[Razeen Sally] Classical Liberalism and Internatio

CLASSICAL LIBERALISM AND INTERNATIONAL ECONOMIC ORDER ‘Students and researchers who have an interest in issues of international economic order will welcome this text…. It will play a most important pioneering role.’ Viktor Vanberg, Freiburg Classical liberalism has frequently been applied to ‘domestic’ political economy. This book is innovative inasmuch as it links classical liberalism to questions of international economic order. Razeen Sally begins with an outline of classical liberalism as applied to domestic economic order. He then surveys the classical liberation tradition from the Scottish Enlightenment to modern thinkers like Knight, Hayek and Viner. Finally, he brings together the insights of thinkers in this tradition to provide a synthetic overview of classical liberalism and international economic order. Sally’s deployment of classical liberalism strikes a different note from other ‘liberal’ interpretations in economics and political science. In particular, classical liberalism points to the domestic preconditions of international order, and advocates unilateral liberalisation in the context of an institutional competition between states. This unusual work of modern theory, intellectual history and international political economy offers new perspectives for economic theorists, political scientists and historians of economic and political thought. Razeen Sally is Lecturer in International Political Economy at the London School of Economics and Political Science. ROUTLEDGE ADVANCES IN INTERNATIONAL POLITICAL ECONOMY 1 THE FUTURE OF THE NATION-STATE Essays on cultural pluralism and political integration Edited by Sverker Gustavsson and Leif Lewin Co-publication with Nerenius & Santérus Publisher AB, Sweden 2 CLASSICAL LIBERALISM AND INTERNATIONAL ECONOMIC ORDER Studies in theory and intellectual history Razeen Sally CLASSICAL LIBERALISM AND INTERNATIONAL ECONOMIC ORDER Studies in theory and intellectual history Razeen Sally London and New York First published 1998 by Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2002. Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 © 1998 Razeen Sally All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Sally, Razeen, 1965– Classical liberalism and international economic order: studies in theory and intellectual history/Razeen Sally. p. cm. Includes bibliographical references and index. 1. Free enterprise—History. 2. Liberalism—History. 3. International economic relations—History. I. Title. HB95.S251998 330.12'2'09–dc2198–4867 CIP ISBN 0-415-16493-1 (hbk) ISBN 0-203-00699-2 Master e-book ISBN ISBN 0-203-17210-8 (Glassbook Format) CONTENTS Acknowledgements viii 1 Introduction 1 PART I The foundations of classical liberalism 13 2 What is classical liberalism? 15 3 The international political economy of David Hume and Adam Smith: commercial openness, institutional change and unilateral free trade 35 PART I I American excursions: Knight and Viner 65 4 The political economy of Frank Knight: classical liberalism from Chicago 67 5 Jacob Viner as historian of ideas and international political economist in the classical liberal tradition 85 PART I I I German neoliberalism: Eucken, Böhm, Röpke 103 6 Ordoliberalism and the social market: classical political economy from Germany 105 7 The international political economy of Wilhelm Röpke: liberalism ‘from below’ 131 v CONTENTS PART IV Constitutionalism and international political economy: Tumlir 151 8 Jan Tumlir: democratic constitutionalism and international economic order 153 PART V Conclusion 175 9 Classical liberalism and international economic order: a synthesis 177 Bibliography 211 Index 220 vi The cosmos scarce will compass nature’s kind, But man’s creations need to be confined. Goethe, Faust II, 2 (Laboratory) Internationalism, like charity, begins at home. Wilhelm Röpke ACKNOWLEDGEMENTS My primary acknowledgement is, of course, to the men, long dead-and-buried, whose thoughts are the inspiration for, and subjects of, this book. My attempt at a synthesis of classical liberalism and international economic order springs from a fascination with a handful of original texts penned by scholars from different countries and at different ages in human history, and yet with a common thread of thought that unites them—at least in my mind. Therefore, however corny it may sound, my original and enduring debt is to Smith’s Wealth of Nations, Hume’s Political Essays, Knight’s Ethics of Competition, Viner’s Long View and the Short, Eucken’s Grundsätze der Wirtschaftspolitik, Röpke’s International Order and Economic Integration and, not least, Hayek’s Constitution of Liberty. These are my livres d’orientation and they form the working material for my shot at combining a ‘book about books’, that is, an exercise in intellectual history, with an overarching theoretical presentation of what classical liberalism has to say that is different and relevant on the subject of international economic order. The four years of research on the book took me from London to Freiburg and Cologne. My thanks are due to the Institut für Wirtschaftspolitik in Cologne and the Walter Eucken Institut in Freiburg for hosting me at various stages of research, and in particular to Professors Hans Willgerodt and Christian Watrin of Cologne University, and Dr Lüder Gerken of the Walter Eucken Institut. The Anglo-German Foundation, the German Academic Exchange Service, the Economic and Social Research Council (award R000221361) and the Alexander von Humboldt Foundation financed research stays in Germany to do work on the German neoliberal tradition. I should like to express my gratitude to these institutions for their generous financial support. The London School of Economics was my intellectual home as a student, and so it remains as a teacher thirteen years after first setting eyes on the unassuming Old Building in Houghton Street. It is with enormous pride that I recall an LSE tradition of classical liberal political economy, begun by Edwin Cannan and continued through the twentieth century by Lionel Robbins and F.A.Hayek in the first instance, but one should also mention Arnold Plant, Ronald Coase, Peter Bauer and Hla Myint, among many others. Furthermore, it is with a definite sense of gratification and fulfilment that I have come across a new generation of bright and exciting graduate students viii ACKNOWLEDGEMENTS here in our Aldwych abode who have shared my eccentric fascination with the ‘wrong ideas of dead men’ (the dismissive label for intellectual history these days, particularly in economics). The arduous preparation of lectures, and the cut-and-thrust of discussion with students in my seminar on Selected Thinkers in Political Economy, have indeed helped the drafting and redrafting of the chapters in this volume. My thanks go to these students and I dearly hope they enjoy—and cast a critical eye upon —the finished product. Bits and pieces of the book have also been presented to the LSE interdepartmental seminar on Theorising Capitalism, inspired by Sir Arthur Knight and organised by Nancy Cartwright. I am grateful to colleagues in the seminar for their comments and, moreover, for the mental hygiene that comes with serious discussion that overcomes disciplinary and departmental barriers. Finally, there are individuals who have kindly taken an interest in the studies of this book at various stages of its preparation. To their criticism and encour-agement I am greatly indebted. I should particularly like to thank Arthur Knight, Meghnad Desai, Hans Willgerodt, Christian Watrin, Terence Hutchison and Viktor Vanberg. Some of these chapters were published separately in article form. Chapter two is an enlarged version of [‘What is liberalism?’], Sapere Aude: Selected Works of the Moscow School of Political Studies, no. 5 [Law and the State], 1996, pp. 76–108. I am indebted to my remarkable and intrepid friends Lena Nemirovskaya and Yuri Senokossov for publishing a talk originally delivered to a seminar of the Moscow School of Political Studies in the Altai Mountain Republic in July 1996. Lena and Yuri are in the energetic vanguard of introducing and inculcating a liberal spirit in their long-suffering Motherland, not least through their political seminars that continue to enthuse and surprise. Chapter six first saw the light of day as ‘Ordoliberalism and the social market: classical political economy from Germany’, New Political Economy 1, 2, 1996, pp. 233–257; chapter four as ‘The political economy of Frank Knight: classical liberalism from Chicago’, Constitutional Political Economy 8, 2, 1997, pp. 121– 136; and chapter seven as ‘The international political economy of Wilhelm Röpke: liberalism “from below”’, Millennium: Journal of International Studies 26, 2, 1997, pp. 321–348. Many elements of chapters two and nine were combined in ‘Classical liberalism and international economic order: an advance sketch’, Constitutional Political Economy 9, 1, 1998, pp. 19–44. All the original articles were more-or-less modified to appear in this book

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