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… is from page 257 of F.A. Hayek’s September 1939 – note carefully the date – New Commonwealth Quarterly essay, “The Economic Conditions of Interstate Federalism [2],” as this essay is reprinted in Hayek’s indispensable 1948 collection, Individualism and Economic Order [3]:
The existence of any measure of economic seclusion or isolation on the part of an individual state produces a solidarity of interests among all its inhabitants and conflicts between their interests and those of the inhabitants of other states which – although we have become so accustomed to such conflicts as to take them for granted – is by no means a natural or inevitable thing. There is no valid reason why any change which affects a particular industry in a certain territory should impinge more heavily upon all or most of the inhabitants of that territory than upon people elsewhere. This would hold good equally for the territories which now constitute sovereign states and for any other arbitrarily delimited region, if it were not for custom barriers, separate monetary organizations, and all the other impediments to the free movement of men and goods.