[Editor’s note: Vilfredo Pareto is best known for his work as an economist. Pareto was not of the Austrian School, but Rothbard notes that Pareto was also a radical political theorist who was influenced by Gustave de Molinari and Herbert Spencer. As such, he is worth noting, especially for his excellent work on the “circulation of elites” and classical liberal exploitation theory. The text below is a minor text by Pareto, written for The Living Age in 1925 as part of a group of columns on the direction Europe was heading in the decade following the Great War. Here we get a sense of Pareto’s very direct approach to politics as well as his generally good instincts in the field of economics. Here Pareto displays his understanding of the politics of monetary inflation and he understands that the Treaty of Versailles was leading to a new conflict in Europe.]
From: The Living Age, Saturday, November 25, 1922, 447-450.
Our society presents, under certain aspects, striking analogies with Roman society at the end of the Republic. One of these analogies is the control over the affairs of the world exercised by a demagogical plutocracy. The autocrats of Rome bought at its election the privilege of exploiting the provinces, and out of the profits they extorted from the provincials they again bought the voters at home. Our plutocrats, likewise, prodigalize money to obtain legislative favors. Campaign expenses in the United States are quite as high as they ever were at Rome.
The taxes levied on the common people by high tariffs and other modern political devices are more regular, less arbitrary, less lawless than the exactions of the Roman proconsuls, but quite as productive to the exploiting classes.
When Rome began the series of foreign wars that subjugated the Mediterranean basin and brought in their train the triumph of a demagogic plutocracy, the people hesitated to endorse that policy. Livy tells us that in the year 200 B.C. ‘the proposal to make war upon Macedonia was rejected upon the first ballot by nearly all the centuries. This was the spontaneous sentiment of men who were weary and worn with the fatigues and dangers of a long and arduous war.’ The tribune Quintus Babius accused the senators of making wars that resulted only in new wars, in order to prevent the common people from enjoying the blessings of peace. At a second election the Senate carried the people with it. In our own days the rivalries of great business interests played no inappreciable part in causing and in prolonging the World War; and there is reason to fear that these interests are today preparing the way to new conflicts.
Looking at the subject from a more general standpoint, we are impressed with the slight change that has occurred during more than 2000 years in the forces that mould and animate society. We hoped for something better after the World War. We dreamed that hatred and conflicts between peoples might end, and that an era of peace and prosperity might dawn.
Unhappily these hopes proved deceptive. Germany’s prostration, Russia’s chaos, the menacing revival of Islam, and other mortal ills weigh heavily upon the world. Business prosperity constantly postpones her arrival. We talk eloquently enough about the reconstruction of Europe, but take no practical steps toward bringing it about.
We must confess that some of our premature hopes were never possible. How could we expect that the people might work less and consume more, after the enormous destruction of wealth caused by the war? The Treaty of Versailles would have made the miracle of the loaves and fishes look like a mere trifle had it accomplished this.
Since we were not able to have a new economic era in reality, we insisted on having it in appearance. So we raised nominal wages and incomes; but we paid them in a fictitious money so that their purchasing power was less than before the war. This benefited some men by enabling them to pay old debts in depreciated currency. It shifted the title to property from one social class to another; and it produced an artificial prosperity, which, though transient, helped for the time being to maintain social and political order.
We now witness signs of a reaction from this fictitious, abnormal condition. The eight-hour day is being attacked; wages are slowly settling back toward their normal standards; the shifting of wealth between individuals and classes is not so rapid as it was. In a word, we seem to be returning slowly toward economic equilibrium.
However, this is not true as yet of trade and transportation. The prosperity of the nineteenth century was due mainly to an abnormal expansion of commerce, made possible by cheap means of transport. It is not enough to produce cheaply; we must also be able to market cheaply. Therefore, when we erect obstacles to the free circulation of commodities, we attack prosperity at its very roots.
In dealing with these questions, Europe has fallen into inexplicable contradictions. We know positively that no country can meet heavy periodical payments to another country unless it can export its merchandise. Yet we expect Germany to pay enormous sums to neighboring countries, although we prevent her from exporting the products of her labor, fearing lest she flood our markets. It is true that each individual country is seeking merely to prevent its own markets from being flooded; but when every Government adopts the same policy, German industry is marooned in its own country. . . .
Let us try to see why the world is falling into these contradictions. First of all we must distinguish between public interest and private interest. Great captains of industry, international financiers, and the public men who are their tools, may find the contradictions of policy we have just described to their private advantage. . . . After every great war, for instance, we note a new high-tariff era. Herbert Spencer observed this phenomenon after the war between France and Germany in 1870 and 1871. It is particularly noticeable today. Each country is striving to isolate itself, not only economically but also intellectually. Naturally certain men and certain groups of men seek to turn these tendencies to their private profit. Since such states of the public mind change very slowly, we must anticipate a continuance of these conditions, and of the spirit that inspires them, until the present cycle of demagogic plutocracy has run its course.
A parallel development is occurring in political affairs. A generous illusion made us imagine that the Great War would be followed by an era of political stability: Magnus ab integro saeculorum nascitur ordo. Unfortunately these hopes were disappointed. The same conflicts of interest and rivalries that existed in the past manifest themselves to-day. The Genoa Conference was in many respects a copy of the Congress of Vienna in 1815, or the Congress of Verona in 1822. There are remarkable parallels between them. The disagreement between England and France over the recognition of the Soviet Government had its parallel in the disagreement at that earlier date over recognizing the new Spanish Republics in America. Even minor details, like the distinction the delegates tried to draw between recognition de jure and recognition de facto, are repeated.
This coincidence is not accidental. The same motives actuated England a hundred years ago that actuate her statesmen to-day. Her people possess more commercial, industrial, and speculative enterprise than the French; and they realized a hundred years ago the material advantages to be derived from the markets of America. To-day the British attitude toward the Russian market is precisely similar.
We know that the advantages anticipated from the opening of the American markets proved fallacious; and the great economic crisis of 1825 ensued. The same thing may occur in connection with opening the Russian market. But meanwhile we witness this odd situation: the Soviets are losing credit with the Socialists and Labor people of Western Europe precisely at a time when they seem to be recovering the confidence of our capitalists. The reason is easy to discover. Business is business. . . .
So our visions of an era of prosperity after the war have proved fallacious; and the mirage of an era of universal political concord vanishes the moment we seek to grasp it. Dark clouds lower on the Eastern horizon. Germany is not penitent, nor will she relinquish her projects of revenge. The effort to draw Russia back into the orbit of Western bourgeois States promises little. Common political interests will sooner or later make Germany and Russia allies. An armed invasion of Western Europe by those countries is not immediately to be feared; but it remains a future peril.
History continues to present remarkable uniformities. For example, the Rhine well merits the name ‘River of Blood.’ From the earliest times down to our own, rival races and civilizations have fought murderous combats on its banks. There is not the slightest probability that the course of history will change now. Tacitus, in describing the peoples that dwelt beyond the Rhine, said: *May mutual hatreds continue to prevail among these nations, in default of friendship for ourselves; for, burdened as we are with the cares of Empire, Fortune can offer us no better gift than the discord of our enemies/
This is a principle that the statesmen of the first French Revolution, and of the Governments of Napoleon I and Napoleon III, seem to have forgotten. Their successors have strengthened German unity by the Versailles Treaty, and are following a course that will throw Germany and Russia into each other’s arms. Men have been ready to compromise the future to win a present advantage, or to avoid a burdensome effort when it might produce results. It was thus that Athens permitted Macedonia to wax strong, until Macedonia subjugated the Hellenic world. It was thus that the nations of the Mediterranean basin permitted Rome to wax powerful until she became the mistress of the ancient world. The progress of the world may indeed have been advanced by the causes that ruined Athens and destroyed Carthage. If we survey the present condition of the world from this broader and more philosophical standpoint, it is impossible to forecast the ultimate outcome of the conditions that we are now witnessing. To attempt to do so would be to venture into the domain of futile speculation.
