Money, Banks and Finance in Economic Thought

"Federalist views on Europe before the second world war : Hayek and the Lippmann colloquium"

Ferey Samuel, BETA-CNRS et University of Lorraine

The paper deals with the federalist views of liberal thinkers in the interwar period. We focus mainly on Hayek and his ideas presented in his paper « The Economic Conditions of Interstate Federalism » published in 1939 and more broaldy of the views on European nationalisms that are discussed during the Lippmann colloquium in 1938. In the 1939 paper, Hayek studies the economic conditions to have an interstate federation. Mainly oriented on the topics of the monetary union, tariffs and State intervention, Hayek thought is an interest point of view on European construction design. For Hayek, an interstate federation could be a good institution for Europe. However, it seems to us that the paper lies on a major ambiguity insofar as federalist views of Hayek are subordinated to free markets and free trade opinions. Indeed, it is not clear if Hayekian thought sees federalism as a good institution by itself or as an efficient tool to weaken State interventions, majority voting rule and interest groups policies. For example, according to him, the great advantage of the interstate federalism is that people unified in the federation have different preferences regarding planned economy and market and that it is more and more difficult to have strong state policies under this institutional design. Hayek exemplifies the fact that when economists discussed Europe at that time, they are involved in a broader debate about the best political institution of such a federation, the role of democracy and the rule of law. And, to deal with the crucial issue of the relationships between liberal State, democracy and European federalism, Hayek follows a classical economic liberalism and, perhaps, underestimated others aspects of a federation. We then conclude by elaborating on this ambiguity and we wonder whether this liberal idea about federalism has been influential among economists’ community. The paper is part of the special session entitled "Economists and the European construction before the Rome Treaty: From federalism to monetary integration" (submitted separately)

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Keywords: Federalism, Hayek, liberalism