WEBVTT NOTE 8. Nation, State, and Economy 1 00:00:00.000 --> 00:00:07.520 Chapter 8 Nation, State and Economy Like many intellectuals of the time, Ludwig 2 00:00:07.520 --> 00:00:12.600 von Mises felt the need to come to grips with the causes and consequences of the war 3 00:00:12.600 --> 00:00:19.720 that had destroyed the Old World. For quite some time, he had anticipated a dreadful end 4 00:00:19.720 --> 00:00:24.600 to the war, and as soon as he had returned from his last mission on the front lines, 5 00:00:24.600 --> 00:00:29.760 he began to put his thoughts on paper. Despite his time-consuming involvement in the 6 00:00:29.760 --> 00:00:36.040 the new republican government, his comer activities and his duties as a professor, he continued 7 00:00:36.040 --> 00:00:41.320 working on a new manuscript, which would contain an in-depth analysis of the causes of the 8 00:00:41.320 --> 00:00:47.960 war, his personal experience of it, and the political challenges facing post-war Austria. 9 00:00:47.960 --> 00:00:52.020 As usual, he worked on the book in the evening and late night hours, after long work days 10 00:00:52.020 --> 00:00:58.960 spent with other tasks. He finished the manuscript in early July 1919, just before leaving Vienna 11 00:00:58.960 --> 00:01:06.720 for a few weeks of vacation in his beloved Bad Kastein. He had written the book as Imperialismus, 12 00:01:06.720 --> 00:01:13.160 but he published it under the title Nation, Staat und Wirtschaft, Nation, State and Economy. 13 00:01:13.160 --> 00:01:18.440 Although it is now one of his less known works, it made a great impression on many readers 14 00:01:18.440 --> 00:01:23.200 at the time and established him as the most important intellectual champion of classical 15 00:01:23.200 --> 00:01:28.360 liberalism in post-war Austria, and eventually in all of Europe. 16 00:01:28.360 --> 00:01:34.460 The first impressed reader was the young Commerce Secretary who typed the manuscript Deres Tiberger. 17 00:01:34.460 --> 00:01:40.760 She would remain his assistant until 1934, when he left for Geneva, and they would remain 18 00:01:40.760 --> 00:01:45.900 good friends for the rest of their lives. The book contains three essays on the theory 19 00:01:45.900 --> 00:01:53.360 of imperialism, with applications to the history of Germany and Austria-Hungary. In the first 20 00:01:53.360 --> 00:01:58.200 In the first chapter, which comprises almost two-thirds of the book, Mises pioneers what 21 00:01:58.200 --> 00:02:05.200 could be called the analysis of the political economy of nations, to explain German imperialism, 22 00:02:05.200 --> 00:02:10.640 which in his view was the main cause of the war. The second chapter contains a thorough 23 00:02:10.640 --> 00:02:16.200 critique of the alleged blessings of German war socialism, and the third dissects the 24 00:02:16.200 --> 00:02:21.400 history and politics of the German social democrats. The book contains most of the political 25 00:02:21.400 --> 00:02:26.760 arguments that Mises would develop in more detail during the 1920s. 26 00:02:26.760 --> 00:02:31.840 Despite the rather specific nature of the events he was dealing with, none of his observations 27 00:02:31.840 --> 00:02:36.960 have lost relevance. As he himself points out in the book, it would be a mistake to 28 00:02:36.960 --> 00:02:44.400 think of pre-1914 German imperialism as a specific problem of the Teutonic race. It 29 00:02:44.400 --> 00:02:49.440 was rather the necessary result of certain historical conditions, which are likely to 30 00:02:49.440 --> 00:03:08.800 The Peace Dictates of the year 1919 have wiped the Austro-Hungarian monarchy off the map, 31 00:03:08.800 --> 00:03:13.440 and for the future world history this empire is likely to be a dead letter. Of all its 32 00:03:13.440 --> 00:03:19.880 struggles and sufferings, nothing but some names will remain in history, also it appears 33 00:03:19.880 --> 00:03:25.960 as in the case of Cartage, but the problems which this empire has made such painful efforts 34 00:03:25.960 --> 00:03:33.380 to solve are not solved in most of its successor states. They reappear everywhere in the world 35 00:03:33.380 --> 00:03:38.800 and will for a long time occupy the minds wherever national minorities struggle for 36 00:03:38.800 --> 00:03:46.260 for the continued existence of their proper culture, migrations, mixed populations and 37 00:03:46.260 --> 00:03:54.560 modern imperialism. In 1914, the predominant political mentality in Germany was authoritarian. 38 00:03:54.560 --> 00:04:00.040 Most Germans believed that sheer physical might was the necessary and sufficient condition 39 00:04:00.040 --> 00:04:05.920 for successful politics. Because nothing was impossible to a powerful government, the essence 40 00:04:05.920 --> 00:04:10.760 The purpose of politics was to make the state irresistible. Mises believed this view to 41 00:04:10.760 --> 00:04:16.880 be short-sighted, but why did the Germans of all nations succumb to imperialism? Why 42 00:04:16.880 --> 00:04:22.920 did they not share with so much of the West the classical liberal enthusiasm for individual 43 00:04:22.920 --> 00:04:27.720 liberty, private property and national self-determination? 44 00:04:27.720 --> 00:04:32.320 Mises gave two answers, one relating to Germany's interior conditions, the other concerning 45 00:04:32.320 --> 00:04:39.680 In both cases, he showed that German imperialism resulted from a clash between the principle 46 00:04:39.680 --> 00:04:46.080 of national self-determination and the principle of democratic government. After a brief honeymoon 47 00:04:46.080 --> 00:04:52.740 with liberal ideas prior to 1848, the Germans embraced the tenets of statism because of 48 00:04:52.740 --> 00:04:59.320 certain particular conditions prevailing in the eastern provinces of Germany and Austria-Hungary. 49 00:04:59.320 --> 00:05:05.160 In these areas, the Germans were a small minority among other nations. The introduction of democratic 50 00:05:05.160 --> 00:05:09.400 government would have transferred political power from the hands of the German Central 51 00:05:09.400 --> 00:05:16.600 States to local majorities of Poles, Ukrainians, Romanians, Hungarians and Slovaks. This in 52 00:05:16.600 --> 00:05:22.440 turn would have prevented any political participation of the Hilitude-dominating Germans, because 53 00:05:22.440 --> 00:05:28.640 in a democratic system, the command of the language of the majority is an absolute necessity. 54 00:05:28.640 --> 00:05:36.240 Mises admits that great political ideas like liberalism, socialism, etc. are not language-dependent, 55 00:05:36.240 --> 00:05:41.600 but he points out that the concrete application of such general ideas is conditioned by language 56 00:05:41.600 --> 00:05:46.960 and language-dependent culture. As long as the liberal parties were in the opposition, 57 00:05:46.960 --> 00:05:53.040 the conflict between German self-determination and majority rule did not become apparent. 58 00:05:53.040 --> 00:05:58.400 In the wake of the revolution of 1848, however, popular democracy in the eastern territories 59 00:05:58.400 --> 00:06:03.560 threatened the new liberal establishment, and German liberals have been anti-democratic 60 00:06:03.560 --> 00:06:09.360 ever since. Significantly, the very first and hotly debated problem of the Constitutive 61 00:06:09.360 --> 00:06:15.600 Assembly, Constituirnder Reichstag, was to select the language for its deliberations 62 00:06:15.600 --> 00:06:21.280 starting on July 22, 1848. The second great problem of the Germans was 63 00:06:21.280 --> 00:06:27.120 their relative overpopulation. Classical liberalism had abolished more and more impediments, not 64 00:06:27.120 --> 00:06:33.320 not only to trade, but also to the free movement of persons. As a result, people migrated to 65 00:06:33.320 --> 00:06:38.800 places offering better work conditions, which made their labour more productive. Many Germans 66 00:06:38.800 --> 00:06:44.720 had moved to colonies that were predominantly populated by English settlers. Surrounded 67 00:06:44.720 --> 00:06:50.480 by an English majority, the German emigres quickly assimilated and thus were lost to 68 00:06:50.480 --> 00:06:56.280 the German nation. In a desperate attempt to counter this development, the German government 69 00:06:56.280 --> 00:07:01.400 established a system of protective tariffs to reduce the incentives of German workers 70 00:07:01.400 --> 00:07:06.820 to emigrate under the pressure of more productive foreign competition. When the failure of this 71 00:07:06.820 --> 00:07:12.600 policy became apparent, the government changed its strategy and decided instead to conquer 72 00:07:12.600 --> 00:07:19.800 British colonies. It began to build a mighty fleet to combat the Royal Navy, guardian of 73 00:07:19.800 --> 00:07:25.280 the British Overseas Empire. This in turn prompted the British entry into the First 74 00:07:25.280 --> 00:07:33.000 World War. Mises identifies population mixes with a German minority as the prime cause 75 00:07:33.000 --> 00:07:38.600 of German hostility to government by popular majority. The Germans prefer to rule as a 76 00:07:38.600 --> 00:07:45.720 minority over a majority of other nationalities rather than be ruled by them. Mises was not 77 00:07:45.720 --> 00:07:50.760 moralizing. His purpose was to explain what had happened. He would leave it to others 78 00:07:50.760 --> 00:07:56.840 to address what should have happened. The German case was unprecedented. For the first 79 00:07:56.840 --> 00:08:02.280 time in the history of liberalism, the principle of national self-determination was incompatible 80 00:08:02.280 --> 00:08:08.680 with majority rule. But imperialism was only partly a product of specific German conditions. 81 00:08:08.680 --> 00:08:15.480 It was also nourished through migrations that produced unfavourable population mixes elsewhere, 82 00:08:15.480 --> 00:08:21.440 And in this respect, the German case had a universal significance. In fact, in all countries 83 00:08:21.440 --> 00:08:27.280 where great migrations had significantly modified the national balance, imperialism had made 84 00:08:27.280 --> 00:08:34.560 an unexpected and powerful return. Mises argued that the Czechs, Russians, Poles and Hungarians 85 00:08:34.560 --> 00:08:40.280 had already followed in the footsteps of the Germans. The United States and Australia too 86 00:08:40.280 --> 00:08:46.280 Tread it on imperialist paths with their immigration policies. Mixed population induced imperialism 87 00:08:46.280 --> 00:08:53.360 had become a world problem. This modern imperialism was more powerful and destructive than its 88 00:08:53.360 --> 00:08:58.440 predecessors because it could rely on the economic achievements of the brief but very 89 00:08:58.440 --> 00:09:05.680 productive era of liberty. Modern tyrants have things much easier than their predecessors. 90 00:09:05.680 --> 00:09:10.960 He who rules the means of exchange of ideas and of goods in the economy based on the division 91 00:09:10.960 --> 00:09:16.760 of labour has his rule more firmly grounded than ever an imperator before. The rotary 92 00:09:16.760 --> 00:09:22.160 press is easy to put into fetters, and whoever controls it need not fear the competition 93 00:09:22.160 --> 00:09:28.080 of the merely spoken or written word. Things were much more difficult for the Inquisition. 94 00:09:28.080 --> 00:09:33.960 The limits of tyranny and the industrial age were by no means narrow. If it contended itself 95 00:09:33.960 --> 00:10:02.320 Only one external limit is posed to this rage for the destruction. The apparatus of the 96 00:10:02.320 --> 00:10:07.000 The economy, based on the vision of labour, cannot be reproduced, let alone extended, 97 00:10:07.000 --> 00:10:11.960 if freedom and property have disappeared. It will die out. And the economy will sink 98 00:10:11.960 --> 00:10:17.920 back into primitive forms. Only then will mankind be able to breathe more freely. 99 00:10:17.920 --> 00:10:23.160 A truly ironic and sad aspect of the war was that the German imperialist spirit had won 100 00:10:23.160 --> 00:10:29.320 over those who had set out to defeat it. Imperialism pressed weapons into the hands of all who 101 00:10:29.320 --> 00:10:57.700 In Nation, Staat und Wirtschaft, Nation, State and Economy, Mises expresses essentially 102 00:10:57.700 --> 00:11:21.380 The League of Nations, brainchild of Woodrow Wilson, was designed in a spirit of preserving 103 00:11:21.380 --> 00:11:26.740 the post-war power positions of the Anglo-Saxon and French nations, just as a hundred years 104 00:11:26.740 --> 00:11:31.980 As earlier, the Holy Alliance had been designed to conserve the new balance of power after 105 00:11:31.980 --> 00:11:38.780 the defeat of Napoleon. In the League, the imperialist ideas of 1914 are in triumph over 106 00:11:38.780 --> 00:11:45.540 those of 1789. While this ironic outcome of the struggle between liberalism and imperialism 107 00:11:45.540 --> 00:11:51.300 was tragic for the Germans, it is less decisive from the standpoint of world history. The 108 00:11:51.300 --> 00:11:56.500 chief point remains that nations are being punished and that the forfeiture theory comes 109 00:11:56.500 --> 00:12:01.740 to Life Again. If one admits exceptions to the right of self-determination of nations, 110 00:12:01.740 --> 00:12:07.140 to the disadvantage of evil nations, one has overturned the first principle of the free 111 00:12:07.140 --> 00:12:13.540 community of nations. Moreover, the League pursued a blind one-size-fits-all agenda of 112 00:12:13.540 --> 00:12:19.840 making the world safe for democracy, overlooking the inconvenient fact that democratic government 113 00:12:19.840 --> 00:12:26.880 in areas with mixed populations does not mean national liberation but national oppression. 114 00:12:26.880 --> 00:12:31.840 The League of Nations of Versailles adopts this nationality principle only for the nations 115 00:12:31.840 --> 00:12:36.720 of Europe, yet in doing so it overlooks the fact that applying this principle wherever 116 00:12:36.720 --> 00:12:41.560 the members of different peoples live mingle together only ignites conflict among peoples 117 00:12:41.560 --> 00:12:46.480 all the more. It is still more serious that the League of Nations does not recognise the 118 00:12:46.480 --> 00:12:51.040 and the freedom of movement of the person, that the United States and Australia are still 119 00:12:51.040 --> 00:12:55.020 allowed to block themselves off from unwanted immigrants. 120 00:12:55.020 --> 00:13:00.500 Such a League of Nations endures so long as it has the power to hold down its adversaries, 121 00:13:00.500 --> 00:13:05.480 its authority, and the effectiveness of its principles are built on force to which the 122 00:13:05.480 --> 00:13:10.920 disadvantaged must yield, but which they will never recognise as right. 123 00:13:10.920 --> 00:13:17.000 American Germans, Italians, Czechs, Japanese, Chinese and others regard it as just that 124 00:13:17.000 --> 00:13:22.840 the immeasurable landed wealth of North America, Australia and East India should remain the 125 00:13:22.840 --> 00:13:28.720 exclusive property of the Anglo-Saxon nation, and that the French be allowed to hedge in 126 00:13:28.720 --> 00:13:35.400 millions of square kilometres of the best land like a private park. 127 00:13:35.400 --> 00:13:40.000 Injustice had been perpetrated on the German nation, but Mises prophetically warned that 128 00:13:40.000 --> 00:13:55.440 He recommended that the Germans turn their backs on imperialism once and for all and 129 00:13:55.440 --> 00:14:00.340 seek instead national self-determination and peaceful relations with all other nations. 130 00:14:00.340 --> 00:14:05.500 This was not an ethical imperative, but a policy in the best interest of the Germans. 131 00:14:05.500 --> 00:14:11.700 To retaliate for wrongs suffered, to take revenge and to punish does satisfy lower instincts, 132 00:14:11.700 --> 00:14:15.180 but in politics the avenger harms himself no less than the enemy. 133 00:14:15.180 --> 00:14:20.380 The world community of labour is based on the reciprocal advantage of all participants. 134 00:14:20.380 --> 00:14:25.980 Whoever wants to maintain and extend it must renounce all resentment in advance. 135 00:14:25.980 --> 00:14:32.420 What would he gain from quenching his thirst for revenge at the cost of his own welfare? 136 00:14:32.420 --> 00:14:38.580 The Utilitarian Method of Social Analysis In a highly developed civilisation operating 137 00:14:38.580 --> 00:14:43.460 under an international division of labour, it was in no one's interest to wage war or 138 00:14:43.460 --> 00:14:49.700 pursue empire. Neither was it in Germany's interest to cultivate resentments against 139 00:14:49.700 --> 00:14:55.100 its present oppressors, nor later to seek revenge. And it was against the considered 140 00:14:55.100 --> 00:15:01.380 self-interests of the victorious Western Allies that they themselves pursued imperialism. 141 00:15:01.380 --> 00:15:06.720 Mises believes that such purely utilitarian considerations make a much stronger case for 142 00:15:06.720 --> 00:15:14.420 passivism than any ethical appeal to the powerful to refrain from exercising power. Mises' rationalist 143 00:15:14.420 --> 00:15:20.620 utilitarianism must not be confused with the utilitarianism of Jeremy Bentham, a British 144 00:15:20.620 --> 00:15:26.900 philosopher of the late 18th and early 19th century. Bentham had given political utilitarianism 145 00:15:26.900 --> 00:15:31.620 from its most famous expression, claiming that the purpose of politics should be to 146 00:15:31.620 --> 00:15:37.380 promote the greatest happiness of the greatest number of citizens, a normative claim. Although 147 00:15:37.380 --> 00:15:41.920 Mises was inspired by Bentham's work, he was not primarily interested in justifying 148 00:15:41.920 --> 00:15:47.260 the application of utilitarianism in politics. He would later comment on the crucial flaw 149 00:15:47.260 --> 00:15:52.900 of Bentham's political thought, which celebrated the democratic majority principle as the foundation 150 00:15:52.900 --> 00:15:58.300 for Liberty. Max Weber's work had alerted him to the necessity of discarding normative 151 00:15:58.300 --> 00:16:04.880 questions from scientific analysis. Science had to deal with the world as it is, not as 152 00:16:04.880 --> 00:16:08.380 it should be. Mises was therefore not interested in whether 153 00:16:08.380 --> 00:16:13.860 utilitarianism should guide politics but in its application. Is the policy under consideration 154 00:16:13.860 --> 00:16:18.760 suitable to attain the proposed end? This, he saw, was the kind of question that could 155 00:16:18.760 --> 00:16:24.800 should be answered objectively. Any other approach risks entanglement in normative questions, 156 00:16:24.800 --> 00:16:29.640 therefore the value of utilitarianism for the social sciences did not consist in any 157 00:16:29.640 --> 00:16:34.560 ready-made political programs advertised under its banner, but in the practical perspective 158 00:16:34.560 --> 00:16:40.840 it offered on social problems. Utilitarianism, as Mises understood it, was not a doctrine, 159 00:16:40.840 --> 00:16:47.040 but a point of view. It was the perspective of rational suitability analysis. Its categories 160 00:16:47.040 --> 00:16:50.400 were means and ends. 161 00:16:50.400 --> 00:16:54.760 These questions had a venerable tradition in economic thought. John Locke, in his analysis 162 00:16:54.760 --> 00:17:00.480 of the debasement of coinage, monetary inflation, had stressed that the crucial question was 163 00:17:00.480 --> 00:17:06.120 whether this policy would at all serve to those ends for which it is proposed, and went 164 00:17:06.120 --> 00:17:12.320 on to show that this was not the case. Similarly, Adam Smith stressed that colonial trade monopolies 165 00:17:12.320 --> 00:17:17.020 is reduced national income in all nations, even in those that were meant to benefit from 166 00:17:17.020 --> 00:17:20.960 them. At the end of a thorough review of the interventionist 167 00:17:20.960 --> 00:17:26.120 trade policies of his time, he concluded, It is thus that every system which endeavours 168 00:17:26.120 --> 00:17:30.640 either by extraordinary encouragements to draw toward a particular species of industry 169 00:17:30.640 --> 00:17:36.260 a greater share of the capital of the society than would naturally go to it, or by extraordinary 170 00:17:36.260 --> 00:17:40.900 restraints to force from a particular species of industry some share of the capital which 171 00:17:40.900 --> 00:17:45.900 which would otherwise be employed in it, is in reality subversive of the great purpose 172 00:17:45.900 --> 00:17:51.980 which it means to promote. It retards instead of accelerating the progress of the society 173 00:17:51.980 --> 00:17:57.860 toward real wealth and greatness, and diminishes instead of increasing the real value of the 174 00:17:57.860 --> 00:18:03.700 annual produce of its land and labour. Other contemporary economists also argued along 175 00:18:03.700 --> 00:18:09.220 these lines. For example, Étienne de Condillac pointed out that virtually all forms of economic 176 00:18:09.220 --> 00:18:15.580 Economic Interventionism were in fact blows against commerce. The same approach characterized 177 00:18:15.580 --> 00:18:20.560 the policy analysis of subsequent generations of economists up to Carl Menger, who had also 178 00:18:20.560 --> 00:18:27.860 been a utilitarian in the Misesian sense. In his investigations and several other writings, 179 00:18:27.860 --> 00:18:33.200 Menger had argued that economic science deals with exact economic laws and that these laws 180 00:18:33.200 --> 00:18:38.420 in turn concern the optimal use of available means to attain a given end. Menger noticed 181 00:18:38.420 --> 00:18:42.920 with great satisfaction that his colleague Heinrich Dietzel championed the same view in 182 00:18:42.920 --> 00:18:47.940 two papers he published at the same time that investigations appeared. Dietzel argued that 183 00:18:47.940 --> 00:18:55.320 economists need not postulate that human behaviour is prompted by primordial economic motivations. 184 00:18:55.320 --> 00:19:00.680 Economic science is not about motives. It is about finding the optimal means to attain 185 00:19:00.680 --> 00:19:06.420 a given end. In short, Dietzel saw economic science as a sort of social technology and 186 00:19:06.420 --> 00:19:10.980 and he eventually proposed to rename the science socio-economics. 187 00:19:10.980 --> 00:19:15.500 Menger's and Dietzl's writings had influenced those younger German language economists who 188 00:19:15.500 --> 00:19:20.360 were outside of the ambit of the historical school, most notably Ludwig Poehler, who criticised 189 00:19:20.360 --> 00:19:26.460 the socialists of the chair for assuming that good intentions would make for sound policy. 190 00:19:26.460 --> 00:19:31.460 Poehler stressed that it was necessary to analyse whether a proposed policy really had 191 00:19:31.460 --> 00:19:35.860 and the Beneficial Consequences that its advocates intended. 192 00:19:35.860 --> 00:19:40.860 Hence in his utilitarian stance, Mises continued a tradition that reached back well beyond 193 00:19:40.860 --> 00:19:46.300 Menger. In Nation, State and Economy, as well as many subsequent works, he showed that suitability 194 00:19:46.300 --> 00:19:51.860 analysis was extremely useful for the rational assessment of all the major political questions. 195 00:19:51.860 --> 00:19:57.380 In fact, the utilitarian method provided the only possible common ground for a rational 196 00:19:57.380 --> 00:20:03.180 Social Comparison of Liberalism, Socialism and Government Interventionism. Mises repeatedly 197 00:20:03.180 --> 00:20:08.060 argued that these political systems are merely different strategies for the realisation of 198 00:20:08.060 --> 00:20:14.140 a common goal, the greatest happiness of the greatest number. Therefore only the utilitarian 199 00:20:14.140 --> 00:20:20.600 method of social analysis makes possible a rational choice between these different means. 200 00:20:20.600 --> 00:20:25.800 It may be that socialism represents a better form of organisation of human labour. Let 201 00:20:25.800 --> 00:20:31.960 But whoever asserts this, try to prove it rationally. If the proof should succeed, 202 00:20:31.960 --> 00:20:37.560 then the world, democratically united by liberalism, will not hesitate to implement the communist 203 00:20:37.560 --> 00:20:43.460 community. In a democratic state, who could oppose a reform that would be bound to bring 204 00:20:43.460 --> 00:20:50.360 the greatest gain to by far the overwhelming majority? Political rationalism does not reject 205 00:20:50.360 --> 00:20:52.960 socialism on principle. 206 00:20:52.960 --> 00:20:57.380 The Fallacies of German Socialism in War and Peace 207 00:20:57.380 --> 00:21:02.220 Nation-State and Economy is a rationalist utilitarian analysis of the three manifestations 208 00:21:02.220 --> 00:21:10.220 of German imperialism. 1. Past German imperialism for the sake of national greatness. 2. Economic 209 00:21:10.220 --> 00:21:15.420 central planning in the First World War, war socialism, which accelerated the introduction 210 00:21:15.420 --> 00:21:21.880 of full-blown socialism, and 3. The blossoming imperialism of the Social Democrats, under 211 00:21:21.880 --> 00:21:27.960 under the banner of syndicalism and the dictatorship of the proletariat. Although Mises does not 212 00:21:27.960 --> 00:21:34.920 define imperialism explicitly, he understands it to be the exact opposite of self-determination, 213 00:21:34.920 --> 00:21:37.980 self-administration, self-rule. 214 00:21:37.980 --> 00:21:43.600 Liberal democracy was historically embodied in the ideas of 1789, which demanded the most 215 00:21:43.600 --> 00:21:48.760 exact and complete application of the principles of full freedom of movement of persons and 216 00:21:48.760 --> 00:21:53.280 Rewards, the most comprehensive protection of the property and freedom of each individual, 217 00:21:53.280 --> 00:21:59.640 and removal of all state compulsion in the school system. In contrast, the majority principle 218 00:21:59.640 --> 00:22:05.680 was in his eyes merely a means, rather than a constituent part of democracy. He explained 219 00:22:05.680 --> 00:22:11.560 that war socialism, far from supporting the German war effort, was one of five disastrous 220 00:22:11.560 --> 00:22:16.640 errors that had led the Central Powers to such a crushing defeat. The other errors were 221 00:22:16.640 --> 00:22:21.400 For Military and Political The military errors were 1. to expect the 222 00:22:21.400 --> 00:22:27.740 war to be short, and 2. to expect miracles from unceasing offensives. The political errors 223 00:22:27.740 --> 00:22:33.960 were 3. not to anticipate a war on all fronts, and 4. to make the interests of the East Elbian 224 00:22:33.960 --> 00:22:41.200 Junkers supreme in German politics. To its advocates, the emergency situation that confronted 225 00:22:41.200 --> 00:22:46.480 the German economy at the outset of the war, or the great tasks that it now confronted, 226 00:22:46.480 --> 00:22:51.520 were sufficient justification for compulsory central planning on all levels, but such a 227 00:22:51.520 --> 00:22:56.920 justification is based in logical fallacy. It was true, Mises granted, that there was 228 00:22:56.920 --> 00:23:01.480 an emergency and that the structure of production had to be adjusted as quickly as possible 229 00:23:01.480 --> 00:23:06.040 from peacetime to wartime conditions. But it does not follow that the government should 230 00:23:06.040 --> 00:23:10.600 then run the economy. The correct question was whether central planning would be better 231 00:23:10.600 --> 00:23:15.640 than the free market at achieving the necessary adjustments. Mises proceeded to demonstrate 232 00:23:15.640 --> 00:23:21.540 that this was not the case. His views on war finance had an impact on young free market-oriented 233 00:23:21.540 --> 00:23:27.840 economists of the interwar period, such as Stefan Pozzoni, die Wehrwirtschaft des totalen 234 00:23:27.840 --> 00:23:34.220 Krieges, and Georg Holzbauer, Warzahlung und Zahlungsmittelversorgung in militärisch besetzten 235 00:23:34.220 --> 00:23:40.600 Gebieten, but also on interventionists like Adolf Lamper, Allgemeine Wehrwirtschaft. Lamper 236 00:23:40.600 --> 00:23:45.180 had a preference for playing markets, though. He suggested that entrepreneurial activities 237 00:23:45.180 --> 00:23:50.940 Please be centrally guided. He also showed that the apparent blessings of wartime socialism 238 00:23:50.940 --> 00:23:57.020 were a dangerous illusion created by the accompanying inflation. The increase of all prices had 239 00:23:57.020 --> 00:24:01.500 falsified the economic calculations of the entrepreneurs. The higher entries in their 240 00:24:01.500 --> 00:24:06.620 books falsified their profit and loss accounting to the point that they believed they were 241 00:24:06.620 --> 00:24:12.380 making profits when in fact they were consuming their capital. Similarly, he debunked the 242 00:24:12.380 --> 00:24:17.740 The widespread myth that war finance through government debts was a way of making future 243 00:24:17.740 --> 00:24:23.220 generations pay for the war effort. This view, he said, was completely wrong. War can be 244 00:24:23.220 --> 00:24:29.580 waged only with present goods. One can fight only with weapons that are already on hand. 245 00:24:29.580 --> 00:24:34.720 One can take everything needed for war only from wealth already on hand. From the economic 246 00:24:34.720 --> 00:24:40.700 point of view, the present generation wages war, and it must also bear all material costs 247 00:24:40.700 --> 00:24:45.780 of War. He went on to explain that war financed through debts rather than through taxation 248 00:24:45.780 --> 00:24:51.900 or inflation made him modifies the future distribution of resources. General misunderstanding 249 00:24:51.900 --> 00:24:56.780 of the economic nature and consequences of wartime central planning was instrumental 250 00:24:56.780 --> 00:25:02.440 in reducing resistance to the accelerated introduction of full socialism. The socialists 251 00:25:02.440 --> 00:25:07.140 themselves denounced the wartime economic regime partly because they did not welcome 252 00:25:07.140 --> 00:25:12.220 Socialism and Association in the minds of the general public between socialism and war, 253 00:25:12.220 --> 00:25:17.900 but also in part from their own intellectual confusion. Mises objected, Socialism means 254 00:25:17.900 --> 00:25:22.320 the transfer of the means of production out of the private ownership of individuals into 255 00:25:22.320 --> 00:25:28.980 the ownership of society. That alone and nothing else is socialism. All the rest is unimportant. 256 00:25:28.980 --> 00:25:34.100 It is a matter of complete indifference for deciding our question, for example, who holds 257 00:25:34.100 --> 00:25:47.140 In the third chapter of Nation, State and Economy, Mises explained that the confusion 258 00:25:47.140 --> 00:25:51.460 about the nature of socialism resulted from the fact that the programme of the socialist 259 00:25:51.460 --> 00:25:57.780 parties in Germany and Austria integrated three distinct elements – Marxist Central 260 00:25:57.780 --> 00:26:04.900 Socialism, Syndicalism, Radical Labour Unionism, and Democratic Government. The socialists 261 00:26:04.900 --> 00:26:09.480 have championed democracy because Karl Marx's theory predicted that socialism would be the 262 00:26:09.480 --> 00:26:15.660 rule of the proletarian majority. Mises observed that the German socialists have stuck to the 263 00:26:15.660 --> 00:26:21.100 tenet of democracy only because until 1914 they had always been in the opposition and 264 00:26:21.100 --> 00:26:27.000 therefore bore no responsibility for their co-nationals in the Eastern Territories. 265 00:26:27.000 --> 00:26:31.680 At the onset of the First World War, when they came to power in Germany and Austria, 266 00:26:31.680 --> 00:26:36.520 they slowly changed their minds, and would have followed in the footsteps of the German 267 00:26:36.520 --> 00:26:41.280 liberals, but with the loss of the eastern provinces the problem of mixed nations disappeared 268 00:26:41.280 --> 00:26:46.840 as well. This part of their programme in which they continued the old classical liberal agenda 269 00:26:46.840 --> 00:26:51.960 that German liberals themselves had abandoned, had created widespread sympathy for the socialist 270 00:26:51.960 --> 00:26:58.240 was cause even in bourgeois circles, but majority rule was not a central tenet of socialism. 271 00:26:58.240 --> 00:27:03.640 The only essential element was central control of all means of production through a dictatorship 272 00:27:03.640 --> 00:27:09.420 of the proletariat, and it was this precept of the socialist creed that would have to 273 00:27:09.420 --> 00:27:16.240 stand up to rational scrutiny, or else socialism would have to be discarded. Is the compulsory 274 00:27:16.240 --> 00:27:22.400 be central control of production more efficient than private ownership of the means of production. 275 00:27:22.400 --> 00:27:27.880 All other considerations were secondary. For example, Mises observed that there was no 276 00:27:27.880 --> 00:27:33.840 necessity in 1919 to wait for the proletarians to become a majority in Germany and Austria 277 00:27:33.840 --> 00:27:38.600 because the majority of the general population was already socialist. But if the socialist 278 00:27:38.600 --> 00:27:44.160 case for central planning was invalid, then no power on earth could maintain a socialist 279 00:27:44.160 --> 00:27:47.340 Socialist Order The dictatorship of the proletariat wants 280 00:27:47.340 --> 00:27:54.020 to use terror to nip any stirring up of opposition in the bud. Socialism is believed established 281 00:27:54.020 --> 00:27:59.560 for all eternity once its property has been taken away from the bourgeoisie, and all possibility 282 00:27:59.560 --> 00:28:04.400 of public criticism has been abolished. It cannot be denied, of course, that much can 283 00:28:04.400 --> 00:28:10.040 be done in this way, that above all, all European civilisation can thus be destroyed, but one 284 00:28:10.040 --> 00:28:14.960 does not thereby build a socialist order of society. If the communist social order is 285 00:28:14.960 --> 00:28:19.400 less suited than one resting on private ownership of the means of production to bring about 286 00:28:19.400 --> 00:28:24.880 the greatest happiness of the greatest number, then the ideas of liberalism cannot be killed 287 00:28:24.880 --> 00:28:31.120 even by terrorist measures. Mises pointed out that the socialist case crucially relied 288 00:28:31.120 --> 00:28:36.720 on the conviction that once the socialised society is realised, its members would be guided 289 00:28:36.720 --> 00:28:42.660 by entirely different motivation than from those of their former lives. Rather than pursuing 290 00:28:42.660 --> 00:28:47.760 their own interests, they would now think only of serving their community. But if one 291 00:28:47.760 --> 00:28:53.500 is sceptical of the feasibility of such a new socialist man, if one seeks instead a 292 00:28:53.500 --> 00:28:58.200 system that will reconcile the private interests of real-world human beings with those of the 293 00:28:58.200 --> 00:29:05.420 larger community, then liberalism had already found such a system, private property. In 294 00:29:05.420 --> 00:29:10.080 In his later work based on the socialist calculation argument, he would show that the problem is 295 00:29:10.080 --> 00:29:15.940 the impossibility of identifying what the interests of the Commonwealth are. 296 00:29:15.940 --> 00:29:20.360 In their daily politics, the socialists had long since turned away from Marxist orthodoxy 297 00:29:20.360 --> 00:29:25.940 to become the political branch of the labour unions, which Marx had despised as petty bourgeois. 298 00:29:25.940 --> 00:29:30.120 They espoused the down-to-earth agenda of their constituency and trumpeted their Marxist 299 00:29:30.120 --> 00:29:33.960 heritage only in election speeches. 300 00:29:33.960 --> 00:29:38.120 But from both the theoretical and practical point of view, the labour unionist programme 301 00:29:38.120 --> 00:29:46.120 was even worse than Marxist socialism. It destroyed the division of labour and the spirit of cooperation. 302 00:29:46.120 --> 00:29:50.640 Syndicalism deliberately places the producer interest of the workers in the foreground. 303 00:29:50.640 --> 00:29:56.120 In making worker groups owners of the means of production, not in so many words, but in 304 00:29:56.120 --> 00:30:02.440 substance, it does not abolish private property. It also does not assure equality. It does 305 00:30:02.440 --> 00:30:08.160 has removed the existing inequality of distribution, but introduces a new one, for the value of 306 00:30:08.160 --> 00:30:12.840 the capital invested in individual enterprises or sectors of production does not correspond 307 00:30:12.840 --> 00:30:18.200 at all to the number of workers employed in them. The income of each single worker will 308 00:30:18.200 --> 00:30:22.100 be all the greater the smaller the number of fellow workers employed in his enterprise 309 00:30:22.100 --> 00:30:26.720 or sector of production, and the greater the value of the material means of production 310 00:30:26.720 --> 00:30:32.400 employed in it. This syndicalistically organised state would be no socialist state, but a state 311 00:30:32.400 --> 00:30:37.200 The state of worker capitalism, since the individual worker groups would be owners of 312 00:30:37.200 --> 00:30:43.760 the capital. Syndicalism would make all repatterning of production impossible. It leaves no room 313 00:30:43.760 --> 00:30:49.480 for free economic progress. In its entire intellectual character, it suits the age of 314 00:30:49.480 --> 00:30:57.560 peasants and craftsmen, in which economic relations are rather stationary. Labour unionism is 315 00:30:57.560 --> 00:31:05.080 is therefore purely destructive. It is locally organised robbery elevated to a general principle. 316 00:31:05.080 --> 00:31:12.320 Mises's criticism did not focus on its moral reprehensibility, however, but on its inability 317 00:31:12.320 --> 00:31:17.960 to sustain the large-scale division of labour characteristic of modern civilisation. Labour 318 00:31:17.960 --> 00:31:24.040 unionism was an utterly unsuitable means to pursue the greatest happiness of the greatest 319 00:31:24.040 --> 00:31:31.360 Number, Political Economy of Language Communities. In his criticism of imperialist policies in 320 00:31:31.360 --> 00:31:37.500 the service of socialism, labour unionism, and the socialist war economy, Mises could 321 00:31:37.500 --> 00:31:44.120 restate many conventional arguments. He faced an unprecedented task in confronting the claim 322 00:31:44.120 --> 00:31:50.360 that imperialism can enhance the welfare of a nation. His pioneering analysis brilliantly 323 00:31:50.360 --> 00:31:57.400 We confirmed Carl Menger's insight that methodological individualism is able to analyse even large 324 00:31:57.400 --> 00:32:03.440 collective phenomena. The main thesis in the first chapter of nation-state and economy 325 00:32:03.440 --> 00:32:08.520 is that governments are incapable of improving the condition of the nations they rule. The 326 00:32:08.520 --> 00:32:14.600 reason is that the origin, emergence, growth, flower and decline of nations are subject 327 00:32:14.600 --> 00:32:19.760 to natural laws. The operation of these laws can be modified by government power, but not 328 00:32:19.760 --> 00:32:24.400 are not abrogated, and any alteration will play out to the detriment of the nation. Mises 329 00:32:24.400 --> 00:32:29.300 proved his case by first analysing nations in a free society and then turning to examine 330 00:32:29.300 --> 00:32:35.680 the impact of government power on their evolution. His practical conclusions called for the denationalisation 331 00:32:35.680 --> 00:32:40.860 of the nation, or more precisely for keeping government intervention as far as possible 332 00:32:40.860 --> 00:32:47.760 out of the life of language communities. Following Scherer, Grimm and Ottobauer, Mises defined 333 00:32:47.760 --> 00:32:53.960 and Nations as Language Communities. He stressed that as far as democratic regimes are concerned, 334 00:32:53.960 --> 00:32:59.600 this definition is more than a mere convention. In democracies, communication and thus language 335 00:32:59.600 --> 00:33:06.080 is the primary political means. Language communities are therefore of critical political importance. 336 00:33:06.080 --> 00:33:11.720 He stated that a nation's specific language generated specific political constructions, 337 00:33:11.720 --> 00:33:16.520 and in particular specific foundational ideas determining the operation of their governments. 338 00:33:16.520 --> 00:33:18.040 Staatsgedanken. 339 00:33:18.040 --> 00:33:22.260 Mises did not argue that language communities are the only factor, or the most important 340 00:33:22.260 --> 00:33:28.520 one in modern politics. He speculated that racial communities were far more important. 341 00:33:28.520 --> 00:33:33.020 The problem was that the sociology of race and of race relations was not sufficiently 342 00:33:33.020 --> 00:33:37.460 developed to warrant scientific statements. He acknowledged, however, that it had become 343 00:33:37.460 --> 00:33:42.040 a principle of modern political world law that it is no longer acceptable to use force 344 00:33:42.040 --> 00:33:58.160 German imperialism made enemies in all quarters by violating this distinction. What were the 345 00:33:58.160 --> 00:34:02.800 natural laws determining the rise and fall of language communities? Mises considered 346 00:34:02.800 --> 00:34:08.320 various objective factors determining their evolution. For example, he examined the role 347 00:34:08.320 --> 00:34:12.080 School of Written Language and stated that it had played a crucial role in the competition 348 00:34:12.080 --> 00:34:17.840 between dialects. The first written dialect became the standard language, but his decisive 349 00:34:17.840 --> 00:34:22.720 considerations start from the fact that the membership in the language community is not 350 00:34:22.720 --> 00:34:28.280 something unalterable. Each human person can decide to leave his former nation and join 351 00:34:28.280 --> 00:34:35.480 another. In a free society, Mises stressed, nations would be purely voluntary associations. 352 00:34:35.480 --> 00:34:41.200 No people and no part of a people shall be held against its will in a political association 353 00:34:41.200 --> 00:34:47.880 that it does not want. The totality of freedom-minded persons who are intent on forming a state 354 00:34:47.880 --> 00:34:53.720 appears as the political nation, patrie, fatalant, becomes the designation of the country they 355 00:34:53.720 --> 00:35:01.840 inhabit, patriot becomes a synonym of free-minded. Liberalism knows no conquests, no annexations, 356 00:35:01.840 --> 00:35:07.280 just as it is indifferent towards the State itself, so the problem of the size of the 357 00:35:07.280 --> 00:35:13.200 State is unimportant to it. It forces no one against his will into the structure of the 358 00:35:13.200 --> 00:35:18.440 State. Whoever wants to emigrate is not held back. When a part of the people of the State 359 00:35:18.440 --> 00:35:24.480 wants to drop out of the Union, liberalism does not hinder it from doing so. Colonies 360 00:35:24.480 --> 00:35:30.960 that want to become independent need only do so. The nation, as an organic entity, can 361 00:35:30.960 --> 00:35:36.640 can be neither increased nor reduced by changes in states. The world as a whole can neither 362 00:35:36.640 --> 00:35:39.780 win nor lose from them. 363 00:35:39.780 --> 00:35:46.280 What then determines individual membership in a language community? Neglecting objective 364 00:35:46.280 --> 00:35:51.360 factors such as the familial, historical, cultural and political environments of the 365 00:35:51.360 --> 00:35:57.800 individual, Mises focused on the voluntary factor of assimilation. He asserted that for 366 00:35:57.800 --> 00:36:02.120 For practical reasons, language minorities tend to assimilate to the language minorities 367 00:36:02.120 --> 00:36:07.320 with whom they are affiliated through trade and other forms of social intercourse. Therefore, 368 00:36:07.320 --> 00:36:12.920 local minority nations, ceteris paribus, tend to disappear in the course of time. Mises 369 00:36:12.920 --> 00:36:17.620 stressed that this assimilation process was dependent on individual membership in certain 370 00:36:17.620 --> 00:36:23.940 social classes, because social contacts were class-dependent. Minorities could preserve 371 00:36:23.940 --> 00:36:28.740 have a separate existence for as long as spatial and social mobility were heavily controlled 372 00:36:28.740 --> 00:36:36.020 through custom and laws. Things changed radically when classical liberalism abolished such laws. 373 00:36:36.020 --> 00:36:41.980 The result was a dramatic migration, both physical and social, that disrupted the established 374 00:36:41.980 --> 00:36:46.740 balances between nations. Mises gave special attention to the impact of the increased spatial 375 00:36:46.740 --> 00:36:53.260 mobility, which by the late 19th century had already reached a massive scale. These migrations 376 00:36:53.260 --> 00:37:07.860 Mises did not believe these movements could be stopped because they reflected the self-interest 377 00:37:07.860 --> 00:37:08.860 of the migrants. 378 00:37:08.860 --> 00:37:13.840 En passant, he mentioned his contribution to the economics of migration by highlighting 379 00:37:13.840 --> 00:37:20.940 the importance of relative overpopulation in distinction to already known absolute overpopulation. 380 00:37:20.940 --> 00:37:26.900 He had developed the concept of relative overpopulation in his Von Ziel der Handelspolitik. What could 381 00:37:26.900 --> 00:37:32.180 be done then to alleviate the national conflicts that were the necessary consequence of those 382 00:37:32.180 --> 00:37:37.340 migrations? The only viable solution, Mises argued, was to reduce the role of the state 383 00:37:37.340 --> 00:37:42.180 within society, because the political conflicts between nationalities primarily concerned 384 00:37:42.180 --> 00:37:46.460 control of the state apparatus. Of course, the struggle of nationalities over the state 385 00:37:46.460 --> 00:37:50.900 and government cannot disappear completely from polyglot territories, but it will lose 386 00:37:50.900 --> 00:37:55.220 sharpness to the extent that the functions of the state are restricted and the freedom 387 00:37:55.220 --> 00:38:01.100 of the individual is extended. Whoever wishes peace among peoples must fight statism. 388 00:38:01.100 --> 00:38:05.820 The way to eternal peace does not lead through strengthening state and central power, as 389 00:38:05.820 --> 00:38:11.980 socialism strives for. The greater the scope the state claims in the life of the individual 390 00:38:11.980 --> 00:38:15.860 and the more important politics becomes for it, the more areas of friction are thereby 391 00:38:15.860 --> 00:38:21.860 are created in territories with mixed population, limiting state power to a minimum, as liberalism 392 00:38:21.860 --> 00:38:26.520 sought would considerably soften the antagonisms between different nations that live side by 393 00:38:26.520 --> 00:38:31.920 side in the same territory. The only true national autonomy is the freedom of the individual 394 00:38:31.920 --> 00:38:38.220 against the state and society. The statification of life and of the economy leads with necessity 395 00:38:38.220 --> 00:38:43.220 to the struggle of nations. Mises offered here a radical alternative to the prevalent 396 00:38:43.220 --> 00:38:48.480 Models for Solving National Conflicts. Austria had the longest experience with national struggles 397 00:38:48.480 --> 00:38:53.140 within a common state, and its intellectual, political and institutional history was therefore 398 00:38:53.140 --> 00:38:57.660 richer than that of any other country in analysing and solving this problem. 399 00:38:57.660 --> 00:39:02.780 For example, the constitution of the Austrian great dukedom of Siebenbergen, which existed 400 00:39:02.780 --> 00:39:09.620 until 1848, provided for separate parliaments and administrations for Saxons, Germans, Hungarians 401 00:39:09.620 --> 00:39:15.060 and secular. Affairs of general interest were dealt with in a common parliament which debated 402 00:39:15.060 --> 00:39:20.500 in Latin. The ugly side of this otherwise charming arrangement was that the Romanians, 403 00:39:20.500 --> 00:39:25.860 who were in the numerical majority in Siebenbürgen, had no representation. During the revolution 404 00:39:25.860 --> 00:39:31.380 of 1848, a promising approach was developed to overcome this and similar problems. On 405 00:39:31.380 --> 00:39:37.420 March 4, 1849, the deputies of the Constituent Assembly, which had by then moved on to the 406 00:39:37.420 --> 00:39:42.980 The City of Kremzier voted on a proposed Kremzier constitution, the point of which was to abolish 407 00:39:42.980 --> 00:39:49.140 the old territorial units composing the empire, the kingdoms and lands, and to replace them 408 00:39:49.140 --> 00:39:53.300 with administrative counties, the boundaries of which would be drawn according to the national 409 00:39:53.300 --> 00:39:55.980 affiliations of the inhabitants. 410 00:39:55.980 --> 00:40:00.580 The German nationalists reacted on the very same day with a counter-proposal presented 411 00:40:00.580 --> 00:40:02.740 by Prince Schwarzenwerke. 412 00:40:02.740 --> 00:40:06.940 From then on, the principle of equal legal treatment of the different languages was on 413 00:40:06.940 --> 00:40:14.740 The Failure of the Revolution prevented the practical application of the Kremsier Constitution, 414 00:40:14.740 --> 00:40:20.040 but the idea lived on, especially in the various programmes of the Social Democratic Party. 415 00:40:20.040 --> 00:40:24.760 At their 1899 convention in Brünn, the Social Democrats decided to tackle the problem of 416 00:40:24.760 --> 00:40:30.760 national conflicts by creating parallel state organisations along national lines. This approach, 417 00:40:30.760 --> 00:40:35.700 they believed, would ensure national autonomy to each nation, and thus prevent struggles 418 00:40:35.700 --> 00:40:50.100 The Social Democratic Faction in the Central Parliament thereafter called itself Union of 419 00:40:50.100 --> 00:40:55.140 Social Democratic Deputies. In the following years its intellectual leaders Carl Renner 420 00:40:55.140 --> 00:41:01.120 and young Otto Bauer revived and refined and popularised the idea of replacing the old 421 00:41:01.120 --> 00:41:06.520 Territorial Units with New National Counties. Before the First World War, Carl Renner published 422 00:41:06.520 --> 00:41:12.800 his ideas on the nationality question under the synonym Synopticus and Rudolf Springer. 423 00:41:12.800 --> 00:41:18.240 At the end of the First World War, he published under his true name das Selbstbestimmungsrecht 424 00:41:18.240 --> 00:41:24.500 der Nationen in besonderer Anwendung auf Österreich. It turned out, however, that nationalistic 425 00:41:24.500 --> 00:41:29.920 passions were too strong to be tamed even by the spirit of socialist solidarity. After 426 00:41:29.920 --> 00:41:34.760 After the introduction of universal suffrage in 1907, the party quickly dissolved into 427 00:41:34.760 --> 00:41:38.960 national organisations and lost all impact on Austrian politics. 428 00:41:38.960 --> 00:41:43.160 With hindsight, and with the help of Mises' theory, we can identify the root cause of 429 00:41:43.160 --> 00:41:44.160 these failures. 430 00:41:44.160 --> 00:41:48.800 All of his predecessors had tried to use government to solve the problem of national struggles. 431 00:41:48.800 --> 00:41:53.800 None of them recognised or admitted that coercive association, the sine qua non of the state, 432 00:41:53.800 --> 00:41:56.240 was the very source of national conflicts. 433 00:41:56.240 --> 00:42:00.920 A different government scheme cannot possibly be a solution for a conflict caused by the 434 00:42:00.920 --> 00:42:08.800 nature of government itself. But how far could one go in keeping the state out of society? 435 00:42:08.800 --> 00:42:14.840 How far should one go? Mises argued that the only limits are of a technical administrative 436 00:42:14.840 --> 00:42:21.200 nature. The size of a state's territory does not matter. It is another question whether 437 00:42:21.200 --> 00:42:26.880 Here a state is viable when its population is small. Now it is to be noted that the costs 438 00:42:26.880 --> 00:42:32.400 of many state activities are greater in small states than in large ones. The dwarf states, 439 00:42:32.400 --> 00:42:37.160 of which we still have a number in Europe, like Liechtenstein, Andorra and Monaco, can 440 00:42:37.160 --> 00:42:41.400 organise their court systems by levels of jurisdiction, for example only if they link 441 00:42:41.400 --> 00:42:46.040 up with a neighbouring state. It is clear that it would be financially quite impossible 442 00:42:46.040 --> 00:43:01.880 Hence, Mises advocated a complete liberalisation of society. There should be no political limits 443 00:43:01.880 --> 00:43:07.520 to this process, and it would in practice be limited only by banal technical considerations. 444 00:43:07.520 --> 00:43:11.380 In other words, Mises welcomed the unhampered competition among national territories, which 445 00:43:11.380 --> 00:43:17.120 which in a free, inter-national society would be a peaceful competition between language-based 446 00:43:17.120 --> 00:43:21.300 cultures in which each individual, through its assimilation choices, would determine 447 00:43:21.300 --> 00:43:27.380 the fate of the various language communities. Mises sensed that the only dignified attitude 448 00:43:27.380 --> 00:43:32.260 toward the reality of cultural competition was national self-confidence, a nation that 449 00:43:32.260 --> 00:43:37.360 believes in itself and its future, a nation that means to stress the sure feeling that 450 00:43:37.360 --> 00:43:41.560 that its members are bound to one another not merely by accident of birth but also by 451 00:43:41.560 --> 00:43:47.100 the common possession of a culture that is valuable above all to each of them would necessarily 452 00:43:47.100 --> 00:43:52.320 be able to remain unperturbed when it saw individual persons shift to other nations. 453 00:43:52.320 --> 00:43:56.560 A people conscious of its own worth would refrain from forcibly detaining those who 454 00:43:56.560 --> 00:44:01.380 wanted to move away and from forcibly incorporating into the national community those who were 455 00:44:01.380 --> 00:44:06.320 not joining it of their free will. To let the attractive force of its own culture prove 456 00:44:06.320 --> 00:44:25.360 Mises argued not only that political rule is unnecessary to improve the condition of 457 00:44:25.360 --> 00:44:31.360 a nation, but also that it is incapable of doing so. In a free society, people constantly 458 00:44:31.360 --> 00:44:53.440 With this consideration, Mises complemented the Ricardian analysis of free trade, which 459 00:44:53.440 --> 00:44:57.920 was based on the assumption that capital and labour were mobile only within the borders 460 00:44:57.920 --> 00:44:59.440 of the State. 461 00:44:59.440 --> 00:45:05.120 In a liberalised world, therefore, there would be a tendency away from differences in income. 462 00:45:05.120 --> 00:45:08.520 There would eventually be no rich or poor countries in the world, there would only be 463 00:45:08.520 --> 00:45:13.480 countries that are more densely populated and other countries that are less so. 464 00:45:13.480 --> 00:45:18.120 Mises pointed out that government intervention does not change anything about people's motives 465 00:45:18.120 --> 00:45:22.220 to migrate from relatively poor areas into relatively rich ones. 466 00:45:22.220 --> 00:45:26.620 On the contrary, if government tries to keep its people in the land through a system of 467 00:45:26.620 --> 00:45:32.220 of Protective Tariffs. It only exacerbates the problem. Protective tariffs might prevent 468 00:45:32.220 --> 00:45:36.180 the emigration of those who would be most affected by foreign competition, but they 469 00:45:36.180 --> 00:45:41.140 reduce the per capita income of all the other members of society, further multiplying the 470 00:45:41.140 --> 00:45:49.340 incentives for emigration. Again, a dispassionate suitability analysis comes out against government 471 00:45:49.340 --> 00:45:55.180 intervention. Mises concluded that the only rational approach in matters of political 472 00:45:55.180 --> 00:46:02.340 Nationalism was to follow classical liberal precepts, shrink the state, open borders, 473 00:46:02.340 --> 00:46:06.180 and face the cultural competition of international migrations.