Studies in Economic Nationalism

CHAPTER II

ECONOMIC NATIONALISM, COLLECTIVISM AND LIBERALISM

I

Collectivism, as has been stressed above, is at the very roots of economic nationalism in the more restricted sense of that term. But what exactly is collectivism? To define it and its opposite, liberalism, and to examine their respective relations to economic nationalism is the next task before us. Since the terms involved are typically among the “dynamite words” referred to at the beginning of Chapter I, definitions are clearly essential. The need, as will presently be seen, is greater than the ready-made means of satisfying it. Let us begin with collectivism and turn first of all to standard dictionaries.

Thus, by consulting The Shorter Oxford Dictionary (1936 edition), we find that “collectivism” is a word that goes back to 1880 and is of French origin. (The main body of the 1877 edition of Littré’s Dictionnaire de la Langue Française has no entry for “collectivisme”; it appears, however in the Supplément, as dating back to 1876.) We then learn that it is “the theory that land and the means of production should be owned by the community for the benefit of the people as a whole.” This definition is couched in terms of property relations alons, a method that is too narrow today, although it was probably justified in the last quarter of the nineteenth century. But, then as now, the definition raised far more questions than it answered. What, for example, is “the benefit of the people as a whole”, how is it defined, by whom, and by what criteria? If we now turn to the compendious Webster’s New International Dictionary (second edition, 1939 printing), we discover that whoever wrote the relevant entry must have been in a whimsical frame of mind: collectivism is here defined as the “theory of the collectivists”, also as “a system based on that theory”. To save us from utter frustration the lexicographer adds helpfully: “It is practically equivalent to socialism” (a term which is discussed in Webster’s at considerably greater length but largely in terms of property relations). Before giving up our quest we turn to the word “collectivist” and find him identified as a “non-revolutionary socialist”, a definition for which there is surprisingly little justification either in the literature of the subject or in current usage.

From dictionaries let us move on to encyclopaedias. The Encyclopaedia Britannica (14th edition) follows, broadly speaking, the brief definition of The Shorter Oxford Dictionary, and defines collectivism as the theory that “society and industry should be based upon the collective, or national ownership of land and capital, i.e. of the means of production, distribution and exchange. Under such a system, the private ownership of capital would be abolished”. Again the definition is limited to the issue between private and public ownership, while questions of economic policy are left out of consideration. None of the definitions quoted so far refers to the relationship of the individual to society, which, it would seem, is the key to the whole problem. It is fair to add that the student consulting the Britannica is advised to turn from the article on collectivism to that on socialism, the latter being substantially more complete. “Socialism”, we might quote, “is essentially a doctrine and a movement aiming at the collective organisation of the community in the interests of the mass of the people by means of the common ownership and collective control of the means of production and exchange.”

Let us look up one more source to which the social scientist (or the inquisitive layman) is likely to turn for enlightenment. The Encyclopedia of the Social Sciences, that invaluable compendium published in fifteen volumes in the early thirties, has on the subject of collectivism a thought ful article from the pen of Walton H. Hamilton, a leading social scientist of his day, from which the following is quoted:

Collectivism is the imposing word to be set over against individualism. It is, broadly, a term for a trend in social development, a program of economic reform, a theory of general welfare and a Utopian order of mankind; technically a general label for comprehensive schemes of authoritative control such as socialism, communism, syndicalism and bolshevism; and, specifically, a name for the trend away from the extreme laissez faire of the nineteenth century.1

While the other definitions mentioned here were too narrow, this, on the contrary, is far too inclusive. It is also essentially negative. Collectivism is not merely a reaction against something; it is a positive concept of society. It is not enough to say that collectivism is “a word to be set over against individualism”; actually, it is the exact opposite of liberalism. In historical perspective, collectivism is a post-democratic reversion to what in other ages and under the reign of different philosophies was called “absolutism” or “despotism”. It is liberalism, individualism, and laissez faire, which are, each with its own emphasis, a reaction against the subordination of the human individual to the state and its government.

II

Let us now propose a definition of our own. Throughout this book collectivism will be treated as a concept of society which places the collectivity at the head of all social values and subordinates to it all the individuals it comprises. Hence, this concept is favourable to authoritarian as against libertarian forms of political organisation. Louis XIV dramatized his claim to absolute power by identifying himself with the state (l’Etat, c’est moi). In our day, the state is being identified with the government in power in societies which are thoroughly collectivized. Such a government — even if originally elected by democratic processes — keeps itself in power by force, after it has lost the consent of the public and so long as it disposes of military and police force. (The public consent might, of course, not have been given to it in the first place.) Collectivism can take many forms: from the relatively mild “Fabian” socialism (and the practices of the post-war Labour government) in Great Britain all the way to the “dictatorship of the proletariat” and the totalitarianism of the Soviet socialist republics. There is one thing in common to all concepts and forms of collectivism, however great the differences between them may otherwise be: the notion that the individual as such is subordinated to the community at large and to the state.

The dictionary definitions quoted above are mostly based upon the opposition of public to private ownership of the means of production. Public ownership is advocated on the ground that productive resources should be owned by the community for the benefit of the people as a whole, and attention has already been directed to the ambiguity of that phrase. When a community owns something, who owns its? Actually, nobody in particular ; and when public ownership is established one soon discovers that, instead of everybody owning the nationalized property, nobody owns it. It is controlled by those who are the spokesmen of the community as a whole, i.e. the government. When we, anyone of us, own a garden, we can arrange it pretty well to suit our ideas as to what a garden should look like, but in a public park we can neither touch or change anything, nor in any way exercise the right of ownership that, in theory, we enjoy as a part of the community. 2

Public ownership, then, means in practice governmental operations. It is because the theorists of socialism never bothered with “operational” definitions and because there was no socialism in action in their day that they could engage in long disquisitions on public ownership of the means of production without ever finding out what, once established, it would exactly mean in practice. At present, enriched by experience, we know that in the hands of a weak government public ownership means inefficiency, while in the hands of a strong government it means authoritarian rule. But, the reader may well ask, is all this necessarily so? Obviously, some further comments are needed. If all industry (or a good deal of it) and all natural resources (or a good many of them) are publicly owned, this means that the market mechanism, which is a distinctive feature of a liberal economy, can no longer operate freely and becomes entirely frustrated over a large sector of the economy. But in a liberal society, it is the market system which distributes resources among their various uses and finished products among the various users. If it cannot operate any longer, there arises a need for some alternative system. This alternative is provided by centralized economic planning, which, rather than “public ownership”, is the most important feature of collectivism. We have seen in Fascist Italy and in Nazi Germany totalitarian governments impose a collectivist pattern upon the peoples of those countries without taking any major measures of nationalization, proving thereby that collectivism can exist without public ownership of the means of production, provided the government fully controls the activities of private owners.

The following observations by Sir Alexander Gray (formerly of the University of Manchester), author of one of the best short histories of socialism, will complete our discussion on this point:

Collectivism had gradually come to denote that type of socialism which concentrates attention on the side of production… By the nationalisation of industry all enterprise is ultimately vested in the State. The private capitalist goes; the critics suggest that State capitalism arrives. All, or nearly all, would ultimately become employees of the State, which, as the unquestioned monopolist in every industry, would be exalted to a place of peculiar power.3

The difficulties of the completely collectivist State are enormous,.. The State being everything, there would be nothing outside the State… In a world of State capitalism, where there would not even be the satisfaction of changing one’s boss, life might be even less pleasant than at present4.

The present mania for planning has its dangers, and it may indeed be doubted whether “planning” as understood by the zealous, is consistent with our freedom and our liberties. It may indeed be a short cut to a dictatorship. Let no one delude himself that it is possible to have an economic plan in an isolated chamber, kept rigidly apart from the political life of the country. If we agree to adopt a plan, then either we may not criticise the plan, once it is adopted, in which case the plan becomes our dictator during its currency; or we may reserve the right to criticise and modify the plan, in which case the plan ceases to be a plan as now understood in many quarters.5

One more comment before moving on. Collectivism can have its origin in one of two basic types of social movement. It can be the result of a ground-swell of discontent, a reaction against excesses of laissez faire, with popular leaders organizing the support of discontented masses for a new form of government and society. But collectivism can also be the result of introducing statism (étatisme) into a society, from the top down as it were, the government taking over function after function and power after power, often imperceptibly and without raising any fundamental political and doctrinal issues (as in the case of “planistic” measures adopted during a depression).

Explaining the origins of socialism, Elie Halévy, the great French historian, best known to the English speaking public through his History of the English People, makes the following striking comments:

At the origins of the industrial age, socialists justified their criticisms by the spectacle offered at that time by the industrial part of the north of England. Machinism, which multiplies production, was to increase the greatest happiness of the greatest number ; well-being or semi-well-being was to appear in all families. Hours of labour were to be reduced, the machines working faster and faster. Quite on the contrary, one could see a few wealthy people as against thousands of paupers; the hours of work increased (ten, twelve, fourteen, sometimes sixteen hours a day); intensive production, ill-thought-out, brought about overproduction, unemployment, economic crisis.6

It is worth while to reflect on how the conditions which gave rise to the birth of socialism were altered in the course of the century or more that followed. And it is worth noting, too, that the widest spread both of stock-ownership (i.e. ownership of means of production) and of the fruits of industrial production, the greatest improvement in the standards of living of the masses, the most substantial reduction in hours of work, in brief, the most widespread distribution of the fruits of technological progress has taken place in the United States, a country which, so far at least, has hardly known an organized socialist movement of major proportions, and where, so far at least, the progress of collectivism has been much less pronounced than anywhere else.

III

Before examining the relationships which exist between collectivism and economic nationalism, let us deal briefly with liberalism, which, as has been noted, must be regarded as the exact opposite of collectivism. The entire recorded history of mankind could be written in terms of the oscillating relationship between the individual and the state. Or, to put it in another way, in terms of man’s perennial quest for both individual freedom and a “good society”. Benedetto Croce entitled one of his principal works History as the Story of Liberty 7 — and this title is a terse statement of a very challenging philosophy of history.

Man, said Aristotle, is a political animal, that is to say, he lives in society and not in isolation. On the other hand, man has shown throughout history a great deal of concern over his independence as an individual and has revolted again and again against political systems which curtail his freedom to the point of degradation of all that consittutes human personality. We may, then, define liberalism as a concept of society which is based on a full recognition of the dignity and the rights of the human person. Liberalism is also an aggregate of policies which aim at achieving the greatest possible freedom of the individual that is compatible with life in society, and which afford the greatest opportunity to men and women, adults and children, for development and for achievement. Further, liberalism is an economic system which, respectful of individual freedom and individual opportunity, promotes the widest spread of material prosperity. Finally, liberalism is the system which, in the industrial age, best furthers the division of labour, domestically and internationally 8, aims at improving the distribution of income and wealth among all members of society, fights attempts on the part of the more powerful people or groups to reduce the freedom of others by the use of their political or economic strength, and promotes good international relations, economic, political and cultural.9

What is the connection between liberalism so defined, on the one hand, and individualism and laissez faire, on the other? To the extent to which the human individual is the principal concern of liberalism, one might consider the terms liberalism and individualism as synonymous. The latter, however, tends to place rather too much emphasis on the individual and too little on society; it could, accordingly, lead to an anarchistic concept of society, i.e. to the very negation of society. A liberal society, for all its liberalism, represents a social order.10 It recognizes the need for a government and is generally favourable to (although not necessarily synonymous with) democracy. Although it emphasizes the individual’s fundamental right to freedom and is concerned about his enjoyment of the material “good things” in life, a liberal society is not oblivious to the fact that a free individual also has duties towards the community of which he is a part. These are, in the first place, moral duties — and it is not an accident that the great liberal philosophers of the eighteenth and early nineteenth centuries were deeply concerned about problems of individual and social morality.11 Then there are the legal obligations, largely revolving round the notion that everybody’s enjoyment of his own freedom depends on his respect for the freedom of others. Since equality is not of this world, inequality must not be allowed to destroy the rights and the freedom of the weaker members of society for the benefit of the stronger. Equality of opportunity is a part of the liberal creed. Where moral force does not suffice, the organs of the state must step in and back it up.

This, roughly, is the liberal concept of society and it involves, as can readily be seen, a certain amount of restraint upon pure individualism. Nor must liberalism, so defined, be confused with laissez faire. The latter was a reaction against the mercantilist state and its innumerable interferences with the life and the economic activities of individuals. Being a reaction — and formulated as it was by men with strong moral feelings — the laissez faire philosophy postulated a well-nigh complete abstention from government interference in the life of society. The concept of the state as a policeman and night watchman had a good deal of vogue in the mid-nineteenth century. In practice, however, it proved rather less than satisfactory since the stronger members of society were far less guided, in practice, by moral laws than had been assumed by the laissez faire philosophers. The functions of the state were, in reality, far greater than those of a night watchman even in the mid-nineteenth century, and the liberalism of the twentieth century can never lose sight of that fact. Liberalism, therefore, gives considerably more scope to public policy than does the “pure” laissez faire concept of society.12

IV

One point in what precedes calls for fuller elaboration. We have noted that the liberalism of the eighteenth and the early nineteenth centuries was a reaction against the all-too-powerful state. It went to the extremes of laissez faire, and this, in due course, resulted in a counter-reaction. The reaction against the excesses of laissez faire was made on behalf of the weaker elements in society which, left to their own devices, could not hope to hold their own. The immediate result of the Industrial Revolution in England and elsewhere was (as has been noted above) the lengthening of hours of work, the expanding employment of women and children, and the growth rather than the reduction of poverty. Let it be noted, however, that child labour was also favoured by the mercantilists. According to Professor Eli F. Heckscher, one of the greatest authorities on mercantilism, no child was too young in the mercantilist view to go into industry. He quotes Colbert to the effect that “experience has always certainly shown that idleness in the first years of a child’s life is a real source of all the disorders in later life”, and refers to Colbert’s edicts, which in fact amounted to forced labour for children in certain districts of France. Children were also employed, even in the sixteenth century, in the English clothing industry and writers of that century and the next were quite lyrical in their comments on little children earning their own upkeep. “The belief that child labour, whether in fact or as an ideal, was a creation of the industrial revolution is a gross fallacy” — is Hekscher’s conclusion.13

It is the liberalism of the late eighteenth and early nineteenth centuries which started the protest against inhuman working conditions. Up to a point, early socialism was an extension of liberalism with the object of promoting and protecting individual welfare and human rights. It is one of the misfortunes of history that what might be termed “orthodox liberalism” moved in the mid-nineteenth century in the direction of laissez faire whilst early socialism turned towards collectivism.

As already indicated, this unhappy turn of events was due, among liberals, to a failure to realize that the state had positive functions to fulfil even in a society which attached supreme importance to the rights of the individual. The turn taken by early socialism, on the other hand, was due to a failure to recognize that, whereas it was proper for the state to protect the weak, an excessive growth of its prerogatives could not but destroy, in the end, the rights and prerogatives of the individual. The transition from early socialism to statism, can also be attributed to the hold exercised by certain attractive clichés over the minds of socialist writers. The idea that when a collectivity jointly owns land and the means of production, each member of the collectivity owns them, is a notion appealing to the “have-nots”; the truth of the matter is less pleasing, however, for, in practice, it is the government that runs things “on behalf of the community”. And when a government runs things “on behalf of the Community”, it has an irresistible tendency to become arbitrary and oppressive.

It is beyond the scope of the present study to explain how and by what intermediate stages humanitarian socialism turned eventually into despotic collectivism. Attention must be directed, however, to what strikes me as a basic trend running through developments of the nineteenth and twentieth centuries. It involves a notion that the state has to protect the individual and that it must adopt policies of economic control in order to ensure individual welfare. From there to overestimating the role of the state and to underestimating that of free individual endeavour is only one step, and the social iniquities of the nineteenth century made it an easy step to take. Movement in that direction was inspired in England by humanitarian considerations; in Germany it was also conditioned by the mystical philosophy of the state which, propounded by Hegel and Fichte, has found many followers during the past century and a half. Marx’s moral indignation led him to the concept of the “dictatorship of the proletariat”, peculiar in theory and dangerous in practical application where it leads to outright despotism. Marxism was to influence and to warp socialist theory and the socialist movement from then on. German socialism developed into a brand of statism with authoritarian overtones, differing therein from the Anglo-Saxon theories of evolutionary or “Fabian” socialism, which were more respectful of democratic principles. British socialism goes back to the Fabian Society, the basic influence behind the Labour Party. Its ideas are refreshingly free from the sinister Marxist doctrines of social revolution and the “dictatorship of the proletariat”. They centre around the idea of public ownership of the means of production, an appealing idea so long as its implications are not fully grasped. Once they are fully worked out, however, it appears quite clearly that public ownership cannot be introduced without leading to more advanced forms of statism, i.e. to the centralized direction by the state of the economic activities of society.

Thus, regardless of the road by which it gets there, the socialist concept of society inevitably leads to the supremacy of the state and the subordination of the individual. The institution of private property is so limited as to become well-nigh meaningless (as in Fabian socialism). Whether state control is established through the nationalization of land and industry or through strict government regulation of the activities of private owners is, on the whole, of secondary importance. The former is the creed of “democratic socialists” (and, in its extremist forms, of totalitarian communists), the latter was the practical policy of the Fascists and Nazis. In either case the individual’s loss of direct access to the means of production involves his loss of political rights and prerogatives. That this must be so should really be quite obvious; the following comments by D.W. Brogan bring the point home with particular clarity:

Czarist Russia was a police state, a censorship-ridden state, a spy-ridden state, but … there were possibilities of independent thought, action, and information in Czarist Russia that do not exist in Stalin’s Russia. There were feeble but genuine organs of independent political activity…; there was in the last years of the regime a feeble parliament. … The press, heavily censored as it was, was not entirely controlled and owned by the government. There was a constant movement in and out of Russia of dissident Russians … And inside Russia there was a large number of people whose immediate livelihood did not depend on keeping on the good side of the government. The opposition, including the Bolshevik Party, could get funds from sympathizers because the government did not own all the means of production, distribution and exchange. A Russian millionaire could decide whether to spend his roubles on Cézannes or on Bolsheviks or a mixture of the two. There were in Czarist Russia thousands of men and women with a knowledge of the outside world, with means of leaving and entering Russia, with incomes fairly safe from complete annihilation if they kept out of direct revolutionary activity. These people could and did talk and write. They gave the outside world its main impression of Russia. … In modern Russia there are no people whom the rulers need fear, whose property or livelihood they need respect. There is a monopoly of the press and of paper and printing facilities.14

One could, of course, multiply examples of state control of economic activity interfering with the freedom of individual citizens. Among instruments of policy which, even without nationalizations, effectively limit the scope of individual action, mention should be made of restrictions on foreign payments (exchange control, quantitative trade restrictions) and the widespread use of permits and licences, including what Keynes has called the “socialization of investments”.

VI

Although the interference of the government in economic life is as old as recorded history, there has never been anything more inclusive and more sweeping in the past than the type of economic planning and control practised in our own day by the collectivist state. Soviet five-year plans were the pracitcal manifestations of this tendency to plan from a central point the entire economic life of a country. Throughout the twenties there developed a vast literature on centralized economic planning. It was advocated on the grounds of rationality, of equity or of efficiency, always without reference to the effects of planning on the lives of individual members of the planned society. By contrast, opponents of centralized economic planning have repeatedly emphasized the losses in efficiency, cumulative effects of mistakes, and social consequences (including the curtailment of personal freedom) which such a system would entail.

Practical attempts at economic planning which were carried out during the thirties as a means of fighting the depression invariably failed to produce the expected results.15 This, claimed the advocates of planning, was due to the timidity and half-heartedness of the planners. Less timidity, however, would have produced a more authoritarian rule! Since the end of World War II new opportunities have appeared for collectivist experiments; they all tend to highlight and confirm the connection between economic planning and economic nationalism. So long as independent states exist, economic planning must be an essentially national pursuit. How to reconcile the requirements of a well-knit world economy with those of independent national plans is among the most difficult problems that the collectivists of today have to solve. So far, they have found no way out of this difficulty and have invariably fallen back upon the practices of economic nationalism.

Having placed the authority of the state above the prerogatives of the individual, collectivists have also placed national planning ahead of the requirements of international order. This conflict was early and very clearly diagnosed by Professor Robbins of the London School of Economics in a book significantly entitled Economic Planning and International Order.16 And the longer the record of practical experience becomes, the more evident it is that in a world of national states, collectivism leads to a great exacerbation of economic nationalism and creates new and well-nigh unlimited opportuities for international dissensions and friction.

VII

But, some readers may object, socialism is an essentially international movement; how, then, can it be considered a source of economic nationalism? This objection cannot be met by saying that we have been discussing collectivism and not socialism, since it is quite clear that socialism is one of the most important manifestations of collectivism. But is socialism an internationally-minded movement as well as an international one? It seems to me that here, as so often in the field of social relations, we have been the victims of verbal confusion. There can be no doubt about the international character of the socialist movement. Not only have socialist thinkers of the various countries influenced each other and cross-fertilized each other’s thinking, but the socialist labour movements of the various western European countries organized the “First International” in 1864 and the “Second International” in 1891. But these ventures were not, in fact, expressions of an international spirit. They were, one might say, attempts at arriving at an international organization of the “underdogs” for the purpose of encouraging each other in the fight they conducted, each in his own country, against the “ruling classes”.

The notion of an international solidarity of workers, widely accepted by the socialist movement, was based on several premises, however, all of which have since proved to be fallacious:

(1) the idea that the interests of all workers are solidary within one and the same country;

(2) the idea that the workers’ interests are solidary as between the various countries;

(3) the idea that class warfare is a fundamental reality far more important than the internal cohesion of nations or international strife between them.

As regards the first and the second of these three questionable assumptions, one could not improve on the following observations by Sir Alexander Gray:

The assumed solidarity of interest uniting all workers, an essential condition of a class war, is a mere delusion. In a given industry there may be a conflict of interest between the different grades. Station-masters, signalmen, engine-drivers and ticket-collectors may have certain interests in common, springing from their common employment; but equally, and for the same reason, they may have divergent interests. If the station-masters are overpaid, the ticket-collectors may have to do without. Strippers, brushers and on-cost workers may be divided by jealousy as well as united by love. It is equally and glaringly true that workers in different industries may have sharply contrasted interests. A coal strike which successfully raises the wages of miners may lead to dearer coal, hampering employment in countless dependent industries. … When we approach the assumed solidarity of workers in different countries, the whole argument lamentably collapses… Competition between countries is reflected in competition between the workers of different countries, and employers and workers have a joint interest in manipulating the tariff (and in doing other things) so that they may keep what they have at the expense of others. Nor is it any answer to say that these things should not be so, and that if the workers were better educated to a higher stage of class consciousness, they would behave otherwise. The point is that the class war is represented as something that is now raging, and has been raging as far back as the memory of man runneth; but the class war postulates solidarity of interests among the workers, and at this moment such solidarity of interests does not exist.17

As for the third assumption, it has been refuted in two different ways. The social history of the United States has demonstrated that a class war is by no means an inevitable feature of an advanced industrial society; and World War I proved that the workers’ national feelings are far stronger than their “class consciousness”.

Let us look at this matter from another angle. Is it not instructive to note that neither free trade nor any of the other policies aimed at increasing the international economic cohesion of the world has received much support from socialist writers or from trade unions? On the contrary, both writers and unions have frequently supported policies of protectionism as well as restrictions on immigration; they have also favoured the “insulation” of national economies against the rest of the world, as a means of safeguarding national central planning for “full employment” or “economic development”. Fichte, who is rightly considered an early forerunner of German socialism, is also one of the leading prophets of autarky. And it is really quite logical that this should be so.

The fact that a number of socialist writers have been favourable, in more recent times, to the League of Nations and to the United Nations must not obscure the other fact that their internationalism has been emotional and political but has not extended to economic policy as such. It is not an accident, either, that the League of Nations, which did all in its power to promote the revival of freer trade and payments and of stable currency relations between nations, was inspired by the philosophy of liberalism, not that of collectivism, while the United Nations, of which the opposite is largely true, has so far proved singularly ineffective in helping rebuild a workable international economy.

It is because collectivism calls for statism and central planning that, in the age of sovereign national states, it has become the major driving force behind economic nationalism. And this force is very strong indeed nowadays over the major part of the planet, and it is extraordinarily dangerous to the peace and the freedom, as well as to the welfare, of all men.

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