DemocracyThe God That Failed Read online

  The Economics and Politics of Monarchy, Democracy, and Natural Order

  Acknowledgments

  Most of the following studies have grown out of speeches delivered at various conferences sponsored by the Ludwig von Mises Institute and the Center for Libertarian Studies. Several of them have been published previously at different locations and in various translations. However, for the present occasion all of them have been systematically revised and substantially enlarged. I thank Llewellyn H. Rockwell Jr., president of the Ludwig von Mises Institute, and Burton S. Blumert, president of the Center for Libertarian Studies, for their continual support, financially and personally, in developing and elaborating the ideas presented here.

  Others who afforded me a forum to express and test my ideas and thus contributed to the present work include Cristian Comanescu, Robert Nef, Gerard Radnitzky, Jiri Schwarz, Jesus Huerta de Soto, and Josef Sima. Thanks go to them, as well as to an anonymous benefactor for his ongoing financial support.

  For many years I have been blessed with the friendship of Walter Block, David Gordon, Jeffrey Herbener, Guido Hiilsmann, Stephan Kinsella, Ralph Raico, and Joseph Salerno. While none of them can be held responsible for any of my ideas, all of them, through suggestions and criticisms in countless conversations as well as their own scholarly writings, have exercised an indelible effect on my thinking.

  Even more important has been the influence of Ludwig von Mises and Murray N. Rothbard. My intellectual debt to their work is notable and, I can only hope, has been dutifully and adequately acknowledged throughout the following studies. To Murray N. Rothbard, with whom I was fortunate to have been closely associated during the last decade of his life, I further owe a profound personal debt. His friendship, and his example of moral courage and of the ability to stay kind, and indeed cheerfully optimistic in the face even of seemingly overwhelming adversity, have deeply and lastingly affected my own conduct and outlook on life.

  Last but not least, I thank my wife, Margaret Rudelich Hoppe, not just for assuming for more than twenty years now the thankless task of editing my English writings, but for always finding the time and energy, in between her work, household, and care for our two teenage children, to provide me with encouragement, comfort, and happiness.

  Introduction

  World War I marks one of the great watersheds of modern history. With its end the transformation of the entire Western world from monarchical rule and sovereign kings to democratic-republican rule and sovereign people that began with the French Revolution was completed. Until 1914, only three republics had existed in Europe—France, Switzerland, and after 1911, Portugal; and of all major European monarchies only the United Kingdom could be classified as a parliamentary system, i.e., one in which supreme power was vested in an elected parliament. Only four years later, after the United States had entered the European war and decisively determined its outcome, monarchies all but disappeared, and Europe along with the entire world entered the age of democratic republicanism.

  In Europe, the militarily defeated Romanovs, Hohenzollerns, and Habsburgs had to abdicate or resign, and Russia, Germany, and Austria became democratic republics with universal—male and female—suffrage and parliamentary governments. Likewise, all of the newly created successor states with the sole exception of Yugoslavia adopted democratic republican constitutions. In Turkey and Greece, the monarchies were overthrown. And even where monarchies remained nominally in existence, as in Great Britain, Italy, Spain, Belgium, the Netherlands, and the Scandinavian countries, monarchs no longer exercised any governing power. Universal adult suffrage was introduced, and all government power was vested in parliaments and "public" officials.

  The world-historic transformation from the ancien regime of royal or princely rulers to the new democratic-republican age of popularly elected or chosen rulers may be also characterized as that from Austria and the Austrian way to that of America and the American way. This is true for several reasons. First, Austria initiated the war, and America brought it to a close. Austria lost, and America won. Austria was ruled by a monarch—Emperor Franz Joseph—and America by a democratically elected president—Professor Woodrow Wilson. More importantly, however, World War I was not a traditional war fought over limited territorial objectives, but an ideological one; and Austria and America respectively were (and were perceived as such by the contending parties) the two countries that most clearly embodied the ideas in conflict with each other.1

  World War I began as an old-fashioned territorial dispute. However, with the early involvement and the ultimate official entry into the war by the United States in April 1917, the war took on a new ideological dimension. The United States had been founded as a republic, and the democratic principle, inherent in the idea of a republic, had only recently been carried to victory as the result of the violent defeat and devastation of the secessionist Confederacy by the centralist Union government. At the time of World War I, this triumphant ideology of an expansionist democratic republicanism had found its very personification in then U.S. President Wilson. Under Wilson's administration, the European war became an ideological mission—to make the world safe for democracy and free of dynastic rulers. When in March 1917 the U.S.allied Czar Nicholas II was forced to abdicate and a new democratic-republican government was established in Russia under Kerensky, Wilson was elated. With the Czar gone, the war had finally become a purely ideological conflict: of good against evil. Wilson and his closest foreign policy advisors, George D. Herron and Colonel House, disliked the Germany of the Kaiser, the aristocracy, and the military elite. But they hated Austria. As Erik von Kuehnelt-Leddihn has characterized the views of Wilson and the American Left, "Austria was far more wicked than Germany. It existed in contradiction of the Mazzinian principle of the national state, it had inherited many traditions as well as symbols from the Holy Roman Empire (double-headed eagle, black-gold colors, etc.); its dynasty had once ruled over Spain (another bite noire); it had led the Counter-Reformation, headed the Holy Alliance, fought against the Risorgimento, suppressed the Magyar rebellion under Kossuth (who had a monument in New York City), and morally supported the monarchical experiment in Mexico. Habsburg—the very name evoked memories of Roman Catholicism, of the Armada, the Inquisition, Metternich, Lafayette jailed at Olmutz, and Silvio Pellico in Briinn's Spielberg fortress. Such a state had to be shattered, such a dynasty had to disappear."2

  1For a brilliant summary of the causes and consequences of World War I see Ralph Raico, "World War I: The Turning Point," in The Costs of War: America's Pyrrhic Victories, John V. Denson, ed. (New Brunswick, NE: Transaction Publishers, 1999).

  2Erik von Kuehnelt-Leddihn, Leftism Revisited: From de Sade to Pol Pot (Washington, D.C.: Regnery, 1990), p. 210; on Wilson and Wilsonianism see further Murray N. Rothbard, "World War I as Fulfillment: Power and the Intellectuals," Journal of Libertarian Studies 9, no. 1 (1989); Paul Gottfried, "Wilsonianism: The Legacy that Won't Die," Journal of Libertarian Studies 9, no. 2 (1990); idem, "On Liberal and Democratic Nationhood," Journal of Libertarian Studies 10, no. 1 (1991); Robert A. Nisbet, The Present Age (New York: Harper and Row, 1988).

  As an increasingly ideologically motivated conflict, the war quickly degenerated into a total war. Everywhere, the entire national economy was militarized (war socialism),3 and the time-honored distinction between combatants and noncombatants and military and civilian life fell by the wayside. For this reason, World War I resulted in many more civilian casualties—victims of starvation and disease—than of soldiers killed on the battlefields. Moreover, due to the ideological character of the war, at its end no compromise peace but only total surrender, humiliation, and punishment was possible. Germany had to give up her
monarchy, and Alsace-Lorraine was returned to France as before the Franco-Prussian War of 1870-71. The new German republic was burdened with heavy long-term reparations. Germany was demilitarized, the German Saarland was occupied by the French, and in the East large territories had to be ceded to Poland (West Prussia and Silesia). However, Germany was not dismembered and destroyed. Wilson had reserved this fate for Austria. With the deposition of the Habsburgs the entire Austrian-Hungarian Empire was dismembered. As the crowning achievement of Wilson's foreign policy, two new and artificial states: Czechoslovakia and Yugoslavia, were carved out of the former Empire. Austria herself, for centuries one of Europe's great powers, was reduced in size to its small German-speaking heartland; and, as another of Wilson's legacies, tiny Austria was forced to surrender its entirely German province of Southern Tyrolia—extending to the Brenner Pass—to Italy.

  Since 1918 Austria has disappeared from the map of international power politics. Instead, the United States has emerged as the world's leading power. The American age—the pax Americana—had begun. The principle of democratic republicanism had triumphed. It was to triumph again with the end of World War II, and once more, or so it seemed, with the collapse of the Soviet Empire in the late 1980s and early 1990s. For some contemporary observers, the "End of History" has arrived. The American idea of universal and global democracy has finally come into its own.4

  3See Murray N. Rothbard, "War Collectivism in World War I," in A New History of Leviathan, Ronald Radosh and Murray N. Rothbard, eds. (New York: E.P. Dutton, 1972; Robert Higgs, Crisis and Leviathan (New York: Oxford University Press, 1987).

  4See Francis Fukuyama, The End of History and the Last Man (New York: Avon Books, 1992).

  Meanwhile, Habsburg-Austria and the prototypical pre-democratic Austrian experience assumed no more than historical interest. To be sure, it was not that Austria had not achieved any recognition. Even democratic intellectuals and artists from any field of intellectual and cultural endeavor could not ignore the enormous level of productivity of Austro-Hungarian and in particular Viennese culture. Indeed, the list of great names associated with late nineteenth and early twentieth century Vienna is seemingly endless.5 However, rarely has this enormous intellectual and cultural productivity been brought in a systematic connection with the pre-democratic tradition of the Habsburg monarchy. Instead, if it has not been considered a mere coincidence, the productivity of Austrian-Viennese culture has been presented "politically correctly" as proof of the positive synergistic effects of a multiethnic society and of multiculturalism.6

  However, at the end of the twentieth century increasing evidence is accumulating that rather than marking the end of history, the American system is itself in a deep crisis. Since the late 1960s or early 1970s, real wage incomes in the United States and in Western Europe have stagnated or even fallen. In Western Europe in particular, unemployment rates have been steadily edging upward and are currently exceeding ten percent. The public debt has risen everywhere to astronomical heights, in many cases exceeding a country's annual Gross Domestic Product.

  5The list includes Ludwig Boltzmann, Franz Brentano, Rudolph Carnap, Edmund Husserl, Ernst Mach, Alexius Meinong, Karl Popper, Moritz Schlick, and Ludwig Wittgenstein among philosophers; Kurt Godel, Hans Hahn, Karl Menger, and Richard von Mises among mathematicians; Eugen von Bohm-Bawerk, Gottfried von Haberler, Friedrich A. von Hayek, Carl Menger, Fritz Machlup, Ludwig von Mises, Oskar Morgenstern, Joseph Schumpeter, and Friedrich von Wieser among economists; Rudolph von Jhering, Hans Kelsen, Anton Menger, and Lorenz von Stein among lawyers and legal theorists; Alfred Adler, Joseph Breuer, Karl Biihler, and Sigmund Freud among psychologists; Max Adler, Otto Bauer, Egon Friedell, Heinrich Friedjung, Paul Lazarsfeld, Gustav Ratzenhofer, and Alfred Schutz among historians and sociologists; Hermann Broch, Franz Grillparzer, Hugo von Hofmannsthal, Karl Kraus, Fritz Mauthner, Robert Musil, Arthur Schnitzler, Georg Trakl, Otto Weininger, and Stefan Zweig among writers and literary critics; Gustav Klimt, Oskar Kokoschka, Adolf Loos, and Egon Schiele among artists and architects; and Alban Berg, Johannes Brahms, Anton Bruckner, Franz Lehar, Gustav Mahler, Arnold Schoenberg, Johann Strauss, Anton von Webern, and Hugo Wolf among composers.

  6See Allan Janik and Stephen Toulmin, Wittgenstein's Vienna (New York: Simon and Schuster, 1973); William M. Johnston, The Austrian Mind: An Intellectual and Social History 1848-1938 (Berkeley: University of California Press, 1972); Carl E. Schorske, Fin-de-Siecle Vienna: Politicsand Culture (New York: Random House, 1981).

  Similarly, the social security systems everywhere are on or near the verge of bankruptcy. Further, the collapse of the Soviet Empire represented not so much a triumph of democracy as the bankruptcy of the idea of socialism, and it therefore also contained an indictment against the American (Western) system of democratic—rather than dictatorial—socialism. Moreover, throughout the Western hemisphere national, ethnic and cultural divisiveness, separatism and secessionism are on the rise. Wilson's multicultural democratic creations, Yugoslavia and Czechoslovakia, have broken apart. In the U.S., less than a century of full-blown democracy has resulted in steadily increasing moral degeneration, family and social disintegration, and cultural decay in the form of continually rising rates of divorce, illegitimacy, abortion, and crime. As a result of an ever-expanding list of nondiscrimination—"affirmative action"—-laws and nondiscriminatory, multicultural, egalitarian immigration policies, every nook and cranny of American society is affected by government management and forced integration; accordingly, social strife and racial, ethnic, and moral-cultural tension and hostility have increased dramatically.

  In light of these disillusioning experiences fundamental doubts concerning the virtues of the American system have resurfaced. What would have happened, it is being asked again, if in accordance with his reelection promise, Woodrow Wilson had kept the U.S. out of World War I? By virtue of its counterfactual nature, the answer to a question such as this can never be empirically confirmed or falsified. However, this does not make the question meaningless or the answer arbitrary. To the contrary, based on an understanding of the actual historical events and personalities involved, the question concerning the most likely alternative course of history can be answered in detail and with considerable confidence.7

  If the United States had followed a strict noninterventionist foreign policy, it is likely that the intra-European conflict would have ended in late 1916 or early 1917 as the result of several peace initiatives, most notably by the Austrian Emperor Charles I. Moreover, the war would have been concluded with a mutually acceptable and facesaving compromise peace rather than the actual dictate. Consequently, Austria-Hungary, Germany, and Russia would have remained traditional monarchies instead of being turned into short-lived democratic republics. With a Russian Czar and a German and Austrian Kaiser in place, it would have been almost impossible for the Bolsheviks to seize power in Russia, and in reaction to a growing communist threat in Western Europe, for the Fascists and National Socialists to do the same in Italy and Germany.8 Millions of victims of communism, national socialism, and World War II would have been saved. The extent of government interference with and control of the private economy in the United States and in Western Europe would never have reached the heights seen today. And rather than Central and Eastern Europe (and consequently half of the globe) falling into communist hands and for more than forty years being plundered, devastated, and forcibly insulated from Western markets, all of Europe (and the entire globe) would have remained integrated economically (as in the nineteenth century) in a world-wide system of division of labor and cooperation. World living standards would have grown immensely higher than they actually have.

  7For a contemporary collection of examples of "counterfactual history" see Virtual History: Alternatives and Counter/actuals, Niall Ferguson, ed. (New York: Basic Books, 1999).

  Before the backdrop of this thought experiment and the actual course of events, the American system and the pax Americana appear—contrary to "offi
cial" history, which is always written by its victors, i.e., from the perspective of the proponents of democracy—to be nothing short of an unmitigated disaster; and Habsburg-Austria and the pre-democratic age appear most appealing.9 Certainly, then, it would be worthwhile to take a systematic look at the historic transformation from monarchy to democracy.

  8On the relationship between communism and the rise of fascism and national socialism see Ralph Raico, "Mises on Fascism, Democracy, and Other Questions," Journal of Libertarian Studies 12, no. 1 (1996); Ernst Nolte, Der europaische Burgerkrieg, 1917-1945. Nationalsozialismus und Bolschewismus (Berlin: Propylaen, 1987).

  9No less of an establishmentarian than George F. Kennan, writing in 1951, came indeed close to admitting as much:

  Yet, today, if one were offered the chance of having back again the Germany of 1913, a Germany run by conservative but relatively moderate people, no Nazis and no Communists, a vigorous Germany, united and unoccupied, full of energy and confidence, able to play a part again in the balancing-off of Russian power in Europe... well, there would be objections to it from many quarters, and it wouldn't make everybody happy; but in many ways it wouldn't be so bad, in comparison with our problem of today. Now, think what that means. When you tally up the total score of the two wars, in terms of their ostensible objectives, you find if there has been any gain at all, it is pretty hard to discern. (American Diplomacy 1900-1950 (Chicago: University of Chicago Press, 1951], pp. 55-56)

  While history will play an important role, the following is not the work of a historian, however, but of a political economist and philosopher. There are no new or unfamiliar data presented. Rather, insofar as a claim to originality is made, it is that the following studies contain new and unfamiliar interpretations of generally known and accepted facts; moreover, that it is the interpretation of facts, rather than the facts themselves, which are of central concern to the scientist and the subject of most contention and debate. One may, for instance, readily agree on the fact that in nineteenth-century America average living standards, tax rates, and economic regulations were comparatively low, while in the twentieth century living standards, taxes, and regulations were high. Yet were twentieth-century living standards higher because of higher taxes and regulations or despite higher taxes and regulations, i.e., would living standards be even higher if taxes and regulations had remained as low as they had been during the nineteenth century? Likewise, one may readily agree that welfare payments and crime rates were low during the 1950s and that both are now comparatively high. Yet has crime increased because of rising welfare payments or despite them, or have crime and welfare nothing to do with each other and is the relationship between the two phenomena merely coincidental? The facts do not provide an answer to such questions, and no amount of statistical manipulation of data can possibly change this fact. The data of history are logically compatible with any of such rival interpretations, and historians, insofar as they are just historians, have no way of deciding in favor of one or the other.