Federal Chancellor Scholz, Excellencies, Ladies and Gentlemen,

I am really honored to address this conference dedicated to the 80th anniversary of Friedrich von Hayek's monumental work, "The Road to Serfdom". Thank you to the Hayek Stiftung for this opportunity.

Hayek wrote and published his book during a time of war – in 1944. In his Foreword to its first American edition, John Chamberlain called it "a warning, a cry in a time of hesitation… It says: Stop, look and listen!".

In many ways, we are again living in "a time of hesitation". So, it is natural to again explore the current relevance of Hayek's insights.

Some might expect this relevance to decrease over time, especially given the large changes in climate, technology, and media which were unimaginable in 1944. However, I would argue that "The Road to Serfdom" may be even more relevant today than it was say 10 years ago. Back then, many of the challenges which now threaten both freedom and prosperity would have been unthinkable to any observer.

Today, I will highlight a few of these challenges, with a focus on economic issues.

Ladies and gentlemen,

The last years have been a time of polycrisis – the pandemic, sharply higher energy prices, Russia's continuing full-scale war against Ukraine and now an economic downturn.

In policymaking, we understandably shifted to crisis mode. This meant temporarily breaking with the core principles which had served us well. This led to a long period of very low interest rates, the suspension of fiscal rules, and a weakly controlled increase in state-aid.

An unfortunate side-effect has been a growing culture of dependence, not only among citizens (who might seek lower energy bills) but also among companies.

The expectation that losses could be nationalized while profits remained privatized gradually gained ground. Businesses would simultaneously object to tax increases while lobbying for subsidies. In an age of cheap money, sound public finances became increasingly viewed as an outdated dogma from a bygone era.

Hayek, writing at a time of war, noted similar trends. He argued that periods of war or other disasters are the only times when almost everything should be subordinated to the pressing need to preserve freedom in the long run. He was troubled, however, by the popularity of proposals for keeping some crisis management tools as part of a more permanent arrangement.

Many in our societies have become impatient with the speed of economic progress. They look for quick fixes to jump-start the economy. This will naturally lead to more planning and direct allocation of resources. We see this in the race to develop new technologies, where discrete actions by one economy are seen as inevitably requiring others to follow suit.

In Europe, the collateral damage could well be to one of the main foundations of our past success – the Single Market.

Hayek saw similar risks. In his view, it was the liberal order that had successfully delivered a standard of living which a hundred years before had not seemed possible.

However, if people start to believe that the possibilities of improving their own lot are unlimited, it also raises public expectations too high. This, in turn, causes impatience. Hayek warned how the principles behind progress instead came to be seen – and I quote – "more as obstacles to speedier progress, impatiently to be brushed away, than as the conditions for the preservation and development of what had already been achieved."

This way, he wrote, "the very success of liberalism became the cause of its decline".

Ladies and gentlemen,

While Hayek was an economist, his insights about the complex political landscape of his time have grown even more relevant over the past decade.

In many societies, we have seen a growth of both far-right and far-left populism and nationalism. These were long viewed as two opposite ends of a linear spectrum. However, the more we look, the more we see how much they share in common. Both are populist, promising simple solutions to difficult problems. Both tend to have collectivist views on economic policy. And both tend to sympathize with foreign regimes which seek to actively undermine or destabilize our societies.

Hayek also noted the striking resemblance between two seemingly opposing ideologies – communism and fascism. Despite their apparent differences, both share a common thread of centralized control, erosion of individual liberties, and distancing from the rule of law. Both see liberals as the main enemy.

The parallels with today are striking – for the Kremlin, democratic governance in Europe is a threat that it tries to destroy. It sees liberal democracy as its biggest enemy. This is why it invaded Ukraine and this is what Ukraine is fighting for today – for all of us.

Another disturbing trend that Hayek also warned about is the increased dysfunctionality of the political process, especially of parliaments.

This is clearly visible in many countries big and small, including in my own, with potentially devastating effects on our freedom and future prosperity.

The problem grows out of the complex maths of forming stable and productive coalitions when populist parties take many seats. This brings greater polarisation, growing aggressiveness and a decline in parliamentary culture. Abuse of filibusters and other parliamentary rules leads to legislative gridlock which paralyzes the whole state.

Not surprisingly, this then increases public frustration with the workings of our democracy. In turn, this can create a growing demand for seemingly "stronger" or "more decisive" leaders. These people would take shortcuts in the democratic process in the name of what they call "getting things done".

The ultimate loser here is the rule of law. And wherever there is frustration, our adversaries are always ready to fuel that fire further.

We need to face these threats more directly by reaffirming the importance of democratic governance. We must work towards strengthening our legislative bodies, ensuring they remain functional, responsive, and accountable.

At the same time, we are living under a flood of disinformation and propaganda, especially from malign actors. Today, the frontline of Putin's so-called shadow war runs through the hearts of our own democracies: universities, parliaments, media and other institutions. The Kremlin's disinformation is reaching wide audiences via social media; it sits literally within our pockets, phones and apps.

Truth becomes increasingly more difficult given the noise of social media echo chambers and sensationalist news cycles. Disinformation campaigns aim to manipulate public opinion and the decisions we make at the ballot boxes, destabilize our societies and erode our will to defend our freedom. Whether Russia spreading propaganda to sow discord or domestic actors pushing falsehoods to further their agendas, the consequences are grave. As a result, the whole fabric of democracy is under stress.

While the scope of propaganda is very different today than 80 years ago, Hayek did sound the alarm on the threat it posed. He wrote – and I quote: "The moral consequences of totalitarian propaganda which we must now consider are of an even more profound kind. They are destructive of all morals because they undermine one of the foundations of all morals, the sense of and the respect for truth."

Hayek saw propaganda as a tool that could be used by authoritarian regimes to strengthen power and suppress opposition. That is why he saw the need for vigilance against propaganda as an essential component of a free society. His warnings bring out the urgency of fighting this threat. We must strengthen our critical thinking skills, promote media literacy, and expose those dealing in disinformation.

Ladies and gentlemen,

Finally, let us turn briefly to international relations. Today, we are facing unprecedented challenges to the established rules-based international order and the rule of law. These principles are a defensive shield against a vision of the world where might makes right and where bigger neighbors can overrun smaller ones with impunity.

For Hayek, the rule of law – pacta sunt servanda – underpins his economic vision. It is the basis not only for vigorous competition but also for a workable international order.

I was particularly struck by his several references to the role and value of smaller countries. He wrote – and I quote – that "we shall all be the gainers if we can create a world for small states to live in".

Hayek also warned against "dangerous mistakes" made because – and I quote – "we do not understand the opponent with whom we are faced" since "such an understanding might destroy some of the dearest illusions to which we are determined to cling."

This reminds me of Russia today. I sometimes still see some in the free world looking at the aggressor through a democratic lens. To make the decisions necessary to defend freedom, we need to understand that the way to sustainable peace in Europe is to help Ukraine to victory and end Russia's historical cycle of aggression.

Ladies and gentlemen,

Let me close on a more personal note. The Estonian translation of "The Road to Serfdom" was published 23 years ago. The foreword was written by my father, Siim Kallas, who was then our minister of finance, and who had earlier been an architect of Estonia's own Wirtschaftswunder. The ideas of Hayek, like the examples set by Ludwig Erhard, Konrad Adenauer and others, influenced our own move to a free market economy. This has delivered significant increases in both prosperity and political and economic freedom.

In his foreword, my father asked and answered the same question we are asking today – and I quote: "Why should today's reader read a book that was published in 1944? The answer is: to wonder, to be amazed at how relevant the Nobel laureate's thoughts are even now, so many years later. This book is a classic."

Winning the fight for freedom in a time of hesitation requires a clear vision and strong resolve. We can draw inspiration from Hayek's principles and apply them to the challenges of our time.

Understanding them does not mean accepting them unconditionally. They force us to doubt, to question and to analyze. And exactly this is the basis of freedom and true democracy.

Thank you!

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