International Order and Economic Integration

I THE ECONOMIC SYSTEM AND INTERNATIONAL ORDER

After giving a general description of the problems of international order in the introduction, in the course of which actual political questions were discussed as far as seems suitable for the purposes of this book, we shall now pursue those questions which seem to us to be most important. We emphasized that international order should be viewed first and foremost in the light of national order and must be developed out of it; that international peace, if it is not to be uprooted by every tempest, must be deeply and firmly grounded in a society which displays healthy spiritual, moral, economic, and social characteristics i.e. steadfastness, simplicity, justice, and humanity. Since the international crisis is only one part of the general crisis of society today, it is understandable that it can be overcome only by the solution of this general crisis. The programme of social and economic reform, therefore, which was developed in my earlier books ‘Die Gesellschaftskrisis der Gegenwart’ and ‘Civitas humana’ is also a programme of a new international order which shall supply the real foundation for a specifically political and legal programme of international political organization.

If the necessity, or at least the advantage, of such a sociological foundation for all questions of international order is acknowledged, it follows that the economic elements of international relations are accorded a special importance. This will therefore be the main subject of the following chapters. In point of fact, of the motives which throughout all times have led to international conflict and finally to war, those which, not always with great precision, are termed economic have always played the most important part. From the battles of primeval times and of the undeveloped races of today for hunting and pasture grounds, for salt deposits and fertile river valleys, the chain stretches by way of the predatory and conquering expeditions of the maritime and merchant states to the struggles today for room for expansion, possession of raw materials, colonies and markets.

A problem immediately presents itself. If a phenomenon exists in which a careful distinction should be made between appearance and reality, between motives which are objectively compelling and those which are merely subjective and pretended, then this phenomenon is war. Since a maximum of passionate devotion on the part of the masses who have to do the fighting is necessary, in order that reason, which otherwise exerts a restraining influence on war, may be put out of action, the first law of warfare, with the exception of a plain and obvious war of defence, has always been that of psychological propaganda. Those responsible for carrying the war must ensure that the masses see the war in the light of those motives which guarantee a maximum of warlike emotion, irrespective of the motives which influence the leaders themselves. Regard must also be given to allies and neutrals. Thus real and apparent motives become interwoven without its being possible to distinguish one from the other and the result is a highly complicated picture which only very few can see in the right light. The fact that it cannot always be assumed that the leaders themselves are clear as to their own motives and interests makes the matter still more involved.

It is therefore not surprizing that it is very difficult to determine what part is played in war by motives of an economic nature. All the more so since such clarification presupposes a very comprehensive knowledge of economics, sociology, and history, which not everyone possesses. Certainly the question presents itself in a different form at different epochs of political history because economic conditions have varied very greatly at different times. We may therefore leave out of consideration here the economic motives behind the Fourth Crusade, which led, not to the freeing of Jerusalem, but to the plundering of the Christian city of Constantinople, or those behind the Seven Years’ War. We shall limit ourselves rather to the present epoch of history which is characterized in the economic field by the predominance of very definite economic conditions. The uncertainty and multiplicity of opinions to be met with here are common knowledge. Everyone knows how widespread was the opinion during the first world war that the actual cause of the German-British conflict was the trade rivalry between the two countries, or that economic and financial motives largely determined the entry of the United States into the war. Many people still hold this opinion today. Was not the world war altogether the inevitable result of Capitalism, and must therefore true peace for the world not be dependent in the first place on the abolition of Capitalism? Must not the Pacifist therefore necessarily be a Socialist? What part is played by the armaments industry? What importance should be accorded to pressure of population as a war factor?

If we turn to the second world war the confusion and contradictions of opinions become quite unbearable. Are not the main causes again to be sought in economic tensions, in the contrast between ‘poor’ and ‘rich’ countries, in the ‘unequal division of raw materials’, in the unequal division of gold, in the policy of self-sufficiency, or in the tension between overpopulated and underpopulated countries? But why was it that only a few of the countries alleged to be ‘victimized’ had recourse to war, and why just those which had replaced the principles of free market economy (commonly known as ‘Capitalism’) by others which can only be termed collectivist or socialist? How is it possible that voices should still be heard which try to put the responsibility for the second world war also upon Capitalism, despite the fact that in Germany, Italy and Japan the most important feature of Capitalism, namely free market economy, was lacking, and had been replaced by a principle of economic organization which essentially characterizes Collectivism, namely, controlled economy. How is the fact to be explained that the other great example of uncompromising Collectivism, namely Russia, went shares with Germany at the beginning of the second world war in dividing up the booty of the East European countries, attacked little Finland and has meanwhile, by methods which are peculiar to Communism, conquered an empire which stretches from Lübeck and Eisenach to Tibet and Indochina? Or is it to be regarded as the fault of Capitalism that the capitalist countries of the West, England, France, and the United States, from fear of war or from military weakness, have displayed an inexcusable forbearance towards the collectivist aggressor states? Is this not making Capitalism responsible for a pacifist attitude, after always having asserted the opposite, and can it be denied that the policy of appeasement has been widely approved of in Socialist circles, and that the military policy of Socialist Governments in England and France are not least of all responsible for the inadequate armament of those countries? At the beginning of the second world war, as Germany and Russia were still united by a pact, did not Communists in all countries decry as ‘imperialistic’ the solidarity regained at last by the capitalists states against the collectivist aggressor states and try to sabotage it?

It is obvious that we get no further with the mechanical theories of orthodox Socialism. A new approach must be made which disengages itself from this stereotyped way of thought, and which takes, not words, but actual facts and conditions, as its starting point. The subject ‘Capitalism and Imperialism’ as presented to us by Marxist theory needs to be thoroughly overhauled. After a beginning was made in the last chapter of my book ‘Civitas humana’ we shall continue here by going further over back ground.

THE THEORY OF INTERNATIONAL ORDER AND THE SOLUTION OF THE PROBLEM IN A LIBERAL AGE

If the relation of the economic system to international order is to be recognized clearly, we must begin by presenting the problem of international order in the form under which it is seen from the economic standpoint. How do matters stand?

We must begin with the observation that an intensive trade, which involves a highly-graded division of labour and therefore an intricate interdependence of one individual upon another, can only develop and be maintained under one important prerequisite. Those who enter into this condition of interdependence must feel confidence in the moral, legal, and institutional framework which protects their system of interchange and their claims that result from it, and that to a degree that makes them willing to accept continually the risks involved in this prosperity-creating relationship. Above all, two prerequisites must be fulfilled.

Firstly, there must be an inviolable rule of law and a code of standards, principles, behaviour, and scale of values, which although unwritten is still generally recognized, to ensure for all members of the working community that minimum of mutual trust and sense of security and continuity which permits of making reasonable plans and dispositions for the future. Secondly, a general means of exchange must exist in the form of a generally acceptable, everywhere freely convertible and stable currency which assures material security for the claims arising from trade.

Only when and as long as these two prerequisites are fulfilled can the risk be sustained which arises from the utmost mutual interdependence of individuals linked by the division of labour and exchange, thus enabling the enormous advantages of such economic integration to be freely enjoyed. Only then and only to this extent is economic integration possible. In other words: economic integration – as far as its geographical extent and its intensity are concerned – always presupposes a corresponding non-economic ‘social’ integration which provides the setting described. The economic integration cannot in the long run extend further than the social integration, and its intensity is also determined by the degree of the latter. This is the cardinal law which governs rise and fall, expansion and recession of trade in the history of mankind1).

Every trained economist of course knows that there is no essential difference between the character of international and domestic trade. But the actual problem of its development becomes obvious if we compare the former with the latter. We recognize that the difficulty consists in finding and guaranteeing a legal, moral and institutional setting for international trade which in some measure approaches that of the intra-national. The problem of social integration is always infinitely more difficult to solve in the field of international relations than inside an individual country with its fixed constitutional structure and its political and moral cohesion. In international trade we may seek in vain for an international setting corresponding to that of the national state. A world state does not exist, and world economy therefore lacks a genuine world constitution, which would lay down uniform standards and compel them to be observed by direct and effective sanctions. And because there is no world state, world economy is unable to establish a uniform world monetary system, i.e. an international currency system, such as we are familiar with from our national currency systems, which are under national control and defined and protected by national legal standards, which would guarantee the three essential conditions of a healthy currency system, homogeneity, universally free usability and the stable value of money.

The subtle disputes of the nature of the ‘international society’ and international law may be left out of account here. The incontrovertible fact suffices for us that international social integration, as the setting for international economic integration, must always, compared with intra-national social integration, be a highly fragile and imperfect structure. How has it despite this been possible that during the past two centuries world economy expanded in an unexampled way and that international economic integration of a nature and intensity developed which differed only in degree, and that not even very much, from the integration existing within each national economy? A world state and a real world currency did not exist at that time any more than they do today. How then was the problem of international order as a prerequisite of international economic integration solved at that time? That is the question, the exact meaning and entire importance of which must be grasped, if we are to understand, not only the past, but also the present.

The problem we are discussing found a solution which may be termed the ‘universalist-liberal’ one. What is meant is this:

(1) Instead of the world state, which is an indispensable setting for a world economy, but which did not exist, a practicable and robust substitute was found, and that in a way with which, on a limited scale, the Res Publica Christiana of the Middle Ages may be compared2). This substitute was the international ‘open society’ (Henri Bergson)3) of that liberal age, a sort of unwritten ordre public international, a secularized Res Publica Christiana, which for that reason spread all over the globe. It is the ‘communitas seu res publica hominum sub Deo’ of St. Thomas Aquinas, to which natural law gave the double roots of universalism, which postulates the brotherhood of man, and of personalism, which postulates the inviolability of the individual, but replanted out of the spiritual earth of Christian Theism into the loose soil prepared by the Renaissance, by Humanism, Enlightment and Liberalism, while the addition ‘sub Deo’ was gradually suppressed and finally dropped4). No description can be given here either of the complicated structure of this international ‘open society’ of the 19th century and its manifold workings, nor of the theological, philosophical, moral and sociological forces which underlay this effective substitute for a world state and which penetrated among even the lowest intellectual classes5). It must suffice to say that these forces which created the universalist system of the ‘open society’ of the 19th century are for the greater part rooted – as indeed is only to be expected – in the same soil which produced the predominantly ‘liberal’ social, political and economic systems of the same age. What first strikes us in considering this order is the respect it enjoyed, which is only accentuated by the bad conscience or apologetics accompanying cases of infringement, which made it possible for international law to be regarded as a genuine law, on a par or even superior to that of the national state; for the world to be united through a network of long-term agreements which therefore made for the stabilization of international relationships; for tensions between large and small states to be continually adjusted – the unjustly suspected ‘balance of power’ – and for a high degree of agreement to exist regarding legal conceptions and national standards of justice. This external order was, however, fostered by the moral and political atmosphere of the ‘open society’, of the secularized Res Publica Christiana; to which a considerable and by no means unwholesome measure of Pax Britannica was added.

(2) If the international ‘open society’ of the 19th century was the creation of a ‘liberal spirit’ in the widest sense, which need not be explained in detail here6), this origin appears very clearly in another respect, and in the narrower and more usual sense attached to the expression ‘liberal’, – not as associated with Thomas Aquinas, Suarez, Victoria, Erasmus or Grotius, but with David Hume and Adam Smith. This point is of the greatest importance as explaining the secret of the international order of the recent past. It is the liberal principle that economic affairs should be free from political direction, the principle of a thorough separation between the spheres of the government and of economy, between sovereignty and the apparatus which provides material goods, between the Imperium and the Dominium, between the political power and the economic power (Maclver). This reduced the economic importance of the existence of sovereign states, with their different legal provisions, their frontiers, their independent administrative systems and civil rights, to a minimum. The economic process was thereby removed from the sphere of officialdom, of public and penal law, in short from the sphere of the ‘state’ to that of the ‘market’, of private law, of property, in short to the sphere of ‘society’, and this did away with the greater part of the causes of conflict and problems of order of an economic nature which arise from the side-by-side existence of sovereign states. This principle also solved an extremely important special problem of international integration, which as we said above was of decisive importance in addition to the problem of international law, i.e. the problem of an international monetary system. Just as the universalist liberal ‘open society’ of the nations was able to create something like a world state, an acting substitute for a non-existent world government, with a common code of law for all nations, so did the application of the principle of separation to money give rise to a working substitute for world money and to establish a really international monetary order in the form of gold standard. The lack of a uniform world monetary system which would guarantee free exchange of currencies at stable rates was compensated for by the fact that all the leading countries accepted the gold standard and supported it more or less scrupulously in a manner which merged the whole globe into a payments union and lent the same qualities of homogeneity, stability and convertibility to international payment transactions as characterize national payments. By this means, by the free and universal convertibility of money at fixed rates and the resulting multilateralism of trade – it became possible for the first time to speak of international economic integration in the exact sense in which we speak of economic integration inside a national economy7).

Nowhere is the essence of this liberal world order which is characterized by its disassociation from political direction so clearly shown as here. This international monetary system was not dependent upon a world monetary authority nor a world monetary union or any other international pact, which would have tempted the nations to default and made monetary and credit policy controversial questions and the subject of diplomatic contests. It rested, on the contrary, entirely on the law of the individual state, and even the much praised ‘co-operation of the Central Banks’ proved, as it came to gain in importance, rather to be an anti-doctrinal deterioration and evasion of the gold currency than an encouragement to it, let alone an indispensable support of the international mechanism of gold currency. Since the validity of the individual national currencies depended upon gold, the fact that money = gold not only effected a fixed and free coupling of national currencies, but also compelled national governments by means of their national currency regulations to behave in matters of monetary and credit policy in such a way that this fixed and free coupling remained an undisputed permanent institution, irrespective of all trade fluctuations. As will be shown later, a further advantage was that the evil of an adverse balance of payments, and of international shortage of a currency were completely unknown in international case histories. While the governments clung to their national currency regulations, and in the firm belief, which had become a tradition, nay, even an article of faith, that they were serving, not world trade but their own interests, defended the free convertibility of their currency and their parity with the delicately-formed tools of monetary and credit policy, the result, by no means aimed at in the first place, was a genuine international monetary system – the only one which our age has up to now known. Gold currency thus illustrated the saying of Adam Ferguson8) (1723–1816), so essential to liberal convictions, that ‘peoples find themselves unexpectedly in possession of institutions which are indeed the outcome of human action, but not the result of human intention’, and it is a proof of the further realization that in the wide field of society and economy such spontaneous co-operation is generally superior to conscious planning. It was a monetary system which rested upon ‘the structural similarity of the national systems’9), and which made currency dependent, not upon political decisions of national governments and their direction, but upon the objective economic laws, which applied once a national currency was linked with gold. It was an ‘economic’ and not a ‘political’ currency system. But it was at the same time a phenomenon with a moral foundation. The obligations, namely, which a conscientious conformity with the rules of the gold standard imposed upon all participating countries formed at the same time a part of that system of written and unwritten standards which, as we have seen, comprised the liberal order public international. The gold standard collapsed as one country after another, for one reason or another, began to disregard the rules of the game, which meant that the gold standard was no longer understood, while at the same time the international order crumbled and the final change of the essentially liberal character of the prevailing economic system to one in which interventionism and collectivism played an increasing part deprived the gold standard of its foundation. The increase of political direction in economic life must necessarily result in the destruction of the monetary order, which rested on the principle of the freedom of economic affairs from political direction.

If we try to sum up the character of the liberal solution of the problem of international order in a few words, we may put it as follows, which at the same time explains the close connection between the two main elements of this order named above: the liberal idea, by creating an ordre public international which was legally and morally effective and which was kept together by manifold institutional links, achieved the closest possible approach to the (unreachable) goal of setting up an international equivalent of the national state which was indispensable to international relationships. At the same time the separation of the political and economic spheres, by which economic activity became a private affair removed from political direction, was not only a decisive aid in the creation of this quasi world state, but also limited the burden placed upon this framework of the international economy, so that this international substitute set-up sufficed for the actual requirements of an international order. In other words it combined the actual practicable maximum of international order with a minimum of demands upon it. These historical forces created an international order without dispensing with national sovereignities, and combined this with an economic system, namely the liberal one, which, in contrast to the collectivist system, requires only a minimum of organizational set-up.

A tremendous achievement which it were opportune at last to understand and duly respect, and whose significance we only fully realize now that this framework no longer exists. On the other hand, now that the liberal idea of order has been supplanted by the collectivist, the meaning of the attempt made above to characterize the liberal international order becomes painfully clear to us. If we examine more clearly the popular idea of today, to erect an international controlled economy on these ruins of an international order, by means of fragmentary Quota, Clearing and barter Agreements and daily varying payments and trade arrangements between the individual states, we cannot help observing its absurdity, and that for a reason which is very instructive in this connection10). Two things immediately become clear: (a) that an international planned economy – we must constantly come back to this – representing as it does the domination of politics over economics on an international level, cannot manage with the international quasi-order of the liberal epoch but presupposes a real super state, and (b) that it was exactly a triumph of the collectivist idea over the liberal one which destroyed this loose quasi-order. International collectivism demands a measure of international statism which would presuppose a very much stronger international frame that that which the liberal age created and which collectivism destroyed. We shall meet this paradox later in another form.

If this completes the picture as we see it of the nature of the problem of international order and its liberal solution, it only remains to say that we have only tried to give an interpretation of international law in the 19th century under the aspect of its economic function. Thus seen the traditional system of international law appears to us as the liberal solution of the problem of international order which has arisen from economic development, this means that this system entered upon a process of disintegration as the liberal idea of order began to decline.11) This contention ought to be substantiated in detail by concrete examples. We shall however content ourselves by a single one of predominant importance, the treatment of private property in international relations.

It was in accordance with the principle of the separation of Imperium and Dominium, upon which the liberal world order rested, that private property was practically dissociated from the question of the territorial supremacy of the states and nationalities of the owners and the conflicts connected with them. This broke with an age-long aftermath of tradition from Feudal times. While colonial imperialism still clung to the idea that a territorial supremacy of the State over the areas in question was necessary, in order to ‘secure’ markets, sources of raw material and possibilities of settlement, this was but an anachronistic sophism which thoughtlessly ignored the established principle of liberal world order. ‘Political power has determinate frontiers, economic power has freedom of the world’ (Maclver)12). This principle of the separation of sovereignty and property was of special importance in cases of war, in which respect for the private property of the enemy was an obvious consequence of the liberal universal international order. After disregard of the private property of the enemy had became the rule among the belligerents in the first world war, the extension of this disregard by the victors after the second world war in forcing neutral countries to follow suit constituted a high point of that legal cynicism which has dissolved the old liberal world order. Some years ago I wrote the following, to demonstrate the length to which matters had gone: ‘Let us imagine that at the time of the Chinese Boxer Rising (1900) – which bore a distant resemblance to National Socialism – Swiss property had been damaged, and let us further assume that someone conceived the idea of confiscating assets, which had been entrusted by individual Chinese to Swiss banks, to compensate the Swiss who had suffered damage. Can the slightest doubt exist that at that time the very idea would have been swept away by a storm of unanimous public protest? Meanwhile, however, a passport no longer has the qualities of a patent of nobility and an insurance policy, but has also become equivalent to a mandate of expropriation, an order of deportation, a document of moral condemnation, an order for arrest and in the extreme case to a sentence of death13)’.

IMPERIALISM

The 19th century, then, applied a ‘liberal’ solution to this problem of international order, which held the separation of Imperium and Dominium to be a factor which furthered international integration, and the renunciation of this solution an unsociable international element. How, though, does this theory match up with the undeniable historical state of affairs known as ‘modern imperialism’? Have we not learnt that this is the regrettable attendant circumstance of ‘modern capitalism’14)?

We shall only be convinced of the assertion that imperialism is a necessary concomitant of capitalism if an empirical proof in two directions is provided: (1) that imperialism has never existed without capitalism, and (2) that capitalism has never existed without imperialism. It is only necessary to demand this proof to know in advance that it can never be brought.

The assertion that there has never been imperialism without capitalism is refuted on almost every page of the history of mankind. The proof demanded under (1), therefore, cannot under any circumstances be brought.

Nor is the situation any better as regards the proof demanded under (2), namely that capitalism has never existed without imperialism. The bottom is knocked out of this theory by the fact that there are plenty of states which are entirely capitalistic without being in the least imperialistic. It suffices to name Switzerland, Sweden, Denmark, or Norway as examples. The Netherlands may also actually be counted as belonging to this capitalistic but not imperialistic group. Although up to recently this country owned rich colonial possessions and displayed a considerable power of expansion in acquiring them, it would be ridiculous to count it among the ‘imperialistic’ powers, since the urge for expansion was entirely absent, which according to the economic theory of imperialism, we must assume to be a prerequisite of it. The fact that there are capitalist countries which are in no wise imperialistic, is all the more unfavourable for the economic theory of imperialism, since this group also includes countries which are among the richest and those playing a leading part economically. They are as strong on the economic side as they are weak on the political side. There is no denying, for example, that Switzerland owes her wealth in no small measure to the fact that for centuries she has not been imperialistic, i.e. that she has never pursued an expensive policy which was destructive to peaceful trade relations, and during a century of undisturbed peace has been able to build up her capital assets by means of unremitting industry and exemplary thrift.

The example of Switzerland might give an obstinate advocate of the economic theory of imperialism occasion to ask whether imperialism must of necessity use political means to attain its end, namely the obtaining of a ruling position. Has not ‘Switzerland’ ‘conquered’ northern Italy through its banking connections and its electric power companies? No deep consideration is necessary, however, to discover the misconception contained in such an idea. Let us suppose that the possession of banks, electric power, railways or gas companies confers influence and power, and that perhaps upon people who are domiciled abroad. Is there any point at all in calling this ‘imperialism’? For this word to have any meaning at all it is essential that the imperialistic policy should be pursued by a political body, i.e. a foreign state. This is just what is lacking in our example. It is not ‘Switzerland’ which is expanding in Italy, but individual Swiss – through the media of juridical persons – who carry on business there and hope to make a profit. This is an example of the wrong thinking which is remarkably frequent, and highly dangerous, in economic considerations, and which Whitehead terms the fallacy of misplaced concreteness15). It consists of turning a conception – in this case ‘Switzerland’ – into an acting reality which founds electric power companies in Italy. It is the same fallacy which before the first world war led to the fatal and poisonous idea that ‘Germany’ was a trade rival of ‘England’, although it was not ‘Germany’ and ‘England’ who were rivals of one another, but certain individual Germans and Englishmen, while at the same time there were far more Germans and Englishmen who competed just as bitterly with their fellow-countrymen and who were associated with nationals of the other country by means of friendly relations as suppliers or purchasers.

If we return to the example of Switzerland, for example, we may be permitted to ask what difference there actually is between the foundation of subsidiaries abroad and the expansion of a business enterprise within the country itself. Does the establishment in Geneva of a branch of the Schweizerische Bankverein denote imperialism on the part of Zürich? The question requires no answer. Anyone familiar with the theory of foreign trade, will recognize that the fallacy exposed here is only one example of the very widespread idea that a socio-economic process changes its nature as soon as nationals of different countries participate in it.

It is therefore inadmissible to speak of imperialism when a foreign business is established in a country, as long as the government of the foreign country does not back that company by means of power politics, as was for instance the case formerly in Turkey. One should of course avoid falling into the other extreme of denying the non-political foundations of enterprises in a foreign country any importance beyond pure business. A banking house or a power station naturally bestows considerable economic influence, and there are of course sufficiently weighty reasons why a country does not willingly concede this influence to a foreign firm. In most cases, however, the unbridled exploitation of the economic influence which a foreign company enjoys by its private business would appear objectionable only under the same conditions in which a business company of the country itself would be open to the same criticism, i.e. whenever a monopoly is involved.

Our investigation, therefore, has led to the conclusion that imperialism can exist without capitalism, just as capitalism without imperialism. This removes the supports from the economic theory of imperialism, which represents imperialism as an inevitable concomitant of capitalism.

That it is possible to grow rich by force at another’s expense is no new or startling discovery. This temptation has existed at all times and under all economic systems and has certainly always been one of the major causes of war. It is, however, inherent in the nature of capitalism that the responsibility for adjustment of production to demand lies in the hands of the private entrepreneur and not in that of the State, that sovereignty and the economic sphere are kept distinctly apart and that ‘the nations, who would not be preserved from violence and war through the conception of cosmopolitan justice, are united through reciprocal self-interest’ (KANT, ‘Zum ewigen Frieden’, Königsberg, 1795, p. 64). In the same book Kant writes, ‘It is the commercial spirit which cannot exist together with war, and which sooner or later takes possession of every nation. Since, namely, of all the powers (means) which the ruling power has at its disposal, monetary power is probably the most reliable, governments . . . find themselves compelled to further true peace, and wherever war threatens to break out in the world, to stave it off by means of negotiations, just as if they were in a permanent state of alliance’. It is thus not a typical characteristic of capitalism for the State to appear in the role of organizer and protector of imperialistic exploitation. Should it do so, then of its own free will, but not as a mystical essential of capitalism.

Modern imperialism, then, is at bottom not an economic, but a political phenomenon. On the other hand must it not be clear to everyone, that an economic system, which in contrast to capitalism, is characterized by the fusing of trade and politics under the command of the State, must by its very nature tend to use state coercive measures for economic ends? This economic system, however, is Socialism, which we are asked to believe will free us from economic imperialism.

That this is the only possible interpretation of the facts, and that the Marxist theory of imperialism – which, like many other Marxist ideas has, consciously or unconsciously, also influenced non-Marxist circles – has distorted reality, is shown by the fact that the various ‘capitalistic’ States behave in entirely different ways, the one is peaceful, the other aggressive; the same state may even at one time be imperialistic and at other times not. The Boer War, for example, would seem to be a very obvious result of economic imperialism but why then did Holland, which had particular reason to do so, refuse to consider the political annexation of the South African market as a necessity of a capitalistic economy? The example of the United States is also particularly instructive; under the influence of a pacifist public opinion, the USA has distanced itself more and more from the old ‘Dollar Diplomacy’, without becoming any the less ‘capitalistic’ thereby. Now that a ‘Gun-Boat Policy’ has become a thing of the past, any further remarks on this point are totally superfluous.

In the same way, the relations between debtor states and creditor states have undergone a basic change in the course of the past few decades. The idea that investments abroad force the debtor country to become a submissive vassal state has lost every vestige of reality. The latest economic crisis in particular has demonstrated the relative impotence of the creditor states with regard to debtor states which have become insolvent, an impotence which is sometimes so exaggerated that it might almost be said that the debtor states have the pull over the creditor states. The United States, for example, have accepted the loss of thousands of millions of dollars, which they had invested in certain states of Latin America, without even attempting to undertake military action of the kind which England and Germany dared take against Venezuela in 1902. Since 1931, Germany has managed to throw off the greater part of its foreign debt without any other consequences than those which accrue to the insolvent debtor in private life, and has indeed been smart enough to take advantage of the repudiation in its trade policy. Nor do the popular notions regarding the chief campaigns undertaken by European imperialism up to 1914 bear any relation to the truth. Although the theory of economic imperialism assumes that capital interests abroad are always the cause of diplomatic conflicts, in actual fact the reverse has been true in many of these famous cases, politics have taken the lead and harnessed capital interests in the service of an expansionist policy16).

These conclusions may be summed up in the following sentence: imperialism is not only not an essential component of capitalism, but, quite apart from all the economic links in the chain of cause and effect, is a concomitant which is foreign to, and even opposed to, the capitalistic system. A bellicose policy by no means furthers the interests of capitalism, but is directly opposed to them. An economic system which rests upon division of labour and exchange needs peace if it is to flourish. The objective and reasonable interests of all those participating in buying and selling demand peace. In the age of world trade and a technology of warfare which develops parallel with technology for peace, war has finally lost any economic meaning, if it is to be anything more than brutal plundering, by which the enormous losses caused by the destruction of the international system of trade can be temporarily compensated for. For the majority of people it has ceased to be a profitable business, although, of course, not for certain groups.

There was no need for the participating countries to wait for the outcome of the first world war to learn how senseless it was economically, as senseless as was the second world war also. There are no objective reasons for making any conflict of an economic nature responsible for its outbreak. The economist in particular has every reason to contradict the popular exaggeration of the economic causes of both the first and the second world war. This might only be considered to apply seriously in respect of the conflict between Germany and England. But it should be stressed here that the cause of the break between the two countries was not trade rivalry – as is known, each was the best customer of the other – but a political rivalry which arose from the German programme of new naval construction, and the danger that Germany would subject France and Belgium and so be able to threaten England directly from the Channel coast. The so-called trade rivalry between Germany and England was nothing more than an ideological disguise for a real conflict of political interests, the logical fallacy of which we have already met with. On purely economic grounds the conflict must of necessity have been forbidden on both sides. In actual fact, as in many wars, economic logic only played a minor part, in contrast to instincts, feelings and passions. The atmosphere created by free market economy i.e. the principle of economic organization inherent in ‘capitalism’, serves rather to curb and suppress atavistic bellicose emotions than to stir them up. Those responsible for the war spirit mostly come from those social classes which are furthest removed from capitalism17).

In conclusion: not only is capitalism conceivable and viable as ‘pure’ capitalism without imperialism – just as a ‘pure’ capitalism can exist inside a country without exploitation; on the contrary, imperialism is the source of the greatest friction and disturbance which up to now have prevented capitalism from demonstrating the power of creating prosperity which it contains. There are three principle reasons which explain why capitalism has not brought the maximum of masswell-being to mankind of which it is capable: the reckless group egoism which with or without certain state interventionism reduces productivity, the gigantic increase in population during the last hundred years, and – imperialism. All three causes are closely related to each other.

Imperialism, as we have said, is basically a political phenomenon and as such a creation of feelings, passions and instincts. It was believed formerly that an optimistic conclusion might be drawn from this, and that the need for peace as dictated by economic reason would more and more curb irrational bellicose instincts. We are far from thinking so optimistically today. We know that instincts, feelings and passions rule mankind far more strongly than the optimistic rationalism of earlier days was prepared to admit, and that the world is governed far less by facts and calculations than is good for it, especially in an age which is dominated by mass movements and mass instincts.

It remains to us to draw two conclusions from our rejection of the theory of economic imperialism. In the first place there are obviously no grounds for assuming that the world-wide slump which developed in 1929 was due to expansion abroad meeting with geographical limits; thus arguing a fatalist prognosis for the future of capitalism. The idea that capitalism is only possible as long as its geographical sphere of influence can be regularly expanded is entirely unfounded. The decisive factor for the success of capitalism is not the number of square kilometres that it covers, but the amount of purchasing power, which again is determined by the amount of production and by a smooth exchange of the goods produced on a basis of division of labour. The second conclusion is that if imperialism is to be attacked, there is no need to turn against capitalism. The opponents of imperialism should not believe that they must become anti-capitalists, as the Marxist theory has tried to drill into them. This applies, not only to highly developed countries, but also to those other countries which up to now were objects of the imperialistic policy of the great powers, and which now wish to liberate themselves from it.

In order to round off our considerations and to cut off the defendants of the theory of economic imperialism from all possibility of a retreat, let us in conclusion present an ultimate clarification. However valuable it is to recognize that the aggressive foreign policies of our age are phenomena which are determined by politics and not by economics, we still cannot avoid the question of the extent to which political decisions which dictate an aggressive foreign policy are, influenced by economic factors of a manifold nature. This has no longer to do with the problem dealt with by the theory of economic imperialism, since we are not discussing an inevitable link between capitalism and imperialism. But this new question we put ourselves is all the more complicated and comprehensive, especially if we take into account, not only economic factors which are objectively established, but also (true or false) opinions on such facts, fixed ideas along economic lines, ideologies and the measures relating to economic policy which they ordain, self-deceptions or suggested deceptions regarding the true economic interests of a nation, an assertive attitude on the part of private interests (for example the armament industry or foreign capital interests) and many more. In putting this question we are once more illustrating the oft-proved saying of Epiktet, that it is not so much facts themselves that mislead people, as the opinions on the facts.

Let us take some known examples. We showed that the first world war could by no means be explained as being due to an objectively established conflict of economic interests. Although it was driven into the minds of the masses both in Germany and England that trade rivalry between the two countries was bound to make war inevitable, this trade rivalry was by no means an economic fact, but a purposefully nourished economic deception for popular consumption, for reasons which we have already met. Had both countries acted in their real and plain interests, they would not only have preserved peace, but each would of necessity have wished the other the greatest possible economic success, in the sense of the two hundred year old extract from David Hume quoted at the beginning of this section of the book. The true state of affairs was so twisted on both sides by political ideology, that the masses were made to relish the actual ‘political’ rivalry, which at bottom was a naval rivalry arising from senseless German ambition. The fact that certain firms on both sides rejoiced at the prospect of being relieved by military force of inconvenient foreign competition only goes to prove that the interests of the individual often lie in a different direction from the interests of the nation as a whole. But it is the task of politics in particular to subdue private interests to the interests of the nation, both then and at all times, and this task is considerably lightened if egoistic private interests are brought to light.

Another example, which is unfortunately of topical interest today, is supplied by foreign trade policy. Although a moderate tariff policy needs by no means be considered an insurmountable barrier to peace, it contains dangers which become obvious today in the tensions caused by a policy of self-sufficiency. It would, however, never occur to anyone to describe this economic policy as unalterable and of compulsory origin. It is rather the outcome of certain political ideologies and certain political conditions. It corresponds further to an internal economic policy which aims at converting our economic system into one of state intervention and collectivism. A real and active peace policy, therefore, must start by attacking these ideologies and conditions.

It is therefore frequently possible to prove that in individual cases ‘economic’ factors play a part in an aggressive foreign policy, when private pressure groups understand how to make use of their national government for their own purposes, or the true economic interests of the nation as a whole are falsely depicted. It is shown over and over again, however, how little these examples go to prove that the prevailing economic system of necessity and by reason of its intrinsic structure results in an aggressive foreign policy. It is true that in such cases the chain of cause and effect contains economic links, but it ends finally in the field in which, contrary to the materialistic interpretation of history, all decisions take place: the field of politics, power, ideology, psychology, sociology, emotionalism. Everything which at a superficial glance seems to indicate that capitalism is the villain of the piece proves upon more thorough examination to be entirely fallacious. It only proves that, under the present economic system as well as under any other, stupidity, egoism, greed and falsehood can carry on their evil work against peace, as long as reason, public spirit, moderation and truth are not able to keep them under control. Not the imaginary inescapable fatalism of the economic laws of capitalism are to be denounced, but human default. And this default is the direct opponent of the spirit and meaning of this economic system. The idea that the economic system which rests upon the regulating function of the market and the separation of political sovereignty from economic activity is that which compulsorily drives nations into war, must be completely rejected.

 

NOTES

18. (p. 73)

The ideas developed in the text I first submitted partly in more detail in my English book ‘International Economic Disintegration’ (3rd Edition, London 1950, p. 67 and the following). There some observations on the question of the reaction of economic integration upon social integration can also be found. I have nothing to add to them on this occasion, except perhaps for the remark, that today I should emphasize the mutual effect even more emphatically. The world situation at this very moment gives one reason to point out, that there is a healthy element of compulsion in the choice, either of continually adapting the degree of international economic integration to the catastrophically lessened international social integration or of once more raising international social integration to the level necessary for vital international economic integration.

19. (p. 74) Res Publica Christiana:

Concerning the degree and the nature of the international community of the Middle Ages information may be obtained specially from: R. F. WRIGHT, Medieval Internationalism: the Contribution of the Medieval Church to International Law and Peace, 1930; R. WALLACH, Das abendländische Gemeinschaftsbewußtsein im Mittelalter, 1930; J. HASHAGEN, Internationalismus und Nationalismus im Mittelalter, Friedenswarte, 1938, 1; R. O’SULLIVAN, Internationalism, European Civilization, its Origin and Development, Vol. V, New York, 1937, p. 1261 and the following; HENRI PIRENNE, Histoire Economique del’Occident Medieval, Bruges 1951. How this international social integration in the Middle Ages corresponded to a high degree of international economic integration, was specially shown by: F. RÖRIG, Mittelalterliche Weltwirtschaft, Blüte und Verfall einer Weltwirtschaftsperiode, Jena 1933. A ‘communis omnium nationum mercancia’ corresponded to the Res Publica Christiana, as stated in the letter (quoted by Rörig) of a Florentine businessman in Bruges to the Hansa of 1457. When in 1531 the inscription ‘In usum negotiatorum cujusque nationis ac linguae’ was introduced over the Antwerp Stock Exchange this epoch of ‘medieval world economy’ was already approaching its end.

20. (p. 74) HENRI BERGSON, Les deux sources de la morale et de la religion, Paris 1932, p. 27 and the following.

21. (p. 74)

This is the moment, when one should let the development of the humanitarian international law of the New Era unroll before one’s eyes in its various stages, which are specially characterized by the courageous pioneering work of the Spanish Jesuits and the Dominicans of the late scholastic school (Franciscus Suarez, Francisco de Vitoria, Ludovicus Molina a.o.) – aptly so called, as it is linked with the great legacy of Thomas Aquinas – and by Hugo Grotius and Burlamaqui. SUAREZ (Tractatus de Legibus et Legislatore Deo, II, cap. 19, n. 19) explains as basis of the Jus gentium ‘quia humanum genus quantumvis in varios populos et regna divisum semper habeat aliquam unitatem . . . quam indicat naturale praeceptum mutui amoris et misericordiae, quod ad omnes extenditur, etiam extraneos et cuiuscunque nationis’. From this nature of the international ‘public society’ VITORIA derives on moral and theological ground the commandment of free trade, which compels by the very law of nature (‘. . . quia etiam hoc videtur jus gentium, ut sine detrimento civium peregrini commercia exerceant’ quoted from R. O’Sullivan, loc. cit., p. 1275), – a commandment, which then in the paragraph prefaced to my book as motto is translated by David Hume from the language of natural law and moral theology into the secular terms of economic profit calculation. In contrast with these great moments of concept of an international ‘public society’ in the history of human thought stands the other fateful series, which begins whit Bodin, the actual inventor of the modern conception of sovereignty, and Machiavelli and – armed with the lesson of the depravity of human nature so effectively presented and disseminated by Luther – is continued via Francis Bacon and Hobbes to Hegel and Treitschke and finally supersedes the humanitarian and universal conception of national relations first in the course of the 19th century in theory and then in the 20th century in practice also. In so far as the humanitarian and universal conception of national relations had been superseded in the course of the 19th century, it is only in line with the law of historical interference (which I have explained in my ‘Gesellschaftskrisis der Gegenwart’, 5th Edition p. 90-103), that it was only after that that the practice of international law harvested its full fruits. It is in the light of this that one should consider the following survey, which shows how the number of cases settled by arbitration annually increased in the 19th century (according to R. O. SULLIVAN, loc. cit. p. 1288)

 

1789-1848 on an average 1 arbitration every 2 years

1848-1860 on an average 1 arbitration per year

1861-1880 on an average 2 arbitrations per year

1881-1900 on an average nearly 5 arbitrations per year.

22. (p. 74)

I refer here to my ‘Gesellschaftskrisis der Gegenwart’, 5th Edition p. 378 et seq. In this overall picture of an international order the dominating role of the leading world political and world economic power or group of powers has been given a very important place. I have expressed my opinion of this several times (International Economic Disintegration p. 16 et passim; Gesellschaftskrisis der Gegenwart, p. 385; Civitas humana, p. 290 et seq.). Along the same lines: F. PERROUX, Entwurf einer Theorie der dominierenden Wirtschaft, Zeitschrift für Nationalökonomie, 1950, No. 1.

23. (p. 75)

I refer to my book ‘Maß und Mitte’, Erlenbach-Zürich, 1950, p. 9 et seq.

24. (p. 76)

I have set forth this idea in more detail in my essay: The Economic Integration of Europe, Measure (Chicago), 1950, No. 4.

25. (p. 76)

Ferguson is quoted according to F. A. HAYEK, Individualismus und wirtschaftliche Ordnung, Erlenbach-Zürich 1952, p. 16.

26. (P. 77)

WERNER STARK, Währungsverträge, a publication in honour of Oscar Engländer, Brünn p. 265. The difficulties of currency pacts therein described, as also those of the Latin coin union illuminate in a very interesting way the basic weakness of the ‘political’ type of an international monetary order compared with the ‘economic’, as I have named these 2 types in the text.

27. (p. 78)

I first developed this idea in detail in my English book ‘Crises and Cycles’ (London, 1936, p. 10 et seq.).

28. (p. 78)

In the past it has always been emphasized, that international law ‘in spite of the anarchistic lack of organisation in the community of nations was true law’ (G. RADBRUCH, Einführung in die Rechtswissenschaft, 2nd Edition, Leipzig 1913, p. 128) and thanks to the ‘pressure of international public opinion’ (an impressive point made by R. M. MACIVER, in particular, The Modern State, London 1926, p. 284) is even more conscientiously observed than national law (sic. RADBRUCH loc. cit.). But it is clear, that this is not a characteristic of international law as such, but of the liberal international order in which disputes are settled as outlined above.

29. (p. 79)

R. M. MACIVER, loc. cit., p. 294. By way of illustration: In the year 1913 the entire British colonies in Africa supplied less than 1% of British export. Their importance was roughly equal to that of Chile. As market for British products the Argentine was about three times and as supplier country about six times as important, without costing the British tax-payer a single penny (according to LEONARD WOOLF, Economic Imperialism, 2nd chapter).

30. (p. 79)

W. RÖPKE, Kollektivschuld und deutscher Widerstand, Neue Schweizer Rundschau, August 1946, p. 203.I have already expressed my opinion of the lack of monetary logic in the idea of ‘suitable compensation’, over which the execution of the Washington agreement concerning the confiscation of German assets in Switzerland finally failed and which is rooted in the same ‘Nationalization of the economy’, which is castigated here, in my essays ‘Offene und zurückgestaute Inflation’ (KYKLOS 1947, p. 70) and ‘Repressed Inflation’ (KYKLOS 1947, p. 244). The importance of the liberal principle of separation for international law as hitherto practiced and the unsolved contradictions arising with its abandonment, are evident in such a singular case as that of shipping. Previously it was the rule that foreign government ships enjoyed immunity, because it could be presumed that merchant shipping was of an exclusively private character and that state ships were to serve solely for the exercise of functions of sovereignty, and because merchant shipping was assigned to the sphere of private property, state shipping, however, to the sphere of sovereignty. Now however the removal of this division by the rise of state-owned merchant marines makes the application of this principle more and more impossible (S. MAIWALD, Die Entwicklung zur staatlichen Handelsschiffahrt im Spiegel des internationalen Rechts. Die Staatsfreiheit des Handels als Kardinalprinzip des Seevölkerrechts, Stuttgart, 1946). Of a similar type are the growing difficulties, which are developing in the present efforts to re-liberate international trade (‘Liberalization’, GATT) by the extended state trading practised by a number of countries.

What importance the principle of separation – especially in the protection of property and international transaction of payments from the arbitrariness of national politics – has for international investment and the development of new countries is obvious. The development of the ‘underdeveloped’ countries in the 19th century was completed under the working and the protective influence of this principle and therefore soundlessly and without international government programme. That therefore, operating in reverse, the present removal of this principle causes one of the most difficult obstacles, for the development of the ‘underdeveloped countries’, is a subject we will deal with later.

31. (p. 80) Imperialism:

In the first edition the essentially Marxist theory of ‘Imperialism’ as a supposedly necessary consequence of ‘Capitalism’ was given a detailed examination, which patiently showed its theoretical untenability and its incompatibility with the historical facts. The author has refrained from repeating this part here, and contents himself with a few comprehensive sentences, for the entire subject has greatly lost in interest. Today a policy of genuine imperialism is only pursued by that world power, which has made the struggle against capitalism its warcry and one of its intellectual weapons in this campaign of conquest is the attempt, successful only in the case of some backward peoples and individuals, to accuse the remaining ‘capitalistic’ world of ‘imperialism’. The Marxist theory of imperialism is only believed by Communists, that is to say, by those, who support the Communist empire in its imperialistic advance. Anyone, however, who finds fault with the shortness of this paragraph, should consult the 1st German edition. Furthermore the following works may be referred to: L. ROBBINS, The Economic Causes of War, London, 1939; W. SULZBACH, Nationales Gemeinschaftsgefühl und wirtschaftliches Interesse, Leipzig 1929; W. SULZBACH, National Consciousness, Washington D.C., without year; W. SULZBACH, ‘Capitalist Warmongers’: A Modern Superstition, Chicago 1942; F. A. HAYEK, Der Weg zur Knechtschaft, Erlenbach-Zürich, without year, p. 271 et seq.; J. FREYMOND, Lénine et l’impérialisme, Lausanne 1951; F. DULBERG, Der Imperialismus im Lichte seiner Theorien, Basel 1936.

32. (p. 81) Fallacy of misplaced concreteness:

W. SULZBACH, Nationales Gemeinschaftsgefühl und wirtschaftliches Interesse, Leipzig 1929; L. MISES, Nation, Staat und Wirtschaft, Wien 1919; A. N. WHITEHEAD, Science and the Modern World, New York 1926.

33. (p. 84) Reality of Imperialism:

That actually in many cases it is not the ‘Capitalists’ who have misused the governments, but the latter who have misused the ‘Capitalists’ for imperialistic purposes, is shown by: E. STALEY, War and the Private Investor, New York 1935. A really classical example of this was the Mexican adventure of Napoleon III. In order to obtain an economic excuse for his intervention he first had the Swiss banker Jecker, who had given the Mexican President Miramon a loan, made a Frenchman and had his certificates of debt bought up by the French government (LORD ACTON, Historical Essays and Studies, London 1907, p. 150 et seq.).

34. (p. 85) The Contrast between War and Free Market Economy:

The idea that war in an economy of exchange, depending upon division of labour is an economic paradox – a ‘false reckoning’ – has found its most popular expression in our time in NORMAN ANGELL’S wellknown writings (The Great Illusion, Fruits of Victory and others). It would be worth while following it from its first beginnings up to today (see E. SILBERNER, La guerre dans la pensée économique du XVIe au XVIIIe siècle, Paris 1939). In addition to the paragraph from KANT already quoted in the text a worthy place should also be given to BENJAMIN CONSTANT (De l’esprit de conquête et de l’ursurpation, 1814, 2nd chapter). Compare moreover the still highly informative work of P. J. PROUDHON, La guerre et la paix, Paris 1861. Compare furthermore: L. MISES, Nation, Staat und Wirtschaft, Wien 1919; S. RUBINSTEIN, Herrschaft und Wirtschaft, München 1930; R. BEHRENDT, zur Grundproblematik des Kapitalismus, Zeitschrift für schweizerische Statistik und Volkswirtschaft, 1933; M. B. HAMMOND. Economic Conflict in International Affairs, American Economic Review, March 1933. In his famous inaugural lecture (‘Du caractère logique des differences d’opinions que séparent les économistes’, Genf 1897) M. PANTALEONI said: ‘Les rapports entre les hommes sont de trois genres dont deux ne sont pas régis par les lois économiques. Ces genres sont si différents les uns des autres, que je ne saurais bâtir aucun pont qui nous conduise de l’un à l’autre. Il y a, d’abord, des rapports violents, des rapports d’oppression, des rapports qui consistent en ceci que les uns détruisent ou bien qu’ils exploitent les autres. . . Il y a, en second lieu, des rapports d’altruisme, que l’on peut appeler des rapports de tutelle. Enfin, nous avons un troisième genre de rapports, des rapports constractuels, dans lesquels la violence qui préside au premier genre de rapports est exclue tout autant que l’est l’altruisme des rapports de tutelle.’ One must simply understand that imperialism belongs to the first and the free market economy to the latter category, to realize that the heterogeneousness of imperialism as a system of repression and exploitation and of the free market economy as a system of contractual relations cannot be more sharply characterized. The more the free market economy is permeated with elements of exploitation (monopoly), so much the more does it on the other hand approach the first category. When R. G. HAWTREY, Economic Aspects of Sovereignty (2nd Edition, London 1952), thinks he can put forward the objection to Angell’s theory that ‘the economic ambitions of states are to be expressed in terms of power’ (p. 18), and that here national interests clash, this assertion, which is moreover only right up to a point, does not touch the heart of the matter. It is just this theory put forward by Angell, which emphasizes that a national cause of conflicts lies not in the field of economic interests (in so far as the economic system keeps them entirely separate from the political sphere) but in the field of the power interests of the states. This conflict is however not only not essential to the liberal economic system but even in contradiction to it.

• 1. (p. 25) The Sociology of War:
• 2. (p. 27) War of Conflict and War of Aggression:
• 3. (p. 31) The inadmissable over-simplification of the peace problem:
• 4. (p. 57) Communist Imperialism:
• 5. (p. 74)
• 6. (p. 75)
• 7. (p. 76)
• 8. (p. 76)
• 9. (P. 77)
• 10. (p. 78)
• 11. (p. 78)
• 12. (p. 79)
• 13. (p. 79)
• 14. (p. 80) Imperialism:
• 15. (p. 81) Fallacy of misplaced concreteness:
• 16. (p. 84) Reality of Imperialism:
• 17. (p. 85) The Contrast between War and Free Market Economy:
• 18That the various factors are interwoven with extraordinary intricacy becomes particularly evident in the dramatic catastrophe of international interrelations which we call war). One of the moral perversities with which our age is afflicted was to deny at times the supremely catastrophic character of war, until two world wars brought disillusionment – let us hope for ever. For centuries the time-honoured belief existed that war was, as a rule, one of the incomprehensible evils of the world system, which – like the other Horsemen of the Apocalypse – Pestilence, Hunger and Death – had to be borne with resignation. Pacifism, in the sense of a mass movement directed towards the abolition of war, only became possible after the beginning of the modern age, when war, like all other things alleged to be the Will of God, came to be regarded in the light of critical and ameliorative reason, and, together with other social institutions, as a work of man which it would be quite possible to alter. Thus instead of being a subject of theology, war became a subject of sociology. Has it in this way become entirely comprehensible? To be honest we must admit that we are still very far from understanding it. Although men have at all times pondered over the phenomenon of war, and although recent generations especially have amassed a gigantic literature on the sociology of war, all that progress adds up to is that we possess a fairly complete list of the possible causes of war and that we realize the extraordinary intricacy which links these causes and which excludes any monistic theory of war sociology. Only a separate and comprehensive volume could do justice to the epistemology which results.
• 19In order to understand in detail what an international peace based on justice must accomplish, the various categories of war must be distinguished. Above all a difference must be made between two types of war, the importance of which is not lessened by the fact that they have often been combined with each other in the course of history and that there are borderline cases in which it is not easy to say whether the one or the other type predominates. A war may arise either through a conflict over concrete claims, which may be compared with a case under civil law (war of conflict), or through an act of violence which corresponds to a breach of the peace under criminal law (war of aggression) ). Whereas individual legal disputes arising from contentions of personal honour or material claims are finally settled by judicial decision, international conflicts of this kind may easily lead to war, as long as a decision by force of arms, which corresponds to the ordeal of the Middle Ages, is not abolished through obligatory international legal procedure, and before this is the case we shall continue to regard war rather as a tragic chain of events than as a vicious action. From their very nature such wars of conflict make it difficult to clarify the question of guilt, provided one of the warring parties – as is however often enough the case – does not misuse the conflict as an excuse for a war of aggression, or does not oppose the readiness of the antagonist to come to an understanding with inexcusable intransigence. This last applies on the whole to the case of the first world war, whereas we should not hesitate to characterize the second in its origin and in all its phases purely as a war of aggression, after it had already been preceded by the wars of aggression in China and Abyssinia.
• 20Is not then the solution of the war problem in reality very simple and only dependent upon the firm determination of the governments and the peoples? If this were our opinion we should be contradicting ourselves, since earlier on we termed just such thinking ‘internationalism’ and warned our readers against it. In actual fact this contradiction is only an apparent one. To explain it we should consider that the problem can be regarded from various angles. In formulating the solution of the war problem so sharply and smoothly above, we were regarding it from the juridical angle. Here in fact everything appears much simpler than it actually is. To be content with such considerations is to lapse into that monistic way of thinking which may be termed legalism and which is no better than economism or any other one-sided outlook. In indicating the legal solution the question has still not been answered as to the conditions under which the peoples and governments would be prepared to accept it firmly and undeviatingly. This question however brings us back to the higher level of the sociological, ethical and political considerations with which we started).
• 21Already in the first German edition of this book, which appeared at the end of the war, attention was diverted, with an outspokenness which at that time was understood by only a few, from the recently overthrown totalitarianism of the Axis powers to the new threat to peace and international order presented by the last remaining totalitarianism of Russian Communism). This danger has meanwhile grown so enormous that all questions of international order today must be considered in its perspective. This fact emerged very clearly in the foregoing section. Everything is of a temporary nature, everything is in a state of constant tension, everything is doubtful, as long as the world is overshadowed by this danger. What is the nature of this danger, and how can it be abolished? A book which deals with the fundamental problems of international order must at least give some indication of the lines along which these questions which weigh so heavily upon us are to be answered, if it is not to lack the foundation of hard and fast reality which the middle of this century demands.
• 22(1) Instead of the world state, which is an indispensable setting for a world economy, but which did not exist, a practicable and robust substitute was found, and that in a way with which, on a limited scale, the Res Publica Christiana of the Middle Ages may be compared). This substitute was the international ‘open society’ (Henri Bergson)) of that liberal age, a sort of unwritten ordre public international, a secularized Res Publica Christiana, which for that reason spread all over the globe. It is the ‘communitas seu res publica hominum sub Deo’ of St. Thomas Aquinas, to which natural law gave the double roots of universalism, which postulates the brotherhood of man, and of personalism, which postulates the inviolability of the individual, but replanted out of the spiritual earth of Christian Theism into the loose soil prepared by the Renaissance, by Humanism, Enlightment and Liberalism, while the addition ‘sub Deo’ was gradually suppressed and finally dropped). No description can be given here either of the complicated structure of this international ‘open society’ of the 19th century and its manifold workings, nor of the theological, philosophical, moral and sociological forces which underlay this effective substitute for a world state and which penetrated among even the lowest intellectual classes). It must suffice to say that these forces which created the universalist system of the ‘open society’ of the 19th century are for the greater part rooted – as indeed is only to be expected – in the same soil which produced the predominantly ‘liberal’ social, political and economic systems of the same age. What first strikes us in considering this order is the respect it enjoyed, which is only accentuated by the bad conscience or apologetics accompanying cases of infringement, which made it possible for international law to be regarded as a genuine law, on a par or even superior to that of the national state; for the world to be united through a network of long-term agreements which therefore made for the stabilization of international relationships; for tensions between large and small states to be continually adjusted – the unjustly suspected ‘balance of power’ – and for a high degree of agreement to exist regarding legal conceptions and national standards of justice. This external order was, however, fostered by the moral and political atmosphere of the ‘open society’, of the secularized Res Publica Christiana; to which a considerable and by no means unwholesome measure of Pax Britannica was added.
• 23(2) If the international ‘open society’ of the 19th century was the creation of a ‘liberal spirit’ in the widest sense, which need not be explained in detail here), this origin appears very clearly in another respect, and in the narrower and more usual sense attached to the expression ‘liberal’, – not as associated with Thomas Aquinas, Suarez, Victoria, Erasmus or Grotius, but with David Hume and Adam Smith. This point is of the greatest importance as explaining the secret of the international order of the recent past. It is the liberal principle that economic affairs should be free from political direction, the principle of a thorough separation between the spheres of the government and of economy, between sovereignty and the apparatus which provides material goods, between the Imperium and the Dominium, between the political power and the economic power (Maclver). This reduced the economic importance of the existence of sovereign states, with their different legal provisions, their frontiers, their independent administrative systems and civil rights, to a minimum. The economic process was thereby removed from the sphere of officialdom, of public and penal law, in short from the sphere of the ‘state’ to that of the ‘market’, of private law, of property, in short to the sphere of ‘society’, and this did away with the greater part of the causes of conflict and problems of order of an economic nature which arise from the side-by-side existence of sovereign states. This principle also solved an extremely important special problem of international integration, which as we said above was of decisive importance in addition to the problem of international law, i.e. the problem of an international monetary system. Just as the universalist liberal ‘open society’ of the nations was able to create something like a world state, an acting substitute for a non-existent world government, with a common code of law for all nations, so did the application of the principle of separation to money give rise to a working substitute for world money and to establish a really international monetary order in the form of gold standard. The lack of a uniform world monetary system which would guarantee free exchange of currencies at stable rates was compensated for by the fact that all the leading countries accepted the gold standard and supported it more or less scrupulously in a manner which merged the whole globe into a payments union and lent the same qualities of homogeneity, stability and convertibility to international payment transactions as characterize national payments. By this means, by the free and universal convertibility of money at fixed rates and the resulting multilateralism of trade – it became possible for the first time to speak of international economic integration in the exact sense in which we speak of economic integration inside a national economy).
• 24(2) If the international ‘open society’ of the 19th century was the creation of a ‘liberal spirit’ in the widest sense, which need not be explained in detail here), this origin appears very clearly in another respect, and in the narrower and more usual sense attached to the expression ‘liberal’, – not as associated with Thomas Aquinas, Suarez, Victoria, Erasmus or Grotius, but with David Hume and Adam Smith. This point is of the greatest importance as explaining the secret of the international order of the recent past. It is the liberal principle that economic affairs should be free from political direction, the principle of a thorough separation between the spheres of the government and of economy, between sovereignty and the apparatus which provides material goods, between the Imperium and the Dominium, between the political power and the economic power (Maclver). This reduced the economic importance of the existence of sovereign states, with their different legal provisions, their frontiers, their independent administrative systems and civil rights, to a minimum. The economic process was thereby removed from the sphere of officialdom, of public and penal law, in short from the sphere of the ‘state’ to that of the ‘market’, of private law, of property, in short to the sphere of ‘society’, and this did away with the greater part of the causes of conflict and problems of order of an economic nature which arise from the side-by-side existence of sovereign states. This principle also solved an extremely important special problem of international integration, which as we said above was of decisive importance in addition to the problem of international law, i.e. the problem of an international monetary system. Just as the universalist liberal ‘open society’ of the nations was able to create something like a world state, an acting substitute for a non-existent world government, with a common code of law for all nations, so did the application of the principle of separation to money give rise to a working substitute for world money and to establish a really international monetary order in the form of gold standard. The lack of a uniform world monetary system which would guarantee free exchange of currencies at stable rates was compensated for by the fact that all the leading countries accepted the gold standard and supported it more or less scrupulously in a manner which merged the whole globe into a payments union and lent the same qualities of homogeneity, stability and convertibility to international payment transactions as characterize national payments. By this means, by the free and universal convertibility of money at fixed rates and the resulting multilateralism of trade – it became possible for the first time to speak of international economic integration in the exact sense in which we speak of economic integration inside a national economy).
• 25Nowhere is the essence of this liberal world order which is characterized by its disassociation from political direction so clearly shown as here. This international monetary system was not dependent upon a world monetary authority nor a world monetary union or any other international pact, which would have tempted the nations to default and made monetary and credit policy controversial questions and the subject of diplomatic contests. It rested, on the contrary, entirely on the law of the individual state, and even the much praised ‘co-operation of the Central Banks’ proved, as it came to gain in importance, rather to be an anti-doctrinal deterioration and evasion of the gold currency than an encouragement to it, let alone an indispensable support of the international mechanism of gold currency. Since the validity of the individual national currencies depended upon gold, the fact that money = gold not only effected a fixed and free coupling of national currencies, but also compelled national governments by means of their national currency regulations to behave in matters of monetary and credit policy in such a way that this fixed and free coupling remained an undisputed permanent institution, irrespective of all trade fluctuations. As will be shown later, a further advantage was that the evil of an adverse balance of payments, and of international shortage of a currency were completely unknown in international case histories. While the governments clung to their national currency regulations, and in the firm belief, which had become a tradition, nay, even an article of faith, that they were serving, not world trade but their own interests, defended the free convertibility of their currency and their parity with the delicately-formed tools of monetary and credit policy, the result, by no means aimed at in the first place, was a genuine international monetary system – the only one which our age has up to now known. Gold currency thus illustrated the saying of Adam Ferguson) (1723–1816), so essential to liberal convictions, that ‘peoples find themselves unexpectedly in possession of institutions which are indeed the outcome of human action, but not the result of human intention’, and it is a proof of the further realization that in the wide field of society and economy such spontaneous co-operation is generally superior to conscious planning. It was a monetary system which rested upon ‘the structural similarity of the national systems’), and which made currency dependent, not upon political decisions of national governments and their direction, but upon the objective economic laws, which applied once a national currency was linked with gold. It was an ‘economic’ and not a ‘political’ currency system. But it was at the same time a phenomenon with a moral foundation. The obligations, namely, which a conscientious conformity with the rules of the gold standard imposed upon all participating countries formed at the same time a part of that system of written and unwritten standards which, as we have seen, comprised the liberal order public international. The gold standard collapsed as one country after another, for one reason or another, began to disregard the rules of the game, which meant that the gold standard was no longer understood, while at the same time the international order crumbled and the final change of the essentially liberal character of the prevailing economic system to one in which interventionism and collectivism played an increasing part deprived the gold standard of its foundation. The increase of political direction in economic life must necessarily result in the destruction of the monetary order, which rested on the principle of the freedom of economic affairs from political direction.
• 26Nowhere is the essence of this liberal world order which is characterized by its disassociation from political direction so clearly shown as here. This international monetary system was not dependent upon a world monetary authority nor a world monetary union or any other international pact, which would have tempted the nations to default and made monetary and credit policy controversial questions and the subject of diplomatic contests. It rested, on the contrary, entirely on the law of the individual state, and even the much praised ‘co-operation of the Central Banks’ proved, as it came to gain in importance, rather to be an anti-doctrinal deterioration and evasion of the gold currency than an encouragement to it, let alone an indispensable support of the international mechanism of gold currency. Since the validity of the individual national currencies depended upon gold, the fact that money = gold not only effected a fixed and free coupling of national currencies, but also compelled national governments by means of their national currency regulations to behave in matters of monetary and credit policy in such a way that this fixed and free coupling remained an undisputed permanent institution, irrespective of all trade fluctuations. As will be shown later, a further advantage was that the evil of an adverse balance of payments, and of international shortage of a currency were completely unknown in international case histories. While the governments clung to their national currency regulations, and in the firm belief, which had become a tradition, nay, even an article of faith, that they were serving, not world trade but their own interests, defended the free convertibility of their currency and their parity with the delicately-formed tools of monetary and credit policy, the result, by no means aimed at in the first place, was a genuine international monetary system – the only one which our age has up to now known. Gold currency thus illustrated the saying of Adam Ferguson) (1723–1816), so essential to liberal convictions, that ‘peoples find themselves unexpectedly in possession of institutions which are indeed the outcome of human action, but not the result of human intention’, and it is a proof of the further realization that in the wide field of society and economy such spontaneous co-operation is generally superior to conscious planning. It was a monetary system which rested upon ‘the structural similarity of the national systems’), and which made currency dependent, not upon political decisions of national governments and their direction, but upon the objective economic laws, which applied once a national currency was linked with gold. It was an ‘economic’ and not a ‘political’ currency system. But it was at the same time a phenomenon with a moral foundation. The obligations, namely, which a conscientious conformity with the rules of the gold standard imposed upon all participating countries formed at the same time a part of that system of written and unwritten standards which, as we have seen, comprised the liberal order public international. The gold standard collapsed as one country after another, for one reason or another, began to disregard the rules of the game, which meant that the gold standard was no longer understood, while at the same time the international order crumbled and the final change of the essentially liberal character of the prevailing economic system to one in which interventionism and collectivism played an increasing part deprived the gold standard of its foundation. The increase of political direction in economic life must necessarily result in the destruction of the monetary order, which rested on the principle of the freedom of economic affairs from political direction.
• 27A tremendous achievement which it were opportune at last to understand and duly respect, and whose significance we only fully realize now that this framework no longer exists. On the other hand, now that the liberal idea of order has been supplanted by the collectivist, the meaning of the attempt made above to characterize the liberal international order becomes painfully clear to us. If we examine more clearly the popular idea of today, to erect an international controlled economy on these ruins of an international order, by means of fragmentary Quota, Clearing and barter Agreements and daily varying payments and trade arrangements between the individual states, we cannot help observing its absurdity, and that for a reason which is very instructive in this connection). Two things immediately become clear: (a) that an international planned economy – we must constantly come back to this – representing as it does the domination of politics over economics on an international level, cannot manage with the international quasi-order of the liberal epoch but presupposes a real super state, and (b) that it was exactly a triumph of the collectivist idea over the liberal one which destroyed this loose quasi-order. International collectivism demands a measure of international statism which would presuppose a very much stronger international frame that that which the liberal age created and which collectivism destroyed. We shall meet this paradox later in another form.
• 28If this completes the picture as we see it of the nature of the problem of international order and its liberal solution, it only remains to say that we have only tried to give an interpretation of international law in the 19th century under the aspect of its economic function. Thus seen the traditional system of international law appears to us as the liberal solution of the problem of international order which has arisen from economic development, this means that this system entered upon a process of disintegration as the liberal idea of order began to decline.) This contention ought to be substantiated in detail by concrete examples. We shall however content ourselves by a single one of predominant importance, the treatment of private property in international relations.
• 29It was in accordance with the principle of the separation of Imperium and Dominium, upon which the liberal world order rested, that private property was practically dissociated from the question of the territorial supremacy of the states and nationalities of the owners and the conflicts connected with them. This broke with an age-long aftermath of tradition from Feudal times. While colonial imperialism still clung to the idea that a territorial supremacy of the State over the areas in question was necessary, in order to ‘secure’ markets, sources of raw material and possibilities of settlement, this was but an anachronistic sophism which thoughtlessly ignored the established principle of liberal world order. ‘Political power has determinate frontiers, economic power has freedom of the world’ (Maclver)). This principle of the separation of sovereignty and property was of special importance in cases of war, in which respect for the private property of the enemy was an obvious consequence of the liberal universal international order. After disregard of the private property of the enemy had became the rule among the belligerents in the first world war, the extension of this disregard by the victors after the second world war in forcing neutral countries to follow suit constituted a high point of that legal cynicism which has dissolved the old liberal world order. Some years ago I wrote the following, to demonstrate the length to which matters had gone: ‘Let us imagine that at the time of the Chinese Boxer Rising (1900) – which bore a distant resemblance to National Socialism – Swiss property had been damaged, and let us further assume that someone conceived the idea of confiscating assets, which had been entrusted by individual Chinese to Swiss banks, to compensate the Swiss who had suffered damage. Can the slightest doubt exist that at that time the very idea would have been swept away by a storm of unanimous public protest? Meanwhile, however, a passport no longer has the qualities of a patent of nobility and an insurance policy, but has also become equivalent to a mandate of expropriation, an order of deportation, a document of moral condemnation, an order for arrest and in the extreme case to a sentence of death)’.
• 30It was in accordance with the principle of the separation of Imperium and Dominium, upon which the liberal world order rested, that private property was practically dissociated from the question of the territorial supremacy of the states and nationalities of the owners and the conflicts connected with them. This broke with an age-long aftermath of tradition from Feudal times. While colonial imperialism still clung to the idea that a territorial supremacy of the State over the areas in question was necessary, in order to ‘secure’ markets, sources of raw material and possibilities of settlement, this was but an anachronistic sophism which thoughtlessly ignored the established principle of liberal world order. ‘Political power has determinate frontiers, economic power has freedom of the world’ (Maclver)). This principle of the separation of sovereignty and property was of special importance in cases of war, in which respect for the private property of the enemy was an obvious consequence of the liberal universal international order. After disregard of the private property of the enemy had became the rule among the belligerents in the first world war, the extension of this disregard by the victors after the second world war in forcing neutral countries to follow suit constituted a high point of that legal cynicism which has dissolved the old liberal world order. Some years ago I wrote the following, to demonstrate the length to which matters had gone: ‘Let us imagine that at the time of the Chinese Boxer Rising (1900) – which bore a distant resemblance to National Socialism – Swiss property had been damaged, and let us further assume that someone conceived the idea of confiscating assets, which had been entrusted by individual Chinese to Swiss banks, to compensate the Swiss who had suffered damage. Can the slightest doubt exist that at that time the very idea would have been swept away by a storm of unanimous public protest? Meanwhile, however, a passport no longer has the qualities of a patent of nobility and an insurance policy, but has also become equivalent to a mandate of expropriation, an order of deportation, a document of moral condemnation, an order for arrest and in the extreme case to a sentence of death)’.
• 31The 19th century, then, applied a ‘liberal’ solution to this problem of international order, which held the separation of Imperium and Dominium to be a factor which furthered international integration, and the renunciation of this solution an unsociable international element. How, though, does this theory match up with the undeniable historical state of affairs known as ‘modern imperialism’? Have we not learnt that this is the regrettable attendant circumstance of ‘modern capitalism’)?
• 32The example of Switzerland might give an obstinate advocate of the economic theory of imperialism occasion to ask whether imperialism must of necessity use political means to attain its end, namely the obtaining of a ruling position. Has not ‘Switzerland’ ‘conquered’ northern Italy through its banking connections and its electric power companies? No deep consideration is necessary, however, to discover the misconception contained in such an idea. Let us suppose that the possession of banks, electric power, railways or gas companies confers influence and power, and that perhaps upon people who are domiciled abroad. Is there any point at all in calling this ‘imperialism’? For this word to have any meaning at all it is essential that the imperialistic policy should be pursued by a political body, i.e. a foreign state. This is just what is lacking in our example. It is not ‘Switzerland’ which is expanding in Italy, but individual Swiss – through the media of juridical persons – who carry on business there and hope to make a profit. This is an example of the wrong thinking which is remarkably frequent, and highly dangerous, in economic considerations, and which Whitehead terms the fallacy of misplaced concreteness). It consists of turning a conception – in this case ‘Switzerland’ – into an acting reality which founds electric power companies in Italy. It is the same fallacy which before the first world war led to the fatal and poisonous idea that ‘Germany’ was a trade rival of ‘England’, although it was not ‘Germany’ and ‘England’ who were rivals of one another, but certain individual Germans and Englishmen, while at the same time there were far more Germans and Englishmen who competed just as bitterly with their fellow-countrymen and who were associated with nationals of the other country by means of friendly relations as suppliers or purchasers.
• 33In the same way, the relations between debtor states and creditor states have undergone a basic change in the course of the past few decades. The idea that investments abroad force the debtor country to become a submissive vassal state has lost every vestige of reality. The latest economic crisis in particular has demonstrated the relative impotence of the creditor states with regard to debtor states which have become insolvent, an impotence which is sometimes so exaggerated that it might almost be said that the debtor states have the pull over the creditor states. The United States, for example, have accepted the loss of thousands of millions of dollars, which they had invested in certain states of Latin America, without even attempting to undertake military action of the kind which England and Germany dared take against Venezuela in 1902. Since 1931, Germany has managed to throw off the greater part of its foreign debt without any other consequences than those which accrue to the insolvent debtor in private life, and has indeed been smart enough to take advantage of the repudiation in its trade policy. Nor do the popular notions regarding the chief campaigns undertaken by European imperialism up to 1914 bear any relation to the truth. Although the theory of economic imperialism assumes that capital interests abroad are always the cause of diplomatic conflicts, in actual fact the reverse has been true in many of these famous cases, politics have taken the lead and harnessed capital interests in the service of an expansionist policy).
• 34There was no need for the participating countries to wait for the outcome of the first world war to learn how senseless it was economically, as senseless as was the second world war also. There are no objective reasons for making any conflict of an economic nature responsible for its outbreak. The economist in particular has every reason to contradict the popular exaggeration of the economic causes of both the first and the second world war. This might only be considered to apply seriously in respect of the conflict between Germany and England. But it should be stressed here that the cause of the break between the two countries was not trade rivalry – as is known, each was the best customer of the other – but a political rivalry which arose from the German programme of new naval construction, and the danger that Germany would subject France and Belgium and so be able to threaten England directly from the Channel coast. The so-called trade rivalry between Germany and England was nothing more than an ideological disguise for a real conflict of political interests, the logical fallacy of which we have already met with. On purely economic grounds the conflict must of necessity have been forbidden on both sides. In actual fact, as in many wars, economic logic only played a minor part, in contrast to instincts, feelings and passions. The atmosphere created by free market economy i.e. the principle of economic organization inherent in ‘capitalism’, serves rather to curb and suppress atavistic bellicose emotions than to stir them up. Those responsible for the war spirit mostly come from those social classes which are furthest removed from capitalism).