Seeing government spread its protective net over an ever-increasing number of producers, those producers who haven’t yet received such protection naturally begin to clamour for it. First, these producers understandably feel as though government is unfairly mistreating them by not granting to them what it grants to so many other producers.
Second, the greater the number of producers who are protected from the downside of economic competition, the greater the negative impact of that protection on consumers and the relatively few producers who are not yet protected. If the full burden of adjusting to economic change is focused on an increasingly smaller number of people, the extent to which each of those people must adjust is greater than if the burden of adjusting to economic change is spread more widely.
If government remains committed to protecting from the downside of economic change all who clamour for such protection, the powers of government must necessarily expand until little freedom of action is left to individuals. It is this stubborn commitment to protect larger and larger numbers of people from the negative consequences of economic change that Hayek argued paves the road to serfdom.
That government must have extraordinary discretionary power over vast areas of human action if it is to try to protect large numbers of people from the downside of economic change is clear. Any time entrepreneurs invent new products that threaten the market share of existing products the owners of the firms that produce those existing products will suffer lower demands for their services. So, too, will workers in the factories that manufacture those existing products. The incomes of these owners and workers will fall, and some might lose their jobs, as a result of the introduction of new, competitive products.
The very same process is true for any economic change. New imports from abroad threaten domestic producers of products that compete with these imports. Labour-saving technologies threaten the livelihoods of some workers whose human skills compete with the tasks that can now be performed at low-cost by these new techniques. Changes in population demographics—say, an aging population—cause the demands for some goods and services (for example, baby strollers and pediatric nurses) to fall as they cause the demands for other goods and services (for example, large sedans and cardiac surgeons) to rise.
Even simple everyday shifts in consumer tastes away from some products and toward other products unleash economic changes that inevitably threaten some people’s incomes and economic rank. The growing popularity several years ago of the low-carbohydrate Atkins diet shifted consumer demand away from foods such as bread and beer and toward low-carb foods such as chicken and beef. As a consequence, bakers and brewers suffered income losses; ranchers and butchers enjoyed income gains. If government were intent on protecting bakers and brewers from experiencing these income losses, it would have either had to somehow stop people from changing their eating habits, or raise taxes on the general population to give the proceeds to bakers and brewers.
Regardless of the particular methods it employs, a government that is resolutely committed to protecting people from any downsides of economic change requires nearly unlimited powers to regulate and tax. As long as people have the desire and can find some wiggle room to change their lives for the better—for example, to change their diets, to invent technologies to conserve the amount of labor required to perform certain tasks, or to increase the amounts they save for retirement—some fellow citizens are likely suffer falling incomes as a result. The only way to prevent any such declines in income is near-total government control over the economy.
Unfortunately, because economic growth is economic change that requires the temporarily painful shifting of resources and workers from older industries that are no longer profitable to newer industries, the prevention of all declines in incomes cannot help but also prevent economic growth. The economy becomes ossified, static, and moribund. So achieving complete protection of all citizens at all times from the risk of falling incomes means not only being ruled by an immensely powerful government with virtually no checks on its discretion, but also the eradication of all prospects of economic growth. Inevitably, at the end of this road paved with the good intention of protecting all producers from loss lies not only serfdom but also widespread poverty.