International Order and Economic Integration

II CAESARO-ECONOMY

The mistake of those among the contemporary socialists, who have made Capitalism responsible for war and imperialism, is however much greater and more fateful than we have up to now imagined. Not only is the accused, that is to say capitalism, wrongly blamed for such a serious crime, rather is it the accuser, i.e. socialism, which seems to be more and more heavily indicted in the course of the criminal trial instigated by itself. This conclusion was already glimmering through the statements of the preceding chapter and must now be substantiated in detail.

We have already tried once to clarify the nature of the liberal world order, which is not always easy to understand, by means of the photographic negative of collectivist order, the essence of which is the removal of the separation principle, the giving of a political character to the economic sphere and the fusion of empire and dominion. Now we have the task of exploring the importance of collectivist economic order for the international community precisely and in detail. We shall endeavour to determine the most essential points as follows.

PRE-COLLECTIVISTIC INTERFERENCE WITH INTERNATIONAL INTERRELATIONS

Before examining the effect of collectivism in the strict sense of administrative control (i.e. political direction) of the economic process, we must take into account that the advance of modern intervention and the welfare state tends to produce a step-by-step removal of the liberal principle of separation and to this extent increases national integration at the expense of international. Tending in the same direction is the national isolation policy of the Trade Unions which is thoroughly compatible with a high degree of international solidarity in the case of strikes. Even in this precollectivist stage that process was becoming clear which I have characterized in my book ‘Maß und Mitte’ as the increasing nationalization of man. It is quite indicative of this process that it is no longer a mistake but a service to the cause of accuracy to substitute the word ‘national’ in every case where an intervention is described as ‘social’, and in all word-combinations made up with this adjective. ‘Social justice’ is a postulate which when considered in a clear light is intended to cover the nation only and not to include Bulgarians, Persians or Indians; ‘social insurance’ is a ‘national insurance’ and ‘socialization’ turns out to be ‘nationalization’ (as in other languages it is honestly so named). We should also not forget that the enforcement of exchange controls, which hinder the individual debtor in the fulfilment of his payment obligations towards the foreign creditor, amounts to a ‘nationalization of insolvency’. In this connection a particularly detailed special chapter would have to be devoted to the extraordinary effect – towards integration on a national, towards disintegration on an international level – of a continued rise in the amount of the national income claimed by the state (fiscal quota), which has long ceased making merely a difference in degree. Public finances, a normal ingredient of a liberal order, which, because of its low fiscal quota, caused no serious infringement of the principle of separation, has developed into an apparatus of an increasingly comprehensive nationalization of the expenditure of income (Fiscal socialism).

The combined effect of all these forces on the decomposition of international interrelations needs not be further examined here. It is sufficient, if we illustrate it by the outstandingly important example of the Decay of the International Monetary Standard, which we have described, and which was finally brought about by the pressure of the disintegrating forces generated by the modern interventionist, welfare and fiscal state. This example is of such outstanding importance for 2 reasons: firstly, it shows the process of the decomposition of international interrelations at a central point, for with the destruction of the international monetary system, which guaranteed the stability of exchange-rates and free convertibility, world economic integration received a fatal blow. Secondly, the failure of all previous attempts to find a substitute for the destroyed international monetary standard, has a deep and depressing meaning, for it illuminates the inherent impossibility of replacing the liberal solution of the problem of international order as a whole by another, and exposes the close correlation between national and international order in a thoroughly concrete and illuminating manner1).

Here a last remark must be appended. The process described of the increasing dependence of economic conditions on a state intervention which is no longer guided by any objective logic of economic interdependence, means that state boundaries are becoming more and more lines, to separate from one another the widely differing markets whose conditions of supply and demand are, however, uniform within each nation and collectively determined. What is just as important: these collective conditions, since they are dependent on decisions by the national state which may be reversed at any moment and are fixed for shorter and shorter periods, are neither forseeable within reasonable limits nor subject to the influence of individuals. So a growing element of political arbitrariness and instability which is incompatible with international order is introduced into international economic transactions. Whereas it makes the national economies stiffen into rigid bodies, it makes world economy more and more fluid and into an area of the haphazard, approximate, continually fluctuating and arbitrary. That is true especially of international conditions of competition. Whereas for the individual within a national economy they are still mainly determined by individual achievement, the competitive ability of the whole economy in international transactions is more and more determined by the national economic policy or the national monopoly policy. The process which was effective in old style ‘dumping’ reappears wherever market differentiation of any kind is practised and is rather becoming the rule: The national boundaries are becoming simultaneously the dividing lines of various theatres of competition which cover a number of enterprises and are collectively determined. To them apply both the principle of national collectivity and the other of arbitrariness: ‘vérité au deça des Pyrénées, erreur au delà’ as also ‘aus der Wolke ohne Wahl zuckt der Strahl’ (lightning may strike indiscriminately from any cloud). By a devaluation or a revaluation of the currency the substance of thousands of contracts is decisively changed over night, and we have reached the point, where countries which are dependent on the import of essential raw materials must often pay almost double the prices valid in the country of production. Export subsidies of all kinds – more or less in the form of repayment of the internal turnover taxes – and the no less manifold import regulations are very usual. The formation of prices in international competition is so arbitrary that, as I expressed it a decade ago, the various national economies are becoming like huge department stores, which distribute the aggregate national costs over the various classes of goods according to what the market will bear2). The whole system is finally crowned by exchange control, which makes the act of payment which is so essential for economic transactions dependent on the decision of a civil servant, and, in this way, as we have already seen, ‘nationalizes solvency’. The disintegration and arbitrariness linked with all this is the extreme opposite of law, order, community, and economic reason. It is on every geographical scale tantamount to the disintegration of society.

EXPLOSIVE EFFECT OF COLLECTIVISM

This development towards the interventionist, welfare and fiscal state shows already essential features of socialism. It lies exactly on the line which the latter follows to its logical end: the subjection of the economy to political forces. What is already true for the step-by-step ‘political direction’ with its increasing accentuation of the economic importance of national boundaries is all the more to be expected from the complete political direction of the economy, to which the superseding of the free market economy by dirigisme actually amounts. In fact it is only now that the process of the ‘nationalization of man’ is being completed. It is no longer a mere tendency, which within certain limits can be avoided, but a logical necessity.

The deciding point, for the comprehension of which one cannot take too much trouble, is exactly that now the economic process as a whole – not, as in the case of the interventionist, welfare and fiscal state only its conditions, its profits and the distribution thereof – is being turned into a responsibility of the state in the sense that the decision about the use of productive resources is no longer left to the price mechanism (‘the current consumer plebiscite’) but delivered up to the authorities. The economy is becoming as entirely a responsibility of the government as the army, and in fact the expression ‘militarization of economic life’ would not ill suit many important sides of the process. The process of transition from a free market economy to dirigisme can also be illustrated here by the example of the relationship between state and church: if the free market economy corresponds to the principle of the separation of state and church, so does dirigisme correspond to the unification of the highest authority in one despotic hand, that fusion which is described as Caesaro-Popery. The collectivist dirigist economy would therefore be nothing but a Caesaro-economy, and if we dare to venture this comparing word-creation, perhaps it is in the hope that the new term has at least the merit of making matters clear.

If however the economic process is dependent on the highest political instance, which ‘plans’ it and enforces this planning by the powers of the state, it is clear, that the following general law becomes valid: on whatever geographical scale the free market economy is being replaced by the collectivism and dirigisme, the fusion of economic process and government sovereignty will always set a political and economic barrier between these spheres of command and the rest of the world. This maximum degree of concentration towards the interior will always be at the expense of disintegration towards the exterior, in the precise sense that that payments and market community (convertibility and multilateralism) is destroyed, which made the once-existing genuine world economy in spite of everything, appear as a mere geographical extension of the integration which prevailed within the national economies. The sphere in which the compulsory control of the economic process takes place must be identical with the sovereign political unity where authority enforces its economic plan. Within this unit an extreme concentration of power in the hand of the government now prevails. So much the deeper yawns the cleft, which separates this order-cell from the other political monads. In short: since within the sovereign sphere of command only a single plan and not the competition of different regional plans can be tolerated, the placing of the economy under official control means, an extreme ‘concentration of power’ – accompanied by the break-up of the next highest communities. Or to express the same idea in another way: if the ‘sovereign’ of the economy was previously the ‘market’, under collectivism it is the state, but while the sovereign ‘market’ as such belongs to the non-political private sphere and therefore as for all natural things ‘space is scarcely enough’ (Faust II, 2, Laboratorium) for it, the new sovereign is literally the national governing power itself, with everything that this implies.

This law is valid, as we have noted, for political organizations on every geographical scale. Let us consider first the lowest scale; in this way interesting results are reached, the very ones which are confirmed by the experiences of our generation.

On the one hand: if within a nation a collectivist body is organized on a regional level, it must disrupt the national body. An excellent example of this is supplied by Germany after 1945, when the Reich collapsed into a number of independent spheres of command, all of them given to independent planning and practically amounting to as many ‘national economies’ which concluded regular ‘trade agreements’ with one another, whereas previously under the rule of a free market economy not even the separation by state-boundaries, languages, customs or currencies had prevented the entire globe from being a single coherent economic system. If today West and East Germany could at least have such dealings with one another as Sweden and the Argentine previously enjoyed, then the highest degree of economic unity between Dresden and Stuttgart that one could hope for, would be reached. Today, however, thanks to the explosive effect of collectivism, they are farther from one another in their economic relations than Lapland and Patagonia were previously under the system of a free market economy.

On the other hand: a collectivist and dirigist economy, which is anchored in national centralization, must show itself to be incompatible with federalism and regional-communal self-administration, for its compulsory co-ordination of the economy according to a central plan leaves little room for a genuine decentralization of the administration. The result is therefore, that collectivism and federalism are in any case incompatible with one another, since in the case of collectivism from below the lower political bodies (cantons, provinces, states) destroy the central authority and in the case of collectivism form above the central authority stifles the members. In any case collectivism means that the state-structure degenerates towards one of the two extremes: to centralism or particularism. In this connection too German development after the second World War offers instructive examples. It especially showed very impressively that, if one wished Western Germany to be a federated state and saw a worthy political goal in genuine self-administration, the choice of a free market economy as economic principle of order was the indispensible preliminary condition.

These considerations are now valid for international relations also. In fact we need only apply our findings concerning the relationship between the regional political bodies and the nation on to the next highest geographical level, to realize that here too domestic concentration can only be achieved at the price of isolation from abroad and an excessive integration on the lower levels at the expense of a corresponding disintegration on the higher. National collectivism – the more radical it is, the more complete must lead to the disruption of the international community. Now collectivism on a national level is the rule, whereas regional collectivism is merely a curiosity, and the supra-national type, for reasons still to be discussed, a Utopia. As a result the phrase may be permitted, that economic collectivism must disrupt international integration and harmony. This can also be expressed as follows: collectivism means total control by the state and, as the national government is the normal political commanding instance, to which it is correlated, complete control by the national state. As in this way the responsibilities of the state become unlimited, it means: increase of national sovereignty to the nth power.

To this corresponds – with grim irony for the internationalistic ideology, from which socialism has taken its beginning – the practice of collectivist foreign economic policy, which with compelling rigour must try to keep away from the national planned economy all disturbing effects from outside, which escape its grasp, and to preserve it in its centrally determined compactness. To this corresponds especially exchange-control, about which Marx and Engels had said not one word, but which now turns out to be the indispensible keystone of the entire system of collectivist commanding force, so very much so that foreign exchange control has become an indispensable – although, by itself, insufficient – feature by which collectivism, is identified. On the other hand an exchange control, for whatever reasons it may be introduced, has a tendency to impart the collectivism of foreign trade and of the exchange market to the entire national economy. The explosive effect on international relations, which collectivism provokes especially by exchange control, becomes clear only when we realize, that it is usually combined with a constant inflationary pressure. The connection between collectivism and inflation, upon which we stumble here and which justifies us in speaking of a collectivistic-inflationary style of economic policy after the second world war, is twofold3).

In the first place national collectivism leads to inflation for reasons, which merit an exact and sober analysis and among which the following must be emphasized: (1) ‘Collectivism of every kind and every degree includes the control of the flow of money and credit by the planning government, but at the same time disconnects the automatic steering signals, which the gold standard had at its disposal. How will the planners make use of the leeway, which they can now use at their own discretion? In all probability they will follow an inflationary course, because it is the line of least resistance, and because it corresponds to the ideologies of ‘full-employment’, of the ‘welfare-state’ and of ‘cheap money’. If, deprived of the navigation-instruments of the gold-standard, on can moreover no longer steer the course of financial policy by fixed landmarks and must reckon with a broad margin of error, one will in a collectivist state develop a tendency to steer rather to the left towards inflation than to the right towards deflation, and at best wrench round the steering-wheel only when inflation remains no longer in doubt even to the most obdurate and has caused serious devastation. The ship of collectivism will therefore show a strong and scarcely resistible drift to inflation, especially as the wind of Keynesianism blows powerfully in the same direction. Experiences since 1945 give ample proof of this. (2) Planners are people, who are optimists for compelling reasons and therefore always subject to a tendency, to issue more drafts on the national economy than it can honour. Impatient and ambitious, they have a tendency to want to achieve too much at once, to spend money with generous hands (which achieves under all conditions the effect of ‘full employment’), letting loose on the national economy by an excess of investments and mass-consumption more demands than can be satisfied at current prices from production and paid imports, and in this way so overtaxing the national economy, that it gives way at its softest and most sensitive point, namely, in the purchasing power of money. The monetary system becomes in this way the account, on which all lapses against proved principles of economic policy are booked up to the point of insolvency. This permanent overtaxing of the national economy is in addition no longer adequately compensated by saving, for an inflationary policy of economic planning, combined with an overpressure of taxation, by which it is usually accompanied, and the psychological effects of a welfare state create an extremely unfavourable climate for saving. (3) While savings are inadequate, a collectivist economy has, on the other hand, invariably an almost irresistible tendency, to drive investments to a maximum volume. From this follows the temptation to resort to forced saving by a credit expansion which diminishes the value of money, to illustrate which we can take the famous Monnet-Plan in France, which was to a large extent financed by the watering-down of the French franc. (4) The collectivistic economy needs constant inflationary pressure, i.e. excessive pressure of demand and overliquidity (W. Eucken), in order to offset the paralysing effect of economic controls; otherwise it would be suffocated by its own apparatus of dirigisme. (5) The demands which are made in a collectivistic state on the public budget, are so high, that the budget deficit becomes a chronic source of inflation (France) or, when a balanced budget is achieved, the revenue is derived from inflated incomes, which in the long run alone will render bearable a fiscalquota of 40 % or more (Great Britain)4).

There is however also an inverse relation between collectivism and inflation. If nowadays collectivism leads as a rule to inflation, inflation leads also to collectivism, because few governments can withstand the temptation to restrain inflation whatever its origin by economic controls. This same apparatus of collectivist compulsion, which is one of the causes of inflation, is used to convert ‘open’ inflation into ‘repressed’ inflation. The indispensible means for this repression is exchange control. If there can be no doubt, that an ‘open’ inflation, such as was the rule after the first World War, is a most disturbing element in international relations, scarcely a word needs be thrown away on the disintegrating effect of the ‘repressed’ inflation, for the very reason that it leads to a complete falsification of international value relations and is indissolubly linked with exchange control.

These connections between collectivism and inflation must be carefully taken into account, if we wish to completely understand the statement that collectivism is an explosive force in international economic relations. We cannot however leave this point, without adding two remarks.

The one refers to the law of geographical scales, according to which collectivism exercises an effect of maximum concentration in the descending direction, and one of maximum disintegration in the ascending direction. We have already verified the validity of this law up to the national level, and there is no reason not to apply it to a case which is as yet merely hypothetical: let us suppose that, in spite of the difficulties still to be discussed, a successful attempt is made to realize collectivism on a supranational level, say in Western Europe. If collectivism on the national level cannot achieve superconcentration in the interior except at the price of a rigid isolation from the exterior this logic would repeat itself in the case of European collectivism, i.e. a collectivism on the level of an entire continent. The national autarky of national collectivism would then be replaced by the continental autarky of European collectivism. If Europe became, let us say, a huge Norway (today the most extreme case of a socialistic country this side of the iron curtain), the isolationist form, in which such a country today regulates its economic relations with foreign countries, would be transferred onto the European level. Every considerable extension of collectivism therefore pushes the problem of international interrelations only on to the next highest geographical level – up to the complete Utopia of world-collectivism.

The other remark applies to the character of the nationalism which inevitably accompanies national collectivism. Is it an aggressive or rather a restrictive nationalism? The economic logic previously developed by us obviously makes it in no way compellingly necessary for a government, which adopts dirigisme rather than a free market economy as its dominating principle, to be forced into the path of an aggressive nationalism. In no case can such a tendency be discerned in any of the countries, which have followed socialistic ideals since the second World War, although slight traces of it could be found in the ruthlessness with which the British Labour-government was wont to use the ‘bargaining power’ of the State monopoly for a large part of the foreign trade with small states like Denmark or the Netherlands. On the whole the nationalism of socialistic countries has remained a restrictive and isolationist one. To render it aggressive obviously requires additional and special elements. Above all collectivism as a ‘social technique’ must be combined with an expansionist and missionary ideology as it was in the case of extreme Marxism and National Socialism. Nevertheless, in the long run there remains the problem whether the fusion of Imperium and Dominium, which is the characteristic of a collectivist system, will not make the ultimately scarcely repressible interest of the state in the progressive extension of the spheres under political domination appears to be a vital interest for the nation and in this way creates the stuff for an international conflict, which even a peaceful and self-isolating socialistic country cannot ignore.

INTERNATIONAL PLANNED ECONOMY

Let us sum up: collectivistic ‘dirigisme’ with planned economy, ‘full employment’ and ‘repressed inflation’ at home and exchange control towards the outside world has – as it can no longer be doubted, and is recognized by more and more socialists, – necessarily the effect of making world economy in the sense of free co-ordination and genuine integration of international economic relations impossible. It must destroy the very basis on which in the liberal era the problem of international interrelations could be solved. It is just as clear that here we find the ultimate cause for the disintegration of world-economy and for the obstinacy with which the international economic confusion has resisted all attempts to overcome it since the second World War. The collectivist and inflationary course of the national governments has led not only at home, but also in international dealings to a state of affairs, the untenability of which cannot much longer be denied, even by convinced socialists. The call for international ‘integration’ is the general answer to it.

The need for removing national ‘dirigisme’ cannot therefore be doubted even by a genuine socialist, if he thinks things out to the end, and fortunately there is no lack of such socialists. Before, however, a socialist draws the only logical conclusion, albeit one which is tantamount to a capitulation, that the restoration of international economic integration can only be achieved in a free market economy, there is for him a last line of retreat. The obvious idea would be to overcome the national disintegration which national collectivism has caused not by the restoration of a free market economy, but by transferring the principle of a planned economy which has been compromised on the national level on to the international level. He would then seek the way out of the impasse of national collectivism in an international collectivism. Will he find it? The right answer to this question is of exceptional importance for the decisions, which our time has to take in the sphere of international interrelations. We shall at a given moment in a later chapter of this book have the opportunity to return to this point again, when we discuss the question of the economic integration of Europe. Only the most important basic considerations are here anticipated.

The question, I repeat, runs, whether in order to overcome international disintegration, it would be sufficient to convert national collectivism into international collectivism and to transfer the style of national economic planning, which is responsible for disintegration, from the national level onto the higher international level. The answer results from the character of the collectivist economic order, i.e. the economic order which replaces the market by plan and compulsion as a political direction of the economic process, i.e. as a controlling dirigisme.

The first result of this is, that the attempt to solve the problem of international order in this manner would be bound up with a serious disadvantage under all circumstances. As in point of fact economic planning which by its very nature implies a radical political direction of the economy always presupposes a state, in which the threads of the planning and directive force meet, it can only extend as far as the sovereign political power extends. International economic planning must therefore remain limited to that sphere, for which the creation of a genuine international state is not completely Utopian. A world state is out of the question, likewise a planned economy of world dimensions. It may also be doubted whether even a comprehensive European state must not still for some time to come remain a mere dream, but it is all the more certain, that this is the utmost we can expect in our European position. Then however the conclusion is unavoidable that by means of economic planning we can hope at the most for a European, but no universal integration like the earlier one of the world economy, that is to say a continental ‘closed’ instead of the ‘open’ economy of the pre-collectivist period, an economic block of the European countries, a ‘vast unit’, whose plus in integration would have be acquired at the expense of less close relations with the rest of the world.

A way out, which would admittedly weld together the nations of single continents, but would drive the continents themselves all the farther apart, would therefore be no commendable one. Furthermore: it is not a possible way out. In order to realise that, we must again remember, that a collectivist order which brings the economy entirely under political control presupposes a state corresponding to the sphere of planning. A European planned economy would therefore, as we have seen, demand a European superstate, which must possess over all the individuals of the continent the same rights of command as national collectivism possesses over the individuals within the national boundaries. Not only however does this European state not exist and is also by no means near to realization, but the very circumstance that it would have to be equipped with the concentrated power of a collectivist state, makes it, in as much as it is to come about by a voluntary decision of the nations and is to be able to count permanently on their voluntary agreement, into something that common sense must call a Utopia. The salient point is that it would have to be not just any kind of state, but a special type, namely a collectivist one, which like a collectivist national state, could only be one centralized to the utmost. It is scarcely imaginable, that the European nations could be ready to transfer to such a superstate powers of authority, which not a few of them are wise enough to withhold even from their own national government in jealous defence of the rights of freedom and in mistrustful repulsion of bureaucratic dictatorship. Will they let themselves be treated as minors by a distant European government, which is rooted in no tradition, like the Norwegians and formerly the English by their own socialist governments, and become reconciled to a Europe resembling a huge Norway or a Labour-Great Britain?

Not even convinced socialists will dare to answer these questions in the affirmative. They show this in that they consider the consolidation of Europe into a superstate possible only in the loose form of a federation which preserves the individual national life. They know as we all do, that Switzerland gives us the lesson, that only the federative type of state is suited to embrace in freedom different nationalities with their own traditions, languages and cultures into one state, and that that, which is true for Switzerland, firmly rooted in the soil of centures-old historical experience, is naturally valid for Europe to a far greater extent. Switzerland however gives us a second lesson, which after previous explanations we no longer need to substantiate: not only can it only exist as a federated state, but even as a federated state only when the predominating economic order is the free market economy and not some degree of collectivism; with, of course, the exception of wartime. And this is also doubly and trebly true for Europe. From these considerations it is clear, that the functioning of a European planned economy, if it is to take place in freedom, presupposes a European state of a type which would be incompatible with that form in which alone a political union of Europe which preserves right and freedom is possible, that is to say the federative.

Having established that the paradox of a national socialism consists in the fact that it must in practice deny the internationalism, in which it has its historical roots, we now stumble on the paradox of international socialism. It consists in the fact that international socialism on the one hand makes a corresponding international state absolutely indispensable, but on the other hand – always supposing that such a state is to be based on the free cooperation of the peoples and not to be welded together by some despot or other into a ‘block’ – makes it impossible, because as a collectivist state it would have to be centralized to the utmost. Therefore just at the moment when we would need the Eueopean state most urgently, it would most surely slip away from us.

All experiences we have been able to acquire up to now confirm this statement. Both the long drawn out difficulties of the economic union between Belgium-Luxembourg and the Netherlands (Benelux) and also the uselessness of the efforts of the Marshall Plan-Administration to carry out an all-European investmentplan not as a mere addition and a diplomatic adjustment of the national investmentplans, but as a European central plan following the pattern of national economic planning, must be understood in the light of these considerations5). Here, in this inexorable economic logic of international planning, lies also one of the main problems, provided by the European Community for Coal and Steel (Montan Union according to the so-called Schuman plan).

This logic is often confused in discussion by frequent reference to the rights of sovereignty, which the nations would have to sacrifice in the common European interest, and from time to time it seems even to be supposed that exercises of the kind of the Schuman plan are excellent on the sole grounds that they demand such a sacrifice from the national governments. And what could lie more clearly on the way to peace and progress? In this way the impression is created, that the refusal to submit the native industry to the controlling and commanding power of a supra-national planning authority lies in the same direction as the obstinacy of hardened governments, who reject a limitation of their freedom in foreign affairs, i.e. ultimately of the sovereign right to war, which it would be so necessary to agree upon in the interest of peace and international co-operation.

This is an astonishing confusion. Subjection to the order of the supranational planning authority, would mean to give up a right which belongs so little to the attributes of a government, that most of them, namely the non-socialist, have in the previous course of modern government history never had recourse to it, for the reason that they consider it an inadmissible extension of national ‘sovereignty’. In the case of these governments therefore the ‘sacrifice’ of sovereignty would mean that they would grant the supra-national planning authority the right to give orders to their own citizens in a sphere, which they themselves have up to now wisely left to the ‘sovereignty’ of the market. They are thus asked to sacrifice a ‘sovereignty’, which they themselves in no way possess, because according to their ‘ordre public’ they leave it to the market – the sphere of Dominium and not of Imperium. If it is, on the contrary, a socialist government like the previous labour-government, it does actually possess the sovereignty in question, but it cannot sacrifice it, if it does not want in this way to deliver up an appreciable piece of its national socialist system to an international superstate.

It is not the sovereignty of the European states which is, when carefully considered, the evil, but the excessive use which so many have made of it in the period of national collectivism. Certainly here an energetic retrenchment is called for. But little would be gained, if the sovereign right, which today the governments invoke to intervene in economic life, were taken away from them solely for the purpose of transferring it to an international authority. A Europe, which exercises the sovereign right of pursuing a planned economy, of submitting the exchange market to controls, of socializing industry and of shutting off the continent by customs barriers and other obstacles to trade, would not be much better, in many respects even worse, than a single national government, which does the same. Certainly the lessening of national sovereignty is one of the most compelling commands of our time, but the excess of sovereignty should be abolished and not transferred to a higher geographical unit. Not to understand this is a failure in comprehension which afflicts most of what is today being said and written about the economic integration of Europe. Sovereignty does not only mean the unquestionable right of the state towards other states, but also that towards its own individuals. In the first case it is a question of the seat, in the second of extent, but it only becomes a real problem, when it becomes a question of extent. A mere transfer of the seat of sovereignty leaves the problem of the extent untouched, even aggravates it.

We shall conclude with three remarks. The first is intended to draw attention to the difference existing between the single measures of international economic planning, as the Schuman plan according to the wishes of the originators was obviously intended to be, and an overall system of international economic planning, which is so comprehensive, that by it the national system of collectivism is really removed and welded into a higher international unit. It would be dogmatic, to exclude the possibility, that in an exceptional case the governments and nations in spite of everything might unite for higher political reasons in a pact providing for a planned economy. But such cases cannot be multiplied at will, without finally difficulty becoming impossibility. There is reason to suppose that the Coal and Steel Community represents the utmost in international economic planning that the European nations could be prepared to accept for higher European reasons.

Secondly it is necessary to stand up from the beginning against the attempt to evade the problem of international economic planning by a fictitious solution. It consists in understanding by international economic planning something quite different from that which is named ‘economic planning’ on the national level and alone earns this name, that is to say, not an international central planning, which directs the international economic process according to a uniform plan and enforces the execution of this plan as national authorities would, but that kind of international trade, which results from dealings between national planned economies6). That this does not result in international order requires no further argument. It will no more lead to international order than the dealings between the regional planned economies in Germany, 1945, which were barely maintained by barter agreements and black marketing, were able to produce a property-functioning national economy. It is this very co-existence of national planned economies which has led through bilateralism, restriction of monetary transactions, autarky and extreme instability of economic relations to the present anarchistic condition of the international economy, which more and more socialists are at last ready to term untenable.

And now a third and last remark. We have revealed that it is an illusion to try to escape international economic disintegration, for which national planned economy is responsible, by international economic planning. So we may state: the Nation is the highest geographical political level, on which a collectivist economic order is possible. From this follows, that collectivism just as it is, is at home a ‘road to serfdom’, to an inescapable ‘super monopoly’ and to smaller economic yield, it becomes in external affairs ‘a way to international disorder’.

THE PARADOX OF SOCIALISM

We have already twice had the opportunity, to speak of the paradox of socialism, that of national and international socialism, and only now is it fully clear to us, how socialism reveals itself to be a typically paradoxical idea, probably the most paradoxical known to the history of human thought. You demand – so would one like to address the socialists – a socialist order in the name of the freedom and dignity of man? But how in practice can it have any result other than the ‘prison state’! You praise the socialist order in the name of maximum productive efficiency, which overcomes the contradiction between ‘progress and poverty’ and puts an end to the ‘capitalist anarchy’ with its waste, its crises, absurdities and miscalculations? But, while you shatter the market with its competition and its price system, you put in place of this regulating drive a central planning authority, which floats without steering, compass, stars and sextant on the vast ocean of the economy! You crave for the socialist order in the name of the struggle against excessive power, privilege, arbitrariness and monopoly? Since however such an order includes the highest possible degree of concentration of economic decisions and this maximum of concentration is at the same time a concentration of political power, that is to say a maximum monopoly of naked force, the socialist crusade against excessive power and arbitrariness must end in an insurpassable and incurable worsening of the existing condition! And finally: In the socialist order, you want to march under the banner of internationalism and the brotherliness of all mankind? As however such an order can mean nothing else, but the imposition of a maximum of controls and welfare functions in the hands of the concrete national state, national integration must likewise increase to a maximum and pay the inevitable price for this in corresponding international disintegration.

It is the lastnamed paradox, with which we have here been occupied, and it is all the more provocative as the socialists have taken the international unifying effect of their programme to be a foregone conclusion just as they took it for granted that ‘capitalism’ is hostile to the international community. It is this paradox, which among all the paradoxes of socialism was the last to be unmasked, only in our own day, under the pressure of experiences, which no one can now escape.

This last paradox is probably the crassest of all. For when we compare the part, which internationalism has played in the socialist ideology, with the reality which has resulted with such compelling logic, one must acknowledge the justice with which a particularly well-informed ex-socialist, Franz Borkenau, states in his work ‘Socialism – National or International’ (London, 1942), that there is scarcely a point in the socialistic creed, in which the gulf between ideal and reality yawns so deeply and hopelessly as here7). With a blindness and an obstinacy, for which it is difficult to find a reasonable basis, the problem existing here, has remained as good as unacknowledged, although every attempt from Fichte onwards to imagine a concrete picture of a socialistic order, ended with a regularity, in which an inner necessity should have been recognized, in the construction of a programme of action, the political centre of which is the national state, the geographical framework of which is the nation. Even Marx, when at the end of his ‘Communist Manifesto’ he developed his socialist programme, had to make suggestions, which of necessity amounted to a ‘national socialism’ and a ‘nationalization of man’, which did not prevent him from concluding his pamphlet a few lines later with the fortissimo-chord of the summons to the unification of the proletarians of all countries.

A true monument to inconsistency, moreover, has been provided by those socialists, who have not been content with international lip-service, but who with inner conviction have interceded for the concrete aims of a liberal trade-policy. We remember that English labour-leader Philip Snowden, in whom a quarter of a century ago a modern Cobden could have been acclaimed, until the hard reality of the labour-state with the new figures of a Sir Stafford Cripps or a Hugh Dalton plunged the memory of a figure like Philip Snowden into the twilight of legend8).

It remains noteworthy, that even the opponents of socialism recognized only very late and then only with slowly developing clarity the nature of the problem of the international consequences of socialism and here discovered one of the most serious paradoxes of socialism and one which is most difficult to refute. Yes, we scarcely say too much, when we maintain, that the discussion on this point is even today in its infancy. If it were otherwise, the discussions how to shape the new international order and about the individual projects arising in this connection, (Benelux, European Federation, Schuman plan, International Control of Investment etc.) would not still be conducted in a fashion, which must be considered inadmissible by the few, who know what is actually at stake. In the light of this, how incomprehensible and naive appears the role of judge, which socialism has for so long delighted to adopt towards the ‘imperialism’ of ‘capitalism’! In fact an economic system, which nullifies the division of Imperium and Dominium, of nation and economy, of politics and economies effected by a free market economy, and leads to a thorough impregnation of all economic conditions with a political colour, must have as its object the employment of governmental powers for the purposes of the economy. Only now, after in contrast to a free market economy, nation and national economy are fused into one, does the economic welfare of the people become a function depending on the size of the area and on the natural wealth within the politically governed territory. Only now does ‘room to live’ (the concept of a nation) develop from a political propagandaphrase or the slogan of the greedily ambitious vested interests of the monopolies into a real problem which affects the nation’s existence. Only now is the struggle for square miles, men, mineral wealth and transportroutes becoming really serious, because these have all become real and indisputable reasons of state. Only now is imperialism as a struggle for the maximum size of the autarkic and collectivist economic area becoming the most essential and inescapable vital law of nations. And now it is becoming evident, that the international economic relations which socialism brings with it are of the type most unforgettably made known to the world as the formation of economic blocks. The iron curtain of rigorous exchange-control, strict bilateralism, nationalization of foreign trade, inexorable supervision of immigration and emigration, destruction of the international monetary mechanism – those are all inevitable consequences, and we know now sufficiently what they mean: not only the shrinking of world-trade, impoverisation, bureaucracy and inflexibility, but also domination, power, hegemony, repression of small countries and unbearable increase of the points of international friction. All that will become even clearer in the next chapter.

 

NOTES

9. (p. 95)

It might be objected, that the cleverest of the substitute-plans, that is to say, the Keynes-Plan of the World Clearings Union, has received no opportunity to prove itself. Even if we do not want to attach a deep sociological significance to the mere fact, that no one has been able to resolve to try it out even once, yet it must be said in addition to all the individual technical criticisms which may be levelled at this plan, that even the Keynes-Plan could in the long run only have worked under general conditions of international order and international balance, which are also the conditions for the working of the gold-standard. The same elementary philosophy might be valid for the so-called Graham-plan (cf. WALTER EUCKEN, Die Wettbewerbsordnung und ihre Verwirklichung, Ordo, II, p. 76 et seq.) and for the European Payments Union.

10. (p. 97) International arbitrariness as a consequence of collectivism:

Cf. W. RÖPKE, International Economic Disintegration, London 1942, p. 47 et seq. There I developed the idea described in the text in more detail. In this connection must be mentioned also the collectivist falsification of international conditions of competition through the policy of the cheapening of groceries by the state and the state control of housing. It is now one of the main obstacles, between the Netherlands and Belgium in the further operation of the Benelux-Union.

11. (p. 100) Collectivism and inflation:

Cf. W. RÖPKE, Das Zeitalter der Inflation, Schriften der Volks- und Betriebswirtschaftlichen Vereinigung im rheinisch-westfälischen Industriegebiet, Duisburg, 1951; F. A. HAYEK, Vollbeschäftigung, Planwirtschaft und Inflation, in his complete work ‘Vollbeschäftigung, Inflation und Planwirtschaft’, published by A. Hunold, Erlenbach-Zürich 1951. For the understanding of repressed inflation: W. RÖPKE, Offene und zurückgestaute Inflation, Kyklos, 1947; W. RÖPKE, Repressed Inflation, Kyklos, 1947.

12. (p. 102) Fiscal pressure and inflation:

In this connection the following should especially be consulted: COLIN CLARK, Public Finance and Changes in the Value of Money, Economic Journal, December 1945. In criticism: JOSEPH A. PECHMANN-THOMAS MAYER, Mr. Colin Clark on the Limits of Taxation, Review of Economics and Statistics, August 1952.

13. (p. 107) International investment-planning:

Here the very appropriate remarks are to be quoted, which WALTER EUCKEN made in the supposedly last of his essays (Investitionssteuerung durch echte Wechselkurse, Zeitschrift für das gesamte Kreditwesen, of February 15th 1950).

14. (p. 109) So-called ‘international economic planning’:

The following examples are given from literature: G. D. H. COLE, The Planning of International Trade, in ‘Studies in World economics’, London 1934; CLARK FOREMAN, The New Internationalism, New York 1934. Such organizations for so-called planning organizations as the International Cotton Advisory Committee, (ICAC), which actually only obligates the member-states to supply statistics and to pay membership contributions, are here naturally completely disregarded. But not a small part of what is today called ‘International Planning’, is nothing but such drapery.

15. (p. 110) The paradox of international socialism:

The above named publication by Borkenau is very praiseworthy, but does not penetrate to the decisive points. It is worthy of note that the standard work, which Marxist Socialism had produced on the question of international complication (OTTO BAUER, Die Nationalitätenfrage und die Sozialdemokratie, Wien 1907), scarcely touches the essential economic issues. It is characteristic that even SCHUMPETER’s well-known work (Kapitalismus, Sozialismus und Demokratie, Bern 1946) completely evades the delicate subject. Informative supplements to this may be found in: L. MISES, Die Gemeinwirtschaft, 2nd. edition, Jena 1932, p. 197 et seq.; F. A. HAYEK, Der Weg zur Knechtschaft, Erlenbach-Zürich, p. 271 et seq.; L. ROBBINS, ECONOMIC Planning and International Order, London 1937; B. BRUTZKUS, Die Lehren des Marxismus im Lichte der russischen Revolution, Berlin 1928 (also in English in the collection published by F. A. HAYEK ‘Collectivist Economic Planning’, London 1935).

About the connection with the history of the ideas of socialism: F. BORKENAU, loc. cit., especially p. 36; W. RÖPKE, Wirtschaftssystem und internationale Ordnung-Prolegomena, Ordo, IV, 1951, p. 261 et seq.

16. (p. III) Socialist Inconsistency:

About the moving figure of Philip Snowden: F. W. HIRST, From Adam Smith to Philip Snowden, a History of Free Trade in Great Britain, London 1925. A last echo of Snowdenese inconsistency was the well-known ejaculation of the late foreign Minister, Ernest Bevin, who stated in the House of Commons, that he longed for the time, when it would be enough for a round-the-world-trip, as previously, to go to Victoria St. Station, buy a ticket, and to get into the train with sufficient pounds. A particularly depressing example of the horrifying lack of coherence in the political and economic thinking of our time, since a socialist minister of all people should know what the realization of his ideal means for the ‘nationalization of Man’.

• 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)
• 9That 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.
• 10In 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.
• 11Is 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).
• 12Already 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.
• 13(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.
• 14(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).
• 15(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).
• 16Nowhere 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.