ABSTRACT
In between 1871 and 1918, a parallel battle of ideas was fought between a new orthodoxy, neoclassical economics, and a new heresy, historicist and Marxist etatism, both claiming descent from a common classical tradition. This chapter focuses on what influence the great economic ideas had on the epochal transition from a Europe of peaceful nations to a Europe of belligerent empires. It examines first of all the decline of Liberal Europe, second, Neoclassical economics and Etatism, and third, a Europe of empires at war. The 1870s were marked by a profound political and economic crisis and a consequent and final turning point in economic policy. Germany is at the epicentre of the political and economic crisis and the resulting turnaround in economic policy. Etatism appears in two forms: socialism and interventionism. Both have in common the goal of subordinating the individual unconditionally to the state, the social apparatus of compulsion and coercion.
