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Racial identity is intertwined with almost every economic and political problem currently under debate, from police violence to immigration controls. In fact, it’s possible that racism and racial conflict are in the public eye now more than at any other time since the Civil Rights Movement.

Recent events should give us pause to consider the implications for a free society of racism and racial discrimination. In particular, it’s instructive to turn to Mises’s writings for insight into the economic and social significance of racist doctrines. I say “doctrines” because Mises didn’t discuss racism in the simple sense of hatred; instead, he criticized the racist ideologies that during his life were used to justify the hatred and political domination of certain racial groups. As a Jewish refugee who fled the Nazis, Mises experienced first-hand the philosophical and practical horrors of racism, and it’s no surprise that he believed that liberalism and racism are inherently in conflict.

Racism and “Polylogism”

Most contemporary economists discuss racism in the context of labor market discrimination. But for Mises, racism is mostly a methodological and epistemological problem. It’s for this reason that his critiques of racism usually appear in his writings on “polylogism” (1949, pp. 75-77; 1945 [1990], pp. 202-203). Polylogism is the idea that the logical structure of the mind is different for different economic, social, or racial groups. The “logics” of different groups cannot be reconciled, and polylogism is therefore also a doctrine of group conflict. Its advocates (in their various forms) believe that supposed differences of mind can explain the economic and social development of different groups, and ultimately provide the justification for the dominion of some groups over others.

According to Mises, the most prevalent examples of polylogism are racism and Marxism, both of which he vigorously opposed on the grounds that they deny the universality of reason. According to Mises, these doctrines failed completely:

Neither the Marxians nor the racists nor the supporters of any other brand of polylogism ever went further than to declare that the logical structure of mind is different with various classes, races, or nations. They never ventured to demonstrate precisely in what the logic of the proletarians differs from the logic of the bourgeois, or in what the logic of the Aryans differs from the logic of the non-Aryans, or the logic of the Germans from the logic of the French or the British. (1949, p. 79)

By denying the existence of a universal logic, polylogism also attempts to deny economics. Specifically, racism and similar doctrines deny the benefits of the division of labor and peaceful social cooperation. Instead, they hold that conflict and even war between groups is inevitable (1957, p. 41). According to such views, the good of one racial group can only come at the harm of another, and consequently, there can never be peace among peoples (1949, pp. 180-181, 210-211).

Mises never tired of attacking this doctrine, which he recognized was an assault on liberalism. Theory and history have demonstrated time and again that peace and free trade between peoples enriches all participants and undermines prejudice and conflict. Thus economics offers a solution to racism: the knowledge that the interests of all racial groups are advanced by social cooperation, and harmed by conflict. Racism is self-defeating because the refusal to peacefully interact with other groups must ultimately damage the welfare of all, even the racists themselves (1949, p. 181).

The Politics of Racism

Yet Mises did not stop at this critique. He also attacked the conceptual basis for drawing economic distinctions between races. He observed that efforts to divide races by their physical characteristics, and to use these distinctions to analyse and predict economic success or failure, were based on pseudoscience that had failed to provide any biological evidence to support its claims (1944, pp. 170, 172; 1951, p. 324; 1957, p. 336). Instead, they were used to promote illiberal philosophies like the eugenics-laced Malthusianism of Keynes, which Mises criticized in the 1920s.

Furthermore, the idea of economic differences based on race membership is itself contradicted by the evidence: “The fundamental discrepancies in world view and patterns of behavior [that we observe in the world] do not correspond to differences in race, nationality, or class affiliation” (1949, p. 87). In fact, Mises argues that even if we assume that racial distinctions and participation in the division of labor are compatible, there is still no good argument against social cooperation under the division of labor, which is always beneficial (1951, pp. 325-326; 1945 [1990], p. 208).

Moreover, the idea of racial conflict is often fostered by anti-liberal political movements. Mises even suggests that race is a collectivist concept invented to replace individualism (1919 [1983], pp. 35, 41). For example, race membership can be falsely conflated with national identity (1919 [1983], pp. 34-35) and thereby used to advance nationalist ideology at the expense of peaceful liberalism.

To that end, race is used as a tool for establishing caste systems and granting legal privileges (1944, p. 172). It thus becomes a means for breeding class conflict in the classical liberal sense. In fact, racist ideology helps drive much larger political movements: the idea that different racial groups must inevitably clash leads naturally to support for militarism (1951, pp. 326-327) and imperialism, with the latter both encouraging and being encouraged by racism (1919 [1983], p. 106; 1951, p. 50).

Mises was an admirer of Western civilization, most notably its creation of the classical liberal tradition. He believed its economic achievements to be the envy of the world. But its past successes justified “neither the white man’s racial self-conceit nor the political doctrines of racism” (1957, p. 334). Ideas about racial supremacy are unfounded and undermine the hope for peace:

Many people take pride in the fact that their ancestors or their relatives have performed great things. It gives some men a special satisfaction to know that they belong to a family, clan, nation, or race that has distinguished itself in the past. But this innocuous vanity easily turns into scorn of those who do not belong to the same distinguished group and into attempts to humiliate and to insult them. The diplomats, soldiers, bureaucrats, and businessmen of the Western nations who in their contacts with the colored races [sic] have displayed overbearing effrontery had no claim at all to boast of the deeds of Western civilization. They were not the makers of this culture which they compromised by their behavior. Their insolence which found its expression in such signs as “Entrance forbidden to dogs and natives” has poisoned the relations between the races for ages to come. (1957, pp. 334-335)

The past provides little justification for racial vanity. At the same time, the supposed achievements of one group mean little for its future, let alone that of other groups, which are always uncertain.

The Struggle for Peace

It should be no surprise that racist ideology conflicts with the principles of a free society. Yet it is vital to understand just how deep this conflict runs. For Mises, racism is not just contrary to liberalism, but to reason itself. It’s a denial of the most fundamental truths of economics, and even of the very idea of economic science. Theories of racial conflict reject peaceful social cooperation and instead promote conflict and war as the foundations of human society.

Making the case for a free society means rejecting racist ideology. One practical way to do this is to reveal the many forms of racism that are institutionalized by government intervention. These include licensing laws, zoning restrictions, wage and price controls, civil asset forfeiture laws, police abuse, the prison system, and many others. Each is a barrier to the division of labor and a blow to human welfare. Only peace and free trade can destroy these barriers once and for all.