Economic Causes of War
by Ludwig von Mises
[This is the major part of a lecture delivered in Orange County,
California, in October 1944. It was published by the Foundation for
Economic Education in 2004.]
War is a primitive human institution. From time immemorial, men were
eager to fight, to kill, and to rob one another. However, the
acknowledgment of this fact does not lead to the conclusion that war
is an indispensable form of interpersonal relations and that the
endeavors to abolish war are against nature and therefore doomed to
failure.
We may, for the sake of argument, admit the militarist thesis that man
is endowed with an innate instinct to fight and to destroy. However,
it is not these instincts and primitive impulses that are the
characteristic features of man. Man's eminence lies in his reason and
in the power to think, which distinguishes him from all other living
creatures. And man's reason teaches him that peaceful cooperation and
collaboration under the division of labor is a more beneficial way to
live than violent strife.
I do not want to dwell on the history of warfare. It is enough to
mention that in the 18th century, on the eve of modern capitalism, the
nature of war was very different from what it had been in the age of
barbarism. People no longer fought one another with the aim of
exterminating or enslaving the defeated. Wars were a tool of the
political rulers and were fought with comparatively small armies of
professional soldiers, mostly made up of mercenaries. The objective of
warfare was to determine which dynasty should rule a country or a
province. The greatest European wars of the 18th century were wars of
royal succession, for example, the wars of the Spanish, Polish,
Austrian, and finally the Bavarian successions. Ordinary people were
more or less indifferent about the outcomes of these conflicts. They
were not much concerned about the question of whether their ruling
prince was a Habsburg or a Bourbon.
Nevertheless, these continuous struggles placed a heavy burden upon
mankind. They were a serious obstacle to the attempts to bring about
greater prosperity. As a result, the philosophers and economists of
the time turned their attention to the study of the causes of war. The
result of their investigation was the following:
Under a system of private ownership of the means of production and
free enterprise, with the only function of government being to protect
individuals against violent or fraudulent attacks on their lives,
health, or property, it is immaterial for the citizens of any nation
where the frontiers of their country are drawn. It is of no concern
for anyone whether his country is big or small, and whether it
conquers a province or not. The individual citizens do not derive any
profit from the conquest of a territory.
It is different with the princes or ruling aristocracies. They can
increase their power and their tax revenues by expanding the size of
their realms. They can profit from conquest. They are bellicose, while
the citizenry is peace loving.
Hence, the old liberals concluded, there would be no more wars under a
system of economic laissez faire and popular government. Wars would
become obsolete because the causes for war would disappear. Since
these 18th- and 19th-century classical liberals were fully convinced
that nothing could stop the movement toward economic freedom and
political democracy, they were certain that mankind was on the eve of
an age of undisturbed peace.
What was needed to make the world safe for peace, they argued, was to
implement economic freedom, free trade and goodwill among the nations,
and popular government. I want to stress the importance of both of
these requirements: free trade at home and in international relations,
and democracy. The fateful error of our age has consisted in the fact
that it dropped the first of these requirements, namely free trade,
and emphasized only the second one, political democracy. In doing so,
people ignored the fact that democracy cannot be permanently
maintained when free enterprise, free trade, and economic freedom do
not exist.
President Woodrow Wilson was fully convinced that what was needed to
make the world safe for peace was to make it safe for democracy.
During the First World War it was believed that if only the German
royal house of the Hohenzollern and the privileged German landed
aristocracy, the Junkers, could be removed from power, a durable peace
could be achieved. What President Wilson did not see was that within a
world of growing government omnipotence this would not be enough. In
such a world of growing government power, there exist economic causes
of war.
Does the Citizen Profit from Conquest?
The eminent British pacifist, Sir Norman Angell, repeats again and
again that the individual citizen cannot derive any profit from the
conquest of a province by his own nation. No German citizen, says Sir
Norman, profited through his nation's annexation of Alsace-Lorraine as
a result of the Franco-Prussian War of 1870–1871. This is quite
correct. But that was in the days of classical liberalism and free
enterprise. It is another thing in our day of government interference
with business.
Let us take an example. The governments of the rubber-producing
countries have entered into a cartel arrangement in order to
monopolize the market for natural rubber. They have forced the
planters to restrict production in order to raise the price of rubber
far above the level it would have attained on a free market. This is
not an exceptional case. Many vital and essential foodstuffs and raw
materials have been subject to similar policies implemented by
governments around the world. They have imposed compulsory
cartelization on numerous industries, as a result of which their
control was shifted away from private entrepreneurs to the hands of
government. Some of these schemes, it is true, have failed. But the
governments concerned have not abandoned their plans. They are eager
to improve the methods applied and are confident that they will be
more successful after the present Second World War.
The individual citizens do not derive any profit from the conquest of
a territory. … Hence, the old liberals concluded, there would be no
more wars under a system of economic laissez faire and popular
government.
There is a lot of talk nowadays about the necessity for international
planning. However, no planning, whether it be national or
international, is required to make planters grow rubber, coffee, and
any other commodity. They embark upon the production of these
commodities because it is the most advantageous way for them to make a
living. Planning in this connection always means government actions
for the restraint of output and the establishment of monopoly prices.
Under such conditions it is no longer true that a nation may not
appear to derive a tangible profit from a victorious war. If the
nations dependent on the importation of rubber, coffee, tin, cocoa,
and other commodities could force the governments of the producing
countries to abandon their monopolistic practices, they would improve
the economic welfare of their citizens.
To mention this state of affairs does not imply a justification for
aggression and conquest. It only demonstrates how utterly mistaken are
pacifists like Sir Norman Angell, who base their arguments in favor of
peace on the unstated assumption that all nations are still committed
to the principles of free enterprise.
Sir Norman Angell is a member of the British Labour Party. This party
stands for the outright socialization of business. But the members of
the Labour Party are too dull to realize what must be the economic and
political consequences of the socialization of business.
The Case of Germany
I want to explain these consequences by referring, first of all, to
the situation in Germany.
Like all other European nations, Germany is poor in natural resources.
It can neither feed nor clothe its population out of its own available
domestic resources. Germans must import huge quantities of raw
materials and foodstuffs, and must pay for these badly needed imports
by exporting manufactures, most of which are produced out of those
imported raw materials. Under free enterprise, Germany brilliantly
adjusted itself to this circumstance. Sixty or seventy years ago, in
the 1870s and 1880s, Germany was one of the world's most prosperous
nations. Its entrepreneurs succeeded extremely well in building up
very efficient manufacturing plants. Germany's industry was foremost
on the European continent. Its products triumphantly swept the world
market. The Germans — all classes of the German population — became
more prosperous from year to year. There was no reason to alter the
structure of German business.
But most of the German ideologists and political writers, the
government-appointed professors and the socialist party leaders, as
well as the government bureaucrats, did not like the free-market
system. They disparaged it as capitalist, plutocratic, bourgeois, and
as Western and Jewish. They lamented the fact that the free-enterprise
system had incorporated Germany into the international division of
labor.
All these groups and political parties wanted to substitute government
management of business for free enterprise. They wanted to do away
with the profit motive. They wanted to nationalize business and to
subordinate it to the commands of the government. This is a
comparatively simple thing in a country that by and large can live in
economic self-sufficiency. Russia, occupying one-sixth of the earth's
surface, can do without almost any imports from abroad. But it is
different with Germany. Germany cannot eschew imports and consequently
must export manufactures. This is precisely what a government
bureaucracy can never achieve. Bureaucrats are only able to flourish
in sheltered domestic markets. They are not fit to compete on foreign
markets.
Most people in Nazi Germany today want the government to control
business. But the fact is that government control of business and
foreign trade are incompatible. A socialist commonwealth must aim at
autarky. This is where aggressive nationalism — once referred to as
Pan-Germanism, and today called National Socialism — comes into the
picture. We are a powerful nation, the National Socialists say; we are
strong enough to crush all other nations. We must conquer all those
countries whose resources are essential for our own economic
well-being. We need autarky and therefore we must fight. We need
Lebensraum (living space) and Nahrungs freiheit (freedom from a
scarcity of food).
Both terms mean the same thing, the conquest of a territory so large
and rich in natural resources that the Germans could live without any
foreign trade at a standard of living not lower than that of any other
nation. The term Lebensraum is fairly well known abroad. But the term
Nahrungs freiheit is not. Freiheit means freedom; Nahrungs freiheit
means freedom from a state of affairs under which Germany must import
foodstuffs. It is the only "freedom" that matters in the eyes of the
Nazis.
Both the Communists and the Nazis agree that the essence of what they
mean by democracy, liberty, and popular government lies in the
establishment of full government control of business. Whether one
calls this system socialism or communism or planning is immaterial.
Regardless of what it is called, this system requires economic
self-sufficiency. But while Russia can, by and large, live in economic
self-sufficiency, Germany cannot. Therefore a socialist Germany is
committed to a policy of Lebensraum or Nahrungs freiheit, that is, to
a policy of aggression.
The pursuit of a program of government control of business must
finally result in a rejection of the international division of labor.
From the viewpoint of Nazi philosophy, the only proper mode of
international relations is war. Their most eminent men take pride in
referring to a dictum of Tacitus. This Roman historian, almost two
thousand years ago, said that the Germans consider it shameful to
acquire by hard work what could be acquired by bloodshed. It was not a
slip of the tongue when Kaiser Wilhelm II, in 1900, raised the Huns as
a model for his soldiers. It was the encapsulation of a conscious
policy.
Dependent on Imports
Germany is not the only European country depending on foreign imports.
Europe — excluding Russia — has a population of about 400 million
people, more than three times the population of the continental United
States. But Europe does not produce cotton, rubber, copra, coffee,
tea, jute, and many essential metals. And it has a quite insufficient
production of wool, fodder, cattle, meat, hides, and of many cereals.
In 1937, Europe produced only fifty-six million barrels of crude
petroleum, as compared with the US production of 1,279 million
barrels. Besides, almost all of Europe's petroleum production is
located in Romania and in eastern Poland. But as a result of the
present war, these areas will come under the control of Russia.
Manufacturing and exporting manufactures are the essentials of
Europe's economic life. However, exporting manufactures is almost
impossible under government control of business.
Such is the stark reality which no socialist rhetoric can conjure
away. If the Europeans want to live they must cling to the well-tried
methods of free enterprise. The alternative is war and conquest. The
Germans have tried it twice and failed both times.
However, the politically most influential groups in Europe are far
from realizing the indispensability of economic freedom. In Great
Britain and France, in Italy and in some smaller countries there is a
powerful agitation for full government control of business. The case
for economic freedom is almost a hopeless cause with the governments
of these countries. The British Labour Party and those British
politicians who wrongly still call their party the Liberal Party look
upon this war not only as a fight for their nation's independence, but
no less as a revolution for the establishment of government control of
business. The third British party, the Conservative Party, by and
large sympathizes with these endeavors. The British want to defeat
Hitler, but they are eager to adopt his economic methods for their own
country. They do not suspect that state socialism in Great Britain
spells the doom of the British masses. Britain must export
manufactures in order to buy raw materials and foodstuffs from abroad.
Any drop in British exports lowers the standard of living of the
British masses.
Conditions in France and Italy and in most other European countries
are similar to those in Great Britain.
In supplying the domestic consumer with various necessities a
socialist government is sovereign. The citizen must take what the
government gives him. But it is different with any export trade. The
foreign consumer buys only if both the quality and the price of the
commodity offered for sale are attractive to him. In this
international arena of serving foreign consumers, capitalism has shown
its greater efficiency and adaptability. The high level of prewar
Europe's economic well-being and civilization was not the outcome of
the activities of government bureaus and agencies. It was an
achievement of free enterprise. Those German cameras and chemicals,
those British textiles, those Paris dresses, hats, and perfumes, those
Swiss watches, and Vienna leather fancy goods were not the product of
government-controlled factories. They were the products of
entrepreneurs indefatigably intent upon improving the quality and
lowering the price of their merchandise. Nobody is bold enough to
assume that a government agency could successfully replace the private
entrepreneurs in this function.
Privately conducted foreign trade is the private affair between
private firms of various countries. If some disagreements result, they
are the conflicts between private firms. They do not create conflicts
in the political relations between nations. They concern a Mr. Meier
and a Mr. Smith. But if foreign trade is a matter of government, such
conflicts are transformed into political issues.
Suppose the Dutch government prefers to buy coal from Great Britain
rather than from the German Ruhr. Then the German nationalists may
think, Why tolerate such behavior on the part of a small nation? It
took the Third Reich precisely four days to smash the armed forces of
the Netherlands in 1940. Let us try it again! Then we will enjoy all
the products of the Netherlands, but without having to pay for them.
"Fair" Distribution of Resources
Let us analyze the frequently expressed demand of the Nazi and Fascist
aggressors for a new and fair distribution of the natural resources
around the globe. In a world of free enterprise, a man who wants to
drink coffee and is not himself a coffee planter must pay for it.
Whether it is a German or an Italian or a citizen of the Republic of
Colombia, he must render some services to his fellow men, earn a money
income and spend part of it on the coffee he desires. In the case of a
country that does not produce coffee within its own borders, this
means exporting goods or resources to pay for the coffee that is
imported. But Messrs. Hitler and Mussolini do not imagine such a
solution to the problem. What they would want is to annex a
coffee-producing country. But since the citizens of Colombia or Brazil
are not enthusiastic about becoming the slaves of either the German
Nazis or the Italian Fascists, this means war.
Another striking example is provided by the case of the cotton
industry. For more than a hundred years, one of the main industries of
all European countries was the spinning of cotton and the manufacture
of cotton goods. Europe does not grow any cotton. Its climate is
unfavorable. But the supply was always sufficient, with the only
exception being the years during the American Civil War in the 1860s,
when the conflict interrupted the supply of cotton from the Southern
states. The European industrial countries acquired enough cotton not
only for the needs of their own domestic consumption, but no less for
undertaking a considerable export trade in cotton goods.
But in the years just preceding the start of the Second World War,
conditions changed. There was still an ample supply of raw cotton on
the world market. But the system of foreign exchange controls that was
adopted by most European countries prevented private businessmen from
buying all the cotton they needed for their production processes.
Hitler's contribution to the decline of the German cotton-goods
industry consisted in restricting their production and making them
discharge a large part of their workforce. Hitler did not worry much
about the fate of these discharged workers. He sent them to work,
instead, in the munitions factories.
As I already point out, there are no economic causes for armed
aggression within a world of free trade and free enterprise. In such a
world, no individual citizen can possibly derive any advantage from
the conquest of a province or a colony. But in a world of totalitarian
states, many citizens may come to believe in an improvement of their
material well-being from the annexation of a territory rich in
resources. The wars of the 20th century have been, to be sure,
economic wars. But they have not been caused by capitalism, as the
socialists would have us believe. They are wars caused by governments
aiming at complete political and economic omnipotence, and have been
supported by the misguided masses of these countries.
The three main aggressor nations in this war — Nazi Germany, Fascist
Italy, and Imperial Japan — will not attain their ends. They have been
defeated, and they know it already. But they may try it again at a
later date, because their counterfeit philosophy — their totalitarian
creed — does not know of any other method of trying to improve the
material conditions of the people other than war. For the
totalitarian, conquest is the only viable political means to attain
their economic ends.
Economic Mentality
I do not say that all wars of all nations and in all ages were
motivated by economic considerations, that is, by the desire to make
the aggressors rich at the expense of the defeated. There is no need
for us to investigate the root causes of the crusades or the religious
wars of the 16th and 17th centuries. What I want to say is that, in
our age, the great wars have been the outcome of a specific economic
mentality.
The Second World War is certainly not a war between the white and the
colored races. No racial differences separate the British, Dutch, and
the Norwegians from the Germans, or the French from the Italians, or
the Chinese from the Japanese. It is not a war between Catholics and
Protestants. After all, there are Catholics and Protestants in both
belligerent camps. It is not a war between democracy and dictatorship.
The claim of several of the United Nations (Soviet Russia in
particular) to the appellation "democratic" is rather questionable. On
the other hand, Finland (which is allied with Nazi Germany) is a
country with a democratically elected government.
My argument that recent wars have been motivated by economic
considerations is not meant to be a justification of the aggressor's
policies. Viewed as an economic means for the attainment of certain
economic benefits, the policy of aggression and conquest is
self-defeating. Even if technically successful in the short run, it
would never attain in the long run the ends at which the aggressors
are aiming. Under the conditions of modern industrialism, there cannot
be any question of a social system such as the Nazis plan under the
name of a "New Order." Slavery is not a method for industrial
societies. If the Nazis had conquered their adversaries, they would
have destroyed civilization and brought back barbarism. They would
certainly not have erected a thousand-year New Order, as Hitler
promised.
Thus, the main problem is how to avoid new wars. The answer is not to
be found in setting up a better League of Nations; neither is it a
question of the establishment of a better World Court, nor even in the
implementation of a World Police Force. The real issue is to make all
nations — or at least the most populous nations of the world — peace
loving. This can be achieved only by going back to free enterprise.
If we want to abolish war, we must remove the causes of war.
The great idol of our time is the State. The State is a necessary
social institution, but it should not be deified. It is not a god; it
is a device of mortal men. If we make it an idol, we must sacrifice to
it the flower of our youth in coming wars.
What is needed to make a lasting peace is much more than new offices
and a new court for the League of Nations in Geneva, or even a new
international police force. What is needed is a change in political
ideologies and a return to a sound free-market economic system.