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Friedrich List

Friedrich List

[list]
List, Friedrich, 1789-1846, German economist. The first professor of economics at the Univ. of Tübingen, he was elected (1820) to the Württemberg legislature. For his advocacy of administrative reforms he was sentenced to imprisonment but was released on condition that he would emigrate to the United States. There he engaged in various enterprises, and in 1832 he was returned to Germany as U.S. consul at Leipzig. Insisting upon the necessity for a commercial association of German states and the full development of productive powers in those states, he became a ceaseless advocate of a customs union (Zollverein). He urged a policy of economic protection for young industries and nations. Many of his influential ideas were subsequently adopted by the U.S. government. List's most important work is The National System of Political Economy (1840, tr. 1904).

See M. Hirst, Life of Friedrich List and Selections from His Writings (1909, repr. 1965).

(born Aug. 6, 1789, Reutlingen, Württemberg, Ger.—died Nov. 30, 1846, Kufstein, Austria) German-born U.S. economist. He first gained prominence as the founder of an association of German industrialists that favoured abolishing tariff barriers between the German states. Exiled in 1825 for his liberal views, he went to the U.S. In his Outlines of American Political Economy (1827) he maintained that a national economy in an early stage of industrialization required tariff protection to stimulate development. After becoming a U.S. citizen, he returned to Germany as U.S. consul at Baden (1831–34) and Leipzig (1834–37). His best-known work was The National System of Political Economy (1841). Financial and other difficulties eventually drove him to suicide.

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Friedrich List (August 6, 1789November 30, 1846) was a leading 19th Century German and American 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.

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 which found realization in Henry Clay's American System. 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, economically unifying Germany, 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. 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 Müller (1779–1829), he was largely influenced by Alexander Hamilton and the American School 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, and he famously doubted the sincerity of calls to free trade from developed nations, Britain in particular:

Any nation which by means of protective 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" put forward by Adam Smith 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." Again, 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."

Disagreements with Adam Smith's ideas

List argued that statesmen had two responsibilities — "one to contemporary society and one to future generations. Matters requiring an immediate decision would normally claim most of their attention, leaving little time for a consideration of problems that might be expected to arise in the future. But when a country had reached a turning point in its development, its leaders were under a moral obligation 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. The nation having a continuous life, its true wealth must consist — and this is List's fundamental doctrine — not in the quantity of exchange values which it possesses, but in the full and many-sided development of its productive powers. Its economic education should be more important than the immediate production of values, and it might be right that one generation should sacrifice its gain and enjoyment to secure the strength and skill of the future. In the sound and normal condition of a nation which has attained economic maturity, the three productive powers of agriculture, manufactures and commerce should be alike developed. But the two latter factors are superior in importance, as exercising a more effective and fruitful influence on the whole culture of the nation, as well as on its independence. Navigation, railways, all higher technical arts, connect themselves specially with these factors; whilst in a purely agricultural state there is a tendency to stagnation. But for the growth of the higher forms of industry all countries are not adapted only those of the temperate zones, whilst the torrid regions have a natural monopoly in the production of certain raw materials; and thus between these two groups of countries a division of labor and confederation of powers spontaneously takes place.

He refused to accept Smith's system the title of the industrial, which he thought more appropriate to the mercantile system, and designated the former as "the exchange-value system." He denied the parallelism asserted by Smith between the economic conduct proper to an individual and to a nation, and held that the immediate private interest of the separate members of the community would not lead to the highest good of the whole. That the nation was an existence, standing between the individual and humanity, and formed into a unity by its language, manners, historical development, culture and constitution. That this unity must be the first condition of the security, well-being, progress and civilization of the individual; and private economic interests, like all others, must be subordinated to the maintenance, completion and strengthening of the nationality.

Stages of economic development

List also had theorised the stages of economic development through which the nations of the temperate zone, which are furnished with all the necessary conditions, naturally pass, in advancing to their normal economic state. These are:

  1. pastoral life
  2. agriculture
  3. agriculture united with manufactures; whilst in the final stage agriculture, manufactures and commerce are combined.

The economic task of the state is to bring into existence through legislative and administrative action the conditions required for the progress of the nation through these stages. Out of this view arises List's scheme of industrial politics. Every nation, according to him, should begin with free trade, stimulating and improving its agriculture by intercourse 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 a system of protection should be employed to allow the home industries to develop themselves fully, and save them from being overpowered in their earlier efforts by the competition of more matured foreign industries in the home market. When the national industries have grown strong enough no longer to dread this competition, 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 for a time in exchange values during the protective period she much more than gains in the long run in productive power, the temporary expenditure being strictly analogous, when we place ourselves at the point of view of the life of the nation, 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 be the most powerful countries in the world in the future—a view expressed by de Tocqueville 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 she needed for her economic progress an extended and conveniently bounded territory reaching to the sea-coast both on north and south, and a vigorous expansion of manufactures and commerce, 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:

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 Steelyard 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 Hansards, 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.

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.

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.

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.

"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.

These days, especially heterodox economists, such as Ha-Joon Chang and Erik Reinert, refer to List often explicitly when writing about suitable economic policies for developing countries.

See also

Further reading

Sources and notes

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