Introduction

INTRODUCTION Sometimes I fancy that there are still such crises in store, especially for the Germanic world, that even the most illustrious viri doctissimi with all their books may one day become obscure.

Jacob Burckhardt, letter to F. von Preen, 19th September, 1875.

IT is an essential part of the general attitude underlying the present investigation that it is based on the following assumptions:

(a) The constantly shifting scene of international economic relations and of the State measures directed toward influencing them, the oscillations of economic activity in the different countries, the social and political disturbances and all the other phenomena, which occupy the forefront of public attention, are only surface symptoms of a deep-set structural change affecting our economic, social, political and cultural system in its entirety and constituting a major “historical crisis,”1 the outbreak of which can be exactly dated as July, 1914, but for the causes of which we must go still further back.

(b) This crisis puts social science in a new situation, which is itself highly critical and which no partial investigation in any field of this science whatever can ignore without running the risk of missing its aim. Nobody conversant with the current development of the social sciences can overlook the fact that the feeling of being on insecure ground is becoming more and more widespread, until even the most tenacious followers of the traditional lines of approach sense the need for reorientation. The growing literature on methodological questions even in countries like England, where it was formerly distinctly unpopular, is a sure token of this scientific situation, as is also the fact that it has been felt necessary to open the present report in such a roundabout way as would have appeared rather strange even five years ago.2

As the present historical crisis finds its first, its most painful and its most conspicuous manifestation in the economic sphere, and since the nineteenth century has accustomed us to treat the economic problems as the main ones, it is easy to understand why the crisis is conceived primarily as an economic one and why, therefore, the traditional approaches of economics have been relied upon thus far. Whether or not this traditional conception corresponds to the inner convictions of our scholars and statesmen, it is at least exemplified in the character of by far the greater part of scientific activity in our field. Accordingly, men and means have been mobilized, during the last ten years, on an unprecedented scale. Facts have been piled up sky-high; conferences have been held in endless succession; economic analysis has been brought to an ever greater degree of refinement (and, incidentally, to an ever greater degree of unreality); vast and detailed programmes of research have been elaborated; a complicated machinery of institutionalized science has been set up; and questionnaires have been sent to almost every country and to every section of the population. It would surely be no pessimistic over-statement to say that nobody feels that this hectic activity has brought us any nearer the fundamental diagnosis which alone could serve as the basis for effective therapy.3

The real cause of this deficiency in the social sciences seems to lie just in the narrowness of our economic conception and the lack of courage and ability in really synthetic interpretation to connect the economic phenomena with the wider aspects of society.4 There is, in fact, increasing evidence that the real epicentre of the earthquake does not lie by any means in the strictly economic sphere, but rather that the economic disturbances are only the external manifestations of a deeper organic disease, of which overemphasis on economic matters—a legacy of the nineteenth century—is only one of the many symptoms. If that is true, then it becomes clear that the traditional approach is doomed to failure and that a new point of departure has to be found.

In fact, every researcher, who goes below the surface of things, makes the daily experience that it has become impossible to analyse a single problem of present-day economics—be it money, crises, international relations, social relations or what you will—without being brought very quickly to the wider contexts of economic activity and behaviour. To stop, therefore, before studying these wider aspects means missing the real points. A few examples may make this clearer.

The radical dissatisfaction and unrest of the working classes are surely among the main disintegrating factors which have brought about the recent dislocations of the economic machinery (wage rigidity and therefore cost rigidity with all its well-known consequences). Laissez-faire in social policy, being acknowledged as untenable, has yielded to social reform, which tries to solve the problem by wage fixing, shortening of the working day, social insurance and protection of labour. Much has been done in this field which everybody will regard, in principle, as a real advance over laissez-faire. Yet, not only does this policy of social reform easily develop into a heavy burden for other sections of the population which happen to be less well organized, and into a very serious impediment to the economic process, but—and this is the real trouble—it has increased, rather than diminished, the menacing dissatisfaction of the workers, and offers only palliatives, instead of a solution of the challenging problem of the proletariat, which, in the last resort, is a human (vital) rather than an economic one. We are to-day tending more and more to realize that the real cause of the discontent of the working classes is to be sought in the devitalization of their existence, so that neither higher wages nor better cinemas can cure it. To be herded together in giant factories like sheep or soldiers; to devote the vitally important hours of life to work under heteronomous regimentation and without fully realizing the sense and dignity of individual labour; to be uprooted from all natural bonds; to return to gloomy slums and to seek recreation in amusements as senseless, mechanized and devitalized as their work itself; to be dependent every minute of the day on the anonymous forces of society; to live from one pay-day to another—these and many other facts constitute the real problem of the proletariat. In order to see it in the right perspective, one should compare such an existence with that of the peasant, the craftsman and even of many rural “home workers,” who all generally earn less and work longer, but lead a fuller, more dignified and human life than the proletarian workman under present conditions. This diagnosis of the disease called “the proletariat” opens a vast field of research in which most of the work remains to be done. The vitally balanced forms of work and existence must be classified, the facts as to the extent of the disease studied, the causes of proletarianization and devitalization analysed, the means of deproletarianization and of preserving non-proletarian forms of life considered, the functions of small property and of the necessities de lege ferenda appraised, researches made into the place of peasant agriculture under modern conditions and the technological possibilities of industrial decentralization (made easier by the electric motor and the internal combustion engine)—these and other suggestions may indicate the direction of this line of research.

The foregoing problem is closely connected with the formidable one of economic stability. Here, the recent advances in purely economic analysis have done much towards a better understanding of the mechanics of economic oscillations. But, here again, refinement in detail has been bought at the price of blindness towards the extra-economic contexts, which constitute the problem of reality. The economic crises of to-day in their severity, in their tendency toward recurrence and in their tenacity, cannot ultimately be understood except as the manifestation of a world which has been proletarianized and largely deprived of its regulatory forces and the appropriate psychological atmosphere of security, continuity, confidence and balanced judgment. Any attempt at neutralizing these deep-set structural disturbances by monetary tricks and public works will only end in disaster or, to be more specific, in the totalitarian state, where every policy, which seeks to give coherence to society without giving it inherent and spontaneous stability, must inevitably end. Worse still: the increasing boldness, not to say cynicism, in prescribing remedies only for the market process itself, is apt to increase the forces of spiritual dissolution. If it is agreed that a lack of private and spontaneous investments forms the root of a depression, it has to be emphasized that investing is the one economic activity which, as anticipating the uncertain future, is most dependent on a minimum of security, on continuity and on the undisputed rule of certain norms and principles in the behaviour of men and in the policy and jurisdiction of governments. This, then, is the very heart of the problem, but it would be difficult to find any reference to it in the whole literature on crises and cycles, saving and investment, the “marginal propensity to consume,” &c.

It is easy to understand, therefore, why anybody looking beyond these technical discussions must feel very intensely the narrow range of the present scientific activity in this field and hence its disquieting degree of unreality. In spite of all the stupendous intelligence which has gone to the making of this literature, we are simply drifting along to unknown dangers.

But this is by no means all. It seems that every formula of business cycle policy has been tried out by now: the German, the English, the American or the Swedish method (if the latter was any method at all and not sheer luck). The paradise of economic stability, however, has not come into sight, only the more or less serious limitations of each and every method. Barring the extreme cases of ill-guided business cycle policy, there are many useful elements in most of these methods; but it seems certain that, with the world as it is, the phenomenon of crises leaves an irreducible remainder; and it is just this remainder which represents an essential, if not the most important part of the problem. What is to be done with this remainder?

The smooth riding of a car depends on two things: on the evenness of the road and on the quality of the springs. If there is no prospect of having a perfectly smooth road, then we must look for better springs. Now, in the matter of economic stability, the prospects of achieving a fairly smooth road are worse than ever. In fact, there is a good chance of its becoming even bumpier than before. If that is to happen, the economic and social system itself must be made more bump-proof, i.e. more capable of absorbing shocks. What this means may be deduced from the example of Switzerland, which, owing to its social structure (peasant agriculture, strong family ties, anchorage of labourers in small property, prevalence of small-size business units, &c.), has shown amazing strength in enduring the series of economic and political shocks of the last twenty years. A country of uprooted and proletarianized nomads soon reaches breaking point in a long period of depression, while a country with a more wholesome social structure possesses large reserves of adaptability and resilience. Where the organic structure of society is better, so too is the economic structure.

But let us consider the more general problem of the degeneration of competitive capitalism occasioned by the growth of monopoly and interventionism. Though it is impossible to give an adequate idea here of the research which has still to be made in this field, the fact should be stressed that this development is largely the result of the disintegration of the state and of the exploitation of weak governments by sectional interests and pressure groups, for it has now become obvious that the working of competition presupposes a strong state which will with severity and impartiality provide the necessary legal and institutional framework of the competitive market. It is difficult to see how the present situation can be altered without changing both society and state themselves; and this cannot be done without first analysing the causes of the present weakness—a task which again brings the fundamental problem of the structure of society to the fore.

What is the right way to integrate society on the basis of those fundamental forces of social coherence without which it crumbles into atomistic masses, interest groups and irresponsible parties, until it becomes an easy prey of dictatorships? That is the crucial problem upon the solution of which everything else hinges. In this respect, it should be noted that traditional liberalism not only committed the error of ignoring the legal and institutional conditions of competition, but also of overlooking its sociologically negative effects. The automatic self-regulation of the competitive system with its unconscious tendency toward equilibrium is a fact which cannot be disputed and the discovery of which signifies an immense achievement of classical economics. That this order is invisible and not brought about by a conscious effort of individuals, is one of the reasons for the tremendous advantages it has over any other economic system as far as the production of material wealth is concerned. But at the same time it must be stressed that, much as competition is economically a highly satisfactory and even indispensable arrangement, it does not breed social integration. It is no principle on which society as a whole can safely be based. It supposes that there is enough integration elsewhere outside of the competitive market to keep society in general and competition in particular from collapsing, which is more or less what we are witnessing to-day.

Traditional liberalism, for a number of comprehensible reasons, has been totally blind to these problems; but the future of liberalism—in its widest sense of anti-totalitarianism—depends on our ability to realize them and to act accordingly. Otherwise the advance of totalitarianism, autarky, collectivism and the rest will not be arrested. The combination of a working competition not only with the corresponding legal and institutional framework, but also with a reintegrated society of freely co-operating and vitally satisfied men, is the only alternative to laissez-faire and totalitarianism which we have to offer. Working out this alternative in all its details and ramifications is a formidable task in which studies of the spiritual forces (religion, rationalism, ideologies, &c.) should play a prominent part if it is to yield real results.

The foregoing examples may suffice, for the moment, to indicate the general direction in which the necessary reorientation of social science is to be sought. It is because we are still far from having grasped the real nature of the problem of present-day reality that the situation in this science, which is responsible for the world of to-morrow, is so lamentably unsatisfactory. It has, indeed, become to some extent almost a fact-recording machine or an intellectual amusement park. “The progressiveness in detail only adds to the danger produced by the feebleness of co-ordination” (A. N. Whitehead). What is to be done about it?

Without in any way belittling the value of traditional activities which, in their proper context, are of great service, there is no doubt that what we need now is the broad and intelligent synthesis which sees society as the whole it really is. Specialization in social sciences, after having rendered immense services, has now become dangerous. It belonged to that stage of the development of modern society in which the sound constitution of the whole body could be safely assumed, so that treatment could be confined to specific parts. Everybody could peacefully work on his own field and cultivate it with infinite care. But now mankind is again on the move to unknown destinations. Under these circumstances, a coordination of the different branches of the social sciences is called for: synthesis instead of analysis. This seems to suggest the idea of “scientific co-operation” in which different scholars work out some means of linking up their researches. It would, however, be unfortunate if we had to start in this way. What we need first is the co-ordination within those single minds that have the intellectual courage and power to accomplish it. All fruitful ideas have to be born and developed in individual research work, before any ambitious plans of organized research are set in motion. Otherwise, we shall again be lost in scattered and hastily co-ordinated detail studies lacking any central ideas behind them. The importance of the proper milieu of work and existence has first to be stressed for science itself. The private study, where the scholar can work without being distracted by institutional machinery and without being regimented and pressed for quick results, was ever and will remain the proper birthplace of everything that is of any lasting scientific value.

Fruitful co-operation between a number of researchers is evidently possible only upon the condition that the work is subordinated to a common range of problems. This common range, therefore, must exist as a basis of co-operation before co-operation itself can usefully start. Consequently, the task of working out such a new range of problems cannot be a matter of co-operation—that would be a vicious circle in logic—but only a matter of individual research on the part of single scholars. Now, in the social sciences we have to-day reached the point where a new range of problems, aspects and scientific philosophies has to be worked out. It is only after this has been done that the organized co-operation of a number of scholars will become possible and necessary. So we have to do with two phases in scientific history which, in due the danger produced by the feebleness of co-ordination” (A. N. Whitehead). What is to be done about it?

Fruitful co-operation between a number of researchers is evidently possible only upon the condition that the work is subordinated to a common range of problems. This common range, therefore, must exist as a basis of co-operation before co-operation itself can usefully start. Consequently, the task of working out such a new range of problems cannot be a matter of co-operation—that would be a vicious circle in logic—but only a matter of individual research on the part of single scholars. Now, in the social sciences we have to-day reached the point where a new range of problems, aspects and scientific philosophies has to be worked out. It is only after this has been done that the organized co-operation of a number of scholars will become possible and necessary. So we have to do with two phases in scientific history which, in due course, are always bound to follow one another, and it would surely be a fatal error in methodology to deal with one of these according to rules which have proved useful only for the other.

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5 The term “historical crisis” is used here in the sense made familiar by Jacob Burckhardt, the great Swiss historian, by his essay on “Die geschichtlichen Krisen” (Weltgeschichtliche Betrachtungen, 4th edn., Stuttgart, 1921, pp. 160-209).

6 The following pages are largely based on a memorandum which the author wrote together with Professor Alexander Rüstow (University of Istanbul) in the summer of 1938.

7 See also: W. Röpke, Die entscheidenden Probleme des weltwirtschaftlichen Verfalls, Zeitschrift für schweizerische Statistik und Volkswirtschaft, 1938, No. 4.

8 In current literature there is already some evidence that the understanding of the scientific situation outlined above is growing. See E. F. M. Durbin, “Methods of Research—A Plea for Co-operation in the Social Sciences,” Economic Journal, June, 1938; A. Löwe, Economics and Sociology: a Plea for Co-operation in the Social Sciences, London, 1935: F. Akerman, Das Problem der sozialökonomischen Synthese, Lund, 1938. The essential things have been said on a wider scientific scale by A. N. Whitehead, Science and the Modern World, New York, 1926; and by Ortega y Gasset, El Tema de Nuestro, Tiempo, Madrid, 1923.

1Cf. my paper “A Value Judgment on Value Judgments” in which I am explaining my attitude in this very important methodological question. It will probably be published in the “American Economic Review.”
2The following pages are largely based on a memorandum which the author wrote together with Professor Alexander Rüstow (University of Istanbul) in the summer of 1938.
3See also: W. Röpke, Die entscheidenden Probleme des weltwirtschaftlichen Verfalls, Zeitschrift für schweizerische Statistik und Volkswirtschaft, 1938, No. 4.
4In current literature there is already some evidence that the understanding of the scientific situation outlined above is growing. See E. F. M. Durbin, “Methods of Research—A Plea for Co-operation in the Social Sciences,” Economic Journal, June, 1938; A. Löwe, Economics and Sociology: a Plea for Co-operation in the Social Sciences, London, 1935: F. Akerman, Das Problem der sozialökonomischen Synthese, Lund, 1938. The essential things have been said on a wider scientific scale by A. N. Whitehead, Science and the Modern World, New York, 1926; and by Ortega y Gasset, El Tema de Nuestro, Tiempo, Madrid, 1923.
5The purpose of this book is to make a new and more promising approach to the diagnostics of that long-run crisis in international economic relations which is one of the most striking symptoms of the general economic, social, and political crisis of occidental society. I believe that the urgent necessity of such an approach has been enhanced rather than diminished by the outbreak of the war. However, I would betray my own philosophy if I regarded this book as anything more than a mere beginning, an invitation to constructive criticism, and a way of opening or furthering a discussion for which the world seems to be ripe. In submitting this book to criticism, I am not afraid to expose myself as one who believes not only in the scientific legitimacy but even in the utmost scientific necessity of employing a measure of judgments, which is ultimately based on a definite conception of what is wrong with the world, and of what should be done in order to put it right again. Those who are shocked by such an attitude may be reassured that I gave more thought to this methodological problem than I am able to explain on this occasion.
6(b) This crisis puts social science in a new situation, which is itself highly critical and which no partial investigation in any field of this science whatever can ignore without running the risk of missing its aim. Nobody conversant with the current development of the social sciences can overlook the fact that the feeling of being on insecure ground is becoming more and more widespread, until even the most tenacious followers of the traditional lines of approach sense the need for reorientation. The growing literature on methodological questions even in countries like England, where it was formerly distinctly unpopular, is a sure token of this scientific situation, as is also the fact that it has been felt necessary to open the present report in such a roundabout way as would have appeared rather strange even five years ago.
7As the present historical crisis finds its first, its most painful and its most conspicuous manifestation in the economic sphere, and since the nineteenth century has accustomed us to treat the economic problems as the main ones, it is easy to understand why the crisis is conceived primarily as an economic one and why, therefore, the traditional approaches of economics have been relied upon thus far. Whether or not this traditional conception corresponds to the inner convictions of our scholars and statesmen, it is at least exemplified in the character of by far the greater part of scientific activity in our field. Accordingly, men and means have been mobilized, during the last ten years, on an unprecedented scale. Facts have been piled up sky-high; conferences have been held in endless succession; economic analysis has been brought to an ever greater degree of refinement (and, incidentally, to an ever greater degree of unreality); vast and detailed programmes of research have been elaborated; a complicated machinery of institutionalized science has been set up; and questionnaires have been sent to almost every country and to every section of the population. It would surely be no pessimistic over-statement to say that nobody feels that this hectic activity has brought us any nearer the fundamental diagnosis which alone could serve as the basis for effective therapy.
8The real cause of this deficiency in the social sciences seems to lie just in the narrowness of our economic conception and the lack of courage and ability in really synthetic interpretation to connect the economic phenomena with the wider aspects of society. There is, in fact, increasing evidence that the real epicentre of the earthquake does not lie by any means in the strictly economic sphere, but rather that the economic disturbances are only the external manifestations of a deeper organic disease, of which overemphasis on economic matters—a legacy of the nineteenth century—is only one of the many symptoms. If that is true, then it becomes clear that the traditional approach is doomed to failure and that a new point of departure has to be found.

International Economic Disintegration