“Free trade,” like “free love,” is a beguiling abstraction that hides more than it reveals. Absolute free trade would be an exchange of commodities between two people without the coercive intervention of a third party. But economic exchange is always embedded in a cultural landscape of noneconomic values, which impose restraints. Blue laws prevent trade on Sundays, medieval Christendom prohibited charging interest on money, and some think no decent society could legalize the sale of drugs or firearms. If someone disagrees with these restraints, it is because he rejects the moral ideals they express, not because he favors “free trade.” Within the restrictions imposed by usury laws, trade flourished in medieval Europe; indeed, it gave rise to the practices we call “capitalism” today. Those who value liberty may seek to minimize these constraints, but economic relations cannot exist outside of noneconomic restraints.
The failure to understand this leads to a number of modern superstitions. One is the illusion that there are economic experts in the way there are experts in medicine or chemistry. But economics is not a predictive science, because it does not have deterministic laws. We act on the basis of our knowledge, and no one can predict future knowledge (to do so would be already to possess it), much less predict how people would react to this knowledge. No one, for example, predicted the stagflation of the late 1970’s. So-called economic laws hold only as long as the shared noneconomic restraints obtain. The “iron law” of economics—that there cannot be full employment and low inflation—does not hold if, like the Romans, you are willing to live by tribute.
Adam Smith correctly observed that it is from the self-interest of the butcher, baker, and brewer that we expect our dinner, not from their benevolence. Friedrich Hayek won a Nobel prize by refining Smith’s argument to demonstrate that the planned economies of socialist and communist countries were doomed to failure because no central agency could ever possess the knowledge needed to achieve what a market can accomplish without planning. This solid insight into a part of social experience would be transmuted by some into a doctrine of the whole: the ideology of laissez-faire capitalism. As Michael Oakeshott observed, Hayek’s plan to prevent planning is perhaps better than socialism, but it is still a centralized plan that could and did collapse into another modern superstition.
To understand this, we should ask a question that Hayek failed to ask: How did communist and national-socialist regimes come to be? They emerged out of a Europe whose social order had been shattered by World War I, a war that was largely the work of liberal regimes. Milton Friedman and others have praised the period from the Congress of Vienna in 1814 to 1914 as the century of laissez faire and, consequently, as the century with less war than any other in modern European history. But it was also the century of wars of unification and centralization, in which smaller political societies of all kinds were crushed into vast states. This period was a century of relative peace only if the concept of war is limited to conflicts between large-scale nation-states. But if we consider the wars of unification in Germany, Italy, the Brazilian war to suppress the secession of Sao Paulo, the American war to suppress the secession of the Southern states (the bloodiest war since the Thirty Years’ War), and similar wars of unification elsewhere—not to mention global imperialism—we must conclude that it was one of the most violent centuries in European history.
The vast territorial states created by this runaway disposition to centralize justified themselves by claiming that they had cleared away petty, localist polities to make the world safe for cosmopolitan laissez faire. But any power strong enough to destroy the political independence of the German principalities or the Southern American states would not be content with merely playing the role of the “night-watchman state” of laissez-faire fantasy. Like everyone else, the night watchmen had ambitions, and with centralized power flooding in around them, they naturally graduated to estate management. When these oversized liberal leviathans collided in 1914, they left more corpses on the battlefield in four years than in the two preceding centuries of war in Europe. The old saw that liberal regimes are not disposed to war is true only if liberalism is viewed not as a concrete practice but as an abstract idea, since abstractions, of course, cannot do anything. It is no exaggeration to say that the 19th century was a Hundred Years’ War against smaller polities of all kinds in favor of unification, centralization, and consolidation; and the 20th century was an Eighty Years’ War between the gigantic leviathans created in the 19th century.
These disasters were the unintended long-term result of the disposition to centralize, first pursued with single-mindedness in the 19th century and justified in part by laissez faire. Centralization led to a spectacular increase in economic liberty for the centralizers, a massive loss of economic liberty for the smaller polities crushed into large-scale liberal states, and the elimination of most economic liberty in the new socialist and communist states that emerged in reaction to the spectacular mismanagement of power by liberal regimes. Lord Acton and John C. Calhoun warned their liberal contemporaries about the evils of ritualistic centralization, but no one listened. Their insights would later be given systematic shape in that school of economics known as “public choice theory,” which is associated with Nobel Laureate James Buchanan.
Whereas Hayek, following Adam Smith, had explored the “spontaneous order” generated unintentionally by individuals pursuing their self-interest, Buchanan discovered a principle of what could be called “spontaneous disorder,” generated unintentionally by the centralized governments required by vast-scale liberal states. Governments are disposed to grow at the expense of society by creating “public goods” that benefit their clientele. The only way to prevent this is by a constitutional system founded on the principle of a veto, including the ultimate veto: secession. (James Buchanan has urged that the European Union include in its treaties the right of a member state to secede.)
With this teaching, the 300-year adventure of Enlightenment liberalism comes full circle. Economic freedom may require not further unification but the division of liberal leviathans back into the smaller polities from whose destruction they violently emerged. Hayek, contemplating the clumsy leviathans of his time, observed that, in the future, liberty might best be preserved in small states. (Unfortunately, he never developed this insight.) This brings us to a question raised by Plato and Aristotle but largely ignored by modern political theorists: How large should a political order be?
Aristotle argued that everything in nature has a proper size, below which or beyond which it becomes dysfunctional. A cottage is not a small mansion, and a mansion is not a large cottage. The charm and beauty of both is lost when the size is out of scale. What is the human scale of political order? From Plato, Aristotle, and St. Augustine down to the present, there has been remarkable agreement regarding the optimal size. A city-state of 50,000 to 200,000 is all that is necessary to produce a flourishing culture. Some would push the limit to 500,000, but beyond that, nothing is gained. Experience confirms this. Athens (with 50,000) and Renaissance Florence (with 40,000) produced cultures that excelled in nearly every form of human endeavor and from which we still gain inspiration.
As the population of a city increases arithmetically, space increases geometrically. Problems of transportation, water, sanitation, crime, poverty, and corruption, which were easily handled on a human scale, increase geometrically as the population of a city moves into the millions. Vast bureaucracies are erected, often creating as many problems as they solve. Corruption and political alienation grow, and entire sections of the megalopolis (which can no longer be called a city in the traditional sense) are written off as blighted areas and resemble the results of carpet-bombing. A megalopolis in the millions, such as Sao Paulo (19 million) or New York (8 million), requires more resources per capita to maintain the monster than would be required for a city of human scale, leaving fewer resources for the cultural luxuries that are the reason for the polity in the first place.
Cities of this dysfunctional size appear only recently. The largest cities during the revolutionary period in America hovered at 30,000. New York did not gain 100,000 until 1820. The monster cities of the last 150 years are the creation of the centralized states in which they are embedded. Around 60 percent of Americans were on the farm in 1900; today, only around two percent remain. As the farmers disappeared, so did an entire order of villages and small towns. This shift did not occur merely because of “free choice” or “market forces” but because the rules were rigged to favor agribusiness and urbanization. The message from the Department of Agriculture in the 1950’s was “Get big or get out.”
Since the history of such small states as Athens and Florence prove that states of vast scale are not necessary for human flourishing, some other justification must be found for their size. For this purpose, another economic superstition has been useful, namely, that economic integration requires political integration. This argument was used to justify the big “unions” of the last two centuries: Great Britain, the nationalist union of France, the German federal union, the United States, the Soviet Union, and the European Union. But the scale of political integration has nothing to do with economic integration. Little Switzerland—one of the ten richest states in the world—is integrated into a global economy, but it is politically independent. It is not a member of the European Union or even of the United Nations. The city-state of Singapore is economically integrated with the world but has maintained political independence since seceding from the Malaysian federal union in 1965.
There is more economic freedom in small states because they must trade to survive and thus must allow fewer regulations on the economy. Large states contain a greater diversity of skills, labor, and resources, and thus they can afford to impose onerous regulations that benefit special-interest groups at the expense of others. The tangle of regulations emerging from the European Union centralizes the economy, reduces economic freedom and consumer choice, and benefits large-scale corporations that engineer the spirit-numbing uniformity of an increasingly mass culture.
The pursuit of economic liberty (what Hobbes called “commodious living”) through political integration is the one constant theme in the three-century-old story of modern politics. It is time that we rethink the entire project. The monster states created by modernity are not necessary for economic or political freedom or the flourishing of culture; taking their history as a whole, they are responsible for spectacular losses of both. Aristotle is right: The presumption must be on behalf of states of human scale. Extensive political integration is good only for domination and war. While it is true that size is sometimes needed for defense, federations of small Greek city-states defeated the monster empire of Persia, federations of mere tribes defeated the Soviets in Afghanistan, and Vietnam defeated the United States. No country since Napoleon has thought it prudent to invade Switzerland and face her well-trained citizen army. Does anyone think that the large states of France, Germany, the Soviet Union, Italy, Japan, and Britain were safe places to live in the last century? Is the United States a safe place to live today? With a military presence in every corner of the globe, the American regime is suffering the same fate as all empires whose reach has extended beyond what prudence can peacefully hold.
We should pause to reflect on just how far the United States has moved beyond anything that could be called a human scale of political order. The Constitution was framed for three million people in 13 sovereign states. When the first Congress met in 1790, there was one representative for every 30,000. Since only property-holding white males could vote, that was close to Plato’s ideal figure of around 5,000 voting citizens per state. By 1910, the U.S. population was 90 million, and Congress capped representation in the House at 435, where it remains today. Now, however, there are 285 million Americans, yielding a ratio of one representative for every 655,000. If we apply this ratio to 1790, there would have been only five members in the House of Representatives. Or to put it another way, if the ratio of the Framers existed today, there would be around 9,000 members in the House. A deliberating body of that size would be out of scale. But does that mean that the ratio of the Framers is out of scale, or that the union has simply grown too large?
Congress and the president now spend over two trillion dollars per year, about two thirds of the gross national product of Germany. This vast amount runs through the hands of only 435 representatives, 100 senators, and one president. Never has so much financial power been controlled by so few. But it gets worse: Nine unelected Supreme Court justices make major social policy for 285 million, and the executive branch, through its creation of “administrative law,” has become a vast legislative body not answerable to the people in any meaningful sense.
Many during the founding generation wondered whether the Constitution they had formed could hold if the union grew too large. By 1860, it had swollen to some ten times its original size. It was probably too large by the 1830’s; it was definitely too large by 1860; and it is certainly too large today. Lincoln made war on the seceding states on the grounds that they were not and never had been sovereign states. He said they should be thought of as counties in a unitary state. Although he was historically and legally wrong, that is how most people think of the states today. How large are these “counties”? If California were an independent country, its GNP would be the seventh largest in the world. Texas’s GNP would be larger than that of Brazil, and Florida’s larger than Australia’s or Argentina’s. Illinois and Ohio, taken together, would have a GNP larger than that of Canada. New York State would be the fifth-largest economy in Europe. These vast polities look like countries, not counties. Should they not be treated as such?
Florida, California, and Texas spend billions to cope with the effects of legal and illegal immigration, though they have no control over their own borders and virtually no control over immigration policy. Entire ways of life and traditions are melting away from forces over which the people of these states have no control. Vermont’s population is 600,000. Its debt for the $500-billion savings-and-loan bailout debacle of the 1980’s was $1.1 billion, even though it had no failed savings-and-loan associations. What value is there in continuing to prop up a union of this monstrous size? This does not necessarily mean that the union should be dissolved, for there are ample resources in the American federal tradition to justify states and local communities recalling, out of their own sovereignty, powers they have allowed the central government to usurp. But such recalling of jurisdiction requires a degree of civic virtue on the local and state level that no longer exists and can be restored only by seriously examining the value of the union itself.
Economists divide the union into five economic regions: the North, South, Midwest, West, and Pacific. If the states in these regions constituted independent unions, the smallest would have a GNP larger than France or Britain. The South, if Oklahoma is included, would have the second-largest GNP in the world, behind Japan. Each of these unions would be a significant player in the world. Even if they all had the same constitution, each would end up with a different interpretation of it. It is doubtful that these unions would have entered the European conflict that began in 1914, which would have reduced the scale of that horrible war. Without the prospect of American intervention, it was likely that the stalemate reached by 1915 would have led to a settlement. If so, there might have been no communism or Nazism, no World War II, and no Cold War. What happened did not have to happen. It is doubtful that these five unions would have concurred in the global gamesterism of the United States after World War II, even if they had united to fight the war. Each of five unions would be more inclined to mind its own business and to heed the advice of George Washington against the pursuit of glory in global entanglements. They likely would not have reached consensus on the wars in Korea, Vietnam, the Persian Gulf, or Serbia. Troops from this hemisphere might not today be in Afghanistan, Saudi Arabia, and elsewhere in an Islamic world that has long been allergic to a dominating Western presence. And if one or more of these unions had become aggressive and imposed its military around the world to protect the expansion of its commerce and culture, the terrorist blowback would have fallen on that union, not the others.
This is only a fantasy, not a suggestion for a political project; it may remind us, however, that there is a human scale to political order, that a great state is not necessarily a large one, and that a state can grow too large for its function. When that happens, it must be downsized toward a more human scale. Liberals are forever telling us that America is a country of change; they celebrate the rapid mobility of labor and capital and the massive influx of immigration, legal and illegal. We are told that we must get used to change and that the dissolution of traditional American society is the price we must pay for a freer and more universal society. We never notice that the change they celebrate is in the service of greater centralization on the part of the state and of corporations. Change always heads in the direction of giantism—of the Tower of Babel. Freedom and human flourishing might require not more unity and centralization but more division, separation, and diversification. The day may not be far off when the centralizers, having flourished for three centuries, will have to learn to live with change.