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<h1 id="title-index">nwo-merc</h1>
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<p>A NEW WORLD ORDER: ECONOMIC LIBERALISM OR THE NEW</p>
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<p>MERCANTILISM?</p>
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<p>By RICHARD M. EBELING</p>
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<p>In the days immediately following the Iraqi invasion of Kuwait
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in August 1990, the Bush Administration declared that a vital
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interest of the United States was at stake--American economic
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well-being was threatened by Iraqi control of the Kuwaiti oil
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fields. However, when a growing number of economists pointed
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out that the U.S. economy had the capacity to adjust in a
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reasonable amount of time to any rise in the price of oil--or
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to a disruption in its supply from the Persian Gulf--the Bush
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Administration began shifting its rationale for American
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intervention.</p>
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<p>The argument was next made that what was actually at stake was
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the freedom of the Kuwaiti people. A number of political
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analysts, however, pointed out that while Saddam Hussein's
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regime in Iraq was undoubtedly a brutal dictatorship, Kuwait
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had not exactly been an example of a free, democratic society.
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In fact, the royal family of Kuwait had closed the Parliament
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a few years earlier and had also imposed various restrictions
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on freedom of speech and the press.</p>
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<p>The Bush Administration again changed the rationale for
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American military intervention. It was now claimed that what
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was at stake was the inviolability of international borders
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and the continued existence of nation-states. A number of
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Middle East experts pointed out, however, that these
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supposedly "inviolable" borders and nation-states were
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themselves the creations of Britain and France when they
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carved up the Turkish Empire at the end of world war I. The
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existing boundaries and the legitimacy of the Persian Gulf
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states are no less "artificial" than making Kuwait "Province
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19" of Iraq.</p>
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<p>The Bush Administration finally argued that what was at stake
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was the establishment of a "new world order." World peace and
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stability could never be secure as long as dictators had the
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license to conquer and plunder their neighbors by force of
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arms. With the end of the Cold War, it was now necessary to
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bring to fruition the noble dreams of Woodrow Wilson and
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Franklin D. Roosevelt which called for a consort of nations to
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police and guarantee world order for the mutual benefit of
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all.</p>
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<p>Few people have asked, however, what the ultimate foundations
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for any durable world order are. And to ask this question is,
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at the same time, to ask: What are the causes of conflict and
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war--the causes of world disorder?</p>
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<p>In the 18th century, the reigning economic philosophy among
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nations was mercantilism. The fundamental premise underlying
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mercantilism was expressed by Voltaire in 1764: "It is clear
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that a country cannot gain unless another loses and it cannot
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prevail without making others miserable." The policy
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implications of this societal philosophy were trade wars and
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territorial conquests. If your own nation was to be wealthy,
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it could only be so by making others poorer. Tariff walls were
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needed to protect the prosperity of domestic producers from
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the "attacks" of foreign competitors. Subsidies were required
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for export producers so that they could "seize" the wealth of
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others in foreign markets. Resources in foreign lands had to
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be militarily "captured" to keep them out of the hands of
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commercial rivals in opposing nation-states who would use them
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to defeat "our" nation-state.</p>
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<p>Economic activity in every nation was entirely politicized.
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Private interests had to be subordinated to the ends of the
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state in this global war of all against all.</p>
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<p>But in the 19th century, the liberal ideal replaced
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mercantilism. The liberal philosophers and economists
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explained that trade among nations, like trade among
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individuals, was mutually beneficial. All men would gain
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through participation in a global division of labor--a way of
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life in which they offered to each other the various products
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in the production of which they specialized. Market
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competition was not conflict, they argued, but rather peaceful
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cooperation: each producer helped to improve the quality of
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life for all through the production and sale of superior and
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less expensive products than the ones offered by his market
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rivals.</p>
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<p>The liberal ideal required minimizing the role of the state in
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economic affairs. The German economist Wilhelm Ropke once
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concisely explained that the "genuinely liberal principle"
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required "the widest possible separation of the two spheres of
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government and economy. . . . This means the largest possible
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'depolitisation' of the economic sphere with everything that
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goes with it. . . . By aid of this principle of separation, it
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was possible to reduce to a minimum the economic coexistence
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of sovereign states with their different legal orders, their
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frontiers, their systems of administration and separate
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citizenships. . . . The result was that it was now possible to
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remove the greatest part of the economic issues of conflict
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and problems to which the coexistence of sovereign States is
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liable to give rise."</p>
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<p>Competition and rivalry, the "capturing" of consumer business
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and the "conquest" of market share were now private matters of
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peaceful exchange and contract. They were no longer affairs of
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state--no longer political issues concerning obedience,
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command and control.</p>
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<p>The privatization of economic life, with government limited to
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the protection of life and property and the adjudication of
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contractual disputes, was the foundation of this "new world
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order" in the predominantly liberal era between the end of the
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Napoleonic wars in 1815 and the beginning of the First World
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War in 1914. And what did it produce? A century of the
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greatest freedom, prosperity and peace that man has ever
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known.</p>
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<p>In the 20th century, however, we have unfortunately returned
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to the mercantilist ideal. Trade and commercial rivalry are
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once again seen as the battleground of political combat.
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Iraq's motive in invading Kuwait merely took the principle to
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its logical conclusion: a nation destroys its economic rival
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by seizing its resources (Kuwait's oil fields) and attempts to
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enrich itself by plundering its accumulated wealth (Kuwait's
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gold and physical assets).</p>
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<p>But the United States and its Desert Storm allies in principle
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conduct their international economic affairs no differently
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than has Saddam Hussein. If some of America's Asian trading
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partners "capture" a large share of the American consumer
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market, the government responds with a tariff-wall "defense."
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If American agriculture cannot earn the profits it considers
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"fair," the U.S. government takes the "offensive" by
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"attacking" other lands through export price-subsidies. If
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other nations will not comply with the wishes of the
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Washington social engineers in some international dispute, the
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American government influences and persuades them with
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government-to-government financial loans, grants and
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subsidized credits--all at American taxpayers' expense, of
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course.</p>
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<p>Nor has the United States government any qualms about military
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adventures to secure its economic goals when circumstances
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seem to warrant it. When it becomes politically profitable for
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the politicians in Washington to oppose the importation of
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narcotics into the United States, then American military
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forces invade one of the countries--Panama--that is accused of
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dealing in the forbidden trade. Or if the occupation of Kuwait
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by Iraq might negatively influence the availability and price
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of a valued import such as oil, then a military crusade is
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launched to guarantee "our" supply of oil. And in the process,
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we purchase some allies--Egypt--by "forgiving" tens of
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billions of dollars in government loans; and we also punish
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others who won't go along with us--Jordan--by withholding
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government aid and loans.</p>
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<p>In a world of politicized trade and commerce, conflicts among
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nations are inevitable, because the economic profits and
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losses of private individuals and industries are raised to the
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level of affairs of state. And, as a consequence, the problems
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and interests of private suppliers and demanders are turned
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into issues of national concern and supposed survival. This is
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the source of much of our global disorder as well as one of
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the fundamental barriers to a truly peaceful "new world
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order."</p>
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<p>In 1936, the Swiss economist and political scientist William
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Rappard delivered a lecture entitled, "The Common Menace of
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Economic and Military Armaments." World order, he said, was
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threatened not only by military aggression but by economic
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warfare as well. The weapons for economic warfare were
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"economic armaments"--meaning all of the legislative and
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administrative devices governments use to politically
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influence imports and exports as well as the allocation of
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commodities and their prices within one's own country and in
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other parts of the world.</p>
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<p>"The primary source of economic and military armaments,"
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Rappard said, "we perceive in the doctrine of political
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nationalism. Political nationalism is the creed which places
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the national State at the top of the scale of human values,
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not only above the individual, but above mankind itself."</p>
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<p>Rappard argued that a new world order of peace and prosperity
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would only be possible when nations undertook a policy of
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economic disarmament. But this would only come about when the
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creed of political nationalism and mercantilism was again
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superseded by the ideals of economic liberalism. And, alas, we
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still seem as far away from that transformation as when
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William Rappard delivered his lecture more than half a century
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ago.</p>
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<p>Professor Ebeling is the Ludwig von Mises Professor of
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Economics at Hillsdale College, Hillsdale, Michigan, and also
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serves as vice-president of academic affairs for The Future of
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Freedom Foundation.</p>
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<p>------------------------------------------------------------
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From the July 1991 issue of FREEDOM DAILY,
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Copyright (c) 1991, The Future of Freedom Foundation,
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PO Box 9752, Denver, Colorado 80209, 303-777-3588.
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Permission granted to reprint; please give appropriate credit
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and send one copy of reprinted material to the Foundation.
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</p>
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