“How History can contribute to the Renaissance of Classical Liberalism: A Comment on Hayek's essay on "Intellectuals and Socialism"”

By David M. Hart

[Created: January, 1985] [Revised: 24 October, 2024]

This is part of a collection of Papers by David M. Hart

In the final paragraph of "Intellectuals and Socialism" F. A. Hayek cautions that the prospects for liberty will not be truly bright "unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds."

What can be done to encourage the creative application of classical liberal-libertarian principles in your own discipline that will most effectively make the "philosophic foundations of the free society" more intellectually exciting and more widely accepted in academia, both now and throughout the next decade?)

Introduction: How History can contribute to the Renaissance of Classical Liberalism

I think Hayek would agree that pure theory is not sufficient in itself to change the intellectual climate of opinion in a more liberal direction. As he has argued, it is quite common for one's political world-view to be shaped, not by learning the precepts of any one political theory or another, but by the particular kind of history which one has absorbed. [1] The absorption of a view of history usually takes place at school where one learns the national myths with which all states desire their citizens to be familiar. It can also take place in a more subtle manner, for example by reading newspapers or watching television. By whatever means, the adoption of a view of history brings along with it a set of underlying political assumptions which, in our age, are of a decidedly anti-market bias. It is my opinion that not only must classical liberals develop an alternative theoretical position to the various forms of interventionism (as Hayek, Mises, and others broadly within the Austrian tradition have done), they must also challenge the views of history which are hostile to classical liberal and market values. By interpreting history in the light of classical liberal theory not only will important errors of fact and interpretation be corrected, but also liberal values will be introduced to a large audience - an audience much larger than that reached by theoretical discussion, given the fact that very few individuals concern themselves with questions of pure political theory.

An examination of any high school or college history text book is sufficient to demonstrate the accuracy of Hayek's observation. For example, the view that one has of the causes of the Great Depression, of the evil consequences of the Industrial Revolution, or of the necessity of drastically controlling the domestic economy in time of war, all help shape one's political attitude towards the free market. By challenging historical interpretations which are hostile to the market one can reinforce liberal values and thereby assist the process whereby liberal theory will gradually come to replace those theories which defend various forms of statism and interventionism.

Classical liberal theory is fortunate to be in a good position to begin challenging interventionist interpretations of history. What makes the creation of a new classical liberal school of history exciting to contemplate is the fact that, like Marxism, classical liberalism is able to explain political, social, and economic activity as aspects of a unifying social theory of considerable power. Liberal social theory is based upon the insights of the Austrian School of economics: subjective value theory, methodological individualism, spontaneous order, and the concept of unintended consequences (or dynamic interventionism). [2] These Austrian insights result in a powerful and inspiring unified view of individual and social action which has important consequences when applied to the study of historical phenomenon. Having such a unified picture of the world is a great advantage over other theories because it enables one to see that an event in one area of social activity often has profound effects in other areas. It is the task of historians to trace the interlocking chains of cause and effect across time and to offer an explanation of them in the light of a theory of individual and group action.

This view of the interdependency of social, political, and economic phenomena is something which classical liberalism shares with Marxism (and here the similarity ends). I believe that the integration of social phenomena into a all-embracing theory provides one with explanatory power of considerable scope. It is a similarly impressive power of explanation which has been one of the most attractive features of Marxism over the past one hundred or so years. A classical liberal social theory which is firmly anchored in historical analysis could eventually rival Marxism in its explanatory power and its attractiveness to intellectuals. It is my hope to contribute to the development of an historically based classical liberal social theory which may ultimately be able to rival Marxism in its intellectual power, if not in its political influence.

In addition to challenging interventionist political assumptions about the past, liberal historical analysis is also useful for developing an awareness of one's own intellectual tradition. I believe it is important to understand how liberal ideas and liberal movements have developed over time, how they originated often in opposition to excessive state power, and how they differ from the ideologies which justify interventionism. Studying the classics of libertarian thought and the accounts of past political and intellectual movements can give one an awareness of being part of a tradition of thought and of being part of an on-going struggle for individual freedom that is centuries old.

History therefore has a direct bearing on the present because, in order to develop strategies for limiting the power of the state, it is important to know why and how our intellectual forebears won or lost their own battles. History also makes it apparent that fundamental change takes considerable time and that it will be many decades before liberal values will be accepted in cultural, intellectual, as well as political circles.

Another strategic reason for developing a liberal school of history is to be able to understand the present political and economic situation. The only way to get a serious grasp of the crises which beset our society is to understand how they developed over the past decades. What we see around us is only the result of past actions, undertaken for particular reasons by particular individuals and complicated by the problem of unintended consequences. In order to understand the current situation and to determine the historical trajectory of our society one has to understand the dynamics of at least the last two hundred years of European and American history. Without a knowledge of the forces at work, the strengths and weaknesses of the contending parties, and the structure of the various national economies, one is in no position to understand what is going on and therefore in no position to undertake serious changes.

Some Features of a Liberal School of History

The liberal school of history has yet to fully integrate the important insights generated by the Austrian school. The scholarly agenda for the next decade is to begin using Austrian insights to forge a liberal theory of history. In the following pages I would like to suggest the main areas in which liberal historians could make the biggest contributions to the development of an historically informed liberal social theory which could rival Marxism in its power and sophistication. It is an enormous task and it is one that will surely take longer than a decade to reach any kind of intellectual maturity. This is not surprising if one examines the development of other schools of historiography such as the "Annales School", which began in the 1920s and 1930s before becoming a quasi-orthodoxy in the 1970s. [3]

I anticipate that liberal historians will generally approach their subject in two different but complementary ways. The first is to use the enormous amount of material which other historians have produced in order to correct and reinterpret their views of the major events of history. The second and perhaps most stimulating approach will be to use our unique social theory to ask new questions about the past. This will be most relevant in examining the deleterious consequences of various forms of state intervention in the economy as well as searching for the beneficiaries of these interventions.

The following are the main areas in which liberal historians could be most original and most effective in challenging interventionist assumptions:

The State as the Focal Point of History

Because classical liberals view the state as an intrusive body which is perhaps the cause of social and economic disruptions, its origin and development into the modern nation state is of particular importance. We must know how and why the state was able to organize its territorial monopoly of coercion, especially how it was able to pacify or eradicate organized opposition to its rule. [4]

Research could probably be divided into three areas. The first would be concerned with the origins of the state or the proto-state and will more likely become part of political anthropology rather than history itself. This is because the origin of political organization began before written records could be kept. What is interesting for the historian are the insights the investigation into the early origins of the state provides for a better understanding of the nature of political power and its intrusive and disruptive effects. It is also useful for comparative purposes, comparing the rise of prehistorical state structures with the rise of the nation state in the early modern period or with the modern nation state in recent centuries. [5]

The second area would deal with the origin of the modern state in the early modern period. It is at this time that the fractured feudal spheres of sovereignty were unified into what was to become absolute monarchies and that the very idea of the "state" as we know it arose. The frequent dynastic wars required the establishment of armies with organized bureaucratic control and secure sources of finance by means of regular taxes. That the modern state and its major institutions had their origin in the necessities of war finance and *raison d'état) has implications for understanding the contemporary state and its crises. [6]

The third area would deal with the development of the modern welfare state since the late-nineteenth century, particularly its history since the Second World War. A liberal interpretation of this development is of vital importance for two reasons. Firstly to dispel the myth that state controlled welfare was needed to counter the "ravages" of the modern capitalist system. Liberal historians need to examine the large number of now-forgotten private efforts to provide welfare, especially in the nineteenth century. These included private hospitals, charitable foundations, schools, friendly and building societies, the non-coercive cooperative activities of trade unions, and above all the family. [7] Secondly, because the state provision of welfare has resulted in the creation of massive bureaucracies to supervise and control this function. This in turn has led to financial and productivity crises which threaten to retard if not prevent further rapid economic development. [8]]

The key to understanding the establishment and the massive growth in the power of the state is provided by analyzing the major institutions which comprise the state. Historians have to understand the nature of the major institutions of the state, in particular how they were able to grow from a privileged group of advisors around the monarch into the rational bureaucratic machine we know today. The most important institutions include the finance and treasury ministries which have the power to tax, the commerce ministry which regulates trade, the war ministry which creates the military-industrial complex by channelling funds and contracts to selected firms, the legal system which enables the state to have its way in regulating and coercing and which is the mechanism of social repression, the elected parliaments which developed out of a body of privileged landed élites into a complex dispenser of patronage and tax dollars, and the education system which is the means of legitimizing the state's activities and inculcating the values of interventionism and obedience. Classical liberal historians have a special sensitivity towards these issues and, when combined with the insights provided by the Austrian school, would enable them to produce the first comprehensive treatments of the modern state. [9]

The Role of Class Conflict

The German-Austrian sociologist Franz Oppenheimer once observed that there are only two ways of acquiring wealth. One either produces it or one steals it. Those who primarily gain wealth by producing it do so by the "economic means." Those who steal it do so by the "political means." This fundamental distinction between the economic and the political means of acquiring wealth leads to a powerful device for analyzing history which rivals the Marxist notion of exploitation in its power and comprehensiveness. Those who use the economic means produce and exchange their goods and services on the market in a peaceful and non-disruptive manner. They comprise a class of people who have an interest in protecting property, developing trade networks, leaving individuals alone to associate with whom and as he or she pleases, avoiding all disruptive confrontations with others, especially war, and generally developing a fragile and extensive spontaneous order. [10]

The people who use the political means to acquire wealth also comprise a class, but a class of non-producers rather than producers. Throughout history this class has used deception, violence, and threats to deprive the producing class of its property in order to live at its expense. Over time, isolated acts of theft became regularized and the state began to emerge as an organized and permanent entity. The class of individuals who were dependent upon the productive activity of the broad mass of the people gradually developed into a "ruling" class. Where the classical liberal interpretation differs from that of Franz Oppenheimer is the abandonment of the rigid and only partially correct view that the early ruling class was from a different race to the subject class of labourers and taxpayers. This might be true for multi-racial societies, like the Austo-Hungarian Empire in which these "race" theorists lived, but is not applicable to other societies in which the ruling class developed from within the racial community. [11]

Irrespective of whether the ruling class was a different race to the subject class or not, the characteristics of the "ruling" class is the same: it could control state policies for its own ends and could select trusted individuals or have themselves appointed to the most important posts in the state and its bureaucracies. The crucial point is that once this non-productive class became entrenched there began a constant battle between the those who paid the taxes and supplied the forced labour on the one hand and the privileged class who received the tax monies and other state benefits on the other.

Such a class theory of society has been implicit in classical liberal thought from its very beginning. From the Physiocratic idea of the classe stérile, to Charles Comte and Charles Dunoyer's idea of the class of industriels, to Herbert Spencer's distinction between the military and industrial forms of social organization, to Vilfredo Pareto's idea of the circulation of élites, and to its modern expression in the writing of Murray Rothbard, Leonard Liggio, and Walter Grinder, the classical liberal theory of class has developed to the point where is now capable of being used for sophisticated historical analysis. [12]

This conflict between the two fundamentally different classes is endemic in all societies which have a state or other body of organized force, such as a standing army or an established religion. Classical liberals are particularly interested in trying to identify those at the top who benefit, in other words, those who comprise the ruling class. Only by identifying them can we understand who they are, how they wield their power, what their economic and political interests are, and how they can be opposed. Thus Kremlin or Capitol Hill watching (and its historical equivalent) should be an important part of classical liberal scholarship. [13] Unfortunately, "class analysis" has been identified with Marxist social theory although some of the earliest and best "class analysis" was done by liberals as Marx himself recognized. There is thus plenty of scope for liberals to reclaim class analysis from the Marxists and to use it to examine the development of the modern welfare state. In addition, liberals will have a powerful tool with which to analyze the class societies of the Marxist régimes, a task which the Marxists themselves are chronically incapable of doing.

"War is the Health of the State"

The radical literary critic and essayist, Randolph Bourne, had a most perceptive insight into the nature of the state when he observed towards the end of the First World War that "War is the health of the State." [14]It seems that each time war breaks out (for whatever reason) the state gains in size and power. Liberal historians should be attracted to any event which transfers resources away from the private sector into the public sector and thereby increases the power of the state vis-à-vis the individual. This is especially true of war and so it is not surprising that liberal social theorists have devoted considerable attention to studying its effects. [15] However, the precise relationship between the state, the military, the war industries, and the suppliers of taxes and labour still needs to be determined, as does the long-term consequences of the militarization of the economy. [16] In order to fight a war one needs massive amounts of money and resources, requiring considerable increases in taxation, the monetization of public debt, and the requisitioning of privately owned resources. Since the state cannot supply all the necessary raw materials and equipment itself it must rely upon the assistance of selected business groups. Thus begins the development of the awkwardly termed "military-industrial complex," which is only the close interdependence of the state and certain privileged business groups which supply the state's military needs. [17]

Industry is not only militarized by being brought under the direction of the state for purposes of supplying war, but society itself must be rearranged to satisfy the requirements of war. Labour regulations ensure that individuals work at the "right" wages at the right place; resources are transferred from the civilian economy to the war economy and the inevitable shortages of consumer goods result in price controls, rationing, and a lowering of quality; criticism of the war régime is crushed by imposing censorship, imprisoning or killing dissidents, and closing newspapers and schools; and the state attempts to win the support of the people by press and radio campaigns, movements to conserve scarce resources, bond drives, and other gimmicks to make the people part of the war effort. [18] Classical liberal social theory is unique in being able to provide explanations for the trauma and dislocation caused by war shortages, misallocation of resources, inflation, and the creeping bureaucratization of the economy.

Analysis of the Market as a Spontaneous Order

A similar situation exists with regard to the study of economic history in general. The liberal's understanding of the dynamic nature of market processes will mean that a deeper understanding of the nature of the industrial revolution as an historical process will be possible. Few historians have given sufficient attention to institutional barriers to economic growth such as the nature of property rights, the legal system which protects them, and the role of money and banking. Nor have historians properly understood the vital role which entrepreneurial activity has had in making better use of existing resources and in stimulating innovation and the creation of entirely new markets. [19]

Classical liberal historians are also able to understand that attempts to regulate the economy or to escape the consequences of previous regulations must ultimately fail. In fact, the most original Austrian insight which liberals could use to great effect in explaining the growth of the state is Mises' application of the idea of unintended consequences. Mises argued that the failure of one regulation usually leads to the imposition of another to counteract or correct the first. Thus the dynamic of interventionism leads to an ever expanding sphere of government regulation and control. [20] If this is correct then classical liberal historians have a powerful explanatory tool at their disposal which no other school possesses. They will have to examine recent economic history closely to determine whether this insight is the primary cause or whether there are other reasons for the expansion of government intervention in the economy.

In spite of the severe handicaps placed on the market and voluntary exchange by the state, the market is constantly endeavouring to reassert itself. [21] Where there are price controls and restrictions, especially in socialist and Marxist régimes, black markets arise to satisfy unmet consumer demand. The relationship between black or grey markets and the "success" of central planning in, for example, the Soviet Union can be analyzed only by someone who has no illusions about the efficiency of central planning. The theoretical groundwork for such an analysis was laid by Mises in his precociously early assessment of the viability of socialism. [22] Using this as a basis, the liberal historian will be able to assess critically the success and failure of the centrally planned economies and the necessity of these economies to liberalize as Yugoslavia, Hungary and China have done.

Classical liberals should be sensitive to all manifestations of voluntary exchange and association. However, special attention should be given to the emergence of the market in its modern form in the relative security of the medieval cities. The origins of the commercial and the industrial revolutions should receive particularly close attention because this is the best example of the market overcoming massive difficulties placed in its path by centuries of privilege and protection. For the first time in human history the common people had a real chance to improve their living conditions and to live as only kings could have lived centuries before. This is an area that desperately needs classical liberal scholarship because for too long it has been monopolized by Marxists, social reformers and others who are out to condemn if not destroy capitalism. [23]

However, as classical liberals, we must not uncritically praise the industrial revolution as it has developed since the sixteenth and seventeenth centuries. We must always be aware of privilege and special interests who may have manipulated the market for their own interests. Some groups, such as wealthy Italian bankers and merchants, were far too closely involved with selling and lending to the monarch and provisioning the army to be absolved from charges of special privilege. Furthermore, certain key elements of the market remained under government control and inhibited the full development of the market revolution. Land ownership remained in the hands of those aristocrats who had appropriated it many centuries before, the money supply remained in the hands of central banks (although gold was the ultimate medium of exchange), transport and public works were often monopolised by the state, and the powerful navies gave contracts to privileged businesses and protected overseas investments at tax-payer expense. In all these areas, classical liberals have quite different and important things to say.

One could also mention the fact that analyses of the business cycle need to be written from an Austrian perspective and the entire banking and monetary system needs to be closely studied to understand the periodic crises which inhibited industrial development and which gave "laissez-faire" capitalism such a bad name. [24] In all areas of economic history, the pernicious effects of intervention must be described and the classes who benefit from it must be identified and exposed, a question rarely asked in the traditional interpretations. [25]

Sympathy towards Oppressed Groups

The other side of the coin to studying the beneficiaries of state power and privilege is the study of the victims of state power. This would include the history of taxpayers, slaves, excluded and persecuted classes like Jews and homosexuals, the problematic position of women, and the treatment of aboriginal groups in settler societies. These groups should be the focus of detailed studies in order to understand why they were chosen for this especially debilitating role and how other groups benefited from their misery. In the United States, slavery is of vital importance. It was the economic linchpin of the South for decades and was the means by which the powerful class of southern planters got their wealth and social position. In other societies, for example South Africa, disadvantaged blacks support an entire system which is dominated by whites who have political and economic privileges of an astonishing variety and scope. Women have been systematically used by societies as a source of cheap labour for centuries. They have been legally and socially discriminated against and so should be carefully studied as an example of political and legal discrimination.

Other groups have similarly suffered under the discriminating power of the state. Homosexual men and women, religious heretics and dissidents, the practitioners of free love and advocates of contraception, and even traders and merchants in some societies have been viciously persecuted for engaging in voluntary economic and social activities. All need to be sympathetically studied by classical liberals. [26]

Rediscovering the Libertarians of the Past

All groups like to find in history forerunners of their particular beliefs. Marxists and socialists have written scores of monographs on minor socialist figures of times gone by. Liberals, like socialists, can trace their intellectual origins back several centuries and it is important that historians do so. The study of past ideas and movements is valuable because it is a source of inspiration and insight. Insight comes from studying the very positive contributions to liberal theory which past liberals have made. Inspiration (as well as despair) comes from studying the successes and the defeats of past movements for reform, such as the Levellers, the Philosophes, the Philosophical Radicals, the classical economists, the free trade movement of the nineteenth century, the American Revolutionaries, the individual anarchists, the Austrian economists, the Old Right Isolationists, and the Abolitionists. All must be critically appraised in an effort to establish the classical liberal tradition as a serious and respectable body of thought. [27]

Demythologizing the State

One of the most important tasks of the liberal historian is to expose the state as the chief source of political privilege and oppression. By analysing both the negative aspects of history (class conflict, the central role of the state in disrupting peaceful activity, and the importance of war and empire in the growth of state power) as well as the positive aspects (the spontaneous growth of the market in practically all conditions, the struggles of oppressed groups for liberation, and the heritage of classical liberal thought and action) the liberal historian is in a position to contribute to the dissemination of liberal values. Once political action is shown to be the source of privilege, which particular vested interests use for their own advantage, it becomes extremely difficult to justify these activities on any higher grounds such as in the public interest or in the name of democracy and equality. Likewise when it can be demonstrated that the market can and has done all the non-coercive functions of the state more cheaply, more efficiently, and most importantly more justly, then the need for the state as an all-pervasive institution becomes much harder to defend. This demythologizing of the state is vital if we are to tear away the mystique of necessity and fairness which surrounds the state and legitimizes its existence.

Conclusion

I have suggested ways in which history can contribute to making "the philosophic foundations of a free society once more a living intellectual issue." History should be a key element in any revival of liberalism for the same reasons that made history an integral part of the rise of socialism and Marxism in this century. It is the political and economic assumptions implicit in any historical analysis which, for good or ill, makes history such a potent vehicle for changing the intellectual climate of opinion. Liberal social theory, when combined with historical analysis, could have a similar impact in the coming century.

Appendix 1: Class Analysis

As the following books indicate most class analysis is the product of Marxist rather than classical liberal theory. Nevertheless, the work that has been done is extremely valuable and needs to be reinterpreted.

On the classical world, G. E. M. Ste. Croix, The Class Struggle in the Ancient Greek World from the Archaic Age to the Arab Conquests (London: Duckworth, 1983). As Ste. Croix realizes, the Marxist framework is largely bankrupt and is incapable of interpreting bureaucratic, "political" classes properly.

On England, Elites and Power in British Society, ed. Philip Stanworth and Anthony Giddens, (Cambridge University Press, 1974) and John Scott, The Upper Classes: Property and Privilege in Britain (London: Macmillan, 1982).

On Europe, Organizing Interests in Western Europe: Pluralism, Corporatism, and the Transformation of Politics, ed. Suzanne Berger (Cambridge University Press, 1983) and on France Pierre Birnbaum, Les sommets de l'État: Essai sur l'élite du pouvoir en France (Paris: Éditions du Seuil, 1977). On Australia, R. W. Connell, Ruling Class, Ruling Culture: Studies of Conflict, Power and Hegemony in Australian Life (Cambridge University Press, 1977).

On Japan, Rob Stevens, Classes In Contemporary Japan (Cambridge University Press, 1983).

On America, G. William Domhoff, The Higher Circles: The Governing Class in America (New York: Random House, 1970); G. William Domhoff, The Powers That Be: Processes of Ruling-Class Domination in America (New York: Random House, 1979); Frederic Cople Jaher, The Urban Establishment: Upper Strata in Boston, New York, Charleston, Chicago, and Los Angeles (Urbana: University of Illinois Press, 1982); S. Menshikov, Millionaires and Managers: Structure of U. S. Financial Oligarchy (Moscow: Progress Publishers, 1973); and Philip H. Burch, Elites in American History (New York: Holmes and Meier, 1980).

On Russia and other Marxist régimes, the collection of essays in Section V, "Classes in Eastern Europe" of Classes, Power, and Conflict: Classical and Contemporary Debates, ed. Anthony Giddens and David Held (London: Macmillan, 1982).

Appendix 2: Capitalism and the State

Barry Supple, "The State and the Industrial Revolution, 1700-1914," in Fontana Economic History of Europe, ed. Carlo M. Cipolla (1973), vol. 3; The State and Economic Growth, ed. Hugh G. J. Aitken (New York: Social Science Research Council, 1959); Big Business and the State: Changing Relations in Western Europe, ed. Raymond Vernon (London: Macmillan, 1974); Charles S. Maier, Recasting Bourgeois Europe: Stabilization in France, Germany, and Italy in the Decade after World War 1 (Princeton Univeresity Press, 1981); Arthur J. Taylor, Laissez-faire and State Intervention in Nieteenth-century Britain (London: Macmillan, 1972); Andrew Shonfield, Modern Capitalism: The Changing Balance of Public and Privcate Power (Oxford University Press, 1969); Organisierter Kapitalismus: Voraussetzungen und Anfänge, ed. Heinrich Winkler (Göttingen, 1974); Philippe C. Schmitter, "Still the Century of Corporatism," Review of Politics, 1974, vol. 36, pp. 85-128; Planning, Politics, and Public Policy: The British, French, and Italian Experience, ed. Jack Hayward and Michael Watson (London: 1975); Richard F. Kuisel, Capitalism and the State in Modern France: Renovation and Economic Management in the Twentieth Century (Cambridge University Press, 1983); Gerold Ambrosius, Der Staat als Unternehmer: Öffenliche Wirtschaft und Kapitalismus seit dem 19. Jahrhundert (Göttingen: Vandenhoeck und Ruprecht, 1984); Wirtschaft, Recht und Staat im Nationalismus: Analysen des Instituts für Sozialforschung 1939-1942, ed. Helmut Dubiel und Alfons Söllner (Frankfurt: Suhrkamp, 1984); State and Economy in Australia, ed. Brian W. Head (Oxford University Press, 1983); N. G. Butlin, A. Barnard, and J. J. Pincus, Government and Capitalism: Public and Private Choice in Twentieth Century Australia (Sydney: George Allen and Unwin, 1982); and Noel G. Butlin, "Colonial Socialism in Australia, 1860-1900," in The State and Economic Growth, op.cit., pp. 26-78.

Endnotes↩

[1] Capitalism and the Historians, ed. F. A. Hayek (London: Routledge and Kegan Paul, 1954).

[2] The basic elements of a liberal social theory have yet to be drawn together in a systematic way. I base my social theory upon the following texts: Ludwig von Mises, Theory and History: An Interpretation of Social and Economic Evolution (New Rochelle, NY: Arlington House, 1969); Ludwig von Mises, Epistemological Problems of Economics, trans. George Reisman (New York University Press, 1976); Carl Menger, Problems of Economics and Sociology, ed. Louis Schneider (Urbana: University of Illinois Press, 1963); Max Weber, Wirtschaft und Gesellschaft: Grundriß der verstehenden Soziologie, ed. Johannes Winkelmann (Tübingen: J. C. B. Mohr, 1976); Lord Acton, Lectures on Modern History, ed. Hugh Trevor-Roper (London: Collins, 1960); and Walter E. Grinder and John Hagel III, "Toward a Theory of State Capitalism: Ultimate Decision-making and Class Structure," Journal of Libertarian Studies vol. 1, no. 1, pp. 59-79.

[3] on the development of the "Annales" approach to history and its gradual seduction of the historical establishment, see Traian Stoianovich, French Historical Method: The Annales Paradigm (Ithaca: Cornell University Press, 1976).

[4] The most stimulating exponent of the "conquest" view of the state is Franz Oppenheimer, System der Soziologie (Jena: Fischer Verlag, 1922-26) especially volume 2, Der Staat (1926). Far from being dead, this interpretation has found support in surprising quarters; see Margaret Levi, "The Predatory Theory of Rule," Politics and Society, 1981, vol. 10, no. 4, pp. 431-65.

[5] The most interesting recent work in political anthropology is summarized in the following collections of essays: The Study of the State, ed. Henri J. Claessen and Peter Skalnik (The Hague: Mouton, 1981); The Early State, ed. Henri J. Claessen and Peter Skalnik (The Hague: Mouton, 1978); The Transition to Statehood in the New World, ed. Grant D. Jones and Robert R. Kautz (Cambridge University Press, 1981); and The Origins of the State: The Anthropology of Political Evolution, ed. Ronald Cohen and Elman R. Service (Philadelphia: Institute for the Study of Human Issues, 1978). The pioneering essay by Robert Carneiro, "A Theory of the Origin of the State," Science, 1970, vol. 169, pp. 733-8 (reprinted by the Institute for Humane Studies, 1977 in the series Studies in Social Theory No. 3), along with Levi and Oppenheimer, provides a useful theoretical framework with which to assess the work in the above mentioned collections.

[6] The military and financial requirements of the early modern state are analyzed by Otto Hintze in numerous essays. Some can be found in the collection The Historical Essays of Otto Hintze, ed. Felix Gilbert (New York: Oxford University Press, 1975); other untranslated essays can be found in Staat und Verfassung: Gesammelte Abhandlungen zur allgemeinen Verfassungsgeschichte, ed. Gerhard Oestreich (Gttingen: Vandenhoeck und Ruprecht, 1962). Treatments of the early modern state which are a useful platform from which classical liberals can work include V. G. Kiernan, State and Society in Europe 1550-1650 (Oxford: Basil Blackwell, 1980); The Formation of National States in Europe, ed. Charles Tilly (Princeton University Press, 1975); Perry Anderson, Lineages of the Absolutist State (London: Verso, 1979); Kenneth Dyson, The State Tradition in Western Europe (Oxford: Martin Robertson, 1980); William H. McNeill, The Pursuit of Power: Technology, Armed Force, and Society since A. D. 1000 (University of Chicago Press); Denis Richet, La France Moderne: L'Esprit des Institutions (Paris: Flammarion, 1973); and David Parker, The Making of French Absolutism (London: Edward Arnold, 1983). Works which provocatively combine history and social theory include Bertrand de Jouvenel, Du Pouvoir: Histoire naturelle de sa croissance (Paris: Hachette, 1972); Gianfranco Poggio, The Development of the Modern State: A Sociological Introduction (Stanford University Press, 1978); Frederic C. Lane, Profits from Power: Readings in Protection Rent and Violence-Controlling Enterprises (Albany: State University of New York Press, 1979); and Bertrand Badie and Pierre Birnbaum, The Sociology of the State, trans. Arthur Goldhammer (University of Chicago Press, 1983).

[7] George Smith has begun this process by examining the movement for voluntary, non-state schooling in Britain in the nineteenth century in "Nineteenth Century Opponents of State Education: Prophets of Modern Revisionism," in The Public School Monopoly: A Critical Analysis of Education and the State in American Society, ed. Robert B. Everhart (San Francisco: Pacific Institute). On the way in which the state has virtually taken over the traditional role of the family, see Philippe Meyer, The Child and The State: The Intervention of the State in Family Life (Cambridge University Press, 1983).

[8] Recent studies of the American Social Security system reveal that the system is virtually bankrupt. Furthermore, it is shown that the same amount of money, if instead of being taxed away from individuals, had been invested in private insurance funds, would have provided considerable investment for industrial development and higher returns for individual investors in the long run. See Peter J. Ferrara, Social Security: The Inherent Contradiction and Social Security: Averting the Crisis (Washington D. C.: Cato Institute). Similar studies of European welfare systems are urgently required.

[9] In addition to the above mentioned works on European state institutions, Stephen Skowronek's book on Building a New American State: The Expansion of National Administrative Capacities 1877-1920 (Cambridge University Press, 1982) is a path-breaking work.

[10] That social and economic institutions are capable of peacefully arising and existing independently of the state is a fundamental insight of Friedrich Hayek and the modern Austrian School. See Hayek's Law, Legislation, and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy (University of Chicago Press, 1973). It also receives support from the work of Michael Polanyi, The Logic of Liberty: Reflexions and Rejoinders (London: Routledge and Kegan Paul, 1951), Thomas Sowell, Knowledge and Decisions (New York: Basic Books, 1980), and, unexpectedly, from recent work in game theory, in particular Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984).

[11] A brief discussion of the origin of racial theories of class conflict can be found in James Alfred Aho, German Realpolitik and American Sociology: An Inquiry into the Sources and Political Significance of the Sociology of Conflict (Lewisburg: Bucknell University Press, 1975).

[12] Surprisingly, there are few histories of the concept of class, even by Marxists. The development of liberal ideas on class can be followed only in separate works: Elizabeth Fox-Genovese, The Origins of Physiocracy: Economic Revolution and Social Order in Eighteenth Century France (Ithaca: Cornell University Press, 1976); Leonard P. Liggio, "Charles Dunoyer and French Classical Liberalism," Journal of Libertarian Studies, 1977, vol. 1, no. 3, pp. 153-78; David Wiltshire, The Social and Political Thought of Herbert Spencer (Oxford University Press, 1978); Vilfredo Pareto: Sociological Writings, ed. S. E. Finer (New York: Praeger, 1967); Walter E. Grinder and John Hagel III, "Toward a Theory of State Capitalism: Ultimate Decision-making and Class Structure," Journal of Libertarian Studies vol. 1, no. 1, pp. 59-79; and the many works of Murray Rothbard.

[13] References on class analysis can be found in Appendix 1.

[14] See the essay of the same name in The Radical Will: Selected Writings 1911-1918 ed. Olaf Hansen (New York: Urizen, 1977).

[15] See the relevant section of Edmund Silberner, The Problem of War in Nineteenth Century Economic Thought (Princeton University Press, 1946).

[16] Jeffrey G. Williamson has revised the traditional view of the consequences of the Napoleonic Wars on British industrial development. He argues that the transfer of resources way from productive use to the state severely retarded British economic development. See "Why was British Growth so slow during the Industrial Revolution?" Journal of Economic History, vol. XLIV, no. 3, pp. 687-712. A comparative approach is provided by War and Economic Development: Essays in Memory of David Joslin, ed. J. M. Winter (Cambridge University Press, 1975).

[17] William H. McNeill, The Pursuit of Power, op. cit., is a masterly synthesis of the process of industrializing war and the related process of militarizing industry which should serve as a model for liberal historians. Other works include Murray N. Rothbard, "War Collectivism in World War 1," in A New History of Leviathan: Essays on the Rise of the American Corporate State, ed. Ronald Radosh and Murray N. Rothbard (New York: E. P. Dutton, 1972); William E. Leuchtenburg, "The New Deal and the Analogue of War," in Change and Continuity in Twentieth Century America, ed. John Braehen, Robert Brenner, and Everett Walters (New York: Harper and Row, 1966); Robert D. Cuff, The War Industries Board: Business-Government Relations During World War One (Baltimore: Johns Hopkins University Press, 1973). On the military-industrial complex, see Benjamin Franklin Cooling, War, Business, and American Society: Historical Perspectives on the Military-Industrial Complex (Port Washington, NY: Kennikat, 1977) and War, Business, and World Military-Industrial Complexes (Port Washington, NY: Kennkat, 1981).

[18] The extensive militarization of German industry and society is discussed in Ludwig von Mises, Nation, State, and Economy: Contributions to the Politics and History of Our Time, trans. Leland B. Yeager (New York University Press, 1983); Gerald D. Feldman, Army, Industry, and Labor in Germany 1914-1918 (Princeton University Press, 1966); and Martin Kitchen, The Silent Dictatorship: The Politics of the German High Command under Hindenburg and Ludendorff 1916-1918 (London: Croom Helm, 1976).

[19] Douglass C. North is one of the few exceptions. See "A Framework for Analyzing the State in Economic History," Explorations in Economic History, 1979, vol. 16, pp. 249-59; "Government and the Cost of Exchange in History," Journal of Economic History, 1984, vol. XLIV, no. 2, pp. 255-64; Structure and Change in Economic History (New York, 1981); and "Transaction Costs, Institutions, and Economic History," in the special issue of Zeitschrift f}r die gesamte Staatswissenschaft, 1984, vol. 140, no. 1, ed. E. G. Furubotn and R. Richter on "The New Institutional Economics: A Symposium. North's weakness is that he practically ignores ideology (whether political or religious) and the importance of class.

[20] Ludwig von Mises, "The Middle of the Road Leads to Socialism," in Planning for Freedom (South Holland, Il: Libertarian Press, 1962).

[21] An entirely new field of scholarship is opening up in the area of the "black economy" as articles in the journal, Problems of Communism, have demonstrated.

[22] FN*[Ludwig von Mises, Socialism. An Economic and Sociological Analysis (Indianapolis: Liberty Press); the Special Issue edited by Don Lavoie of the Journal of Libertarian Studies, 1981, vol. 5, no. 1; and Trygve J. B. Hoff, Economic Calculation in the Socialist Society (Indianapolis: Liberty Press).

[23] Historians of the industrial revolution have not all been hostile to the market. Examples of sympathetic treatments include T. S. Ashton, The Industrial Revolution 1760-1839 (New York: Oxford University Press, 1964); R. M. Hartwell, The Industrial Revolution and Economic Growth (1971); The Causes of the Industrial Revolution in England, ed. R. M. Hartwell (London: Methuen, 1967); The Long Debate on Poverty: Eight Essays on Industrialisation and 'the Condition of England', ed. R. M. Hartwell (London: IEA, 1974); The Standard of Living in Britain in the Industrial Revolution, ed. Arthur J. Taylor (London: Methuen, 1975); the above mentioned collection edited by Hayek; and the historiographical essay by Hartwell, "Interpretations of the Industrial Revolution in England: A Methodological Inquiry," Journal of Economic History, 1959, vol. 19, no. 2, pp. 229-49.

[24] Lawrence White has made an important contribution to the reassessment of the role of central banks in the early nineteenth century in Free Banking in England: Theory, Experience and Debate 1800-1845 (Cambridge University Press, 1983).

[25] Classical liberal historians have to tread a thin line between sympathy and support for the market and criticism of vested interests and political privileges. A corrective to excessive and uncritical enthusiasm for the industrial economy as it has historically developed can be found in the works listed in Appendix 2.

[26] David Brion Davis, The Problem of Slavery in Western Culture (Harmondsworth: Penguin, 1970); Moses I. Finley, Ancient Slavery and Modern Ideology (Harmondsworth: Penguin, 1983); Paul E. Lovejoy, Transformations in Slavery: A History of Slavery in Africa (Cambridge University Press, 1983); Albert Wirz, Sklaverei und kapitalistisches Weltsystem (Frankfurt: Suhrkamp, 1984); George M. Frederickson, White Supremacy: A Comparative Study in American and South African History (Oxford University Press, 1982); Olive Schreiner, Women and Labour (London: Virago, 1978); Margaret E. Hirst, The Quakers in Peace and War: An Account of their Peace Principles and Practice (London: Swarthmore, 1923); N. G. Butlin, Our Original Aggression: Aboriginal Populations of Southeastern Australia 1788-1850 (Sydney: George Allen and Unwin, 1983); Dennis Hardy, Alternative Communities in Nineteenth Century England (London: Longman, 1979).

[27] I have tried to encourage interest in the classical liberal movements of the past in the series "An Outline of the History of Libertarian Thought," in the Humane Studies Review and I refer the reader to the books cited there.