Studies in Economic Nationalism

CHAPTER V

FICHTE’S BLUEPRINT FOR AUTARKY

It is the principal conclusion of the studies underlying the present book that, in our age, collectivism is the mainspring of economic nationalism. While, historically, this link is of relatively recent origin, analytically it goes back over a century and a half. Its blueprint was the child of the fertile mind of Johann Gottlieb Fichte (1762-1814) and appears in a relatively obscure tract, published in 1800 by that famous German philosopher under the intriguing title, The Closed Commercial State.1

Fichte’s fame is that of a philosopher and of a leading champion, in the era of the Napoleonic wars, of German nationalism. His principal works deal with ethics and with the philosophy of science, while his Speeches to the German Nation are a classic of German political literature. His excursion into the realm of political economy seems to have been an isolated episode, without any response from his contemporaries. Fichte wrote The Closed Commercial State fully realizing that it would get no response from practising statesmen. His thesis was that — in the interest of peace — countries should be completely isolated from one another in all but cultural relations. The means of action he recommended for the achievement of such complete isolation were very drastic and stood in sharp contrast to the liberal trend of the times. It is not surprising, therefore, that his book has remained an obscure curiosity ever since its publication. In Germany, Fichte came eventually to be considered as an early forerunner of state socialism, a verdict confirmed by modern historians of socialism, such as Sir Alexander Gray in his book The Socialist Tradition.2 Outside Germany, The Closed Commercial State remained largely unknown. It is characteristic that all the space given to Fichte in the compendious and authoritative history of economic doctrines by Gide and Rist is a footnote (albeit a lengthy one) in the chapter on State socialism, where his book is described as “very curious”.3 Quincy Wright’s voluminous Study of War 4 makes practically no reference to Fichte and does not even mention his Closed Commercial State. Noteworthy too is the fact that there seems to exist neither an English nor a French translation of this book, whose ponderous and involved style in its original German provides little inducement for potential readers to come to grips with it.

After over a century of neglect, Fichte began to attract some attention in his own land during World War I, when Germany, her allies, and the territories occupied by her armies, became to all intents and purposes a “closed commercial State” in consequence of the successful Allied blockade. His position as an early prophet of modern policies was not, however, made secure till after 1933, when Hitler’s “New Order” and Schacht’s economic policies carried into effect the Fichtean blueprint. Attention began to be drawn to some passages, at least, of his book. Professor Rappard, whose writings on economic nationalism were cited in Chapter I, did more than anyone to familiarize the English-speaking world with that aspect of Fichte’s economics which was particularly relevant in the circumstances of the late thirties. 5 In spite of these beginnings of interest in Fichte, the full implications of his economic philosophy remain buried in his unavailable prophetic little book.

The reader may well ask why he should concern himself with a tract over a century and a half old which, since it remained largely unknown, could not have been really influential? Fichte’s book is important not only because it is the first analytical description of the international implications of collectivism, but because it remains to this day the only such analysis available, ruthless, unadorned, and complete. There is as much self-righteousness in Fichte as there is in the modern protagonists of national planning, as much conviction that he alone has found the key to the truth and that his is the only way leading to a rational organization of society. But, unlike his modern (and unwitting) followers, Fichte accepts all the international implications of his social philosophy, indeed he postulates them. Because it is so completely consistent and so entirely candid a blueprint of what seemed in his day to be a peculiar vagary of a philosopher’s logic, but has become in the past twenty-five years a political reality at various times and in various places, The Closed Commercial State must be carefully read and seriously pondered over by students of international affairs. While it is true that authoritarian policies of national self-sufficiency have not made their appearance as a direct result of Fichte’s influence, it is equally true that a good knowledge of Fichte’s utopia can greatly help us in understanding some of the most perplexing aspects of the modern forms of economic nationalism.6 Habent sua fata libelli!

II

From beginning to end, Fichte’s short treatise attributes to the state powers of regulating the country’s economy as well as the lives of its inhabitants: “It is the purpose of the state to give everyone what is his, to set him up in his property, and then to protect him in it.” A concept which occurs time and again throughout the book is that everybody in the state should live as pleasantly as possible. We can leave out from the present context Fichte’s version of the philosophy of the social compact, so fashionable in his day as a philosophical device. His system starts from a most confusing network of agreements and contracts, one more fictitious than the other, and all quite unnecessary in terms of his later proposals. Fichte’s “statism” has an equalitarian tinge to it: “All must first be comfortable and warmly dressed before anyone dresses beautifully.” 8 As Sir Alexander Gray paraphrased it: “There must be enough for all before there are superfluities for some.” 9

The national economy, according to Fichte, should be fully planned by the government. It is the government which will determine what is to be produced and in what quantities, how many people will work in each field of endeavour, at what price goods will be sold and by whom, and even who will be the buyers. The following passage is typical:

It is easy to see, how the government could assure itself that the fixed number of craftsmen will not be exceeded. Everybody who wishes to devote himself exclusively to some particular occupation must register himself with the government… If he registers for a branch of activity where the largest number of employees allowed by law is already engaged, the authorization will be refused and he will be suggested other lines of work in which his talents might be needed.10

What becomes of individual freedom under such a system of all- pervasive regulations is another matter and one about which Fichte has little to say; the little he does have to say will be quoted later.

It is impossible, in the space of this chapter, to go into the details of Fichte’s planned economy.11 What is of special interest in the present context are the international repercussions of this approach. “There is hardly any need to prove”, says Fichte, “that the maintenance by subjects of relations with foreigners does not fit at all into the proposed commercial system.” Why not? Here is the answer:

The government must be in a position to count upon a certain quantity of goods entering into the commercial network so that the subjects might always be assured of the continued satisfaction of their usual needs. But how could the government reliably count upon a foreign contribution to this quantity of goods since this foreign contribution is not subject to its power? The government must determine and guarantee commodity prices. How could it do so in relation to foreign goods when it has no power of determining prices which prevail in the foreigner’s own land and at which he has to buy his raw materials? On the other hand, should the government set a price which the foreigner cannot accept, the latter will avoid that country’s market and there will develop a shortage of goods with which to satisfy customary needs. The goverment must guarantee to its subjects a market for their products and manufactures and the price at which these can be sold. How can it do so if goods are sold abroad in countries where it has no power either to control or to determine the demand for or the price of the products of its subjects?12

Here we have in a nutshell the perennial conflict between national planning and foreign trade.13 The state can control economic life within the country but not beyond its boundaries; foreign trade brings into the picture uncertainties which are disturbing to the planner. Hence one must choose between “rational” state organization of the national economy and foreign trade. Fichte chooses the former but is careful to qualify as follows: “Then only the government alone should conduct such trade, just as it alone can declare war, make peace, and conclude alliances.” 14 One of the much-debated issues in our own times is the opposition between state trading and private trade, the collectivist planners leaning heavily toward the former. “In a rational state (Vernunftstaat)”, says Fichte,, “the private citizens simply cannot be allowed to trade directly with a citizen of a foreign country.”15

And so Fichte is led to the notion of economic isolation as a method of establishing an environment in which the state can plan the economic and social life of the country in a “rational” way and without disturbing influences originating abroad.

III

This point reached, the balance of Fichte’s argument falls into two parts. In the first of these he looks into international relations in a world where partial and incomplete measures are taken to promote self-sufficiency. This he finds unsatisfactory because it does not lead to the full achievement of domestic aims and yet results in a great deal of international strife. He concludes, therefore, that national isolation must be complete, and in the last part of his book he examines ways and means by which a state can isolate itself successfully from the rest of the world. Fichte’s views along both of these lines will be quoted in the present and next section of this chapter.

First a word concerning Fichte’s views on money. They are interesting in themselves and occupy an important position in his argumentation. In his approach to money and to goods, Fichte is very far removed from the mercantilists. He considers that wealth consists in raw materials, food and manufactured goods, not in money. He does not believe that the monetary instrument needs to have, within an isolated economy, any intrinsic value.16 He writes:

The closed commercial state whose citizen entertains no direct relations with foreigners can make into money practically anything it wants by declaring that the state itself will only accept payments in that money and in no other. …Thus, the national currency [Landesgeld] is created, about which there never arises the question of whether it is acceptable abroad, since, for a closed commercial state, foreign countries are as good as non-existent.17

So far so good; as far as domestic monetary relations are concerned, the state is absolutely sovereign, but what of foreign trade (since, at this stage of his argument, Fichte analyses conditions which exist in a world from which foreign trade has not yet been fully eliminated)? In a controlled economy, the circulation of money is subject to all the state regulations that govern the production and distribution of goods. In an uncontrolled economy, however, Fichte anticipates a great scramble for money, everybody trying to garner as much of it as possible at the expense of everybody else. It all results, says Fichte, in an endless war of everybody against everybody else, a war between buyers and sellers, a war that grows more violent and more dangerous as the population of the world increases, as production and the crafts improve, and as the number of needs grows and multiplies. The buyer wants to get goods as cheaply as possible and therefore calls for free trade as a means to arrive at increased competition and falling prices — all of which Fichte regards as undesirable and harmful. “People want absolutely to be free to destroy one another,” he scornfully remarks.18 Now, so long as there is international trade — possibly free international trade — things will go this unhappy way, and this must be so since the state can apply the regulation based on reason only within its own boundaries.

Here Fichte turns mercantilist for a while. We have already seen how the mercantilist concept that trade can only be advantageous to one but not to both partners has led to conflict and strife. This notion recurs in Fichte. Indeed, he makes this into the major cause of war19, which surely is a wild exaggeration even in terms of the mercantilist world picture. We shall note with interest, in the next chapter, what becomes of that notion in the writings of Lord Keynes, follower in that respect both of mercantilism and (probably without realizing it) of Fichte. The doctrines of David Hume and Adam Smith do not seem to have affected Fichte’s thinking in any way, although it is hardly conceivable that he could have been ignorant of their writings. His tract, however, is written in a dogmatic, rather than polemic vein, and no reference is made in it to the writings of anyone else.

Having thus established, to his satisfaction at least, that, in an unplanned world, trade leads to conflict and war, Fichte addresses himself to a further examination of the consequences of foreign trade for the welfare of an individual country. The following observations are illuminating:

No state which counts on foreign markets and encourages and directs domestic industry with that expectation in mind, can guarantee to its subjects the continued existence of these markets. Should the neighbouring country turn to the same line of food production, or should it, because of a prohibition by its government, suddenly find itself obliged to renounce the foreign merchandise, then the worker of our country would be left without food and be reduced to poverty. The only consolation which one is given in such a case is that the interruption of the usual trade would not happen suddenly, so that one might find other markets somewhere else, or, should one lose these markets as well, one could move over to other kinds of food, seeing that one cannot be adequately supplied with the former kinds.20

Fichte goes on to say that in practice sudden trade prohibitions are adopted and that their consequences are very drastic indeed; hence he regards as very considerable the risks arising from foreign trade.

But these are not, in Fichte’s mind, all the consequences that might result from changes in trade channels. The domestic difficulties mentioned in the foregoing excerpt lead to widespread discontent. So will the state control of foreign trade, taxes on imports, and other regulations. People will feel that something is wrong, that they are being deprived of a part of their welfare, and, being uninformed and knowing little or nothing about “the real aims which any rational government has in mind when applying this kind of trade restriction,” 21 they will think that they are being deprived of goods merely to enable the government to acquire them for itself. Fichte notes, in passing, that taxes and levies on foreign trade are more resented by the population than any others. And then there is trouble in store for the state:

There arises in the hearts of the subjects a hatred against the government and, with this hatred, a war against it, which is conducted first through subterfuge and then through the use of open violence; there develops contraband trade 22 and an artificial system of defrauding the government. In the opinion of the people, it ceases to be an offence to swindle the government, but indeed this becomes an admitted and even glorious self-defence against the general enemy.23 … To oppose these hostilities on the part of subjects, the government then adopts for its part harsh and hostile counter-measures, which are carried out even more harshly by embittered underlings.24

Fichte’s conclusion is clear25: “Such a system of only partly eliminating foreign trade … does not bring about the results which it should bring about and creates new evils.” 26

IV

And so we reach the political part of Fichte’s book, the closing of the frontiers of the state and the cessation of all foreign economic relations. Now, says Fichte, it must by no means be considered that by closing its boundaries the state simply renounces all the former advantages of foreign trade and declares itself content with whatever the country happens to produce at that time. On the contrary, the state, before it can close its boundaries, must reach its “natural boundaries”. It must also develop to the utmost all its resources, introduce from abroad new productive techniques, and create, as far as possible, substitutes for hitherto imported goods.

This notion of “natural boundaries” is one that brings with it a great deal of trouble. Let us quote Fichte’s somewhat heavy definition of what natural boundaries are:

Certain parts of the surface of the globe including their inhabitants are by nature clearly predestined to form political units. They are separated from the rest of the earth by large rivers, seas and impassable mountains; … it is to these indications of nature as to what shall remain together and what shall be separated that one refers when, in contemporary political discussion, one speaks of the natural frontiers of empires. This conception is far more important and more serious than is usually thought. It is based not only on well-protected and solid military frontiers, but far more still on productive independence and self-sufficiency.27

However, a state may not be and generally is not endowed, to begin with, with its natural boundaries. These have to be acquired. How? By the use of force and at the expense of neighbours unable adequately to protect and defend themselves. And so Fichte’s recommendations lead to wars of conquest:

It has always been the privilege of philosophers to sigh over wars. The present author loves them no more than anyone else. But he believes in their inevitability in the present circumstances and deems it uncalled for to complain of the inevitable. In order to abolish war it is necessary to abolish its cause. Every state must receive what it intends to obtain through war and what it alone can reasonably determine, that is, its natural frontiers. When that is accomplished it will have no further claims on any other state, since it will possess what it has sought.

While the state to be closed is seeking its natural frontiers, it should, in Fichte’s opinion, continue to engage in foreign trade, but on a state trading basis. The government of the expanding state will have, because of its monetary wealth, the means of arming itself and of attacking for that purpose large foreign resources. It will be so strong “that no resistance can be made to its expansion. Thus, it could carry out its notion [of reaching natural boundaries] without bloodshed and almost without using the sword, and this operation will be far more an armed occupation than a war.”28 When a hundred and thirty-odd years later Dr. Schacht regimented the foreign trade of Germany for the sake of Germany’s rearmament and thereby paved the way for Hitler’s eventual “armed occupation” (without war) of Austria and Czechoslovakia, he was literally (if perhaps unconsciously) applying Fichte’s precepts!

V

These, then, are the military aspects, as it were, of the closing of the commercial state.29 The purely economic measures also present the greatest interest. In the first place, “all direct relations of the citizens with any foreigners whatever must be entirely discontinued”.30 In order to be discontinued, they must be rendered impracticable and impossible. How can this best be accomplished? Here is Fichte’s recommendation:

All possibility of world trade depends upon the possession of means of exchange that are accepted throughout the world and upon our ability to accept such means of exchange. … Hence the real solution of our problem is the following: all world money [Weltgeld] found in the hands of citizens, i.e. all gold and silver, must be taken out of circulation and must be exchanged against a new national currency [Landesgeld], i.e. a currency which is only valid within the country. … The government must ensure for all eternity the value of the money it issues, i.e. that value in comparison with goods which it is given at the time of its introduction. Hence, with the introduction of national currency, it is also necessary to introduce the fixing of prices which have to be maintained from then on.31

In brief, monetary reform associated with price fixing. Next comes the nationalization of foreign trade:

With the same single move by which it introduces the new internal currency, the state will take over the entire import and export trade of the country. This takes place in the following way: immediately before the introduction of the new internal currency the government will buy all foreign merchandise that is found in the country. … It is, in part, the purpose of this purchase to ascertain exactly the existing supplies of and current needs for this merchandise, and in part to obtain control over the prices of these goods. … The government settles with the merchants in the new currency immediately after its introduction. 32

As the government introduces the “national” currency, Fichte would have it issue a manifesto to all foreign countries inviting them to transfer all the deals they might have in progress with the inhabitants of the “closing state” to its government, and that within prescribed time limits. Should they fail to do so, they would be penalized through the loss of their claims. Nationals of the state would be requested to transfer to the government all their claims against foreigners. In addition, foreigners would be warned not to enter into any new business transactions with inhabitants of the “closing state” without specific permission by its government; for the government would refuse responsibility for any “unauthorized” claims acquired by foreigners against nationals of the country after the issuance of that declaration.33

In taking over the country’s foreign trade the government would aim at gradually reducing its volume until at long last it could be eliminated altogether. This transition should be fully planned. A very “modern” notion of economic planning underlies the entire approach to this “transitional period”. As the volume of foreign trade declines, people will have to “disaccustom” themselves from using foreign goods — a process in which they will be assisted by the progressive rise in price of the increasingly scarce foreign goods. At the same time the government will plan the development of manufacture in order to provide substitutes for goods hitherto obtained through foreign trade: foreign goods will be replaced by home produce, according as domestic manufacture, promoted through deliberate planning “and no longer left to blind chance”, steadily increases in volume. 34 Exports too will decline, and the productive capacity thus liberated will be used to produce for the domestic market. This entire transition will be planned by the government. Just how these plans will be implemented Fichte does not say.

And so, by degrees, Fichte’s state will expand its boundaries, reduce its foreign trade, and introduce increasingly stringent measures of national economic planning.

VI

A few niceties of the Fichtean system remain to be noted. Being a philosopher himself, and a philosopher of science at that, Fichte was well aware of the importance for a country not to stultify itself by keeping aloof from the achievements of science and arts elsewhere in the world. In order to achieve the highest possible living standards of the population, the government of the isolated state should attract from abroad such foreign resources as it might need and, most of all, foreign talent:

The government will attract from abroad, at any price, great minds in applied science, inventive chemists, physicists, technicians, artists, and manufacturers. It will pay what no other government could afford and so everybody will rush to serve it. It will conclude with these foreigners long-term contracts. During the years they will spend in the country they will bring into it their science and art and they will instruct nationals, and as they go abroad they will receive world currency for the domestic currency in which they will thus far have been paid. Thus, they will go back to their countries enriched with money which is acceptable there, or should they wish to stay and be naturalized, so much the better. Only one must leave them full liberty and choice, and guarantee it to them from the start — one will also buy foreign machinery and imitate it at home.35

How reminiscent is the above passage — its last lines not least so — of the practices of the Soviet Union in the 1920’s and 1930’s.

It is interesting how the logic of a system, once its fundamental assumptions are adopted, carries one, step by step, relentlessly, to almost fully foreseeable conclusions. Our modern economic planner, addicted as he is to exchange control, frowns upon an individual’s freedom to travel abroad at will. So does Fichte:

Only the scholar and the major artist should have a reason to travel out of the closed commercial state; idle curiosity must not be allowed any longer to carry its boredom across all countries. The former travels are for the best advantage of humanity and of the state. Far from interfering with them, the government should even encourage them and send scholars and artists abroad at public expense.36

But what of people who, during the transitional period, might wish to leave a country in which they might run the risk of being imprisoned? Fichte recognizes this possibility but believes that it can easily be taken care of. (So did Dr. Schacht in the 1930’s.) People, if they wish, can leave, but they will only be allowed to take with them what cash they had on hand at the time of the monetary reform. They may not take their possessions along. But let us hear once again Fichte speaking in his own words:

A significant migration might have to be expected at first by people to whom the new order — which alone is the true order — would appear oppressive, depressing, and pedantic. The state loses nothing through the departure of such persons. The amount of money that their departure would take away from the government would not be large in comparison with the total. They can take out as a maximum what cash they had at the time of the monetary reform … as much real cash as was in their possession, I repeat, because after the monetary reform they will not be allowed to sell commodities or property and exchange the proceeds against world currency. The government would know from its books where such a sale had taken place, and proceeds of such a transaction would not be converted. At the utmost they might receive abroad the interest on such sums for the rest of their life… The principal, as a part of the national wealth, remains in the country and goes to the nearest non-emigrated heirs.37

Fichte makes no bones, throughout his entire treatise, about the state using methods of compulsion to achieve the proposed objectives. He regards this as rational and normal. Indeed, he refers scornfully in the last pages of his book to those who might greatly object to his theories. These remarks are our last quotation from Der geschlossne Handelsstaat38, and they answer the question put earlier in this chapter: what is Fichte’s attitude towards individual freedom:

It is. … a trait of our generation that it wants to play. … It is very inclined, in order to satisfy this desire, to transform life itself into a game. … Because of this inclination, people want to do nothing according to rules but would like to achieve everything by chance and luck. Achievement and all human relations are to be like a gamble. … These people derive more enjoyment from the excitement of the quest than from the security of possession. These are the people who all the time call aloud for freedom of trade and production, freedom from control and police, freedom from all order and morality. To them all that aims at strict regularity and a well- ordered and steady march of events appears to be an infringement of their natural freedom.39

Clearly, there is no room for either individual freedom or friendly international relations in the kind of planned society that Fichte regards as the new and only rational order.

So long as all this was a philosopher’s daydream, Der geschlossne Handelsstaat deserved probably the relative obscurity which was its fate. Now that we are endowed with the questionable blessings of national collectivisms, Fichte’s blueprint should be widely known and carefully meditated on.

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7 Der Geschlossne Handelsstaat, op. cit., p. 4.