The book is here.
You can read all about List and his economic thought here.
List is very critical of Adam Smith, but it was interesting to read a non-Leftist critique of Smith. I didn’t know that such a thing existed!
In short, List believes that Smith and his followers neglect the way that the world works in their understanding of economics. The neglect leads to conclusions that would be irresponsible for the leaders of a nation to pursue.
Smith and his followers assume "a state of things which has yet to come into existence." They assume "the existence of a universal union and a state of perpetual peace, and deduce[] therefrom the great benefits of free trade."
List agrees that free trade is beneficial to some nations in some circumstances. He also believes it is beneficial to the world as a whole. However, he does not believe that it is always beneficial to all nations at all times. This seems like a reasonable position, but it puts him at odds with Smith and his followers.
List also believes that Smith errs in focusing on wealth as opposed to focusing on the ability to produce wealth, "the power of producing wealth is therefore infinitely more important than wealth itself; lt insures not only the possession and the increase of what has been gained, but also the replacement of what has been lost. This is still more the case with entire nations (who cannot live out of mere rentals) than with private individuals."
Finally, List believes that leaders of nations must focus on the long-term welfare of the nation. A Smith-based approach will be too focused on short-term gains at the expense of long-term prosperity.
To this last point, one can’t help but think that List would be sad, but not surprised to see, modern America losing all her manufacturing jobs in favor of jobs that create transitory wealth at best (in honor of GBFM, think of girls in short-skirts selling subprime mortgages).
Much of the book is devoted to historical examples of development. List makes a very convincing case that development requires some period of protectionism. The US own system was based on List’s ideas. It seems to have worked here.
Here, from the introduction to List’s work, is a summary of his view of how nations develop:
In the first stage they must adopt free trade with the more advanced nations as a means of raising themselves from a state of barbarism and of making advances in agriculture. In the second stage they must resort to commercial restrictions to promote the growth of manufactures, fisheries, navigation, and foreign trade. In the last stage, after reaching the highest degree of wealth and power, they must gradually revert to the principle of free trade and of unrestricted competition in the home as well as in foreign markets, so that their agriculturists, manufacturers, and merchants may be preserved from indolence and stimulated to retain the supremacy which they have acquired. Writing in 1841, [List] concludes the survey: ‘In the first stage, we see Spain, Portugal, and the Kingdom of Naples; in the second, Germany and the United States of North America; France apparently stands close upon the boundary line of the last stage; but Great Britain alone at the present time has actually reached it.’
List was an early discoverer of the importance of institutions and the make-up of the population for economic growth:
One thing alone was wanting to Italy to enable her to become what England has become in our days, and because that one thing was wanting to her, every other element of prosperity passed away from her; she lacked national union and the power which springs from it. The cities and ruling powers of Italy did not act as members of one body, but made war on and ravaged one another like independent powers and states. While these wars raged externally, each commonwealth was successively overthrown by the internal conflicts between democracy, aristocracy, and autocracy. These conflicts, so destructive to national prosperity, were stimulated and increased by foreign powers and their invasions, and by the power of the priesthood at home and its pernicious influence, whereby the separate Italian communities were arrayed against one another in two hostile factions.
. . .
Everywhere and at all times has the well-being of the nation been in equal proportion to the intelligence, morality, and industry of its citizens; according to these, wealth has accrued or been diminished; but industry and thrift, invention and enterprise, on the part of individuals, have never as yet accomplished aught of importance where they were not sustained by municipal liberty, by suitable public institutions and laws, by the State administration and foreign policy, but above all by the unity and power, of the nation.
Nor does he ignore power:
And power is more important than wealth. That is indeed the fact. Power is more important than wealth. And why? Simply because national power is a dynamic force by which new productive resources are opened out, and because the forces of production are the tree on which wealth grows, and because the tree which bears the fruit is of greater value than the fruit itself. Power is of more importance than wealth because a nation, by means of power, is enabled not only to open up new productive sources, but to maintain itself in possession of former and of recently acquired wealth, and because the reverse of power —namely, feebleness—leads to the relinquishment of all that we possess, not of acquired wealth alone, but of our powers of production, of our civilisation, of our freedom, nay, even of our national independence, into the hands of those who surpass us in might, as is abundantly attested by the history of the Italian republics, of the Hanseatic League, of the Belgians, the Dutch, the Spaniards, and the Portuguese.
. . .
England has got into her possession the keys of every sea, and placed a sentry over every nation : over the Germans, Heligoland; over the French, Guernsey and Jersey; over the inhabitants of North America, Nova Scotia and the Bermudas; over Central America, the island of Jamaica; over all countries bordering on the Mediterranean, Gibraltar, Malta, and the Ionian Islands. She possesses every important strategical position on both the routes to India with the exception of the Isthmus of Suez, which she is striving to acquire; she dominates the Mediterranean by means of Gibraltar, the Red Sea by Aden, and the Persian Gulf by Bushire and Karrack. She needs only the further acquisition of the Dardanelles, the Sound, and the Isthmuses of Suez and Panama, in order to be able to open and close at her pleasure every sea and every maritime highway. Her navy alone surpasses the combined maritime forces of all other countries, if not in number of vessels, at any rate in fighting strength.
So was it England’s power or England’s economic system that made it the dominant force in the world? List’s answer is power.
I can think of at least one other non-Leftist critique of Smith, that proposed by John D. Mueller:
“… what is economics about? The short answer is production, exchange, distribution, and consumption. Scholastic economics (c.1250-1776) began when Thomas Aquinas integrated these four elements, all drawn from Aristotle and Augustine, at the individual, domestic and political levels. This “AAA” outline was taught by Catholics and Protestants (after the Reformation) for more than five centuries. (Lutheran Samuel Pufendorf’s version was widely known in the American colonies and cited by Alexander Hamilton among other founders.)
“Classical economics (1776-1871) began when Adam Smith cut these four elements to two, trying to explain what he called “division of labor” (specialized production) by production and exchange alone. When three economists (W.S. Jevons, Carl Menger, and Leon Walras) simultaneously but independently reinvented Augustine’s theory of utility, reintegrating consumption with production and exchange, “neoclassical” economics (1871-c.2000) was born.
“Adam Smith’s significance is therefore not what he added to, but rather subtracted from economics. The necessity of describing all four facets of any economic event with at most three equations has condemned classical and neoclassical economists frequently to resort to circular logic and/or empirically false assumptions.”
Mr. Mueller’s recent book on ‘neo-scholastic economics’ is for sale here.
Thanks!
List makes some good points.
I’ll go along with his emphasis on Great Britain’s military power over its economic power. The same applies to Britain’s successor.
Both Britain and the US have greatly benefited from the moat between them and their competitors. They have been, in effect, uninvadable. A key to the success of both empires has been naval hegemony.
Yet the US’s carriers no longer seem so impregnable. Space weaponization has to be the next step. Who needs boats if you can rain death from satellites? The question is, if a bluewater navy is no longer the sine qua non of a hegemon, will watery distance from potential aggressors still matter? Obviously it still matters today. In the long run, maybe not so much.
The US own system was based on List’s ideas.
List came after Hamilton, and List studied the American system closely. It’s more accurate to say that List’s ideas are based on studying America.
Noted. Thanks
Indeed. List lived in America as a young man, and was impressed by Hamiltonian protectionism.
I had forgotten about Bushire and Karrack.
What Sound was he referring to?
Interesting that England got Suez but not Panama, and spent a lot of blood and treasure on the Dardanelles.
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Review of “National System of Political Economy” by Friedrich List | Foseti
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Review of “National System of Political Economy” by Friedrich List | Foseti