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

3.

A World Government

The establishment of a supernational world government is an old idea of pacifists.

Such a world government is not needed for the maintenance of peace, however, if democracy and an unhampered market economy prevail everywhere. Under free capitalism and free trade no special provisions or international institutions are required to safeguard peace. Where there is no discrimination against foreigners, when everyone is free to live and to work where he likes, there are no longer causes for war.

We may grant to the socialists that the same holds true for a socialist world state, provided the rulers of this state do not discriminate against any races, linguistic groups, or religions. But if, on the contrary, discrimination is applied, nothing can hinder the outbreak of wars if those who are injured by it believe that they are strong enough to sweep it away.

All talk about the establishment of a world authority to prevent armed conflicts by the aid of a world police force is vain if favored groups or nations are not prepared to renounce their special privileges. If these privileges are to be maintained, a world state can be conceived only as the despotic rule of the privileged nations over the underprivileged. A democratic commonwealth of free nations is incompatible with any discrimination against large groups.

A world parliament elected by the universal and equal suffrage of all adults would obviously never acquiesce in migration and trade barriers. It is absurd to assume that the peoples of Asia would be prepared to tolerate the immigration laws of Australia and New Zealand, or that the predominantly industrial nations of Europe would agree to a policy of protectionism for the countries producing raw materials and foodstuffs.

One should not allow oneself to be misled by the fact that within individual countries minority groups have succeeded in obtaining privileges beneficial to themselves and detrimental to the majority of the nation. We have dealt sufficiently with this phenomenon. Suppose we assume that the intricacy of the problem of the economic consequences of protectionism should so confuse the minds of the international lawmakers that the representatives of those injured by trade barriers were temporarily deluded into withdrawing their opposition. It is not very likely, but it could happen. But it is certain that a world parliament, in which the representatives of those injured by the working of immigration barriers would form a compact majority, would never consent to their permanent preservation. Such are the hard facts which render the ambitious plans for a democratic world state or world federation illusory. Under present conditions it is utopian to indulge in such projects.

We have already pointed out that the maintenance of migration barriers against totalitarian nations aiming at world conquest is indispensable to political and military defense. It would undoubtedly be wrong to assert that under present conditions all kinds of migration barriers are the outcome of the misguided selfish class interests of labor. However, as against the Marxian doctrine of imperialism, almost generally accepted today, it is necessary to emphasize that the capitalists and entrepreneurs in their capacity as employers are not at all interested in the establishment of immigration barriers. Even if we were to agree to the fallacious doctrine that profits and interest come into existence because the entrepreneurs and capitalists withhold from the worker a part of what should rightly be paid to him, it is obvious that neither their short-run nor their long-run interests push the capitalists and entrepreneurs toward measures which raise domestic wage rates. Capital does not favor immigration barriers any more than it does Sozialpolitik, whose inextricable outcome is protectionism. If the selfish class interests of big business were supreme in the world, as the Marxians tell us, there would be no trade barriers. The owners of the most efficient plants are—under domestic economic freedom—not interested in protection. They would not ask for import duties were it not to compensate for the rise in costs caused by pro-labor policies.

As long as there are migration barriers, wage rates fixed on the domestic labor market remain at a higher level in those countries in which physical conditions for production are more favorable—as, for instance, in the United States—than in countries offering less favorable conditions. Tendencies toward an equalization of wage rates are absent when the migration of workers is prevented. Under free trade combined with migration barriers there would prevail in the United States a tendency toward an expansion of those branches of production in which wages form a comparatively small part of the total costs of production. Those branches which require comparatively more labor (for instance, the garment trade) would shrink. The resulting imports would bring about neither bad business nor unemployment. They would be compensated by an increase in the export of goods which can be produced to the greatest advantage in this country. They would raise the standard of living both in America and abroad. While some enterprises are menaced by free trade, the interests of the bulk of industry and of the whole nation are not. The main argument advanced in favor of American protectionism, namely, that protection is needed to maintain the nation’s high standard of living, is fallacious. American wage rates are protected by the immigration laws.

Pro-labor legislation and union tactics result in raising wage rates above the level secured by the immigration laws. The social gains brought about by such methods are only apparent. If there is no tariff, they result either in a drop in wage rates or in unemployment, because the competitive power of domestic industries is weakened and because their sales drop concomitantly. If there is a protective tariff, they raise the prices of those commodities which on account of the increase in domestic production costs require protection. Thus the workers are hurt in their capacity as consumers.

Investors would not suffer if protection were denied to domestic industries. They are free to invest in those countries in which conditions seem to offer the best chances of profit. Only the interests of the capital already invested in some branches of industry are favored by protection.

The best evidence that big business does not derive an advantage from protection is provided by the fact that the biggest firms are operating plants in various countries. This is precisely the characteristic feature of large-scale enterprises in this age of hyper-protectionism.* However, it would be more profitable for them (and, of course, at the same time more advantageous for consumers) if they were able to concentrate their entire production in plants located where conditions are most favorable.

The real barrier to a full use of the productive forces is not, as the Marxians say, capital or capitalism, but those policies designed to reform and to check capitalism which Marx branded as petty bourgeois. At the same time these policies beget economic nationalism and substitute international conflict for peaceful coöperation under the international division of labor.

[* ]For instance, the American motor-car manufacturers or the big oil, margarine, and soap concerns. The American automobile manufacturers do not advocate protection. In Germany the Association of Manufacturers of Machinery was the only organization which (up to 1933) had the courage to fight openly the protectionist program of the nationalist parties.