Friedrich List

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Friedrich List (August 6, 1789 - November 30, 1846) was a leading 19th Century German economist who believed in the "National System" type of capitalism.

Biography

He was born at Reutlingen, 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. There he resided from 1825 to 1832, first engaging in farming and afterwards in journalism.

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. The discovery of coal on some land which he had acquired made him financially independent, and he became United States consul at Leipzig in 1832. He strongly advocated the extension of the railway system in Germany, and the establishment of the Zollverein was due largely to his enthusiasm and ardour. In 1841 "…. List was offered the post of Editor of the Rheinische Zeitung, a new liberal paper which was being established in Cologne. But he declared that ill-health prevented him from accepting the post - which eventually went to Karl Marx….."( Henderson 1983, p. 85 ). 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 he brought his life to an end by his own hand on the 30th of November 1846.

Influences

Though List's practical conclusions were different from those of Adam Smith and J. B. Say, he was largely influenced by Alexander Hamilton and the American System of capitalism rooted in Hamilton's economic principles, but also by the general mode of thinking of America's first Treasury Secretary, and by his strictures on the doctrine of Adam Smith. It was particularly against the cosmopolitan principle in the contemporary economical system that he protested, and against the absolute doctrine of free trade, which was in harmony with that principle. 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.

List’s main economic theories

Economics based on productive powers

List considered that the prosperity of a nation depended not upon the wealth that it had amassed but upon its ability to develop productive forces which would create wealth in the future. These forces included scientific discoveries, advances in technology, improvements in transport, the provision of educational facilities, the maintenance of law and order, an efficient public administration, and the introduction of a measure of self-government.

He kept proceeding to draw a distinction between the theory of exchange value and the theory of powers of prediction. He argued that Adam Smith and his followers had laid too much emphasis upon material wealth, which had an exchange value, and had not adequately appreciated the significance of the productive powers that create wealth. He praised Adam Smith for breaking new ground with his theory of the division of labor, but criticized him for omitting to explain fully the role in the economy of the 'productive powers of labor', which he had mentioned in the introduction to The Wealth of Nations.

He also complained that Adam Smith had failed to “...assign a productive character to the mental labour of those who maintain law and order and cultivate and promote instruction, religion, science, and art...”.

He thought it ridiculous that a pig breeder or a maker of bagpipes should be regarded as a productive member of society, while a professor or a composer should not.

On the issue of law he writes that:”...while J. B. Say was right when he asserted that 'laws cannot create wealth', it was just as right to argue that laws could 'create productive power, which is more important than riches, i.e. than the possession of values of exchange....'" (Henderson 1983, p. 177) , and finally and foremost: “....The civilization, political education and power of nations, depend chiefly on their economical condition and reciprocally; the more advanced their economy, the more civilized and powerful will be the nation, the more rapidly will its civilization and power increase, and the more will its economical culture be developed....”( List 1856 )

Importing duties assist cultivation of domestic industry

The following excerpts define List’s theory of national development:

“….In the economical development of nations by means of external trade, four periods must be distinguished. In the first, agriculture is encouraged by the importation of manufactured articles, and by the exportation of its own products; in the second, manufacturers begin to increase at home, whilst the importation of foreign manufactures to some extent continues; in the third, home manufactures mainly supply domestic consumption and the internal markets; finally, in the fourth, we see the exportation upon a large scale of manufactured products, and the importation of raw materials and agricultural products…..” ( List 1956 ).

“…The system of import duties being considered as a mode of assisting the economical development of a nation, by regulating its external trade, must constantly take as a rule the principle of the industrial education of the country. To encourage agriculture by the aid of protective duties is vicious policy; for agriculture can be encouraged only by promoting manufacturing industry; and the exclusion of raw material and agricultural products from abroad, has no other result than to impede the rise of national manufactures. ….” ( ibid. )

“….. it is only when a nation has reached such a stage of development that she can bear the strain of competition with foreign manufactures without injury in any respect, that she can safely dispense with protection to her own manufactures, and enter on a policy of general free trade…..” ( List 1827 )

This, in fact, is the central idea of List's theory, which in its economical aspect he opposed to the cosmopolitical theory of Adam Smith and J. B. Say, and in its political and national aspect to their theory of universal freedom of trade. This “economic nationalism” can be spotted permeating his whole economic writing.

List’s theory of “national economics”

List repeated his assertion that economists should realize that since the human race is divided into independent states, “….a nation would act unwisely to endeavor 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….” He claimed that a country should not count the cost of defending the overseas trade of its merchants: “….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…..." ( Henderson 1983, p. 150)

Both Adam Smith and Karl Marx took the hopeful view that nations and national rivalry were a relic from the past that could be easily overcome. Smith relied on commercial self-interest. Marx relied on class divisions erasing national differences. Both were quite correct as to the general direction in which the world was moving. But List was more realistic in thinking that the excellent goal of a cosmopolitical world could not be quickly achieved without allowing for the present existence and power of rival nations and states. Even from this point of view, nobody now disputes that Marx and Engels seriously underestimated the strength of nationalism ( Williams ).

Disagreements with Adam Smith's ideas

In the third chapter of The Wealth of Nations, Smith mentions the actual cause of the division of labour, which is the benefits resulting from the formation of a very large economic unit. From the point of view of net production, the larger the better, obviously. List, at this reasons: But supposing the large economic unit contains several separate sovereign states? Smith does not ask this question. It may not have occurred to him. He was a man who felt that the union with Britain had been a great blessing. Did he also foresee an eventual union of Europe being brought about by trade?

Friedrich List correctly notes that Smith drew on systems of thought that were 'cosmopolitical', seeing national differences as a relic of the Dark Ages that enlightened politics would eventually overcome. But List realised that there would be problems. And he had the advantage of seeing the drastic self-destruction of 18th century Enlightenment in the French Revolution. In the Europe-wide struggle of the Napoleonic Wars, Britain had backed various reactionary forces rather than let a strong Empire emerge in Continental Europe.

And so, his answer was: “….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 recognize the same conditions of right among themselves and renounce self-redress, can only be realized if a large number of nationalities attain to as nearly the same degree as possible of industry and civilization, 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 civilization 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….." ( List 1844, pp. 102-3 )

Legacy

List holds historically one of the highest places in economic thought as applied to practical objects. His principal work is entitled Das Nationale System der Politischen Ökonomie (1841) and was translated into English as The National System of Political Economy and this book has been more frequently translated than the works of any other German economist, except Karl Marx.

Eugene During, a lecturer at the university of Berlin, declared that: “… List's doctrines represented ‘the first real advance’ in economics since the publication of The Wealth of Nations ( by Adam Smith ) …" and Marx himself wrote in his famous Anti-Duhring pamphlet: "…It would be better to read Herr Duhring's chapter on mercantilism in the 'original', that is, in F. List's “National System”, Chapter 29…" Marx was clearly well aware of what List was on about but chose never to deal with it directly. And because Marx did not, List was largely ignored by later writers.

However, List’s influence among developing nations has been considerable. Despite the “National System” was vigorously attacked, such was the demand for it that three editions were called for within the space of a few months, and translations of it were published in English, French, Russian, Swedish, Hungarian, and many other foreign languages. Japan in the 19th century followed his model ( Japan ), Hungarian leader Kossuth alluded to him in public as “…the man who had best instructed the nations as to their true national economical interests…” , and it has also been argued that Deng Xiaoping's post-Mao policies were inspired by List ( China ).

The last excerpt from “The National System” can be forever taken as a “manual” to all the NGOs in the developed world dealing with the developing countries: “…..The economical education of a country of inferior intelligence and culture, or one thinly populated, relatively to the extent and the fertility of its territory, is effected most certainly by free trade, with more advanced, richer, and more industrious nations. Every commercial restriction in such a country aiming at the increase of manufactures, is premature, and will prove detrimental, not only to civilization in general, but the progress of the nation in particular. If its intellectual, political, and economical education, under the operation of free trade, has advanced so far, that the importation of foreign manufactures, and the want of markets for its own products has become an obstacle to its ulterior development, then only can protective measures be justified.... Internal and external trade flourish alike under the protective system; these have no importance but among nations supplying their own wants by their own manufacturing industry,` consuming their own agricultural products, and purchasing foreign raw materials and commodities with the surplus of their manufactured articles. Home and foreign trade are both insignificant in the merely agricultural countries of temperate climes, and their external commerce is usually in the hands of the manufacturing and trading nations in communication with them. …. A good system of protection does not imply any monopoly in the manufacturers of a country; it only furnishes a guarantee against losses to those who devote their capital, their talents, and their exertions to new branches of industry….” ( List 1856 )

References

ISBN links support NWE through referral fees

• List, George F., National System of Political Economy, Lippincott, Philadelphia 1856, pp. 63-64, 69-70, 73, 77-81
• List, George F., Outlines of a New System of Political Economy, Lippincott, Philadelphia, 1827
• List, George F, The German Zollverein in the Edinburgh Review, 1844, Vol. LXXIX, p. 105 et seq.)
• List, G. Fr. , Vorlaufer und ein Opfer für das Vaterland , (Anon., 2 vols., Stuttgart, 1877)
• 69 <javascript:opN('lstNPENotes.html>
• Biography of List by Goldschmidt (Berlin, 1878)
• Biography of List by Jentsch (Berlin, 1901)
• China berkeley.edu on List influences of Deng
• Henderson, William O., Friedrich List: Economist and Visionary , Frank Cass, London 1983
• Henderson, William O. Friedrich List: Economist and Visionary (Frank Cass, London 1983)
• Hirst, M. E., Life of Friedrich List , London, 1909; contains a bibliography and a reprint of List's Outlines of American Political Economy,1827.
• Japan List's influence on Japan (cyberzone.com)
• Williams, Gwydion M. < Friedrich List and the 19th century economic alternative <http://members.aol.com/BevinSoc/ltur6.htm>
• Paperback Edition of 2005, from Amazon Books
• Friedrich List: Outlines of American Political Economy - web pages with a commentary
• Chronology of List's life
• A Comparison Of List, Marx and Adam Smith
• Quotations From List
• 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

Sources and notes

• 1911 Encyclopædia Britannica

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