In the national state current ideologies make it comparatively easy to persuade the rest of the community that it is in their interest to protect “their” iron industry or “their” wheat production or whatever it be. An element of national pride in “their” industry and considerations of national strength in case of war generally induce people to consent to the sacrifice. The decisive consideration is that their sacrifice benefits compatriots whose position is familiar to them. Will the same motives operate in favor of other members of the Union? Is it likely that the French peasant will be willing to pay more for his fertilizer to help the British chemical industry? Will the Swedish workman be ready to pay more for his oranges to assist the Californian grower? Or the clerk in the city of London be ready to pay more for his shoes or his bicycle to help American or Belgian workmen? Or the South African miner prepared to pay more for his sardines to help the Norwegian fishermen?--Hayek (1939) "The Economic Conditions of Interstate Federalism."
Hayek's (1939) "The Economic Conditions of Interstate Federalism" plays two roles in recent critical discussions of neo-liberalism. First, Wolfgang Streeck (recall) sees in it the neoliberal masterplan for the European Union by which a federal structures prevent the development of socialism and the welfare-state among member units (of the federation). Streeck's reading of Hayek is not wholly misleading. Hayek does state that "it would be desirable for the constitution of the federation to impose on the freedom of the individual states would have to be even greater than we have hitherto assumed and that their power of independent action would have to be limited still further." And this is not limited "to state economic policy but also to economic policy conducted by trade and professional organizations extending over the territory of the state."
But even so the justification of this is not to prevent the welfare state or local experimentation, but "to prevent evasions of the fundamental provisions securing free movement of men, goods, and capital." Hayek's real targets are "trade-unions, cartels, or professional associations," and other would be local monopolists. That is to say, Hayek is no Lionel Robbins (his LSE colleague), who in his (1941) "Economic aspects of federation" proposal did leave more room for local "experimentation" even socialist experimentation (albeit with various restrictions). For Robbins "the [member] states are completely free to set up collectivist undertakings."* This is surely a bridge too far for Hayek. But the target of Hayek is, as he writes shortly below, not primarily redistribution, but interference "with economic activity" and "state control." (This is not to suggest that Hayek is a fan of redistribution, but see Zwolinski's recent essay.)
The second line of interpretation is due to (recall) Yoram Hazony, who in The Virtue of Nationalism, reads Hayek (1939) as endorsing (quoting Hazony) an "international federal state without significant boundaries between nations." (See also the accompanying notes in Hazony.)** If we look at the passage quoted at the top of this post we can see what inspired Hazony. Hayek is clearly thinking of a trans-Atlantic North American (e.g., "California")-European federation; Hayek calls it a federation of "Atlantic democratic states," but one that includes Europe's dominions/colonies (e.g., South Africa). And, indeed, when after the war plans were developed for a European (economic) Community the African colonies were very much included. (Before it become independent in 1962 Algeria was part of the EEC.)
Hayek's stance is, in part, if not inspired by the phenomenal success of Clarence Streit's (1939) Union Now, at least clearly co-extensive with it. (Streit is explicitly mentioned in Hayek's piece.) While Hayek proposes a geographically extensive federation, it is not global in character. In Hayek, this is so because he wishes to exclude the "socialist" countries like the USSR. Or to be precise, he thinks the USSR would refuse to "submit" to the rules governing his proposed "interstate federation." So, while Hazony has accurately discerned the drift of Hayek's proposal, his federation is not necessarily global in character and there is no expectation it will naturally become such a global empire. So, unlike Mises -- who often writes as if the success conditions of liberalism presuppose the establishment of global liberalism --, Hayek thinks liberalism need not entail global federation.+
But that leaves another question. As Or Rosenboim recounts, and building on Orwell, Streits'proposal while centered on the virtues of liberal democracies, clearly also is meant to secure domination of a (racialized hierarchy of) 'civilized' peoples. How does Hayek see the relationship between the federation and European colonies. Recall that while Mises hoped to secure a liberal global order, Mises thought the sooner the European imperial powers de-colonized the better. Hayek recognizes that the question is lurking behind his own proposal. Here's what he writes.
What is notable is that unlike Mises, who is explicit about the unmitigated evils of colonialism, Hayek leaves his views on the matter oblique here.++ It's pretty clear, however, that he is primarily focused on the way that colonies generate interstate rivalry (and so war, protection, etc.). An interstate federation is a solution to the problem of such state rivalry over colonialism. The benefits, if any, of holding a colony now accrue to all the members of a federation.
It's possible (perhaps this is lurking behind the "in general") Hayek also thinks that the federation would treat the inhabitants of the colonies more humanely than the member states. But if so, he does not say it. And his remarks are naturally read as endorsing continued colonial rule by the federation. It is striking that roughly in the same period, Mises comes out as looking much more committed to democracy and freedom than Hayek does.
Let me close. In his paper, Hayek writes "that nineteenth-century liberalism did not succeed more fully is due largely to its failure to develop in this direction; and the cause is mainly that, because of historical accidents, it successively joined forces first with nationalism and later with socialism, both forces being equally incompatible with its main principle." In the accompanying footnote, Hayek treats John Stuart Mill as exemplary of both (regrettable) tendencies.
We may say, without a sense of superiority, and a considerable note of melancholy and regret, that twentieth-century liberalism did not succeed more fully is in no small matter due to its continued temptation to treat the economic interests of (Northern) Atlantic states as co-extensive with the true direction of liberalism. Even those that explictly rejected Mill's civilizational mission were often infected by this tendency.
*Robbins clearly thinks that if free trade is not prevented then many state monopolies will be run relatively efficiently (and so will act as de facto competitive enterprises). This seems reasonably prescient if we look at the role of state monopolies in relatively open economies of Scandinavia and the Netherlands since.
**I recently read (recall) Or Rosenboim's The Emergence of Globalism: Visions of World Order in Britain and The United States and that surely has influenced what follows.
+I don't meant to deny that both Mises and Hayek are clearly indebted to and can be re-interpreted as (here; recall also here; and here) accepting Kant's regulative ideal of a ever closing union of global federation in Perpetual Peace.
++Some other time I'll discuss his views in Road to Serfdom.
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