Liberalism’s Last Man: Hayek in the Age of Political Capitalism

Published by EH.Net (August 2025).

Vikash Yadav. Liberalism’s Last Man: Hayek in the Age of Political Capitalism. Chicago: University of Chicago Press, 2023. 288 pp. $35 (hardcover), ISBN 978-0226821474.

Reviewed for EH.Net by Peter Boettke, George Mason University.

 

Vikash Yadav is a professor at Hobart and William Smith Colleges specializing in international relations and development economics. He has devoted considerable time in teaching and research to questions about liberalism in relation to these two fields of specialization. This book is a product of those efforts.

Hobart and William Smith Colleges have a long history of presenting contending perspectives in economic ideas as a core of their educational endeavor. Yadav reflects this value and discusses ideas with the utmost of charity and care. This is particularly valuable in this exercise because a figure such as F. A. Hayek, or for that matter Milton Friedman or James Buchanan, is often treated in the neoliberal literature with great derision, and often even attributed the status of “evil genius” linked to all sorts of perceived modern wrong turns such as Pinochet in Chile; Donald Trump in the US, and ideas such as “austerity”. But the way these links are too often drawn – especially by historians — are misinformed at best, and figments of a wild imagination at worst. Instead, the reality is that these thinkers are deeply liberal in their sentiments, committed to a working form of a self-governing democratic society. They are struggling to find the institutional infrastructure that will enable and sustain a society of free and responsible individuals who can prosper through voluntary exchange in a market economy, and live and be actively engaged in caring communities. The liberal prioritizes peace, and the by-product is prosperity through enabling productive specialization and social cooperation through exchange. The argument from Adam Smith to F. A. Hayek is that the liberal order was grounded in the institutions of property, contract and consent – stability of possession, transference of possession via consent, and the keeping of promises. If you want to understand the consequences of illiberalism, just do the thought experiment of a world without such stability of possession, where transference is through force, and promises are never kept – as we economists might say, solve for that equilibrium.

Free market capitalism is the economic system that fits this depiction of the liberal order. Its nemesis is not only socialism, but the mercantilist system of monopoly privileges and power. In fact, Adam Smith’s great book was written as a critique of mercantilism, and in a letter written 1780, Smith described his book as a “very violent attack I had made upon the whole commercial system of Great Britain.” That commercial system was a form of political capitalism. Friedman makes a similar indictment of political capitalism when he followed up Free to Choose with his Tyranny of the Status Quo in 1984 with an analysis of what he called the “iron triangle” – the intimate relationship between special interest groups, regulators and politicians, which will work to block any meaningful liberal capitalist reform. Buchanan was concerned with how the rent-seeking society would undermine not only capitalism but liberal democracy as well. Hayek, in works such as The Road to Serfdom (1944) and The Constitution of Liberty (1960), warned his readers of not only the inefficiencies of socialist policies but the consequences for political freedom of both “hot” and “cold” versions of socialism in practice.

The structure of Yadav’s book is to revisit the main themes of The Road to Serfdom but update not with socialism in mind, but with political capitalism in mind. Whereas liberal capitalism is characterized by the rule of law, the entrepreneurial market as a competitive process of discovery, and institutional checks against arbitrary power, political capitalism is characterized by authoritarian government, technocratic government, weak notion of the rule of law, and a state-guided economy.

One way to think about this is that the “creative destruction” of the liberal and entrepreneurial market society is welcomed by those who want to get ahead – the marginalized, the unseen, the discounted – and despised by those who are already ahead – the powerful and the privileged. Political capitalism is the institutional instantiation of this rejection of the dynamic and fluid entrepreneurial society and thus the preferred system of the existing ruling elite. Whether political capitalism is endemic to liberal capitalism, and thus inevitable will have to be a topic for another day – a question posed by Joseph Schumpeter when he asks whether capitalism can survive. Yadav’s argument is different, and he argues that once Hayek’s argument for liberalism is reimagined for our age of political capitalism it can become the best defense against the temptations of political capitalism. It is, he argues, a vital task to do this reimagining.

The mechanisms to achieve this goal boil down to:

• relying on the rule of law as an armor that will block exercises of arbitrary power by the privileged elites;
• a shift from a stress in the intellectual argument on the efficiency of free market capitalism to the moral dignity of individual autonomy that is foundational for a liberal capitalist system which can in turn serve as the glue that binds citizens together in a free society;
• an analytical emphasis on exploring the market as a procedure for the discovery, use and dissemination of knowledge that proves more adaptable for long-run economic growth and prosperity than technocratic economic policies;
• a rule-based approach to policy activism that enables the liberal social order to address the challenges of inequality and climate change without sliding into authoritarian technocracy;
• a learning, responsive liberalism that avoids the discretionary temptations often correlated with efforts to right social ills through state-action through constitutional restraint;
• establishing the argument that the reliance on polycentric institutions of governance will enable the system to be resilient against the state capture so prevalent with political capitalism;
• finally, a cultural shift in the public narrative about the liberal order such that Hayek’s liberalism is seen by the new generation not as a relic of the past but as a living and adaptive order that can address their pressing concerns while not succumbing to the allure of technocratic solutions promised by political capitalism.

Liberal capitalism is both humble and flexible, and upholds the moral dignity of all. It places constitutional limits on exercising the abusive and arbitrary power of unchecked privileged elites.

Whereas Hayek was concerned with socialist ideas from Germany and Russia inadvertently influencing the thought in the United Kingdom and United States, and thus undermining the liberal order, Yadav’s book looks that the impact of the experience in East Asia – China, Singapore, and Vietnam – and the argument in particular that this authoritarian model of political capitalism outperforms liberal capitalism because the technocratic approach can cut through the messiness of liberal democracy and deliver generalized prosperity faster. Confidence at the time of the writing of this book was running high on the Chinese model, and at an all-time low in European liberal model as these economies faced aging populations, bloated public sectors, stagnation, rent-seeking, and disconnected elites. In terms of development economics, the China model of political capitalism was increasingly viewed as more desirable than the model of liberal capitalism by the policy elites in the Global South. So there is an urgency to Yadav’s message and his attempt to update and reframe Hayek to stave off the new ‘road to serfdom’.

Vikash Yadav’s Liberalism’s Last Man is a welcome reflection of the fragility of liberal capitalism and what is required to adapt the system to be robust in the face of its own internal tensions, the modern challenges of inequality, etc., and the attraction of state control of the market with the promise of well-orchestrated prosperity. The reader will come to appreciate Yadav’s approach to teaching contending perspectives in political economy as much as the core argument that emerges in the exercise. The book is well researched, well written, and an important addition to the bookshelf of teacher/scholars of the history of political and economic thought, and to the field of development economics.

 

Peter Boettke is Distinguished University Professor at George Mason University and the author of, most recently, The Socialist Calculation Debate (Cambridge University Press, 2025) and The Historical Path to Liberty and Human Progress (Universidad Francisco Marroquin Press, 2025). His work focuses on comparative economic systems and political economy and social philosophy.

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