I am reading a lot on federation lately, for an article I would like to contribute to Brandon’s special issue of Cosmos + Taxis. I am going back to the debate about federalizing (parts of the) the democratic world which was very lively in the 1930s and 1940s. Reading the texts, for example the best-selling Union Now! (1939) by American journalist Clarence Streit, you can feel the scare for the authoritarian rulers and their nationalistic and militaristic policies. As an anti-dote, Streit proposed the federation of all the grown democracies in the world at that time, 15 in total, spread over the globe. This Union of the North Atlantic had to include a union citizenship, a union defense force, a union customs-free economy, union money and union postal and communications system After the war broke out, Streit published a new version, now calling for a union between Britain and the USA. Needless to say, none of these or other proposals went anywhere. Still some interesting perpetual questions remain.

Ludwig von Mises and Friedrich Hayek also wrote on federation during this period, as I described in Classical Liberalism and International Relations Theory (2009). I now went back to their writings, which is a treat. It is nice to have a fresh look, I also have deeper insights now (at least – I think!) than I had about 15 years ago when first encountering these ideas.

One of the divides between Mises and Hayek (which they never openly discussed, as far as I am aware) revolved around the alleged pacifying effect of federations. Mises made the point that joining a federation would lead to a larger loss of sovereignty than was normally conceived in the debate. It was not just about pooling some powers at the federal level. In an interventionist world, Mises argued, the number of policies that are dealt with from the center, or the capitol, continually rise. After all, the call for intervention will be made from all corners of the federation, all the time. This leads to a call for equal treatment, which in turn lead to a larger number of policies and regulations administered from the capitol. Consequently, the member states increasingly lose sovereignty and eventually end up as mere provinces. This would be a new cause of division, especially when the member states of the new federation used to be powerful countries on their own. Hence, a federation divides, not unites. Therefore, he proposed a much more radical solution in his plan for Eastern Europe: no federation but a strict central union (administered by foreigners, in a foreign language he even once suggested) where the members would basically have no say at all over all the important legislation normally associated with sovereignty. The laws and regulations would be limited, ensuring maximum economic and political freedom for the individual citizen.

This blog is not meant to discuss the merits of Mises’ ideas. It solely aims to point at a division between Mises and Hayek. Hayek, and most thinkers on federation with him, Streit included, had different expectations about the political effects of federation. They expected that federation would be a force of unity.  In a federation you arrange the most difficult and divisive policies at the center (for example defense, foreign policy and foreign trade), while leaving all other policies to the constituent parts. This allows room for different policies in those states, while taking away their instruments to start violent conflict. Yes, this would mean less sovereignty, but also less trouble, while the freedom within the federation still ensured as much or as little additional policies as the individual states see fit. Hayek would favor his idea the rest of his life, also proposing it for the Middle East, for example.  

Who was right? That is impossible to say, I think. There are elements of both Misesian and Hayekian arguments in the real-life experiences of federations around the globe. For some it is indeed a good way to pool the core of sovereignty, while remaining as diverse as possible. Although most them do not disintegrate with violent conflict, the increase of all kind of policies at the federal center has certainly happened. However, this is not unique to federations and most importantly, it is not a question of formal legal organization. It is a question of mentality of both politicians and populations. This is another reason to keep fighting ‘the war of ideas’, because ideas have the power to change societies.