Chapter 15

The Prospects Of International Order

Father of Neoliberalism

Hayek Hayek
8 min read
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Of all checks on democracy, federation has been the most efficacious and the most congenial. … The federal system limits and restrains the sovereign power by dividing it and by assigning to Government only certain defined rights. It is the only method of curbing not only the majority but the power of the whole people. Lord Acton.

In no other field has the world yet paid so dearly for the abandonment of nineteenth-century liberalism as in the field where the retreat began: in international relations. Yet only a small part ofthe lesson which experience ought to have taught us has been learnt. Perhaps even more than elsewhere current notions of what is desirable and practicable are here still of a kind which may well produce the opposite of what they promise. The part of the lesson of the recent past which is slowly and gradually being appreCiated is that many kinds of economic planning, conducted independently on a national scale, are bound in their aggregate effect to be harmful even from a purely economic point of view, and in addition to produce serious international friction. That there is little hope of international order or lasting peace so long as every country is free to employ whatever measures it thinks desirable in its own immediate interest, however damaging they may be to others, needs little emphasis now. Many kinds of economic planning are indeed practicable only ifthe planning authority can effectively shut out all extraneous influences; the result ofsuch planning is therefore inevitably the piling up ofrestrictions on the movements ofmen and goods.

Less obvious but by no means less real are the dangers to peace arising out of the artificially fostered economic solidarity of all the inhabitants of anyone country, and from the new blocks of opposed interests created by planning on a national scale. It is neither necessary nor desirable that national boundaries should mark sharp differences in standards of living, that membership of a national group should entitle to a share in a cake altogether different from that in which members of other groups share. If the resources of different nations are treated as exclusive properties of these nations as wholes, if international economic relations, instead of being relations between individuals, become increasingly relations between whole nations organised as trading bodies, they inevitably become the source offriction and envy between whole nations. It is one ofthe most fatal illusions that by substituting negotiations between states or organised groups for competition for markets or for raw materials, international friction would be reduced. This would merely put a contest of force in the place of what can only metaphorically be called the “struggle” of competition, and transfer to powerful and armed states, subject to no superior law, the rivalries which between individuals had to be decided without recourse to force. Economic transactions between national bodies who are at the same time the supreme judges of their own behaviour, who bow to no superior law, and whose representatives cannot be bound by any considerations but the immediate interest of their respective nations, must end in clashes of power. 1

If we were to make no better use of victory than to countenance existing trends in this direction, only too visible before 1939, we might indeed find that we have defeated NationalSocialism merely to create a world of many national socialisms, differing in detail, but all equally totalitarian, nationalistic, and in recurrent conflict with each other. The Germans would appear as the disturbers of peace, as they already do to some people,2 merely because they were the first to take the path along which all the others were ultimately to follow.


Those who at least partly realise these dangers usually draw the conclusion that economic planning must be done “internationally”, Le. by some super-national authority. But though this would avert some ofthe obvious dangers raised by planning on a national scale, it seems that those who advocate such ambitious schemes have little conception ofthe even greater difficulties and dangers which their proposals create. The problems raised by a conscious direction of economic affairs on a national scale inevitably assume even greater dimensions when the same is attempted internationally. The conflict between planning and freedom cannot but become more serious as the similarity of standards and values among those submitted to a unitary plan diminishes. There need be little difficulty in planning the economic life of a family, comparatively little in a small community.

1 On all these and on the following points, which can be touched upon only very briefly, see Professor Lionel Robbins’s Economic Planning and International Order, 1937, passim.

2 See particularly the significant book by James Burnham, The Managerial Revolution, 1941 .

But as the scale increases, the amount of agreement on the order of ends decreases and the necessity to rely on force and compulsion grows. In a small community common views on the relative importance of the main tasks, agreed standards of value, will exist on a great many subjects. But their number will become less and less the wider we throw the net: and as there is less community of views, the necessity to rely on force and coercion increases.

The people of anyone country may easily be persuaded to make a sacrifice in order to assist what they regard as “their” iron industry or “their” agriculture, or in order that in their country nobody should sink below a certain level. So long as it is a question of helping people whose habits oflife and ways of thinking are familiar to us, of correcting the distribution of incomes among, or the working conditions of, people we can well imagine and whose views on their appropriate status are fundamentally similar to ours, we are usually ready to make some sacrifices. But one has only to visualise the problems raised by economic planning of even an area such as Western Europe to see that the moral bases for such an undertaking are completely lacking. Who imagines that there exist any common ideals of distributive justice such as will make the Norwegian fisherman consent to forgo the prospect of economic improvement in order to help his Portuguese fellow, or the Dutch worker to pay more for his bicycle to help the Coventry mechanic, or the French peasant to pay more taxes to assist the industrialisation of Italy? If most people are not willing to see the difficulty this is mainly because, consciously or unconsciously, they assume that it will be they who will settle these questions for the others, and because they are convinced oftheir own capacity to do this justly and equitably. English people, perhaps even more than others, begin to realise what such schemes mean only when it is presented to them that they might be a minority in the planning authority, and that the main lines of the future economic development of Great Britain might be determined by a non-British majority. How many people in this country would be prepared to submit to the decision of an international authority, however democratically constituted, which had power to decree that the development of the Spanish iron industry must have precedence over similar development in South Wales, that the optical industry had better be concentrated in Germany to the exclusion of Great Britain, or that only fully refined petrol should be imported to Great Britain and all the industries connected with refining reserved for the producer countries? To imagine that the economic life of a vast area comprising many different people can be directed or planned by democratic procedure betrays a complete lack of awareness of the problems such planning would raise. Planning on an international scale, even more than is true on a national scale, cannot be anything but a naked rule of force, an imposition by a small group on all the rest of that sort of standard and employment which the planners think suitable for the rest. If anything is certain it is that Grossraumwirtschaft of the kind at which the Germans have been aiming can be successfully realised only by a master race, a Herrenvolk, ruthlessly imposing its aims and ideas on the rest. It is a mistake to regard the brutality and the disregard of all the wishes and ideals of the smaller people shown by the Germans simply as a sign oftheir special wickedness; it is the nature ofthe task they have assumed which makes these things inevitable. To undertake the direction of the economic life of people with widely divergent ideals and values is to assume responsibilities which commit one to the use of force; it is to assume a position where the best intentions cannot prevent one from being forced to act in a way which to some of those affected must appear highly immoral. 1

1 The experience in the colonial sphere, ofthis country as much as of any other, has amply shown that even the mild forms of planning which we know as

This is true even if we assume the dominant power to be as idealistic and unselfish as we can possibly conceive. But how small is the likelihood that it will be unselfish, and how great are the temptations! I believe the standards of decency and fairness, particularly with regard to international affairs, to be as high, if not higher, in this than in any other country. Yet even now we can hear people arguing that victory must be used to create conditions in which British industry will be able to utilise to the full the particular equipment which it has built up during the war, that the reconstruction of Europe must be so directed as to fit in with the special requirements of the industries of this country, and to secure to everybody in this country the kind of employment for which he thinks himself most fit. The alarming thing about these suggestions is not that they are made, but that they are made in all innocence and regarded as a matter of course by decent people who are completely unaware of the moral enormity which the use of force for such purposes involves. 1


colonial development involve, whether we wish it or not, the imposition of certain values and ideals on those whom we try to assist. It is, indeed, this experience which has made even the most internationally minded of colonial experts so very sceptical of the practicability of an “international” administration of colonies.

1 If anyone should still fail to see the difficulties, or cherish the belief that with a little good will they can all be overcome, it will help if he tries to follow the implications of central direction of economic activity applied on a world scale. Can there be much doubt that this would mean a more or less conscious endeavour to secure the dominance ofthe white man, and would rightly be so regarded by all other races? Till I find a sane person who seriously believes that the European races will voluntarily submit to their standard of life and rate of progress being determined by a World Parliament, I cannot regard such plans as anything but absurd. But this does unfortunately not preclude that particular measures, which could be justified only if the principle of world direction were a feasible ideal, are seriously advocated.

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