“To retaliate for wrong suffered, to take revenge and to punish, does satisfy lower instincts, but in politics the avenger harms himself no less than the enemy,” Mises wrote addressing Germany in Nation, State, and Economy (1919). “What would he gain from quenching his thirst for revenge at the cost of his own welfare?”
It was the achievement of Ludwig von Mises (1881-1973) to recreate in his time the radical program of early liberalism, i.e., the realizing of individual freedom, peace, and prosperity through limitations on state power, individual rights, and an economy based on private property. He systematically confronted the prevailing intellectual errors of the post-liberal era of statism in which he lived, and attacked with intelligence, scholarship, and courageous passion the all-powerful state and its intellectual apologists (for this, he has often been seen as “intransigent”). He sought to learn how and why liberalism itself had succumbed to the new fashions of collectivism, welfarism, militarism, etc. This task involved a thoroughgoing historical critique of liberalism from within, to find out exactly which errors of thought had played into the hands of anti-liberals, and how and when these errors had arisen.
At the beginning of the 20th century, when Mises took up his systematic studies of law, society, and economics, new, fashionable new thinkers were proclaiming the end of laissez-faire and the need for state intervention on a grand scale to overcome the inherent “evils” of the market economy and to recreate “organic” social solidarity. For their part, conservatives contributed to the overall problem, by adopting and adapting the new doctrines of state intervention and grafting them onto older, feudalistic doctrines that older-style conservatives had never disowned.
As for socialism, it was—as Murray N. Rothbard would later write1 —in its very origins, a fusion of themes and ideas taken from both liberalism and feudal/statist reaction. This “fusion” came about in several waves. Socialists meant to retain the liberal goals of peace and prosperity, by using intervention to “correct” supposed self-destructive tendencies in liberal society. Positivism, with its a new managerial elite; Hegelianism, the “scientific socialism” of Marx; and sociology all moved in this direction.
The new statism had competing Left and Right tendencies: Marxism and corporatism. Mises lived and worked in a world where would-be social engineers dominated public life, quarrelling over which form of collectivism was the best path, but agreeing on ever-greater state control of people’s lives and property. The “catastrophe of 1914-1918” (Schumpeter’s term for World War I) intensified such late 19th-century trends as “social imperialism” and various forms of “national socialism.”
Mises’s university education left him well prepared for his attempt to criticize and rebuild liberalism. His studies began in the law faculty, giving him a much broader intellectual foundation than one might expect in a contemporary economist. His “intense interest in historical knowledge” led him to reject the teachings of the German historical school.
Mises’s Reconstruction of Liberalism
In World War I Mises served as an artillery officer. He witnessed communist revolutions in Germany and Hungary and was well aware of the revolution in Russia. These events raised the problem of socialism from one of theory to one of practice.
But the breakdown of the pre-1914 European order raised even broader questions of political economy. Thus, Mises necessarily had to address the causes and consequences of wars from the standpoint of rationalist liberalism. He brought to bear on this problem the tools of praxeology, subjective value theory, his theories of money, socialism (an outgrowth of the last), business cycles, etc. Applying all this, Mises necessarily wrote works containing much historical material.
In 1919, Mises published Nation, Staat, und Wirtschaft (English: Nation, State, and Economy, 1983), which looked into problems of ethnic minorities in relation to state power, democracy, minority rights, freedom, self-determination, secession, etc. Here, Mises assessed the causes and consequences of the European disaster. The disaster included the Versailles settlement.
For Mises, the “nation” consists of those who communicate and think in the same language. He rebuts some common counterarguments, while observing that it is not necessary for all members of a nation to be included in the same state.
Thus in 1919, Mises writes as a German advising other Germans, including the German-Austrians, how best to address their crisis. While he uses the term “right” with respect to various freedoms and self-determination, he keeps this term on a secondary level. His arguments are utilitarian (consequentialist), so that if one wants to live in a free and prosperous commonwealth, he should do x, y, and z— i.e., follow the program of laissez-faire liberalism as reconstructed by Mises.
Given the premises, the argument is compelling. Given the liabilities, political and financial, imposed on the German peoples by their victorious, imperialist neighbors, there were two—and only two—ways out. The first was imperialism, a resumption of the war as soon as possible. This was widely popular, but criminally mistaken. The second option was to adopt the full program of liberalism.
Mises was aware of the side of war that many found uplifting and creative:
Warlike activity assures a man of that deep satisfaction aroused by the highest straining of all forces in resistance to external dangers. That is no mere atavistic reawakening of impulses and instincts that have become pointless in changed circumstances. The inner feeling of happiness aroused not by victory and revenge but rather by struggle and danger originates in the vivid perception that exigency compels the person to the highest deployment of forces of which he is capable and that it makes everything that lies within him become effective…. Bravery is an emanation of health and strength and is the rearing up of human nature against external adversity. Attack is the most primary initiative. In his feelings man is always an imperialist.2
Nevertheless, it would be utterly irrational to “beat the world to ruins to let a romantic longing exhaust itself….” Those who wished to do exactly that, however, denied the patriotism and national feeling of liberals:
The rational policy that is commonly called the ideas of 1789 has been reproached for being unpatriotic—in Germany, un-German. It takes no regard of the special interests of the fatherland; beyond mankind and the individual, it forgets the nation. This reproach is understandable only if one accepts the view that there is an unbridgeable cleavage between the interest of the people as a whole on the one side and that of individuals and of all mankind on the other side. If one starts with the harmony of rightly understood interests, then one cannot comprehend this objection at all.
The utilitarian policy has further been reproached for aiming only at the satisfaction of material interests and neglecting the higher goals of human striving. The utilitarian supposedly thinks of coffee and cotton and on that account forgets the true values of life…. Nothing is more absurd than this criticism. It is true that utilitarianism and liberalism postulate the attainment of the greatest possible productivity of labor as the first and most important goal of policy. But they in no way do this out of misunderstanding of the fact that human existence does not exhaust itself in material pleasures…. If they deny to the state the mission of furthering the realization of the values of life, they do so not out of want of esteem for true values but rather in the recognition that these values… are inaccessible to every influence by external forces…. They demand freedom of thought because they rank thought much too high to hand it over to the domination of magistrates and councils. They demand freedom of speech and of the press because they expect the triumph of truth only from the struggle of opposing opinions. They reject every authority because they believe in man.
The person who has a low opinion of the mind is not the one who wants to make it free from all external regulation but rather the one who wants to control it by penal laws and machine guns. The reproach of a materialistic way of thinking applies not to individualistic utilitarianism but to collectivistic imperialism.3
Gustavede Molinariand Some Others on These Questions
At this point, I would like to introduce some writers who have addressed much the same issues. In 1854, Gustave de Molinari published an essay on “Progress Realized in the Usages of War.”4 Economic progress, Molinari wrote, has resulted from the separation of the personnel and materials of war from those of peace, symbolized by the contrast of open cities and fortified towns. With the growth of peaceful occupations came respect for the productive and commercial sectors and a desire to disrupt their activities as little as possible in war. The utility of this policy had been shown by practice; such practices were then codified in the law of nations.
“Unfortunately,” writes Molinari, “the new practices which the properly understood interest of the belligerents introduced into war in accord with the general interest of civilization did not prevail always during the great struggle of the Revolution and the Empire” (1789-1815). He praise Wellington, the Iron Duke, for adhering strictly to the rules of civilized warfare and treating civilians well. Wellington’s forces took nothing from the people for which they did not pay. By contrast, Russian forces in Wallachia and Moldavia paid for their acquisitions in “depreciated paper money”!5
So far, rules protecting commerce and private property only applied on land. At sea, seizure and destruction of property were normal, even menacing neutral shipping. Molinari mentions a 1780 draft treaty between Sweden, Denmark, the U.S., Prussia, Austria, Portugal, and the Two Sicilies intended to rectify matters.
Murray Rothbard’s discussion of U.S. diplomacy under the Confederation provides interesting support for Molinari’s account. Rothbard notes that in April 1783, Benjamin Franklin had negotiated a treaty with Sweden “based on the Libertarian American Plan of 1776,” that is,
freedom of trade and the safeguarding of neutrals’ rights: in particular, restricting contraband that might be seized by belligerent powers; the freedom of neutral shipping between belligerent ports; and [the principle that] free ships make free goods. The Swedish treaty made the further liberal addition of agreeing to convoy each other’s ships in time of war.6
Congress appointed a new treaty commission, headed by Thomas Jefferson, in 1784. The commission was to work toward treaties grounded on the logic already adopted. Congress sought agreements “prohibiting privateering between the parties in case of war between them; and restricting the scope of blockades.” Further, a new rule should be introduced that “now contraband was to be purchased rather than seized. (John Adams, indeed, wished to abolish the contraband category altogether, and thus preserve neutral rights totally.)”7
A treaty negotiated with Prussia in 1785 “provided for neutral convoys, but also for purchase of contraband and abolition of all privateering between the two countries, even if they were at war. Jefferson explained, on behalf of the American commissioners, that these provisions were “for the interest of humanity in general, that the occasions of war, and the inducements to it, should be diminished.” The ultimate goal was to be “the total emancipation of commerce and the bringing together of all nations for a free intercommunications of happiness.”8
These attempts to protect commerce, even during war, did not prevail. Instead, as Molinari noted, the powers had gone beyond the “active” pursuit of plunder at sea to the “passive” policy of injuring an enemy’s productive enterprises through general blockades. Of the two, the latter might well be more damaging and counterproductive, having the opposite of the desired effect.9
Thus the allied coalition (from 1793) sought to impose a starvation blockade on France. This strengthened the Revolution, delayed peace, and “exasperated national animosities.” It was no accident, Molinari wrote, that the coastal regions of France showed the greatest hatred for England. One might well compare the World War I blockade of the Central Powers by the Allies.10
Molinari now turned to the Eastern (Crimean) War, which had begun in March 185). Here, too, was found counterproductive economic warfare. He remarks rather dryly that something was wrong when the Czar, hoping to punish his enemies, prohibited the export of Russian cereals and metals, while England sought to punish Russia by preventing the movement of the same exports!11
Other misbegotten policies accompanied the Eastern War. English attacks on Finnish private property had driven the normally anti-Russian Finns into the arms of Russia. Such destruction of property underlay most national hatreds. This made lasting peace more difficult—and, implicitly, set the stage for new wars.12
Molinari recommended a distinction between strategic and commercial blockades. It made sense to blockade an enemy port that was primarily a naval base.13 General commercial blockades were an attack on prosperity and civilization. The problems arising from blockades in the War of 1812, the War for Southern Independence, 1861-1865, and World War I, 1914-1919, bear out Molinari’s reasoning.
Molinari notes that the real interest of all in respecting commerce and property is “”no less real for not being immediately obvious to the eyes.”14
The counterproductivity of war—even from the standpoint of the “winners”—is underscored by William Graham Sumner’s essay, “The Conquest of American by Spain” and, recently, by military historian Caleb Carr’s little book, The Lessons of Terror (2002).15 Sumner held that in defeating the ramshackle Spanish empire, the United States adopted the arbitrary, imperial values of Spain. Carr’s central theme is that attacks on civilian populations are always counterproductive.
The General Conclusions Reached by Mises in.1919
Mises saw World War I as an unprecedented crisis of civilization. He wrote: “There were great wars before; flourishing states were annihilated, whole peoples exterminated. All that can in no way be compared with what is now occurring before our eyes. In the world crisis whose beginning we are experiencing… [n]one can stand aside” because “progress in the techniques of war and transportation and communication makes it impossible today for the defeated to evade the execution of the victor’s sentence of annihilation.”16
The industrial techniques developed by the modern capitalist economy had made war
more fearful and destructive than ever before because it is now waged with all the means of the highly developed technique that the free economy has created. Bourgeois civilization has built railroads and electric power plants, has invented explosives and airplanes, in order to create wealth. Imperialism has placed the tools of peace in the service of destruction. With modern means it would be easy to wipe out humanity at one blow.
Thus, capitalism had unintentionally put means of which older kings and tryants could scarcely have dreamed at the disposal of modern states, so that
[b]y pressing a button one can expose thousands to destruction. It was the fate of civilization that it was unable to keep the external means that it had created out of the hands of those who had remained estranged from its spirit…. He who rules the means of exchange of ideas and of goods in the economy based on the division of labor has his rule more firmly grounded than ever an imperator before…. How much more efficient than the guillotine of Robespierre are the machine guns of Trotsky! Never was the individual more tyrannized, than since the outbreak of the World War and especially of the world revolution. One cannot escape the police and administrative technique of the present day.17
But there was an
external limit … to this rage for destruction. In destroying the free cooperation of men, imperialism undercuts the material basis of its power…. In using the weapons to blow up the forge and kill the smith, it makes itself defenseless in the future. The apparatus of the economy based on division of labor cannot be reproduced, let alone extended, if freedom and property have disappeared.18
Primitivism would ensue.
Mises next addressed the Versailles settlement:
The unfortunate outcome of the war brings hundreds of thousands, even millions, of Germans under foreign rule and imposes tribute payments of unheard-of size on the rest of Germany …. Need and misery for the German people will emerge from this peace. The population will decline; and the German people, which before the war counted among the most numerous peoples of the earth, will in the future have to be numerically less significant than they once were.19
The German nation would have to direct serious, disciplined thought toward getting out this artificial fix. One popular solution, the path of renewed war and German imperialism could only end in disaster:
The nations that today have robbed and enslaved Germany are very many. The amount of power that they have exercised is so great that they will watch anxiously to prevent any strengthening of Germany again. A new war that Germany might wage could easily become a Third Punic War and end with the complete annihilation of the German people…. [S]uccess would not be worth the stakes….20
Mises therefore recommended another path—that of production and competition. The Germans must create a genuinely liberal free-market society at home, so as to pull themselves up through hard work and efficiency. They would outcompete those who temporarily held the whip-hand over them:
To set nothing against the efforts of imperialistic neighbor states to oppress and de-Germanize us other than productive labor, which makes one wealthy and thereby free, is a way that leads more quickly and surely to the goal than the policy of struggle and war.21
Forcible expansion had failed. It could not be known what roadblocks the victorious powers might set against German economic liberalism. If the powers sought to suppress peaceful rivalry, “all modern civilization faces downfall.”
The outlook would be poor, in such a case, even if the relatively innocent side should prevail. Those who had wanted peace would resort to all the means of imperialism: victorious, they would “not lay down their weapons again; they themselves remain imperialists.”22
This was exactly Sumner’s argument in “The Conquest of America by Spain.” Further, the victorious powers—”Englishmen, Frenchmen, and Americans”—were not without imperialist faults, despite their adoption of relative economic liberalism:
Now they stand as victors and are not willing to content themselves with what they indicated before their victory as their war aim. They have long since forgotten the fine programs with which they went to war. Now they have power and are not willing to let it get away. Perhaps they think that they will exercise power for the general good, but that is what all those with power have believed. Power is evil in itself, regardless of who exercises it.23
If the Allies proved unreasonable, “so much the worse for them…” This was no argument against economic liberalism for the German nation. Germans could still benefit: “It was the greatest error of German imperialists that they accused those who had advised a policy of moderation of having unpatriotic sympathy for foreigners; the course of history has shown how much they thereby deluded themselves.”24
Revenge through state action should not form the basis of German policy:
It would be the most terrible misfortune for Germany and for all humanity if the idea of revenge should dominate the German policy of the future. To become free of the fetters that have been forced upon German development by the peace of Versailles … that alone should be the goal of the new German policy. To retaliate for wrong suffered, to take revenge and to punish, does satisfy lower instincts, but in politics the avenger harms himself no less than the enemy…. What would he gain from quenching his thirst for revenge at the cost of his own welfare?25
The warlike “ideas of 1914” were embodied in the unjust peace settlement and the League of Nations. Whole nations were “being ‘punished’” and “the forfeiture theory comes to life again.” This threatened private investment overseas and undercut the international division of labor that went hand in hand with liberalism. It was shortsighted indeed that “Englishmen, North Americans, French, and Belgians, those chief exporters of capital, thereby help gain recognition for the principle that owning capital abroad represents a form of rule and that its expropriation is the natural consequence of political changes….” Such a principle and precedent was in no one’s long-run interest.26
As for the much-advertised socialist alternative, “[i]f we wanted to throw ourselves into the arms of Bolshevism merely for the purpose of annoying our enemies, the robbers of our freedom and our property, or to set their house on fire too, that would not help us in the least.” Germans could not pull themselves up “by warlike actions nor by revenge and the policy of despair.” The only workable policy was that of across-the-board liberalism.27
- 1“Left and Right: The Prospects for Liberty,” Left and Right, I, 1 (Spring 1965), reprinted in Egalitarianism as a Revolt Against Nature and Other Essays ( Auburn , AL : Ludwig von Mises Institute, 2000), pp. 21-53.
- 2Ludwig von Mises, Nation, State, and Economy, translated by Leland Yeager (New York: New York University Press, 1983), pp. 213-214.
- 3Mises, Nation, State, and Economy, pp, 214-215.
- 4Gustave de Molinari, “Progrès Réalisé dans les Usages de la Guerre,” in Questions d’ Économie Politique et de Droit Publique, vol. II (Paris, Brussels: Guillaumin, 18610, pp. 277-325.)
- 5Ibid., p. 285.
- 6Murray N. Rothbard, Conceived in Liberty, Vol. V [unpublished fragment on Confederation Period], p. 74 (and overleaf), Rothbard Papers.
- 7Ibid., pp. 74-75.
- 8Ibid., p. 75.
- 9Molinari, pp. 319-320.
- 10Molinari, pp. 296-298. Cf. Ralph Raico , “The Politics of Hunger: A Review,” Review of Austrian Economics, 3 (1989), pp. 253-259.
- 11Ibid., p. 309, 323-324; for the whole discussion see pp. 304-310.
- 12Ibid., pp. 313-317.
- 13Ibid., p. 320.
- 14Ibid., p. 325.
- 15William Graham Sumner, War and Other Essays (New Haven, CT: Yale University Press, 1914); Caleb Carr, The Lessons of Terror ( New York : Random House, 2002).
- 16Mises, Nation, State, and Economy, p. 215-216.
- 17Ibid., p. 216.
- 18Ibid., p. 217.
- 19Ibid.
- 20Ibid., pp. 217-218.
- 21Ibid., p. 218.
- 22Ibid., p. 219.
- 23Ibid.; my italics.
- 24Ibid., pp. 219-220.
- 25Ibid., p. 220; my italics.
- 26Ibid.; my italics.
- 27Ibid., p. 221.
