Studies in Economic Nationalism

1.

THE ECONOMIC FOUNDATIONS OF COLLECTIVE SECURITY* (1943)

The achievement of political security is the basic quest of every peace-loving human group. It is even more basic than the quest for material welfare, since in an insecure world the latter is merely a passing phase. It has become clear to many thinkers and statesmen for some time past that political security cannot be attained and preserved through its own devices by one nation alone. Out of that realization developed the conception of collective security. The term, once widely used, now less frequently applied, is a very appropriate one since it emphasizes the collective or social aspect of the security problem. Should another terminology be adopted in the years to come, the fact will remain that no nation can remain secure alone. The opposite of collective security is individual insecurity. This was fully realized by the peacemakers of 1919 and has been fully confirmed by the tragic developments of the past decade.

The system of security devised in the latter years of the first World War and at the Paris Peace Conference and embodied in the Covenant of the League of Nations attached a great deal of importance to economic measures. Economic sanctions, referred to in certain League of Nations documents as the “economic weapon”, occupied a prominent position in the plans for repressing acts of aggression. We shall see that the provisions of the Covenant were of utmost importance and that they might have become the beginning of a very fruitful course of developments. We shall see also that in setting up in the days to come an improved system of security, it will be necessary to go well beyond the provisions of Article XVI of the Covenant. oth the theoretical analysis of the issues involved in the enforcement of peace, and the practical lessons learned since 1931, point to the need for reconsidering the role of the economic factor in a system of organized security. With respect to the military factor, the lesson seems to have been learned: nobody doubts any more that an organized and peaceful world society needs a strong armed force to repel all possible future acts of aggression. But in the realm of economic relationships there is still a good deal of ground to cover. This paper leads to two conclusions: (1) that the “economic weapon” in order to be fully effective must be used as a preventive weapon; (2) that only in an economically interdependent world can such a weapon be at all used. In the pages that follow we shall try to show by what process these conclusions have been reached and to what sort of further implications they lead.1

The notion of Collective Security.

Article XVI of the Covenant of the League of Nations contains the basic definitions and implementations of “Collective security.” Since some of the discussion that follows is based on that article, its most relevant parts are quoted:

1. Should any Member of the League resort to war in disregard of its Covenants under Articles 12, 13 or 15,2 it shall ipso facto be deemed to have committed an act of war against all other Members of the League, which hereby undertake immediately to subject it to the severance of all trade or financial relations, the prohibition of all intercourse between their nationals and the nationals of the Covenant-breaking State,3 and the prevention of all financial, commercial or personal intercourse between the nationals of the Covenant-breaking State and the nationals of any other State, whether a Member of the League or not.

2. It shall be the duty of the Council in such case to recommend to the several Governments concerned what effective military, naval or air force the Members of the League shall severally contribute to the armed forces to be used to protect the Covenants of the League.

3. The Members of the League agree, further, that they will mutually support one another in the financial and economic measures which are taken under this Article, in order to minimize the loss and inconvenience resulting from the above measures, and that they will mutually support one another in resisting any special measures aimed at one of their number by the Covenant-breaking State, and that they will take the necessary steps to afford passage through their territory to the forces of any of the Members of the League which are co-operating to protect the Covenants of the League.

It is the provision which stipulates that the aggressor country will become ipso facto engaged in war with all the other members of the League that contains the essence of the collective security idea. To be sure, this means that an act of aggression constitutes the starting point of a general war. But such a war is not a bellum omnium contra omnes, but merely a common war against an aggressor, law-breaking state. It expresses the social reaction against a lawless use of force. True, it commits every member of the International Organization to taking part in a war even if the aggression is geographically very remote. The alternative, however, is to give a free hand to aggressors.

After 1920 the commitments under Article XVI were quickly whittled down.4 Whatever was left, was not applied in practice when an opportunity arose or was applied only half-heartedly and partially as in the Italo-Ethiopian war. We shall not deal here with that dismal story, except as it teaches certain valuable lessons for the future. But we shall examine carefully article XVI and its implications. While it was unapplied in the past, it contains, embryonically, important principles of policy. In one way or another these principles, further developed and amended, are indispensable to any system of international security.

War, then, is stipulated to be indivisible, that is to say, a matter of concern to the whole international community. The aggressor is to be repelled, his designs frustrated by a common action of members of the International Organization. To that effect, they are to adopt various measures, economic and military. Article XVI gives a great deal of prominence to the former. The latter are mentioned, explicitly but in a rather secondary way. It is the “economic weapon” which is considered to be of primary importance. The reasons of it are simple: on the one hand, the great role played by blockade in the World War; on the other hand, the reluctance to resort to military measures except in extremis. However, the conception of efficient economic sanctions is based on certain assumptions, mostly made tacity or even unwittingly, at the time of the drafting of the Covenant, yet essential to the success of the scheme. These assumptions we must now carefully examine.

Foundations of Economic Sanctions.

The League of Nations was to be, in the hopes of its authors, a universal organization. The assumption of universality underlies to a considerable extent the philosophy of the Covenant. Once it became clear that it was not to be fulfilled in practice, certain important consequences should have naturally followed.

If the International Organization has a universal membership and if its members live up to their obligations, then the execution of the provisions of paragraph 1 of Article XVI is a relatively simple matter. If all the states of the world effectively break off relations, economic and others, with the aggressor state, then the latter is deprivedi of all accesss to desources produced outside of its boundaries5 and is greatly handicapped in the conduct of the war. The degree of this handicap depends, obviously, upon the economic resources of the aggressor country — and this consideration opens a line of thought to which we shall revert presently.

On the other hand, if the International Organization has a limited membership, and such was the case of the League of Nations, the situation is completely different. Non-members are not bound by the rules of the Organization. Since they remain outside the Organization by their own will, this is presumably due to the fact that they do ont approve of collective security and of the obligations it entails. Can one, then, count on their full collaboration in times of crisis? Optimistic commentators of the early ’twenties nortwithstanding, it is safer and more reasonable to assume that some at least of the nonmembers would fail to collaborate. Indeed, some might line up with the peace-breaking country. It is clear therefore that in the case of a non-univerasl organization voluntary measures adopted in line with the obligations of Article XVI will not suffice. In order to prevent “all financial, economic and personal intercourse between the nationals of any other state, whether a Member of the League or not,” measures of compulsion are indispensable, or at least very likely to become indispensable. The words which we now have italicized contain the key to the problem, if not to its solution. Members of the League had an obligation. How then was the economic intercourse between their nationals and those of the Covenant-breaking state to be prevended? There is one way only to achieve this. Its name is blockade.6

Blockade, however, is not a purely economic measure. It consists in interrupting or intercepting trade between the blockaded country and other countries which might be disposed to trade with it. This calls for naval and military measures. The blokaded country tends to fight back. And the “shooting war” is on. In the case of countries which are neighbor sof the blockaded country on the same continent, the enforcement of blockade is even more difficult. In any case when we speak of blockade we cease speaking of an “economic weapon” as distinct from military ones.

It follows that in a non-universal organization economic sanctions cannot be separated from military ones if applied after an act of aggression has been committed. We shall see presently that there is considerable scope for purely economic sanctions in policies aiming at the prevention of aggression. But ance an act of aggression has been committed, war in the military sense of the word is hardly avoidable.

Let us get back, however, to the ideas underlying the theory of economic asnctions. The basic ones is that of the importance of international economic interdependence. Modern war is a great industrial undertaking and modern industry works with materials produced the world over and secured through trade by those who do not dispose of them at home. If trade could be interrupted, the country affected by it would find it impossible to continue for any length of time the operation of the industrial machine necessary for the war. Some countries would lack certain raw materials, other countries would lack some other raw materials or some types of technical equipment, or food, or some secret of production patented abroad. Thus they would be handicapped in their war effort. In other words, owing to the economic interdependence of nations, the application of economic sanctions (as provided in Article XVI) would reduce the war potential of the aggressor country and thus condemn it to eventual defeat.

We see now that the crux of the conception of economic sanctions is to be found in the international division of labor. The more a country depends upon world trade, the more it is vulnerable to economic sanctions. The larger th enumber of countries which are dependent upon foreign trade for some of their basic supplies, the greater the degree of international security: in a world of interdependent countries economic sanctions could be very effective; such a world would not be therefore “safe for aggressors.”

This last point has not been clearly perceived by the authors of the League of Nations Covenant. If it had been, measures would have been taken to increase the degree of economic interdependence. Instead, as we know only too well, no frontal attack was launched — or even proposed — against economic nationalism. That failure of creating an economic environment favorable to the operation of the “economic weapon” was not the least among the causes which brought about the collapse of collective security and contributed to the coming of the Second World War.

Complicating factors.

We have already emphasized one of the mots important factors which complicated the simplicity of the League of Nations scheme of security: the non-universality of the system. From that follows the need for blockade and the impossibility of avoiding military war measures alongside the economic ones. Should there be powerful outsiders and should they either be strictly neutral or take the side of the aggressor, the chances of a quick victory for the defenders of law would be very slim, while the prospect of a long and difficult war is often an incentive to forces of “appeasement.” In the future no effort must therefore be spared to achieve a broad, universal organization. The “United Nations” are an excellent nucleus for such an organization. In order to keep them all in the peace-time system and in order to attract to it other countries as well, the new International Organization must offer important inducements to its members. Membership must not only entail obligations, it must also contribute to the security and prosperity of member states.

In order to provide security, the system must be so devised as to be trusted by the member states. It must be strong and free from important reservations. Developments such as the recommendations of the “International Blockade Commission” should not be allowed to happen again. In the first few years after the World War the League system of security was so reduced by reservations and interpretations that in 1925 a distinguisyed Swiss scholar and statesman could write as follows:7

By the various interpretations adopted, these articles (10 and 16) have been so appreciably weakened, that today no responsible European statesman would venture to stake his reputation and the security of his country on the potential protection of the League in case of international disturbance.

In another attempt to establish security in the world such a situation should not develop again. In the end it is some test-case or other that will either confirm and strengthen or eles weaken or destroy the faith in the system that will have been established. That faith, in turn, will determine the adoption by the various countries of certain necessary, domestic economic measures. Here, as in so many other matters, the political and the economic factors are intimately woven together.

In addition to that general confidence in the system, there is both need and scope for certain economic advantages accruing to members of the International Organization and to them alone. This is the type of advantage that would be easily understood by the man in the street, would readily appeal to him, and would make him into an adherent of the Organization which otherwise might well remain for him an unintelligible abstraction. These measures, which cannot be outlined here in detail, would consist in a preferential treatment with respect to commercial policy, international credits etc. which members of the Organization would grant to each other but which would not be extended to non-members. Since membership would be open to all states which accept the obligations entailed by it, this discrimination against non-members would in effect be a penalty imposed for non-collaboration. While we cannot do more at this place than state the broad principle, the matter should be carefully studied at the present time, in connection with post-war planning.

Within the International Organization the above-mentioned economic arrangements would tend so develop interdependence. The discriminatory treatment of non-members would, on the other hand, make it more difficult for them to achieve economic independence. Such would be the case, at least, of economically none too powerful countries. Since, however, a strong country may stay out of the Organization, there is another source of complication to be reckoned with.

Small or economically weak states are a very minor danger to world’s peace, especially if there is in existence a system of collective security. An armed “revolt” of “have-nots” about which so much was being said in the years preceding World War II is an impossibility. In order to wage war with any hope of success against powerful opponents, a country has to dispose of a large war potential, adequate industrial facilities, supplies of raw materials and food as well as of technical skill. It has, furthermore, to make itself as blockade-proof as possible. All of that is beyond the reach of an economically weak country. The alleged “have-nots” of the thirties were economically and military powerful countries, strong enough to intimidate their opponents into making concessions, strong enough to face the prospect of war. All this would hardly need emphasizing were it not for the stubborn survival of the myth (or, rather, fallacy) of the “have-not nations.”

There remains the fact to be counted with in the future that some powerful country might violate peace and resist economic sanctions. Should that ever happen, another major conflagration would be inevitable. Thus no complete guarantee against war can be obtained. We shall have achieved a great deal of progress, however, if we minimize the chances of aggression. After World War II after the defeat of the Axis powers, it is quite likely that the remaining powers will be members of the new International Organization. And this makes it possible to view with hopeful anticipation new developments in the direction of international security.

It will be noted that not one of the Axis powers would have been strong enough for wars of conquest had a system of security been in operation all through the twenty inter-war years. Had the United Nations been in existence as an effective grouping of peace-loving countries willing to strike at an aggressor swiftly and strongly, all the acts of violence from 1931 onwards might have been prevented or beaten back locally. The economic aspects of these speculations are also very interesting. Neither Germany, nor Japan, nor Italy are normally independent of foreign trade. All of them, and particularly the latter two are very vulnerable to blockade, unless they have had an opportunity of improving their situation through an accumulation of stock-piles of strategic materials. But this and similar policies is precisely what preceded the coming of the Second World War. Nor were these measures counteracted by appropriate moves on the part of states interested in the maintenance of peace and of the respect for international law. Policies of autarky were freely carried out. And these policies were a prelude to and preparation for conquest.

Autarky and Conquest.

On the surface of it nothing could sound more peaceful than “autarky,” the desire of a country to be entirely independent from the rest of the world. The reality, however, is much less peaceful than that. The desire for complete economic independence cannot be motivated by the quest for higher living standards, since it is recognized that international trade contributes to the prosperity of the trading nations. The planet is so built that every nation needs resources which are not obtainable within the area it inhabits. And the “autarkic” countries were precisely those which complained most insistently about being “have-nots.” Why then the policies of self-sufficiency? The answer is very simple. Just as the advocates of collective security realize the importance of economic interdependence and of economic sanctions against the aggressor country, so aggressors-to-be realize the importance of being blockade-proof. Policies of autarky as they were practiced by Germany, Italy and Japan in the recent past, were attempts at making these countries capable of withstanding blockade. Furthermore, by establishing state control over foreign trade, the governments of these countries could change the structure of imports in a way favoring the growth of the national war potential.

Policies of “autarky” involve certain changes in the structure of domestic industries as well as changes in the composition of foreign trade. The development of “key-industries” and substitute products, regardless of costs, at the detriment of articles of civilian consumption, with ample use of state subsidies and a reduction of living standards of the population, such is the essence of the domestic measures. Adopted in peace-times, such measures can only serve the cause of some future war.

As for foreign policies, modern “autarky” does not aim at reducing the volume of imports. On the contrary, attempts are made to expand it . More and more imports are needed to satisfy the requirements of a growing war industry and to build up, at the same time, stock-piles of imported materials of the kinds which are essential in war and impossible to replace by home-produced goods. Thus Axis imports were growing at the very time when their professed policies were autarkic. These countries were even complaining at their inability to import more — and these complaints were taken all too seriously by the statesmen of Western powers.

One of the means of expanding their imports has been found by the “autarkic” countries in the commercial penetration and domination of other countries. Germany’s “bloodless conquest” are well-known and their story need nor be retold here. What needs to be said, however, is that these conquests would not have taken place if the Western powers had practiced a policy of international economic collaboration in the ’thirties, instead of a policy of economic nationalism. Countries of Eastern and South-Eastern Europe traded with Germany which most of them distrusted and feared, because they could not expand their trade with the democratic countries owing to the import restrictions of the latter. The same development started with respect to certain Latin American countries but, before it went very far, the war and the ensuing blockade of Germany by the British Navy interrupted the course of the German economic penetration of the Western Hemisphere.

Japan also was able to import strategic raw materials well after its wars of aggression in Asia got under way.

Thus what was called “autarky” was a system of policies the purpose of which was to speed up the production of war equipment and the attainment, for some years at least, of a high degree of independence from foreign sources of supply. This is something to remember in the future. Autarchy is a prelude to wars of conquest and should therefore be considered as a first step in a country’s violation of peace.

Other forms of economic nationalism and their effects upon autarky.

The policies of “autarky” briefly discussed above are economic helpmates of policies of conquest. But there are other economic restrictions, other manifestations of economic nationalism which have no aggressive purposes by themselves, but help the type of developments with which we were hitherto concerned. They either are the expression of “old-fashioned” protectionism or result from fear of aggression. Thus one can speak of an “autarky of fear” as well as of an “autarky of aggression.”

Fear of this type can be only eliminated through the establishment of a reliable system of international security and through effective limitations of national sovereignty. The establishment of appropriate super-national bodies, endowed with responsibilities and powers, is, of course, the road towards a trustworthy International Organization. In the economic field this involves the creation of bodies such as an International Trade Authority,8 an International Monetary Authority, an International Investment Board, etc. The new International Organization must have powers to counteract measures of economic nationalism on the part of individual members. Competitive tariff increases, competitive monetary devaluations, onesided defaults on international loans are all of them most detrimental to good relations between nations and to the growth of that economic interdependence which, as we have seen, is of such vital importance to the operation of collective security.

All of this is conducive to sweeping changes of international economic relations. But without such radical changes security will remain unachieved and the “autarky of defense” will remain in operation. And this will make it possible for countries contemplating eventual aggressions to prepare for them economically in the future as they did in the recent past.

Instruments of commercial policy are limited in number though their number has been expanded in the past fifteen years. The “new” instruments include quotas, exchange control, barter-clearing arrangements and various types of subsidies. All of them involve state control over the volume and the structure of foreign trade. Such control makes it possible for the state to promote policies of autarky. Some of these instruments have been introduced, at first, to help a country in the event of a major upset in her balance of payments. This took place in a world whose economic relations were torn apart by economic nationalism. In a world of collaborating nations other measures can be devised with the help of the International Monetary Authority and the International Investment Board.9 On the other hand, the enumerated “new” instruments of policy should be eliminated entirely. What is also necessary is the limitation, wherever possible, of the direct control by the state over the structure of foreign trade. Whatever interventions are necessary, should take the shape of “framework interventions” such as general trade agreements and tariffs.10

Concerning tariffs, it is not likely that they could be eliminated entirely. They might be, however, revised, reduced and stabilized. Also further changes of tariffs should be placed under the supervision of the International Trade Authority. It could be shown, for instance, that the “infant industries protection” which is one of the most valid protectionist measures can only then be carried our in practice if there is an international authority which could rule about the removal of protection after the protected industry has “grown up”. In actual practice there has never been a way of preventing the protection of “infant industries” from degenerating into that of “vested interests.” While the idea of withdrawing tariff policies from the exclusive sovereignty of individual states is certainly very “revolutionary,” we shall have to adopt some such “revolutionary” ideas if we are to achieve peace in the world. On careful examination it will appear, however, that the impact of these suggestions upon the doily life of people everywhere would be advantageous rather than otherwise. It is only the intellectual adjustment that may be difficult.

Far from us the idea of offering here a blue-print for post-war reconstruction. We are concerned with these matters only in order to make it clear that some such program is necessary in order to fight effectively policies of aggressive autarky. It is only when we have made “autarky of defense” uneecessary through the establisment of a system of security that could be relied upon, and when we have placed “old-fashioned protectionism” under an international control, that we shall have isolated autarkic policies proper. And then we can proceed to fight them.

Economic nationalism is either a body-guard of policies of aggression and conquest, or the result of considerations mentioned above.11 In the first case it is a part of international warfare. In the second, it helps the future breakers of peace by making it impossible to prevent them from mobilizing resources in the service of their warlike designs. Economic factors are only rarely and to a minor extent causes of was; but economic nationalism, if allowed to continue after the present war is won, may well develop into the principal “Trojan Horse” of the next peace.

The scope of the “Economic Weapon”.

We have seen the limitations on the use of the economic sanctions in a system of collective security. Once a conflagration has started through an act of aggression, economic measures alone are insufficient. Blockade involves military measures as well. Futhermore if the aggressor power is to be checked in its course of conquest, military help must be given to the victim of aggression, while the attacker may have to be brought into a battle on one or more additional fronts. The idea that collective security can work through the economic sanctions alone is a dangerous fallacy. While the very terms of Article XVI of the League’s Covenant gives no real support to that fallacy, it gained ground nevertheless in the fifteen years that folloved the establishment of the League of Nations. Thus in the Italo-Ethiopian war exclusive reliance was placed on economic sanctions — and even those were not carried out completely. Italy was very vulnerable by the “Economic Weapon,” and, had that weapon been fully used, it might have proved effective. This would have involved blockade and — very likely — naval fighting on the Mediterranean. But that was precisely what the powers “enforcing” the Covenant were unwilling to undertake. If it had been fully realized that economic and military measures are inseparables once war has broken out, one would have either applied full sanctions or none. It may be suggested that either course would have been preferable to the one actually taken.

Before we try to define the real scope of the economic measures aiming at the enforcement of peace, let us digress for a moment and deal with the cost of sanctions and with the requirements for collaboration among members of the International Organization.

The application of economic sanctions not only creates serious difficulties to the country against which they are imposed, but may cause substantial losses to countries which apply them. Economic sanctions mean: cessation of trade. And this means disruption of usual trade channels and of normal business dealings. The impact varies from country to country. Some may have depended heavily upon their trade with the country against which sanctions have now been declared. Others may have depended on that trade less or not at all. Some countries may make the necessary adjustments easily, while others, economically weaker, may find it very difficult. Monetary and financial complications may develop. All of this is so evident that plans should he made beforehand for co-operative coping with such a situation. Furthermore some countries, such as the neighbors of that against which sanctions have been imposed, may face aggressive acts on the part of that country, should they participate in the imposition and application of sanctions.

All that has been foreseen by the authors of the Covenant, as witnessed by paragraph 3 of Article XVI. Its provisions failed, however, to be elaborated in the years that followed, and in 1935-6 no procedure was available for dealing with these important matters. In the future this angle of the problem must not be disregarded. Fortunately, we have now an instrument of action in the shape of the Lend-Lease Program. Without going into the details of the matter, let us suggest that arrangements which are proving so efficient at the time of the present war may be very useful instruments of sharing judiciously and equitably the costs of economic sanctions and of giving economic help to countries which bear the brunt of the economic maladjustments resulting from sanctions and blockade.

Preventive economic sanctions.

With this in mind, we can now approach what is the principal contention of this paper, namely the role of economic sanctions considered as a preventive weapon. It is as such that they may render the use of armed force unnecessary, limit the gravity of conflict and bring about a reconsideration by an adventurous government of its aggressive plans. We know only too well how high in terms of life and treasure may be the costs of repressing and repulsing aggression. And the more one studies the twenty years between the two world wars, the more one feels that the second of them might have been prevented. Nobody can be sure what the course of history might have become had certain developments taken place instead of others. It would be idle to speculate too much about it. And yet history has a lesson to teach and one way it teaches it is to make us formulate certain hypotheses as guides to future action. In the particular case with which we are here concerned the hypothesis is the following: if the Axis powers had been prevented to organize their economic life and foreign trade so as to increase their war potential and to make themselves, temporarily at least, self-sufficient in basic war materials, they might have been unable to risk the war.

Thus the “Economic Weapon” of collective security would come into operation as soon as it would be ascertained that some government or group of governments apply policies (of the type described above) aiming at reducing their dependence on the world market. These governments would be approached by proper agencies of the International Organization with the demand to explain these measures and to abandon them in favor of others, cooperative in nature and internationally supervised. In that way, every legitimate objective could be achieved, relative to improving the economic situation of the country or countries in question, while the adoption of autarkic policies would be made more difficult. Members of the International Organization would be obliged by statute to seek international collaboration in case of domestic difficulties, rather than to resort to the “forbidden” instruments of policy. But the Organization would also keep a watchful eye on “outsiders”. The latter, to be sure, would anyhow be deprived of certain advantages enjoyed by members of the Organization — but there would be ample scope for additional sanctions should they adopt autarkic policies and refuse to abandon them. The aim of these “preventive sanctions” is to make it impossible in the future for any country to repeat the recent economic feats of Germany and Japan. Thus the danger of aggression would be reduced. And should the aggression happen nevertheless, the aggressor would from the outser be weaker than if no such preventive measures were adopted.

What we suggest, then, is to consider autarkic policies are internationally unfriendly acts and to respond to them by the imposition of “preventive sanctions.” This proposal calls for much elaboration. It is submitted here for discussion. It seems to result from the twenty years of experience of the interwar period.

Modern war is a complex economic venture. To be waged successfully it must be well prepared. If we want to minimize the chances of war in the future we must accomplish two purposes: make it as difficult as possible for individual countries to be prepared for war, and make the international community strong enough to repel aggression whenever it occurs. The collective security system of the League of Nations was aiming at the second objective, though in practice much too half-heartedly. The first objective was given little attention; and yet it is at least as vital as the second and it holds out the best chance for the avoidance of war. The objective can only be attained if economic nationalism is eliminated from contemporary international life. And it can best be attained through the threat and application of what we have called “preventive economic sanctions.”

Conclusions.

The conclusions of the foregoing analysis can be summed up very briefly. The economic contribution to collective security is twofold. Positively, it consists in the development of a system of preventive sanctions. Negatively, and most importantly, it involves a fight against economic nationalism. This fight, let us add, in order to be successful, should probably be started already during the present war.

The outlawry of autarky and the establishment of a strong International Organization are necessary steps in the struggle against economic nationalism, but there must be also an attack against the more purely economic arguments for nationalist economic policies. That attack can show, as economists have indeed been showing since the days of Adam Smith, that economic nationalism is prejudicial to prosperity. In the past decade, however, the view was often voiced, under the leadership of Lord Keynes, that economic “insulation” is favorable to domestic stability, full employment and prosperity. Even if that view should be accepted (and the present writer strongly dissents from it), it would still be true that economic interdependence is to be prefered on the grounds of security and peace. Adam Smith was willing to make concessions to protectionism on the assumption that it might help national defense. Today, in a changed world, it is the internationalists rather than the nationalists who have a right to make the claim that “defense… is of much more importance than opulence,” for defense — or security — calls for a well integrated world economy. And if the teachings of an important body of economic doctrine are correct, that way lies also the prosperous economic development of all the nations of the world.

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