(Note: I originally wrote posted this on another now-deleted blog sometime in ~2020)
Friedrich List is a borderline paradoxical figure at first sight, seemingly in contradiction with himself: he pioneered a customers union within a fractured Germany, but also campaigned in favor of protectionist policies later on; he both lambasts Smith and Say and the simplicity of the arguments for free trade, and yet repeatedly implies that “one day” there will be free trade; he yearned for a united Germany, but simultaneously rejected outright jingoism. But Its in his nuance and synthesis that List sketches perspectives that we seem to have neglected.
After Marx, List was the most prominent German Economist of his time. His journey and travels were not straightforward, and neither were his fortunes. He was born in the town of Reutingen in Germany in 1789, where he rose through the ranks working in government in actuarial, financial, and other bureaucratic capacities, became a professor of political economy, and finally upsetting the King with an anonymous pamphlet. He was forced into exile, first in France, then the cantons of Switzerland, and elsewhere – eventually traveling to the United States. In the United States he traveled with Lafayette, seeing most of the US, giving speeches with American protectionists, editing a German-American newspaper, and built one of the first railways in the new world. After a few years in the States, his ever-present homesickness struck. He and his family again returned to Europe where he continued his journalistic and and techno-economic endeavors. Eugene Wendler, a scholar on List, describes List’s life in all his idealism, trials, and his tragic self-inflicted end in 1846, as a “Swabian tragedy”1.
List did many things, but a few stand out in their current relevance for our time: he refused to draw a distinction between political and economic; he had a view of economic relations predicated on stages of development and their interactions; and he emphasized productive powers over merely exchange of value, most famously through his arguments in favor of some practices of protectionism.
One central polemic in List’s magnum opus The National System of Political Economy and its precursor essay submitted for competition, The Natural System of Political Economy, is of Adam Smith and Jean-Baptiste Say’s framing of the economic science. List often refers to their understanding of economics as The School or cosmopolitan economics. The latter term was in reference to List’s own view of the economic system. List understood the economic perspective to be divisible into: the individual, the nation, and the cosmopolitan. And he posited that the individual and the cosmopolitan had both been addressed by Smith and Say, but the national economic perspective had been hand-waved and abstracted away to the detriment of any pragmatic economic theory, in his view. The washing away of the conceptual existence of the Nation from any model on economic systems was a grave mistake in the view of List, for how is any cosmopolitan economic theory understandable without its primitives - and surely individuals are not the only unit in any real cosmopolitan economic model to be taken seriously? More importantly, while not fully appreciated in direct terms by List, his critical observations are likely central to beginning to understand the reality of value flows and power in a modern socio-economic world system, where globalizing forces are not easy to roll back, and increasing integration and interaction accentuates the differences between (at least) the rhetoric of the economic profession and the ground realities most workers in various countries. The division of the economic and the political, by means of ignoring economics at the hierarchical level of the nation-state, allowed for an easier understanding of economies, but not of reality.
The “game” might be value, but the meta-game played out in reality was, and is still, power:
“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”2
It is in this sense that List is a realist: proposing that the economic system is not totally understood – or understandable much at all – in isolation. Therefore, in order to understand how the economic sub-game fits into the larger state of play, and how societies grow wealthy, one must theorize on a national system of political economy.
List also broadly connects his three scales of economic abstraction stating that “if a nation declines, the individual shares in the disastrous consequences of its fall”3 and furthermore that “nations have not yet attained a state of political and social development which would make [perpetual peace and universal free trade] possible”.4 It is from these lenses of economic scale and hierarchy that List reconstructed an understanding of trade and the nature of wealth.
Critical to understanding List’s work was his categorization of nations into stages of development:
“As respects their economy, nations have to pass through the following stages of development: original barbarism, pastoral condition, agricultural condition, agricultural-manufacturing condition, and agricultural-manufacturing-commercial condition.”5
Transitioning from one stage of development to the next was, for List, not to be taken for granted, and furthermore, the development policy of a national economy should be anchored in the context of a nation’s stage of development as well as its geopolitical position. List notes, using England as an example, that while free trade is to be encouraged for a national economy particularly at lower stages of development, to reach the highest levels of technical-industrial development requires some way to play against trade.6 The relation between the benefits of trade to a nation and the nation’s level of development was not a linear one in List’s view.
While his concepts for stages of development differ slightly between The Natural System and The National System, the most important points remain intact. In The Natural System, List echos his work as counsel of the Trade and Commerce Union in Germany (the predecessor to the Tariff Union) in a passage on the development during the agricultural phases of development:
“At the same time people will begin to recognize how feudal rights impose restrictions upon production and internal trade. They will see the drawbacks of feudalism and they will appreciate the need for sound laws and institutions which will guarantee the liberty of the individual…”
While at the surface there seem to be tensions between Lists attitudes towards free trade between this passage (and his work on freeing internal German trade) and his views on protectionism in the broader question at the cosmopolitan level (expanded upon later), these tensions can be resolved by understanding List’s emphasis on the developmental context of a State and where it can best draw gains both in productive power and political power. In the case of internal trade, List advocated for a united Germany, and thus internal trade would serve those ends; but in the case of a state vying for hegemonic power, the pay off matrix is entirely different.
However, most discussed and of greatest interest for List is the transition from an largely agricultural to agricultural and industrial state. List notes that it is here that his protectionist beliefs kick into play and are – if properly implemented – a force for increasing a nations wealth and power.7
Friedrich List’s major contribution for which he is recognized is his stance on protectionism. He advocated for protectionist policies as a consequence of his understanding of the intertwined nature of the political and economic, as well as the un-guaranteed development of nations through their stages of development. His advising for protectionism was predicated, in particular, against the backdrop of competition among states at the highest levels of development (in his time, manufacturing and machinery). However, at the most general level – and the reason for protectionism to be warranted at all – List was convinced that augmenting long run productive power over short term exchange of value was the cornerstone to both economic development and political power.
There were several policies List advocated for in terms of protectionism, as well as guidelines for appropriate usage. Protectionist policy was for the higher industries which were a) difficult to develop without the assurance of a relatively stable future demand and b) would provide tremendous wealth through increased productive power in whatever task it was that was performed.8 To actually perform protectionist policies on said industries, List emphasized pragmatic, just-enough tariffs to stir internal competition and foster new high-value-add industries9, national prizes to bring attention and prestige to these industries, and what we now recognize as human capital formation through educational institutions.10 Protectionism was simply a means for sustained growth of internal industries (read: productive power), protecting them from the gales of international trade until they could spread their wings and thrive. Tariffs were not to be a fixture brought on by lobbying from lazy industrialists, but a state-managed initiative to sacrifice short term exchange of value for long term productive power and, ultimately, wealth creation.
“If, therefore, a sacrifice of value is caused by protective duties, it is made good by the gain of a power of production, which not only secures to the nation an infinitely greater amount of material goods, but also industrial independence in case of war.”11
Economically, it is not controversial to accept that growth rates and productivity are of the utmost importance, however the political importance of protectionism should not be understated and is increasingly relevant. The power to efficiently produce necessities and highly technical goods on one’s own soil meant some form of Autarky (not a word List used) – self-sufficiency, robustness, redundancy. List didn’t believe that every country had the necessary requirements either geologically or otherwise to actually fulfill this goal, but he noted that countries like Germany and the United States were capable of this at least through their circumstances of location and resources as a starting point. Furthermore, in Outlines Of American Political Economy, which he wrote while residing in the United States, he even speculates as to whether free trade would foster the same level of “competition” or pressures that traditional international conflict had and continues to have (a classic example might be the Cold War, for instance).12 For List, free trade was a nigh utopian dream, one that would require historical processes to reach, and one that was unlikely to happen in sudden gear shift of international attitudes.13
In addition to his thoughts on political power and wealth creation through strategic protection of internal industries, List was interested in technologies such as the railroad and the telegram. He understood the power of reducing transaction costs and the second order effects of the railway and his dedication to both realizing a railroad in Pennsylvania and in his work helping bring Germany its first railways adds weight to his words. Ultimately, List understood, the addition of canals and railways and steam boats were part of the bootstrapping process off of an agricultural economy to an agricultural-industrial one – one spurs the other, the latter spurs the former, and so on.14 Productive power is a driver, and a moving force, with byproducts of wealth.
“ A cripple can accomplish by directing a steam engine a hundred times more than the strongest man can with his mere hand.”15
But what does any of this mean presently?
The importance of reading List today is as a reminder and a way to step out of the waters of the present moment. The prevailing wisdom is free trade without consequences, free trade as universal good any way and always. And while, in pure utilitarian terms, this might hold, the meta-game will rear its ugly head: that politics (zero-sum power games) exist through the sheer existence of competing interests, namely nation-states, requires that we account for them if we are to survey the world. List understood this, even if he didn’t like it, but it has been largely left on the wayside in the West. Why?
I can only speculate, but I would add that List understood the British as adopting the language of free trade through its intellectual output and through trade agreements with countries like portugal and france precisely because it was in a position to geopolitically benefit from free-er trade by way of asymmetric relative advantages (ie both parties get positive payoff but one benefits more than the other). Today, the same could be said of the United States. Who wins when you get to sell high value goods and services and import cheap products? And, comparatively, who loses? The countries who are in the middle of the value chain, the ones who are trying to find their way up the development ladder in order to make it to the top. It’s no wonder that China has manipulated its currency heavily, for years depressing the cost of its exported good for the rest of the world. To maintain its export-driven development strategy China, in effect, adopted protectionist policies and more or less sucked high value add manufacturing from the US and into its own borders and skill pool. The US response has been, effectively, null – and as Michael Lind points out, this shouldn’t be surprising.
Michael Lind wrote a piece for the nation in 1995 titled: “Marx, Smith – or List?”, where he proposed that in the next century, the real intellectual battle would be not between the forces of communism and the efforts neoliberals, but between those who believed in free trade bar none and those who would begin to question the standard orthodoxy of development economics and its political nature, thus bringing us to back to List.
Even before Michael Lind had penned his article many of the east Asian miracles had already been directly referencing and using Listian principles to fuel their development (with significant modifications – monopolistic and state own enterprises, for example). In an article for The Atlantic, the author describes finding List’s works with ease in Japan while being hard-pressed to do so in the United States – a testament to the degree to which List was recognized as a figure in a body of economic thought that was simply unexamined in the West. Indeed, in The Economic Thought of Friedrich List, Mei Junjie traced awareness of List’s ideas in China back to the early 1900s as more political and economic thought was introduced and translated. In 1927 the first Chinese copy of List’s National System was published by a Chinese student who had studied in Germany (and coincidentally a newer Chinese translation of National System was also published just before China entered the WTO).16
Yet, however interesting or insightful List’s thought might be for interpreting thought around national economy which is becoming more popular once again, its worth noting that the precision of policy needed to enact meaningful protectionist measures or other general policies to guide the economy to higher productive powers is by no means easy – there’s a requirement for high-integrity institutions with capability to have strategic time horizons beyond singular election cycles.
Friedrich List’s work deserves to be re-acquainted with to understand where we are, where we’ve been, and where we are going; to understand why we are in this moment is partly to understand the political-economic forces that have shaped it. Perhaps one of the most important features of List’s work, for today, is its emphasis on not merely widget exchange but real, actual wealth through means – through capability. One might get the impression that productivity and productive capacity have been de-prioritized as of late, but some sense that endless financialization, rentierism, and arbitrage have manufactured the mirage of societal wealth while many things have stated much the same. It need not be so…
Wendler writes: “List’s slogan [‘Freedom through prosperity’] displays even more perspective in that it views wealth not as the goal of economic activity but rather as a means of designing one’s existence.”
1 Wendler, Friedrich List 1789-1846, page 27
2 The National System of Political Economy
3 The Natural System of Political Economy, page 30
5 The National System of Political Economy
6 “The industrial history of nations. and of none more clearly than that of England, proves that the transition from the savage state to the pastoral one, from the pastoral to the agricultural, and from agriculture to the first beginnings in manufacture and navigation, is effected most speedily and advantageously by means of free commerce with further advanced towns and countries, but that a perfectly developed manufacturing industry, an important mercantile marine, and foreign trade on a really large scale, can only be attained by means of the interposition of the power of the State.” - The National System of Political Economy
7 ”Solely in nations of the latter kind, namely, those which possess all the necessary mental and material conditions and means for establishing a manufacturing power of their own, and of thereby attaining the highest degree of civilisation, and development of material prosperity and political power, but which are retarded in their progress by the competition of a foreign manufacturing Power which is already farther advanced than their own—only in such nations are commercial restrictions justifiable for the purpose of establishing and protecting their own manufacturing power; and even in them it is justifiable only until that manufacturing power is strong enough no longer to have any reason to fear foreign competition, and thenceforth only so far as may be necessary for protecting the inland manufacturing power in its very roots.” - The National System of Political Economy
8 List was unequivocally against protectionism for agricultural goods
9 Interestingly, in the Tiger economies, in many cases monopolies were granted but other concessions were made in order to ensure international competitiveness and dynamism remained
10 The Natural System of Political Economy, p106
11 The National System
12] “Though, therefore, philosophers may imagine that an eternal peace, a union of the whole human family under a common law, would/produce the highest degree of human happiness, it is never theless true, that the contests between nation and nation, often pernicious and destructive to civilization, were as often causes of its pi‘omotibn, as a. people was struggling for its freedom and indepen dence, against despotism and depression; and that as often as this happened, it produced an elevation of all its faculties, and thereby an advancement of the whole human race towards greater perfection.” - Outlines of American Political Economy
13 “Free trade is no idle dream. With the triump of reason it will be universally established and then all peoples on earth will achieve the highest degree of physical and cultural well being. This, however, can happen only when all countries have reached the same stage in their economic, moral, social, and political development. Moreover it would appear that if the world is divided into large national units, this process of unification will be hastened to a successful conclusion” - The Natural System of Political Economy, p98-99
14 “It is evident that canals, railways, and steam navigation are called into existence only by means of the manufacturing power, and can only by means of it be extended over the whole surface of the country. … it is impossible that a sufficiently large traffic in either goods or passengers can take place to defray the costs of the erection and maintenance of the machinery of transport.”
15 National System of Political Economy
16 The Economic Thought of Friedrich List p214