The Dangerous Consequences of the German Historical School

Ludwig von Mises spends a good deal of time attacking the German Historical School of Economics in Human Action and other works. The doctrines of the school are no longer influential, although as the philosopher and economist Birsen Filip notes in her recent book The Early History of Economics in the United States: The Influence of the German Historical School of Economics on Teaching and Theory (Routledge, 2023), things were once different. Germany was the principal place for graduate work in economics in the years from the latter part of the nineteenth century to World War I. The leading lights of the school—who included Wilhelm Roscher, Bruno Hildebrand, Karl Knies, and Gustav Schmoller—were scholars of immense erudition who impressed many of their contemporaries, and many people thought that they were correct in their rejection of universally true laws of economics. Further, Schmoller—in his polemical battle, the famous Methodenstreit [controversy over method], with Carl Menger, the founder of the Austrian School—attacked the Austrians for their methodological individualism and their reliance on “abstract” economic laws. Given this background, one can readily understand why Mises attacks the German Historical School, but are his discussions—the echoes of “battles long ago”—of secondary significance to today’s readers?

Mises does not think so. He believes that the doctrines of the German Historical School led directly to Nazism, and the origins of that immensely destructive movement continue to preoccupy today’s readers. In this week’s column, I’m going to set forward Mises’s arguments about this topic, as found in his Omnipotent Government (Yale University Press, 1944).

Briefly, Mises’s argument is that the German Historical School sought to restrict international free trade. The attempt to secure autarky led to both imperialism and struggles with neighboring nations in order to gain control over resources that the state considered vital for national economic development. Mises says:

For more than sixty years German nationalists have been depicting the consequences which the protectionist policies of other nations must eventually have for Germany. Germany, they pointed out, cannot live without importing food and raw materials. How will it pay for these imports when one day the nations producing these materials have succeeded in the development of their domestic manufactures and bar access to German exports? There is, they told themselves, only one redress: We must conquer more dwelling space, more Lebensraum.

During the late nineteenth century, the main proponent of war and imperialism for these economic reasons was Adolf Wagner, a leading member of the German Historical School. Mises’s judgment on Wagner is mordant:

Adolf Wagner was not a keen mind. He was a poor economist. The same is true of his partisans. But they were not so dull as to fail to recognize that protection is not a panacea against the dangers which they depicted. The remedy they recommended was conquest of more space—war. They asked for protection of German agriculture in order to encourage production on the poor soil of the country, because they wanted to make Germany independent of foreign supplies of food for the impending war. Import duties for food were in their eyes a short-run remedy only, a measure for a period of transition. The ultimate remedy was war and conquest.

Though the members of the German Historical School aimed at war and conquest, they were cautious in setting forward their views. “Wagner, Schmoller, and the other socialists of the chair, in their lectures and seminars, long preached the gospel of conquest. But before the end of the [eighteen] ’nineties they did not dare to propagate such views in print.”

Sometimes, though, the mask slipped. Mises notes that Schmoller,

in a book published in Stuttgart in 1900 . . . [wrote] ‘I cannot dwell on the details of the commercial and colonial tasks for which we need the navy. Only some points may be mentioned briefly. We are bound to wish at all costs that in the coming century a German country of twenty or thirty million Germans be established in Southern Brazil. It is immaterial whether this remain a part of our Reich. Without communications continually safeguarded by battleships, without Germany’s standing ready for vigorous interference in these countries, this evolution would be exposed to peril.’

The Nazis carried out the economic policies of the German Historical School, adapted to the conditions of the 1930s and 1940s.

The essential ideas of Nazism were developed by the Pan-Germans and the socialists of the chair in the last thirty years of the nineteenth century. The system was completed long before the outbreak of the first World War. Nothing was lacking and nothing but a new name was added later. The plans and policies of the Nazis differ from those of their predecessors in imperial Germany only in the fact that they are adapted to a different constellation of political conditions. The ultimate aim, German world hegemony, and the means for its attainment, conquest, have not changed.

Mises’s point that the pursuit of autarky leads to war is of great contemporary relevance. Some national conservatives in our own time call for the United States to secure the resources it needs for a war with China through tariff protection and “industrial policy.” As Mises pointed out eighty years ago, such talk is dangerous.