False Internationalism

August 20, 1956

There has recently appeared a 64-page pamphlet, by the European economist Wilhelm Röpke, called Economic Order and International Law. It is one of the most penetrating analyses that have yet appeared of the modern malady of false internationalism. Though it was a course of lectures before the Academy of International Law, it has been independently printed only for private circulation (A.W. Sijthoff, Leyden) and its contents deserve to be far more widely known.

Röpke’s thesis has so many facets and corollaries that it is difficult to summarize in any short space. He begins by pointing out that a central element in the Socialist movement of the last hundred years has been the idea of the international mission of Socialism. Yet Socialism in practice (or any other brand of collectivism-interventionism, “planning,” the Welfare State) has led to nationalism, economic isolationism, autarky—in brief, to international disintegration.

AN AS-IF WORLD MONEY

Röpke contrasts this international disintegration, brought about by the interventionist, collectivist, and inflationary policies followed by most governments today, with the “universalist-liberal” solution approached in the nineteenth century—and largely retained, for that matter, up to about twenty years ago. Nations did not surrender their sovereignty to some international super-state. They did not set up endless intergovernmental bodies like the United Nations, with its maze of sub-agencies, or the International Monetary Fund, or the European Payments Union, or the Schuman Plan. But they did adhere to a far more real international order, a sort of As-If World State, with an As-If World Money.

International law respected private property. The natural resources of the world were owned and developed by private persons, or by corporations in which anybody, whatever his nationality, could buy shares in the world’s stock exchanges. International trade was obstructed only by tariffs. It was not ripped into shreds by exchange control, blocked currencies, devaluations, bilateralism, import quotas, export subsidies, balance of payments deficits, and “dollar shortages.”

But the great achievement of traditional liberalism in the nineteenth century was the creation of a de facto world currency, the international gold standard. The gold standard meant that governments and central banks, in their money and credit policies, were subjected to a severe common discipline which prevented anyone from stepping out of line and upsetting international equilibrium.

DISCIPLINE OF GOLD

This discipline was economic rather than political. Any disobedience to the rules was promptly followed by consequences which every government found it to its own interest to avoid. Governments were continuously compelled to coordinate their money, credit, and fiscal policies in such a way that the resulting monetary unity of the world was not very different from a genuine de jure international currency system.

The politicians destroyed this system, and now treat it as utopian. But it is their proposed substitutes that are really impracticable and utopian. Professor Röpke analyzes the fallacies behind the notion of European economic “integration” through a collectivist super-state. He shows how advocacy of this utopian ideal has drawn attention away from the first real step in any reform, which is a return to free convertibility of currencies. This presupposes the abolition of exchange control. He dissects the failure of the International Monetary Fund, and particularly of the European Payments Union, which compels its creditor members (and ultimately the American taxpayer) to subsidize the monetary and fiscal follies of the debtor countries, and which sets up, at best, a closed currency block discriminating particularly against the dollar area. He points to the arbitrariness and tensions inherent in the Schuman plan.

Röpke proves, in short, that collectivist planning on the national scale must find its counterpart in national autarky, and that real international economic cooperation is possible only with free markets, free competition, and a freely working price mechanism.