Peaceful Nationalism as a Foundation for Economic Liberalism

Political controversy has arisen in recent debates on immigration concerning the compatibility between economic liberalism and restrictions on the free movement of labor across national borders. A recent report from the United States Census Bureau suggests that the immigration rate in cities has sharply declined, especially in “large urban counties and border counties” that have “long sustained themselves through immigration.” This is raising concerns that “it could lead to problems maintaining a population and a work force,” which would seem to be incompatible with a commitment to the contractual freedom on which free markets rely.

Many economists view immigration controls as a problem. A recent report shows that, from 1994 to 2023, “immigrants – legal and illegal – paid more in taxes every single year than they received in benefits, broadly defined,” and that, far from being a cost to the economy, immigrants constitute a fiscal benefit. Against this, defenders of border control cite arguments that may broadly be described as nationalist. They view nationalism as incompatible with economic and political liberalism to the extent that mass immigration alters the national culture, heritage, and demographic composition of the host population.

Whether nationalism is compatible with economic liberalism depends on how nationalism is understood in the first place. The different aspects of this debate cannot be comprehensively addressed in a brief article, but the analysis of Ludwig von Mises in his book Nation, State, and Economy, may help to shed light on the compatibility between nationalism and economic liberalism.

Mises argues that nationalism is compatible with economic and political liberty if it is peaceful, based on self-determination as an individual right, and invoked to defend freedom rather than for militaristic or imperialistic purposes. In his introduction to that book, Leland B. Yeager observes that,

[Mises] sympathized with movements for national liberation and unity. As he explained, liberal nationalism—in sharp contrast with militaristic and imperialistic nationalism—can be an admirable attitude and a bulwark of peace. Different peoples should be able to respect and—to interpret a bit—even share in each one’s pride in its own culture and history.

Given that he was writing in 1919, after the World War, Mises could not have been naïve as to the potential for nationalism to drive militarism and imperialism. Yet he saw liberal nationalism as a potential “bulwark of peace.” What is this notion of liberal or “liberal democratic” nationalism?

First, Mises describes liberalism in the classical tradition as “pacifistic and anti-militaristic.” Nationalism must, therefore, also be necessarily peaceful if it is to be compatible with economic liberalism.

Second, liberal nationalism is inextricably associated with the concept of individualism. Mises explains,

The word and concept nation belong completely to the modern sphere of ideas of political and philosophical individualism… If we wish to gain insight into the essence of nationality, we must proceed not from the nation but from the individual. We must ask ourselves what the national aspect of the individual person is and what determines his belonging to a particular nation.

He also emphasized the importance of choice and consent, rejecting any role for force or compulsion in nation-building. For example, the harmonization of laws across states would certainly help to facilitate free trade, as seen in common markets such as that in the European Union. But such harmonization must be by consent of the national populations if it is to be compatible with economic liberalism. It would therefore exclude the types of compulsion seen when the EU imposed fines on Hungary and Poland in a bid to compel them to conform to the EU’s view of fundamental liberal values—which were diametrical opposed to the cultural values of those nations. Mises cautions against such compulsion in the creation of common markets:

[Liberalism] does not believe that to reach this goal [of free trade without border restrictions], great empires or even a world empire must be created. It persists in the position that it adopts for the problem of state boundaries. The peoples themselves may decide how far they want to harmonize their laws; every violation of their will is rejected on principle. Thus a deep chasm separates liberalism from all those views that want forcibly to create a great state for the sake of the economy.

It is also significant that Mises explicitly distinguishes the “nation” from the “state,” so his arguments in defense of nationalism must not be read as pertaining to any form of statism. This is worth emphasizing as some readers have wrongly supposed that by defending nationalism, Mises was defending statism. On the contrary, Mises explains that “the criterion of the nation should in no way be sought in efforts to form a unified state.”

As many have pointed out, the concept of democracy is meaningless if people have no real choice or no real opportunity to express their consent or opposition. This is indeed one of the weaknesses of the EU that prompted the UK to leave the Union—the fear that UK citizens did not have any effective way of ensuring that its national interests would be represented in decision-making by the centralized EU institutions. A further difficulty with supra-national entities, as Mises recognized, is that in peaceful nationalism lie the seeds of militant nationalism. This is a fear some have raised in relation to French and German dominance of the EU.

Given these difficulties, what possible benefit can arise from nationalism? Mises depicts national sentiment as a bulwark against the ambitions and machinations of tyrannical monarchs who seek to wield absolute power over their subjects and therefore discourage bonds of loyalty among their people. This was a particular pressing threat at the time in which he was writing. He observed that the tyrant insists that his people’s only loyalty must be to himself as their overlord, and not to each other. By forming bonds of loyalty to each other, people’s sense of nationhood stands as a bulwark against the tyranny of princes. National unity then serves as a foundation for liberty:

In [national] unity strength is sought to overcome the alliance of the oppressors. Unity in a unified state offers the peoples the highest assurance of maintaining their freedom. And there, too, nationalism does not clash with cosmopolitanism, for the unified nation does not want discord with neighboring peoples, but peace and friendship.

The important lesson to derive from Mises’s analysis is that nationalism is compatible with peace and liberty when it is understood as a force against tyranny. As Mises puts it, “The nationality principle above all bears no sword against members of other nations. It is directed in tyrannos.”

It is in this context that Mises defends the idea of national self-determination. The desire of the tyrannical prince to amass as much territory as possible, and subject as many nations as possible to his lordship, is thwarted by the self-determination of nations. Understood in that sense, there is no conflict between liberty and nationalism. As Mises explains, nationalism in this sense is not opposed to free trade or to “cosmopolitanism,” the desire to cooperate with other nations of the world in pursuit of common economic or political goals. It is in this sense that nationalism is compatible with economic liberalism:

Therefore, above all, there is also no opposition between national and citizen-of-the-world attitudes. The idea of freedom is both national and cosmopolitan. It is revolutionary, for it wants to abolish all rule incompatible with its principles, but it is also pacifistic. What basis for war could there still be, once all peoples had been set free? Political liberalism concurs on that point with economic liberalism, which proclaims the solidarity of interests among peoples.