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Market Liberalism, International Order, and World Peace,
Part 1
by Richard M. Ebeling, November
2000
In this Post–Cold War epoch the world is desperately searching for international order,
global peace, and general economic prosperity. The great debate going on
around the world is whether these desired goals can be attained through the
existing system of national sovereignty or whether they require the
establishment of international political organizations with the delegated
power to impose order and peace and to plan and regulate for global
material prosperity. The nation-state and world-governing authorities are
seen as the two alternatives confronting the human race.
The 20th century was a horrible
nightmare, the consequence of political and economic nationalism run wild.
Human beings in the tens of millions have been crushed on the altar of the
nation-state. Wars and civil wars have brought in their wake mass
destruction on a scale that is difficult to really comprehend, as
nation-states have fought each other for land, resources, and power and as groups
within nation-states have battled for control of the levers of political power
within their own borders.
National governments have used their
right of coercion to restrict trade, prohibit freedom of
movement, control the use of capital and resources, and regulate and
manipulate money, exchange rates, production, and prices. These same
governments have used their monopoly power of force within geographical
areas to brainwash the populations under their political jurisdiction through
state education, regulated or restricted mass media, and general
indoctrination and propaganda that make the multitudes love their
paternalistic national Big Brother.
The essence of the nation-state as it
has developed over the centuries is that it is the master over all men, all
material things, and all the ideas and beliefs within its territorial domain. The
state is sovereign.
But who is the state? As the
classical-liberal Italian historian Guglielmo Ferrero argued, many of the conflicts within
nation-states for the past 250 years have been over whether legitimate
sovereignty resided in hereditary kings and princes who derived their power
from ancient conquest that was then maintained by custom, tradition, and
theological sanctification.
Or whether that political legitimacy
arose from the will of the people and the consent of the governed,
maintained and reinforced through regularly practiced democratic processes.
Or whether the right to rule the state
and its subjects was determined by the seizure of power by a self-chosen
elect claiming to know the destiny of a nation or a race or the laws of class
relationships and inevitable historical development.
Regardless of whether it has been a
monarch, democratically elected representatives, or bands of duces,
führers, and peoples commissars, all interests have been made
subordinate to the interest of the nation-state. Nothing has stood above the
state; not individuals, not various groups, not humanity as a whole. All have
been sacrificed to the sovereign nation.
It has been pointed out by historians of
nationalism, such as Carleton Hayes and Walter Sulzbach, that the modern
notion of the nation and nationality is relatively new, something that has
emerged on the world stage only over the last three or four centuries.
Before that, peoples allegiances, loyalties, and senses of identity and
connection with others were based on religious faith or service to a
nobleman, lord of the manor, or ones family, trade guild, or region
and community. The idea that a common language or ethnic heritage
necessarily defined people as a nation or a
nationality did not really exist in the sense that is today more
or less taken for granted in most parts of the world.
Because of this, it is argued that
regardless of their linguistic, ethnic, or religious background and upbringing,
people must now transcend national identity, interest, and power. The
concerns of all men, regardless of who they are or where they are, are now
global. International organization, power, and political authority must replace
the nation-state or, if they are not replaced, such national political entities
must be subordinate to a higher world regime of institutions of legitimate
control, regulation, and planning.
The new world order
The foundation stones for such a new
world order were laid in the years after the Second World War with the
establishment of the United Nations, the International Monetary Fund, the
World Bank, the International Labor Organization, the World Health
Organization, the General Agreement on Tariffs and Trade (which has now
become the World Trade Organization), and numerous others that form a
spiders web of international institutions having power and authority
over billions of lives around our planet. And other, new organizations have
been proposed, such as an International Environmental Agency, that would be
responsible for regulating industry and population in the name of
saving the earth, as well as enforce labor standards and work
conditions in countries around the world to ensure that they are both
just and consistent with a planet properly balanced between
man and nature.
In Europe a political process has begun
in which the nation-states of that continent are being slowly transformed
into what will be lower-level administrative elements in an all-encompassing
European state. That is the primary political purpose behind the
establishment of a single currency, the Euro. As the Spanish free-market
economist Pedro Schwartz has warned, the European Union threatens to
become a mirror image on a larger scale of our interventionist
welfare states, awash with rules and regulations, riddled with subsidized
agriculturists, tax cheats, black marketeers, feigned unemployed, and
imaginary maladies.
In July 2000, U.S. Sen. Phil Gramm said
at the Centre for Policy Studies in London that Great Britain should apply for
membership into the North American Free Trade Agreement (NAFTA) and
that such an application would be greeted with serious and positive
consideration. But for those who are responsible for the political and policy
control of NAFTA, free trade is not the only thing on their mind. The recently
elected president of Mexico, Vincente Fox, said in August 2000 that Mexico
needed to catch up and be an equal economic partner with the United States
and Canada. But for this to happen, Fox argued, I dont think
the market, by itself, will do the job. This job has to be done by the
intelligence of people, by the intelligence of governments, by the talent of
our nations.
What exactly did this mean? According
to the Washington Post, Fox went on to say that he
would like to see the creation of a development fund through the North
American Free Trade Agreement, similar to the $35-billion-a-year European
Union development fund, which helps to create jobs and increases income in
poorer countries of the European Union, such as Portugal and Greece.
Transfer of sovereignty
And here is the heart of the matter.
The existing and proposed international authorities for political control and
economic planning are not designed to replace the existing network of
nation-states with a new and liberating regime of individual freedom and
economic liberty. Instead, they are designed to manage the personal, social,
and economic affairs of billions of people the same way that nation-states
have been managing them on a territorially smaller scale for several
centuries already.
It is the transfer of sovereignty
the legitimized right to politically rule and command obedience over a
geographical area to a more globally encompassing plane. Some, such
as NAFTA and the European Union, are directed to a wider regional arena of
control extending only over some existing nation-states. Others, such as the
International Monetary Fund, the World Bank, and the World Trade
Organization, are truly global in their purpose and functions.
But each of these involves a
continuation and often an intensification of the politicization of society. It
would be an absurd exaggeration to suggest that these international
organizations have had no positive effects. Under the more recent rules of
the European Union, for example, citizens of member nation-states have a
greater degree of freedom of movement to live and work where they desire,
with fewer residency restrictions than previously prevailed in many of these
countries.
There is a flexibility in capital
movement among European Union members, which creates an economic
environment conducive to a more rational (i.e., more profit-driven) pattern
of investments. And the more petty and extreme regulations and controls
that have been in place in some of these European countries have been
reduced or repealed to match the regulatory norms of the consensus of the
member nations.
Nonetheless, behind these
intergovernmental political organizations is the same planning and
social-engineering mentality that has guided the governments of the individual
nation-states. The methods and types of production are to be strictly
regulated, prices and wages must conform to standards of
fairness and social justice, and huge
welfare-state safety nets are not only internationalized but imposed
and expanded in those member countries that up to that point had been less
interventionist in their domestic policies. And there is no way out for any of
the member countries other than leaving the regional or international
political order to which they belong.
Mexican President Foxs
remarks quoted above demonstrate the mentality dominating these
organizations: markets cannot do the job, and member governments must
participate in a further internationalization of the redistribution of wealth.
The NAFTA bureaucracy is to be provided with a development
fund paid for, obviously, by U.S. and Canadian taxpayers. That
bureaucracy will then allocate these funds to various sectors of the Mexican
economy, to assist selected industries and employment opportunities that
the NAFTA bureaucrats decide are the most worthy after, one can be sure,
consultation with various ministries of the Mexican government. The
decisions, one can be confident, will be impartial, unbiased, and not in the
least tainted by the sick aroma of Mexican special-interest politics.
It was Laura Tyson, former head of
President Clintons Council of Economic Advisors, who suggested the
establishment of an International Environmental Agency (IEA) in the
January-February 2000 issue of Foreign Affairs. This agency would
have the delegated power to evaluate and enforce global environmental rules
that would be binding on the citizens of the member countries. The IEA would
have the authority to dictate the directions and form of global production,
investment, and resource use and allocation in the name of saving the planet.
Furthermore, it would have power to dictate workplace standards and
influence wage scales in Third World countries to prevent supposed labor and
environment exploitation.
Back in 1945, the German free-market
economist Moritz J. Bonn, then an exile in the United States from war-torn
Europe, made the succinct observation,
International economic relations
can be carried out in three different ways: exclusively by private individuals
and corporations; exclusively by governments; or by private persons and
corporations on the one side and by governments and government
institutions on the other side.
Economic or market liberalism
Bonn also pointed out 11 years earlier,
in 1934,
that whenever the spirit of
[economic] liberalism has prevailed in the economic sphere, international
cooperation has worked fairly well notwithstanding political nationalist
frictions.... Whenever international economic exchange was operated in its
spirit, international economic interdependence made for peace in the political
field and for the reduction of friction in the economic field.... International
interdependence of this sort was real cooperation. It raised the standard of
living in all the countries concerned.
Yet it is the case for economic or
market liberalism that is not heard at all in this ongoing debate about an
international order for the 21st century. It is the alternative both to political
and economic nationalism and to international political authority. And it is the
only alternative that is consistent with individual freedom, economic liberty,
international peace, and global prosperity.
Professor Ebeling is the Ludwig von Mises Professor of
Economics at Hillsdale College, Hillsdale, Michigan, and serves as vice
president of academic affairs for The Future of Freedom Foundation.
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