Friedrich List
Encyclopedia
Georg Friedrich List was a leading 19th century German economist
who developed the "National System" or what some would call today the National System of Innovation. He was a forefather of the German historical school of economics
, and considered the original European unity theorist whose ideas were the basis for the European Economic Community
.
, Württemberg
. Unwilling to follow the occupation of his father, who was a prosperous tanner
, he became a clerk in the public service, and by 1816 had risen to the post of ministerial under-secretary. In 1817, he was appointed professor of administration and politics at the University of Tübingen, but the fall of the ministry in 1819 compelled him to resign. As a deputy to the Württemberg chamber, he was active in advocating administrative reforms. He was eventually expelled from the chamber and in April 1822 sentenced to ten months' imprisonment with hard labor in the fortress of Asperg
. He escaped to Alsace
, and after visiting France and England returned in 1824 to finish his sentence, and was released on undertaking to emigrate to America.
Arriving in the United States in 1825, he settled in Pennsylvania
, where he became an extensive landholder. He first engaged in farming, but soon switched to journalism
and edited a German paper in Reading
. He was active in the establishment of railroads.
It was in America that he gathered from a study of Alexander Hamilton
's work the inspiration which made him an economist of his pronounced “National System” views which found realization in Henry Clay
's American System
. In 1827 he published a pamphlet entitled Outlines of a New System of Political Economy, in which he defended the doctrine of protection. The discovery of coal
on some land which he had acquired made him financially independent.
In 1830, he was appointed United States consul
at Hamburg
, but on his arrival in Europe
in he found that the Senate
had failed to confirm his appointment. After residing for some time in Paris
, he returned to Pennsylvania. He next settled in Leipzig
in 1833, where for some time he was U. S. consul. He was a journalist in Paris from 1837 to 1843. He wrote several letters for the Augsburg Allgemeine Zeitung, which were published in 1841 in a volume under the title of Das nationale System der politischen Oekonomie.
In 1843 he established the Zollvereinsblatt in Augsburg
, a newspaper in which he advocated the enlargement of the custom's union , and the organization of a national commercial system. He strongly advocated the extension of the railway system in Germany. The development of the Zollverein to where it unified Germany economically was due largely to his enthusiasm and ardour.
In 1841, his ill health had led him to decline an offer to edit the Rheinische Zeitung
, a new Cologne
paper of liberal views, and Karl Marx
took the post. He visited Austria and Hungary in 1844.
In 1846, he visited England
with a view to forming a commercial alliance between that country and Germany, but was unsuccessful. His latter days were darkened by many misfortunes; he lost much of his American property in a financial crisis, ill-health also overtook him, and killed himself on 30 November 1846.
(1779–1829), he was largely influenced by Alexander Hamilton
and the American School
rooted in Hamilton's economic principles, including Daniel Raymond
, but also by the general mode of thinking of America's first Treasury Secretary, and by his strictures on the doctrine of Adam Smith
. He opposed the cosmopolitan principle in the contemporary economical system and the absolute doctrine of free trade
which was in harmony with that principle, and instead developed the infant industry argument
, to which he had been exposed by Hamilton and Raymond. He gave prominence to the national
idea and insisted on the special requirements of each nation according to its circumstances and especially to the degree of its development. He famously doubted the sincerity of calls to free trade from developed nations, in particular Britain:
and J.B. Say. List contrasted the economic behaviour of an individual with that of a nation
. An individual promotes only his own personal interests but a state fosters the welfare of all its citizens. An individual may prosper from activities which harm the interests of a nation. "Slavery may be a public calamity for a country, nevertheless some people may do very well in carrying on the slave trade and in holding slaves." Likewise, activities beneficial to society may injure the interests of certain individuals. "Canals and railroads may do great good to a nation, but all waggoners will complain of this improvement. Every new invention has some inconvenience for a number of individuals, and is nevertheless a public blessing". List argued that although some government action was essential to stimulate the economy, an overzealous government might do more harm than good. "It is bad policy to regulate everything and to promote everything by employing social powers, where things may better regulate themselves and can be better promoted by private exertions; but it is no less bad policy to let those things alone which can only be promoted by interfering social power."
Due to the "universal union" that nations have with their populace, List stated that "from this political union originates their commercial union, and it is in consequence of the perpetual peace thus maintained that commercial union has become so beneficial to them. … The result of a general free trade would not be a universal republic, but, on the contrary, a universal subjection of the less advanced nations to the predominant manufacturing, commercial and naval power, is a conclusion for which the reasons are very strong. … A universal republic …, i.e. a union of the nations of the earth whereby they recognise the same conditions of right among themselves and renounce self-redress, can only be realised if a large number of nationalities attain to as nearly the same degree as possible of industry and civilisation, political cultivation and power. Only with the gradual formation of this union can free trade be developed, only as a result of this union can it confer on all nations the same great advantages which are now experienced by those provinces and states which are politically united. The system of protection
, inasmuch as it forms the only means of placing those nations which are far behind in civilisation on equal terms with the one predominating nation", appears to be the most efficient means of furthering the final union of nations, and hence also of promoting true freedom of trade."
In his seventh letter List repeated his assertion that economists should realise that since the human race is divided into independent states, "a nation would act unwisely to endeavour to promote the welfare of the whole human race at the expense of its particular strength, welfare, and independence. It is a dictate of the law of self-preservation to make its particular advancement in power and strength the first principles of its policy". A country should not count the cost of defending the overseas trade of its merchants. And "the manufacturing and agricultural interest must be promoted and protected even by sacrifices of the majority of the individuals, if it can be proved that the nation would never acquire the necessary perfection … without such protective measures."
in the production of certain raw materials. Thus, there was a spontaneous division of labor and confederation of powers between these two groups of countries.
List contended that Smith's economic system is not an industrial system but a mercantile system, and called it "the exchange-value system". Contrary to Smith, he argued that the immediate private interest of individuals would not lead to the highest good of society. The nation stood between the individual and humanity, and was defined by its language, manners, historical development, culture and constitution. This unity must be the first condition of the security, well-being, progress and civilization of the individual. Private economic interests, like all others, must be subordinated to the maintenance, completion and strengthening of the nation.
The progress of the nation through these stages is the task of the state, which must create the required conditions for the progress by using legislation and administrative action. This view leads to List's scheme of industrial politics. Every nation should begin with free trade, stimulating and improving its agriculture
by trade with richer and more cultivated nations, importing foreign manufactures and exporting raw products. When it is economically so far advanced that it can manufacture for itself, then protection should be used to allow the home industries to develop, and save them from being overpowered by the competition of stronger foreign industries in the home market. When the national industries have grown strong enough that this competition is not a threat, then the highest stage of progress has been reached; free trade should again become the rule, and the nation be thus thoroughly incorporated with the universal industrial union. What a nation loses in exchange during the protective period, it more than gains in the long run in productive power. The temporary expenditure is analogous to the cost of the industrial education of the individual.
"In a thousand cases the power of the State is compelled to impose restrictions on private industry. It prevents the ship owner from taking on board slaves on the west coast of Africa, and taking them over to America. It imposes regulations as to the building of steamers and the rules of navigation at sea, in order that passengers and sailors may not be sacrificed to the avarice and caprice of the captains. …Everywhere does the State consider it to be its duty to guard the public against danger and loss, as in the sale of the necessaries of life, so also in the sale of medicines, &c."
the previous year. List hoped to persuade political leaders in England to co-operate with Germany to ward off this danger. His proposal was perhaps not so far-fetched as might appear at first sight. In 1844, the writer of an article in a leading review had declared that 'in every point of view, whether politically or commercially, we can have no better alliance than that of the German nation, spreading as it does, its 42 millions of souls without interruption over the surface of central Europe'
The practical conclusion which List drew for Germany was that it needed for its economic progress an extended and conveniently bounded territory reaching to the seacoast both on north and south, and a vigorous expansion of manufacture and trade, and that the way to the latter lay through judicious protective legislation with a customs union comprising all German lands, and a German marine with a Navigation Act. The national German spirit, striving after independence and power through union, and the national industry, awaking from its lethargy and eager to recover lost ground, were favorable to the success of List's book, and it produced a great sensation. He ably represented the tendencies and demands of his time in his own country; his work had the effect of fixing the attention, not merely of the speculative and official classes, but of practical men generally, on questions of political economy; and his ideas were undoubtedly the economic foundation of modern Germany as applied by the practical genius of Bismarck
.
List considered that Napoleon's 'Continental System', aimed just at damaging Britain during a bitter long-term war, had in fact been quite good for German industry. This was the direct opposite of what was believed by the followers of Adam Smith
. As List put it:
List's argument was that Germany should follow actual English practice rather than the abstractions of Smith's doctrines:
Before 1914, List and Marx were the two best-known German economists and theorists of development.
He is credited with influencing National Socialism in Germany, and his ideas are credited as forming the basis of the European Economic Community
.
His influence among developing nations has been considerable. Japan has followed his model. It has also been argued that Deng Xiaoping
's post-Mao
policies were inspired by List.
Heterodox economists
, such as Ha-Joon Chang
and Erik Reinert, refer to List often explicitly when writing about suitable economic policies for developing countries.
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
who developed the "National System" or what some would call today the National System of Innovation. He was a forefather of the German historical school of economics
Historical school of economics
The Historical school of economics was an approach to academic economics and to public administration that emerged in 19th century in Germany, and held sway there until well into the 20th century....
, and considered the original European unity theorist whose ideas were the basis for the European Economic Community
European Economic Community
The European Economic Community The European Economic Community (EEC) The European Economic Community (EEC) (also known as the Common Market in the English-speaking world, renamed the European Community (EC) in 1993The information in this article primarily covers the EEC's time as an independent...
.
Biography
He was born in ReutlingenReutlingen
Reutlingen is a city in Baden-Württemberg, Germany. It is the capital of the eponymous district of Reutlingen. As of April 2008, it has a population of 109,828....
, Württemberg
Württemberg
Württemberg , formerly known as Wirtemberg or Wurtemberg, is an area and a former state in southwestern Germany, including parts of the regions Swabia and Franconia....
. Unwilling to follow the occupation of his father, who was a prosperous tanner
Tanning
Tanning is the making of leather from the skins of animals which does not easily decompose. Traditionally, tanning used tannin, an acidic chemical compound from which the tanning process draws its name . Coloring may occur during tanning...
, he became a clerk in the public service, and by 1816 had risen to the post of ministerial under-secretary. In 1817, he was appointed professor of administration and politics at the University of Tübingen, but the fall of the ministry in 1819 compelled him to resign. As a deputy to the Württemberg chamber, he was active in advocating administrative reforms. He was eventually expelled from the chamber and in April 1822 sentenced to ten months' imprisonment with hard labor in the fortress of Asperg
Asperg
Asperg is a town in the district of Ludwigsburg, Baden-Württemberg, Germany. It is situated 15 km north of Stuttgart, and 4 km west of Ludwigsburg. The Hohenasperg fortress is situated in Asperg....
. He escaped to Alsace
Alsace
Alsace is the fifth-smallest of the 27 regions of France in land area , and the smallest in metropolitan France. It is also the seventh-most densely populated region in France and third most densely populated region in metropolitan France, with ca. 220 inhabitants per km²...
, and after visiting France and England returned in 1824 to finish his sentence, and was released on undertaking to emigrate to America.
Arriving in the United States in 1825, he settled in Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
, where he became an extensive landholder. He first engaged in farming, but soon switched to journalism
Journalism
Journalism is the practice of investigation and reporting of events, issues and trends to a broad audience in a timely fashion. Though there are many variations of journalism, the ideal is to inform the intended audience. Along with covering organizations and institutions such as government and...
and edited a German paper in Reading
Reading, Pennsylvania
Reading is a city in southeastern Pennsylvania, USA, and seat of Berks County. Reading is the principal city of the Greater Reading Area and had a population of 88,082 as of the 2010 census, making it the fifth most populated city in the state after Philadelphia, Pittsburgh, Allentown and Erie,...
. He was active in the establishment of railroads.
It was in America that he gathered from a study of Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
's work the inspiration which made him an economist of his pronounced “National System” views which found realization in Henry Clay
Henry Clay
Henry Clay, Sr. , was a lawyer, politician and skilled orator who represented Kentucky separately in both the Senate and in the House of Representatives...
's American System
American System (economic plan)
The American System, originally called "The American Way", was a mercantilist economic plan that played a prominent role in American policy during the first half of the 19th century...
. In 1827 he published a pamphlet entitled Outlines of a New System of Political Economy, in which he defended the doctrine of protection. The discovery of coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
on some land which he had acquired made him financially independent.
In 1830, he was appointed United States consul
Consul
Consul was the highest elected office of the Roman Republic and an appointive office under the Empire. The title was also used in other city states and also revived in modern states, notably in the First French Republic...
at Hamburg
Hamburg
-History:The first historic name for the city was, according to Claudius Ptolemy's reports, Treva.But the city takes its modern name, Hamburg, from the first permanent building on the site, a castle whose construction was ordered by the Emperor Charlemagne in AD 808...
, but on his arrival in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
in he found that the Senate
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
had failed to confirm his appointment. After residing for some time in Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, he returned to Pennsylvania. He next settled in Leipzig
Leipzig
Leipzig Leipzig has always been a trade city, situated during the time of the Holy Roman Empire at the intersection of the Via Regia and Via Imperii, two important trade routes. At one time, Leipzig was one of the major European centres of learning and culture in fields such as music and publishing...
in 1833, where for some time he was U. S. consul. He was a journalist in Paris from 1837 to 1843. He wrote several letters for the Augsburg Allgemeine Zeitung, which were published in 1841 in a volume under the title of Das nationale System der politischen Oekonomie.
In 1843 he established the Zollvereinsblatt in Augsburg
Augsburg
Augsburg is a city in the south-west of Bavaria, Germany. It is a university town and home of the Regierungsbezirk Schwaben and the Bezirk Schwaben. Augsburg is an urban district and home to the institutions of the Landkreis Augsburg. It is, as of 2008, the third-largest city in Bavaria with a...
, a newspaper in which he advocated the enlargement of the custom's union , and the organization of a national commercial system. He strongly advocated the extension of the railway system in Germany. The development of the Zollverein to where it unified Germany economically was due largely to his enthusiasm and ardour.
In 1841, his ill health had led him to decline an offer to edit the Rheinische Zeitung
Rheinische Zeitung
The Rheinische Zeitung was a 19th-century German newspaper, edited most famously by Karl Marx.The paper was founded on January 1, 1842 with a reformist pro-democracy editorial slant, providing an outlet for the Rhine region's middle-class and intellectuals, who were increasingly opposed to...
, a new Cologne
Cologne
Cologne is Germany's fourth-largest city , and is the largest city both in the Germany Federal State of North Rhine-Westphalia and within the Rhine-Ruhr Metropolitan Area, one of the major European metropolitan areas with more than ten million inhabitants.Cologne is located on both sides of the...
paper of liberal views, and Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
took the post. He visited Austria and Hungary in 1844.
In 1846, he visited England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
with a view to forming a commercial alliance between that country and Germany, but was unsuccessful. His latter days were darkened by many misfortunes; he lost much of his American property in a financial crisis, ill-health also overtook him, and killed himself on 30 November 1846.
Influences
Though List's practical conclusions were different from those of Adam MüllerAdam Müller
Adam Heinrich Müller was a German publicist, literary critic, political economist, theorist of the state and forerunner of economic romanticism.-Early life:...
(1779–1829), he was largely influenced by Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
and the American School
American School (economics)
The American School, also known as "National System", represents three different yet related constructs in politics, policy and philosophy. It was the American policy for the 1860s to the 1940s, waxing and waning in actual degrees and details of implementation...
rooted in Hamilton's economic principles, including Daniel Raymond
Daniel Raymond
Daniel Raymond was the first important political economist to appear in the United States.He authored Thoughts on Political Economy and The Elements of Political Economy .- Economic theory :...
, but also by the general mode of thinking of America's first Treasury Secretary, and by his strictures on the doctrine of Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
. He opposed the cosmopolitan principle in the contemporary economical system and the absolute doctrine of free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
which was in harmony with that principle, and instead developed the infant industry argument
Infant industry argument
The Infant industry argument is an economic rationale for trade protectionism. The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar...
, to which he had been exposed by Hamilton and Raymond. He gave prominence to the national
Nationalism
Nationalism is a political ideology that involves a strong identification of a group of individuals with a political entity defined in national terms, i.e. a nation. In the 'modernist' image of the nation, it is nationalism that creates national identity. There are various definitions for what...
idea and insisted on the special requirements of each nation according to its circumstances and especially to the degree of its development. He famously doubted the sincerity of calls to free trade from developed nations, in particular Britain:
Any nation which by means of protectiveProtectionismProtectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.
Economics based on nations
List's theory of "national economics" differed from the doctrines of "individual economics" and "cosmopolitan economics" by Adam SmithAdam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
and J.B. Say. List contrasted the economic behaviour of an individual with that of a nation
Nation
A nation may refer to a community of people who share a common language, culture, ethnicity, descent, and/or history. In this definition, a nation has no physical borders. However, it can also refer to people who share a common territory and government irrespective of their ethnic make-up...
. An individual promotes only his own personal interests but a state fosters the welfare of all its citizens. An individual may prosper from activities which harm the interests of a nation. "Slavery may be a public calamity for a country, nevertheless some people may do very well in carrying on the slave trade and in holding slaves." Likewise, activities beneficial to society may injure the interests of certain individuals. "Canals and railroads may do great good to a nation, but all waggoners will complain of this improvement. Every new invention has some inconvenience for a number of individuals, and is nevertheless a public blessing". List argued that although some government action was essential to stimulate the economy, an overzealous government might do more harm than good. "It is bad policy to regulate everything and to promote everything by employing social powers, where things may better regulate themselves and can be better promoted by private exertions; but it is no less bad policy to let those things alone which can only be promoted by interfering social power."
Due to the "universal union" that nations have with their populace, List stated that "from this political union originates their commercial union, and it is in consequence of the perpetual peace thus maintained that commercial union has become so beneficial to them. … The result of a general free trade would not be a universal republic, but, on the contrary, a universal subjection of the less advanced nations to the predominant manufacturing, commercial and naval power, is a conclusion for which the reasons are very strong. … A universal republic …, i.e. a union of the nations of the earth whereby they recognise the same conditions of right among themselves and renounce self-redress, can only be realised if a large number of nationalities attain to as nearly the same degree as possible of industry and civilisation, political cultivation and power. Only with the gradual formation of this union can free trade be developed, only as a result of this union can it confer on all nations the same great advantages which are now experienced by those provinces and states which are politically united. The system of protection
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
, inasmuch as it forms the only means of placing those nations which are far behind in civilisation on equal terms with the one predominating nation", appears to be the most efficient means of furthering the final union of nations, and hence also of promoting true freedom of trade."
In his seventh letter List repeated his assertion that economists should realise that since the human race is divided into independent states, "a nation would act unwisely to endeavour to promote the welfare of the whole human race at the expense of its particular strength, welfare, and independence. It is a dictate of the law of self-preservation to make its particular advancement in power and strength the first principles of its policy". A country should not count the cost of defending the overseas trade of its merchants. And "the manufacturing and agricultural interest must be promoted and protected even by sacrifices of the majority of the individuals, if it can be proved that the nation would never acquire the necessary perfection … without such protective measures."
Disagreements with Adam Smith's ideas
List argued that statesmen had two responsibilities: "one to contemporary society and one to future generations". Normally, most of leaders' attention is occupied by urgent matters, leaving little time to consider future problems. But when a country had reached a turning point in its development, its leaders were morally obliged to deal with issues that would affect the next generation. "On the threshold of a new phase in the development of their country, statesmen should be prepared to take the long view, despite the need to deal also with matters of immediate urgency." List's fundamental doctrine was that a nation's true wealth is the full and many-sided development of its productive power, rather than its current exchange values. For example, its economic education should be more important than immediate production of value, and it might be right that one generation should sacrifice its gain and enjoyment to secure the strength and skill of the future. Under normal conditions, an economically mature nation should also develop agriculture, manufacture and commerce. But the two latter factors were more important because they better influenced the nation's culture and independence. These factors were especially connected to navigation, railways and high technology, while a purely agricultural state tended to stagnate. But, List claims, only countries in temperate regions were adapted to grow higher forms of industry. On the other hand, tropical regions had a natural monopolyMonopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
in the production of certain raw materials. Thus, there was a spontaneous division of labor and confederation of powers between these two groups of countries.
List contended that Smith's economic system is not an industrial system but a mercantile system, and called it "the exchange-value system". Contrary to Smith, he argued that the immediate private interest of individuals would not lead to the highest good of society. The nation stood between the individual and humanity, and was defined by its language, manners, historical development, culture and constitution. This unity must be the first condition of the security, well-being, progress and civilization of the individual. Private economic interests, like all others, must be subordinated to the maintenance, completion and strengthening of the nation.
Stages of economic development
List theorised that nations of the temperate zone (which are furnished with all the necessary conditions) naturally pass through stages of economic development in advancing to their normal economic state. These are:- pastoral life
- agriculture
- agriculture united with manufactures
- agriculture, manufactures and commerce are combined
The progress of the nation through these stages is the task of the state, which must create the required conditions for the progress by using legislation and administrative action. This view leads to List's scheme of industrial politics. Every nation should begin with free trade, stimulating and improving its agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
by trade with richer and more cultivated nations, importing foreign manufactures and exporting raw products. When it is economically so far advanced that it can manufacture for itself, then protection should be used to allow the home industries to develop, and save them from being overpowered by the competition of stronger foreign industries in the home market. When the national industries have grown strong enough that this competition is not a threat, then the highest stage of progress has been reached; free trade should again become the rule, and the nation be thus thoroughly incorporated with the universal industrial union. What a nation loses in exchange during the protective period, it more than gains in the long run in productive power. The temporary expenditure is analogous to the cost of the industrial education of the individual.
"In a thousand cases the power of the State is compelled to impose restrictions on private industry. It prevents the ship owner from taking on board slaves on the west coast of Africa, and taking them over to America. It imposes regulations as to the building of steamers and the rules of navigation at sea, in order that passengers and sailors may not be sacrificed to the avarice and caprice of the captains. …Everywhere does the State consider it to be its duty to guard the public against danger and loss, as in the sale of the necessaries of life, so also in the sale of medicines, &c."
View of Britain and world trade
While List once had urged Germany to join other 'manufacturing nations of the second rank' to check Britain's 'insular supremacy', by 1841 he considered that the United States and Russia would become the most powerful countries—a view expressed by Alexis de TocquevilleAlexis de Tocqueville
Alexis-Charles-Henri Clérel de Tocqueville was a French political thinker and historian best known for his Democracy in America and The Old Regime and the Revolution . In both of these works, he explored the effects of the rising equality of social conditions on the individual and the state in...
the previous year. List hoped to persuade political leaders in England to co-operate with Germany to ward off this danger. His proposal was perhaps not so far-fetched as might appear at first sight. In 1844, the writer of an article in a leading review had declared that 'in every point of view, whether politically or commercially, we can have no better alliance than that of the German nation, spreading as it does, its 42 millions of souls without interruption over the surface of central Europe'
The practical conclusion which List drew for Germany was that it needed for its economic progress an extended and conveniently bounded territory reaching to the seacoast both on north and south, and a vigorous expansion of manufacture and trade, and that the way to the latter lay through judicious protective legislation with a customs union comprising all German lands, and a German marine with a Navigation Act. The national German spirit, striving after independence and power through union, and the national industry, awaking from its lethargy and eager to recover lost ground, were favorable to the success of List's book, and it produced a great sensation. He ably represented the tendencies and demands of his time in his own country; his work had the effect of fixing the attention, not merely of the speculative and official classes, but of practical men generally, on questions of political economy; and his ideas were undoubtedly the economic foundation of modern Germany as applied by the practical genius of Bismarck
Otto von Bismarck
Otto Eduard Leopold, Prince of Bismarck, Duke of Lauenburg , simply known as Otto von Bismarck, was a Prussian-German statesman whose actions unified Germany, made it a major player in world affairs, and created a balance of power that kept Europe at peace after 1871.As Minister President of...
.
List considered that Napoleon's 'Continental System', aimed just at damaging Britain during a bitter long-term war, had in fact been quite good for German industry. This was the direct opposite of what was believed by the followers of Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
. As List put it:
I perceived that the popular theory took no account of nations, but simply of the entire human race on the one hand, or of the single individual on the other. I saw clearly that free competition between two nations which are highly civilised can only be mutually beneficial in case both of them are in a nearly equal position of industrial development, and that any nation which owing to misfortunes is behind others in industry, commerce, and navigation… must first of all strengthen her own individual powers, in order to fit herself to enter into free competition with more advanced nations. In a word, I perceived the distinction between cosmopolitical and political economy.
List's argument was that Germany should follow actual English practice rather than the abstractions of Smith's doctrines:
Had the English left everything to itself—'Laissez faire, laissez aller', as the popular economical school recommends—the [German] merchants of the SteelyardSteelyardThe Steelyard, from the German Stalhof, was in the Middle Ages the main trading base of the Hanseatic League in London.-Location:It lay on the north bank of the Thames by the outflow of the Walbrook, in the Dowgate ward of the City of London. The site is now covered by Cannon Street station and...
would be still carrying on their trade in London, the Belgians would be still manufacturing cloth for the English, England would have still continued to be the sheep-farm of the HansardsHanseatic LeagueThe Hanseatic League was an economic alliance of trading cities and their merchant guilds that dominated trade along the coast of Northern Europe...
, just as Portugal became the vineyard of England, and has remained so till our days, owing to the stratagem of a cunning diplomatist. Indeed, it is more than probable that without her [highly protectionist] commercial policy England would never have attained to such a large measure of municipal and individual freedom as she now possesses, for such freedom is the daughter of industry and wealth.
Railways
List was the leading promoter of railways in Germany. His proposals on how to start up a system were widely adopted. He summed up the advantages to be derived from the development of the railway system in 1841:- It is a means of national defence: it facilitates the concentration, distribution and direction of the army.
- It is a means to the improvement of the culture of the nation…. It brings talent, knowledge and skill of every kind readily to market.
- It secures the community against dearth and famine, and against excessive fluctuation in the prices of the necessaries of life.
- It promotes the spirit of the nation, as it has a tendency to destroy the Philistine spirit arising from isolation and provincial prejudice and vanity. It binds nations by ligaments, and promotes an interchange of food and of commodities, thus making it feel to be a unit. The iron rails become a nerve system, which, on the one hand, strengthens public opinion, and, on the other hand, strengthens the power of the state for police and governmental purposes.
Legacy
List's principal work is entitled Das Nationale System der Politischen Ökonomie (1841) and was translated into English as The National System of Political Economy.Before 1914, List and Marx were the two best-known German economists and theorists of development.
"This book has been more frequently translated than the works of any other German economist, except Karl Marx."
He is credited with influencing National Socialism in Germany, and his ideas are credited as forming the basis of the European Economic Community
European Economic Community
The European Economic Community The European Economic Community (EEC) The European Economic Community (EEC) (also known as the Common Market in the English-speaking world, renamed the European Community (EC) in 1993The information in this article primarily covers the EEC's time as an independent...
.
His influence among developing nations has been considerable. Japan has followed his model. It has also been argued that Deng Xiaoping
Deng Xiaoping
Deng Xiaoping was a Chinese politician, statesman, and diplomat. As leader of the Communist Party of China, Deng was a reformer who led China towards a market economy...
's post-Mao
Maoism
Maoism, also known as the Mao Zedong Thought , is claimed by Maoists as an anti-Revisionist form of Marxist communist theory, derived from the teachings of the Chinese political leader Mao Zedong . Developed during the 1950s and 1960s, it was widely applied as the political and military guiding...
policies were inspired by List.
As Marx was not interested in the survival of the capitalist system, he was not really concerned with economic policy, except in so far as the labour movement was involved. There, his argument was concentrated on measures to limit the length of the working day, and to strengthen trade union bargaining power. His analysis was also largely confined to the situation in the leading capitalist country of his day—the UK—and he did not consider the policy problems of other Western countries in catching up with the lead country (as Friedrich List did). In so far as Marx was concerned with other countries, it was mainly with poor countries which were victims of Western imperialism in the merchant capitalist era.
Heterodox economists
Heterodox economics
"Heterodox economics" refers to approaches or to schools of economic thought that are considered outside of "mainstream economics". Mainstream economists sometimes assert that it has little or no influence on the vast majority of academic economists in the English speaking world. "Mainstream...
, such as Ha-Joon Chang
Ha-Joon Chang
Ha-Joon Chang is one of the leading heterodox economists and institutional economists specialising in development economics...
and Erik Reinert, refer to List often explicitly when writing about suitable economic policies for developing countries.
See also
- Henry Charles CareyHenry Charles CareyHenry Charles Carey , a leading 19th century economist of the American School of capitalism. He is now best known for the book The Harmony of Interests, to compare and contrast what he called the "British System" of laissez faire free trade capitalism with the "American System" of developmental...
- Alexander HamiltonAlexander HamiltonAlexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
- Henry ClayHenry ClayHenry Clay, Sr. , was a lawyer, politician and skilled orator who represented Kentucky separately in both the Senate and in the House of Representatives...
- Daniel RaymondDaniel RaymondDaniel Raymond was the first important political economist to appear in the United States.He authored Thoughts on Political Economy and The Elements of Political Economy .- Economic theory :...
- Abraham LincolnAbraham LincolnAbraham Lincoln was the 16th President of the United States, serving from March 1861 until his assassination in April 1865. He successfully led his country through a great constitutional, military and moral crisis – the American Civil War – preserving the Union, while ending slavery, and...
- Otto von BismarckOtto von BismarckOtto Eduard Leopold, Prince of Bismarck, Duke of Lauenburg , simply known as Otto von Bismarck, was a Prussian-German statesman whose actions unified Germany, made it a major player in world affairs, and created a balance of power that kept Europe at peace after 1871.As Minister President of...
- Economic patriotism
- Economic interventionismEconomic interventionismEconomic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy...
- Infant industry argumentInfant industry argumentThe Infant industry argument is an economic rationale for trade protectionism. The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar...
- ProtectionismProtectionismProtectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
- National System
- Contributions to liberal theoryContributions to liberal theoryIndividual contributors to classical liberalism and political liberalism are associated with philosophers of the Enlightenment. Liberalism as a specifically named ideology begins in the late 18th century as a movement towards self-government and away from aristocracy...
Further reading
- Biography of List by Goldschmidt (Berlin, 1878)
- Biography of List by Jentsch (Berlin, 1901)
- Bolsinger, Eckard, 'The Foundation of Mercantile Realism: Friedrich List and International Political Economy' (http://www.psa.ac.uk/journals/pdf/5/2004/Bolsinger.pdf)
- List, ein Vorlaufer und ein Opfer für das Vaterland (Anon., 2 vols., Stuttgart, 1877)
- Henderson, William O. Friedrich List: Economist and Visionary (Frank Cass, London 1983)
- Patrick J. Buchanan, Day of Reckoning: How Hubris, Ideology, and Greed Are Tearing America Apart (New York: St. Martin's Press, 2007), pp. 197–98.
- M. E. Hirst's Life of Friedrich List London, (1909) contains a bibliography and a reprint of List's Outlines of American Political Economy (1827) in addition to his Philadelphia Speech (1827) (to the Harrisburg Convention), Petition on Behalf of the Handelsverein to the Federal Assembly (1819) (in Germany), and the INTRODUCTION to the The National System of Political Economy (1841) (which is not included in the English translation of The National System ..)
- The National System of Political Economy — a free download of his main work, in English translation
- Paperback Edition of 2005, from Amazon Books
- A Comparison Of List, Marx and Adam Smith
- Quotations From List
- Union Europe — List's vision of a peaceful union
- An unfinished review of The National System of Political Economy written by Karl Marx in 1845
- Online extracts of, Kicking Away the Ladder: Development Strategy in Historical Perspective (2002), (winner of the 2003 Myrdal Prize) by the economist Ha-Joon Chang of the University of Cambridge. It was named after the phrase Kicks Away the Ladder used by List
- Levi-Faur, David. Economic Nationalism: From Friedrich List to Robert Reich. Review of International Studies, 23, 1997, pp. 359–370.
- Levi-Faur, David. Friedrich List and the Political Economy of the Nation-State. Review of International Political Economy, 4, 1997, pp. 154–78.
- Borchardt, Knut and Hans Otto Schötz (eds.). (1991). Wirtschaftspolitik in der Krise. Die (Geheim-)Konferenz der Friedrich List-Gesellschaft im Sept.1931 über Möglichkeiten und Folgen einer Kreditausweitung, Baden-Baden: Nomos Verlagsgesellschaft
- Brügelmann, Hermann. (1956). Politische Ökonomie in kritischen Jahren. Die Friedrich List-Gesellschaft E.V., von 1925-1935., with an introduction by Edgar Salin, Tübingen: Mohr, Gr.-Oktav. XIX, 192 S
- Selwyn, B. (2009) An Historical Materialist Appraisal of Friedrich List and his Modern Day Followers', New Political Economy 14 (2), 157-180.