Thursday, December 7, 2017

What Ludwig von Mises Had to Say About Trump-Style Economic Nationalism

The below is from a recently translated paper, Ideas on Postwar Economic Policy, by Ludwig von Mises.

This article was first published in Spanish the Mexican journal Cuadernos Americanos, Mexico, Year 1, vol. 4, July-August 1942.

The Mises observations are as relevant today  as when they were first published, 75 years ago:
The main characteristic of policies implemented in the decade that preceded the current war, was economic nationalism; that is, an economic policy based on the belief that it is possible to promote the wellbeing of all nationals of a country, or at least of a specific group of them, through measures harmful to foreigners. It was understood that deterring or prohibiting, in an absolute way, the importation of foreign goods; restricting the immigration of aliens; or expropriating, partially or totally, the capital owned by foreigners could provide an important service to a country. This is not the appropriate place to analyze if those measures are suitable to achieve their desired end. The classical economic theory of free exchange has already proven, beyond refutation, that
the final result of restrictions placed on foreign trade is the general decline of the productivity of labor and, therefore, of standards of living. In this way, production ceases to occur in places where a high return may be achieved and moves to others where, with the same investment of capital and labor, much lower returns can be obtained. The classic doctrine of free exchange of Hume, Smith and Ricardo has never been refuted. All objections to it turned out to be unfounded.

However, protectionism not only creates economic disadvantages. It also precludes peaceful cooperation between states leading to a sure war. The Society of Nations’ efforts to stop the new global conflagration, through a system of collective security, were in vain because of this environment since all states, big or small, tended to harm one another by implementing certain economic measures.

If we are unable to overcome economic nationalism, all hopes of achieving the reconstruction of our culture will prove illusory. Economic nationalism prevents industrialized States, that is, all those that are compelled to import foodstuff and raw materials, from gathering the necessary means to pay for their imports. How would they be able to pay if not through the exportation of their industrial products? If not permitted to export their industrial articles, these states would be fatally forced into autarchy; on the other hand, countries that possess raw materials would loose markets for the produce of their land. In industrialized states, this situation provokes the desire to dominate nations that possess raw materials through military means. We must not fool ourselves: ambitions of conquest lie behind apparently innocent claims for the equal distribution of natural sources of wealth and free access to raw materials.

In a peaceful world ruled by free trade, there would be no problems regarding raw materials. Each country would be able to buy all the raw materials it could pay for in international markets. In a world subject to protectionism things happen in a very different way: in this world the problem of raw materials cannot disappear; and for small countries, that is those that are weaker militarily, having mines or a fertile soil within their borders represents a danger.

All arguments regarding the advantages of peace, international cooperation, the creation of a society of nations and the reconstruction of the world economy are hollow words if there is the intention of preserving protectionism. If one is not willing to renounce economic nationalism, small states will lose their autonomy and become the vassals of strong militaristic states. Coalitions of Great Powers, armed to the teeth, will confront one another and take advantage of any momentary weakness of their adversaries to undertake new campaigns of conquest.

It is necessary to understand that this new World War (as well as the First World War) is not the consequence of a natural catastrophe unleashed upon innocent men; rather, it is the inevitable result of the nationalist economic policy pursued in the preceding decades. In a world were free trade prevails, despite the dynamism of Hitler or Mussolini, reaching a state of war would not have been possible. Evil men will always exist; however, it is important to create an economic order in which their power to do harm is reduced to a minimum.

In summary, without the eradication of economic nationalism, it will not be possible to return to peace and wellbeing.


  1. Everything he wrote is true. But what is the similarity between Mussolini's policies and Trump's?

  2. The policies that exist since the 30's in America are not the fault of Trump, of course. The American state and those in many other countries traveled down the route towards Fascism (economic nationalism and central economic planning) from the 30's onwards, way before Trump. But his own economic plans are based on the same misguided ideas that support those policies, including tariffs, so-called "bilateral trade deals" and his Market-hostile immigration policies.