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fought near Königgrätz (and Sadowa), about sixty-five miles east of Prague, on July 3. The timely arrival of troops commanded by the Crown Prince of Prussia (later, for ninety-nine days in 1888, the Emperor Frederick III) helped clinch the victory of Field Marshal Count Helmuth Karl Bernhard von Moltke (who was later to be victorious in the war with France also) and seal the defeat of Austrian General Ludwig von Benedek.2

Mises’s many references to Königgrätz, then, allude to the changes brought about by the brief war of 1866, which was ended by the preliminary peace of Nikolsburg and the definitive treaty of Prague. The King of Hanover was dethroned and his state absorbed into Prussia. (It is interesting to speculate on how differently the course of history might have turned out if only Queen Victoria of England had been a man. Her accession in 1837 separated the previously united crowns of England and Hanover, where the Salic Law barred females from the throne.) Austria lost Venetia to Italy but no territory to Prussia. Its expulsion from the German Confederation, however, ended Austria’s dominance in German affairs. Austrians did not, though, immediately stop thinking of themselves as Germans. Mises illustrates their sentiment by quoting from the dramatist Franz Grillparzer (1791–1872).

The old German Confederation gave way to the North German Confederation, composed of Prussia and the other states north of the Main River. The component states retained their own administrations but placed their military forces and foreign policy under the federal government, dominated by Bismarck. Prussia also negotiated alliances with the south German states.

The defeated Austrians turned to tidying up their domestic affairs. They reached a compromise (Ausgleich) with the Hungarians, granting Hungary quasi-independence with its own parliament and government. Emperor Francis Joseph submitted to coronation as King of Hungary in Budapest on June 8, 1867 (only eleven days, by coincidence, before his brother Maximilian, the defeated and captured Emperor of Mexico, was executed at Querétaro).

2. Benedek had had much experience on the Italian front but had been assigned to the northern front, supposedly to leave the easier Italian command to members of the Habsburg dynasty. Moltke and Benedek are named here because Mises mentions them as examples of victorious and defeated generals, respectively. He also mentions Karl Mack von Leiberich, an Austrian general who surrendered to Napoleon at Ulm in 1805, and Franz Gyulai, an Austrian general defeated in the war of 1859.

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The Franco-Prussian War of 1870 –1871 resulted in the cession of Alsace-Lorraine to Germany. France also had to pay an indemnity of 5,000,000,000 francs, providing an unfortunate precedent for allied demands on Germany after its defeat in 1918.

The German Empire was proclaimed in a ceremony at Versailles, near Paris, in January 1871. Bismarck had persuaded the reluctant King Ludwig II of Bavaria (later called the “mad king”) to invite King William I of Prussia to assume the hereditary title of German Emperor. The Empire absorbed the institutions of the North German Confederation of 1867, including the Federal Council and elected Reichstag; a modified constitution admitted the southern states of Bavaria, Württemberg, and Baden.

Meanwhile, Italy also achieved unification. Other Italian states joined with Sardinia-Piedmont in 1861 to proclaim its King, Victor Emmanuel II, King of Italy. In 1870, while the French, who had been protecting the Pope, were at war with Germany, the Italians seized the opportunity to conquer the Papal States and transfer the capital of Italy to Rome. Mises mentions three heroes of the movement for Italian liberation and unification: Giuseppe Mazzini, Giuseppe Garibaldi, and Count Camillo Benso di Cavour. He also mentions three Italian poets and patriots of the first half of the nineteenth century: Giacomo Leopardi, Giuseppe Giusti, and Silvio Pellico.

Not all Italian-speaking territory yet formed part of the Kingdom of Italy; some remained under Austro-Hungarian rule. This territory was called Italia irredenta, and irredentism was the movement calling for its liberation and absorption into Italy. World War I largely achieved the objectives of the movement. Mises mentions Gabriele D’Annunzio, a poet, novelist, and dramatist who helped persuade Italy to join the allies in that war, who lost an eye in aerial combat, and who later (after Mises was writing) led an unofficial occupation of Fiume (now Rijeka, Yugoslavia) that eventuated in its incorporation into Italy.

Mises sometimes uses the word “irredentism” in its broader sense of a movement for any country’s absorbing territories still outside its boundaries inhabited by people speaking its national language. Irredentism in this broader sense refers, in particular, to advocacy of incorporation of German-speaking Austria into the German Empire.

Representatives of the great European powers convened in Berlin in 1878 to impose on Russia a revision of the harsh treaty that it had imposed on Turkey after defeating it in a war. The Congress of Berlin also,

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incidentally, authorized Austria-Hungary to occupy and administer the Turkish provinces of Bosnia and Herzegovina, now in Yugoslavia. The occupation was not entirely trouble-free; Mises mentions rebellions in Herzegovina and around the Gulf of Kotor. Austria-Hungary finally annexed the occupied provinces in 1908.

Another important development in international politics was the negotiation of an alliance between Germany and Austria-Hungary in 1879. Apparently Bismarck’s decision not to impose an excessively harsh peace on Austria in 1866 was paying off. This alliance, like the RussianFrench alliance and others, set the stage for a chain reaction whereby the countries not directly involved in the original dispute between Austria and Serbia in 1914 got drawn into World War I.

The Wilhelministic Era, which Mises refers to, was the reign of William II as German Emperor, particularly from the dismissal of Bismarck as chancellor in 1890 until World War I.

The defeat of the Central Powers in that war split Austria-Hungary up into several states. Currency inflations gained momentum. In Germany the Spartacists, whom Mises mentions and who reorganized themselves into the German Communist Party in December 1918, seemed for a time to have prospects of gaining power in at least the major cities.

We now turn to a few explanations and identifications that did not fit into the preceding chronological survey. Cabinet ministers in both Germany and Austria were responsible to the Emperor rather than to parliament. Although a government could not be thrown out of office by a vote of no confidence, parliamentary majorities were necessary to enact specific pieces of legislation; and the government occasionally resorted to political maneuvers and tricks to achieve the necessary majorities. Mises refers scornfully to these circumstances. In Austria, in particular, the parliamentary situation and the alignment of parties was complicated by the mixture of nationalities and by such issues as what languages should be used in particular schools. Mises refers, for example, to Badeni’s electoral reform of 1896. (Count Kazimierz Felix Badeni, a Polish aristocrat, became prime minister in 1895. The finance minister and foreign minister in his cabinet also came from the Polish part of the Empire. Badeni was dismissed in 1897 through the pressure of Germanspeaking factions, who considered his policies on use of language in the civil service too favorable to the Czechs.) Mises also notes allusions made at the time to the government’s courting of the ironically nicknamed “Imperial and Royal Social Democrats” (the term “Imperial and

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Royal,” commonly abbreviated in German as “K.k.,” referred to the Austrian Empire and Kingdom of Hungary and meant something like “governmental” or “official”).

The nationality situation is also in the background of Mises’s reference to the Linz Program of 1882. The extreme German nationalists proposed the restoration of German dominance in Austrian affairs by detaching Galicia, Bukovina, and Dalmatia from the Monarchy, weakening the ties with Hungary to a purely personal union under the same monarch, and establishing a customs union and other close ties with the German Reich. They apparently did not realize that Bismarck had little reason to provide help, since the existing domestic situation in Austria-Hungary was consonant with his approach to international affairs. The leader of the extreme German-Austrian nationalists was Georg Ritter von Schönerer, who later made anti-Semitism a part of his program.

Employing synecdoche, Mises sometimes opposes Potsdam to Weimar. Potsdam was the home of the Prussian Monarchy, and the word symbolizes the authoritarian state and militarism. Weimar, the literary and cultural center, stands for the aspect of Germany evoked by calling it the “nation of poets and thinkers.” (The “classical period” of German literature, to which Mises also refers, corresponds roughly to the time of Goethe.)

The Gracchi, referred to in a Latin saying that Mises quotes, were the brothers Tiberius and Gaius Gracchus, agrarian, social, and political reformers of the second century b.c. Both perished in separate public disturbances, one of them after having sought an unconstitutional reelection as tribune of the people.

It is quite unnecessary to identify every event, person, or school of thought that Mises refers to—Alexander the Great and so on. Still, there is no harm in adding that the Manchester School was a group of English economists of the first half of the nineteenth century, led by Richard Cobden and John Bright, who campaigned for a market economy and a free-trade policy. François Quesnay, 1694 –1774, was a French physician and economist who stressed the central role of agriculture and who prepared the Tableau Economique, a kind of rudimentary input-output table.

Benedikt Franz Leo Waldeck, 1802–1870, was Mises’s example of the possibility of being both a Prussian nationalist and a sincere liberal democrat. Waldeck, a member of the highest Prussian court, had been

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a radical deputy in the Prussian constituent assembly in 1848 and leader of a committee that drafted a constitution. Later, as an opposition member of the Prussian chamber of deputies, he continued resisting authoritarian trends in government.

This introduction might fittingly end by especially recommending the discussion with which Mises ends his book—his discussion of the respective roles of value judgments and positive analysis in the choice between socialism and liberal capitalism. Mises proceeds not only from a liberal democratic outlook but also, and especially, from a rationalist and utilitarian philosophy.

Thanks are due to the Thomas Jefferson Center Foundation and the James Madison Center of the American Enterprise Institute for contributing much of the secretarial help required in preparing the translation. Thanks for their good work also go to Mrs. Anne Hobbs, Mrs. Carolyn Southall, and Miss Linda Wilson.

nation, state, and economy

Introduction

Only from lack of historical sense could one raise the question whether and how the World War could have been avoided. The very fact that the war took place shows that the forces working to cause it were stronger than those working to prevent it. It is easy to show, after the fact, how affairs could or should have been better managed. It is clear that the German people underwent experiences during the war that would have restrained them from war if they had already undergone those experiences. But nations, like individuals, become wise only through experience, and only through experience of their own. Now, to be sure, it is easy to see that the German people would be in a quite different position today if they had shaken off the yoke of princely rule in that fateful year 1848, if Weimar had triumphed over Potsdam and not Potsdam over Weimar. But every person must take his life and every nation must take its history as it comes; nothing is more useless than complaining over errors that can no longer be rectified, nothing more vain than regret. Neither as judges allotting praise and blame nor as avengers seeking out the guilty should we face the past. We seek truth, not guilt; we want to know how things came about to understand them, not to issue condemnations. Whoever approaches history the way a prosecutor approaches the documents of a criminal case—to find material for indictments— had better stay away from it. It is not the task of history to gratify the need of the masses for heroes and scapegoats.

That is the position a nation should take toward its history. It is not the task of history to project the hatred and disagreements of the present back into the past and to draw from battles fought long ago weapons for the disputes of one’s own time. History should teach us to recognize causes and to understand driving forces; and when we understand everything, we will forgive everything. That is how the English and French approach their history. The Englishman, regardless of his political

2 introduction

affiliation, can consider the history of the religious and constitutional struggles of the seventeenth century, the history of the loss of the New England states in the eighteenth century, objectively; there is no Englishman who could see in Cromwell or Washington only the embodiment of national misfortune. And no Frenchman would want to strike Louis XIV, Robespierre, or Napoleon out of the history of his people, be he Bonapartist, royalist, or republican. And for the Catholic Czech, also, it is not hard to understand Hussites and Moravian Brethren in terms of their own time. Such a conception of history leads without difficulty to understanding and appreciation of what is foreign.

Only the German is still far from a conception of history that does not see the past with the eyes of the present. Even today Martin Luther is, for some Germans, the great liberator of minds, and, for others, the embodiment of the anti-Christ. This holds above all for recent history. For the modern period, which begins with the Peace of Westphalia, Germany has two approaches to history, the Prussian-Protestant and the AustrianCatholic, which reach a common interpretation on scarcely a single point. From 1815 on, a still broader clash of views develops, the clash between the liberal and the authoritarian ideas of the state;1 and finally, the attempt has recently been made to oppose a “proletarian” to a “capitalist” historiography. All that shows not only a striking lack of scientific sense and historical critical faculty but also a grievous immaturity of political judgment.

Where it was not possible to achieve consensus in interpreting longpast struggles, it is much less to be expected that agreement can be reached in evaluating the most recent past. Already, here also, we see two sharply contradictory myths arising. On the one hand it is asserted that the German people, misled by defeatist propaganda, had lost the will to power; and thus, through “collapse of the home front,” the inevitable final victory, which would have made the earth subject to it, was transformed into disastrous defeat. It is forgotten that despair did not grip the people until the decisive victories heralded by the General Staff failed to occur, until millions of German men bled to death in purposeless struggles against an opponent far superior in numbers and better armed, and until hunger brought death and disease to those who had

1. On this compare Hugo Preuss, Das deutsche Volk und die Politik (Jena: Eugen Diederichs, 1915), pp. 97 ff.