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Nation, State, and Economy
Ludwig von Mises

B. The Migration Problem and Nationalism

The variety of conditions of life in the individual parts of the earth's surface touches off migrations of individual persons and entire peoples. If the world economy were managed by the decree of an authority that surveyed everything and ordered what was most appropriate, then only the absolutely most favorable conditions of production would be utilized. Nowhere would a less productive mine or a less productive field be in use if more productive mines or fields lay unused elsewhere. Before a less productive condition of production is put to use, one must always first consider whether there do not exist more productive ones. Less productive conditions of production that might be in use would be discarded at once if others should be found whose yield would be so much greater than an increased yield would be attained from discarding the old and introducing the new sources of production, even despite the loss to be expected because the immovably invested capital would become useless. Since the workers have to settle in places of production or in their immediate neighborhood, the consequences for the conditions of settlement follow automatically.

The natural conditions of production are by no means unchangeable. In the course of history they have undergone great changes. Changes can take place in nature itself, for example, through changes of climate, volcanic catastrophes, and other elemental events. Then there are the changes that occur from human activity, for example, exhaustion of mines and of the fertility of the soil. More important, however, are changes in human knowledge, which overturn traditional views about the productivity of the factors of production. New needs are awakened, either from the development of the human character or because the discovery of new materials or forces has stimulated them. Previously unknown production possibilities are discovered, either through the discovery of hitherto unknown natural forces and putting them to use or through the progress of productive techniques, which makes it possible to tap natural forces that had been unusable or less usable before. It follows that it would not be enough for the director of the world economy to determine the locations of production once and for all; he would continually have to make changes in them according to changing circumstances, and every change would have to go hand in hand with a resettlement of workers.

What would happen under ideal world socialism by order of the general director of the world economy is achieved in the ideal of the free world economy by the reign of competition. The less productive enterprises succumb to the competition of the more productive. Primary production and industry migrate from places of lower-yielding conditions of production to places of higher-yielding ones; and with them migrate capital, so far as it is mobile, and workers. The result for the movement of peoples is thus the same in either case: the stream of population goes from the less fruitful territories to the more fruitful.

That is the basic law of migrations of persons and peoples. It holds true in the same degree for the socialist and the free world economy; it is identical with the law under whose operation the distribution of population takes place in every smaller territory cut off from the outside world. It always holds true, even though its effectiveness may be disturbed in greater or lesser degree by extra-economic factors also, perhaps by ignorance of conditions, by sentiments that we are accustomed to calling love of home, or by intervention of an external power that hinders migration.

The law of migration and location makes it possible for us to form an exact concept of relative overpopulation. The world, or an isolated country from which emigration is impossible, is to be regarded as overpopulated in the absolute sense when the optimum of population?that point beyond which an increase in the number of people would mean not an increase but a decrease of welfare?is exceeded.[32] A country is relatively overpopulated where, because of the large size of the population, work must go on under less favorable conditions of production than in other countries, so that, ceteris paribus, the same application of capital and labor yields a smaller output there. With complete mobility of persons and goods, relatively overpopulated territories would give up their population surplus to other territories until this disproportion had disappeared.

The principles of freedom, which have gradually been gaining ground everywhere since the eighteenth century, gave people freedom of movement. The growing security of law facilitates capital movements, improvement of transportation facilities, and the location of production away from the points of consumption. That coincides?not by chance?with a great revolution in the entire technique of production and with drawing the entire earth's surface into world trade, The world is gradually approaching a condition of free movement of persons and capital goods. A great migration movement sets in. Many millions left Europe in the nineteenth century to find new homes in the New World, and sometimes in the Old World also. No less important is the migration of the means of production: capital export. Capital and labor move from territories of less favorable conditions of production to territories of more favorable conditions of production.

Now, however?as a result of a historical process of the past?the earth is divided up among nations. Each nation possesses definite territories that are inhabited exclusively or predominantly by its own members. Only a part of these territories has just that population which, in conformity with the conditions of production, it would also have under complete freedom of movement, so that neither an inflow or an outflow of people would take place. The remaining territories are settled in such a way that under complete freedom of movement they would have either to give up or to gain population.

Migrations thus bring members of some nations into the territories of other nations. That gives rise to particularly characteristic conflicts between peoples.

In that connection we are not thinking of conflicts arising out of the purely economic side effects of migrations. In territories of emigration, emigration drives up the wage rate; in territories of immigration, immigration depresses the wage rate. That is a necessary side effect of migration of workers and not, say, as Social Democratic doctrine wants to have believed, an accidental consequence of the fact that the emigrants stem from territories of low culture and low wages. The motive of the emigrant is precisely the fact that in his old homeland, because of its relative overpopulation, he can get no higher wage. If this reason were absent, if there were no difference in the productivity of labor between Galicia and Massachusetts, then no Galician would emigrate. If one wants to raise the European territories of emigration to the level of development of the eastern states of the Union, then there is just nothing else to do than let the emigration proceed to the point that the relative overpopulation of the former and the relative underpopulation of the latter have disappeared. Clearly, American workers view this immigration just as unhappily as European employers view the emigration. Indeed, the Junker east of the Elbe thinks no differently about the flight of workers from the land when his tenant goes to West Germany than when he goes to America; the unionized worker of the Rhineland is disturbed by immigration from the lands east of the Elbe no less than members of a Pennsylvania trade union. But that in the one case the possibility exists of forbidding the emigration and immigration, or at least of impeding it, while in the other case such measures could be thought of by at most a few eccentrics born a couple of centuries too late, is only to be attributed to the fact that, besides damage to the interests of individuals in the case of international migration, other interests also are damaged.

Emigrants who settle in previously uninhabited territories can preserve and further cultivate their national character in the new home also. Spatial separation can lead over time to the emigrants' developing a new independent nationality. Such development of independence was in any case easier in times when transport and communication still had to struggle with great difficulties and when the written transmission of the national culture was greatly impeded by the slight diffusion of literacy. With the present-day development of the means of transportation and communication, with the relatively high degree of popular education and the wide dissemination of the monuments of national literature, such national splitting off and the formation of new national cultures is far more difficult. The trend of the times works rather toward convergence of the cultures of peoples living far apart, if not even toward a blending of nations. The bond of common language and culture that links England with its far-away dominions and with the United States of America, which now will soon have been politically independent for one and a half centuries, has become not looser but closer. A people that today sends out colonists into an uninhabited territory can count on the emigrants' keeping their national character.

If, however, the emigration is directed to already inhabited territories, then various possibilities are conceivable. It may be that the immigrants come in such masses or possess such superiority through their physical, moral, or intellectual constitution that they either entirely displace the original inhabitants, as the Indians of the prairies were displaced by the palefaces and were driven to destruction, or that they at least achieve domination in their new home, as would perhaps have been the case with the Chinese in the western states of the Union if legislation had not restricted their immigration in time or as could be the case in the future with the European immigrants into North America and Australia. Things are different if immigration takes place into a country whose inhabitants, because of their numbers and their cultural and political organization, are superior to the immigrants. Then it is the immigrants who sooner or later must take on the nationality of the majority.[33]

The great discoveries had made the whole surface of the earth known to Europeans since the end of the Middle Ages. Now all traditional views about the inhabitability of the earth gradually had to change; the New World, with its excellent conditions of production, was bound to attract settlers from old and now relatively overpopulated Europe. At first, of course, it was only adventurers and political malcontents who moved far away to find a new home. Reports of their successes then drew others after them, at first only a few, then ever more and more, until finally in the nineteenth century, after improvement of the means of ocean transportation and the removal of limitations on freedom of movement in Europe, millions went migrating.

Here is not the place to investigate how it happened that all colonial land suitable for settlement by white Europeans was colonized by the English, Spanish, and Portuguese. Here it is enough for us to recognize the outcome that the best parts of the earth's surface inhabitable by whites thereby became English national property and that, in addition, the Spaniards and Portuguese in America, and scarcely also the Dutch in South Africa and the French in Canada, came onto the scene. And this outcome is extremely important. It made the Anglo-Saxons the most numerous nation among the white civilized peoples. This, coupled with the circumstance that the English possess the largest merchant fleet in the world and that they administer the best territories of the tropics as political rulers, had led to the fact that the world today wears an English face. The English language and English culture have impressed their stamp on our times.

For England this means above all that Englishmen who leave the island of Great Britain because of its relative overpopulation can almost always settle in territories where the English language and English culture prevail. When a Briton goes abroad, whether to Canada or to the United States or to South Africa or to Australia, he does cease to be a Briton, but he does not cease to be an Anglo Saxon. It is true that the English until quite recently, did not appreciate this circumstance, that they paid no special attention to emigration, that they faced the dominions and the United States indifferently, coldly, and sometimes even with hostility, and that only under the influence of Germany's efforts directed against them did they begin to seek closer economic and political relations first with the dominions and then with the United States. It is just as true that the other nations, which had been less successful in acquiring overseas possessions, also long paid just as little attention to this development of affairs as the English themselves and that they envied the English more for their rich tropical colonies, for their trade and seaport colonies, and for shipping, industry, and trade than for possession of territories of settlement, which were less appreciated.

Only as the stream of emigrants, flowing abundantly at first only from England, also came to be fed more from other European territories did people begin to concern themselves with the national fate of the emigrants. People noticed that while the English emigrants could maintain their mother tongue and national culture, home customs, and usage's of their fathers in their new homes, the other European emigrants overseas gradually ceased to be Dutchmen, Swedes, Norwegians, etc. and adapted themselves to the nationality of their environment. People saw that this alienation was unavoidable, that it occurred quicker here, slower there, but that it never failed to occur and that the emigrants?at the latest in the third generation, most already in the second, and not seldom even in the first?became members of Anglo-Saxon culture. The nationalists who dreamed about the size of their nation viewed this with sorrow, but it seemed to them that nothing could be done about it. They founded associations that endowed schools, libraries, and newspapers for the colonists to check the emigrants' national alienation; but what they achieved thereby was not much. People had no illusions about the fact that the reasons for emigration were of compelling economic nature and that the emigration as such could not be impeded. Only a poet like Freiligrath could ask the emigrants:

Oh sprecht! warum zogt ihr von dannen?
Das Neckartal hat Wein und Korn
.
[Oh speak! Why are you moving away?
The Neckar Valley has wine and grain.]
The statesman and the economist well knew that there were more wine and more grain overseas than at home.

As late as the beginning of the nineteenth century people could scarcely suspect the significance of this problem. Ricardo's theory of foreign trade still started with the assumption that the free mobility of capital and labor exists only within the boundaries of a country. In the home country all local differences in the profit rate and the wage rate are evened out by movements of capital and workers. Not so for differences between several countries. Lacking there was that free mobility which would ultimately be bound to cause capital and labor to flow from the country offering less favorable conditions of production to the country of more favorable conditions. A range of emotional factors ("which I should be sorry to see weakened," the patriot and politician Ricardo interjects here into the exposition of the theorist) resists that. Capital and workers remain in the country, even though they thereby suffer a loss of income, and turn to those branches of production having, while not absolutely, still relatively more favorable conditions.[34] The basis of the free-trade theory is thus the fact that noneconomic reasons keep capital and labor from moving across national boundaries, even if this seems advantageous for economic motives. This may have been true on the whole in the days of Ricardo, but for a long time it has no longer been true.

But if the basic assumption of Ricardo's doctrine of the effects of free trade falls, then this doctrine must also fall along with it. There is no basis for seeking a fundamental difference between the effects of freedom in domestic trade and in foreign trade. If the mobility of capital and labor internally differs only in degree from their mobility between countries, then economic theory can also make no fundamental distinction between the two. Rather, it must necessarily reach the conclusion that the tendency inheres in free trade to draw labor forces and capital to the locations of the most favorable natural conditions of production without regard to political and national boundaries. In the last analysis, therefore, unrestricted free trade must lead to a change in the conditions of settlement on the entire surface of the earth; from the countries with less favorable conditions of production capital and labor flow to the countries with more favorable conditions of production.

The free-trade theory modified in this way, just like the doctrine of Ricardo, also reaches the conclusion that from the purely economic point of view nothing speaks against free trade and everything against protectionism. But since it leads to quite different results regarding the effect of free trade on locational shifts of capital and labor, it presents a quite changed point of departure for testing the extraeconomic reasons for and against the protective system.

If one sticks with the Ricardian assumption that capital and labor are not impelled to move abroad even by more favorable conditions of production, then it turns out that the same applications of capital and labor lead to different results in the individual countries. There are richer and poorer nations. Trade-policy interventions can change nothing about that. They cannot make the poorer nations richer. The protectionism of the richer nations, however, appears completely senseless. If one drops that Ricardian assumption, then one sees a tendency prevail over the entire earth toward equalization of the rate of return on capital and of the wage of labor. Then, finally, there no longer are poorer and richer nations but only more densely and less densely settled and cultivated countries.

There can be no doubt that, even then, Ricardo and his school would have advocated nothing other than the policy of free trade, since they could not have avoided recognizing that protective tariffs are not the way out of these difficulties. For England, however, this problem never existed. Its rich holdings of territories for settlement lets emigration appear a matter of national indifference to it. The British emigrants can maintain their national character even far away; they cease to be Englishmen and Scots, but they remain Anglo-Saxons, and the war showed anew what that means politically.

For the German people, though, things are different. For reasons that go far back, the German nation has no territories for settlement at its disposal where emigrants can maintain their German character. Germany is relatively overpopulated; it must sooner or later yield up its surplus population, and if for some reason or other it could not or would not do this, then the standard of living of the Germans would have to sink to a lower level. If, however, Germans do emigrate, then they lose their national character, if not in the first generation, then in the second, third, or at the latest the fourth.

That was the problem that German policy saw posed for it after the establishment of the empire of the Hohenzollerns. The German people faced one of those great decisions that a nation does not have to make every century. It was fateful that the solution to this great problem became urgent before another, no less great, problem was solved, that of the establishment of the German national state. Even only to comprehend a question of this significance and of this historical gravity in its full scope would have required a generation that could decide its fate fearlessly and freely. That, however, was not allowed to the German people of the Great Prussian Reich, the subjects of the twenty-two federated princes. In these questions, also, it did not take its fate into its own hands; it left the most important decision to the generals and diplomats; it followed its leaders blindly without noticing that it was being led to the precipice. The end was defeat.

As early as the beginning of the thirties of the nineteenth century, people in Germany had begun to concern themselves with the problem of emigration. Now it was the emigrants themselves who made the unsuccessful attempt to establish a German state in North America; now again it was the Germans at home who sought to take the organization of emigration into their hands. That these efforts could lead to no success is not surprising. How ever could the attempt to establish a new state succeed for the Germans, who in their own country were not even able to transform the pitiable multiplicity of several dozen patrimonial principalities, with their enclaves, their hereditary affiliations, and their family laws, into a national state? How could German men have found the strength to assert themselves out there in the wide world among Yankees and Creoles when at home they were not even able to put an end to the farcical rule of the miniature thrones of the Reuss and Schwarzburg princes? Where was the German subject to get the political insight that politics on the grand scale requires when at home it was forbidden to him "to judge the actions of the supreme state authority by the measure of his limited intellect?"[35]

In the middle of the seventies of the last century the problem of emigration had acquired such significance that its solution could no longer be dragged out. The decisive thing was not that emigration was steadily growing. According to data of the United States, the immigration of Germans there (not counting Austrians) had risen from 6,761 in the decade 1821 to 1830 to 822,007 in the decade 1861 to 1870; then, right after 1874, an?although at first only temporary?drop-off in the German emigration to the United States occurred. Far more important was that it was becoming ever clearer that the conditions of production in Germany for agriculture and for the most important branches of industry were so unfavorable that competition with foreign countries was no longer possible. The extension of the railroad net in the countries of Eastern Europe and the development of ocean and river shipping made it possible to import agricultural products into Germany in such quantity and at such low prices that the continued existence of the bulk of German agricultural units was most seriously threatened. Already from the fifties Germany was a rye-importing country; since 1875 it has also been a wheat-importing country. A number of branches of industry, particularly the iron industry, also had to struggle with growing difficulties.

It is clear where the causes lay, even though people of the time may have felt it only vaguely. The superiority of the natural conditions of production of foreign countries made itself all the more strongly evident as the continuing development of means of transportation cheapened freight rates. People did try to explain the lesser competitive capacity of German production in another way; and in that connection, as indeed is generally characteristic of the discussion of problems of economic policy in Germany during the last few decades, people concerned themselves predominantly with nonessential side issues and so quite overlooked the great significance of the principles of the problem.

If people had recognized the fundamental significance of these problems and had grasped the deeper interconnection of things, then they would have had to say that Germany was relatively overpopulated and that to restore a distribution of population over the entire surface of the earth corresponding to the conditions of production, part of the Germans had to emigrate. Whoever did not share misgivings of national policy about a decline in the size of population or even about an end to the growth of population in Germany would have been content with this judgment. In any case he would have consoled himself with the fact that individual branches of production would move abroad partially in such a way that German entrepreneurs would establish enterprises abroad so that the consumption of the entrepreneurs' incomes would take place in the German Reich and would thereby expand the food-supply margin of the German people.

The patriot who sees his ideal in a large number of people would have had to recognize that his goal could not be reached without reduction of the standard of living of the nation unless the possibility were created, through acquiring colonies for settlement, of retaining part of the surplus population within the nation despite its emigration from the mother country. He would then have had to turn all his strength to acquisition of land for settlement. In the middle of the seventies of the nineteenth century, and even a decade longer, conditions were not at all yet such that it would not have been possible to reach this goal. In any case it could have been reached only in association with England. England was at that time and for long afterwards still troubled by a great concern, by anxiety that its Indian possession could be seriously threatened by Russia, For that reason it needed an ally that would have been in a position to hold Russia in check. Only the German Reich might have done that. Germany was strong enough to guarantee England the possession of India; Russia could never have thought of attacking India as long as it was not sure of Germany on its western border.[36] England could have given a great compensation for this guarantee, and surely would have given it. Perhaps it would have let Germany have its extensive South African possession, which at that time had only a very thin Anglo-Saxon settlement; perhaps it also would have helped Germany obtain a large territory for settlement in Brazil or Argentina or in western Canada. Whether this was attainable may be doubted after all.[37] But it is certain that if Germany could have attained anything along this line at that time, it could have done so only in association with England. The great Prussian Reich of the Junkers east of the Elbe, however, wanted no alliance with liberal England. For reasons of domestic politics, the Three Emperors' League, the continuation of the Holy Alliance, seemed to it to be the sole suitable association that it could enter into. When this alliance finally showed itself untenable and the German Reich, faced with the choice either of siding with Russia against Austria-Hungary or with Austria-Hungary against Russia, decided for the alliance with Austria, then Bismarck still repeatedly sought to maintain a friendly relationship with Russia. So, then, this opportunity of acquiring a great territory for settlement for Germany remained unused.

Instead of seeking, in association with England, to acquire a colony for settlement, the German Reich made the transition to protective tariffs from 1879 on. As ever at great turning points of policy, here, too, people saw neither the deeper significance of the problem nor the meaning of the new policy being adopted. To the liberals the protective tariff seemed a temporary backsliding into a superseded system. The practitioners of political realism, that hodgepodge of cynicism, lack of conscience, and unvarnished selfishness, evaluated the policy merely from the standpoint of their own interests as an increase in the incomes of landowners and entrepreneurs. The Social Democrats trotted out their faded recollections of Ricardo; as for a deeper knowledge of things, which surely would not have been difficult with the help of this guide, they were hindered by their doctrinaire clinging to Marxist theory. Only much later, and even then only hesitantly, was the great significance grasped that that policy shift had not only for the German people but for all peoples.[38]

The most remarkable thing about the protective tariff policy of the German Empire is that it lacked any deeper foundation. For the political realist it was sufficiently justified by its finding a majority in the German Reichstag. Any theoretical foundation for the protective tariff theory, however, looked very bad. The appeal to List's theory of an infant-industry tariff just did not hold water. It is no refutation of the free-trade argument to assert that the protective system puts idle productive forces to use. That they do not come into use without protection proves that their use is less productive than that of the productive forces used in their place. The infant industry tariff also cannot be economically justified. Old industries have an advantage over young ones in many respects. But the rise of new industries is to be deemed productive from the overall point of view only when their lesser productivity at the start is at least made up for by greater productivity later. Then, however, the new enterprises are not only productive from the point of view of the whole economy but also privately profitable; they would be brought into existence even without special encouragement. Every newly established firm reckons with such initial costs that should be recovered later. It is untenable to cite, in opposition, the fact that almost all states have supported the rise of industry by protective tariffs and other protectionistic measures. The question remains open whether the development of viable industries would have proceeded even without such encouragement. Within the territories of states, changes of location occur without any external help. In territories that lacked industry before, we see industries arise that not only maintain themselves successfully alongside those of older industrial territories but not seldom drive those quite out of the market.

None of the German tariff rates, moreover, could be called an infant-industry tariff; neither the grain tariffs nor the iron tariffs nor any one of the several hundred other protective tariffs may be given this name. And tariffs other than infant industry tariffs were never advocated by List; he was fundamentally a free-trader.

Moreover, the presentation of a protective-tariff theory in Germany has never once been attempted at all.[39] The longwinded and self-contradictory discussions about the necessity of protection for all national labor and of a gap-free tariff cannot lay claim to this name. They do indicate the direction in which reasons for the protective tariff policy had to be sought; they could not be suitable, however?and precisely because they renounced any economic line of thinking in advance and were oriented purely by power politics?for examining the question whether the goals being sought could also really be attained by this means.

Of the arguments of the protective-tariff advocates, we must at first leave aside the military one?or, as people now commonly say, the "war-economy" one?regarding autarky in case of war; that one will be discussed later. All other arguments start from the fact that the natural conditions for great and important branches of production are more unfavorable in Germany than in other territories and that the natural disadvantages must be compensated for by protective tariffs if production is to take place in Germany at all. For agriculture it could only be a question of thereby maintaining the internal market, for industry only of maintaining foreign markets, a goal that could be reached only by dumping by branches of production cartelized under the protection of the tariff. Germany, as a relatively overpopulated country working under more unfavorable conditions than foreign countries in a number of branches of production, had to export either goods or people. It decided for the former. It overlooked the fact, however, that export of goods is possible only if one competes with countries of more favorable conditions of production, that is, if, despite higher costs of production, one delivers just as cheaply as the countries producing at lower costs. That means, however, pressing down workers' wages and the standard of living of the whole people.

For years people in Germany could indulge in extreme illusions about that. To understand this interconnection of things, it would have been necessary to think economically and not in terms of statism and power politics. But some day it was nevertheless bound to impress itself on everyone with irrefutable logic that the protective tariff system was bound to fail in the end. One could deceive oneself about the fact that it was damaging the relative well-being of the German people as long as an absolute growth of national wealth could still be observed. But attentive observers of world economic development could not help but express misgivings about the future development of German foreign trade. What would happen to German commodity exports once an independent industry had become developed in the countries that still formed the market for German industry and had been in a position to produce under more favorable conditions?[40]

From this situation the desire finally arose among the German people for great colonies for settlement and for tropical territories that could supply Germany with raw materials. Because England stood in the way of the realization of these intentions, because England had broad territories at its disposal in which Germans could have settled, and because England possessed great tropical colonies, the desire arose to attack England and defeat it in war. That was the idea that led to construction of the German battle fleet.

England recognized the danger in time. First it strived for a peaceful settlement with Germany; it was ready to pay a high price for that. When this intention was wrecked on the resistance of German policy, England prepared itself accordingly. It was firmly resolved not to wait until Germany had a fleet superior to the English; it was resolved to wage war earlier, and it enlisted allies against Germany. When Germany got into war with Russia and France in 1914 over Balkan affairs, England fought also because it knew that in case of a German victory it would have to wage war alone with Germany in a few years. The construction of the German battle fleet had to lead to war with England before the German fleet had achieved superiority over the English. For the English knew that the German ships could be used in no other way than to attack England's fleet and its coast. The pretext with which Germany sought to conceal the ultimate intentions that it was pursuing by constructing the fleet was that it needed a mighty fleet to protect its expanded ocean trade. The English knew what to make of that. Once, when there still were pirates, merchant ships did need protection by cruisers on endangered seas. Since the establishment of security on the sea (approximately since 1860) that had no longer been necessary. It was quite impossible to explain the construction of a battle fleet usable only in European waters by a desire to protect trade.

It is also immediately understandable why, from the beginning, almost all states of the world sympathized with England against Germany. Most had to fear Germany's hunger for colonies. Only a few nations of Europe are in a situation similar to the German in being able to feed their populations within their own borders only under more unfavorable conditions than are found in the rest of the world. To these belong the Italians in the first place, and also the Czechs. That these two nations also were on the side of our adversaries was Austria's doing.[41]

Now the war has been fought, and we have lost it. The German economy has been quite shattered by the long "war economy"; in addition, it will have to bear heavy reparations burdens. But far worse than these direct consequences of the war must appear the repercussion on Germany's world economic position. Germany has paid for the raw-material supplies on which it depends partly by export of manufactures, partly from the yield of its foreign enterprises and capital investments. That will no longer be possible in the future. During the war the foreign investments of the Germans were expropriated or used up in payment for the import of various goods. The export of manufactures, however, will encounter extreme difficulties. Many markets have been lost during the war and will not be easy to win back. Here, too, the war has created no new situation but only has hastened a development that would have occurred without it. The impediment to trade caused by the war has brought new industries to life in Germany's former markets. They would have arisen even without the war, but later. Now, once they are there and are operating under more favorable conditions of production than German enterprises, they will pose severe competition to German exports. The German people will be compelled to shrink their consumption. They will have to work more cheaply, that is, live worse, than other peoples. The entire level of German culture will thereby be depressed. After all, culture is wealth. Without well-being, without wealth, there never has been culture.

True, emigration might still remain open. But the inhabitants of the territories that might be considered do not want to admit any German immigrants. They fear being outnumbered by the German elements; they fear the pressure that immigration would be bound to exert on wages. Long before the war, Wagner could already refer to the fact that, except for the Jews, there is no other people than the German "that is scattered in so many national fragments and individuals among other civilized peoples and other nations almost over the entire earth's surface, that often forms a quite capable element here, often also only a sort of cultural fertilizer, seldom in the leading positions in life, more frequently in the middle ones and down to the lower ones, little men and little women." And he added that "this German diaspora" is not much more liked, even though more respected, than Jews and Armenians and is not seldom subject to just as strong an aversion on the part of the native population.[42] How will things become now, after the war?

Only now can one fully survey the damage that the departure from the principles of liberal policy has caused for the German people. How very different a position Germany and Austria would be in today if they had not undertaken the fateful return to the protective tariff! Of course, the size of the population would not be as large as it is today. But the smaller population could be living and working under conditions just as favorable as those of the other countries of the world. The German people would be richer and happier than it is today; it would have no enemies and no enviers. Hunger and anarchy?that is the result of the protectionist policy.

The outcome of German imperialism, which cast the German people into bitter misery and made it into a pariah people, shows that those whose leadership it followed in the last generation were not on the right path. Neither fame nor honor nor wealth nor happiness was to be found on this path. The ideas of 1789 would not have brought the German people to its position today. Did not the men of the Enlightenment, who today are reproached for lack of state feeling,[43] better understand what is good for the German people and the entire world? More clearly than all theories could do, the course of history shows that properly understood patriotism leads to cosmopolitanism, that the welfare of a people lies not in casting other peoples down but in peaceful collaboration. Everything that the German people possessed, its intellectual and material culture, it has uselessly sacrificed to a phantom, to no one's benefit and to its own harm.

A nation that believes in itself and its future, a nation that means to stress the sure feeling that its members are bound to one another not merely by accident of birth but also by the common possession of a culture that is valuable above all to each of them, would necessarily be able to remain unperturbed when it saw individual persons shift to other nations. A people conscious of its own worth would refrain from forcibly detaining those who wanted to move away and from forcibly incorporating into the national community those who were not joining it of their own free will. To let the attractive force of its own culture prove itself in free competition with other peoples?that alone is worthy of a proud nation, that alone would be true national and cultural policy. The means of power and of political rule were in no way necessary for that.

That nations favored by fate possess wide territories of settlement could provide no cogent grounds for adopting another policy. It is true that those colonies were not taken with smooth talk, and one can think only with shudders and anger of the fearful mass murders that prepared the basis for many of the colonial settlements flourishing today. But all other pages of world history were also written in blood, and nothing is more stupid than efforts to justify today's imperialism, with all of its brutalities, by reference to atrocities of generations long since gone. It must be recognized that the time for expeditions of conquest is past, that today it is at least no longer acceptable to use force on peoples of the white race. Whoever wanted to contradict this principle of modern political world law, an expression of the liberal ideas of the time of the Enlightenment, would have to set himself against all other nations of the world. It was a fateful error to want to undertake a new partition of the earth with cannons and armored ships.

The nations suffering from relative overpopulation in their homelands can no longer use those means of relief today that were usual at the time of national migrations. Full freedom of emigration and immigration and unlimited free mobility of capital must be their demand. Only in this way can they attain the most favorable economic conditions for their fellow nationals.

Of course, the struggle of nationalities over the state and government cannot disappear completely from polyglot territories. But it will lose sharpness to the extent that the functions of the state are restricted and the freedom of the individual is extended. Whoever wishes peace among peoples must fight statism.

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[32] Compare Wicksell, Vorlesungen ?ber National?konomie auf Grundlage des Marginalprinzipes (Jena: 1913), vol. 1, p. 50.

[33] The assimilation is furthered if the immigrants come not all at once but little by little, so that the assimilation process among the early immigrants is already completed or at least already under way when the newcomers arrive.

[34] Cf. Ricardo, Principles of Political Economy and Taxation in The Works of D. Ricardo, edited by McCulloch, second edition (London: 1852), pp. 76 ff.

[35] Cf. the decree of 15 January 1838 of the Prussian Minister of the Interior, v. Rochow, reprinted in Prince-Smith's Gesammelte Schriften (Berlin: 1880), vol. 3, p. 230.

[36] To rule out any misunderstanding, let it be expressly noted that there is no intention here of taking a position on the question that was much discussed in Germany whether the "western" or "eastern" orientation for German policy was to be preferred. Both orientations were imperialist-minded, i.e., the question ran whether Germany should attack Russia or England. Germany should have allied itself with England to stand by it in a defensive war against Russia. There is no doubt, however, that then this war would never have occurred.

[37] But let it be noted that England, until the outbreak of the World War, repeatedly made attempts to have peaceful negotiations with Germany and was ready to buy peace even at the price of giving up some land.

[38] When Lensch (Drei Jahre Weltrevolution (Berlin: 1917], pp. 28 ff.) designates the shift in trade policy of 1879 as one of the deepest grounds of today's world revolution, then he is certainly to be agreed with, but for quite other reasons than those he adduces. In view of the events that have taken place in the meanwhile, it is no longer worth while to refute his further discussions.

[39] Schuller, in Schutzzoll und Freihandel (Vienna: 1905), gives a theory of the setting of tariff rates; on his arguments for the protective tariff, cf. Mises, "Vom Ziel der Handelspolitik," Archiv f?r Sozialwissenschaft und Sozialpolitik, vol. 42, 1916/1917, p. 562, and Philippovich, Grundriss der politischen ?konomie, vol. 2, 1 st part, seventh ed.(T?bingen: 1914), pp. 359 f.

[40] Cf., out of a large literature, Wagner, Agrar- und Industriestaat, second ed.

[41] That Japan and China were also against us is to be ascribed to the disastrous Chiao-chou policy.

[42] Cf. Wagner, loc. cit., p. 81.

[43] Cf. Sprengel, Das Staatsbewusstein in der Deutschen Dichtung seit Heinrich von Kleist (Leipzig: 1918), pp. 8 ff.

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