The Global Currency Plot

All nations must come together to build a stronger global regime.
– BARACK OBAMA

The idea of establishing world domination, a world government, a world state is not new—and it results from experience with the aggressive, warlike nature of the state. Immanuel Kant in his late work “Zum ewigen Frieden” (“Perpetual Peace”) (1795) promoted a world republic in order to achieve a lasting peace between the states; in doing so he took up the ideas of the Dutch legal scholar Hugo Grotius (1583–1645). The English writer H. G. Wells (1866–1946) strongly promoted the idea of a world state in various books. The English historian Arnold J. Toynbee (1889–1975) and the American historian and philosopher Will J. Durant (1885–1981) were also in favor.

The League of Nations since 1920 and the United Nations since 1945 are modern attempts to approach the “ideal of world government”—not only to promote international cooperation and peacefully balance the interests of the various states, but also to fundamentally support the interests of the state.71 The G20 (Group of Twenty), an informal association of nineteen states and the European Union, is an initiative by these states to shape the international financial and economic system and to coordinate policies that, it is thought, can only be pursued jointly at the international level—such as environmental protection, migration management, and counterterrorism.

In 1961, the British philosopher Bertrand Russell (1872–1970) published a paper entitled “Has Man a Future?” in which he argued that the whole world needed a single government to maintain peace; as early as 1955, Russell had published the “Russell Einstein Manifesto” with Albert Einstein (1879–1955), in which he sought to warn of the dangers of nuclear war.

The idea of a world state continues to receive support from many sides. With a view to a possible clash of cultures, the Catholic theologian Hans Küng (b. 1928), together with representatives of various religions, adopted Towards a Global Ethic: An Initial Declaration in 1993: a commitment to nonviolence, reverence for life, a just economic order, a life in truth, and equal rights for men and women. Without a global ethic there could be no world order. The philosopher Otfried Höffe (b. 1943) also formulates a need for action in Demokratie im Zeitalter der Globalisierung (1999), in which he argues that in order to meet future challenges, there is a need for a global legal and state order which has to submit to the conditions of a liberal democracy and which is supplemented in a subsidiary way by the national states.

The numerous explanations and design recommendations for the international coexistence of states, however, usually ignore logical findings.72 This deficit will be remedied below.

At the beginning of 2019, there were 195 states in the world.73 Such a large number of states does not, however, represent an end stage or a stable equilibrium from a logical point of view. Rather, the multitude of states existing side by side has a powerful tendency—namely the tendency to make fewer and fewer states out of many states and ultimately to form a unified world state. Hans-Hermann Hoppe takes this position in his 1990 essay “Banking, Nation States, and International Politics: A Sociological Reconstruction of the Present Economic Order,”74 in which he formulates a progression-theoretical reflection.75

A state—understood as a territorial compulsory monopolist with ultimate decision-making power over all conflicts in its territory—is necessarily in competition with other states. In principle, every state must fear that its subjects will leave if it gives them too raw a deal. For example, companies relocate their operations to other countries if they are overtaxed in their home country. Moreover, the possibility of any state to finance itself by spending inflationary money is limited. If inflation rises too much, people will no longer accept state money and will, for example, ask for comparatively better money from other countries.

How can the state overcome the limitations that stand in the way of its own urge to exploit and expand? The states could think about cartel formation. However, a cartel, in so far as it is based on voluntary agreement, is unstable. The cartel members would be obliged to imitate the economic and tax policy of the worst cartel member, so that no location has better economic conditions than the least attractive—otherwise there would be a migration of capital and labor between regions, which the cartel is meant to prevent. However, the comparatively better states will not want to get involved in such a policy. For them the incentives to withdraw from the cartel are greatest: they can offer better economic and living conditions within their borders and thus attract companies and workers from other countries, thereby broadening their own tax and power base.

Couldn’t a state cartel try to prevent an unwelcome withdrawal of cartel members by contractually agreeing that in such a case painful sanctions would become due, for example, in the form of capital movement restrictions and trade sanctions? At least that’s conceivable. But who would want to voluntarily sign such a contract? Certainly not the states that operate better than the others, i.e., those that have the greatest incentive to leave the cartel because cartel membership does not benefit them.

Because a cartel of states is not stable, Hoppe argues, there is only one stable solution: a state must eliminate the competitive situation, expand its sphere of influence and, as its ultimate goal, establish itself as a world government and then turn its money into world money. It’s obvious who wins in this battle: it will be the economically and militarily most powerful state. It can quite easily expand its sphere of influence by violent measures (war): it invades other states and subdues and dominates them; its threat potential alone may be sufficient for other states to comply with it and to submit to it voluntarily.

The most powerful state also ensures that the defeated states accept its currency—its fiat money. The advantages this has for it are obvious: the more people use its money, the greater the money-creation gain (seigniorage). What’s more, once the most powerful state has a monopoly over the production of the money used worldwide, its financing possibilities and thus its taxation and redistribution power increase enormously. It is easier than ever to buy support from its electorate—the cost of fiat funding is borne not only by local citizens and entrepreneurs, but also by the people in the subdued countries.

However, an alternative, pseudo-peaceful development to the militant and violent rise of a state to a world state is conceivable: democratic socialism becomes the dominant, universally accepted ideology worldwide, and from then on it determines the form of relations between states. When the states have established democratic socialism, there will also be agreement that democratic socialism strives for world domination. The democratic socialists cannot be content with just creating equality for the people in a region. This does not achieve equality for all people in all regions of the world at the same time.

In addition to equality, there is another very practical reason why democratic socialism must claim worldwide applicability: a spatially limited democratic socialism cannot exist permanently in the face of a free market system. Efficient enterprises and employees will emigrate from a spatially limited democratic socialism. In view of the “better conditions” in the other regions, sooner or later the electorate will demand a departure from democratic socialism, or the poor economic and social conditions will force this.

But even a coexistence of regionally or nationally different forms of democratic socialism cannot function in the long run. They too would compete for capital and labor. As long as economic conditions vary from region to region (due to differences in resources and population density), there will be incentives for workers to migrate and for companies to relocate capital between them. The individual states that have committed themselves to democratic socialism will not be able to put up with this. 76  

Democratic socialism will have to aspire to world domination under a unified leadership.77 However, it will find itself confronted with great difficulties. One reason is the diversity of production conditions in this world. There are regions that have better and richer stocks of natural resources than others—and as a result, prosperity can vary from region to region. Another reason is that the population also varies from region to region: there are relatively dense and less densely populated areas. Regions with a relatively large labor supply will have lower real incomes than regions with a relatively low labor supply.

In order to bring about equal living conditions, the democratic socialists must allow migration or initiate and control it politically. People must move from regions with less favorable production conditions to regions with more favorable production conditions. If migration were possible without hindrance, sooner or later a situation would arise in which wages for equal work would converge worldwide. Some areas would be denser, others less densely populated: In net-emigration countries, the labor supply would shrink, and real wages rise; in net-immigration countries, labor supply would rise and real wages fall.

In the world today we find, however, that unimpeded migration inevitably leads to a problem for democratic socialism. Due to the diversity of people in this world (in terms of language, culture, tradition, religion, etc.), democratic socialism is not faced with a homogeneous population, but rather with a highly heterogeneous electorate in the individual regions of the world. This makes a politically motivated redistribution of income and wealth between heterogeneous voters difficult or even impossible: people in different regions will take the view that the resources and capital in their territory must serve them and that outsiders must not benefit from them.

It is certainly possible to implement democratic socialism in individual regions in which people feel relatively closely connected on the basis of language, culture, tradition, religion, etc. Here there is probably at least a certain willingness on the part of those who have some of their wealth taken away to agree to the redistribution or to accept it without insurrection. If, however, the composition of the population is too heterogeneous, democratic socialism loses its support among voters. This points to the central obstacle that stands in the way of the goal of establishing a worldwide uniform democratic socialism: the diversity of people. This insight draws attention to the nation and the nationality principle.

• 71Leopold Kohr writes bluntly: “The League of Nations was the product of World War I, and the United Nations of World War II. None of these glorified vast-scale organizations was ever worth its price, and it makes one shudder to think of the price of an ultimate single World State.” (Kohr, The Breakdown of Nations [Devon, UK: Green Books, 2001], p. 74.)
• 72For example Herfried Münkler explicitly addresses “the logic of world domination” (the subtitle of his book) and bases his argument on “the rationality of the actors, simply the logic of world domination” (Imperien: Die Logik der Weltherrschaft—vom alten Rom bis zu den Vereinigten Staaten , p. 9). However, the logical insight that the state has an aggressive urge to expand (in a way that violates property ownership) is ignored.
• 73One hundred and ninety-three states are members of the United Nations, and two are not (Vatican City and Palestine); not included are Taiwan, the Cook Islands, Niue, dependencies and others.
• 74This is a counterposition to the widespread view that a balance between a few large states would be established in the world. For example, George Bernard Shaw (1856–1950), member of the socialist intellectual Fabian Society, argued, “The world is to the big and powerful states by necessity: and the little ones must come within their borders or be crushed out of existence,” quoting Elie Halevy, A History of the English People, epilogue vol. I, 1895–1905, trans. E. I. Watkin (London: Ernest Benn, 1929), p. 105n1.
• 75Briefly stated, the term progression theorem, which was coined by Joseph T. Salerno, “Two Traditions in Modern Monetary Theory: John Law and A. R. J. Turgot,” in Money: Sound and Unsound (Auburn, AL: Ludwig von Mises Institute, 2010), pp. 1–60, esp. 49), refers to a path-dependent advance in action-logical thinking: What logical consequences result when action is taken under certain conditions created by the preceding action? For an application of this thereom, see Jörg Guido Hülsmann, “Political Unification: A Generalized Progression Theorem,” Journal of Libertarian Studies 13, no. 1 (1997): 81–96.
• 76In democratic socialism—as in every democracy—the struggle for prerogatives is unleashed: each tries to forestall the other, to gain more privileges than the others. There will always be winners and losers—simply because there cannot be privileges for everyone!
• 77We can also say centralistic socialism. See Michael Tugan-Baranowsky, Der moderne Sozialismus in seiner geschichtlichen Entwicklung (Dresden: O. V. Böhmert, 1908), p. 132.