1. The First World War and Its Moral Foundations

The profound theoretical and practical issues of war and peace pervaded Luigi Einaudi’s life and work, leaving an indelible imprint on his intellectual legacy. Within the span of just over three decades, Einaudi bore witness to the initial outbreak of the big fire that would blaze up Europe with the progressive and inexorable collapse of the Ottoman Empire. He subsequently experienced the two world wars: first, during 1914–1918, as an economist and prominent opinion leader engaged in the “battle for ideas” advocating Italian intervention alongside the Entente; later, from 1940 to 1945, as a keen and involved observer of the events that ultimately culminated in an unprecedented transformation of the international order. The “Thirty Years’ War,” as punctuated by the two world wars, aroused both hopes and disappointments in Einaudi. Hopes for it gave an opportunity to test the practical and theoretical tenets of liberal internationalism as a pathway to peace and cooperation among nations. Disappointments for it laid bare the inherent limitations of a purely idealistic conception of history that was equally unable to come to terms with the structural realities of power. Only from the combination of idealism and realism could a liberal view of history emerge stronger. Yet, this synthesis necessitated a justification of war and the use of force as necessary instruments for defending and asserting the principles and values underpinning “open societies.”

Consequently, Einaudi was never a pacifist, though his intellectual endeavours consistently aimed at identifying and leveraging every possible mechanism to construct a more integrated and interdependent world. His rejection of naïve pacifism arose from empirical observation rather than doctrinaire reasoning. Einaudi dismissed theories attributing the origins of war to materialistic interpretations of history, centered on economic motives only as the driving force, as fundamentally flawed. Even though he substantially shared Norman Angell’s thesis on the economic irrationality of war, he refrained from embracing its naively optimistic conclusions. For Einaudi, wars in modern time—and in particular the European outbreak of 1914—were essentially rooted in spiritual and ideological convictions. These conflicts derived their legitimacy from the collective belief of entire nations in the necessity of waging war to defend or promote their unique ideal of “civilisation,” their specific forms of social organisation, and their spiritual ethos. In this regard, the war of 1914 soon revealed itself to Einaudi as yet another bloody chapter in the protracted history of Europe’s religious wars of the sixteenth century, now reproposed as an epochal confrontation between two irreconcilable political and state philosophies. On one side stood the liberal philosophy, premised on the primacy of society and individuals; on the other, an authoritarian conception of the state as the instrument for shaping society, endowing it with an patterned legal and social structure, and directing it towards a predefined common good. This second model of society—born from the absolutist “dogma” of sovereignty—represented, in Einaudi’s views, a constant threat to peace. Wherever it prevailed, it fostered an excessive drive for power and hegemony.

For Einaudi, the Great War was not merely the outcome of a confrontation between two geopolitical alliances but, more profoundly, a clash between two distinct conceptions of civilisation, embodied respectively by England and Wilhelmine Germany. The former represented a form of benevolent imperialism ostensibly capable of fostering development, welfare, and civil progress among colonised populations. The latter as the expression of a predatory imperialism premised on the self-ascribed superiority of an “elect” race and its presumed right to impose dominion over other states and peoples.

However, Einaudi never showed any ingrained animosity towards Germany. His analyses of the nation consistently reflected a broadly favourable assessment of the historical role played by the great German monarchies in forging a modern public sphere receptive to the principles and values of liberal society. He also expressed admiration for the efficiency and organisation of the German state’s bureaucratic apparatus, as well as for the advanced experiments in social policy implemented by the Prussian ruling class. Yet, such considerations did not mitigate the ethical and ideological objections that underpinned Einaudi’s fundamental rejection of the German path to modernity. He regarded it as excessively inclined towards curtailing individual freedoms in favour of social discipline and the uniformity of thought and purpose.

From Einaudi’s comparative evaluation of these two imperialisms, and his alignment with one over the other, it would be mistaken to infer that he was, in principle, an advocate of colonial warfare. Quite the contrary: he was deeply sceptical of their economic and financial justifications. For Einaudi, it was almost axiomatic that no war could bring such benefits to the national community, except for the narrow advantages accruing to a privileged few—those who would finally profit from lucrative government contracts for the exploitation of newly conquerred territories. Einaudi considered military ventures legitimate only if their objectives included the enlightened aim of advancing the spiritual, moral, and material well-being of the colonised populations. These principles were among the reasons behind his severe criticism of the Libyan campaign, which he deemed both a financial debacle and a moral failure, founded on premises that were insufficiently robust from either an idealistic or a political standpoint.

The outbreak of the Great War, however, prompted Einaudi to unreservedly advocate for Italy’s entry into the conflict, aligning himself with the tenets of enlightened liberal-conservative interventionism, epitomised by the editorial stance of Luigi Albertini's Corriere della Sera. As a prominent opinion-maker for the Milanese newspaper and other pro-interventionist publications, Einaudi directed his efforts along two principal lines: the rigorous and accurate analysis of the conflict’s economic and financial dimensions, aimed at shaping and influencing the major economic policy decisions of the wartime governments; and a series of propagandistic writings, including articles and essays (notably those compiled in the collections Gli ideali di un economista and Lettere di Junius), which predominantly addressed the ethical and moral aspects.

It is worth noting, in this regard, that between the scientist-economist Einaudi and the intellectual engagé in the service of state propaganda there was no contradiction or solution of continuity. Indeed, he placed great emphasis in all his writings on the “non-economic virtues” of war, that is, on the importance of the moral and spiritual benefits it would bring if conducted victoriously. Indeed, he believed that only the awareness of such benefits could make bearable the immense economic sacrifices imposed by a conflict that had revealed, in Ernst Jünger's sense, an unprecedented, terrifying logic of “total war”. Both the Prediche and other wartime writings by Einaudi therefore had to insist on the need for the Italian people to take part in the conflict by sacrificing all private interests for the good of the nation; because only in this way would they be able to defend and promote for themselves a higher ideal of civil coexistence.

These themes and insights would later percolate in Einaudi's more reflective and forward-looking analyses of the economic management and social repercussions of the Italian war, published in 1933 as part of the prestigious Carnegie Foundation for International Peace series on the Economic and Social History of the World War.

For Einaudi—much like for all strands of liberal interventionism, whether of a democratic or enlightened conservative background, such as that represented by Albertini and Salandra—the Italian war constituted the necessary completion of the work initiated during the Risorgimento by the founding fathers of the Italian state and nation. Also for this position in Einaudi's thinking, there was a seamless convergence of ideals between the Italian war and the war of the Entente, dedicated to the affirmation and dissemination of the liberal conception of the state. This vision was underpinned by the principles of self-determination, liberty, independence, cooperation, and reciprocal relations among peoples and nations. For Einaudi, there was no doubt that the powers of the Entente represented the radical negation of these values.

Einaudi’s idealistic and cultural perspective, rooted in the anti-Austrian sentiments widely shared across Italy, also led him to embrace the notion of the war of 1915 as the final chapter of the Risorgimento. Against this background, Einaudi’s disdain for neutralist positions, particularly those espoused by Giolitti and the Socialists, was unequivocal. He regarded their stance as a betrayal of the foundational ideals upon which the Italian state and nation were built. The defeat at Caporetto led Einaudi intensify his efforts to support the government’s propaganda initiatives, aiming to bolster the morale of soldiers and avert the disintegration of the domestic front. His article on the historical significance of the eastern border stands as a telling example of these efforts. The final year of the war prompted a renovated reflection for Einaudi—not only on the underlying causes of the conflict but, more importantly, on the imperative of establishing a new international order capable of ensuring stable and peaceful relations among nations.

This imperative became even more pressing for Einaudi after the United States’ entry into the conflict—an event that, in his view, imbued the war with an even more pronounced ideological and cultural dimension. To Einaudi, this development affirmed the conviction that, if the Entente coalition were victorious, the war would fulfil its historical mission by eradicating the pernicious concept of the power-state—of the perfect entity of the self-contained state—which he regarded as the root cause of all wars. The United States, with its distinct political and social structure—characterised by federalism, the substantial influence of public opinion on governance, and the true affirmation of the principle of popular sovereignty, untainted by the degenerative tendencies of parliamentarianism—embodied, for Einaudi, the most credible guarantor of the possibility of reconstructing the international order on new foundations in homage to firm principles of liberal inspiration. Furthermore, Einaudi viewed Italy, as the inheritor of the noble struggles of the Risorgimento, and the Wilsonian United States as natural allies in their common fight against the threat posed by authoritarian and imperialist states to the ideals of free and independent nations.

In Einaudi’s estimation, the entry of the United States into the World conflict also outlined a future grand Atlantic alliance between the United States and Great Britain to possibly serve as a catalyst for a parallel process of convergence and integration among European states on the medium-long term, to be united by shared institutions, linguistic and cultural affinities, and proximate territorial borders. For Einaudi, this vision embodied the hope of constructing a new European and global legal, political, and economic order, increasingly characterised by interdependence and a supranational ethos. The envisioned models for this framework were to be found in the British Commonwealth and the American political constitution.

Nevertheless, the fundamental prerequisite for building remained that all national governments converged on the willingness to renounce and decisively overcome the “dogma of sovereignty”. The ostensibly utopian nature of Einaudi’s liberal internationalism was consistently tempered by his deep economic pragmatism which he constantly set as a base for his reflections about the nature, the objectives, and the operational structures and the actual functioning of the supranational institutions that he envisaged as the legacy of the Great War.

2. The Peace of 1919: Hopes and Disappointments

The conclusion of hostilities and the start of negotiations leading to the peace treaties disclosed to Einaudi a perspective which increasingly contradicted the aspirations which drove him to consider the confrontation between the Entente powers and the Central Empires as the necessary phase in the transition towards a new historical era for Europe and the world, a phase defined by progress rooted in order and liberty. However, the principle of self-determination of peoples—particularly as it manifested in Central Europe and the Balkans—soon revealed itself as little more than a guise for the bounded nationalism that, even before 1914, had posed a threat to peace and the advancement of nations. Moreover, it emerged as the resilient core of the doctrine of absolute state sovereignty, which Einaudi regarded as the obstacle majeur to the establishment of the international order he had envisioned.

More than ever in the past, this nationalism intrinsically tied to the reassertion of unrestrained state sovereignty became the cohesive and dynamic force uniting both the vanquished and the victorious as they faced one another at the peace negotiation table. This sovereignty extended not only to the redrawing of national borders and the partitioning of colonial territories but also to the economic provisions of the peace treaties—ranging from the reparations due by the defeated to the debt -based relationships forged among the victorious powers.

The post-war reality, as it unfolded, presented a formidable challenge to Einaudi’s aspirations for the creation of a supranational institution capable of mediating and resolving Europe’s internal conflicts as well as broader international disputes. When established, the League of Nations, which ostensibly embodied such a vision, was significantly undermined by the absence of key powers such as Germany and Russia and more nefariously that of the United States—a prospect inconceivable at the time of its entry into the war on the side of the Entente. This withdrawal was precipitated by the will of the American people, who compelled their leaders to resist any measure that might compromise state sovereignty by subordinating it to the authority of a supranational body. As a result, the League of Nations was reduced to little more than an instrument through which the European powers sought to pursue their national interests and realise their own political objectives.

Einaudi's reflections on constructing a future order of peace centred on the dichotomy between a “League of Nations” and a “federation”, the latter envisaged as the distant foundation for a world parliament. While recognising that the first option was more readily attainable in the short term, he did not break with the dogma of state sovereignty, leaving individual national governments—driven by their own self-interests— the task to negotiate solutions to international disputes and agreements on matters such as trade, economic governance, common resource exploitation, and peace. Nevertheless, Einaudi believed that creating the conditions and structures to foster dialogue and systematic interaction among states could raise a greater awareness of the mutual benefits derived from aligning particular interests with broader, collective ones. This, in turn, could pave the way for the eventual integration of all peoples' interests but of Europeans’ especially.

Guided by this vision, Einaudi anticipated in 1918 already many ideas that would find their implementation after the Second World War. His proposals aligned closely with what is now recognised as the “functionalist” approach, which became a primary and decisive driving force behind European integration. This is evident in his thoughts on supranational oversight of primary resources—such as agriculture and mining—key aspects of trade, freight and people transport, and services, alongside the elimination of customs barriers. Despite his growing disillusionment with the international climate of the time, Einaudi maintained a forward-looking perspective, seeking to leverage any positive elements within the prevailing situation. Einaudi’s stance on the Fiume question epitomises this complex outlook, blending deep-seated national sentiment with his broader, supranational aspirations. His arguments passionately underscored the Italian national identity of the city, stating that "no League, no society of nations will ever be able to heal in the hearts of Italians the lacerating wound opened in the body of the Fatherland by the detachment of one of its cities." After President Wilson's proposal to cede Fiume's sovereignty to the nascent Yugoslav state, providing it with vital breath for its economy and that of the other Balkan and Central European regions reliant on the Adriatic.

However, at the same time Einaudi resolutely refused to “elevate sovereignty to an unchallengeable dogma”. He advocated for Italy’s ability, once its sovereignty over Fiume was recognised, to engage in discussions with "all the nations of the hinterland" to establish forms of cooperation. These could be secured by international treaties ensuring access routes and free zones within the port. “So that every nation can enjoy the widest possible security of free access to the sea and equal treatment. By acting in this way, we Italians believe we are setting ourselves on the high road that will in time lead to the United States of the world."

On the delicate and complex issue of Fiume, therefore, Einaudi's sensitivity together with his background both tied to nationalism and to Risorgimento led him to react passionately to Wilson's pragmatism. However, the proposal to establish supranational frameworks for managing the port redirected the debate towards the more fertile ground of Einaudi’s ideal: the gradual overcoming of absolute national sovereignty as a prerequisite for enabling peace and freedom, and fostering progress among nations.

3. The Economic Conduct and Social Consequences of the War in Italy

The experience of the First World War brought to the forefront of Einaudi's reflections the need to redefine public space and reconsider the relationship between the state and society in Europe. This reevaluation was prompted by the profound transformations introduced by “wartime collectivism” and the extensive state regulation of public life and economic activity. Einaudi observed that, in the aftermath of hostilities, a pervasive belief had taken root across the countries involved in the conflict: namely, that the omnipotent, interventionist state model, which had proved effective during wartime, could also serve as the mechanism to fulfil peacetime aspirations of social harmony, economic prosperity, and universal happiness. These aspirations had been the underlying theme of wartime propaganda from all governments, aimed both at motivating soldiers on the battlefield and at galvanising the “domestic front” into maximum productivity across industries, agriculture, mining, and services.

Einaudi recognised that the Walter Rathenau “associated economy” model found resonance beyond the German borders. The themes and insights he had explored during the war were revisited, enriched, and systematically developed in light of new data, statistics and rules in his landmark 1933 study “La condotta economica della guerra italiana”. This work, as historian Roberto Vivarelli has noted, constitutes one of the most relevant contributions to understanding the erosion of civic spirit and the moral disarray that characterised Italy's immediate post-war period, shedding significant light on the origins of fascism.

According to Einaudi, fifty years of Italian unification had not sufficed, following centuries of foreign rule and “paternalistic governments” that had succeeded the communal factions, to give rise to a genuine state. While this nascent state had managed to achieve “victory in war, it lacked the resilience to overcome the post-war challenges”. The reason, Einaudi wrote, was “the absence of awareness among the citizens that they were part of the state, indeed integral to the very state”. These same men who, in 1917, following the catastrophe of the Isonzo, were able to defend the soil of their invaded homeland on the Piave and ultimately achieved victory, failed to “see in the plutocrats who assaulted public wealth and banks, and in the proletarians who seized land and factories the enemies of the res publica. All of them where their own true enemies. They expected the state to defend their interests” But that state, he continued, “deprived of its inner strength derived from the spontaneous engagement of its people, did not exist. This was the essence of the war”.

Italy’s most profound weakness laid then in its inability to adopt what Einaudi described as a “stoic conception” of war. In his analysis, the war could not significantly alter the nation’s social structure unless the ruling classes—including the workers unions and peasants associations—hold a precise understanding of its costs and the purposes for which Italy had entered the conflict. He asserted: "If everyone had been convinced that the war would be protracted and cost-prohibitive, that it would require substantial increases in taxation, disproportionately borne by the middle and upper classes and levied on luxury consumption and incomes above subsistence levels, and that little financial compensation could be anticipated from the annexation of the Italian territories under Austrian rule; if all had understood that the severe economic impoverishment in lives and resources resulting from the war could only be offset by inestimable, albeit purely moral, benefits (...), then the nation would have faced the harsh sacrifices imposed by the war without faltering."

In order to minimise these costs, it would have been necessary to have “a clear recognition of the war’s fundamentally idealistic objectives, whose material rewards, if any, could only be realised indirectly and in a distant future”. These themes, recurrent in Einaudi’s wartime writings—later compiled under the title Prediche (Sermons)—highlighted “their shared character as exhortations towards renunciation, frugality, and sacrifice”. The “stoic conception” of war’s aims should have been mirrored by an equally stoic economic management of its conduct. But, as he noted, fearing discontent among the masses hardest hit by the war effort and in pursuit of “the utopia of minimising the burdens of war or rendering them as imperceptible as possible”, the state became increasingly enmeshed in regulating the nation’s economic life.

All this resulted in actions by governments that were often chaotic and improvised, addressing only the superficial symptoms “of what were considered as evils and were mostly necessary and beneficial reactions to the war effort”. It would have then be necessary to have “a reduction in consumption and an emphasis on stimulating production. However as the people - overexcited by the pen-pushers unaware of their evil incipiently committed - would not tolerate the necessary rise in prices, the state found itself compelled to intervene with price controls, requisitions, incentives, and enforced labour and production measures. Everyone, regardless of wealth, had to be treated equally in the face of the danger of their homeland; but not daring or not being able to use the only effective tool for this purpose: taxation to reduce all incomes to subsistence levels. Instead, the government resorted to a façade of equitable treatment, employing ration cards and threats of confiscation of newly generated surpluses and pre-existing wealth”.

Without deliberate intent, driven by the “most potent virtue of social envy”, the state—an entity with little more than half a century’s experience, previously limited to performing a few functions efficiently—was compelled to extend its tasks into entirely new domains. “The old bureaucracy,” Einaudi observed, “seasoned yet efficient only for long-established practices, faltered under the enormity of these new responsibilities;” while the new bureaucracy, comprising “ministerial god almighty”, appointed haphazardly through the random processes of wartime recruitment and unaccustomed to administrative oversight, “ignored and scorned them.” Thus, “tumultuously”, there emerged alongside the traditional military state—administrator, judge, and educator—a “new productive state functioning as farmer, wholesale and retail merchant, distributor of essential goods and foodstuffs, of houses and land, regulator of incomes and fortunes”. In this transformed social and institutional landscape, there came a swarming of leaders “persuaded of their mastery over the secrets of economic prosperity and social peace” and “many politicians, reluctantly ceding wartime governance to military commanders, aspired to civil triumphs reminiscent of Napoleonic grandeur”. Free enterprise and competition, Einaudi noted, were increasingly derided; while “if the term was feared, as a reflection of the neutralist conduct of the socialists, collectivism was actually venerated”. According to Einaudi, the conflict had wrought a profound shift in public ethics, introducing the temptation to perpetuate in every place the authoritarian and paternalistic governance of wartime into peacetime. He observed that “men now thought and acted communistically”. Industrialists “readily acquiesced to receive state allocation of raw materials necessary for production at prices viable in the ratio to the selling price of the manufactured product and willingly submitted to state regulation of wages, oversight of production inputs, and calculation of potential profits. No longer workers' concessions, or smiling workers for a rising wage, and plentiful profits despite controls and regulations more than before the war”

However, the hope of returning to a free-market economy through the dismantling of wartime harnessing was both short-lived and illusory. In the immediate post-war months, Einaudi articulated, in the pages of Il Corriere, the growing discontent of small and medium-sized entrepreneurs towards the regime of state constraints, commissions, and the burgeoning technocracy of “ministerial god almighty”. He passionately advocated for the dismissal of these figures, particularly targeting Giuffrida, a prominent representative of the new state technocracy. Einaudi declared: “We have endured them for far too long. Let professors return to their lectures, state councillors to their legal opinions, soldiers to their regiments, and lawyers to their proper pursuits, rather than blending coffee, trading hides, and marketing tuna. Let everyone return to their rightful occupation. Dissolve the commissions, disband the commissariats and ministries (...). Industrialists and workers, capable of mutual understanding and collaboration, have demonstrated their ability to engage with each other as those who fight and take risks inevitably must.”

Despite Einaudi’s heartfelt appeals, there was widespread resistance to a swift and uncompromising return to the pre-war situation. A new myth had already emerged to supplant the ideals of justice and freedom: “In that first post-war year, it assumed the guise of the associated economy.” This concept epitomised “a nebulous associationism between private individuals and the state, between smaller entities and the state, and between cooperatives and the state” so much so that individual and public players would “operate as emanations of, and almost as integral components of, community.” Instead of the absolute communism that was widely perceived as antithetical to the Italian economy, this new ideal sought to reconcile, integrate, or even transcend the dichotomy between the individual and the state by merging them into a superior collective entity. Yet, as Einaudi noted, this new myth was merely “a continuation and adaptation of the wartime system that had gradually moulded.” Its allure stemmed from a deep belief—one that proved tragically illusory—that collective prosperity could be achieved through an unchecked “minting” policy i.e. an unchecked supply of paper money.

The real consequence of such “inflationary illusion” was in fact to incite only a relentless “assault on the state treasury” by all organised interest groups and productive sectors. Industrialists, cooperatives (irrespective of political or ideological alignment), trade unions, and agricultural associations all vied aggressively for resources, unleashing a “tumultuous struggle for power” that foreshadowed bitter and unmanageable social discord. Following some illuminating post-war events - the rapid expansion of heavy industry through mergers, alliances, and ambitious programmes within groups such as Ilva and Ansaldo; repeated attempts by industrial conglomerates to penetrate the banking system; the collapse of Ansaldo and the Banca Italiana di Sconto; and the subsequent bailout of depositors at the treasury’s expense—Einaudi came to the conclusion that the technical achievements of wartime collectivism had inadvertently sown “the poison of state-backed economic operations across all sectors of economy”. This had two critical effects. First, it fuelled intense animosities among social groups, each striving to secure the highest level of state protection for their interests. Second, it precipitated the gradual but inexorable disintegration of the national unity that the war—despite its myriad contradictions and for only a fleeting moment—had given hope of someday achieving.

4. War, Ruling Classes and Public Ethics

Einaudi attributed the failure to overcome the post-war crisis not to economic factors but to a moral deficit: “The social upheaval of the war and the consequent monetary inflation exacerbated the crisis by intensifying the arrogance of selfish instincts and diverting men, even more than before, from the contemplation of higher ideals to the pursuit of earthly acquisitiveness.” The corrosive impact of state domination over society, coupled with the disempowerment of the nation's productive forces seduced by the lure of protectionism, was, in Einaudi’s view, further magnified by the absence of a ruling class commensurate with the stature of those who had forged the unitary state. Contrary to hopes that the war would herald the emergence of a renewed and invigorated Italy, Einaudi observed that it had instead accentuated “the mediocre composition of the political class; for dispersed and weakened what little remained of the old independent classes and delayed, perhaps for decades, the elevation of the new agricultural and industrial middle classes to the status of politically independent players.” Einaudi’s critique of the disappearance of the “better element” from politics, and the ascendancy of a utilitarian and pragmatic approach to governance, intersected with his broader theoretical and institutional reflections on the present and future of a genuinely liberal conception of the state. For him, the European war had marked the moment when the contours of two distinct forms of liberalism became apparent: the Anglo-Saxon approach, to which he felt a profound affinity, and the “continental” approach, which he associated, in many respects, with the constitution of the Wilhelminian Empire. In this analysis, Einaudi identified a stark contrast between these two models of liberal democracy which did not align rigidly, he argued, with the composition of the two major warring alliances but seemed instead to trace its origins to a deeper and more ancient legal-institutional divide.

This divergence had given rise, on the one hand, to constitutions that succeeded, as in the British case, in integrating the modern concept of liberty and blending it to the absolutist framework of the modern state construction, thereby establishing a virtuous relationship between representation and decision-making. On the other hand, it had led to constitutions which, following the example of the French Revolution, had elevated the fiction of parliament as the embodiment of the people's will to the principle of governance. In practice, however, these systems permitted other powers and institutions—whether the dictatorship of the virtuous, the state bureaucracy, the army, or the crown—to appropriate and exercise that principle, effectively substituting its prerogatives. The British and American experiences demonstrated, according to Einaudi, that genuine liberal democracies did not govern through parliaments only. The Great War of 1914, in his view, served to affirm this fundamental premise. The traditional anti-parliamentary critique, prevalent in the turn of the century from, rendered even more stringent by the exigencies of wartime governance became heavier by weighty new institutional arguments. This anti-parliamentary polemic, as is well known, was closely intertwined with the figure of Giovanni Giolitti, who had long been the target of scathing attacks from the Milanese press and a cohort of Italian liberal intellectuals. For Einaudi, the war had marked a definitive rupture between the amorphous, neutralist parliament and the real country, epitomised primarily by the veterans but also by an informed and enlightened public opinion. This public, composed of opinion leaders and the press, represented the sole force capable of exercising genuine oversight over government actions and fostering the free exchange of ideas essential for articulating a high-minded and forward-looking vision of national interests. Einaudi's opposition to parliamentary governance was deeply rooted in his critique of the political system instituted in Italy following the so-called parliamentary revolution of 1876 and the rise of Agostino Depretis. This event, in Einaudi’s assessment, marked the beginning of a relentless decline in the ethical standards of political and governmental conduct in Italy. He repeatedly underscored the epochal significance of this transition, which was characterised by an increasingly corrupt entanglement of parliamentary and administrative functions and a corresponding abandonment of the rigorous fiscal discipline that had guided the economic policies of the historical Right wing. This shift gave rise to the systematic clientelistic manipulation of public expenditure, a practice that Giolitti would refine during his protracted parliamentary dictatorship. The war, cloaked in the aura of a miraculous, transformative mission, ultimately consecrated and entrenched these practices within the political culture of the nation. To support his points, Einaudi invoked the writings of Giustino Fortunato, a fervent admirer of the parliamentary system who had nonetheless expressed sharp criticisms of the conduct of many politicians of his era. In Einaudi’s view, the war, by virtue of the immense sacrifices it demanded from the nation for victory, presented a unique opportunity to rediscover and embrace the principles of good governance championed by the founding fathers of the Italian state. These principles included sound administration, moral rectitude, cautious reliance on measures such as the issuance of paper money, and a preference for taxation and fiscal mechanisms (and, where necessary, borrowing) to ensure an equitable distribution of the burdens borne by the population. Even within the constraints of a wartime economy—characterised globally by high public debt, an uncontrolled expansion of paper currency circulation, pervasive state interventionism, and protectionist policies—Einaudi maintained that adherence to rigorous fiscal ethics could shield the nation from inequitable sacrifices and the social and economic tensions that inevitably arose as a result. Such an approach, he argued, would also curb the increasingly pernicious intertwining of public finances and private interests, which stymied the development of a thriving market economy and obstructed the emergence of a dynamic civil society. From this civil society, virtuous and visionary political elites might eventually have been drawn to lead the nation.

Einaudi’s initial hope that Fascism could serve as a vehicle for a liberal revolution aligned with these ideals proved to be short-lived. The authoritarian and illiberal nature of the Fascist state—shaped by the wartime practices of public safety administrations—quickly became evident, even to those like Einaudi who had initially believed that their liberal principles might find expression in the economic policies of figures such as Alberto De Stefani. At this juncture, Einaudi forcefully articulated his critique of the intrinsic connection between the dogma of absolute state sovereignty—underpinning the entire legal and regulatory framework of the Fascist regime, despite its frequent contradictions in practice—and the perpetuation of international disorder and conflict. His reassertion of supranationality and interdependence as the essential pillars for a peaceful, stable, and prosperous international political order assumed renewed urgency. The Second World War would provide a decisive further test bench of these convictions for Einaudi.

5. The Second World War and Liberal Interventionism

The Second World War, which epitomised the unresolved tensions and contradictions of the Great War and the failure of the 1919 peace settlement, appeared to Einaudi as a validation of many of his ideas regarding the nature, causes, and consequences of wars. These ideas were distilled most cogently in his speech to the Constituent Assembly on 29 July 1947 during the debate on the ratification of the peace treaty. Einaudi argued that, like the First World War, the Second had stemmed from a fundamental contradiction: the growing demands for the integration of peoples and states—spurred by advances in technology, communications, trade, and economic interdependence—clashed with the prevailing model of absolute sovereignty, characterised by closure and protectionism, everywhere in the world and particularly in Europe.

Within just 25 years, Einaudi noted, this contradiction had twice reached a critical breaking point on the continent, ultimately sparking catastrophic conflicts. The reaffirmation of absolute state sovereignty enshrined in the treaties that followed the First World War; the elevation of this principle to the level of dogma by ideocratic regimes in Russia, Italy, and Germany; and the failure of efforts, such as the establishment of the League of Nations after the First World War , to mitigate its effects, had inexorably led to the Second World War. In Europe especially, the clash between sovereign, protectionist states and the dynamics unleashed by remarkable technological, communicative, and economic developments drove certain nations—just as in 1914—to resort to military conquest. They sought to secure what they deemed to be their rightful Lebensraum, or living space, as a means to safeguard and assert their unlimited sovereignty in a transformed global landscape.

For Einaudi, this pursuit of living space was tantamount to an objective to politically and economically unify Europe through coercion, benefitting those states that had successfully embraced and wielded the doctrine of absolute sovereignty. From this analysis arose two critical lessons from the Second World War and its aftermath. The first was the imperative to embark upon a federalist process of political and economic integration within Europe. Such integration was not only the sole viable antidote to future wars but also a vital prerequisite for the civil, economic, and social regeneration of European nations, achieved within a framework of order and liberty. The second lesson, addressed to the global community of peoples and powers, was the commitment to establish a supranational authority endowed with sufficient powers to act decisively. This body would need to wield adequate authority and strength, derived from sovereign states voluntarily relinquishing a portion of their traditional powers, to prevent and resolve tensions that might otherwise escalate into new conflicts.

Einaudi later took satisfaction in witnessing and supporting—within the scope and capacity afforded by the prominent positions he held from 1944 onwards—the inception and evolution of Europe’s political and economic integration. His earlier criticisms of the League of Nations, particularly its legal and political deficiencies, had proven prescient, and he applied the same critical lens to the United Nations. From its founding, he highlighted the structural flaws that rendered it impotent in achieving its lofty ambition of eradicating war from the globe. Even in the wake of the cataclysmic Second World War, Einaudi’s reflections, analyses, and proposals represented a profound synthesis of idealism and pragmatism. They were rooted in his conviction that human nature is a delicate balance of material and spiritual dimensions. This perspective is evident in his article The Nature of a World Peace, published in The Annals of the American Academy of Political and Social Science in July 1940. There, Einaudi examined the cultural—and, to an extent, religious—drivers of conflicts, once again stressing the role of the major absolutist state doctrines in Europe and the world as fundamental triggers of war.

Five years later, writing in La Libertà di Milano on 13 July 1945—while the war in the Far East still raged and just weeks after the signing of the United Nations Charter on 26 June—Einaudi expressed a realistic pessimism. Yet, he did not entirely abandon hope. He observed that, much like the negotiations in Paris in 1919, the world’s major powers were again failing to heed the unmistakable lessons of war. Their unwillingness to relinquish elements of the political sovereignty inherited from the absolutist tradition of the state was, in his view, a critical obstacle to averting future catastrophes. In this article, Einaudi, as was his custom, adopted an instructive tone. He opened by recalling a poignant question posed by the editor of the Italian edition of the American armed forces magazine Stars and Stripes. Following the approval of the United Nations Charter, the editor wondered whether this new international organisation, had it existed in 1935–36, could have prevented Mussolini’s aggression against Ethiopia.

Einaudi’s response to the potential efficacy of the United Nations was decidedly sceptical, and he elaborated his reasoning as follows. Referring to the San Francisco Charter “following the magnificent preamble and the stupendous enumeration of the goals of peace, progress, and civilisation that the peoples and nations united set out to achieve, the very text concludes with the phrase - accordingly, our respective governments - the die was cast”. The pact, he concluded, “is not a pact between peoples but a pact between sovereign states; it is a pact based on the principle of the sovereign equality of all its members. Since the force of war lays precisely in the principle of the sovereignty of individual states, the suppression of war could not arise from this very principle Noble humanitarian efforts aimed at fostering a world in which individuals might persuade their rulers to eschew war could be considered, but nothing more. We remain on the threshold of the problem of peace. The solution has not been found."

Einaudi’s incisive critique of the United Nations as an insufficient safeguard against new threats of recourse to war by states was underpinned by his earlier reflections in an article titled Il Problema (The Problem), published in L’Opinione on 23 May 1945. This article remains strikingly topical today. At its core was Einaudi’s assertion that "the Allies (...) are in truth fighting to affirm their obligation to intervene in the internal affairs of a state whose regime could constitute a continual threat to their existence(…) because a regime that oppresses human freedom internally is a government of infection for the entire world.” Einaudi was thus an unwavering advocate of the "war for democracy," that is the right of liberal democracies to intervene in the internal affairs of a state to dismantle its political and social structures when these were inspired to totalitarian ideologies, and therefore incompatible with the principles and values of the rule of law and for this very reason intrinsically pernicious to peace.

For Einaudi, liberal values were the sole “spiritual values” capable of binding the world together in harmony: this had been the enduring lesson of the First World War . This belief, he argued, was the enduring lesson of the First World War and as well as the justification for Italy's taking the field alongside the Entente. These same values underpinned the Allies' struggle during the Second World War to protect and expand the realms of democracy worldwide. Einaudi’s reflections, while theoretical, bore significant practical implications, particularly within the civil war climate that was being fuelled in large areas of north-central Italy in May 1945. In such a situation, the Allies’ role was to steadfastly defend, using any available legal and military resource, the principles of liberty and the rule of law. These principles, only recently reclaimed, were already under siege from a political force deeply influenced by statolatry and totalitarian ideology—ideologies that had contributed most to filling the planet with cemeteries. Moreover, this political force drew overt support from a state openly committed to propagating and imposing its ideology worldwide.

6. The Aftermath of the Second World War: Liberal Internationalism to the Test

Among the more disheartening outcomes of the Second World War, as perceived by Einaudi, was the evident inability of the United Nations, as established in its founding charter, to prevent states from resorting to war to resolve international disputes. Yet, alongside this disappointment, there emerged developments that inspired a degree of optimism in Einaudi about the prospects for Europe and the world to be able to take the path of gradually overcoming the principle of the state with absolute sovereignty—a principle he had long identified as the root cause of wars, particularly the two catastrophic global conflicts of the 20th century. The Bretton Woods Agreements of 1944 stood out to Einaudi as a pivotal signal of the acknowledgement by the great powers engaged in the struggle against those of the Tripartite of the necessity to avoid the grave mistakes of 1919, as criticised by Keynes, concerning the payment of war reparations and inter-allied debts. Moreover, they reflected the willingness of 44 signatory nations to be committed to clear rules — most notably fixed currency exchange-rate parities, multilateral balancing of currency transactions with total convertibility of currencies into gold or hard currency. These principles were designed to stimulate international trade and promote the expansion of the global economy in the aftermath of the war.

Einaudi recognised that while the Bretton Woods system could not ignore the inherent hierarchy among its signatory states—with the United States assuming a preeminent position—it nonetheless imposed obligations on all parties to adhere to specific constraints in the formulation and execution of their monetary and economic policies. This framework, by its very nature, entailed a tangible limitation on the sovereign powers of individual states, to the advantage of the community of states that had signed the agreements. Einaudi’s positive interpretation of Bretton Woods was substantiated by the significant progress at world level towards the goals of peace and the civil and social growth of peoples as well as by the subsequent trajectory of the international order achieved by the 44 signatory states, and by those who later acceded to the agreements who could benefit from the movement of capital and goods across the world.

The Marshall Plan—another outcome of the Second World War—elicited Einaudi’s admiration and hopes that were ultimately validated. He particularly appreciated the impetus it provided for the long-anticipated economic and political integration of Europe, an essential step in eradicating the possibility of "fratricidal" wars among European states. This integration, he believed, was key to fostering civil, economic, and social progress under conditions of both order and liberty. The Plan’s objectives and the instruments it deployed to achieve them, it closely aligned with the ideas and proposals that had consistently shaped Luigi Einaudi’s philosophical, economic, and political thought. By seeking to expedite the material and moral reconstruction, as well as the financial recovery, of the war-torn nations of Europe (including those within the political bloc coalescing around the victorious USSR), the Marshall Plan visions and proposals starkly contrasted political, economic and financial measures enshrined in the peace treaties of 1919–1920. For Einaudi, those earlier decisions had been a critical factor in the chain of events leading to the Second World War.

For Einaudi, it was of a paramount significance for Europe and the world that United States were demonstrating through the Marshall Plan - contrarily to they their isolationist stance after the First World War - they would not abdicate their mission as the leading power of the democratic world by deploying their prestige and political influence, their economic and financial resources, together with their military capabilities in the service of liberty in Europe and beyond. Einaudi had always been an idealist-realist thinker however he realised there was also a substantial share of “national self-interest” inherent in the Plan’s formulation. However, he also acknowledged that the United States had effectively embraced - in theory and in practice - the principle of interdependence among states. In the atomic age, this principle assumed critical importance for securing peace, security, and prosperity on a global scale. The Plan’s foundation on this principle—through an agreement among states of varying economic, political, and military stature—represented, in Einaudi’s view, a further and meaningful step towards curbing and mitigating the doctrine of absolute state sovereignty. This vision had long been a cornerstone of his political and economic thought, shaping his analyses, judgments, and proposals.

Finally, two years after his article in L'Opinione (May 1945), Einaudi could not fail to observe that the Marshall Plan also implied a positive answer to an issue of growing urgency in this immediate post-war era for the democratic states of Europe: was it a moral imperative of liberal democracies to respond decisively and appropriately—including through direct intervention—to the threats posed by totalitarian regimes against the institutions and social orders of liberal states that Einaudi considered the only ones “capable of holding the world together”.