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Wednesday, May 25, 2011

Is a Nation Something That Can Be Built?

In the wake of both the collapse of the Soviet empire and the more recent U.S. interventions in Iraq and Afghanistan, we have seen a lively debate on nation-building. Many people who are ordinarily skeptical about the power of the U.S. government as a force for good, either at home or around the world, have come to believe that it can take on the supposedly noble task of rebuilding nations that have been plunged into chaos by political upheaval and/or war.

Although the phrase “nation-building” sounds much more constructive and well-intentioned than the destruction and death that have normally accompanied the use of American power, the reality is that attempts to build nations are likely to fail. What the nation-builders overlook is a distinction made by Ludwig von Mises almost 100 years ago: A nation is not necessarily the same as a “state.” In his underappreciated little book Nation, State, and Economy, Mises argued that “nations” are defined not by geography or by political institutions, but most fundamentally by language and other similar cultural institutions that provide a basis for “mutual understanding.”

Therefore the nation, Mises argued, cannot be understood as a static object that we can manipulate as we wish: “Nations and languages are not unchangeable categories but, rather, provisional results of a process in constant flux; they change from day to day, and so we see before us a wealth of intermediate forms whose classification requires some pondering.”

This evolutionary perspective on what constitutes a nation suggests that it may be very difficult for an external observer to even know whether a given mass of people constitutes a “nation,” much less be able to know what it would take to build a nation out of their current “intermediate form.” As we know from F. A. Hayek, people learn how to coordinate their behavior with one another via such evolutionary processes. In other words nations are spontaneous orders that emerge from the daily choices of people about the language they use and the other ways in which they participate in, or withdraw from, a variety of cultural forms. The people themselves constitute a “nation” by their individual choices.

States imposed on nations by princes, Mises contended, are doomed to fail because they normally attempt to eliminate all forms of community that lie between the prince and the people. Anything that doesn’t come from the State is to be dissolved. In other words imposed States dislike and destroy the delicate, complex, and evolved connections that comprise a true nation. This is why totalitarian regimes try to control language, religion, family, and all of the other intermediary institutions between individual and State: because those institutions help to define what it means to be a nation as distinct from a State. They provide a buffer between the evolving choices of individuals and the attempt to control those choices from the top down.

Like other attempts to control spontaneous orders, nation-building faces significant knowledge problems. It is no different in principle from attempting to plan an economy domestically. As Mises and Hayek pointed out decades ago, when planners attempt to allocate resources from the top down, they have no market signals to guide their behavior or to indicate what value people place on various outputs and inputs—that is, no prices with which to engage in economic calculation.

Nation-building is even harder than central planning at home. Once we understand that true nations are the unintended consequence of decentralized cultural processes involving millions of choices by millions of people, the absurdity of trying to build a nation as if it were a child’s toy or even a skyscraper becomes clear. Mucking around in processes that are too complex to understand in all of their relevant causal connections is almost certain to produce unintended and undesirable consequences. All the intermediary institutions that define a nation (such as language, customs, religion, and family) themselves have strong elements of spontaneous order to them because they grow out of the day-to-day practice of individuals with no overarching plan. These are ways in which individuals try to coordinate their behavior, slowly evolving institutions to assist them. Such processes of coordination work best when individuals and small groups are free to use their own particular knowledge to determine what will improve their lives. To build a nation, in Mises’s terms, would require one to be able to do a better job than the decentralized social processes described above.

Economist Chris Coyne, in his wonderful book After War, confirms that postwar reconstruction (the form recent nation-building has taken) suffers from the same sort of knowledge problem that faces those who would “build” an economy domestically. If Mises and Hayek were right about the impossibility of socialist planning because economies are simply too complex to be surveyed by one mind without the help of signals such as prices, then nation-building is equally impossible. Just as the intervention of economic planners inevitably produces results that run counter to their stated goals, leading them to intervene again to solve those problems, so will nation-building create pushback and new forms of culture and community that frustrate the designs of the builders. The quagmires of Iraq and Afghanistan are clear evidence for this argument.

Coyne articulates a number of propositions that explain the failure of attempts at “exporting democracy.” Three of those are of particular relevance to the argument here.

Why Democracy Can’t Be Exported

First, he argues that while economists and other social scientists have a pretty good idea of what constitutes a functional nation, they have much less knowledge about how to bring a “failed nation” to that point. How nations emerge is a process that is both complex and unique to each particular country. All that we can do is get out of the way and let people figure it out for themselves.

Coyne also distinguishes between the factors that nation-builders can control and those they cannot.

He argues that the uncontrollable factors are what we generally call “culture” or the “informal rules and institutions” that constitute societies. These factors constrain those that we can control. In other words there are things nation-builders can attempt to do, such as initiate democratic elections as the U.S. government did in Iraq, but the success of those formal changes depends greatly on whether they are consistent with the underlying culture. Just putting formal changes in place because you can control them does not mean they will produce the desired result.


Finally, Coyne points out that many attempts at nation-building suffer from what economists have long called the “Nirvana fallacy.” That fallacy lies in comparing the imperfection of existing reality to the perfect world they can imagine in their theories or on their chalkboards, then condemning reality for failing to measure up. In the chalkboard descriptions of how nation-building should take place, planners are presumed to be guided by the public interest with all the information they need to generate the desired outcomes. I have already discussed the problem with the latter. The former, though, also omits the imperfections of politics. The knowledge problem is compounded by perverse incentives.

There is a pitfall in assuming that those charged with using the political process to build, or rebuild, a nation will ignore their self-interest and be motivated solely by the public interest. Nation-builders need to correctly identify the public interest. Although they may know what the endpoint is, knowing what path will generate that socially desirable outcome is the fundamental challenge. It is not possible for them to know if any given nation-building action is actually in the public interest. With that constraint we should not be surprised to see the self-interest of the nation-builders predominating. Coyne documents how political self-interest has ruled U.S. nation-building efforts in Iraq and Afghanistan, manifested in the cozy relationships American politicians and policymakers have with private-sector firms with whom they had preexisting associations. Nation-building is a fertile ground for the sorts of corporate-State partnerships that undermine genuinely free markets.

Liberalism and Anti-Imperialism

Coyne’s book and the broader arguments I have offered above are part of the long-standing classical-liberal tradition of anti-imperialism. Perhaps because of the accidental alliances created by the Cold War, many have forgotten that tradition. In fact, classical liberals have always believed that the best way to encourage national development is through trade in goods and services and ideas—not through political or military intervention, even in the name of helping others.

The arguments against nation-building are much the same as those against domestic intervention (which can be recast as “economy-building” or “morality-building”). Both spring from the mistaken belief that outsiders can do better than the arrangements that emerge spontaneously and evolve continuously as individuals engage with each other. Both suffer from insurmountable knowledge problems and the perverse incentives of the political process. A better choice is to encourage unhampered exchange—within and between nations. Failure to grasp the impossibility—and often brutal consequences—of nation-building can remove yet another bulwark against further domestic intervention. If we can build a nation to our liking overseas, after all, why can’t we do it at home?

  • Steven Horwitz was the Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he was also Director of the Institute for the Study of Political Economy. He is the author of Austrian Economics: An Introduction.