaves is a classic example of how such a coalition can provide dominant political power for roughly a century. Under von Hayek's own assumptions the "inevitable" result should be plutocracy through crony capitalism with anyone who complains about the resultant inequality denounced for being "envious" of his moral and intellectual superiors.
Why the Worst (CEOs) Get on Top: Accounting Control Fraud is a "Sure Thing"
I have explained this point enough times that I will simply direct any new readers to the scores of articles that explain why this is true. I also stress how important the "Gresham's" dynamic is in explaining why such frauds can become epidemic and why such epidemics drive our recurrent, intensifying financial crises. The least ethical CEOs "get on top" in such a world and they produce plutocracy, massive inequality, and crony capitalism. Von Hayek wants progressives to declare unilateral political disarmament while the most corrupt CEOs dominate our economies and our political systems. Von Hayek's blood libel about progressive, democratic government is a classic example of Frederic Bastiat's warning:
"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
What a wondrous irony it is that three ultra-rightists, Lord Acton, Bastiat and von Hayek, should combine so perfectly to explain our current plight in which plunder by elite CEOs has become "a way of life." CEOs do not yet have "absolute" political power, but their power and corruption is rising steadily and has become so great that they are able to "plunder" with impunity. That impunity arose because von Hayek's disciples were able to use his anti-democratic bigotry and failed economic dogmas to "create for themselves in the course of time a legal system that authorizes [plunder] and a moral code that glorifies it." Von Hayek was one the principal framers of that immoral moral code that glorifies plunder by CEOs. Libertarians glorify von Hayek's bigoted glorification of elites as our moral superiors who have a right to rule and plunder our Nation. Tyler Cowen calls plutocracy and pervasive plunder a "hyper-meritocracy," but it is a rule by the most unethical for the most venal of purposes and it is the greatest enemy of merit and justice.