HIST363: Global Perspectives on Industrialization

Not all economists went along with the "classical" free market economics of Adam Smith and David Ricardo. George Friedrich List (1789-1846) argued that economic policy had to be adapted to the needs of specific nations. Free trade was not practical in Germany, he insisted, until the country had attained a greater degree of industrial growth.

From George Friedrich List. National System of Political Economy

Political economy, in matters of international commerce, must draw its lessons from experience; the measures it advises must be appropriate to the wants of our times, to the special condition of each people, it must not, however, disavow the exigencies of the future nor the higher interests of the whole human race. Political economy must rest consequently upon Philosophy, Policy, and History.

For the interests of the future and the welfare of men, philosophy requires a more intimate union and communion of nations, a renunciation of war so far as possible, the establishment and development of international law, transition of the jus gentium to a federal law, freedom of communication among nations, as well in moral as in material concerns; lastly, the union of all nations under some rule of law, or in some aspects of the subject, a universal association.

In the case of any particular people, a wise administration, with extended views, pursues special objects, seeking guarantees for independence and for duration, measures calculated to hasten progress in civilization, well-being, and power, and to improve social condition so that the body politic shall be completely and harmoniously developed in all its parts, perfect in itself, and politically independent.

History, for its part, assists in no equivocal manner in providing for the exigencies of the future, by teaching how, in every epoch, progress, material and intellectual, has kept pace with the extent of political association and commercial relations. But it justifies at the same time the exigencies of government and nationality, showing how nations have perished for not having sufficiently watched over the interests of their culture and power; how a commerce entirely free with nations more advanced has been of advantage to those still in the first phases of their development; also how those which had made some progress have been able by proper regulations in their foreign trade, to make still greater progress and to overtake those which had preceded them. History thus shows the way of reconciling the respective exigencies of philosophy and government.

But practice and theory, such as actually exhibited, take their sides, the former exclusively for the particular exigencies of nationality, the latter for the absolute requirements of cosmopolitism....

The practical importance of the great question of free trade between nations is generally felt in our day, as also the necessity of investigating, with impartiality, once for all, how far theory and practice have erred on this subject, and how far any reconciliation between them is possible. It is at least needful to discuss seriously the problem of such a reconciliation.

It is not indeed with any assumed modesty, it is with the feeling of a profound mistrust of his power, that the author ventures upon this attempt; it is after resisting many years his inclination, after having hundreds of times questioned the correctness of opinions and again and again verifying them; after having frequently examined opposing opinions, and ascertained, beyond a doubt, their inaccuracy, that he determined to enter upon the solution of this problem. He believes himself free from the empty ambition of contradicting old authorities and propounding new theories. If the author had been an Englishman, he would probably never have entertained doubts of the fundamental principle of Adam Smith's theory. It was the condition of his own country which begot in him, more than twenty years since, the first doubts of the infallibility of that theory; it was the condition of his country which, since that time, determined him to develop, first in anonymous articles, then in more elaborate treatises, not anonymous, contrary opinions. At this moment, the interests of Germany alone give him the courage to publish the present work; he will however not dissemble, that a personal motive is connected with those interests; that is, the necessity in which he is placed of showing by a treatise of some extent, that he is not quite incompetent to treat of political economy....

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....

The anterior progress of certain nations, foreign commercial legislation and war have compelled inferior countries to look for special means of effecting their transition from the agricultural to the manufacturing stage of industry, and as far as practicable, by a system of duties, to restrain their trade with more advanced nations aiming at manufacturing monopoly.

The system of import duties is consequently not, as has been said, an invention of speculative minds; it is a natural consequence of the tendency of nations to seek for guarantees of their existence and prosperity, and to establish and increase their weight in the scale of national influence....

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.

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.

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.

There is no monopoly, because internal competition comes in the place of foreign competition, and every individual has the privilege of taking his share in the advantages offered by the country to its citizens; it is only an advantage to citizens as against foreigners, who enJoy in their own country a similar advantage.

Source: George Frederich List, http://web.archive.org/web/20160802125751/https:/legacy.fordham.edu/halsall/mod/1856list.asp
This work is in the Public Domain.