The Last Knight of Liberalism

Chapter 8. Nation, State, and Economy

1 Mises, Nation, Staat und Wirtschaft. Beiträge zur Politik und Geschichte der Zeit (Vienna & Leipzig: Manzsche Verlags- und Universitäts-Buchhandlung, 1919); translated by Leland B. Yeager as Nation, State, and Economy (New York: New York University Press, 1983).

2 The first impressed reader was the young Kammer secretary who typed the manuscript: Therese Thieberger. She would remain his assistant until 1934, when he left for Geneva, and they would remain good friends for the rest of their lives. See Thieberger to Mises, December 5, 1971; Grove City Archive: Thieberger file.

3 Rudolf Sieghart made this point with great emphasis:

The peace diktats of the year 1919 have wiped the Austro-Hungarian monarchy off the map, and for the future world history this Empire is likely to be a dead letter. Of all its struggles and sufferings, nothing but some names will remain in history, or so it appears, as in the case of Carthage. But the problems which this Empire has made such painful efforts to solve are not solved in most of its successor states. They reappear everywhere in the world and will for a long time occupy the minds wherever national minorities struggle for the continued existence of their proper culture. (Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht , p. 361)

4 Mises admits that great political ideas like liberalism, socialism, etc., are not language-dependent. But he points out (Nation, State, and Economy, pp. 38, 41, 87) that the concrete application of such general ideas is conditioned by language and language-dependent culture.

5 Significantly, the very first and hotly debated problem of the constitutive assembly (konstituierender Reichstag) was to select the language for its deliberations starting on July 22, 1848. See Isabel Röskau-Rydel, “Galizien, Bukowina, Moldau,” in idem, Deutsche Geschichte im Osten Europas: Galizien, Bukowina, Moldau (Berlin: Siedler, 1999), p. 96.

6 See Mises, Nation, Staat und Wirtschaft, p. 1.

7 See ibid., pp. 45, 63f., 74, 90, 107n.

8 Mises, Nation, State, and Economy, p. 216.

9 Mises, Nation, Staat und Wirtschaft, p. 178; Nation, State, and Economy, p. 217.

10 Mises, Nation, Staat und Wirtschaft, p. 180; Nation, State, and Economy, p. 219. Mises here expresses essentially the same idea as William Graham Sumner in his famous essay on “The Conquest of the United States by Spain” (Yale Law Journal, January 1899) in which he argued that, although the democratic United States had won the 1898 war with imperialist Spain, the Spanish spirit had conquered the United States.

11 Mises, Nation, Staat und Wirtschaft, p. 181; Nation, State, and Economy, p. 220.

12 Mises, Nation, Staat und Wirtschaft, p. 74; Nation, State, and Economy, p. 91.

13 Mises, Nation, Staat und Wirtschaft, p. 181; Nation, State, and Economy, p. 220.

14 He would later comment on the crucial flaw of Bentham’s political thought, which celebrated the democratic majority principle as the foundation for liberty. See Mises, Theory and History (New Haven, Conn.: Yale University Press, 1957), pp. 67f.

15 See Mises, Nation, Staat und Wirtschaft, p. 174; Nation, State, and Economy, p. 211.

16 John Locke, “Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money,” Patrick Hyde Kelly, ed., Locke on Money (Oxford: Clarendon Press, 1991), vol. 1, p. 304.

17 See Adam Smith, Wealth of Nations (New York: Modern Library, 1994), bk. 4, chap. 7, pt. 3, p. 660 and passim.

18 Ibid., bk. 4, chap. 9, p. 745. Other contemporary economists also argued along these lines. For example, Etienne de Condillac pointed out that virtually all forms of economic interventionism were in fact “blows against commerce.” See Condillac, Commerce and Government (Cheltenham, U.K.: Edward Elgar, 1997), second part.

19 See Carl Menger, Untersuchungen über die Methode der Socialwissenschaften und der Politischen Oekonomie insbesondere (Leipzig: Duncker & Humblot, 1883), in particular appendix 6, pp. 262ff.; repinted in Carl Menger, Gesammelte Werke, F.A. Hayek, ed., 2nd ed. (Tübingen: Mohr, 1969), vol. 2; idem “Zur Kritik der politischen Ökonomie,” Zeitschrift für das Privat- und öffentliche Recht der Gegenwart 14 (1887); idem, “Grundzüge einer Klassifikation der Wirtschaftswissenschaften,” Jahrbücher für Nationalökonomie und Statistik, n.s. 19 (1889). The latter two papers have been reprinted in Menger, Gesammelte Werke, vol. 3.

20 See Heinrich Dietzel, “Der Ausgangspunkt der Socialwirthschaftslehre und ihr Grundbegriff,” Zeitschrift für die gesamte Staatswissenschaft 39 (1883): 1–80; idem, “Beiträge zur Methodik der Wirtschaftswissenschaften,” Jahrbücher für Nationalökonomie und Statistik 43 (1884): 17–44, 193–259.

21 See Heinrich Dietzel, Theoretische Socialökonomik (Leipzig: Duncker & Humblot, 1895); idem, “Selbstinteresse und Methodenstreit in der Wirtschaftstheorie,” Handwörterbuch der Staatswissenschaften, 3rd ed. (Jena: Gustav Fischer, 1911), vol. 7, pp. 685–97.

22 See Ludwig Pohle, Die gegenwärtige Krisis in der deutschen Volkswirtschaftslehre (Leipzig: Deichert, 1911), pp. 13f., 30ff.

23 See Mises, Nation, Staat und Wirtschaft, pp. 141 n., 148f., 150, 182.

24 Mises, Nation, Staat und Wirtschaft, p. 182; Nation, State, and Economy, p. 221.

25 Mises, Nation, Staat und Wirtschaft, p. 37; Nation, State, and Economy, p. 46.

26 Mises, Nation, Staat und Wirtschaft, p. 79; Nation, State, and Economy, p. 96. In contrast, the majority principle was in his eyes merely a means, rather than a constituent part of democracy; see Nation, Staat und Wirtschaft, p. 36.

27 The other errors were military and political. The military errors were, (1) to expect the war to be short, and (2) to expect miracles from unceasing offensives. The political errors were (3) not to anticipate a war on all fronts, and (4) to make the interests of the East-Elbian Junkers supreme in German politics. See Mises, Nation, Staat und Wirtschaft, pp. 111ff.

28 His views on war finance had an impact on young free-market oriented economists of the interwar period such as Stefan Possony (Die Wehrwirtschaft des totalen Krieges ) and Georg Holzbauer (Barzahlung und Zahlungsmittelversorgung in militärisch besetzten Gebieten ), but also on interventionists like Adolf Lampe (Allgemeine Wehrwirtschaft ). Lampe had a preference for “playing markets” though. He suggested that entrepreneurial activities be centrally guided.

29 Mises, Nation, Staat und Wirtschaft, p. 137; Nation, State, and Economy, p. 168. He went on to explain that war finance through debts (rather than through taxation or inflation) merely modifies the future distribution of resources.

30 Mises, Nation, Staat und Wirtschaft, p. 140; Nation, State, and Economy, p. 172.

31 Mises observes that the German socialists had stuck to the tenet of democracy only because until 1914 they had always been in the opposition and therefore bore no responsibility for their co-nationals in the eastern territories. With the onset of World War I, when they came to power in Germany and Austria, they slowly changed their minds and would have followed in the footsteps of the German liberals, but with the loss of the eastern provinces the problem of mixed nations disappeared as well. See Mises, Nation, Staat und Wirtschaft, pp. 105f.

32 See Mises, Nation, Staat und Wirtschaft, p. 152f.; Nation, State, and Economy, p. 185f.

33 Mises, Nation, Staat und Wirtschaft, p. 169; Nation, State, and Economy, p. 206.

34 See Mises, Nation, Staat und Wirtschaft, pp. 157ff. In his later work, based on the socialist-calculation argument, he would show that the problem is the impossibility of identifying what the interests of the commonwealth are.

35 Mises, Nation, Staat und Wirtschaft, pp. 163f.; Nation, State, and Economy, p. 199.

36 See Mises, Nation, Staat und Wirtschaft, pp. 9f. He stated that a nation’s specific language generated specific “political constructions” and in particular specific foundational ideas determining the operation of their governments (Staatsgedanken); see ibid., pp. 12, 38, 41, 87.

37 Mises did not argue that language communities are the only factor, or the most important one, in modern politics. He speculated that racial communities were far more important. The problem was that the sociology of race and of race relations was not sufficiently developed to warrant scientific statements. He acknowledged, however, that it had become a “principle of modern political world law” that it is “no longer acceptable to use force on peoples of the white race.” That is, the use of force against dark-skinned people in the European colonies was considered legitimate, but not the use of force against fellow-whites. German imperialism made enemies in all quarters by violating this distinction. See Mises, Nation, Staat und Wirtschaft, pp. 62, 64f.; Nation, State, and Economy, pp. 76, 79f.

38 For example, he examined the role of written language and stated that it had played a crucial role in the competition between dialects. The first written dialect became the standard language. See Mises, Nation, Staat und Wirtschaft, pp. 17ff.

39 Mises, Nation, Staat und Wirtschaft, p. 27; Nation, State, and Economy, p. 34.

40 Mises, Nation, Staat und Wirtschaft, pp. 31f.; Nation, State, and Economy, pp. 39f.

41 See Mises, Nation, Staat und Wirtschaft, p. 48.

42En passant he mentioned his contribution to the economics of migration by highlighting the importance of relative overpopulation, in distinction to already-known absolute overpopulation. See Mises, Nation, Staat und Wirtschaft, pp. 45ff. He had developed the concept of relative over-population in his “Vom Ziel der Handelspolitik,” Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916): 576.

43 Mises, Nation, Staat und Wirtschaft, p. 62; Nation, State, and Economy, p. 77.

44 Mises, Nation, Staat und Wirtschaft, pp. 78f.; Nation, State, and Economy, p. 96.

45 For surveys on Austrian language legislation, see Alfred Fischel, ed., Materialien zur Sprachenfrage (Brünn: Irrgang, 1902); idem, ed., Das österreichische Sprachenrecht, 2nd ed. (Brünn: Irrgang, 1910); Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 421ff.

46 See Eduard Bernatzik, Die Ausgestaltung des Nationalgefühls im 19. Jahrhundert (Hannover: Helwing, 1912), p. 30.

47 See Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 323; Röskau-Rydel, “Galizien, Bukowina, Moldau,” p. 97.

48 The social-democratic faction in the central parliament thereafter called itself “union of social-democratic deputies.” See Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 351ff.

49 See Otto Bauer, Die Nationalitätenfrage und die Sozialdemokratie (Vienna: Verlag der Wiener Volksbuchhandlung, 1907); translated as The Question of Nationalities and Social Democracy (Minneapolis: University of Minnesota Press, 2000). Before World War I, Karl Renner published his ideas on the nationality question under the pseudonyms “Synoptikus” and “Rudolf Springer.” See Synoptikus, Staat und Nation (Vienna: Dietl, 1899); Rudolf Springer, Die Krise des Dualismus und das Ende der Déakistischen Episode in der Geschichte der Habsburgschen Monarchie: eine politische Skizze (Vienna: published by the author, 1904); idem, Grundlagen und Entwicklungsziele der Österreichisch-Ungarischen Monarchie (Leipzig: Deuticke, 1906). At the end of World War I, he published under his true name: Das Selbstbestimmungrecht der Nationen: in besonderer Anwendung auf Oesterreich (Leipzig: Deuticke, 1918).

50 Mises, Nation, Staat und Wirtschaft, pp. 66f.; Nation, State, and Economy, p. 82.

51 Mises, Nation, Staat und Wirtschaft, p. 61; Nation, State, and Economy, p. 76.

52 With this consideration Mises complemented the Ricardian analysis of free trade, which was based on the assumption that capital and labor were mobile only within the borders of the state. See Mises, Nation, Staat und Wirtschaft, pp. 51ff.