The Online Library of Liberty

A project of Liberty Fund, Inc.

• The Liberty Fund Library of the Works of Ludwig Von Mises
• Foreword to the Liberty Fund Edition
• Preface
• Omnipotent Government
• Introduction
• Part I: The Collapse of German Liberalism
• I: German Liberalism
• 1.: The Ancien Régime and Liberalism
• 2.: The Weakness of German Liberalism
• 3.: The Prussian Army
• 4.: The Constitutional Conflict In Prussia
• 5.: The “little German” Program
• 6.: The Lassalle Episode
• II: The Triumph of Militarism
• 1.: The Prussian Army In the New German Empire
• 2.: German Militarism
• 3.: The Liberals and Militarism
• 4.: The Current Explanation of the Success of Militarism
• Part II: Nationalism
• III: Etatism
• 1.: The New Mentality
• 2.: The State
• 3.: The Political and Social Doctrines of Liberalism
• 4.: Socialism
• 5.: Socialism In Russia and In Germany
• 6.: Interventionism
• 7.: Etatism and Protectionism
• 8.: Economic Nationalism and Domestic Monopoly Prices
• 9.: Autarky
• 10.: German Protectionism
• IV: Etatism and Nationalism
• 1.: The Principle of Nationality
• 2.: The Linguistic Group
• 3.: Liberalism and the Principle of Nationality
• 4.: Aggressive Nationalism
• 5.: Colonial Imperialism
• 6.: Foreign Investment and Foreign Loans
• 7.: Total War
• 8.: Socialism and War
• V: Refutation of Some Fallacious Explanations
• 1.: The Shortcomings of Current Explanations
• 2.: The Alleged Irrationality of Nationalism
• 3.: The Aristocratic Doctrine
• 4.: Misapprehended Darwinism
• 5.: The Role of Chauvinism
• 6.: The Role of Myths
• Part III: German Nazism
• VI: The Peculiar Characteristics of German Nationalism
• 1.: The Awakening
• 2.: The Ascendancy of Pan-germanism
• 3.: German Nationalism Within an Etatist World
• 4.: A Critique of German Nationalism
• 5.: Nazism and German Philosophy
• 6.: Polylogism
• 7.: Pan-germanism and Nazism
• VII: The Social Democrats In Imperial Germany
• 1.: The Legend
• 2.: Marxism and the Labor Movement
• 3.: The German Workers and the German State
• 4.: The Social Democrats Within the German Caste System
• 5.: The Social Democrats and War
• VIII: Anti-semitism and Racism
• 1.: The Role of Racism
• 2.: The Struggle Against the Jewish Mind
• 3.: Interventionism and Legal Discrimination Against Jews
• 4.: The “stab In the Back”
• 5.: Anti-semitism As a Factor In International Politics
• IX: The Weimar Republic and Its Collapse
• 1.: The Weimar Constitution
• 2.: The Abortive Socialization
• 3.: The Armed Parties
• 4.: The Treaty of Versailles
• 5.: The Economic Depression
• 6.: Nazism and German Labor
• 7.: The Foreign Critics of Nazism
• X: Nazism As a World Problem
• 1.: The Scope and Limitations of History
• 2.: The Fallacy of the Concept of “national Character”
• 3.: Germany’s Rubicon
• 4.: The Alternative
• Part IV: The Future of Western Civilization
• XI: The Delusions of World Planning
• 1.: The Term “planning”
• 2.: The Dictatorship Complex
• 3.: A World Government
• 4.: Planned Production
• 5.: Foreign Trade Agreements
• 6.: Monet Ary Planning
• 7.: Planning International Capital Transactions
• XII: Peace Schemes
• 1.: Armament Control
• 2.: A Critique of Some Other Schemes Proposed
• 3.: The Union of the Western Democracies
• 4.: Peace In Eastern Europe
• 5.: The Problems of Asia
• 6.: The Role of the League of Nations
• Conclusion

Part II

Nationalism

III

Etatism

1.

The New Mentality

The most important event in the history of the last hundred years is the displacement of liberalism by etatism. Etatism appears in two forms: socialism and interventionism. Both have in common the goal of subordinating the individual unconditionally to the state, the social apparatus of compulsion and coercion.

Etatism too, like liberalism in earlier days, originated in Western Europe and only later came into Germany. It has been asserted that autochthonous German roots of etatism could be found in Fichte’s socialist utopia and in the sociological teachings of Schelling and Hegel. However, the dissertations of these philosophers were so foreign to the problems and tasks of social and economic policies that they could not directly influence political matters. What use could practical politics derive from Hegel’s assertion: “The state is the actuality of the ethical idea. It is ethical mind qua the substantial will manifest and revealed to itself, knowing and thinking itself, accomplishing what it knows and in so far as it knows it.” Or from his dictum: “The state is absolutely rational inasmuch as it is the actuality of the substantial will which it possesses in the particular self-consciousness once that consciousness has been raised to consciousness of its universality.”*

Etatism assigns to the state the task of guiding the citizens and of holding them in tutelage. It aims at restricting the individual’s freedom to act. It seeks to mold his destiny and to vest all initiative in the government alone. It came into Germany from the West.† Saint Simon, Owen, Fourier, Pecqueur, Sismondi, Auguste Comte laid its foundations. Lorenz von Stein was the first author to bring the Germans comprehensive information concerning these new doctrines. The appearance in 1842 of the first edition of his book, Socialism and Communism in Present-Day France, was the most important event in pre-Marxian German socialism. The elements of government interference with business, labor legislation, and trade-unionism* also reached Germany from the West. In America Frederick List became familiar with the protectionist theories of Alexander Hamilton.

Liberalism had taught the German intellectuals to absorb Western political ideas with reverential awe. Now, they thought, liberalism was already outstripped; government interference with business had replaced old-fashioned liberal orthodoxy and would inexorably result in socialism. He who did not want to appear backward had to become “social,” i.e., either interventionist or socialist. New ideas succeed only after some lapse of time; years have to pass before they reach the broader strata of intellectuals. List’s National System of Political Economy was published in 1841, a few months before Stein’s book. In 1848 Marx and Engels produced the Communist Manifesto. In the middle ’sixties the prestige of liberalism began to melt away. Very soon the economic, philosophical, historical, and juridical university lectures were representing liberalism in caricature. The social scientists outdid each other in emotional criticism of British free trade and laissez faire; the philosophers disparaged the “stock-jobber” ethics of utilitarianism, the superficiality of enlightenment, and the negativity of the notion of liberty; the lawyers demonstrated the paradox of democratic and parliamentary institutions; and the historians dealt with the moral and political decay of France and of Great Britain. On the other hand, the students were taught to admire the “social kingdom of the Hohenzollerns” from Frederick William I, the “noble socialist,” to William I, the great Kaiser of social security and labor legislation. The Social Democrats despised Western “plutodemocracy” and “pseudo-liberty” and ridiculed the teachings of “bourgeois economics.”

The boring pedantry of the professors and the boastful oratory of the Social Democrats failed to impress critical people. The élite were conquered for etatism by other men. From England penetrated the ideas of Carlyle, Ruskin, and the Fabians, from France Solidarism. The churches of all creeds joined the choir. Novels and plays propagated the new doctrine of the state. Shaw and Wells, Spielhagen and Gerhart Hauptmann, and hosts of other writers, less gifted, contributed to the popularity of etatism.

2.

The State

The state is essentially an apparatus of compulsion and coercion. The characteristic feature of its activities is to compel people through the application or the threat of force to behave otherwise than they would like to behave.

But not every apparatus of compulsion and coercion is called a state. Only one which is powerful enough to maintain its existence, for some time at least, by its own force is commonly called a state. A gang of robbers, which because of the comparative weakness of its forces has no prospect of successfully resisting for any length of time the forces of another organization, is not entitled to be called a state. The state will either smash or tolerate a gang. In the first case the gang is not a state because its independence lasts for a short time only; in the second case it is not a state because it does not stand on its own might. The pogrom gangs in imperial Russia were not a state because they could kill and plunder only thanks to the connivance of the government.

This restriction of the notion of the state leads directly to the concepts of state territory and sovereignty. Standing on its own power implies that there is a space on the earth’s surface where the operation of the apparatus is not restricted by the intervention of another organization; this space is the state’s territory. Sovereignty (suprema potestas, supreme power) signifies that the organization stands on its own legs. A state without territory is an empty concept. A state without sovereignty is a contradiction in terms.

The total complex of the rules according to which those at the helm employ compulsion and coercion is called law. Yet the characteristic feature of the state is not these rules, as such, but the application or threat of violence. A state whose chiefs recognize but one rule, to do whatever seems at the moment to be expedient in their eyes, is a state without law. It does not make any difference whether or not these tyrants are “benevolent.”

The term law is used in a second meaning too. We call international law the complex of agreements which sovereign states have concluded expressly or tacitly in regard to their mutual relations. It is not, however, essential to the statehood of an organization that other states should recognize its existence through the conclusion of such agreements. It is the fact of sovereignty within a territory that is essential, not the formalities.

The people handling the state machinery may take over other functions, duties, and activities. The government may own and operate schools, railroads, hospitals, and orphan asylums. Such activities are only incidental to the conception of a state. Whatever other functions it may assume, the state is always characterized by the compulsion and coercion exercised.

With human nature as it is, the state is a necessary and indispensable institution. The state is, if properly administered, the foundation of society, of human coöperation and civilization. It is the most beneficial and most useful instrument in the endeavors of man to promote human happiness and welfare. But it is a tool and a means only, not the ultimate goal. It is not God. It is simply compulsion and coercion; it is the police power.

It has been necessary to dwell upon these truisms because the mythologies and metaphysics of etatism have succeeded in wrapping them in mystery. The state is a human institution, not a superhuman being. He who says “state” means coercion and compulsion. He who says: There should be a law concerning this matter, means: The armed men of the government should force people to do what they do not want to do, or not to do what they like. He who says: This law should be better enforced, means: The police should force people to obey this law. He who says: The state is God, deifies arms and prisons. The worship of the state is the worship of force. There is no more dangerous menace to civilization than a government of incompetent, corrupt, or vile men. The worst evils which mankind ever had to endure were inflicted by bad governments. The state can be and has often been in the course of history the main source of mischief and disaster.

The apparatus of compulsion and coercion is always operated by mortal men. It has happened time and again that rulers have excelled their contemporaries and fellow citizens both in competence and in fairness. But there is ample historical evidence to the contrary too. The thesis of etatism that the members of the government and its assistants are more intelligent than the people, and that they know better what is good for the individual than he himself knows, is pure nonsense. The Führers and the Duces are neither God nor God’s vicars.

The essential characteristic features of state and government do not depend on their particular structure and constitution. They are present both in despotic and in democratic governments. Democracy too is not divine. We shall later deal with the benefits that society derives from democratic government. But great as these advantages are, it should never be forgotten that majorities are no less exposed to error and frustration than kings and dictators. That a fact is deemed true by the majority does not prove its truth. That a policy is deemed expedient by the majority does not prove its expediency. The individuals who form the majority are not gods, and their joint conclusions are not necessarily godlike.

3.

The Political and Social Doctrines of Liberalism

There is a school of thought which teaches that social coöperation of men could be achieved without compulsion or coercion. Anarchism believes that a social order could be established in which all men would recognize the advantages to be derived from coöperation and be prepared to do voluntarily everything which the maintenance of society requires and to renounce voluntarily all actions detrimental to society. But the anarchists overlook two facts. There are people whose mental abilities are so limited that they cannot grasp the full benefits that society brings to them. And there are people whose flesh is so weak that they cannot resist the temptation of striving for selfish advantage through actions detrimental to society. An anarchistic society would be exposed to the mercy of every individual. We may grant that every sane adult is endowed with the faculty of realizing the good of social coöperation and of acting accordingly. However, it is beyond doubt that there are infants, the aged, and the insane. We may agree that he who acts antisocially should be considered mentally sick and in need of cure. But as long as not all are cured, and as long as there are infants and the senile, some provision must be taken lest they destroy society.

Liberalism differs radically from anarchism. It has nothing in common with the absurd illusions of the anarchists. We must emphasize this point because etatists sometimes try to discover a similarity. Liberalism is not so foolish as to aim at the abolition of the state. Liberals fully recognize that no social coöperation and no civilization could exist without some amount of compulsion and coercion. It is the task of government to protect the social system against the attacks of those who plan actions detrimental to its maintenance and operation.

The essential teaching of liberalism is that social coöperation and the division of labor can be achieved only in a system of private ownership of the means of production, i.e., within a market society, or capitalism. All the other principles of liberalism—democracy, personal freedom of the individual, freedom of speech and of the press, religious tolerance, peace among the nations—are consequences of this basic postulate. They can be realized only within a society based on private property.

From this point of view liberalism assigns to the state the task of protecting the lives, health, freedom, and property of its subjects against violent or fraudulent aggression.

That liberalism aims at private ownership of the means of production implies that it rejects public ownership of the means of production, i.e., socialism. Liberalism therefore objects to the socialization of the means of production. It is illogical to say, as many etatists do, that liberalism is hostile to or hates the state, because it is opposed to the transfer of the ownership of railroads or cotton mills to the state. If a man says that sulphuric acid does not make a good hand lotion, he is not expressing hostility to sulphuric acid as such; he is simply giving his opinion concerning the limitations of its use.

It is not the task of this study to determine whether the program of liberalism or that of socialism is more adequate for the realization of those aims which are common to all political and social endeavors, i.e., the achievement of human happiness and welfare. We are only tracing the role played by liberalism and by antiliberalism—whether socialist or interventionist—in the evolution which resulted in the establishment of totalitarianism. We can therefore content ourselves with briefly sketching the outlines of the social and political program of liberalism and its working.

In an economic order based on private ownership of the means of production the market is the focal point of the system. The working of the market mechanism forces capitalists and entrepreneurs to produce so as to satisfy the consumers’ needs as well and cheaply as the quantity and quality of material resources and of man power available and the state of technological knowledge allow. If they are not equal to this task, if they produce poor goods, or at too great cost, or not the commodities that the consumers demand most urgently, they suffer losses. Unless they change their methods to satisfy the consumers’ needs better, they will finally be thrown out of their positions as capitalists and entrepreneurs. Other people who know better how to serve the consumer will replace them. Within the market society the working of the price mechanism makes the consumers supreme. They determine through the prices they pay and through the amount of their purchases both the quantity and quality of production. They determine directly the prices of consumers’ goods, and thereby indirectly the prices of all material factors of production and the wages of all hands employed.

Within the market society each serves all his fellow citizens and each is served by them. It is a system of mutual exchange of services and commodities, a mutual giving and receiving. In that endless rotating mechanism the entrepreneurs and capitalists are the servants of the consumers. The consumers are the masters, to whose whims the entrepreneurs and the capitalists must adjust their investments and methods of production. The market chooses the entrepreneurs and the capitalists, and removes them as soon as they prove failures. The market is a democracy in which every penny gives a right to vote and where voting is repeated every day.

Outside of the market stands the social apparatus of compulsion and coercion, and its steersmen, the government. To state and government the duty is assigned of maintaining peace both at home and abroad. For only in peace can the economic system achieve its ends, the fullest satisfaction of human needs and wants.

But who should command the apparatus of compulsion and coercion? In other words, who should rule? It is one of the fundamental insights of liberal thought that government is based on opinion, and that therefore in the long run it cannot subsist if the men who form it and the methods they apply are not accepted by the majority of those ruled. If the conduct of political affairs does not suit them, the citizens will finally succeed in overthrowing the government by violent action and in replacing the rulers by men deemed more competent. The rulers are always a minority. They cannot stay in office if the majority is determined to turn them out. Revolution and civil war are the ultimate remedy for unpopular rule. For the sake of domestic peace, liberalism aims at democratic government. Democracy is therefore not a revolutionary institution. On the contrary, it is the very means of preventing revolutions. Democracy is a system providing for the peaceful adjustment of government to the will of the majority. When the men in office and their methods no longer please the majority of the nation, they will—in the next election—be eliminated, and replaced by other men and another system. Democracy aims at safeguarding peace within the country and among the citizens.

The goal of liberalism is the peaceful coöperation of all men. It aims at peace among nations too. When there is private ownership of the means of production everywhere and when the laws, the tribunals, and the administration treat foreigners and citizens on equal terms, it is of little importance where a country’s frontiers are drawn. Nobody can derive any profit from conquest, but many can suffer losses from fighting. War no longer pays; there is no motive for aggression. The population of every territory is free to determine to which state it wishes to belong, or whether it prefers to establish a state of its own. All nations can coexist peacefully, because no nation is concerned about the size of its state.

This is, of course, a very cool and dispassionate plea for peace and democracy. It is the outcome of a utilitarian philosophy. It is as far from the mystical mythology of the divine right of kings as it is from the metaphysics of natural law or the natural and imprescriptible rights of man. It is founded upon considerations of common utility. Freedom, democracy, peace, and private property are deemed good because they are the best means for promoting human happiness and welfare. Liberalism wants to secure to man a life free from fear and want. That is all.

About the middle of the nineteenth century liberals were convinced that they were on the eve of the realization of their plans. It was an illusion.

4.

Socialism

Socialism aims at a social system based on public ownership of the means of production. In a socialist community all material resources are owned and operated by the government. This implies that the government is the only employer, and that no one can consume more than the government allots to him. The term “state socialism” is pleonastic; socialism is necessarily always state socialism. Planning is nowadays a popular synonym for socialism. Until 1917 communism and socialism were usually used as synonyms. The fundamental document of Marxian socialism, which all socialist parties united in the different International Working Men’s Associations considered and still consider the eternal and unalterable gospel of socialism, is entitled the Communist Manifesto. Since the ascendancy of Russian Bolshevism most people differentiate between communism and socialism. But this differentiation refers only to political tactics. Present-day communists and socialists disagree only in respect to the methods to be applied for the achievement of ends which are common to both.

The German Marxian socialists called their party the Social Democrats. It was believed that socialism was compatible with democratic government—indeed that the program of democracy could be fully realized only within a socialist community. In Western Europe and in America this opinion is still current. In spite of all the experience which events since 1917 have provided, many cling stubbornly to the belief that true democracy and true socialism are identical. Russia, the classical country of dictatorial oppression, is considered democratic because it is socialist.

However, the Marxians’ love of democratic institutions was a stratagem only, a pious fraud for the deception of the masses.* Within a socialist community there is no room left for freedom. There can be no freedom of the press where the government owns every printing office. There can be no free choice of profession or trade where the government is the only employer and assigns everyone the task he must fulfill. There can be no freedom to settle where one chooses when the government has the power to fix one’s place of work. There can be no real freedom of scientific research where the government owns all the libraries, archives, and laboratories and has the right to send anyone to a place where he cannot continue his investigations. There can be no freedom in art and literature where the government determines who shall create them. There can be neither freedom of conscience nor of speech where the government has the power to remove any opponent to a climate which is detrimental to his health, or to assign him duties which surpass his strength and ruin him both physically and intellectually. In a socialist community the individual citizen can have no more freedom than a soldier in the army or an inmate in an orphanage.

But, object the socialists, the socialist commonwealth differs in this essential respect from such organizations: the inhabitants have the right to choose the government. They forget, however, that the right to vote becomes a sham in a socialist state. The citizens have no sources of information but those provided by the government. The press, the radio, and the meeting halls are in the hands of the administration. No party of opposition can be organized or can propagate its ideas. We have only to look to Russia or Germany to discover the true meaning of elections and plebiscites under socialism.

The conduct of economic affairs by a socialist government cannot be checked by the vote of parliamentary bodies or by the control of the citizens. Economic enterprises and investments are designed for long periods. They require many years for preparation and realization; their fruits ripen late. If a penal law has been promulgated in May, it can be repealed without harm or loss in October. If a minister of foreign affairs has been appointed, he can be discharged a few months later. But if industrial investments have been once started, it is necessary to cling to the undertaking until it is achieved and to exploit the plant erected as long as it seems profitable. To change the original plan would be wasteful. This necessarily implies that the personnel of the government cannot be easily disposed of. Those who made the plan must execute it. They must later operate the plants erected, because others cannot take over the responsibility for their proper management. People who once agree to the famous four- and five-year plans virtually abandon their right to change the system and the personnel of government not only for the duration of four or five years but for the following years too, in which the planned investments have to be utilized. Consequently a socialist government must stay in office for an indefinite period. It is no longer the executor of the nation’s will; it cannot be discharged without sensible detriment if its actions no longer suit the people. It has irrevocable powers. It becomes an authority above the people; it thinks and acts for the community in its own right and does not tolerate interference with “its own business” by outsiders.*

The entrepreneur in a capitalist society depends upon the market and upon the consumers. He has to obey the orders which the consumers transmit to him by their buying or failure to buy, and the mandate with which they have charged him can be revoked at any hour. Every entrepreneur and every owner of means of production must daily justify his social function through subservience to the wants of the consumers.

The management of a socialist economy is not under the necessity of adjusting itself to the operation of a market. It has an absolute monopoly. It does not depend on the wants of the consumers. It itself decides what must be done. It does not serve the consumers as the businessman does. It provides for them as the father provides for his children or the headmaster of a school for the students. It is the authority bestowing favors, not a businessman eager to attract customers. The salesman thanks the customer for patronizing his shop and asks him to come again. But the socialists say: Be grateful to Hitler, render thanks to Stalin; be nice and submissive, then the great man will be kind to you later too.

The prime means of democratic control of the administration is the budget. Not a clerk may be appointed, not a pencil bought, if Parliament has not made an allotment. The government must account for every penny spent. It is unlawful to exceed the allotment or to spend it for other purposes than those fixed by Parliament. Such restrictions are impracticable for the management of plants, mines, farms, and transportation systems. Their expenditure must be adjusted to the changing conditions of the moment. You cannot fix in advance how much is to be spent to clear fields of weeds or to remove snow from railroad tracks. This must be decided on the spot according to circumstances. Budget control by the people’s representatives, the most effective weapon of democratic government, disappears in a socialist state.

Thus socialism must lead to the dissolution of democracy. The sovereignty of the consumers and the democracy of the market are the characteristic features of the capitalist system. Their corollary in the realm of politics is the people’s sovereignty and democratic control of government. Pareto, Georges Sorel, Lenin, Hitler, and Mussolini were right in denouncing democracy as a capitalist method. Every step which leads from capitalism toward planning is necessarily a step nearer to absolutism and dictatorship.

The advocates of socialism who are keen enough to realize this tell us that liberty and democracy are worthless for the masses. People, they say, want food and shelter; they are ready to renounce freedom and self-determination to obtain more and better bread by submitting to a competent paternal authority. To this the old liberals used to reply that socialism will not improve but on the contrary will impair the standard of living of the masses. For socialism is a less efficient system of production than capitalism. But this rejoinder also failed to silence the champions of socialism. Granted, many of them replied, that socialism may not result in riches for all but rather in a smaller production of wealth; nevertheless the masses will be happier under socialism, because they will share their worries with all their fellow citizens, and there will not be wealthier classes to be envied by poorer ones. The starving and ragged workers of Soviet Russia, they tell us, are a thousand times more joyful than the workers of the West who live under conditions which are luxurious compared to Russian standards; equality in poverty is a more satisfactory state than well-being where there are people who can flaunt more luxuries than the average man.

Such debates are vain because they miss the central point. It is useless to discuss the alleged advantages of socialist management. Complete socialism is simply impracticable; it is not at all a system of production; it results in chaos and frustration.

The fundamental problem of socialism is the problem of economic calculation. Production within a system of division of labor, and thereby social coöperation, requires methods for the computation of expenditures asked for by different thinkable and possible ways of achieving ends. In capitalist society market prices are the units of this calculation. But within a system where all factors of production are owned by the state there is no market, and consequently there are no prices for these factors. Thus it becomes impossible for the managers of a socialist community to calculate. They cannot know whether what they are planning and achieving is reasonable or not. They have no means of finding out which of the various methods of production under consideration is the most advantageous. They cannot find a genuine basis of comparison between quantities of different material factors of production and of different services; so they cannot compare the outlays necessary with the anticipated outputs. Such comparisons need a common unit; and there is no such unit available but that provided by the price system of the market. The socialist managers cannot know whether the construction of a new railroad line is more advantageous than the construction of a new motor road. And if they have once decided on the construction of a railroad, they cannot know which of many possible routes it should cover. Under a system of private ownership money calculations are used to solve such problems. But no such calculation is possible by comparing various classes of expenditures and incomes in kind. It is out of the question to reduce to a common unit the quantities of various kinds of skilled and unskilled labor, iron, coal, building materials of different types, machinery, and everything else that the building, the upkeep, and the operation of railroads necessitates. But without such a common unit it is impossible to make these plans the subject of economic calculations. Planning requires that all the commodities and services which we have to take into account can be reduced to money. The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation.

Socialism as a universal mode of production is impracticable because it is impossible to make economic calculations within a socialist system. The choice for mankind is not between two economic systems. It is between capitalism and chaos.

5.

Socialism in Russia and in Germany

The attempts of the Russian Bolsheviks and of the German Nazis to transform socialism from a program into reality have not had to meet the problem of economic calculation under socialism. These two socialist systems have been working within a world the greater part of which still clings to a market economy. The rulers of these socialist states base the calculations on which they make their decisions on the prices established abroad. Without the help of these prices their actions would be aimless and planless. Only in so far as they refer to this price system are they able to calculate, keep books, and prepare their plans. With this fact in mind we may agree with the statement of various socialist authors and politicians that socialism in only one or a few countries is not yet true socialism. Of course these men attach a quite different meaning to their assertions. They are trying to say that the full blessings of socialism can be reaped only in a world-embracing socialist community. The rest of us, on the contrary, must recognize that socialism will result in complete chaos precisely if it is applied in the greater part of the world.

The German and the Russian systems of socialism have in common the fact that the government has full control of the means of production. It decides what shall be produced and how. It allots to each individual a share of consumer’s goods for his consumption. These systems would not have to be called socialist if it were otherwise.

But there is a difference between the two systems—though it does not concern the essential features of socialism.

The Russian pattern of socialism is purely bureaucratic. All economic enterprises are departments of the government, like the administration of the army or the postal system. Every plant, shop, or farm stands in the same relation to the superior central organization as does a post office to the office of the postmaster general.

The German pattern differs from the Russian one in that it (seemingly and nominally) maintains private ownership of the means of production and keeps the appearance of ordinary prices, wages, and markets. There are, however, no longer entrepreneurs but only shop managers (Betriebsführer). These shop managers do the buying and selling, pay the workers, contract debts, and pay interest and amortization. There is no labor market; wages and salaries are fixed by the government. The government tells the shop managers what and how to produce, at what prices and from whom to buy, at what prices and to whom to sell. The government decrees to whom and under what terms the capitalists must entrust their funds and where and at what wages laborers must work. Market exchange is only a sham. All the prices, wages, and interest rates are fixed by the central authority. They are prices, wages, and interest rates in appearance only; in reality they are merely determinations of quantity relations in the government’s orders. The government, not the consumers, directs production. This is socialism in the outward guise of capitalism. Some labels of capitalistic market economy are retained but they mean something entirely different from what they mean in a genuine market economy.

The execution of the pattern in each country is not so rigid as not to allow for some concessions to the other pattern. There are, in Germany too, plants and shops directly managed by government clerks; there is especially the national railroad system; there are the government’s coal mines and the national telegraph and telephone lines. Most of these institutions are remnants of the nationalization carried out by the previous governments under the regime of German militarism. In Russia, on the other hand, there are some seemingly independent shops and farms left. But these exceptions do not alter the general characteristics of the two systems.

It is not an accident that Russia adopted the bureaucratic pattern and Germany the Zwangswirtschaft pattern. Russia is the largest country in the world and is thinly inhabited. Within its borders it has the richest resources. It is much better endowed by nature than any other country. It can without too great harm to the well-being of its population renounce foreign trade and live in economic self-sufficiency. But for the obstacles which Czarism first put in the way of capitalist production, and for the later shortcomings of the Bolshevik system, the Russians even without foreign trade could have long enjoyed the highest standard of living in the world. In such a country the application of the bureaucratic system of production is not impossible, provided the management is in a position to use for economic calculation the prices fixed on the markets of foreign capitalist countries, and to apply the techniques developed by the enterprise of foreign capitalism. Under these circumstances socialism results not in complete chaos but only in extreme poverty. A few years ago in the Ukraine, the most fertile land of Europe, many millions literally died of starvation.

In a predominantly industrial country conditions are different. The characteristic feature of a predominantly industrial country is that its population must live to a great extent on imported food and imported raw materials.* It must pay for these imports by the export of manufactured goods, which it produces mainly from imported raw materials. Its vital strength lies in its factories and in its foreign trade. Jeopardizing the efficiency of industrial production is equivalent to imperiling the basis of sustenance. If the plants produce worse or at higher cost they cannot compete in the world market, where they must outdo commodities of foreign origin. If exports drop, imports of food and other necessities drop correspondingly; the nation loses its main source of living.

Now Germany is a predominantly industrial country. It did very well when, in the years preceding the first World War, its entrepreneurs steadily expanded their exports. There was no other country in Europe in which the standard of living of the masses improved faster than in imperial Germany. For German socialism there could be no question of imitating the Russian model. To have attempted this would have immediately destroyed the apparatus of German export trade. It would have suddenly plunged into misery a nation pampered by the achievements of capitalism. Bureaucrats cannot meet the competition of foreign markets; they flourish only where they are sheltered by the state, with its compulsion and coercion. Thus the German socialists were forced to take recourse to the methods which they called German socialism. These methods, it is true, are much less efficient than that of private initiative. But they are much more efficient than the bureaucratic system of the Soviets.

This German system has an additional advantage. The German capitalists and the Betriebsführer, the former entrepreneurs, do not believe in the eternity of the Nazi regime. They are, on the contrary, convinced that the rule of Hitler will collapse one day and that then they will be restored to the ownership of the plants which in pre-Nazi days were their property. They remember that in the first World War too the Hindenburg program had virtually dispossessed them, and that with the breakdown of the imperial government they were de facto reinstated. They believe that it will happen again. They are therefore very careful in the operation of the plants whose nominal owners and shop managers they are. They do their best to prevent waste and to maintain the capital invested. It is only thanks to these selfish interests of the Betriebsführer that German socialism secured an adequate production of armaments, planes, and ships.

Socialism would be impracticable altogether if established as a world-wide system of production, and thus deprived of the possibility of making economic calculations. When confined to one or a few countries in the midst of a world capitalist economy it is only an inefficient system. And of the two patterns for its realization the German is less inefficient than the Russian one.

6.

Interventionism

All civilizations have up to now been based on private ownership of the means of production. In the past civilization and private ownership have been linked together. If history could teach us anything, it would be that private property is inextricably linked with civilization.

Governments have always looked askance at private property. Governments are never liberal from inclination. It is in the nature of the men handling the apparatus of compulsion and coercion to overrate its power to work, and to strive at subduing all spheres of human life to its immediate influence. Etatism is the occupational disease of rulers, warriors, and civil servants. Governments become liberal only when forced to by the citizens.

From time immemorial governments have been eager to interfere with the working of the market mechanism. Their endeavors have never attained the ends sought. People used to attribute these failures to the inefficacy of the measures applied and to the leniency of their enforcement. What was wanted, they thought, was more energy and more brutality; then success would be assured. Not until the eighteenth century did men begin to understand that interventionism is necessarily doomed to fail. The classical economists demonstrated that each constellation of the market has a corresponding price structure. Prices, wages, and interest rates are the result of the interplay of demand and supply. There are forces operating in the market which tend to restore this—natural—state if it is disturbed. Government decrees, instead of achieving the particular ends they seek, tend only to derange the working of the market and imperil the satisfaction of the needs of the consumers.

In defiance of economic science the very popular doctrine of modern interventionism asserts that there is a system of economic coöperation, feasible as a permanent form of economic organization, which is neither capitalism nor socialism. This third system is conceived as an order based on private ownership of the means of production in which, however, the government intervenes, by orders and prohibitions, in the exercise of ownership rights. It is claimed that this system of interventionism is as far from socialism as it is from capitalism; that it offers a third solution of the problem of social organization; that it stands midway between socialism and capitalism; and that while retaining the advantages of both it escapes the disadvantages inherent in each of them. Such are the pretensions of interventionism as advocated by the older German school of etatism, by the American Institutionalists, and by many groups in other countries. Interventionism is practiced—except for socialist countries like Russia and Nazi Germany—by every contemporary government. The outstanding examples of interventionist policies are the Sozialpolitik of imperial Germany and the New Deal policy of present-day America.

Marxians do not support interventionism. They recognize the correctness of the teachings of economics concerning the frustration of interventionist measures. In so far as some Marxian doctrinaires have recommended interventionism they have done so because they consider it an instrument for paralyzing and destroying the capitalist economy, and hope thereby to accelerate the coming of socialism. But the consistent orthodox Marxians scorn interventionism as idle reformism detrimental to the interests of the proletarians. They do not expect to bring about the socialist utopia by hampering the evolution of capitalism; on the contrary, they believe that only a full development of the productive forces of capitalism can result in socialism. Consistent Marxians abstain from doing anything to interfere with what they deem to be the natural evolution of capitalism. But consistency is a very rare quality among Marxians. So most Marxian parties and the trade-unions operated by Marxians are enthusiastic in their support of interventionism.

A mixture of capitalist and socialist principles is not feasible. If, within a society based on private ownership of the means of production, some of these means are publicly owned and operated, this does not make for a mixed system which combines socialism and capitalism. The enterprises owned and operated by the state or by municipalities do not alter the characteristic features of a market economy. They must fit themselves, as buyers of raw materials, of equipment and of labor, and as sellers of goods and services, into the scheme of the market economy. They are subject to the laws determining production for the needs of consumers. They must strive for profits or, at least, to avoid losses. When the government tries to eliminate or to mitigate this dependence by covering the losses of its plants and shops by drawing on the public funds, the only result is that this dependence is shifted to another field. The means for covering the losses must be raised by the imposition of taxes. But this taxation has its effect on the market. It is the working of the market mechanism, and not the government collecting the taxes, that decides upon whom the incidence of the taxes falls and how it affects production and consumption. The market, not the government, determines the working of those publicly operated enterprises.

Nor should interventionism be confused with the German pattern of socialism. It is the essential feature of interventionism that it does not aim at a total abolition of the market; it does not want to reduce private ownership to a sham and the entrepreneurs to the status of shop managers. The interventionist government does not want to do away with private enterprise; it wants only to regulate its working through isolated measures of interference. Such measures are not designed as cogs in an all-round system of orders and prohibitions destined to control the whole apparatus of production and distribution; they do not aim at replacing private ownership and a market economy by socialist planning.

In order to grasp the meaning and the effects of interventionism it is sufficient to study the working of the two most important types of intervention: interference by restriction and interference by price control.

Interference by restriction aims directly at a diversion of production from the channels prescribed by the market and the consumers. The government either forbids the manufacture of certain goods or the application of certain methods of production, or makes such methods more difficult by the imposition of taxes or penalties. It thus eliminates some of the means available for the satisfaction of human needs. The best-known examples are import duties and other trade barriers. It is obvious that all such measures make the people as a whole poorer, not richer. They prevent men from using their knowledge and ability, their labor and material resources as efficiently as they can. In the unhampered market forces are at work tending to utilize every means of production in a way that provides for the highest satisfaction of human wants. The interference of the government brings about a different employment of resources and thereby impairs the supply.

We do not need to ask here whether some restrictive measures could not be justified, in spite of the diminution of supply they cause, by advantages in other fields. We do not need to discuss the problem of whether the disadvantage of raising the price of bread by an import duty on wheat is outweighed by the increase in income of domestic farmers. It is enough for our purpose to realize that restrictive measures cannot be considered as measures of increasing wealth and welfare, but are instead expenditures. They are, like subsidies which the government pays out of the revenue collected by taxing the citizens, not measures of production policy but measures of spending. They are not parts of a system of creating wealth but a method of consuming it.

The aim of price control is to decree prices, wages, and interest rates different from those fixed by the market. Let us first consider the case of maximum prices, where the government tries to enforce prices lower than the market prices.

The prices set on the unhampered market correspond to an equilibrium of demand and supply. Everybody who is ready to pay the market price can buy as much as he wants to buy. Everybody who is ready to sell at the market price can sell as much as he wants to sell. If the government, without a corresponding increase in the quantity of goods available for sale, decrees that buying and selling must be done at a lower price, and thus makes it illegal either to ask or to pay the potential market price, then this equilibrium can no longer prevail. With unchanged supply there are now more potential buyers on the market, namely, those who could not afford the higher market price but are prepared to buy at the lower official rate. There are now potential buyers who cannot buy, although they are ready to pay the price fixed by the government or even a higher price. The price is no longer the means of segregating those potential buyers who may buy from those who may not. A different principle of selection has come into operation. Those who come first can buy; others are too late in the field. The visible outcome of this state of things is the sight of housewives and children standing in long lines before the groceries, a spectacle familiar to everybody who has visited Europe in this age of price control. If the government does not want only those to buy who come first (or who are personal friends of the salesman), while others go home empty-handed, it must regulate the distribution of the stocks available. It has to introduce some kind of rationing.

But price ceilings not only fail to increase the supply, they reduce it. Thus they do not attain the ends which the authorities wish. On the contrary, they result in a state of things which from the point of view of the government and of public opinion is even less desirable than the previous state which they had intended to alter. If the government wants to make it possible for the poor to give their children more milk, it has to buy the milk at the market price and sell it to these poor parents with a loss, at a cheaper rate. The loss may be covered by taxation. But if the government simply fixes the price of milk at a lower rate than the market, the result will be the contrary of what it wants. The marginal producers, those with the highest costs, will, in order to avoid losses, go out of the business of producing and selling milk. They will use their cows and their skill for other, more profitable purposes. They will, for example, produce cheese, butter, or meat. There will be less milk available for the consumers, not more. Then the government has to choose between two alternatives: either to refrain from any endeavors to control the price of milk and to abrogate its decree, or to add to its first measure a second one. In the latter case it must fix the prices of the factors of production necessary for the production of milk at such a rate that the marginal producers will no longer suffer losses and will abstain from restricting the output. But then the same problem repeats itself on a remoter plane. The supply of the factors of production necessary for the production of milk drops, and again the government is back where it started, facing failure in its interference. If it keeps stubbornly on, pushing forward its schemes, it has to go still further. It has to fix the prices of the factors of production necessary for the production of those factors of production which are needed for the production of milk. Thus the government is forced to go further and further, fixing the prices of all consumer goods and of all factors of production—both human (i.e., labor) and material—and to force every entrepreneur and every worker to continue work at these prices and wages. No branch of industry can be omitted from this all-round fixing of prices and wages and from this general order to produce those quantities which the government wants to see produced. If some branches were to be left free, the result would be a shifting of capital and labor to them and a corresponding fall of the supply of goods whose prices the government has fixed. However, it is precisely these goods which the government considers especially important for the satisfaction of the needs of the masses.*

But when this state of all-round control of business is achieved, the market economy has been replaced by the German pattern of socialist planning. The government’s board of production management now exclusively controls all business activities and decides how the means of production—men and material resources—must be used.

The isolated measures of price fixing fail to attain the ends sought. In fact, they produce effects contrary to those aimed at by the government. If the government, in order to eliminate these inexorable and unwelcome consequences, pursues its course further and further, it finally transforms the system of capitalism and free enterprise into socialism.

Many American and British supporters of price control are fascinated by the alleged success of Nazi price control. They believe that the German experience has proved the practicability of price control within the framework of a system of market economy. You have only to be as energetic, impetuous, and brutal as the Nazis are, they think, and you will succeed. These men who want to fight Nazism by adopting its methods do not see that what the Nazis have achieved has been the building up of a system of socialism, not a reform of conditions within a system of market economy.

There is no third system between a market economy and socialism. Mankind has to choose between those two systems—unless chaos is considered an alternative.*

It is the same when the government takes recourse to minimum prices. Practically the most important case of fixing prices at a higher level than that established on the unhampered market is the case of minimum wages. In some countries minimum wage rates are decreed directly by the government. The governments of other countries interfere only indirectly with wages. They give a free hand to the labor unions by acquiescing in the use of compulsion and coercion by unions against reluctant employers and employees. If it were otherwise strikes would not attain the ends which the trade-unions want to attain. The strike would fail to force the employer to grant higher wages than those fixed by the unhampered market, if he were free to employ men to take the place of the strikers. The essence of labor-union policy today is the application or threat of violence under the benevolent protection of the government. The unions represent, therefore, a vital part of the state apparatus of compulsion and coercion. Their fixing of minimum wage rates is equivalent to a government intervention establishing minimum wages.

The labor unions succeed in forcing the entrepreneurs to grant higher wages. But the result of their endeavors is not what people usually ascribe to them. The artificially elevated wage rates cause permanent unemployment of a considerable part of the potential labor force. At these higher rates the marginal employments for labor are no longer profitable. The entrepreneurs are forced to restrict output, and the demand on the labor market drops. The unions seldom bother about this inevitable result of their activities; they are not concerned with the fate of those who are not members of their brotherhood. But it is different for the government, which aims at the increase of the welfare of the whole people and wants to benefit not only union members but all those who have lost their jobs. The government wants to raise the income of all workers; that a great many of them cannot find employment is contrary to its intentions.

These dismal effects of minimum wages have become more and more apparent the more trade-unionism has prevailed. As long as only one part of labor, mostly skilled workers, was unionized, the wage rise achieved by the unions did not lead to unemployment but to an increased supply of labor in those branches of business where there were no efficient unions or no unions at all. The workers who lost their jobs as a consequence of union policy entered the market of the free branches and caused wages to drop in those branches. The corollary of the rise in wages for organized workers was a drop in wages for un-organized workers. But with the spread of unionism conditions have changed. Workers now losing their jobs in one branch of industry find it harder to get employment in other lines. They are victimized.

There is unemployment even in the absence of any government or union interference. But in an unhampered labor market there prevails a tendency to make unemployment disappear. The fact that the unemployed are looking for jobs must result in fixing wage rates at a height which makes it possible for the entrepreneurs to employ all those eager to work and to earn wages. But if minimum wage rates prevent an adjustment of wage rates to the conditions of demand and supply, unemployment tends to become a permanent mass phenomenon.

There is but one means to make market wage rates rise for all those eager to work: an increase in the amount of capital goods available which makes it possible to improve technological methods of production and thereby to raise the marginal productivity of labor. It is a sad fact that a great war, in destroying a part of the stock of capital goods, must result in a temporary fall in real wage rates, when the shortage of man power brought about by the enlistment of millions of men is once overcome. It is precisely because they are fully aware of this undesirable consequence that liberals consider war not only a political but also an economic disaster.

Government spending is not an appropriate means to brush away unemployment. If the government finances its spending by collecting taxes or by borrowing from the public, it curtails the private citizens’ power to invest and to spend to the same extent that it increases its own spending capacity. If the government finances its spending by inflationary methods (issue of additional paper money or borrowing from the commercial banks) it brings about a general rise of commodity prices. If then money wage rates do not rise at all or not to the same extent as commodity prices, mass unemployment may disappear. But it disappears precisely because real wage rates have dropped.

Technological progress increases the productivity of human effort. The same amount of capital and labor can now produce more than before. A surplus of capital and labor becomes available for the expansion of already existing industries and for the development of new ones. “Technological unemployment” may occur as a transitory phenomenon. But very soon the unemployed will find new jobs either in the new industries or in the expanding old ones. Many millions of workers are today employed in industries which were created in the last decades. And the wage earners themselves are the main buyers of the products of these new industries.

There is but one remedy for lasting unemployment of great masses: the abandonment of the policy of raising wage rates by government decree or by the application or the threat of violence.

Those who advocate interventionism because they want to sabotage capitalism and thereby finally to achieve socialism are at least consistent. They know what they are aiming at. But those who do not wish to replace private property by German Zwangswirtschaft or Russian Bolshevism are sadly mistaken in recommending price control and labor-union compulsion.

The more cautious and sophisticated supporters of interventionism are keen enough to recognize that government interference with business fails in the long run to attain the ends sought. But, they assert, what is needed is immediate action, a short-run policy. Interventionism is good because its immediate effects are beneficial, even if its remoter consequences may be disastrous. Do not bother about tomorrow; only today counts. With regard to this attitude two points must be emphasized: (1) today, after years and decades of interventionist policies, we are already confronted with the long-run consequences of interventionism; (2) wage interventionism is bound to fail even in the short run, if not accompanied by corresponding measures of protectionism.

7.

Etatism and Protectionism

Etatism—whether interventionism or socialism—is a national policy. The national governments of various countries adopt it. Their concern is whatever they consider favors the interests of their own nations. They are not troubled about the fate or the happiness of foreigners. They are free from any inhibitions which would prevent them from inflicting harm on aliens.

We have dealt already with how the policies of etatism hurt the well-being of the whole nation and even of the groups or classes which they are intended to benefit. For the purpose of this book it is still more important to emphasize that no national system of etatism can work within a world of free trade. Etatism and free trade in international relations are incompatible, not only in the long run but even in the short run. Etatism must be accompanied by measures severing the connections of the domestic market with foreign markets. Modern protectionism, with its tendency to make every country economically self-sufficient as far as possible, is inextricably linked with interventionism and its inherent tendency to turn into socialism. Economic nationalism is the unavoidable outcome of etatism.

In the past various doctrines and considerations induced governments to embark upon a policy of protectionism. Economics has exposed all these arguments as fallacious. Nobody tolerably familiar with economic theory dares today to defend these long since unmasked errors. They still play an important role in popular discussion; they are the preferred theme of demagogic fulminations; but they have nothing to do with present-day protectionism. Present-day protectionism is a necessary corollary of the domestic policy of government interference with business. Interventionism begets economic nationalism. It thus kindles the antagonisms resulting in war. An abandonment of economic nationalism is not feasible if nations cling to interference with business. Free trade in international relations requires domestic free trade. This is fundamental to any understanding of contemporary international relations.

It is obvious that all interventionist measures aiming at a rise in domestic prices for the benefit of domestic producers, and all measures whose immediate effect consists in a rise in domestic costs of production, would be frustrated if foreign products were not either barred altogether from competition on the domestic market or penalized when imported. When, other things being unchanged, labor legislation succeeds in shortening the hours of work or in imposing on the employer in another way additional burdens to the advantage of the employees, the immediate effect is a rise in production costs. Foreign producers can compete under more favorable conditions, both on the home market and abroad, than they could before.

The acknowledgment of this fact has long since given impetus to the idea of equalizing labor legislation in different countries. These plans have taken on more definite form since the international conference called by the German government in 1890. They led finally in 1919 to the establishment of the International Labor Office in Geneva. The results obtained were rather meager. The only efficient way to equalize labor conditions all over the world would be freedom of migration. But it is precisely this which unionized labor of the better-endowed and comparatively underpopulated countries fights with every means available.

The workers of those countries where natural conditions of production are more favorable and the population is comparatively thin enjoy the advantages of a higher marginal productivity of labor. They get higher wages and have a higher standard of living. They are eager to protect their advantageous position by barring or restricting immigration.* On the other hand, they denounce as “dumping” the competition of goods produced abroad by foreign labor remunerated at a lower scale; and they ask for protection against the importation of such goods.

The countries which are comparatively overpopulated—i.e., in which the marginal productivity of labor is lower than in other countries—have but one means to compete with the more favored countries: lower wages and a lower standard of living. Wage rates are lower in Hungary and in Poland than in Sweden or in Canada because the natural resources are poorer and the population is greater in respect to them. This fact cannot be disposed of by an international agreement, or by the interference of an international labor office. The average standard of living is lower in Japan than in the United States because the same amount of labor produces less in Japan than in the United States.

Such being the conditions, the goal of international agreements concerning labor legislation and trade-union policies cannot be the equalization of wage rates, hours of work, or other such “pro-labor” measures. Their only aim could be to coördinate these things so that no changes in the previously prevailing conditions of competition resulted. If, for example, American laws or trade-union policies resulted in a 5 per cent rise in construction costs, it would be necessary to find out how much this increased the cost of production in the various branches of industry in which America and Japan are competing or could compete if the relation of production costs changed. Then it would be necessary to investigate what kind of measures could burden Japanese production to such an extent that no change in the competitive power of both nations would take place. It is obvious that such calculations would be extremely difficult. Experts would disagree with regard both to the methods to be used and the probable results. But even if this were not the case an agreement could not be reached. For it is contrary to the interests of Japanese workers to adopt such measures of compensation. It would be more advantageous for them to expand their export sales to the disadvantage of American exports; thus the demand for their labor would rise and the condition of Japanese workers improve effectively. Guided by this idea, Japan would be ready to minimize the rise in production costs effected by the American measures and would be reluctant to adopt compensatory measures. It is chimerical to expect that international agreements concerning socio-economic policies could be substituted for protectionism.

We must realize that practically every new pro-labor measure forced on employers results in higher costs of production and thereby in a change in the conditions of competition. If it were not for protectionism such measures would immediately fail to attain the ends sought. They would result only in a restriction of domestic production and consequently in an increase of unemployment. The unemployed could find jobs only at lower wage rates; if they were not prepared to acquiesce in this solution they would remain unemployed. Even narrow-minded people would realize that economic laws are inexorable, and that government interference with business cannot attain its ends but must result in a state of affairs which—from the point of view of the government and the supporters of its policy—is even less desirable than the conditions which it was designed to alter.

Protectionism, of course, cannot brush away the unavoidable consequences of interventionism. It can only improve conditions, in appearance; it can only conceal the true state of affairs. Its aim is to raise domestic prices. The higher prices provide a compensation for the rise in costs of production. The worker does not suffer a cut in money wages but he has to pay more for the goods he wants to buy. As far as the home market is concerned the problem is seemingly settled.

But this brings us to a new problem: monopoly.

8.

Economic Nationalism and Domestic Monopoly Prices

The aim of the protective tariff is to undo the undesired consequences of the rise in domestic costs of production caused by government interference. The purpose is to preserve the competitive power of domestic industries in spite of the rise in costs of production.

However, the mere imposition of an import duty can attain this end only in the case of those commodities whose domestic production falls short of domestic demand. With industries producing more than is needed for domestic consumption a tariff alone would be futile unless supplemented by monopoly.

In an industrial European country, for example Germany, an import duty on wheat raises the domestic price to the level of the world market price plus the import duty. Although the rise in the domestic wheat price results in an expansion of domestic production on the one hand and a restriction of domestic consumption on the other hand, imports are still necessary for the satisfaction of domestic demand. As the costs of the marginal wheat dealer include both the world market price and the import duty, the domestic price goes up to this height.

It is different with those commodities that Germany produces in such quantities that a part can be exported. A German import duty on manufactures which Germany produces not only for the domestic market but for export too would be, as far as export trade is concerned, a futile measure to compensate for a rise in domestic costs of production. It is true that it would prevent foreign manufacturers from selling on the German market. But export trade must continue to be hampered by the rise in domestic production costs. On the other hand the competition between the domestic producers on the home market would eliminate those German plants in which production no longer paid with the rise in costs due to government interference. At the new equilibrium the domestic price would reach the level of the world market price plus a part of the import duty. Domestic consumption would now be lower than it was before the rise in domestic production costs and the imposition of the import duty. The restriction of domestic consumption and the falling off of exports mean a shrinking of production with consequent unemployment and an increased pressure on the labor market resulting in a drop in wage rates. The failure of the Sozialpolitik becomes manifest.*

But there is still another way out. The fact that the import duty has insulated the domestic market provides domestic producers with the opportunity to build up a monopolistic scheme. They can form a cartel and charge the domestic consumers monopoly prices which can go up to a level only slightly lower than the world market price plus the import duty. With their domestic monopoly profits they can afford to sell at lower prices abroad. Production goes on. The failure of the Sozialpolitik is skillfully concealed from the eyes of an ignorant public. But the domestic consumers must pay higher prices. What the worker gains by the rise in wage rates and by pro-labor legislation burdens him in his capacity as consumer.

But the government and the trade-union leaders have attained their goal. They can then boast that the entrepreneurs were wrong in predicting that higher wages and more labor legislation would make their plants unprofitable and hamper production.

Marxian myths have succeeded in surrounding the problem of monopoly with empty babble. According to the Marxian doctrines of imperialism, there prevails within an unhampered market society a tendency toward the establishment of monopolies. Monopoly, according to these doctrines, is an evil originating from the operation of the forces working in an unhampered capitalism. It is, in the eyes of the reformers, the worst of all drawbacks of the laissez-faire system; its existence is the best justification of interventionism; it must be the foremost aim of government interference with business to fight it. One of the most serious consequences of monopoly is that it begets imperialism and war.

There are, it is true, instances in which a monopoly—a world monopoly—of some products could possibly be established without the support of governmental compulsion and coercion. The fact that the natural resources for the production of mercury are very few, for example, might engender a monopoly even in the absence of governmental encouragement. There are instances, again, in which the high cost of transportation makes it possible to establish local monopolies for bulky goods, e.g., for some building materials in places unfavorably located. But this is not the problem with which most people are concerned when discussing monopoly. Almost all the monopolies that are assailed by public opinion and against which governments pretend to fight are government made. They are national monopolies created under the shelter of import duties. They would collapse with a regime of free trade.

The common treatment of the monopoly question is thoroughly mendacious and dishonest. No milder expression can be used to characterize it. It is the aim of the government to raise the domestic price of the commodities concerned above the world market level, in order to safeguard in the short run the operation of its pro-labor policies. The highly developed manufactures of Great Britain, the United States, and Germany would not need any protection against foreign competition were it not for the policies of their own governments in raising costs of domestic production. But these tariff policies, as shown in the case described above, can work only when there is a cartel charging monopoly prices on the domestic market. In the absence of such a cartel domestic production would drop, as foreign producers would have the advantage of producing at lower costs than those due to the new pro-labor measure. A highly developed trade-unionism, supported by what is commonly called “progressive labor legislation,” would be frustrated even in the short run if domestic prices were not maintained at a higher level than that of the world market, and if the exporters (if exports are to be continued) were not in a position to compensate the lower export prices out of the monopolistic profits drawn on the home market. Where the domestic cost of production is raised by government interference, or by the coercion and compulsion exercised by trade-unions, export trade will need to be subsidized. The subsidies may be openly granted as such by the government, or they may be disguised by monopoly. In this second case the domestic consumers pay the subsidies in the form of higher prices for the commodities which the monopoly sells at a lower price abroad. If the government were sincere in its antimonopolistic gestures, it could find a very simple remedy. The repeal of the import duty would brush away at one stroke the danger of monopoly. But governments and their friends are eager to raise domestic prices. Their struggle against monopoly is only a sham.

The correctness of the statement that it is the aim of the governments to raise prices can easily be demonstrated by referring to conditions in which the imposition of an import duty does not result in the establishment of a cartel monopoly. The American farmers producing wheat, cotton, and other agricultural products cannot, for technical reasons, form a cartel. Therefore the administration developed a scheme to raise prices through restriction of output and through withholding huge stocks from the market by means of government buying and government loans. The ends arrived at by this policy are a substitute for an infeasible farming cartel and farming monopoly.

No less conspicuous are the endeavors of various governments to create international cartels. If the protective tariff results in the formation of a national cartel, international cartelization could in many cases be attained by agreements between the national cartels. Such agreements are often very well served by another pro-monopoly activity of governments, the patents and other privileges granted to new inventions. However, where technical obstacles prevent the construction of national cartels—as is almost always the case with agricultural production—no such international agreements can be built up. Then the governments interfere again. History between the two world wars is an open record of state intervention to foster monopoly and restriction by international agreements. There were schemes for wheat pools, rubber and tin restrictions, and so on.* Of course, most of them collapsed very quickly.

Such is the true story of modern monopoly. It is not an outcome of unhampered capitalism and of an inherent trend of capitalist evolution, as the Marxians would have us believe. It is, on the contrary, the result of government policies aiming at a reform of market economy.

9.

Autarky

Interventionism aims at state control of market conditions. As the sovereignty of the national state is limited to the territory subject to its supremacy and has no jurisdiction outside its boundaries, it considers all kinds of international economic relations as serious obstacles to its policy. The ultimate goal of its foreign trade policy is economic self-sufficiency. The avowed tendency of this policy is, of course, only to reduce imports as far as possible; but as exports have no purpose but to pay for imports, they drop concomitantly.

The striving after economic self-sufficiency is even more violent in the case of socialist governments. In a socialist community production for domestic consumption is no longer directed by the tastes and wishes of the consumers. The central board of production management provides for the domestic consumer according to its own ideas of what serves him best; it takes care of the people but it no longer serves the consumer. But it is different with production for export. Foreign buyers are not subject to the authorities of the socialist state; they have to be served; their whims and fancies have to be taken into account. The socialist government is sovereign in purveying to the domestic consumers, but in its foreign-trade relations it encounters the sovereignty of the foreign consumer. On foreign markets it has to compete with other producers producing better commodities at lower cost. We have mentioned earlier how the dependence on foreign imports and consequently on exports influences the whole structure of German socialism.*

The essential goal of socialist production, according to Marx, is the elimination of the market. As long as a socialist community is still forced to sell a part of its production abroad—whether to foreign socialist governments or to foreign business—it still produces for a market and is subject to the laws of the market economy. A socialist system is defective as such as long as it is not economically self-sufficient.

The international division of labor is a more efficient system of production than is the economic autarky of every nation. The same amount of labor and of material factors of production yields a higher output. This surplus production benefits everyone concerned. Protectionism and autarky always result in shifting production from the centers where conditions are more favorable—i.e., from where the output for the same amount of physical input is higher—to centers where they are less favorable. The more productive resources remain unused while the less productive are utilized. The effect is a general drop in the productivity of human effort, and thereby a lowering of the standard of living all over the world.

The economic consequences of protectionist policies and of the trend toward autarky are the same for all countries. But there are qualitative and quantitative differences. The social and political results are different for comparatively overpopulated industrial countries and for comparatively underpopulated agricultural countries. In the predominantly industrial countries the prices of the most urgently needed foodstuffs are going up. This interferes more and sooner with the well-being of the masses than the corresponding rise in the prices of manufactured goods in the predominantly agricultural countries. Besides, the workers in the industrial countries are in a better position to make their complaints heard than the farmers and farm hands in the agricultural countries. The statesmen and economists of the predominantly industrial countries become frightened. They realize that natural conditions are putting a check on their country’s endeavors to replace imports of food and raw materials by domestic production. They clearly understand that the industrial countries of Europe can neither feed nor clothe their population out of domestic products alone. They foresee that the trend toward more protection, more insulation of every country, and finally self-sufficiency will bring about a tremendous fall in the standard of living, if not actual starvation. Thus they look around for remedies.

German aggressive nationalism is animated by these considerations. For more than sixty years German nationalists have been depicting the consequences which the protectionist policies of other nations must eventually have for Germany. Germany, they pointed out, cannot live without importing food and raw materials. How will it pay for these imports when one day the nations producing these materials have succeeded in the development of their domestic manufactures and bar access to German exports? There is, they told themselves, only one redress: We must conquer more dwelling space, more Lebensraum.

The German nationalists are fully aware that many other nations—for example, Belgium—are in the same unfavorable position. But, they say, there is a very important difference. These are small nations. They are therefore helpless. Germany is strong enough to conquer more space. And, happily for Germany, they say today, there are two other powerful nations, which are in the same position as Germany, namely, Italy and Japan. They are the natural allies of Germany in these wars of the have-nots against the haves.

Germany does not aim at autarky because it is eager to wage war. It aims at war because it wants autarky—because it wants to live in economic self-sufficiency.

10.

German Protectionism

The second German Empire, founded at Versailles in 1871, was not only a powerful nation; it was—in spite of the depression which started in 1873—economically very prosperous. Its industrial plants were extremely successful in competing—abroad and at home—with foreign products. Some grumblers found fault with German manufactures; German goods, they said, were cheap but inferior. But the great foreign demand was precisely for such cheap goods. The masses put more stress upon cheapness than upon fine quality. Whoever wanted to increase sales had to cut prices.

In those optimistic 1870’s everybody was fully convinced that Europe was on the eve of a period of peace and prosperity. There were to be no more wars; trade barriers were doomed to disappear; men would be more eager to build up and to produce than to destroy and to kill each other. Of course, farsighted men could not overlook the fact that Europe’s cultural preëminence would slowly vanish. Natural conditions for production were more favorable in overseas countries. Capitalism was on the point of developing the resources of backward nations. Some branches of production would not be able to stand the competition of the newly opened areas. Agricultural production and mining would drop in Europe; Europeans would buy such goods by exporting manufactures. But people did not worry. Intensification of the international division of labor was in their eyes not a disaster but on the contrary a source of richer supply. Free trade was bound to make all nations more flourishing.

The German liberals advocated free trade, the gold standard, and freedom of domestic business. German manufacturing did not need any protection. It triumphantly swept the world market. It would have been nonsensical to bring forward the infant-industry argument. German industry had reached its maturity.

Of course, there were still many countries eager to penalize imports. However, the inference from Ricardo’s free-trade argument was irrefutable. Even if all other countries cling to protection, every nation serves its own interest best by free trade. Not for the sake of foreigners but for the sake of their own nation, the liberals advocated free trade. There was the great example set by Great Britain, and by some smaller nations, like Switzerland. These countries did very well with free trade. Should Germany adopt their policies? Or should it imitate half-barbarian nations like Russia?

But Germany chose the second path. This decision was a turning point in modern history.

There are many errors current concerning modern German protectionism.

It is important to recognize first of all that the teachings of Frederick List have nothing to do with modern German protectionism. List did not advocate tariffs for agricultural products. He asked for protection of infant industries. In doing this he underrated the competitive power of contemporary German manufacturing. Even in those days, in the early 1840’s, German industrial production was already much stronger than List believed. Thirty to forty years later it was paramount on the European continent and could very successfully compete on the world market. List’s doctrines played an important role in the evolution of protectionism in Eastern Europe and in Latin America. But the German supporters of protectionism were not justified in referring to List. He did not unconditionally reject free trade; he advocated protection of manufacturing only for a period of transition, and he nowhere suggested protection for agriculture. List would have violently opposed the trend of German foreign-trade policy of the last sixty-five years.

The representative literary champion of modern German protectionism was Adolf Wagner. The essence of his teachings is this: All countries with an excess production of foodstuffs and raw materials are eager to develop domestic manufacturing and to bar access to foreign manufactures; the world is on the way to economic self-sufficiency for each nation. In such a world what will be the fate of those nations which can neither feed nor clothe their citizens out of domestic foodstuffs and raw materials? They are doomed to starvation.

Adolf Wagner was not a keen mind. He was a poor economist. The same is true of his partisans. But they were not so dull as to fail to recognize that protection is not a panacea against the dangers which they depicted. The remedy they recommended was conquest of more space—war. They asked for protection of German agriculture in order to encourage production on the poor soil of the country, because they wanted to make Germany independent of foreign supplies of food for the impending war. Import duties for food were in their eyes a short-run remedy only, a measure for a period of transition. The ultimate remedy was war and conquest.

It would be wrong, however, to assume that the incentive to Germany’s embarking upon protectionism was a propensity to wage war. Wagner, Schmoller, and the other socialists of the chair, in their lectures and seminars, long preached the gospel of conquest. But before the end of the ’nineties they did not dare to propagate such views in print. Considerations of war economy, moreover, could justify protection only for agriculture; they were not applicable in the case of protection for the processing industries. The military argument of war preparedness did not play an important role in the protection of Germany’s industrial production.

The main motive for the tariff on manufactures was the Sozialpolitik. The pro-labor policy raised the domestic costs of production and made it necessary to safeguard the policy’s short-run effects. Domestic prices had to be raised above the world market level in order to escape the dilemma of either lower money wages or a restriction of exports and increase of unemployment. Every new progress of the Sozialpolitik, and every successful strike, disarranged conditions to the disadvantage of the German enterprises and made it harder for them to outdo foreign competitors both on the domestic and on the foreign markets. The much glorified Sozialpolitik was only possible within an economic body sheltered by tariffs.

Thus Germany developed its characteristic system of cartels. The cartels charged the domestic consumers high prices and sold cheaper abroad. What the worker gained from labor legislation and union wages was absorbed by higher prices. The government and the trade-union leaders boasted of the apparent success of their policies: the workers received higher money wages. But real wages did not rise more than the marginal productivity of labor.

Only a few observers saw through all this, however. Some economists tried to justify industrial protectionism as a measure for safeguarding the fruits of Sozialpolitik and of unionism; they advocated social protectionism (den sozialen Schutzzoll). They failed to recognize that the whole process demonstrated the futility of coercive government and union interference with the conditions of labor. The greater part of public opinion did not suspect at all that Sozialpolitik and protection were closely linked together. The trend toward cartels and monopoly was in their opinion one of the many disastrous consequences of capitalism. They bitterly indicted the greediness of capitalists. The Marxians interpreted it as that concentration of capital which Marx had predicted. They purposely ignored the fact that it was not an outcome of the free evolution of capitalism but the result of government interference, of tariffs and—in the case of some branches, like potash and coal—of direct government compulsion. Some of the less shrewd socialists of the chair (Lujo Brentano, for example) went so far in their inconsistency as to advocate at the same time free trade and a more radical pro-labor policy.

In the thirty years preceding the first World War Germany could eclipse all other European countries in pro-labor policies because it above all indulged in protectionism and subsequently in cartelization.

When, later, in the course of the depression of 1929 and the following years, unemployment figures went up conspicuously because trade-unions would not accept a reduction of boom wage rates, the comparatively mild tariff protectionism turned into the hyper-protectionist policies of the quota system, monetary devaluation, and foreign exchange control. At that time Germany was no longer ahead in pro-labor policies; other countries had surpassed it. Great Britain, once the champion of free trade, adopted the German idea of social protection. So did all other countries. Up-to-date hyper-protectionism is the corollary of present-day Sozialpolitik.

There cannot be any doubt that for nearly sixty years Germany set the example in Europe both of Sozialpolitik and of protectionism. But the problems involved are not Germany’s problems alone.

The most advanced countries of Europe have poor domestic resources. They are comparatively overpopulated. They are in a very unlucky position indeed in the present trend toward autarky, migration barriers, and expropriation of foreign investments. Insulation means for them a severe fall in standards of living. After the present war Great Britain—with its foreign assets gone—will be in the same position as Germany. The same will be true for Italy, Belgium, Switzerland. Perhaps France is better off because it has long had a low birth rate. But even the smaller, predominantly agricultural countries of the European East are in a critical position. How should they pay for imports of cotton, coffee, various minerals, and so on? Their soil is much poorer than that of Canada or the American wheat belt; its products cannot compete on the world market.

Thus the problem is not a German one; it is a European problem. It is a German problem only to the extent that the Germans tried—in vain—to solve it by war and conquest.

IV

Etatism and Nationalism

1.

The Principle of Nationality

In the early nineteenth century the political vocabulary of the citizens of the United Kingdom of Great Britain and Ireland did not differentiate between the concepts state, people, and nation. The conquests which expanded the realm and brought countries and their inhabitants into subjection did not alter the size of the nation and the state. These annexed areas, as well as the overseas settlements of British subjects, remained outside the state and the nation. They were property of the crown under the control of Parliament. The nation and the people were the citizens of the three kingdoms, England, Scotland, and Ireland. England and Scotland had formed a union in 1707; in 1801 Ireland joined this union. There was no intention of incorporating into this body the citizens settled beyond the sea in North America. Every colony had its own parliament and its own local government. When the Parliament of Westminster attempted to include in its jurisdiction the colonies of New England and those south of New England, it kindled the conflict which resulted in American independence. In the Declaration of Independence the thirteen colonies call themselves a people different from the people represented in the Parliament at Westminster. The individual colonies, having proclaimed their right to independence, formed a political union, and thus gave to the new nation, set up by nature and by history, an adequate political organization.

Even at the time of the American conflict British liberals sympathized with the aims of the colonists. In the course of the nineteenth century Great Britain fully recognized the right of the white settlers in overseas possessions to establish autonomous governments. The citizens of the dominions are not members of the British nation. They form nations of their own with all the rights to which civilized peoples are entitled. There has been no effort to expand the territory from which members are returned to the Parliament of Westminster. If autonomy is granted to a part of the Empire, that part becomes a state with its own constitution. The size of the territory whose citizens are represented in the Parliament at London has not expanded since 1801; it was narrowed by the founding of the Irish Free State.1

For the French Revolutionists the terms state, nation, and people were also identical. France was for them the country within the historical frontiers. Foreign enclaves (like papal Avignon and the possessions of German princes) were according to natural law parts of France, and therefore to be reunited. The victorious wars of the Revolution and of Napoleon I temporarily relegated these notions to oblivion. But after 1815 they were restored to their previous meaning. France is the country within the frontiers fixed by the Congress of Vienna. Napoleon III later incorporated into this realm Savoy and Nice, districts with French-speaking inhabitants for whom there was no longer room left in the new Italian kingdom in which the state of Savoy-Piedmont-Sardinia had been merged. The French were not enthusiastic about this expansion of their country; the new districts were slow to be assimilated to the French commonwealth. The plans of Napoleon III to acquire Belgium, Luxembourg, and the left bank of the Rhine were not popular in France. The French do not consider the Walloons or the French-speaking Swiss or Canadians members of their nation or people. They are in their eyes French-speaking foreigners, good old friends, but not Frenchmen.

It was different with the German and Italian liberals. The states which they wanted to reform were products of dynastic warfare and intermarriage; they could not be considered natural entities. It would have been paradoxical indeed to destroy the despotism of the prince of Reuss Junior Branch in order to establish a democratic government in the scattered territories owned by that potentate. The subjects of such princelings did not consider themselves Reussians of the Junior Branch or Saxe-Weimar-Eisenachians, but Germans. They did not aim at a liberal Schaumburg-Lippe. They wanted a liberal Germany. It was the same in Italy. The Italian liberals did not fight for a free state of Parma or of Tuscany but for a free Italy. As soon as liberalism reached Germany and Italy the problem of the extent of the state and its boundaries was raised. Its solution seemed easy. The nation is the community of all people speaking the same language; the state’s frontiers should coincide with the linguistic demarcations. Germany is the country inhabited by German-speaking people; Italy is the land of the people using the Italian idiom. The old border lines drawn by the intrigues of dynasties were doomed to disappear. Thus the right of self-determination and of government by the people, as expounded by Western liberalism, becomes transformed into the principle of nationality as soon as liberalism becomes a political factor in Central Europe. The political terminology begins to differentiate between state and nation (people). The people (the nation) are all men speaking the same idiom; nationality means community of language.

According to these ideas, every nation should form an independent state, including all members of the nation. When this has one day been achieved there will be no more wars. The princes fight each other because they wish to increase their power and wealth by conquest. No such motives are present with nations. The extent of a nation’s territory is determined by nature. The national boundaries are the linguistic boundaries. No conquest can make a nation bigger, richer, or more powerful. The principle of nationality is the golden rule of international law which will bring undisturbed peace to Europe. While kings were still planning wars and conquests the revolutionary movements of Young Germany and of Young Italy were already coöperating for the realization of this happy constitution of a New Europe. The Poles and Hungarians joined the choir. Their aspirations also met with the sympathies of liberal Germany. German poets glorified the Polish and Hungarian struggles for independence.

But the aspirations of the Poles and Magyars differed in a very important way from those of the German and Italian liberals. The former aimed at a reconstruction of Poland and Hungary within their old historical boundaries. They did not look forward to a new liberal Europe but backward to the glorious past of their victorious kings and conquerors, as depicted by their historians and writers. Poland was for the Poles all the countries that their kings and magnates had once subjugated, Hungary was for the Magyars all the countries that had been ruled in the Middle Ages by the successors of Saint Stephen. It did not matter that these realms included many people speaking idioms other than Polish and Hungarian. The Poles and the Magyars paid lip service to the principles of nationality and self-determination; and this attitude made the liberals of the West sympathetic to their programs. Yet what they planned was not the liberation but the oppression of other linguistic groups.

So too with the Czechs. It is true that in earlier days some champions of Czech independence proposed a partition of Bohemia according to linguistic demarcations. But they were very soon silenced by their fellow citizens, for whom Czech self-determination was synonymous with the oppression of millions of non-Czechs.

The principle of nationality was derived from the liberal principle of self-determination. But the Poles, the Czechs, and the Magyars substituted for this democratic principle an aggressive nationalism aiming at the domination of people speaking other languages. Very soon German and Italian nationalists and many other linguistic groups adopted the same attitude.

It would be a mistake to ascribe the ascendancy of modern nationalism to human wickedness. The nationalists are not innately aggressive men; they become aggressive through their conception of nationalism. They are confronted with conditions which were unknown to the champions of the old principle of self-determination. And their etatist prejudices prevent them from finding a solution for the problems they have to face other than that provided by aggressive nationalism.

What the Western liberals have failed to recognize is that there are large territories inhabited by people of different idioms. This important fact could once be neglected in Western Europe but it could not be overlooked in Eastern Europe. The principle of nationality cannot work in a country where linguistic groups are inextricably mixed. Here you cannot draw boundaries which clearly segregate linguistic groups. Every territorial division necessarily leaves minorities under foreign rule.

The problem becomes especially fateful because of the changeability of linguistic structures. Men do not necessarily stay in the place of their birth. They have always migrated from comparatively overpopulated into comparatively underpopulated areas. In our age of rapid economic change brought about by capitalism, the propensity to migrate has increased to an unprecedented extent. Millions move from the agricultural districts into the centers of mining, trade, and industry. Millions move from countries where the soil is poor to those offering more favorable conditions for agriculture. These migrations transform minorities into majorities and vice versa. They bring alien minorities into countries formerly linguistically homogeneous.

The principle of nationality was based on the assumption that every individual clings throughout his life to the language of his parents, which he has learned in early childhood. This too is an error. Men can change their language in the course of their life; they can daily and habitually speak a language other than that of their parents. Linguistic assimilation is not always the spontaneous outcome of the conditions under which the individual lives. It is caused not only by environment and cultural factors; governments can encourage it or even achieve it by compulsion. It is an illusion to believe that language is a non-arbitrary criterion for an impartial delimitation of boundaries. The state can, under certain conditions, influence the linguistic character of its citizens.

The main tool of compulsory denationalization and assimilation is education. Western Europe developed the system of obligatory public education. It came to Eastern Europe as an achievement of Western civilization. But in the linguistically mixed territories it turned into a dreadful weapon in the hands of governments determined to change the linguistic allegiance of their subjects. The philanthropists and pedagogues of England who advocated public education did not foresee what waves of hatred and resentment would rise out of this institution.

But the school is not the only instrument of linguistic oppression and tyranny. Etatism puts a hundred more weapons in the hands of the state. Every act of the government which can and must be done by administrative discretion with regard to the special merits of each case can be used for the achievement of the government’s political aims. The members of the linguistic minority are treated like foes or like outlaws. They apply in vain for licenses, for foreign exchange under a system of foreign exchange control, or for import licenses under a quota system. Their shops and plants, their clubhouses, school buildings, and assembly halls are closed by the police because they allegedly do not comply with the rules of the building code or with the regulations for preventing fires. Their sons somehow fail to pass the examinations for civil service jobs. Protection is denied to their property, persons, and lives when they are attacked by armed gangs of zealous members of the ruling linguistic group. They cannot even undertake to defend themselves: the licenses required for the possession of arms are denied to them. The tax collectors always find that they owe the treasury much more than the amount shown on the returns they have filed.

All this indicates clearly why the attempts of the Covenant of the League of Nations to protect minorities by international law and international tribunals were doomed to failure. A law cannot protect anybody against measures dictated by alleged considerations of economic expediency. All sorts of government interference in business, in the countries inhabited by different linguistic groups, are used for the purpose of injuring the pariahs. Custom tariffs, taxation, foreign exchange regulations, subsidies, labor legislation, and so on may be utilized for discrimination, even though this cannot be proved in court procedure. The government can always explain these measures as being dictated by purely economic considerations. With the aid of such measures life for the undesirables, without formal violation of legal equality, can be made unbearable. In an age of interventionism and socialism there is no legal protection available against an ill-intentioned government. Every government interference with business becomes an act of national warfare against the members of the persecuted linguistic groups. With the progress of etatism the antagonism between the linguistic groups becomes more bitter and more implacable.

Thus the meaning of the concepts of Western political terminology underwent a radical change in Central and Eastern Europe. The people differentiate between the good state and the bad state. They worship the state as do all other etatists. But they mean only the good state—i.e., the state in which their own linguistic group dominates. For them this state is God. The other states in which their own linguistic group does not dominate are, in their opinion, devils. Their concept of fellow citizens includes all people speaking their own language, all Volksgenossen, as the Germans say, without any regard to the country where they live; it does not include citizens of their own state who happen to speak another language. These are foes and barbarians. The Volksgenossen living under a foreign yoke must be freed. They are the Irredenta, the unredeemed people.

And every means is believed right and fair, if it can accelerate the coming of the day of redemption. Fraud, felonious assault, and murder are noble virtues if they serve the cause of Irredentism. The war for the liberation of the Volksgenossen is a just war. The greatness of the linguistic group and the glory of the right and true state are the supreme criteria of morality. There is but one thing that counts—their own linguistic group, the community of men speaking the same language, the Volksgemeinschaft.

2.

The Linguistic Group

Economists, sociologists, and historians have provided us with different definitions of the term nation. But we are not interested here in what meaning social science ought to attach to it. We are inquiring what meaning the European supporters of the principle of nationality attach to the concepts nation and nationality. It is important to establish the way in which these terms are used in the vocabulary of present-day political action and the role they play in actual life and in contemporary conflicts.

The principle of nationality is unknown to American or Australian politics. When the Americans freed themselves from the rule of Great Britain, Spain, and Portugal their aim was self-determination, not the establishment of national states in the sense that the principle of nationality gives to the term nation. Linguistically they resembled the old countries overseas from which their ancestors once came to America. The people who now form the United States of America did not want to annex English-speaking Canada. Nor did the French-speaking Canadians who opposed the British system of administration fight for a French-speaking state. Both linguistic groups coöperate in a more or less peaceful way within the Dominion of Canada; there is no Irredenta. Latin America is also free from linguistic problems. What separates Argentina from Chile or Guatemala from Mexico is not the idiom. There are many racial, social, political, and even religious conflicts in the Western Hemisphere too. But in the past no serious linguistic problem has troubled American political life.

Neither are there any grave linguistic antagonisms in present-day Asia. India is linguistically not homogeneous; but the religious discrepancy between Hinduism and Islam is much more important there than the problem of idioms.

Conditions may perhaps soon change. But at the present moment the principle of nationality is more or less a European concept. It is the main political problem of Europe.

According to the principle of nationality, then, every linguistic group must form an independent state, and this state must embrace all people speaking this language. The prestige of this principle is so great that a group of men who for some reason wish to form a state of their own which would otherwise not conform to the principle of nationality are eager to change their language in order to justify their aspirations in the light of this principle.

The Norwegians now speak and write an idiom that is almost identical with that of Denmark. But they are not prepared to renounce their political independence. To provide linguistic support for their political program, eminent Norwegians have wanted to create a language of their own; to form out of their local dialects a new language, something like a return to the old Norse used up to the fifteenth century. The greatest Norwegian writer, Henrik Ibsen, considered these endeavors lunacy and scorned them as such in Peer Gynt.*

The people of Ireland speak and write English. Some of the foremost writers of the English language are Irishmen. But the Irish want to be politically independent. Therefore, they reason, it is necessary to return to the Gaelic idiom once used in their country. They have excavated this language from old books and manuscripts and try to revive it. To some extent they have even succeeded.

The Zionists want to create an independent state composed of those professing the Jewish religion. For them the Jews are a people and a nation. We are not concerned here with whether the historical arguments brought forward for the justification of these claims are correct or not, or whether the plan is politically sound or unsound. But it is a fact that the Jews speak many different languages; from the viewpoint of the principle of nationality the aspirations of Zionism are no less irregular than those of the Irish. Therefore the Zionists try to induce the Jews to speak and write Hebrew. These plans are paradoxical in the face of the fact that in the days of Christ the inhabitants of Palestine did not speak Hebrew; their native tongue was Aramaic. Hebrew was the language of the religious literature only. It was not understood by the people. The second language generally known was Greek.†

These facts demonstrate the meaning and prestige of the principle of nationality. The terms nation and nationality as applied by the advocates of this principle are equivalent to the term “linguistic group.” The terms used in the Habsburg Empire for these conflicts were die nationale Frage (the national question), and synonymously die Sprachenfrage (the linguistic problem), nationale Kämpfe (national struggles), and synonymously Sprachenkämpfe (linguistic struggles). The main subject of conflict has always been which language should be used by the administration, by the tribunals, and by the army, and which language should be taught in the schools?

It is a serious error of English and French books and newspapers to refer to these conflicts as racial. There is no conflict of races in Europe. No distinct bodily features which an anthropologist could establish with the aid of the scientific methods of anatomy separate the people belonging to different groups. If you presented one of them to an anthropologist he would not be able to decide by biological methods whether he was a German, Czech, Pole, or Hungarian.

Neither have the people belonging to any one of these groups a common descent. The right bank of the Elbe River, the whole of northeastern Germany, eight hundred years ago was inhabited only by Slavs and Baltic tribes. It became German-speaking in the course of the processes which the German historians call the colonization of the East. Germans from the west and south migrated into this area; but in the main its present population is descended from the indigenous Slavs and Baltic peoples who, under the influence of church and school, adopted the German language. Prussian chauvinists, of course, assert that the native Slavs and Balts were exterminated and that the whole population today is descended from German colonists. There is not the slightest evidence for this doctrine. The Prussian historians invented it in order to justify in the eyes of German nationalists Prussia’s claim to hegemony in Germany. But even they have never dared to deny that the Slav ancestry of the autochthonous princely dynasties (of Pomerania, Silesia, and Mecklenburg) and of most of the aristocratic families is beyond doubt. Queen Louise of Prussia, whom all German nationalists consider the paragon of German womanhood, was a scion of the ducal house of Mecklenburg, whose originally Slav character has never been contested. Many noble families of the German northeast can be traced back to Slav ancestors. The genealogical trees of the middle classes and the peasantry, of course, cannot be established as far back as those of the nobility; this alone explains why the proof of Slav origin cannot be provided for them. It is indeed paradoxical to assume that the Slavonic princes and knights should have exterminated their Slav serfs in order to settle their villages with imported German serfs.

Shifting from one of these linguistic groups to another occurred not only in earlier days. It happened and happens so frequently that nobody remarks upon it. Many outstanding personalities in the Nazi movement in Germany and Austria and in the Slavonic, Hungarian, and Rumanian districts claimed by Nazism were the sons of parents whose language was not German. Similar conditions prevail all over Europe. In many cases the change of loyalties has been accompanied by a change in family name; more often people have retained their foreign-sounding family names. The Belgian poets Maeterlinck and Verhaeren have written in French; their names suggest a Flemish ancestry. The Hungarian poet Alexander Petöfi, who died for the cause of the Hungarian revolution in the battle of Schässburg (1849), was the son of a Slavonic family named Petrovics. Thousands of such cases are known to everyone familiar with European soil and people. Europe too is a melting pot, or rather a collection of melting pots.

Whenever the question is raised whether a group must be considered a distinct nation and therefore entitled to claim political autonomy, the issue is whether the idiom involved is a distinct language or only a dialect. The Russians maintain that the Ukrainian or Ruthenian idiom is a dialect, like Platt-Deutsch in northern Germany or Proven-çal in southern France. The Czechs use the same argument against the political aspirations of the Slovaks, and the Italians against the Rhaeto-Romanic idiom. Only a few years ago the Swiss Government gave to the Romansh the legal status of a national language. Many Nazis declare that Dutch is not a language but a German dialect—a Platt which has arrogated to itself the status of a language.

The principle of nationality has been late in penetrating into the political thought of Switzerland. There are two reasons why Switzerland has up to now successfully resisted its disintegrating power.

The first factor is the quality of the three main languages of Switzerland: German, French, and Italian. For every inhabitant of continental Europe it is a great advantage to learn one of these languages. If a German-Swiss acquires command of French or Italian he not only becomes better equipped for business life but gains access to one of the great literatures of the world. It is the same for the French-Swiss and for the Italian-Swiss when learning Italian or German. The Swiss, therefore, do not object to a bilingual education. They consider it a great help for their children to know one or both of the two other main languages of the country. But what gain can a French-Belgian derive from a knowledge of Flemish, a Slovak from a knowledge of Hungarian, or a Hungarian from a knowledge of Rumanian? It is almost indispensable for an educated Pole or Czech to know German; but for a German it is a waste of time to learn Czech or Polish. This explains why the educational problem is of minor importance under the linguistic conditions of Switzerland.

The second factor is the political structure. The countries of eastern Europe were never liberal. They jumped from monarchical absolutism directly into etatism. Since the 1850’s they have clung to the policy of interventionism which only in the last decades has overwhelmed the West. Their intransigent economic nationalism is a consequence of their etatism. But on the eve of the first World War Switzerland was still a predominantly liberal country. Since then it has turned more and more to interventionism; and as that spread the linguistic problem has become more serious. There is Italian Irredentism in the Ticino; there is a pro-Nazi party in the German-speaking parts, and there are French nationalists in the southwest. A victory of the allied democracies will doubtless stop these movements; but in that case Switzerland’s integrity will be safeguarded by the same factor to which it owed its origin and its maintenance in the past, namely, the political conditions of its neighbor countries.

There is one instance in continental Europe in which the characteristic feature that separates two nations is not language but religion and the alphabetical types used in writing and printing. The Serbs and the Croats speak the same idiom; but while the Serbs use the Cyrillic alphabet the Croats use the Roman. The Serbs adhere to the orthodox creed of the Oriental Church; the Croats are Roman Catholics.

It must be emphasized again and again that racism and considerations of racial purity and solidarity play no role in these European struggles of linguistic groups. It is true that the nationalists often resort to “race” and “common descent” as catchwords. But that is mere propaganda without any practical effect on policies and political actions. On the contrary, the nationalists consciously and purposely reject racism and racial characteristics of individuals when dealing with political problems and activities. The German racists have provided us with an image of the prototype of the noble German or Aryan hero and with a biologically exact description of his bodily features. Every German is familiar with this archetype and most of them are convinced that this portrait is correct. But no German nationalist has ever ventured to use this pattern to draw the distinction between Germans and non-Germans. The criterion of Germanism is found not in a likeness to this standard but in the German tongue.* Breaking up the German-speaking group according to racial characteristics would result in eliminating at least 80 per cent of the German people from the ranks of the Germans. Neither Hitler nor Goebbels nor most of the other champions of German nationalism fit the Aryan prototype of the racial myth.

The Hungarians are proud to be the descendants of a Mongolian tribe which in the early Middle Ages conquered the country they call Hungary. The Rumanians boast their descent from Roman colonists. The Greeks consider themselves scions of the ancient Greeks. Historians are rather skeptical in regard to these claims. The modern political nationalism of these nations ignores them. It finds the practical criterion of the nation in the language instead of in racial characteristics or in the proof of descent from the alleged ancestry.

3.

Liberalism and the Principle of Nationality

The foes of liberalism have failed in their endeavors to disprove liberalism’s teachings concerning the value of capitalism and democratic government. Have they succeeded better in criticizing the third part of the liberal program—namely, the proposals for peaceful coöperation among different nations and states? In answering this question we must emphasize again that the principle of nationality does not represent the liberal solution of the international problem. The liberals urged self-determination. The principle of nationality is an outcome of the interpretation which people in Central and Eastern Europe, who never fully grasped the meaning of liberal ideas, gave to the principle of self-determination. It is a distortion, not a perfection, of liberal thought.

We have already shown that the Anglo-Saxon and the French fathers of liberal ideas did not recognize the problems involved. When these problems became visible, the old liberalism’s creative period had already been brought to an end. The great champions were gone. Epigones, unable successfully to combat the growing socialist and interventionist tendencies, filled the stage. These men lacked the strength to deal with new problems.

Yet, the Indian summer of the old classical liberalism produced one document worthy of the great tradition of French liberalism. Ernest Renan, it is true, cannot really be considered a liberal. He made concessions to socialism, because his grasp of economic theories was rather poor; he was consequently too accommodating to the antidemocratic prejudices of his age. But his famous lecture, Qu’est-ce qu’une nation?, delivered in the Sorbonne on March 11, 1882, is thoroughly inspired by liberal thought.* It was the last word spoken by the older Western liberalism on the problems of state and nation.

For a correct understanding of Renan’s ideas it is necessary to remember that for the French—as for the English—the terms nation and state are synonymous. When Renan asks: What is a nation? he means: What should determine the boundaries of the various states? And his answer is: Not the linguistic community, not the racial kinship founded on parentage from common ancestors, not religious congeniality, not the harmony of economic interests, not geographical or strategical considerations, but—the right of the population to determine its own destiny.† The nation is the outcome of the will of human beings to live together in one state.‡ The greater part of the lecture is devoted to showing how this spirit of nationality originates.

The nation is a soul, a moral principle (“une âme, un principe spirituel”).§ A nation, says Renan, daily confirms its existence by manifesting its will to political coöperation within the same state; a daily repeated plebiscite, as it were. A nation, therefore, has no right to say to a province: You belong to me, I want to take you. A province consists of its inhabitants. If anybody has a right to be heard in this case it is these inhabitants. Boundary disputes should be settled by plebiscite.‖

It is important to realize how this interpretation of the right of self-determination differs from the principle of nationality. The right of self-determination which Renan has in mind is not a right of linguistic groups but of individual men. It is derived from the rights of man. “Man belongs neither to his language nor to his race; he belongs to himself.”¶

Seen from the point of view of the principle of nationality the existence of states like Switzerland, composed of people of different languages, is as anomalous as the fact that the Anglo-Saxons and the French are not eager to unite into one state all the people speaking their own language. For Renan there is nothing irregular in these facts.

More noteworthy than what Renan says is what he does not say. Renan sees neither the fact of linguistic minorities nor that of linguistic changes. Consult the people; let them decide. All right. But what if a conspicuous minority dissents from the will of the majority? To that objection Renan does not make a satisfactory answer. He declares—with regard to the scruple that plebiscites could result in the disintegration of old nations and in a system of small states (we say today Balkanization)—that the principle of self-determination should not be abused but only employed in a general way (d’une façon très générale).*

Renan’s brilliant exposition proves that the threatening problems of Eastern Europe were unfamiliar to the West. He prefaced his pamphlet with a prophecy: We are rushing into wars of destruction and extermination, because the world has abandoned the principle of free union and has granted to the nations, as it once did to the dynasties, the right to annex provinces contrary to their desires.† But Renan saw only half the problem involved and therefore his solution could be but a half-way one.

Yet it would be wrong to say that liberalism has failed in this field. Liberalism’s proposals for the coexistence and coöperation of nations and states are only a part of the total liberal program. They can be realized, they can be made to work only within a liberal world. The main excellence of the liberal scheme of social, economic, and political organization is precisely this—that it makes the peaceful coöperation of nations possible. It is not a shortcoming of the liberal program for international peace that it cannot be realized within an antiliberal world and that it must fail in an age of interventionism and socialism.

In order to grasp the meaning of this liberal program we need to imagine a world order in which liberalism is supreme. Either all the states in it are liberal, or enough are so that when united they are able to repulse an attack of militarist aggressors. In this liberal world, or liberal part of the world, there is private property in the means of production. The working of the market is not hampered by government interference. There are no trade barriers; men can live and work where they want. Frontiers are drawn on the maps but they do not hinder the migrations of men and shipping of commodities. Natives do not enjoy rights that are denied to aliens. Governments and their servants restrict their activities to the protection of life, health, and property against fraudulent or violent aggression. They do not discriminate against foreigners. The courts are independent and effectively protect everybody against the encroachments of officialdom. Everyone is permitted to say, to write, and to print what he likes. Education is not subject to government interference. Governments are like night-watchmen whom the citizens have entrusted with the task of handling the police power. The men in office are regarded as mortal men, not as superhuman beings or as paternal authorities who have the right and duty to hold the people in tutelage. Governments do not have the power to dictate to the citizens what language they must use in their daily speech or in what language they must bring up and educate their children. Administrative organs and tribunals are bound to use each man’s language in dealing with him, provided this language is spoken in the district by a reasonable number of residents.

In such a world it makes no difference where the frontiers of a country are drawn. Nobody has a special material interest in enlarging the territory of the state in which he lives; nobody suffers loss if a part of this area is separated from the state. It is also immaterial whether all parts of the state’s territory are in direct geographical connection, or whether they are separated by a piece of land belonging to another state. It is of no economic importance whether the country has a frontage on the ocean or not. In such a world the people of every village or district could decide by plebiscite to which state they wanted to belong. There would be no more wars because there would be no incentive for aggression. War would not pay. Armies and navies would be superfluous. Policemen would suffice for the fight against crime. In such a world the state is not a metaphysical entity but simply the producer of security and peace. It is the night-watchman, as Lassalle contemptuously dubbed it. But it fulfills this task in a satisfactory way. The citizen’s sleep is not disturbed, bombs do not destroy his home, and if somebody knocks at his door late at night it is certainly neither the Gestapo nor the O.G.P.U.

The reality in which we have to live differs very much from this perfect world of ideal liberalism. But this is due only to the fact that men have rejected liberalism for etatism. They have burdened the state, which could be a more or less efficient night-watchman, with a multitude of other duties. Neither nature, nor the working of forces beyond human control, nor inevitable necessity has led to etatism, but the acts of men. Entangled by dialectic fallacies and fantastic illusions, blindly believing in erroneous doctrines, biased by envy and insatiable greed, men have derided capitalism and have substituted for it an order engendering conflicts for which no peaceful solution can be found.

4.

Aggressive Nationalism

Etatism—whether interventionism or socialism—must lead to conflict, war, and totalitarian oppression of large populations. The right and true state, under etatism, is the state in which I or my friends, speaking my language and sharing my opinions, are supreme. All other states are spurious. One cannot deny that they too exist in this imperfect world. But they are enemies of my state, of the only righteous state, even if this state does not yet exist outside of my dreams and wishes. Our German Nazi state, says Steding, is the Reich; the other states are deviations from it.* Politics, says the foremost Nazi jurist, Carl Schmitt, is the discrimination between friend and foe.†

In order to understand these doctrines we must look first at the liberal attitude toward the problem of linguistic antagonisms.

He who lives as a member of a linguistic minority, within a community where another linguistic group forms the majority, is deprived of the means of influencing the country’s politics. (We are not considering the special case in which such a linguistic minority occupies a privileged position and oppresses the majority as, for example, the German-speaking aristocracy in the Baltic duchies in the years preceding the Russianization of these provinces.) Within a democratic community public opinion determines the outcome of elections, and thereby the political decisions. Whoever wants to make his ideas prevalent in political life must try to influence public opinion through speech and writing. If he succeeds in convincing his fellow citizens, his ideas obtain support and persist.

In this struggle of ideas linguistic minorities cannot take part. They are voiceless spectators of the political debates out of which the deciding vote emerges. They cannot participate in the discussions and negotiations. But the result determines their fate too. For them democracy does not mean self-determination; other people control them. They are second-class citizens. This is the reason why men in a democratic world consider it a disadvantage to be members of a linguistic minority. It explains at the same time why there were no linguistic conflicts in earlier ages, where there was no democracy. In this age of democracy people in the main prefer to live in a community where they speak the same language as the majority of their fellow citizens. Therefore in plebiscites concerning the question to which state a province should belong, people as a rule, but not always, vote in favor of the country where they will not be members of a linguistic minority.

But the recognition of this fact by no means leads liberalism to the principle of nationality. Liberalism does not say: Every linguistic group should form one state and one state only, and each single man belonging to this group should, if at all possible, belong to this state. Neither does it say: No state should include people of several linguistic groups. Liberalism postulates self-determination. That men in the exercise of this right allow themselves to be guided by linguistic considerations is for liberalism simply a fact, not a principle or a moral law. If men decide in another way, which was the case, for example, with the German-speaking Alsatians, that is their own concern. Such a decision, too, must be respected.

But it is different in our age of etatism. The etatist state must necessarily extend its territory to the utmost. The benefits it can grant to its citizens increase in proportion to its territory. Everything that the interventionist state can provide can be provided more abundantly by the larger state than by the smaller one. Privileges become more valuable the larger the territory in which they are valid. The essence of etatism is to take from one group in order to give to another. The more it can take the more it can give. It is in the interest of those whom the government wishes to favor that their state become as large as possible. The policy of territorial expansion becomes popular. The people as well as the governments become eager for conquest. Every pretext for aggression is deemed right. Men then recognize but one argument in favor of peace: that the prospective adversary is strong enough to defeat their attack. Woe to the weak!

The domestic policies of a nationalist state are inspired by the aim of improving the conditions of some groups of citizens by inflicting evils on foreigners and those citizens who use a foreign language. In foreign policy economic nationalism means discrimination against foreigners. In domestic policy it means discrimination against citizens speaking a language which is not that of the ruling group. These pariahs are not always minority groups in a technical sense. The German-speaking people of Meran, Bozen, and Brixen are majorities in their districts; they are minorities only because their country has been annexed by Italy. The same is true for the Germans of the Egerland, for the Ukrainians in Poland, the Magyars of the Szekler district in Transylvania, the Slovenes in Italian-occupied Carniola. He who speaks a foreign mother tongue in a state where another language predominates is an outcast to whom the rights of citizens are virtually denied.

The best example of the political consequences of this aggressive nationalism is provided by conditions in Eastern Europe. If you ask representatives of the linguistic groups of Eastern Europe what they consider would be a fair determination of their national states, and if you mark these boundaries on a map, you will discover that the greater part of this territory is claimed by at least two nations, and not a negligible part by three or even more.* Every linguistic group defends its claims with linguistic, racial, historical, geographical, strategic, economic, social, and religious arguments. No nation is prepared sincerely to renounce the least of its claims for reasons of expediency. Every nation is ready to resort to arms to satisfy its pretensions. Every linguistic group therefore considers its immediate neighbors mortal enemies and relies on its neighbor’s neighbors for armed support of its own territorial claims against the common foe. Every group tries to profit from every opportunity to satisfy its claims at the expense of its neighbors. The history of the last decades proves the correctness of this melancholy description.

Take, for example, the case of the Ukrainians. For hundreds of years they were under the yoke of the Russians and the Poles. There has been no Ukrainian national state in our day. One might assume that the spokesmen of a people which has so fully experienced the hardships of ruthless foreign oppression would be prudent in their pretensions. But nationalists simply cannot renounce. Thus the Ukrainians claim an area of more than 360,000 square miles with a total population of some sixty millions, of whom, according even to their own declaration, only “more than forty millions” are Ukrainians.* These oppressed Ukrainians would not be content with their own liberation; they strive at the oppression of twenty or more millions of non-Ukrainians.

In 1918 the Czechs were not satisfied with the establishment of an independent state of their own. They incorporated into their state millions of German-speaking people, all the Slovaks, tens of thousands of Hungarians, the Ukrainians of Carpatho-Russia and—for considerations of railroad management—some districts of Lower Austria. And what a spectacle was the Polish Republic, which in the twenty-one years of its independence tried to rob violently three of its neighbors—Russia, Lithuania, and Czechoslovakia—of a part of their territories!

These conditions were correctly described by August Strindberg in his trilogy To Damascus:†

father melcher: At the Amsteg station, on the Gotthard line, you have probably seen a tower called the castle of Zwing-Uri; it is celebrated by Schiller in Wilhelm Tell. It stands there as a monument to the inhuman oppression which the inhabitants of Uri suffered at the hands of the German Kaiser! Lovely! On the Italian side of the Saint Gotthard lies the station of Bellinzona, as you know. There are many towers there, but the most remarkable is the Castel d’Uri. It is a monument to the inhuman oppression, which the Italian canton suffered at the hands of the inhabitants of Uri. Do you understand?

the stranger: “Liberty! Liberty, give us, in order that we may suppress.”

However, Strindberg did not add that the three cantons Uri, Schwyz, and Unterwalden under nineteenth-century liberalism peacefully coöperated with the Ticino whose people they had oppressed for almost three hundred years.

5.

Colonial Imperialism

In the fifteenth century the Western nations began to occupy territories in non-European countries peopled by non-Christian populations. They were eager to obtain precious metals and raw materials that could not be produced in Europe. To explain this colonial expansion as a search for markets is to misrepresent the facts. These traders wanted to get colonial products. They had to pay for them; but the profit they sought was the acquisition of commodities that could not be bought elsewhere. As businessmen they were not so foolish as to believe in the absurd teaching of Mercantilism—old and new—that the advantage derived from foreign trade lies in exporting and not in importing. They were so little concerned about exporting that they were glad when they could obtain the goods they wanted without any payment at all. They were often more pirates and slavers than merchants. They had no moral inhibitions in their dealings with the heathen.

It was not in the plans of the kings and royal merchants who inaugurated European overseas expansion to settle European farmers in the occupied territories. They misprized the vast forests and prairies of North America from which they expected neither precious metals nor spices. The rulers of Great Britain were much less enthusiastic about founding settlements in continental America than about their enterprises in the Caribbean, in Africa, and the East Indies, and their participation in the slave trade. The colonists, not the British Government, built up the English-speaking communities in America, and later in Canada, in Australia, New Zealand, and South Africa.

The colonial expansion of the nineteenth century was very different from that of the preceding centuries. It was motivated solely by considerations of national glory and pride. The French officers, poets, and after-dinner speakers—not the rest of the nation—suffered deeply from the inferiority complex which the battles of Leipzig and Waterloo, and later those of Metz and Sedan, left with them. They thirsted for glory and fame; and they could quench their thirst neither in liberal Europe nor in an America sheltered by the Monroe Doctrine. It was the great comfort of Louis Philippe that his sons and his generals could reap laurels in Algeria. The Third Republic conquered Tunis, Morocco, Madagascar, and Tonking in order to reëstablish the moral equilibrium of its army and navy. The inferiority complex of Custozza and Lissa drove Italy to Abyssinia, and the inferiority complex of Aduwa to Tripoli. One of the important motives that made Germany embark on colonial conquests was the turbulent ambition of shabby adventurers like Dr. Karl Peters.

There were other cases too. King Leopold II of Belgium and Cecil Rhodes were belated conquistadors. But the main incentive of modern colonial conquest was the desire for military glory. The defenselessness of the poor aborigines, whose main weapons were the dreariness and impassableness of their countries, was too tempting. It was easy and not dangerous to defeat them and to return home a hero.

The modern world’s paramount colonial power was Great Britain. Its East Indian Empire surpassed by far the colonial possessions of all other European nations. In the 1820’s it was virtually the only colonial power. Spain and Portugal had lost almost their entire overseas territories. The French and the Dutch retained at the end of the Napoleonic Wars as much as the British were willing to leave them; their colonial rule was at the mercy of the British Navy. But British liberalism has fundamentally reformed the meaning of colonial imperialism. It granted autonomy—dominion status—to the British settlers, and ran the East Indies and the remaining Crown colonies on free-trade principles. Long before the Covenant of the League of Nations created the concept of mandates, Great Britain acted virtually as mandatory of European civilization in countries whose population was, as the Britons believed, not qualified for independence. The main blame which can be laid on British East Indian policies is that they respected too much some native customs—that, for example, they were slow to improve the lot of the untouchables. But for the English there would be no India today, only a conglomeration of tyrannically misruled petty principalities fighting each other on various pretexts; there would be anarchy, famines, epidemics.2

The men who represented Europe in the colonies were seldom proof against the specific moral dangers of the exalted positions they occupied among backward populations. Their snobbishness poisoned their personal contact with the natives. The marvelous achievements of the British administration in India were overshadowed by the vain arrogance and stupid race pride of the white man. Asia is in open revolt against the gentlemen for whom socially there was but little difference between a dog and a native. India is, for the first time in its history, unanimous on one issue—its hatred for the British. This resentment is so strong that it has blinded for some time even those parts of the population who know very well that Indian independence will bring them disaster and oppression: the 80 millions of Moslems, the 40 millions of untouchables, the many millions of Sikhs, Buddhists, and Indian Christians. It is a tragic situation and a menace to the cause of the United Nations. But it is at the same time the manifest failure of the greatest experiment in benevolent absolutism ever put to work.

Great Britain did not in the last decades seriously oppose the step-by-step liberation of India. It did not hinder the establishment of an Indian protectionist system whose foremost aim is to lock out British manufactures. It connived at the development of an Indian monetary and fiscal system which soon or late will result in a virtual annulment of British investments and other claims. The only task of the British administration in India in these last years has been to prevent the various political parties, religious groups, races, linguistic groups, and castes from fighting one another. But the Hindus do not long for British benefits.

British colonial expansion did not stop in the last sixty years. But it was an expansion forced upon Great Britain by other nations’ lust of conquest. Every annexation of a piece of land by France, Germany, or Italy curtailed the market for the products of all other nations. The British were committed to the principles of free trade and had no desire to exclude other people. But they had to take over large blocks of territory if only to prevent them from falling into the hands of exclusive rivals. It was not their fault that under the conditions brought about by French, German, Italian, and Russian colonial methods only political control could adequately safeguard trade.*

It is a Marxian invention that the nineteenth-century colonial expansion of the European powers was engendered by the economic interests of the pressure groups of finance and business. There have been some cases where governments acted on behalf of their citizens who had made foreign investments; the purpose was to protect them against expropriation or default. But historical research has brought evidence that the initiative for the great colonial projects came not from finance and business but from the governments. The alleged economic interest was a mere blind. The root cause of the Russo-Japanese War of 1904 was not the desire of the Russian Government to safeguard the interests of a group of investors who wanted to exploit the Yalu timber estates. On the contrary, because the government needed a pretext for intervention, it deployed “a fighting vanguard disguised as lumbermen.” The Italian Government did not conquer Tripoli on behalf of the Banco di Roma. The bank went to Tripoli because the government wanted it to pave the way for conquest. The bank’s decision to invest in Tripoli was the result of an incentive offered by the Italian Government—the privilege of rediscount facilities at the Bank of Italy, and further compensation in the form of a subsidy to its navigation service. The Banco di Roma did not like the risky investment from which at best but very poor returns could be expected. The German Reich did not care a whit for the interests of the Mannesmanns in Morocco. It used the case of this unimportant German firm as a lame excuse for its aspirations. German big business and finance were not at all interested. The Foreign Office tried in vain to induce them to invest in Morocco. “As soon as you mention Morocco,” said the German Secretary for Foreign Affairs, Herr von Richthofen, “the banks all go on strike, every last one of them.”*

At the outbreak of the first World War a total of less than 25,000 Germans, most of them soldiers and civil servants and their families, lived in the German colonies. The trade of the mother country with its colonies was negligible; it was less than .5 per cent of Germany’s total foreign trade. Italy, the most aggressive colonial power, lacked the capital to develop its domestic resources; its investments in Tripoli and in Ethiopia perceptibly increased the capital shortage at home.

The most modern pretense for colonial conquest is condensed in the slogan “raw materials.” Hitler and Mussolini tried to justify their plans by pointing out that the natural resources of the earth were not fairly distributed. As have-nots they were eager to get their fair share from those nations which had more than they should have had. How could they be branded aggressors when they wanted nothing but what was—in virtue of natural and divine right—their own?

In the world of capitalism raw materials can be bought and sold like all other commodities. It does not matter whether they have to be imported from abroad or bought at home. It is of no advantage for an English buyer of Australian wool that Australia is a part of the British Empire; he must pay the same price that his Italian or German competitor pays.

The countries producing the raw materials that cannot be produced in Germany or in Italy are not empty. There are people living in them; and these inhabitants are not ready to become subjects of the European dictators. The citizens of Texas and Louisiana are eager to sell their cotton crops to anyone who wants to pay for them; but they do not long for German or Italian domination. It is the same with other countries and other raw materials. The Brazilians do not consider themselves an appurtenance of their coffee plantations. The Swedes do not believe that their supply of iron ore justifies Germany’s aspirations. The Italians would themselves consider the Danes lunatics if they were to ask for an Italian province in order to get their fair share of citrus fruits, red wine, and olive oil.

It would be reasonable if Germany and Italy were to ask for a general return to free trade and laissez passer and for an abandonment of the—up to now unsuccessful—endeavors of many governments to raise the price of raw materials by a compulsory restriction of output. But such ideas are strange to the dictators, who do not want freedom but Zwangswirtschaft and self-sufficiency.

Modern colonial imperialism is a phenomenon by itself. It should not be confused with European nationalism. The great wars of our age did not originate from colonial conflicts but from nationalist aspirations in Europe. Colonial antagonisms kindled colonial campaigns without disturbing the peace between the Western nations. For all the saber rattling, neither Fashoda nor Morocco nor Ethiopia resulted in European war. In the complex of German, Italian, and French foreign affairs, colonial plans were mere byplay. Colonial aspirations were not much more than a peacetime outdoor sport, the colonies a tilting ground for ambitious young officers.

6.

Foreign Investment and Foreign Loans

The main requisite of the industrial changes which transformed the world of handicraftsmen and artisans, of horses, sailing ships, and windmills into the world of steam power, electricity, and mass production was the accumulation of capital. The nations of Western Europe brought forth the political and institutional conditions for safeguarding saving and investment on a broader scale, and thus provided the entrepreneurs with the capital needed. On the eve of the industrial revolution the technological and economic structure of Western economy did not differ essentially from conditions in the other parts of the inhabited surface of the earth. By the second quarter of the nineteenth century a broad gulf separated the advanced countries of the West from the backward countries of the East. While the West was on the road of quick progress, in the East there was stagnation.

Mere acquaintance with Western methods of production, transportation, and marketing would have proved useless for the backward nations. They did not have the capital for the adoption of the new processes. It was not difficult to imitate the technique of the West. But it was almost impossible to transplant the mentalities and ideologies which had created the social, legal, constitutional, and political milieu from which these modern technological improvements had sprung. An environment which could make for domestic capital accumulation was not so easy to produce as a modern factory. The new industrial system was but the effect of the new spirit of liberalism and capitalism. It was the outcome of a mentality which cared more about serving the consumer than about wars, conquest, and the preservation of old customs. The essential feature of the advanced West was not its technique but its moral atmosphere which encouraged saving, capital formation, entrepreneurship, business, and peaceful competition.

The backward nations perhaps might have come to understand this basic problem and might have started to transform their social structures in such a way that autochthonous capital accumulation would have resulted. Even then it would have been a slow and troublesome process. It would have required a long time. The gulf between West and East, between advanced nations and backward nations, would have broadened more and more. It would have been hopeless for the East to overtake the head start gained by the West.

But history took another course. A new phenomenon appeared—the internationalization of the capital market. The advanced West provided all parts of the world with the capital needed for the new investments. Loans and direct investments made it possible to outfit all countries with the paraphernalia of modern civilization. Mahatma Gandhi expresses a loathing for the devices of the petty West and of devilish capitalism. But he travels by railroad or by motor car and, when ill, goes for treatment to a hospital equipped with the most refined instruments of Western surgery. It does not seem to occur to him that Western capital alone made it possible for the Hindus to enjoy these facilities.

The enormous transfer of capital from Western Europe to the rest of the world was one of the outstanding events of the age of capitalism. It has developed natural resources in the remotest areas. It has raised the standard of living of peoples who from time immemorial had not achieved any improvement in their material conditions. It was, of course, not charity but self-interest which pushed the advanced nations to the export of capital. But the profit was not unilateral; it was mutual. The once backward nations have no sound reason to complain because foreign capitalists provided them with machinery and transportation facilities.

Yet in this age of anticapitalism hostility to foreign capital has become general. All debtor nations are eager to expropriate the foreign capitalist. Loans are repudiated, either openly or by the more tricky means of foreign exchange control. Foreign property is liable to discriminatory taxation which reaches the level of confiscation. Even un-disguised expropriation without any indemnification is practiced.

There has been much talk about the alleged exploitation of the debtor nations by the creditor nations. But if the concept of exploitation is to be applied to these relations, it is rather an exploitation of the investing by the receiving nations. These loans and investments were not intended as gifts. The loans were made upon solemn stipulation of payment of principal and interest. The investments were made in the expectation that property rights would be respected. With the exception of the bulk of the investments made in the United States, in some of the British dominions, and in some smaller countries, these expectations have been disappointed. Bonds have been defaulted or will be in the next few years. Direct investments have been confiscated or soon will be. The capital-exporting countries can do nothing but wipe off their balances.

Let us look at the problem from the point of view of the predominantly industrial countries of Europe. These comparatively overpopulated countries are poorly endowed by nature. In order to pay for badly needed foodstuffs and raw materials they must export manufactures. The economic nationalism of the nations which are in a position to sell them these foodstuffs and raw materials shuts the doors in their face. For Europe the restriction of exports means misery and starvation. Yet there was one safety valve left, as long as the foreign investments could be relied upon. The debtor nations were obliged to export some quantities of their products as payment of interest and dividends. Even if the goal of present-day foreign-trade policies, the complete prevention of any import of manufactures, were to be attained, the debtor nations would still have to provide the creditor nations with the means to pay for a part of the formers’ excess production of food and raw materials. The consumers of the creditor nations would be in a position to buy these goods on the sheltered home market, as it were, from the hands of those receiving the payments from abroad. These foreign investments represented in a certain manner the share of the creditor nations in the rich resources of the debtor nations. The existence of these investments softened to some extent the inequality between the haves and the have-nots.

In what sense was prewar Great Britain a have nation? Surely not in the sense that it “owned” the Empire. But the British capitalists owned a considerable amount of foreign investments, whose yield made it possible for the country to buy a corresponding quantity of foreign products in excess of that quantity which was the equivalent of current British exports. The difference in the economic structures of prewar Great Britain and Austria was precisely that Austria did not own such foreign assets. The British worker could provide for a considerable quantity of foreign food and raw materials by working in factories which sold their products on the sheltered British market to those people who received these payments from abroad. It was as if these foreign wheat fields, cotton and rubber plantations, oil wells and mines had been situated within Great Britain.

After the present war, with their foreign assets gone either through the methods applied in financing the war expenditure or by default and confiscation on the part of the governments of the debtor nations, Great Britain and some other countries of Western Europe will be reduced to the status of comparatively poor nations. This change will affect very seriously the conditions of British labor. Those quantities of foreign food and raw materials which the country could previously procure by means of the interest and dividend payments received from abroad will in the future be sought by desperate attempts to sell manufactures to which every country wants to bar access.

7.

Total War

The princes of the ancien régime were eager for aggrandizement. They seized every opportunity to wage war and to conquer. They organized—comparatively small—armies. These armies fought their battles. The citizens detested the wars, which brought mischief to them and burdened them with taxes. But they were not interested in the outcome of the campaigns. It was more or less immaterial to them whether they were ruled by a Habsburg or by a Bourbon. In those days Voltaire declared: “The peoples are indifferent to their rulers’ wars.”*

Modern war is not a war of royal armies. It is a war of the peoples, a total war. It is a war of states which do not leave to their subjects any private sphere; they consider the whole population a part of the armed forces. Whoever does not fight must work for the support and equipment of the army. Army and people are one and the same. The citizens passionately participate in the war. For it is their state, their God, who fights.

Wars of aggression are popular nowadays with those nations which are convinced that only victory and conquest could improve their material well-being. On the other hand the citizens of the nations assaulted know very well that they must fight for their own survival. Thus every individual in both camps has a burning interest in the outcome of the battles.

The annexation of Alsace-Lorraine by Germany in 1871 did not bring about any change in the wealth or income of the average German citizen. The inhabitants of the annexed province retained their property rights. They became citizens of the Reich, and returned deputies to the Reichstag. The German Treasury collected taxes in the newly acquired territory. But it was, on the other hand, burdened with the expense of its administration. This was in the days of laissez faire.

The old liberals were right in asserting that no citizen of a liberal and democratic nation profits from a victorious war. But it is different in this age of migration and trade barriers. Every wage earner and every peasant is hurt by the policy of a foreign government, barring his access to countries in which natural conditions of production are more favorable than in his native country. Every toiler is hurt by a foreign country’s import duties penalizing the sale of the products of his work. If a victorious war destroys such trade and migration walls, the material well-being of the masses concerned is favored. Pressure on the domestic labor market can be relieved by the emigration of a part of the workers. The emigrants earn more in their new country, and the restriction of the supply on the domestic labor market tends to raise wage rates at home too. The abolition of foreign tariffs increases exports and thereby the demand on the domestic labor market. Production on the least fertile soil is discontinued at home, and the farmers go to countries in which better soil is still available. The average productivity of labor all over the world increases because production under the least favorable conditions is curtailed in the emigration countries and replaced by an expansion of production in the immigration countries offering more favorable physical opportunities.

But, on the other hand, the interests of the workers and farmers in the comparatively underpopulated countries are injured. For them the tendency toward an equalization of wage rates and farm yields (per capita of the men tilling a unit of land), inherent in a world of free mobility of labor, results, for the immediate future, in a drop of income, no matter how beneficial the later consequences of this free mobility may be.

It would be futile to object that there is unemployment in the comparatively underpopulated countries, foremost among them Australia and America, and that immigration would only result in an increase of unemployment figures, not in an improvement of the conditions of the immigrants. Unemployment as a mass phenomenon is always due to the enforcement of minimum wages higher than the potential wages which the unhampered labor market would have fixed. If the labor unions did not persistently try to raise wage rates above the potential market rates there would be no lasting unemployment of many workers. The problem is not the differences in union minimum rates in different countries, but those in potential market wage rates. If there were no trade-union manipulation of wages, Australia and America could absorb many millions of immigrant workers until an equalization of wages was reached. The market wage rates both in manufacturing and in agriculture are many times higher in Australia, in New Zealand, and in northern America than in continental Europe. This is due to the fact that in Europe poor mines are still exploited while much richer mining facilities remain unused in overseas countries. The farmers of Europe are tilling the rocky and barren soil in the Alps, the Carpathians, the Apennines, and the Balkan Mountains, and the sandy soil of the plains of northeastern Germany, while millions of acres of more fertile soil lie untouched in America and Australia. All these peoples are prevented from moving to places where their toil and trouble would be much more productive and where they could render better services to the consumers.

We can now realize why etatism must result in war whenever the underprivileged believe that they will be victorious. As things are in this age of etatism the Germans, the Italians, and the Japanese could possibly derive profit from a victorious war. It is not a warrior caste which drives Japan into ruthless aggression but considerations of wage policies which do not differ from those of the trade unions. The Australian trade unions wish to close their ports to immigration in order to raise wage rates in Australia. The Japanese workers wish to open the Australian ports in order to raise wage rates for the workers of their own race.

Pacifism is doomed in an age of etatism. In the old days of royal absolutism philanthropists thus addressed the kings: “Take pity on suffering mankind; be generous and merciful! You, of course, may profit from victory and conquest. But think of the grief of the widows and orphans, the desolation of those maimed, mutilated and crippled, the misery of those whose homes have been destroyed! Remember the commandment: Thou shalt not kill! Renounce glory and aggrandizement! Keep peace!” They preached to deaf ears. Then came liberalism. It did not declaim against war; it sought to establish conditions, in which war would not pay, to abolish war by doing away with the causes. It did not succeed because along came etatism. When the pacifists of our day tell the peoples that war cannot improve their well-being, they are mistaken. The aggressor nations remain convinced that a victorious war could improve the fate of their citizens.

These considerations are not a plea for opening America and the British Dominions to German, Italian, and Japanese immigrants. Under present conditions America and Australia would simply commit suicide by admitting Nazis, Fascists, and Japanese. They could as well directly surrender to the Führer and to the Mikado. Immigrants from the totalitarian countries are today the vanguard of their armies, a fifth column whose invasion would render all measures of defense useless. America and Australia can preserve their freedom, their civilizations, and their economic institutions only by rigidly barring access to the subjects of the dictators. But these conditions are the outcome of etatism. In the liberal past the immigrants came not as pacemakers of conquest but as loyal citizens of their new country.

However, it would be a serious omission not to mention the fact that immigration barriers are recommended by many contemporaries without any reference to the problem of wage rates and farm yields. Their aim is the preservation of the existing geographical segregation of various races. They argue this: Western civilization is an achievement of the Caucasian races of Western and Central Europe and their descendants in overseas countries. It would perish if the countries peopled by these Westerners were to be overflowed by the natives of Asia and Africa. Such an invasion would harm both the Westerners and the Asiatics and Africans. The segregation of various races is beneficial to all mankind because it prevents a disintegration of Western civilization. If the Asiatics and Africans remain in that part of the earth in which they have been living for many thousands of years, they will be benefited by the further progress of the white man’s civilization. They will always have a model before their eyes to imitate and to adapt to their own conditions. Perhaps in a distant future they themselves will contribute their share to the further advancement of culture. Perhaps at that time it will be feasible to remove the barriers of segregation. In our day—they say—such plans are out of the question.

We must not close our eyes to the fact that such views meet with the consent of the vast majority. It would be useless to deny that there exists a repugnance to abandoning the geographical segregation of various races. Even men who are fair in their appraisal of the qualities and cultural achievements of the colored races and severely object to any discrimination against those members of these races who are already living in the midst of white populations are opposed to a mass immigration of colored people. There are few white men who would not shudder at the picture of many millions of black or yellow people living in their own countries.

The elaboration of a system making for harmonious coexistence and peaceful economic and political coöperation among the various races is a task to be accomplished by coming generations. But mankind will certainly fail to solve this problem if it does not entirely discard etatism. Let us not forget that the actual menace to our civilization does not originate from a conflict between the white and colored races but from conflicts among the various peoples of Europe and of European ancestry. Some writers have prophesied the coming of a decisive struggle between the white race and the colored races. The reality of our time, however, is war between groups of white nations and between the Japanese and the Chinese who are both Mongolians. These wars are the outcome of etatism.

8.

Socialism and War

The socialists insist that war is but one of the many mischiefs of capitalism. In the coming paradise of socialism, they hold, there will no longer be any wars. Of course, between us and this peaceful utopia there are still some bloody civil wars to be fought. But with the inevitable triumph of communism all conflicts will disappear.

It is obvious enough that with the conquest of the whole surface of the earth by a single ruler all struggles between states and nations would disappear. If a socialist dictator should succeed in conquering every country there would no longer be external wars, provided that the O.G.P.U. were strong enough to hinder the disintegration of this World State. But the same holds true for any other conqueror. If the Mongol Great Khans had accomplished their ends, they too would have made the world safe for eternal peace. It is too bad that Christian Europe was so obstinate as not to surrender voluntarily to their claims of world supremacy.*

However, we are not considering projects for world pacification through universal conquest and enslavement, but how to achieve a world where there are no longer any causes of conflict. Such a possibility was implied in liberalism’s project for the smooth coöperation of democratic nations under capitalism. It failed because the world abandoned both liberalism and capitalism.

There are two possibilities for world-embracing socialism: the coexistence of independent socialist states on the one hand, or the establishment of a unitary world-embracing socialist government on the other.

The first system would stabilize existing inequalities. There would be richer nations and poorer ones, countries both underpopulated and overpopulated. If mankind had introduced this system a hundred years ago, it would have been impossible to exploit the oil fields of Mexico or Venezuela, to establish the rubber plantations in Malaya, or to develop the banana production of Central America. The nations concerned lacked both the capital and trained men to utilize their own natural resources. A socialist scheme is not compatible with foreign investment, international loans, payments of dividends and interest, and all such capitalist institutions.

Let us consider what some of the conditions would be in such a world of coördinate socialist nations. There are some overcrowded countries peopled by white workers. They labor to improve their standard of living, but their endeavors are handicapped by inadequate natural resources. They badly need raw materials and foodstuffs that could be produced in other, better endowed countries. But these countries which nature has favored are thinly populated and lack the capital required to develop their resources. Their inhabitants are neither industrious nor skillful enough to profit from the riches which nature has lavished upon them. They are without initiative; they cling to old-fashioned methods of production; they are not interested in improvement. They are not eager to produce more rubber, tin, copra, and jute and to exchange these products for goods manufactured abroad. By this attitude they affect the standard of living of those peoples whose chief asset is their skill and diligence. Will these peoples of countries neglected by nature be prepared to endure such a state of things? Will they be willing to work harder and to produce less because the favored children of nature stubbornly abstain from exploiting their treasures in a more efficient way?

Inevitably war and conquest result. The workers of the comparatively overpopulated areas invade the comparatively underpopulated areas, conquer these countries, and annex them. And then follow wars between the conquerors for the distribution of the booty. Every nation is prepared to believe that it has not obtained its fair share, that other nations have got too much and should be forced to abandon a part of their plunder. Socialism in independent nations would result in endless wars.

These considerations prepare for a disclosure of the nonsensical Marxian theories of imperialism. All these theories, however much they conflict with each other, have one feature in common: they all maintain that the capitalists are eager for foreign investment because production at home tends, with the progress of capitalism, to a reduction in the rate of profit, and because the home market under capitalism is too narrow to absorb the whole volume of production. This desire of capitalists for exports and for foreign investment, it is held, is detrimental to the class interests of the proletarians. Besides, it leads to international conflict and war.

Yet the capitalists did not invest abroad in order to withhold goods from home consumption. On the contrary, they did so in order to supply the home market with raw materials and foodstuffs which could otherwise not be obtained at all, or only in insufficient quantities or at higher costs. Without export trade and foreign investment European and American consumers would never have enjoyed the high standard of living that capitalism gave them. It was the wants of the domestic consumers that pushed the capitalists and entrepreneurs toward foreign markets and foreign investment. If the consumers had been more eager for the acquisition of a greater quantity of goods that could be produced at home without the aid of foreign raw materials than for imported food and raw materials, it would have been more profitable to expand home production further than to invest abroad.

The Marxian doctrinaires shut their eyes purposely to the inequality of natural resources in different parts of the world. And yet these inequalities are the essential problem of international relations.* But for them the Teutonic tribes and later the Mongols would not have invaded Europe. They would have turned toward the vast empty areas of the Tundra or of northern Scandinavia. If we do not take into account these inequalities of natural resources and climates we can discover no motive for war but some devilish spell, for example—as the Marxians say—the sinister machinations of capitalists, or—as the Nazis say—the intrigues of world Jewry.

These inequalities are natural and can never disappear. They would present an insoluble problem for a unitary world socialism also. A socialist world-embracing management could, of course, consider a policy under which all human beings are treated alike; it could try to ship workers and capital from one area to another, without considering the vested interests of the labor groups of different countries or of different linguistic groups. But nothing can justify the illusion that these labor groups, whose per capita income and standard of living would be reduced by such a policy, would be prepared to tolerate it. No socialist of the Western nations considers socialism to be a scheme which (even if we were to grant the fallacious expectations that socialist production would increase the productivity of labor) must result in lowering living standards in those nations. The workers of the West are not striving for equalization of their earnings with those of the more than 1,000 million extremely poor peasants and workers of Asia and Africa. For the same reason that they oppose immigration under capitalism, these workers would oppose such a policy of labor transfer on the part of a socialist world management. They would rather fight than agree to abolition of the existing discriminations between the lucky inhabitants of comparatively underpopulated areas and the unfortunate inhabitants of the overpopulated areas. Whether we call such struggles civil wars or foreign wars is immaterial.

The workers of the West favor socialism because they hope to improve their condition by the abolition of what they describe as unearned incomes. We are not concerned with the fallacies of these expectations. We have only to emphasize that these Western socialists do not want to share their incomes with the underprivileged masses of the East. They are not prepared to renounce the most valuable privilege which they enjoy under etatism and economic nationalism—the exclusion of foreign labor. The American workers are for the maintenance of what they call “the American way of life,” not for a world socialist way of life, which would lie somewhere between the present American and the coolie level, probably much nearer to the latter than to the former. This is stark reality that no socialist rhetoric can conjure away.

The same selfish group interests which through migration barriers have frustrated the liberal plans for world-wide peaceful cooperation of nations, states, and individuals would destroy the internal peace within a socialist world state. The peace argument is just as baseless and erroneous as all the other arguments brought forward to demonstrate the practicability and expediency of socialism.

V

Refutation of Some Fallacious Explanations

1.

The Shortcomings of Current Explanations

The current explanations of modern nationalism are far from recognizing that nationalism within our world of international division of labor is the inevitable outcome of etatism. We have already exposed the fallacies of the most popular of these explanations, namely, of the Marxian theory of imperialism. We have now to pass in review some other doctrines.

The faultiness of the Marxian theory is due to its bad economics. Most of the theories with which we shall deal now do not take economic factors into account at all. For them nationalism is a phenomenon in a sphere not subject to the influence of factors commonly called economic. Some of these theories even go so far as to assert that nationalistic motivations arise from an intentional neglect of economic matters for the other matters.

A thorough scrutiny of all these dissenting opinions would require an examination of all the fundamental problems of social life and social philosophy. We cannot achieve this in a study devoted to nationalism and the conflicts it has aroused, but must limit ourselves to the problems under investigation.

With regard to prevalent mistakes it may be necessary to emphasize again that we are considering policies and political actions and the doctrines influencing them, not mere views and opinions without practical effect. Our purpose is not to answer such questions as: In what respect do people of various nations, states, linguistic, and other social groups differ from one another? Or: Do they love or hate one another? We wish to know why they prefer a policy of economic nationalism and war to one of peaceful coöperation. Even nations bitterly hating one another would cling to peace and free trade if they were convinced that such a policy best promoted their own interests.

2.

The Alleged Irrationality of Nationalism

There are people who believe that they have satisfactorily explained nationalism by establishing its irrationality. They hold it a serious mistake, common mostly to economists, to assume that human action is always rational. Man is not, they say, a rational being. The ultimate goals of his actions are often if not always irrational. The glory and the greatness of their own nation, state, race, linguistic group, or social class are such irrational goals, which men prefer to increase in wealth and welfare or to the improvement of their standard of living. Men do not like peace, security, and a quiet life. They long for the vicissitudes of war and conquest, for change, adventure, and danger. They enjoy killing, robbing, and destroying. They yearn to march against the enemy when the drums beat, when the trumpets sound, and flags flutter in the wind.

We must recognize, however, that the concepts rational and irrational apply only to means, never to ultimate ends. The judgments of value through which people make their choice among conflicting ultimate ends are neither rational nor irrational. They are arbitrary, subjective, and the outcome of individual points of view. There are no such things as objective absolute values, independent of the individual’s preferences. The preservation of life is as a rule considered an ultimate goal. But there have always been men who preferred death to life, when life could be preserved only under conditions that they considered unbearable. Human actions consist always in a choice between two goods or two evils which are not deemed equivalent. Where there is perfect equivalence, man stays neutral; and no action results. But what is good and what is better, or what is bad and what is worse, is decided according to subjective standards, different with different individuals, and changing with the same individuals according to circumstances.

As soon as we apply the concepts rational and irrational to judgments of value we reduce ends to means. We are referring to something which we have set as a provisional end, and considering the choice made on the basis of whether it is an efficient means to attain this end. If we are dealing with other people’s actions we are substituting our own judgment for theirs, and if we are dealing with our own past actions we are substituting our present valuations for our valuations at the instant in which we acted.

Rational and irrational always mean: reasonable or not from the point of view of the ends sought. There is no such thing as absolute rationality or irrationality.

We may now understand what people are trying to say when they ascribe irrational motives to nationalism. They mean that liberalism was wrong in assuming that men are more eager to improve the material conditions of their well-being than to attain other ends, e.g., national glory, the enjoyment of the dangerous life, or an indulgence in a taste for sadistic pleasures. Men, they say, have rejected capitalism and free trade because they aim at goals other than those that liberalism considers supreme. They do not seek a life free from want and fear, or one of steadily increasing security and riches, but the particular satisfactions with which the totalitarian dictators provide them.

Whether these statments are true or untrue cannot be determined by philosophical or a priori considerations. These are statements about facts. We need to ask whether the attitude of our contemporaries is really such as these explanations would have us believe.

There is no doubt that there really are some people who prefer the attainment of other ends to the improvement of their own material well-being. There have always been men who voluntarily renounced many pleasures and satisfactions in order to do what they considered right and moral. Men have preferred martyrdom to the renunciation of what they believed to be true. They have chosen poverty and exile because they wanted to be free in the search for truth and wisdom. All that is noblest in the progress of civilization, welfare, and enlightenment has been the achievement of such men, who braved every danger and defied the tyranny of powerful kings and fanatical masses. The pages of history tell us the epic of heretics burned at the stake, of philosophers put to death from Socrates to Giordano Bruno, of Christians and Jews heroically clinging to their faith in spite of murderous persecutions, and of many other champions of honesty and fidelity whose martyrdom was less spectacular but no less genuine. But these examples of self-denial and readiness to sacrifice have always been exceptional; they have been the privilege of a small elite.

It is furthermore true that there have always been people who sought power and glory. But such aspirations are not contrary to the common longing for more wealth, higher income, and more luxuries. The thirst for power does not involve the renunciation of material improvement. On the contrary, men want to be powerful in order to acquire more wealth than they could get by other methods. Many expect to acquire more treasures by robbing others than they could get by serving consumers. Many chose an adventurous career because they were confident that they could succeed better that way. Hitler, Goebbels, and Goering were simply unfit for any honest job. They were complete failures in the peaceful business of capitalist society. They strove for power, glory, and leadership, and thus became the richest men in present-day Germany. It is nonsense to assert that the “will to power” with them is something contrary to the longing for more material well-being.

The explanation of modern nationalism and war with which we have to deal at this point in our investigation refers not only to the leaders but also to their followers. With regard to these the question is: Is it true that people—the voters, the masses of our contemporaries—have intentionally abandoned liberalism, capitalism, and free trade and substituted for them etatism—interventionism or socialism—economic nationalism, and wars and revolutions, because they care more for a dangerous life in poverty than for a good life in peace and security? Do they really prefer being poorer in an environment where no one is better off than they to being richer within a market society where there are people wealthier than they? Do they choose the chaos of interventionism, socialism, and endless wars although they are fully aware that this must mean poverty and hardships for them? Only a man lacking all sense of reality or common observation could venture to answer these questions in the affirmative. Clearly men have abandoned liberalism and are fighting capitalism because they believe that interventionism, socialism, and economic nationalism will make them richer, not poorer. The socialists did not and do not say to the masses: We want to lower your standard of living. The protectionists do not say: Your material well-being will suffer by import duties. The interventionists do not recommend their measures by pointing out their detrimental effects for the commonweal. On the contrary, all these groups insist again and again that their policy will make their partisans richer. People favor etatism because they believe that it will make them richer. They denounce capitalism because they believe that it deprives them of their fair share.

The main point in the propaganda of Nazism between 1919 and 1933 was: World Jewry and Western capitalism have caused your misery; we will fight these foes, thus rendering you more prosperous. German Nazis and Italian Fascists fought for raw materials and fertile soil, and they promised their followers a life of wealth and luxury. The sacro egoismo of the Italians is not the mentality of idealists but that of robbers. Mussolini did not praise the dangerous life for its own sake but as a means of getting rich booty. When Goering said that guns are more important than butter he explained that Germans in the immediate future had to restrict their consumption of butter in order to get the guns necessary for the conquest of all the treasures of the world. If this is altruism, self-denial, or irrational idealism, then the gentlemen of Brooklyn’s Murder Syndicate were the most perfect altruists and idealists.

The nationalists of all countries have succeeded in convincing their followers that only the policies they recommend are really advantageous to the well-being of the whole nation and of all its honest citizens, of the we; and that all other parties are treacherously ready to sell their own nation’s prosperity to foreigners, to the they. By taking the name “nationalist” they insinuate that the other parties favor foreign interests. The German nationalists in the first World War called themselves the party of the Fatherland, thus labeling all those who favored a negotiated peace, a sincere declaration that Germany did not want to annex Belgium, or no more sinking of liners by submarines, as treacherous foes of the nation. They were not prepared to admit that their adversaries also were honest in their affection for the commonweal. Whoever was not a nationalist was in their eyes an apostate and traitor.

This attitude is common to all contemporary antiliberal parties. The so-called “labor parties,” for example, pretend to recommend the only means favorable to the—of course—material interests of labor. Whoever opposes their program becomes for them a foe of labor. They do not permit rational discussion concerning the expediency of their policies for the workers. They are infatuated enough to pay no attention at all to the objections raised against them by economists. What they recommend is good, what their critics urge is bad, for labor.

This intransigent dogmatism does not mean that nationalists or labor leaders are in favor of goals other than those of the material well-being of their nations or classes. It merely illustrates a characteristic feature of our day, the replacement of reasonable discussion by the errors of polylogism. We will deal with this phenomenon in a later chapter.

3.

The Aristocratic Doctrine

Among the infinity of fallacious statements and factual errors that go to form the structure of Marxian philosophy there are two that are especially objectionable. Marx asserts that capitalism causes increasing pauperization of the masses, and blithely contends that the proletarians are intellectually and morally superior to the narrow-minded, corrupt, and selfish bourgeoisie. It is not worth while to waste time in a refutation of these fables.

The champions of a return to oligarchic government see things from a quite different angle. It is a fact, they say, that capitalism has poured a horn of plenty for the masses, who do not know why they become more prosperous from day to day. The proletarians have done everything they could to hinder or slow down the pace of technical innovations—they have even destroyed newly invented machines. Their unions today still oppose every improvement in methods of production. The entrepreneurs and capitalists have had to push the reluctant and unwilling masses toward a system of production which renders their lives more comfortable.

Within an unhampered market society, these advocates of aristocracy go on to say, there prevails a tendency toward a diminution of the inequality of incomes. While the average citizen becomes wealthier, the successful entrepreneurs seldom attain wealth which raises them far above the average level. There is but a small group of high incomes, and the total consumption of this group is too insignificant to play any role in the market. The members of the upper middle class enjoy a higher standard of living than the masses but their demands also are unimportant in the market. They live more comfortably than the majority of their fellow citizens but they are not rich enough to afford a style of life substantially different. Their dress is more expensive than that of the lower strata but it is of the same pattern and is adjusted to the same fashions. Their bathrooms and their cars are more elegant but the service they render is substantially the same. The old discrepancies in standards have shrunk to differences that are mostly but a matter of ornament. The private life of a modern entrepreneur or executive differs much less from that of his employees than, centuries ago, the life of a feudal landlord differed from that of his serfs.

It is, in the eyes of these pro-aristocratic critics, a deplorable consequence of this trend toward equalization and a rise in mass standards that the masses take a more active part in the nation’s mental and political activities. They not only set artistic and literary standards; they are supreme in politics also. They now have comfort and leisure enough to play a decisive role in communal matters. But they are too narrow-minded to grasp the sense in sound policies. They judge all economic problems from the point of view of their own position in the process of production. For them the entrepreneurs and capitalists, indeed most of the executives, are simply idle people whose services could easily be rendered by “anyone able to read and write.”* The masses are full of envy and resentment; they want to expropriate the capitalists and entrepreneurs whose fault is to have served them too well. They are absolutely unfit to conceive the remoter consequences of the measures they are advocating. Thus they are bent on destroying the sources from which their prosperity stems. The policy of democracies is suicidal. Turbulent mobs demand acts which are contrary to society’s and their own best interests. They return to Parliament corrupt demagogues, adventurers, and quacks who praise patent medicines and idiotic remedies. Democracy has resulted in an upheaval of the domestic barbarians against reason, sound policies, and civilization. The masses have firmly established the dictators in many European countries. They may succeed very soon in America too. The great experiment of liberalism and democracy has proved to be self-liquidating. It has brought about the worst of all tyrannies.

Not for the sake of the elite but for the salvation of civilization and for the benefit of the masses a radical reform is needed. The incomes of the proletarians, say the advocates of an aristocratic revolution, have to be cut down; their work must be made harder and more tedious. The laborer should be so tired after his daily task is fulfilled that he cannot find leisure for dangerous thoughts and activities. He must be deprived of the franchise. All political power must be vested in the upper classes. Then the populace will be rendered harmless. They will be serfs, but as such happy, grateful, and subservient. What the masses need is to be held under tight control. If they are left free they will fall an easy prey to the dictatorial aspirations of scoundrels. Save them by establishing in time the oligarchic paternal rule of the best, of the elite, of the aristocracy.

These are the ideas that many of our contemporaries have derived from the writings of Burke, Dostoievsky, Nietzsche, Pareto, and Michels, and from the historical experience of the last decades. You have the choice, they say, between the tyranny of men from the scum and the benevolent rule of wise kings and aristocracies. There has never been in history a lasting democratic system. The ancient and medieval republics were not genuine democracies; the masses—slaves and metics—never took part in government. Anyway, these republics too ended in demagogy and decay. If the rule of a Grand Inquisitor is inevitable, let him rather be a Roman cardinal, a Bourbon prince, or a British lord than a sadistic adventurer of low breeding.

The main shortcoming of this reasoning is that it greatly exaggerates the role played by the lower strata of society in the evolution toward the detrimental present-day policies. It is paradoxical to assume that the masses whom the friends of oligarchy describe as riffraff should have been able to overpower the upper classes, the elite of entrepreneurs, capitalists, and intellectuals, and to impose on them their own mentality.

Who is responsible for the deplorable events of the last decades? Did perhaps the lower classes, the proletarians, evolve the new doctrines? Not at all. No proletarian contributed anything to the construction of antiliberal teachings. At the root of the genealogical tree of modern socialism we meet the name of the depraved scion of one of the most eminent aristocratic families of royal France. Almost all the fathers of socialism were members of the upper middle class or of the professions. The Belgian Henri de Man, once a radical Left-wing socialist, today a no less radical pro-Nazi socialist, was quite right in asserting: “If one accepted the misleading Marxist expression which attaches every social ideology to a definite class, one would have to say that socialism as a doctrine, even Marxism, is of bourgeois origin.”* Neither did interventionism and nationalism come from the “scum.” They also are products of the well-to-do.

The overwhelming success of these doctrines which have proved so detrimental to peaceful social coöperation and now shake the foundations of our civilization is not an outcome of lower-class activities. The proletarians, the workers, and the farmers are certainly not guilty. Members of the upper classes were the authors of these destructive ideas. The intellectuals converted the masses to this ideology; they did not get it from them. If the supremacy of these modern doctrines is a proof of intellectual decay, it does not demonstrate that the lower strata have conquered the upper ones. It demonstrates rather the decay of the intellectuals and of the bourgeoisie. The masses, precisely because they are dull and mentally inert, have never created new ideologies. This has always been the prerogative of the elite.

The truth is that we face a degeneration of a whole society and not an evil limited to some parts of it.

When liberals recommend democratic government as the only means of safeguarding permanent peace both at home and in international relations, they do not advocate the rule of the mean, of the lowbred, of the stupid, and of the domestic barbarians, as some critics of democracy believe. They are liberals and democrats precisely because they desire government by the men best fitted for the task. They maintain that those best qualified to rule must prove their abilities by convincing their fellow citizens, so that they will voluntarily entrust them with office. They do not cling to the militarist doctrine, common to all revolutionaries, that the proof of qualification is the seizure of office by acts of violence or fraud. No ruler who lacks the gift of persuasion can stay in office long; it is the indispensable condition of government. It would be an idle illusion to assume that any government, no matter how good, could lastingly do without public consent. If our community does not beget men who have the power to make sound social principles generally acceptable, civilization is lost, whatever the system of government may be.

It is not true that the dangers to the maintenance of peace, democracy, freedom, and capitalism are a result of a “revolt of the masses.” They are an achievement of scholars and intellectuals, of sons of the well-to-do, of writers and artists pampered by the best society. In every country of the world dynasties and aristocrats have worked with the socialists and interventionists against freedom. Virtually all the Christian churches and sects have espoused the principles of socialism and interventionism. In almost every country the clergy favor nationalism. In spite of the fact that Catholicism is world embracing, even the Roman Church offers no exception. The nationalism of the Irish, the Poles, and the Slovaks is to a great extent an achievement of the clergy. French nationalism found most effective support in the Church.

It would be vain to attempt to cure this evil by a return to the rule of autocrats and noblemen. The autocracy of the czars in Russia or that of the Bourbons in France, Spain, and Naples was not an assurance of sound administration. The Hohenzollerns and the Prussian Junkers in Germany and the British ruling groups have clearly proved their unfitness to run a country.

If worthless and ignoble men control the governments of many countries, it is because eminent intellectuals have recommended their rule; the principles according to which they exercise their powers have been framed by upper-class doctrinaires and meet with the approval of intellectuals. What the world needs is not constitutional reform but sound ideologies. It is obvious that every constitutional system can be made to work satisfactorily when the rulers are equal to their task. The problem is to find the men fit for office. Neither a priori reasoning nor historical experience has disproved the basic idea of liberalism and democracy that the consent of those ruled is the main requisite of government. Neither benevolent kings nor enlightened aristocracies nor unselfish priests or philosophers can succeed when lacking this consent. Whoever wants lastingly to establish good government must start by trying to persuade his fellow citizens and offering them sound ideologies. He is only demonstrating his own incapacity when he resorts to violence, coercion, and compulsion instead of persuasion. In the long run force and threat cannot be successfully applied against majorities. There is no hope left for a civilization when the masses favor harmful policies. The elite should be supreme by virtue of persuasion, not by the assistance of firing squads.

4.

Misapprehended Darwinism

Nothing could be more mistaken than the now fashionable attempt to apply the methods and concepts of the natural sciences to the solution of social problems. In the realm of nature we cannot know anything about final causes, by reference to which events can be explained. But in the field of human actions there is the finality of acting men. Men make choices. They aim at certain ends and they apply means in order to attain the ends sought.

Darwinism is one of the great achievements of the nineteenth century. But what is commonly called Social Darwinism is a garbled distortion of the ideas advanced by Charles Darwin.

It is an ineluctable law of nature, say these pseudo-Darwinists, that each living being devours the smaller and weaker ones and that, when its turn comes, it is swallowed by a still bigger and stronger one. In nature there are no such things as peace or mutual friendship. In nature there is always struggle and merciless annihilation of those who do not succeed in defending themselves. Liberalism’s plans for eternal peace are the outcome of an illusory rationalism. The laws of nature cannot be abolished by men. In spite of the liberal’s protest we are witnessing a recurrence of war. There have always been wars, there will always be wars. Thus modern nationalism is a return from fallacious ideas to the reality of nature and life.

Let us first incidentally remark that the struggles to which this doctrine refers are struggles between animals of different species. Higher animals devour lower animals; for the most part they do not feed in a cannibalistic way on their own species. But this fact is of minor importance.

The only equipment which the beasts have to use in their struggles is their physical strength, their bodily features, and their instincts. Man is better armed. Although bodily much weaker than many beasts of prey, and almost defenseless against the more dangerous microbes, man has conquered the earth through his most valuable gift, reason. Reason is the main resource of man in his struggle for survival. It is foolish to view human reason as something unnatural or even contrary to nature. Reason fulfills a fundamental biological function in human life. It is the specific feature of man. When man fights he nearly always makes use of it as his most efficient weapon. Reason guides his steps in his endeavors to improve the external conditions of his life and well-being. Man is the reasonable animal, Homo sapiens.

Now the greatest accomplishment of reason is the discovery of the advantages of social coöperation, and its corollary, the division of labor. Thanks to this achievement man has been able to centuple his progeny and still provide for each individual a much better life than nature offered to his nonhuman ancestors some hundred thousand years ago. In this sense—that there are many more people living today and that each of them enjoys a much richer life than his fathers did—we may apply the term progress. It is, of course, a judgment of value, and as such arbitrary. But it is made from a point of view which practically all men accept, even if they—like Count Tolstoi or Mahatma Gandhi—seem unconditionally to disparage all our civilization. Human civilization is not something achieved against nature; it is rather the outcome of the working of the innate qualities of man.

Social coöperation and war are in the long run incompatible. Self-sufficient individuals may fight each other without destroying the foundations of their existence. But within the social system of coöperation and division of labor war means disintegration. The progressive evolution of society requires the progressive elimination of war. Under present conditions of international division of labor there is no room left for wars. The great society of world-embracing mutual exchange of commodities and services demands a peaceful coexistence of states and nations. Several hundred years ago it was necessary to eliminate the wars between the noblemen ruling various countries and districts, in order to pave the way for a peaceful development of domestic production. Today it is indispensable to achieve the same for the world community. To abolish international war is not more unnatural than it was five hundred years ago to prevent the barons from fighting each other, or two thousand years ago to prevent a man from robbing and killing his neighbor. If men do not now succeed in abolishing war, civilization and mankind are doomed.

From a correct Darwinist viewpoint it would be right to say: Social coöperation and division of labor are man’s foremost tools in his struggle for survival. The intensification of this mutuality in the direction of a world-embracing system of exchange has considerably improved the conditions of mankind. The maintenance of this system requires lasting peace. The abolition of war is therefore an important item in man’s struggle for survival.

5.

The Role of Chauvinism

Confusing nationalism and chauvinism or explaining nationalism as a consequence of chauvinism is a widespread error.

Chauvinism is a disposition of character and mind. It does not result in action. Nationalism is, on the one hand, a doctrine recommending a certain type of action and, on the other hand, the policy by which this action is consummated. Chauvinism and nationalism are therefore two entirely different things. The two are not necessarily linked together. Many old liberals were also chauvinists. But they did not believe that inflicting harm upon other nations was the proper means of promoting the welfare of their own nation. They were chauvinists but not nationalists.

Chauvinism is a presumption of the superiority of the qualities and achievements of one’s own nation. Under present conditions this means, in Europe, of one’s own linguistic group. Such arrogance is a common weakness of the average man. It is not too difficult to explain its origin.

Nothing links men more closely together than a community of language, and nothing segregates them more effectively than a difference of language. We may just as well invert this statement by asserting that men who associate with each other use the same idiom, and men between whom there is no direct intercourse do not. If the lower classes of England and of Germany had more in common with each other than with the upper strata of the society of their own countries, then the proletarians of both countries would speak the same idiom, a language different from that of the upper classes. When under the social system of the eighteenth century the aristocracies of various European countries were more closely linked with each other than with the commoners of their own nation, they used a common upper-class language—French.

The man who speaks a foreign language and does not understand our language is a “barbarian,” because we cannot communicate with him. A “foreign” country is one where our own idiom is not understood. It is a great discomfort to live in such a country; it brings about uneasiness and homesickness. When people meet other people speaking a foreign language, they regard them as strangers; they come to consider those speaking their own tongue as more closely connected, as friends. They transfer the linguistic designations to the people speaking the languages. All those speaking Italian as their main and daily language are called Italians. Next the linguistic terminology is used to designate the country in which the Italians live, and finally to designate everything in this country that differs from other countries. People speak of Italian cooking, Italian wine, Italian art, Italian industry, and so on. Italian institutions are naturally more familiar to the Italians than foreign ones. As they call themselves Italians, in speaking of these institutions they use the possessive pronouns “mine” and “our.”

Overestimation of one’s own linguistic community, and of everything commonly called by the same adjective as the language, is psychologically not more difficult to explain than the overvaluation of an individual’s own personality or underestimation of that of other persons. (The contrary—undervaluation of a man’s own personality and nation, and overestimation of other people and of foreign countries—may sometimes happen too, although more rarely.) At any rate it must be emphasized that chauvinism was more or less restricted up to the beginning of the nineteenth century. Only a small minority had a knowledge of foreign countries, languages, and institutions, and these few were in the main educated enough to judge foreign things in a relatively objective way. The masses knew nothing about foreign lands. To them the foreign world was not inferior but merely unfamiliar. Whoever was conceited in those days was proud of his rank, not of his nation. Differences in caste counted more than national or linguistic ones.

With the rise of liberalism and capitalism conditions changed quickly. The masses became better educated. They acquired a better knowledge of their own language. They started reading and learned something about foreign countries and habits. Travel became cheaper, and more foreigners visited the country. The schools included more foreign languages in their curriculum. But nevertheless for the masses a foreigner is still in the main a creature whom they know only from books and newspapers. Even today there are living in Europe millions who have never had the opportunity of meeting or speaking with a foreigner, except on a battlefield.

Conceit and overvaluation of one’s own nation are quite common. But it would be wrong to assume that hatred and contempt of foreigners are natural and innate qualities. Even soldiers fighting to kill their enemies do not hate the individual foe, if they happen to meet him apart from the battle. The boastful warrior neither hates nor despises the enemy; he simply wants to display his own valor in a glorious light. When a German manufacturer says that no other country can produce as cheap and good commodities as Germany, it is no different from his assertion that the products of his domestic competitors are worse than his own.

Modern chauvinism is a product of literature. Writers and orators strive for success by flattering their public. Chauvinism spread therefore with the mass production of books, periodicals, and newspapers. The propaganda of nationalism favors it. Nevertheless, it has comparatively slight political significance, and must in any case be clearly distinguished from nationalism.

The Russians are convinced that physics is taught in the schools of Soviet Russia only, and that Moscow is the only city equipped with a subway system. The Germans assert that only Germany has true philosophers; they picture Paris as an agglomeration of amusement places. The British believe that adultery is quite usual in France, and the French style homosexuality le vice allemand. The Americans doubt whether the Europeans use bathtubs. These are sad facts. But they do not result in war.

It is paradoxical that French boors pride themselves on the fact that Descartes, Voltaire, and Pasteur were Frenchmen and take a part of Molière’s and Balzac’s glory to themselves. But it is politically innocuous. The same is true of the overestimation of one’s own country’s military achievements and of the eagerness of historians to interpret lost battles, after decades or even centuries, as victories. It gives an impartial observer a curious feeling when Hungarians or Rumanians speak of their nation’s civilization in epithets which would be grotesquely incongruous even if the Bible, the Corpus Juris Civilis, the Declaration of the Rights of Man, and the works of Shakespeare, Newton, Goethe, Laplace, Ricardo, and Darwin were written by Hungarians or Rumanians in Hungarian or Rumanian. But the political antagonism of these two nations has nothing to do with such statements.

Chauvinism has not begotten nationalism. Its chief function in the scheme of nationalist policies is to adorn the shows and festivals of nationalism. People overflow with joy and pride when the official speakers hail them as the elite of mankind and praise the immortal deeds of their ancestors and the invincibility of their armed forces. But when the words fade away and the celebration reaches its end, people return home and go to bed. They do not mount the battle-horse.

From the political point of view it is no doubt dangerous that men are so easily stirred by bombastic talk. But the political actions of modern nationalism cannot be explained or excused by chauvinist intoxication. They are the outcome of cool though misguided reasoning. The carefully elaborated, although erroneous, doctrines of scholarly and thoughtful books have led to the clash of nations, to bloody wars, and destruction.

6.

The Role of Myths

The term “myths” has long been used to signify purely fictitious narratives and doctrines. In this sense Christians call the teachings and stories of paganism myths. In this sense those who do not share the Christian faith call the biblical tales mythical. For the Christian they are not myths but truth.

This obvious fact has been distorted by writers who maintain that doctrines which cannot stand the criticism of reason can nonetheless be justified by ascribing to them a mythical character. They have tried to build up a rationalistic theory for the salvation of error and its protection against sound reasoning.

If a statement can be disproved, you cannot justify it by giving it the status of a myth and thus making it proof against reasonable objections. It is true that many fictions and doctrines, today generally or in the main refuted and therefore called myths, have played a great role in history. But they played this role not as myths but as doctrines considered true. In the eyes of their supporters they were entirely authentic; they were their honest convictions. They turned to myths in the eyes of those who considered them fictitious and contrary to fact, and who therefore did not let their actions be influenced by them.

For Georges Sorel a myth is the imaginary construction of a future successful action.* But, we must add, to estimate the value of a method of procedure one point only has to be taken into account, namely, whether or not it is a suitable means to attain the end sought. If reasonable examination demonstrates that it is not, it must be rejected. It is impossible to render an unsuitable method of procedure more expedient by ascribing to it the quality of a myth. Sorel says: “If you place yourself on this ground of myths, you are proof against any kind of critical refutation.”† But the problem is not to succeed in polemic by taking recourse to subtleties and tricks. The only question is whether or not action guided by the doctrine concerned will attain the ends sought. Even if one sees, as Sorel does, the task of myths to be that of equipping men to fight for the destruction of what exists,‡ one cannot escape the question: Do these myths represent an adequate means to achieve this task? It needs to be pointed out, incidentally, that destruction of existing conditions alone cannot be considered as a goal; it is necessary to build up something new in the place of what is destroyed.

If it is proved by reasonable demonstration that socialism as a social system cannot realize what people wish or expect to realize through it, or that the general strike is not the appropriate means for the attainment of socialism, you cannot change these facts by declaring—as Sorel did—that socialism and the general strike are myths. People who cling to socialism and the general strike wish to attain certain aims through them. They are convinced that they will succeed by these methods. It is not as myths but as doctrines considered to be correct and well founded that socialism and the general strike are supported by millions of men.

Some free thinkers say: Christianity is an absurd creed, a myth; yet it is useful that the masses should adhere to the Christian dogmas. But the advantage that these free thinkers expect depends upon the masses actually taking the Gospels as truth. It could not be attained if they were to regard the Commandments as myths.

Whoever rejects a political doctrine as wrong agrees with the generally accepted terminology in calling it a myth.* But if he wants to profit from a popular superstition in order to attain his own ends, he must be careful not to disparage it by calling it a myth openly. For he can make use of this doctrine only so long as others consider it to be truth. We do not know what those princes of the sixteenth century believed who joined the religious Reformation. If not sincere conviction but the desire for enrichment guided them, then they abused the faith of other people for the sake of their own selfish appetites. They would have prejudiced their own interests, however, if they had called the new creed mythical. Lenin was cynical enough to say that revolutions must be achieved with the catchwords of the day. And he achieved his own revolution by affirming publicly—against his better conviction—the catchwords that had taken hold of public opinion. Some party leaders may be capable of being convinced of the falsehood of their party’s doctrine. But doctrines can have real influence only so far as people consider them right.

Socialism and interventionism, etatism and nationalism are not myths, in the eyes of their advocates, but doctrines indicating the proper way to the attainment of their aims. The power of these teachings is based on the firm belief of the masses that they will effectively improve their lot by applying them. Yet they are fallacious; they start from false assumptions and their reasoning is full of paralogisms. Those who see through these errors are right in calling them myths. But as long as they do not succeed in convincing their fellow citizens that these doctrines are untenable, the doctrines will dominate public opinion and politicians and statesmen will be guided by them. Men are always liable to error. They have erred in the past; they will err in the future. But they do not err purposely. They want to succeed, and they know very well that the choice of inappropriate means will frustrate their actions. Men do not ask for myths but for working doctrines that point the right means for the ends sought.

Nationalism in general and Nazism in particular are neither intentional myths nor founded or supported by intentional myths. They are political doctrines and policies (though faulty) and are even “scientific” in intent.

If somebody were prepared to call myths the variations on themes like “We are the salt of the earth,” or “We are the chosen people,” in which all nations and castes have indulged in one way or another, we should have to refer to what has been said about chauvinism. This is music for the enchantment and gratification of the community, mere pastime for the hours not devoted to political business. Politics is activity and striving toward aims. It should not be confused with mere indulgence in self-praise and self-adulation.

[* ]Hegel, Philosophy of Right, translated by T. M. Knox (Oxford, 1942), pp. 155–156.

[† ]Hayek, “The Counter-Revolution of Science,” Economica, VIII, 9–36, 119–150, 281–320.

[* ]Adolf Weber (Der Kampf zwischen Kapital and Arbeit, 3d and 4th eds. Tübingen, 1921, p. 68) says quite correctly in dealing with German trade unionism: “Form and spirit . . . came from abroad.”

[* ]Bukharin, Program of the Communists (Bolshevists), p. 29.

[* ]Hayek, Freedom and the Economic System (Chicago, 1939), pp. 10 ff.

[* ]The United States, although the country with the most efficient and greatest industry, is not a predominantly industrial country, as it enjoys an equilibrium between its processing industries and its production of food and raw materials. On the other hand Austria, whose industry is small compared with that of America, is predominantly industrial because it depends to a great extent on the import of food and raw materials and must export almost half of its industrial output.

[* ]For the two situations in which price-control measures can be used effectively within a narrowly confined sphere, the reader is referred to Mises’s Nationalökonomie, pp. 674–675. [See Human Action (1949), 3rd (1966), 4th (1996), and Liberty Fund (2007) editions, pp. 765–766.—Ed.]

[* ]We pass over the fact that, because of the impossibility of economic calculation under it, socialism too must result in chaos.

[* ]Many Americans are not familiar with the fact that, in the years between the two world wars, almost all European nations had recourse to very strict anti-immigration laws. These laws were more rigid than the American laws, since most of them did not provide for any immigration quotas. Every nation was eager to protect its wage level—a low one when compared with American conditions—against the immigration of men from other countries in which wage rates were still lower. The result was mutual hatred and—in face of a threatening common danger—disunion.

[* ]We need not consider the case of import duties so low that only a few or none of the domestic plants can continue production for the home market. In this case foreign competitors could penetrate the domestic market, and prices would reach the level of the world market price plus the whole import duty. The failure of the tariff would be even more manifest.

[* ]G. L. Schwartz, “Back to Free Enterprise,” Nineteenth Century and After, CXXXI (1942), p. 130.

[* ]See above, p. 67–68.

[1. ][Established December 6, 1922.—Ed.]

[* ]Act IV, scene in the lunatic asylum.

[† ]Kenyon, “The Bible as Christ Knew It,” The History of Christianity in the Light of Modern Knowledge (London, 1929), p. 172. Some Zionists advocated Yiddish as the national language; but they did not succeed in establishing it. Yiddish is a German dialect with some words borrowed from Hebrew and more from the Slavonic languages. It is the dialect spoken by the Jews of German origin in northeastern Europe. The newspapers in Hebrew type printed and distributed in America are not written in Hebrew but in Yiddish.

[* ]We shall consider in chapter VIII the alleged racial factors in nationalist Jew baiting.

[* ]Renan, Qu’est-ce qu’une nation? (ed. Paris, 1934).

[† ]Ibid., p. xi.

[‡ ]Ibid., pp. 84, 88.

[§ ]Ibid., p. 83.

[‖ ]Ibid., pp. viii ff., 89–90, 95 ff.

[¶ ]“L’homme n’appartient ni à sa langue, ni à sa race; il n’appartient qu’à lui-même.” Ibid., p. ix.

[* ]Ibid., p. 91.

[† ]Ibid., p. viii.

[* ]Steding, Das Reich und die Krankheit der Kultur (Hamburg, 1938).

[† ]Carl Schmitt-Dorotić, Der Begriff des Politischen (Munich, 1932).

[* ]E.g., the city of Fiume is claimed by the Hungarians, Croats, Yugoslavs, and Italians.

[* ]Hrushevsky, A History of the Ukraine (published for the Ukrainian National Association by Yale University Press, New Haven, 1941), p. 574.

[† ]Part III, act IV, scene ii. Authorized translation by Sam E. Davidson, Poet Lore, XLII, No. 3 (Boston, Bruce Humphries, Inc., 1935), p. 259.

[2. ][The truth of Mises’s remark that it was the British who held India together was borne out after World War II. India and Pakistan were declared to be separate sovereign states in 1947, and Bangladesh seceded from Pakistan in 1971.—Ed.]

[* ]W. L. Langer, The Diplomacy of Imperialism (New York, 1935), I, pp. 75, 95; L. Robbins, The Economic Causes of War (London, 1939), pp. 81, 82.

[* ]Staley, War and the Private Investor (New York, 1935); Robbins, op. cit.; Sulzbach, “Capitalist Warmongers,” A Modern Superstition (Chicago, 1942). Charles Beard (A Foreign Policy for America, New York, 1930, p. 72) says with regard to America: “Loyalty to the facts of historical record must ascribe the idea of imperialist expansion mainly to naval officers and politicians rather than to business men.” That is valid for all other nations too.

[* ]Benda, La Trahison des clercs (Paris, 1927), p. 253.

[* ]Voegelin, “The Mongol Orders of Submission to the European Powers 1245–1255,” Byzantion, XV, pp. 378–413.

[* ]We have dealt only with those types of foreign investment that were intended to develop the natural resources of the backward countries, i.e., investment in mining and agriculture and their auxiliaries such as transportation facilities, public utilities, and so on. The investment in foreign manufacturing was to a great extent due to the influence of economic nationalism; it would not have happened within a world of free trade. It was protectionism that forced the American motor-car producers and the German electrical plants to establish branch factories abroad.

[* ]See the characteristic ideas of Lenin about the problems of entrepreneurship and management in his pamphlet State and Revolution (New York, 1917), pp. 83–84.

[* ]De Man, Die Psychologie des Sozialismus (rev. ed. Jena, 1927), pp. 16–17. Man wrote this at a time when he was a favorite of German Left-wing socialism.

[* ]Sorel, Réflexions sur la violence (3d ed. Paris, 1912), p. 32: “Les hommes qui participent aux grands mouvements sociaux se représentent leur action prochaine sous formes d’images de batailles assurant le triomphe de leur cause. Je propose de nommer mythes ces constructions.” [“Men who are participating in great social movements always picture their coming action in the form of images of battle in which their cause is certain to triumph. I proposed to give the name of † ‘myths’ to these constructions.” Reflections on Violence, translated by Thomas Ernert Hulme and edited by Jeremy Jennings (Cambridge: Cambridge University Press, 1999), p. 20.—Ed.]

[† ]Ibid., p. 49.

[‡ ]Ibid., p. 46.

[* ]Perroux, Les Mythes hitleriens (Lyon, 1935); Rougier, Les Mystiques politiques contemporaines (Paris, 1935); Rougier, Les Mystiques économiques (Paris, 1938).