World War I has frequently been described as one of the big watershed marks of history.
What I want to do is to explain what the difference between the pre-World War I history and post-World War I history consists.
and explain that from World War I on we have some reason to label this period a period of decivilization.
I want to do the following things. First I want to present you in very brief form an economic theory.
Then I want to apply this theory to post and pre-World War I and then I want to show you the predictive power of this theory.
Let me begin with theory. Government is a territorial monopolist of compulsion or a territorial monopolist of property rights violations.
and all governments should be expected to have a tendency toward growth
and all governments should also be expected as having a tendency towards territorial expansion.
However, different forms of government affect, so to speak, these two tendencies towards internal growth
and towards territorial expansion.
We can distinguish between two types of governmental forms.
What I try to do now is something that I have never seen in the literature done,
even though it is a very elementary idea.
We can use the distinction of economics between private property and public property
also by applying it to the institution of government.
Governments can be privately owned, which would be a situation where there exists a ruler who owns the government as if it would be his private property.
In particular, he would have the right to pass the property in the government on to future generations.
And we can have publicly owned government. When government is, when caretakers are in charge of government who do not own the government, but temporarily are in charge of governments, they of course cannot pass property in government onto future generations, and publicly owned government would be also institutions where there is free entry, so to speak, into the institutions
Now, from this difference between privately owned government and publicly owned government,
a number of deductions can be made using a few additional assumptions.
I go very quickly through these.
First of all, we can say, a private owner of a government has an economic incentive to
maximize his total wealth. That is to say, he will be interested in preserving the capital
value of the government of his realm, so to speak. On the other hand, if governments are
are publicly owned. The economic incentive of such caretakers is not to preserve the
capital value of the realm or the government, but his incentive is to loot the country as
quickly as possible because what he can't loot now, he might never be able to loot in
the future.
The second prediction is intimately related to the first one, and it's this. Because of the fact that into a public government there exists free entry, whereas a privately owned government is very restrictive, you pass it on to future generations yourself,
There exists in private governments a clear-cut distinction, so to speak, between the rulers
and those people who are being ruled. Everybody clearly realizes, they are the rulers and
I am being ruled. On the other hand, in a publicly owned government, you might be among
the ruled right now, but you have the chance to become the ruler tomorrow. Everybody can
Nobody can become the president, so to speak. Nobody can become the king. As a consequence,
there will be on the part of the public more resistance against the rule by a private person
than against a person who can be substituted by other individuals. So there will be a resistance
against government rule much more pronounced under private government than under publicly
The Third Prediction is, a private owner of a government would for instance not incur
debt as likely as a publicly owned government caretaker would, because a publicly owned
caretaker is exempt from liability for debts that he incurs. The debts will be paid by
by future caretakers and not by himself.
The fourth prediction is a private owner of a government will refrain to a large extent
from redistributing income within civil society.
What he will do is redistribute income from civil society onto himself.
Why would he restrict himself from redistributing income within civil society?
because he realizes if you redistribute income within civil society it will lower so to speak
the value of his realm, encourage unproductive behavior and so on and he will refrain from
it.
On the other hand a public, a caretaker of a government because he has to be re-elected
will of course make tremendous efforts to redistribute income within civil society.
After all he has to be re-elected by those people and by making promises to them he knows
that this is the way to become re-elected.
And the fifth prediction concerns now war and foreign policy.
That is the following, while private owners also have a tendency to go to war and to expand
and Their Territories, private owners have recourse to a different way of expanding their
territory and that is by engaging in marriage policy. I can simply marry my kid to somebody
else's kid, another ruler and thereby all of a sudden my territory is much bigger. So
I can resort to peaceful means so to speak in order to enlarge my territory whereas if
If I'm a public, if I'm a caretaker, there is no other way but to engage in conquest.
Okay, now I want to apply this theory. First I want to explain now why World War I is so
to speak the point in history to which this theory can be applied. Obviously implicit
in what I have said so far is that private governments, the way I have described it,
the typical example, historical example, are monarchies. On the other hand, publicly owned
government, the typical example for that would be democratic republics. In history, we can
say that most of human history, insofar as we had any governments at all, mankind was
ruled by monarchs. There exist a few exceptions, Athens in classical Greece, the Roman Republic,
Venice and Florence during the Renaissance period, the United Provinces, what later on
World War I became the Netherlands from 1648 to 1673, then the Cromwell period and also Switzerland, but these were exceptions and usually short-lived exceptions.
Most of the world was ruled by monarchs.
The significance of World War I, the world historical significance of World War I consists in the fact that World War I constitutes a point in time when we leave, so to speak, the monarchical age in which mankind lived before and enter, so to speak, the democratic republican age.
The transition from the monarchical age to the republican age took place from the time of the French Revolution until World War I.
The first republic, major republic in Europe was obviously the French Republic.
After Napoleon's defeat in the Congress of Vienna in 1815, the monarchical order is restored
in Europe. However, the French Revolution left some important traces, so to speak. And
These traces can be identified as the tendency during the entire 19th century to gradually
increase the franchise. There existed practically no franchise before that. In Britain, in France
For instance, universal franchises introduced again in 1848, in universal male franchise.
Even the most ardent proponents of universal franchise only considered males in the 19th
century. Females were included as just something that occurred only in 20th century. In Britain,
The expansion of the franchise occurs in 1832, in 1867, again an expansion takes place again
in 1884 and by 1900 about three-fourths of all male adults have the right to vote.
In Prussia, universal male suffrage is introduced in 1850, however that is still stratified
into three different classes depending on the amount of taxes that people pay, and in 1871,
Universal Mail franchise is also adopted for the lower house in Germany. In Italy, Universal
franchise, essentially Universal franchise is introduced in 1913, in Austria in 1907.
in 1907. In addition, between 1890 and 1910, Universal Franchise exists, is introduced
in Belgium, in the Netherlands, in Norway, in Sweden, in Spain, in Greece, Bulgaria,
Serbia and Turkey. Despite this emasculation, so to speak, of monarchies that took place
during the 19th century, there still exists only two republics at the outbreak of World
War I, Switzerland and France. And only one major monarchy can be described as a parliamentary
monarchy, that is a monarchy where the power rests with parliament instead of resting with
After World War I, however, the entire world becomes democratic republican due to the entrance
of the United States into World War I. From the point of view of Wilson, the war was an
ideological war, a war also directed against the monarchs in Europe, especially against
The Habsburg Monarchy in Austria and the Hohenzollern in Germany. As a result of World War I, the Romanovs are ousted in Russia, the Hohenzollerns are ousted in Germany, the Habsburgs are ousted in Austria, all other countries, even those countries that are nominally remaining monarchical in order
are no longer monarchies because all power rests now with parliaments and we have after World War I almost everywhere introduced universal male and female suffrage.
All newly created states after World War I, turn democratic, republican, to give you here the newly created states, Poland, Finland, Estonia, Latvia, Lithuania, Hungary, Czechoslovakia, all of those originate after World War I, come about as the result of the destruction of the Austrian-Hungarian Empire and Russia in particular.
Now let me just illustrate, so to speak, the predictive power of the theory that I presented
by comparing the pre-World War I history with post-World War I history.
First, taxation.
During the entire monarchical age, there was a slight tendency for governments to increase
is the overall tax load. But for hundreds of years, basically the amount of taxes collected
by government did not exceed 5 to 8% of GNP, of national product. There existed no income
Income Tax, practically no country income tax before 1914. And by 1900, even with the expansion
of the franchise, the government size in all European countries averages no more than about
of 10% of national product. Since the onset of the Democratic-Republican age, government
taxes as percentage of GNP during the 1920s and 1930s increased to 20 to 30 percent, and
In the present time, tax load as percentage of GNP has reached 50% within less than 100
years, after several hundred years of practically no increase in overall amount of taxes.
If you look at government employment, government employment consisted of no more than 2 to
3%, almost through the entire monarchical age, several hundred years. Government employment
nowadays with, so to speak, free entry into the apparatus of government in all western
countries is somehow between 15 and 20% of the labor force. If we look at things like
by inflation. The monarchical age was characterized by and large by the existence of a commodity
money. No single individual could be trusted, so to speak, having the monopoly of printing
a pure paper money currency. The republican age, however, where rule becomes anonymous,
The republican age has been characterized by in the beginning a gold exchange standard
which is a fake gold standard and then finally by a pure paper money standard.
If I compare let's say Great Britain being the leading financial power in the 19th century
with the United States being the leading power in the 20th century, in England for instance
Under a commodity money standard, from 1660 to 1760, prices continuously fell.
From 1760 to 1860, prices continuously fell.
From 1860 until 1910, wholesale price index fell from 100 points to 80 points.
The money supply in Great Britain from 1845 to 1918, a period of more than 70 years, increased
about six-fold.
If you compare this now with, so to speak, the new age, then you find this.
United States price index, wholesale price index in 1921 was 113, in 1948 it was 185,
in 1971 it was 255, in 1981 it was 658, and in 1991 it was above 1000.
So continuous increase in the money supply. If you look at money supply figures, you find
that from 1918 to 1991, again a period of 70 years, the money supply in the United States
increased about 64-fold. It doubled from 1918 to 1939, then it doubled again by 1944, then
If you look at debt and interest. During the monarchical age, government debts were essentially war debts. That is, during wars, debt was incurred and because wars were frequently lit,
said that the overall tendency for debt was to increase. However, during peace periods,
the debt load usually was reduced. England had before World War I a lower debt load than
it had after the Napoleonic Wars. That is, for a hundred years, a significant reduction
in the debt load occurred. In addition, kings usually had to pay above-market interest rates
in order to secure loans, because people realized, of course, there is a tremendous risk to loan
money to these guys. On the other hand, if you compare now the current system of debt,
you find that, first of all, debt now increases in peacetime and in wartime. There is absolutely
We know a period when debt does not increase and secondly debt is now sold at actually below market rate, market interest rates because governments can monetize their debt. They basically print up money in order to finance their debt.
If we look at interest rates as a particularly interesting indicator, the overall, the secular trend of interest rates is to fall.
If we go to the beginning of civilization, we find that in classical Greece interest rates were about 16 to 18 percent.
And the overall tendency was sometimes upward trends and sometimes downward trends, but the overall trend of interest rates was to continuously fall.
By 1900, the interest rates in all European countries, minimum interest rates, were significantly
below 3% and approaching 2%.
If we compare this with the Democratic-Republican age, we find that during the Republican age,
interest rates did no longer fall.
Despite the fact that real incomes in the current times are higher and we should expect that interest rates are lower,
20th century interest rates have always been above 19th century interest rates.
Even if we take into account, for instance, the fact that at least from the 1970s on there is an inflation premium built into the nominal interest rate
and we subtract this inflation premium in order to get some sort of estimate of the real interest rate we still find that on the average interest rates seem to be around 4 to 5% in the 20th century, this is interest rates are now as high as they were in the 15th century in Europe and savings influencing
and of course interest rates.
Savings in the United States are about 5% of disposable income, which is about the same
savings rate as we had in 17th century England, when people were extremely much poorer than
they are now and it would have been obviously much more difficult for people to save then.
Next Indicator, Law, Legislation, Welfare and Crime. Legislation under the monarchical
age basically did not exist. Monarchs did not create new laws. They accepted the pre-existing
private property law. They assumed or they accepted for themselves also the rules of
private property. In the meantime, of course, we have, just as we have paper money inflation,
We also have now legal inflation.
Every country in the meantime passes tens of thousands of laws every single year, creating
of course a tremendous amount of legal uncertainty.
Welfare, monarchies took in on the average, as I said, during the 19th century for instance
Today, governments take in 50% of national product and of that they spend 10-20% on military
Expenditure, which would be about 5 to 10 percent of GNP, whereas monarchical systems
spend 2.5 percent of GNP on military expenditures.
But more important than this is the following, 50 percent of government expenditures are
nowadays spent on social and welfare legislation.
Everything that basically did not exist under the monarchical order.
The consequence of welfare spending, I just want to point out one of the consequences.
Welfare spending reduces the value of families.
Again, for several hundred years, for instance, the birth rate was between 30 and 40 per 1,000
population, slightly more in Catholic countries, slightly less in Protestant countries.
In the 20th century, birth rates have fallen to 15 to 20 per thousand population. It has
basically fallen in half. With respect to crime rates, you would expect if you have
a flood of legislation going on, that this obviously causes, so to speak, an erosion
of the knowledge of what is right and wrong.
And you would expect that crime rates should increase.
Again, that is precisely what you can observe.
Crime rates during the 19th century,
I rely on data from Horenstein and Wilson,
crime rates during the 19th century
essentially fell from year to year.
However, from about 1950 on,
That is, after you had some generations living under democratic republican regimes and under
egalitarian feelings, from 1950s on in the entire western world you can see an uprise
in crime rates.
Finally, war and foreign policy.
As I said before, monarchies, you would expect that a lot of their foreign policy consists
simply in marriage policy.
Let me just give you one example, the Habsburgs, a typical example. A huge number of examples
could be given. How monarchies expanded their territories. Maximilian, the emperor, lived
ruled from 1493 to 1519, married Mary of Burgundy and inherited the realm of Burgundy, which
includes the western extremities of France and the Netherlands through this marriage.
They had a son, Philip, and Philip was married to Joanna, who was the heiress of Ferdinand
and Isabella of Spain, and in this way they acquired Spain.
And these two had son Charles, who was Charles V, Emperor Charles V, who had a territory
including Austria, Netherlands, Spain, and the American possessions. Wars were basically
During the monarchical age, inheritance disputes. There was intermarriage going on and sometimes
dynasties died out and obviously then wars resulted over inheritances. But because they
were inheritance disputes, so to speak, they were always limited wars. They had clear-cut
objectives. I want this, this is the throne I need, this is the town or this is the province
that I have to get. Let me just read you a quote from Guillermo Ferreiro, a colleague
of Mises during his time in Switzerland, who characterizes 18th century warfare. That basically
applies also to the warfare before and even for 19th century warfare. And he says something
War became limited and circumscribed by a system of precise rules. It was definitely
regarded as a kind of single combat between the two armies, the civil population being
merely spectators. Pillage, requisitions and acts of violence against the population were
forbidden in the home country as well as in the enemy country. Each army established depots
in its rear, in carefully chosen towns, shifting them as it moved about.
Conscription existed only in a rudimentary and sporadic form, soldiers being scarce and
hard to find.
Everything was done to ensure their quality by a long patience and meticulous training,
but as this was costly, it rendered them very valuable and it was necessary to let as few
be killed as possible.
Trying to economize their men, generals tried to avoid fighting battles. The object of warfare
was the execution of skillful maneuvers and not the annihilation of the adversary. A campaign
without battles and without loss of life, a victory obtained by a clever combination
of movements, was considered the crowning achievement of this art. The ideal pattern
of Perfection. It was avarice and calculation that made war more humane. War became a kind
of game between sovereigns. A war was a game with its rules and its stakes, a territory,
an inheritance, a throne, a treaty. The loser paid, but the judge paid.
In contrast to this, Republican wars have always been tended to be ideologically motivated
Wars, and accordingly also total wars. That is, they had not limited territorial objectives.
There are already plenty of examples for this in ancient history. Athens was extremely imperialistic
and viciously brutal towards his enemies. The Roman Republic, let's say a guy like Caesar
Let's say a guy like Caesar was a ruthless imperialist. Switzerland, a republic, was famous during the Middle Ages for the ferocity of its fighters and for a brief period of time.
It looked like Switzerland might become a major European power until it was finally put in its place and then remained as little as it is nowadays.
was nothing but a huge butcher. France, the Napoleonic Wars were extremely brutal. Also for the first time they had introduced mass conscriptions. The armies reached sizes that they had never reached before. The Civil War in the United States, a typical example of an ideologically motivated war, again used mass conscriptions and ended in huge battles.
and World War I was the next example of this.
Let me just quote General J.F.C. Fuller, one of the leading military historians, how he
summarizes, so to speak, the difference between monarchical wars and democratic wars.
He says something like this, the influence of the spirit of nationality that is of democracy
on War was profound. It emotionalized war and, consequently, brutalized it. In the 18th century, wars were largely the occupation of kings, couriers, and gentlemen. Armies lived on their depots. They interfered as little as possible with the people, and as soldiers were paid out of the king's privy purse, they were too costly to be thrown away lightly on mass attacks. The change came about with the French Revolution, and as armies became
obey more and more the instruments of the people.
Not only did they grow in size, but in ferocity.
National armies fight nations, royal armies fight their like.
The first obey a mob, always demented, the second a king, generally sane.
All this developed out of the French Revolution, which also gave to the world conscription,
World Warfare and the herd coupling with finance and commerce has begotten new realms of war.
For when once the whole nation fights, then is the whole national credit available for
the purposes of war.
Let me come to a conclusion here.
Since 1918, practically all indicators of high or rising time preference, short-term orientation,
have exhibited a systematic upward tendency. As far as government is concerned, democratic
republicanism produced communism, and with this, public slavery and government sponsored
Mass Murder, even in peacetime, fascism, national socialism, and lastly and most enduringly,
social democracy, or what the United States, what is called in the United States liberalism.
Compulsory military service has become almost universal, foreign and civil wars have increased
in frequency and in brutality, and the process of political centralization has advanced further
than ever before. Internally, democratic republicanism has led to permanently rising taxes, debts
and public employment. It has led to the destruction of the gold standard, unparalleled paper money
inflation and increased protectionism and migration controls. Even the most fundamental
private law provisions have been perverted by an unabating flood of legislation and regulation.
Simultaneously, as regards civil society, the institutions of marriage and family have been destroyed through welfare legislation, and according to these, the number of children has declined, and the rates of divorce, illegitimacy, single parenthood, singledom and abortion have increased.
Rather than rising with rising incomes, savings rates have been stagnating or even falling.
In comparison to the 19th century, the cognitive prowess of the political and intellectual
elites and the quality of public education have declined, and the rates of crime, structural
unemployment, welfare dependency, parasitism, negligence, recklessness, uncivility, psychopathy
and Hedonism have increased. The consequence then is, what can we do about it? Can anything
be done to prevent the process of de-civilization from running its full course, so to speak?
And what? Above all, I would think that the idea of democracy and democratic rule must
be delegitimized. Ultimately, the course of human history is of course determined by ideas.
Whether they are true or false. And just as kings could not exercise their rule unless a majority of public opinion accepted such rule as legitimate, so democratic rulers cannot last without ideological support in public opinion.
Likewise, the transition from monarchical to democratic rule has to be explained as fundamentally nothing but a change in public opinion.
Until the end of World War I, the overwhelming majority of the public in Europe accepted
monarchical rule as legitimate. And today, hardly anyone would do so. Indeed, the idea
of monarchical government is considered to be laughable nowadays. Accordingly, I would
think that a return to the Ancien Régime has to be regarded as impossible. The legitimacy
The theory of monarchical rule appears to have been irretrievably lost, nor would such
a return be a genuine solution. Rather, the idea of democratic-republican rule must be
rendered equally, if not more, laughable than the rule by monarchs, not the least by identifying
Democratic Republicanism as the source of de-civilization. It must be made clear that
it is not government, monarchical or democratic, but private property and the recognition and
defense of private property rights, which is the ultimate source of human civilization.
and strategically, as to promote the delegitimation of democracy and at the same time advance
the supreme legitimacy of private property, contractualism and individual responsibility.
Ideological support should be given to all decentralizing or even secessionist social
of Forces for a territorially smaller government makes for moderation, and only in small regional
communities does it become possible for elites, for natural elites to emerge whose voluntarily
acknowledged authority can lend legitimacy to the idea and institution of a pure private
or a pure private law society as the answer to monarchy and democracy.
Thank you very much.