(SHORT VERSION) THE THIRD ROAD TO SERFDOM: AUTHORITARIAN NATIONALISM

This Blog post continues the Metaeconomics series exploring the moral and empirical balance between ego-based self-interest and empathy-based other (shared)-interest in political economy.

It follows earlier Blog posts — The Two Roads to Serfdom and The Two Roads from Mont Pelerin — by mapping a third road: Authoritarian Nationalism, where democracy falters and empathy dies, and the economy goes down the Road to Serfdom. Together, the Blog posts show why Dual Interest Theory (DIT) is essential to keeping democracy humane — and economies truly free and viable. 

This short version was written in an integrated editing effort involving ChatGPT-5:  It integrates. I integrate (Metaeconomics is an integration).  The following is in integration, made more accessible as I requested that ChatGPT use a 12^th grade knowledge of English, taking out the “academic jargon.” 

The Detailed Version is here, in academic jargon form.

Preface: Lessons from the Danube

This essay began on a river — the Danube — during a cruise from Amsterdam to Vienna. One stop, in Nuremberg, changed everything.

Standing where Nazi rallies once filled the air with hate, and later where justice was done at the Nuremberg Trials, I couldn’t stop thinking: how does a democracy lose its moral compass and fall into authoritarian nationalism?

While traveling, I read historian Helmut Walser Smith’s Germany: A Nation in Its Time (2020). It’s a sweeping account of how a nation built on hope and unity slid into radical authoritarian nationalism between 1933 and 1945. His story, combined with what I saw on that journey, led me to a disturbing realization: the world — including the United States — is once again flirting with that same dark path.

Three Roads to Serfdom

Economist Friedrich Hayek warned in 1944 that socialism, taken to extremes, could lead to a “Road to Serfdom.” I’ve argued before that unfettered and extreme capitalism — the ideology of “markets solve everything” — creates a second road, one we saw in the collapse in the 2008 financial crash (and also, back in 1929, same reasons).

Now a third road has opened. It’s built on Authoritarian Nationalism — a toxic mix of economic failure, cultural fear, as well as religious and market fundamentalism. It replaces the rule of law with the rule of men, loyalty with blind obedience, and empathy with exclusion.

This is The Third Road to Serfdom.

Across the world — from Russia and Hungary to Brazil, Turkey, and even the U.S. — this pattern repeats: fear and frustration are turned into political power by leaders promising national “greatness.” But what they deliver is control, division --- leading to a slow death of democracy, and the destruction of the economy.

The “Virtue” of Nationalism — or Its Trap?

Conservative philosopher Yoram Hazony, in The Virtue of Nationalism (2018, 2025), calls nationalism a moral and ethical good. He argues that independent nations — not global empires — are the best safeguard for human freedom. That sounds appealing. But what happens when “national pride” becomes a weapon — when loyalty is demanded only from the “us,” and the “them” are silenced, deported, or worse?

Hazony dismisses Nazi Germany as “not true nationalism,” claiming it was about empire, not nation. Historian Helmut Smith disagrees — and the evidence is on his side. Germany in the 1920s was a struggling democracy. Fear, resentment, and economic collapse allowed authoritarian nationalism to rise — and eventually radicalize — into one of history’s greatest horrors.

So the question today is this: Can we build a healthy, ethical nationalism — one rooted in empathy and shared purpose — without sliding into authoritarian control?

What History Teaches

Germany’s story is a warning. It began with ordinary people wanting unity and dignity. It ended with tyranny and genocide. And it took a global coalition — the Anti-Fascist Allies — to stop it.

After 1945, Germany rebuilt itself around democracy and humility. But even now, nationalist movements like the “Alternative for Germany” (AfD) echo the same “us vs. them” logic that once destroyed the nation.

The U.S. should take note. Our own flirtation with authoritarian nationalism — visible since 2016 and accelerating after 2024 — shows how easily freedom can erode when ego-driven politics drowns out empathy and shared moral purpose.

The Nationalist Age

Helmut Walser Smith’s Germany: A Nation in Its Time traces how devotion to the “fatherland” evolved from patriotic pride into blind obedience. The idea of sacrifice for the nation—noble in theory—became sacrifice of others in practice.

By the 1300s-1500s, loyalty to one’s land had begun to carry the weight of sacred duty. By World War I, that duty meant dying for the fatherland. Smith notes that before 1918, Germans lived in an age of nationalism—a time of shared loyalty. But after the war, that loyalty hardened into an age of the nationalists—a mindset of “us” versus “them.”

From "Sacrifice For" to "Sacrifice Of"

World War I revealed how industrial power made killing routine. German soldiers died by the thousands every day; by World War II, the losses were even higher. What began as sacrifice for the nation twisted into sacrifice of anyone seen as a threat to it.

Smith writes that the Nazis (the National Socialist Party) recast purity itself as virtue—believing a “true” German nation could exist only through the elimination of those deemed impure. Two systems of law soon appeared: one for the “us,” and one for the “them.” Jews and other “inferiors” lost citizenship, property, even the right to live.

In Dual Interest Theory (DIT) terms, empathy was banned. A dark empathy bound the “us” together, while empathy with the “them” was in effect banned, and became a crime.

The Rise of Authoritarian Nationalism

After World War I, Germany was broken—its economy in ruins, its people desperate. Inflation made paper money worthless. Veterans came home wounded, widowed, or disillusioned. In this chaos, people longed for a savior.

Enter Adolf Hitler, a failed artist and mediocre soldier --- a failure at everything he had tried --- who discovered the power of oratory. He told people exactly what they wanted to hear: That their suffering wasn’t their fault, that “outsiders” had stolen their greatness, that he alone could restore Germany’s pride.

By repeating lies until they sounded like truth—a method later known as the Big Lie Political Technique—Hitler built a movement. At first, only a small minority supported him. Yet, as democracy faltered and fear deepened, the Nazis became a mass phenomenon. And, it was not just in Germany:  Between 1920 and 1938, many  of Europe’s democracies fell into authoritarianism.

The pattern is disturbingly familiar: when economic despair meets cultural fear, Authoritarian Nationalism finds its opening.

Law for “Us,” Different Law for “Them”

Once in power, Hitler’s government turned prejudice into policy. The Nuremberg Laws of 1935 divided citizens by bloodline—three Jewish grandparents made you a Jew, two made you “half.” Marriages and friendships across the divide were outlawed. “Racial purity” became national law.

Propaganda was relentless. Total discard for truth for purpose ruled the oratory. The regime promised jobs, homes, and pride—while demonizing Jews, communists, and anyone labeled “un-German.” Truth didn’t matter; repetition replaced reason. People were told that loyalty meant silence. Those who questioned the regime risked prison, exile, or worse.

By 1938, terror ruled the streets. The Kristallnacht pogrom destroyed synagogues and Jewish businesses while neighbors looked on—or joined in. Even teenagers, raised on six years of propaganda, became willing enforcers. The moral bonds of empathy were severed.

Total Ban on Empathy

In Hitler’s Reich, compassion itself became subversive. Goebbels declared, “We are not here to feel empathy with the Jews, but only for the German people.” What followed was the machinery of genocide: deportations, starvation, shootings, gas vans, and finally, the extermination camps.

Over a million were killed in Auschwitz alone. In occupied Eastern Europe, entire communities were wiped out. Civilians scavenged the homes of their murdered neighbors. Nazi leaders justified it all as “necessary” for the German future—even as the killings destroyed the very economy and society they claimed to save.

In DIT terms, this was empathy reduced to zero. Humanity itself was rewritten around a single, cruel logic: Power for the few, obedience from the many, and death for the rest.

Echoes Today

Smith’s account reminds us that nationalism is not evil by nature—but unchecked nationalism, fused with fear and falsehood, breeds tyranny. Authoritarian Nationalism thrives wherever empathy dies and truth becomes negotiable.

The lesson is simple, and urgent: whenever leaders demand loyalty over conscience, when lies are repeated until believed, when compassion is mocked as weakness—the Third Road to Serfdom has already begun.

After Nationalism

V-E Day arrived on May 8, 1945. Hitler committed suicide  a week earlier, dodging any responsibility. The war left mountains of dead—soldiers and civilians alike—and a moral and ethical crater in the middle of Europe.

A Living Fatherland (c. 1945–1950)

In the final year, the killing was relentless. German military losses spiked—hundreds of thousands in single months. Cities like Berlin and Nuremburg were reduced to ash. Air raids by the U.S. and Britain killed well over 300,000 civilians in the last two years alone.

Peace didn’t end the suffering. Germans were expelled from parts of Eastern Europe; millions were displaced, many starving or assaulted along the way. Occupation forces—Soviet and, at times, American—committed abuses. Meanwhile, survivors returning to homes found their property taken and neighbors unwilling to give it back.

Most Germans claimed they hadn’t known the full horror. The Allied documentary Death Mills forced a reckoning: the camps were real, the atrocities undeniable. Germany began a painful shift—from denial to awareness, from shame toward the slow work of empathy.

The Presence of Empathy-Based Compassion (c. 1950–2000)

Postwar Germany reentered the world cautiously. Industry and transport lay in ruins. Many citizens still believed “National Socialism” --- the only political party allowed (all political opposition was demonized, and eventually all other parties banned) during the 1933-1945 period --- had good ideas, just badly carried out—a sign of how deep nationalism’s appeal had been. Anti-Jewish prejudice lingered, too. Even into the 1960s, a troubling share of West Germans endorsed racial myths or a Germany without Jews.

Then came rebuilding. With Allied help, the economy revived. By the late 1950s, nostalgia for the Nazi years collapsed; fewer than one in ten called them “Germany’s best.” Most wanted less military, more education and research. The aim was to become “a nation among nations”—normal, democratic, responsible.

In 1961, the Berlin Wall sealed East from West. West Germany accepted the reality of two states while choosing investment over militarism. By 1970, real GNP had tripled; money for universities and science rose above defense. Nationalist symbols felt dated. The word “Holocaust” entered public speech, and remembrance became part of civic life.

The 1980s brought a new test: immigration. Fears of lost “purity” resurfaced; some pushed cash offers for foreigners to leave. Right-wing writers warned of the “disappearance of the German people.” Then history flipped again. The year 1989 saw the East German revolution and the fall of the Wall; 1990 brought reunification.

But, the immigrant “problem” remained:  Backlash came—arson, assaults, the murder of immigrants. But this time something different happened: Germans marched for others.

In the 1990s, mass protests defended migrants and minorities. In DIT terms, empathy-with returned to the public square. Germans began separating national belonging from nationalist prejudice. As Smith puts it: they no longer lived in a nationalist age, but they still lived in the age of nationalism—and kept wrestling with it.

By the end of the century, leaders spoke of a “living, not deathly, concept of fatherland.” That meant owning the past without reenacting it; drawing strength from truth, and measuring national worth by  empathy-sympathy-compassion rather than conquest. In DIT language: less fixation on blood and tribe, more commitment to a shared other-interest among all who live within Germany’s civic community.

What This Means for All Democracies (Dual Interest Theory in Metaeconomics Lens)

• Economics (incentives) alone didn’t save Germany; ethics played a key role. Recovery paired markets with memory, prosperity with responsibility.

• Empathy is policy, not sentiment. When Germans stood up for immigrants, they stabilized their democracy, and improved the economy.

• National pride is safest when it’s civic, not ethnic. A nation built on rule of law equally applied to all, and shared purpose, can honor its culture without sliding back into “us vs. them.”

• 
  

Bottom line: After 1945, Germany learned to make “fatherland” about care, not cruelty—about sacrifice for the common good, not sacrifice of the other. That’s the road away from serfdom.

Epilogue: The Republic of the Germans at the Dawn of the Twenty-Second Century

Today’s Germany, in the 2020s, is built on empathy rather than ancestry.  Democracy is strong in Germany.  Citizenship is no longer about “blood” but about belonging. A child born to foreign parents becomes German if one parent has lived there legally for eight years and the child affirms that citizenship by early adulthood.

The new kind of loyalty is based on shared life, not shared genetics — a nation defined by choice and community, not race. In that sense, Germany now reflects what America used to celebrate: that being born or raised within the republic, and committing to its ideals, makes you part of “we the people.”

Problem is:  The story isn’t over. A new wave of nationalism is rolling across this Spaceship Earth — angry, exclusionary, and loud. Smith (2020) describes it as trading in “antielitism, antipluralism, and xenophobia.” Its leaders claim to speak for the “real” people while turning neighbor against neighbor. This pattern has appeared in France, Britain, Italy, and now, unmistakably, the United States. In America, we-the-people is splitting into us-the-people and them-the-people.

Germany faces its own challenge. The Alternative for Germany (AfD) party, echoing the rhetoric of the 1930s, entered Parliament with a few seats won in 2017. In the U.S., a similar movement — the MAGA Faction within the Republican Party — has reshaped American politics since 2016, even winning the presidency again in 2024. Fortunately, AfD will never gain a strong foothold in Germany.  What of MAGA in America?

There’s a difference, though. Germans remember where radical nationalism leads.  Americans have no experience with said kind of nationalism. History itself acts as a guardrail. Many Germans instinctively resist the AfD because they know how fragile democracy becomes when loyalty replaces law, and “purity” replaces principle. The question is: Will Americans learn that lesson before it’s too late?

Smith ends his book with a sober truth:

“Historical nationalism, especially in its modern, radical form, cannot make nations. It demeans, divides, and ultimately destroys them.”

That’s the heart of it. A nation built on exclusion erodes from within. A republic survives only when empathy-with — the willingness to see the humanity of others — extends in every direction.

Dual Interest Theory (DIT) explains why: a healthy nation must balance ego-based self-interest with empathy-based other (shared)-interest. Citizens must temper self-concern with empathy for others. Only then can “we-the-people” truly mean everyone.

The fate of democracy — in Germany, America, and beyond — depends on that balance. Empathy is not weakness. It is the moral and ethical engine of freedom itself.

Metaeconomic Postscript on Nationalism

The rallying cry of Authoritarian Nationalism is always the same:“Make [Nation] Great Again.”

It promises moral purity, restored strength, and renewed greatness — through obedience, exclusion, and a return to some “golden age” that never really existed. A twin slogan, “[Nation] First,” pushes isolation and dominance, a bully’s version of patriotism. Together they define what I call The Third Road to Serfdom.

The Technology of the Big Lie

Authoritarian movements thrive on contempt for truth.  It borders on the total disregard for truth: Say anything to accomplish purpose.  Their leaders master an old political technology: BLPT — Big Lie Political Technology — or more accurately, the Total Disregard for Truth Technology.

They repeat one shocking falsehood after another — “The 2020 election was stolen!” — until the lie becomes a creed. Once followers swallow the first falsehood, the leader can say anything, and they’ll nod along.

Each audience hears what it wants:

• Farmers are promised endless subsidies.

• The faithful are promised restored church power.

• Veterans are promised unlimited benefits.

• The elderly are promised untouched Medicare.

• Educators are promised support for science — even as science is defunded.

  
  

The promises are impossible, but that’s the point. The goal is control, not coherence.

Assault on Science and Humanities (and the Arts)

Authoritarian nationalist regimes almost always end up anti-science, anti-humanities, and anti-arts — even though those are the very foundations of serious, systematic inquiry and creativity.

Even in democratic countries, the farther politics tilts toward authoritarian nationalism, the louder the attacks on science, the arts, and the humanities become. As Levitsky and Way (2010) show, once systems slide toward Competitive Authoritarianism—like today’s Hungary—these assaults accelerate.

It’s a paradox: authoritarian regimes need science for technology, weapons, and surveillance.But they fear science—and the humanities—for the same reason: both question authority. Authoritarians don’t reject science as a tool; they reject it as a culture of open inquiry and shared truth.

Why the Fear?

Psychological reason: Authoritarian minds crave certainty, control, and predictability.But science, humanities, and the arts thrive on doubt, evidence, and imagination. They question assumptions and stretch the moral imagination—exactly what authoritarians can’t tolerate.

Political reason: Science and the humanities create independent truth systems outside state control. Authoritarian power depends on owning the narrative—on defining what’s “real.” So independent inquiry must be bent, muzzled, or destroyed.

And, how does the control work?

• Control science: Demand “patriotic science,” suppress data on climate, pandemics, and inequality.

• Control humanities & arts: Rewrite history and literature to fit nationalist myths.

• Discredit expertise: Call scientists, artists, and scholars “elites,” “globalists,” or “enemies of the people.”

The goal isn’t to abolish knowledge—it’s to domesticate it. Science becomes obedient technocracy; humanities and arts become patriotic décor. Inquiry survives only in chains.

When attacks on science and the humanities rise together, they mark a shift from horizontal rule of law and reason toward vertical rule of men and myth. Authoritarian nationalism cannot withstand the empirical, ethical, and imaginative tests that genuine science and humanities impose. So it smothers them.

Truth doesn’t vanish—it’s simply declared unpatriotic.

The Creation of “Them”

Every authoritarian needs an enemy. “Them” can mean immigrants, political opponents, journalists, university professors, and just anyone refusing blind loyalty. Once identified, “them” are blamed for every failure — and punishing them becomes proof of patriotism.

That’s how 1930s Germany justified persecution, and how modern movements justify purges, bans, and loyalty tests. The logic is always the same: silence opposition, claim victimhood, and call it virtue.

The DIT Diagnosis

Dual Interest Theory (DIT) exposes why such systems fail.

Authoritarian Nationalism runs entirely on ego-based self-interest — self-glorification, greed, and the “dark empathy” of insiders protecting each other. There is no empathy-with the outsider, and no shared moral balance. The result is inevitable: collapse.

Germany’s 1933–45 experiment proved it. So have Russia, Hungary, Brazil, Turkey, China — all low-trust, low-income, low-freedom economies … none of which are doing well.

In 2024, America’s democracy based market economy produced roughly $224 per person per day.

Under authoritarian regimes? Russia: $41. Hungary: $64. Turkey: $42. China: $36. Brazil: $28. Power may concentrate, but prosperity evaporates, except for the few at the top.

Authoritarian systems also destroy modern government  itself, — replacing professional civil servants with loyalists, dismantling science agencies, and silencing regulators. Without empathy-based ethics --- drawing on science & humanities (human science) --- inside government, corruption fills the vacuum. Modern government is essential to modern economy, and, autocrats assure said government is instead incompetent and corrupt.

The Real Patriotism: Me & We

Can a nation still claim the virtues of nationalism without sliding into authoritarianism?Yes — but only if it remembers the We in We the People.

A healthy nation builds mutual loyalty, not blind obedience. It invites every citizen — native or immigrant — into a shared story grounded in fairness, law, and compassion. DIT calls this the balance of Me & We (Ego & Empathy), Self & Other-interest: self-interest (incentive) guided by shared-interest (ethic).

Adam Smith saw it in the 1700s, when Democracies started to form.  The Wealth of Nations explained how Incentive drives progress; The Theory of Moral Sentiments --- the Ethic --- showed why empathy gives it meaning. A nation without both — Wealth and Sentiment, Incentive and Ethic — loses its soul. It goes toward serfdom, and soulless system.

The Choice Before America

Germany learned its lesson the hard way. It will not tolerate authoritarian nationalism again.

But America? The warning lights are flashing. Modern government is being gutted. Courts and agencies are under siege. The Constitution is being bent by “loyalists.” Even conservative voices now ask: Is this still a republic?

Conservative Peggy Noonan recently wrote in the Wall Street Journal:

“Are we maintaining our republic? The last nine months a lot of lines seem to have been crossed… You ask: Is all this constitutional?”

Exactly. The Founders rejected autocrats for a reason. The republic depends on horizontal power — law over men, empathy over ego. Lose that, and we enter The Third Road to Serfdom.

The Global Balance Sheet

• Horizontal democracies (Norway, New Zealand, Germany, Japan, Canada) prosper and remain free, vibrant economies all.

• Hybrid regimes (Hungary, India, Turkey, Brazil, Israel) tilt toward vertical control, economies foundering.

• Full authoritarian states (Russia, China, Iran, Saudi Arabia) run on fear, corruption, and shrinking economies. Absolute vertical control, economies will never reach full potential.

• 
  

And the United States? No longer clearly in the first group. We’re drifting toward the second — competitive authoritarian nationalism — where elections still happen, but truth no longer decides them. GDP has already declined just since January 20, 2025: Hang on.

Wake Up America

The phrase “we didn’t know” will not save us. We do know.History has already run this experiment — and it ended in ashes.

A constitutional democracy, guided by empathy and bound by law, is the only proven path to freedom and prosperity. Every step away from it leads downward — toward economic decay, moral blindness, and, eventually, serfdom.

So, WUPA — Wake Up America.

Defend empathy. Protect truth. Keep the republic.

Because the serfs of history did not have much fun — not even at the medieval festivals.