The National System of Political Economy

By Friedrich List

MORE than thirty-three years have elapsed since I first entertained doubts as to the truth of the prevailing theory of political economy, and endeavoured to investigate (what appeared to me) its errors and their fundamental causes. My avocation (as Professor) gave me the motive to undertake that task–the opposition which it was my fate to meet with forcibly impelled me to pursue it further.My German contemporaries will remember to what a low ebb the well-being of Germany had sunk in 1818. I prepared myself by studying works on political economy. I made myself as fully acquainted as others with what had been thought and written on that subject. But I was not satisfied with teaching young men that science in its present form; I desired also to teach them by what economical policy the welfare, the culture, and the power of Germany might be promoted. The popular theory inculcated the principle of freedom of trade. That principle appeared to me to be accordant with common sense, and also to be proved by experience, when I considered the results of the abolition of the internal provincial tariffs in France, and of the union of the three kingdoms under one Government in Great Britain. But the wonderfully favourable effects of Napoleon’s Continental system, and the destructive results of its abolition, were events too recent for me to overlook; they seemed to me to be directly contradictory of what I previously observed. And in endeavouring to ascertain on what that contradiction was founded, the idea struck me that
the theory was quite true, but only so in case all nations would reciprocally follow the principles of free trade, just as those provinces had done. This led me to consider the nature of
nationality. I perceived that the popular theory took no account of
nations, but simply of the entire human race on the one hand, or of single individuals 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, while she nevertheless possesses the mental and material means for developing those acquisitions, 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. I felt that Germany must abolish her internal tariffs, and by the adoption of a common uniform commercial policy towards foreigners, strive to attain to the same degree of commercial and industrial development to which other nations have attained by means of their commercial policy. [From the Preface to the First Edition]

Book Cover

Translator/Editor

J. Shield Nicholson, ed. Sampson S. Lloyd, trans.

First Pub. Date

1841

Publisher

London: Longmans, Green, and Co.

Pub. Date

1909

Comments

First published in German. First translated 1885.

Copyright

The text of this edition is in the public domain. Picture of List courtesy of The Warren J. Samuels Portrait Collection at Duke University.

Book III, Chapter XXXII

THE SYSTEM OF VALUES OF EXCHANGE (CONTINUED)—JEAN BAPTISTE SAY AND HIS SCHOOL.

THIS author on the whole has merely endeavoured to systematise, to elucidate, and to popularise, the materials which Adam Smith had gathered together after an irregular fashion. In that he has perfectly succeeded, inasmuch as he possessed in a high degree the gift of systematisation and elucidation. Nothing new or original is to be found in his writings, save only that he asserted the productiveness of mental labours, which Adam Smith denied. Only, this view, which is quite correct according to the theory of the productive powers, stands opposed to the theory of exchangeable values, and hence Smith is clearly more consistent than Say. Mental labourers produce directly no exchangeable values; nay, more, they diminish by their consumption the total amount of material productions and savings, and hence the total of material wealth. Moreover, the ground on which Say from his point of view includes mental labourers among the productive class, viz. because they are paid with exchangeable values, is an utterly baseless one, inasmuch as those values have been already produced before they reach the hands of the mental labourers; their possessor alone is changed, but by that change their amount is not increased. We can only term mental labourers productive if we regard the productive powers of the nation, and not the mere possession of exchangeable values, as national wealth. Say found himself opposed to Smith in this respect, exactly as Smith had found himself opposed to the physiocrats.

In order to include manufacturers among the productive class, Smith had been obliged to enlarge the idea of what constitutes wealth; and Say on his part had no other alternative than either to adopt the absurd view that mental labourers are not productive, as it was handed down to him by Adam Smith, or else to enlarge the idea of wealth as Adam Smith had done in opposition to the physiocrats, namely, to make it comprise productive power; and to argue, national wealth does not consist in the possession of exchangeable values, but in the possession of power to produce,
just as the wealth of a fisherman does not consist in the possession of fish, but in the ability and the means of continually catching fish to satisfy his wants.

It is noteworthy, and, so far as we are aware, not generally known, that Jean Baptiste Say had a brother whose plain clear common sense led him clearly to perceive the fundamental error of the theory of values, and that J. B. Say himself expressed to his doubting brother doubts as to the soundness of his own doctrine.

Louis Say wrote from Nantes, that a technical language had become prevalent in political economy which had led to much false reasoning, and that his brother Jean himself was not free from it.
*96 According to Louis Say, the wealth of nations does not consist in material goods and their value in exchange, but in the ability continuously to produce such goods. The exchange theory of Smith and J. B. Say regards wealth from the narrow point of view of an individual merchant, and this system, which would reform the (so-called) mercantile system, is itself nothing else than a restricted mercantile system.
*97 To these doubts and objections J. B. Say replied to his brother that ‘his (J. B. Say’s) method (method?) (viz. the theory of exchangeable values) was certainly not the best, but that the difficulty was, to find a better.’
*98

What! difficult to find a better? Had not brother Louis, then, found one? No, the real difficulty was that people had not the requisite acuteness to grasp and to follow out the idea which the brother had (certainly only in general terms) expressed; or rather, perhaps, because it was very distasteful to have to overturn the already established school, and to have to teach the precise opposite of the doctrine by which one had acquired celebrity. The only original thing in J. B. Say’s writings is the form of his system, viz. that he defined political economy as the science which shows how
material wealth is produced, distributed, and consumed. It was by this classification and by his exposition of it that J. B. Say made his success and also his school, and no wonder: for here
everything lay ready to his hand; he knew how to explain so clearly and intelligibly the special process of production, and the individual powers engaged in it; he could set forth so lucidly (within the limits of his own narrow circle) the principle of the division of labour, and so clearly expound the trade of individuals. Every working potter, every huckster could understand him, and do so the more readily, the less J. B. Say told him that was new or unknown. For that in the work of the potter, hands and skill (labour) must be combined with clay (natural material) in order by means of the potter’s wheel, the oven, and fuel (capital), to produce pots (valuable products or values in exchange), had been well known long before in every respectable potter’s workshop, only they had not known how to describe these things in scientific language, and by means of it to generalise upon them. Also there were probably very few hucksters who did not know before J. B. Say’s time, that by exchange both parties could gain values in exchange, and that if anyone exported 1,000 thalers’ worth of goods, and got for them 1,500 thalers’ worth of other goods from abroad, he would gain 500 thalers.

It was also well known before, that work leads to wealth, and idleness to beggary; that private self-interest is the most powerful stimulus to active industry; and that he who desires to obtain young chickens, must not first eat the eggs. Certainly people had not known before that all this was political economy; but they were delighted to be initiated with so little trouble into the deepest mysteries of the science, and thus to get rid of the hateful duties which make our favourite luxuries so dear, and to get perpetual peace, universal brotherhood, and the millennium into the bargain. It is also no cause for surprise that so many learned men and State officials ranked themselves among the admirers of Smith and Say; for the principle of ‘laissez faire et laissez aller’ demands no sagacity from any save those who first introduced and expounded it; authors who succeeded them had nothing to do but to reiterate, embellish, and elucidate their argument; and who might not feel the wish and have the ability to be a great statesman, if all one had to do was to fold one’s hands in one’s bosom? It is a strange peculiarity of these systems, that one need only adopt their first propositions, and let oneself be led credulously and confidingly by the hand by the author, through a few chapters, and one is lost. We must say to M. Jean Baptiste Say at the outset that
political economy is not, in our opinion, that science which teaches only how values in exchange are produced by individuals, distributed among them, and consumed by them; we say to him that a statesman will know and must know, over and above that, how the productive powers of a whole
nation can be awakened, increased, and protected, and how on the other hand they are weakened, laid to sleep, or utterly destroyed; and how by means of those national productive powers the national resources can be utilised in the wisest and best manner so as to produce national existence, national independence, national prosperity, national strength, national culture, and a national future.

This system (of Say) has rushed from one extreme view—that the State can and ought to regulate everything—into the opposite extreme—that the State can and ought to do nothing: that the individual is everything, and the State nothing at all. The opinion of M. Say as to the omnipotence of individuals and the impotence of the State verges on the ridiculous. Where he cannot forbear from expressing a word of praise on the efficacy of Colbert’s measures for the industrial education of France, he exclaims, ‘One could hardly have given
private persons credit for such a high degree of wisdom.’

If we turn our attention from the system to its author, we see in him a man who, without a comprehensive knowledge of history, without deep insight into State policy or State administration, without political or philosophical views, with merely one idea adopted from others in his head, rummages through history, politics, statistics, commercial and industrial relations, in order to discover isolated proofs and facts which may serve to support his idea. If anyone will read his remarks on the Navigation Laws, the Methuen Treaty, the system of Colbert, the Eden Treaty, &c. he will find this judgment confirmed. It did not suit him to follow out connectedly the commercial and industrial history of nations. That nations have become rich and mighty under protective tariffs he admits, only in his opinion they became so in spite of that system and not in consequence of it; and he requires that we should believe that conclusion on his word alone. He maintains that the Dutch were induced to trade directly with the East Indies, because Philip II. forbade them to enter the harbour of Portugal; as though the protective system would justify that prohibition, as though the Dutch would not have found their way to the East Indies without it. With statistics and politics M. Say is as dissatisfied as with history; with the former because no doubt they produce the inconvenient facts which he says ‘have so often proved contradictory of his system’—with the latter because he understood nothing at all of it. He cannot desist from his warnings against the pitfalls into which statistical facts may mislead us, or from reminding us that politics have nothing to do with political economy, which sounds about as wise as if anyone were to maintain that pewter must not be taken into account in the consideration of a pewter platter.

First a merchant, then a manufacturer, then an unsuccessful politician, Say laid hold of political economy just as a man grasps at some new undertaking when the old one cannot go on any longer. We have his own confession on record, that he stood in doubt at first whether he should advocate the (so-called) mercantile system, or the system of free trade. Hatred of the Continental system (of Napoleon) which had ruined his manufactory, and against the author of it who had turned him out of the magistracy, determined him to espouse the cause of absolute freedom of trade.

The term ‘freedom’ in whatever connection it is used has for fifty years past exercised a magical influence in France. Hence it happened that Say, under the Empire as well as under the Restoration, belonged to the Opposition, and that he incessantly advocated economy. Thus his writings became popular for quite other reasons than what they contained. Otherwise would it not be incomprehensible that their popularity should have continued after the fall of Napoleon, at a period when the adoption of Say’s system would inevitably have ruined the French manufacturers? His firm adherence to the cosmopolitical principle under such circumstances proves how little political insight the man had. How little he knew the world, is shown by his firm belief in the cosmopolitical tendencies of Canning and Huskisson. One thing only was lacking to his fame, that neither Louis XVIII. nor Charles X. made him minister of commerce and of finance. In that case history would have coupled his name with that of Colbert, the one as the creator of the national industry, the other as its destroyer.

Never has any author with such small materials exercised such a wide scientific terrorism as J. B. Say; the slightest doubt as to the infallibility of his doctrine was branded as obscurantism; and even men like Chaptal feared the anathemas of this politico-economical Pope. Chaptal’s work on the industry of France, from the beginning to the end, is nothing else than an exposition of the effects of the French protective system; he states that expressly; he says distinctly that under the existing circumstances of the world, prosperity for France can only be hoped for under the system of protection. At the same time Chaptal endeavours by an article in praise of free trade, directly in opposition to the whole tendency of his book, to solicit pardon for his heresy from the school of Say. Say imitated the Papacy even so far as to its ‘Index.’ He certainly did not prohibit heretical writings individually by name, but he was stricter still; he prohibits all, the non-heretical as well as the heretical; he warns the young students of political economy not to read too many books, as they might thus too easily be misled into errors; they ought to read only a few, but those good books, which means in other words,
‘You ought only to read me and Adam Smith, no others.’ But that none too great sympathy should accrue to the immortal father of the school from the adoration of his disciples, his successor and interpreter on earth took good care, for, according to Say, Adam Smith’s books are full of confusion, imperfection, and contradictions; and he clearly gives us to understand that one can only learn from himself ‘how one ought to read Adam Smith.’

Notwithstanding, when Say was at the zenith of his fame, certain young heretics arose who attacked the basis of his system so effectually and so boldly, that he preferred privately to reply to them, and meekly to avoid any public discussion. Among these, Tanneguy du Châtel (more than once a minister of State) was the most vigorous and the most ingenious.

‘Selon vous, mon cher critique,’ said Say to Du Châtel in a private letter, ‘il ne reste plus dans mon économie politique que des actions sans motifs, des faits sans explication, une chaîne de rapports dont les extrémités manquent et dont les anneaux les plus importants sont brisés. Je partage donc l’infortune d’Adam Smith, dont un de nos critiques a dit qu’il avait fait rétrograder l’économie politique.’
*99 In a postscript to this letter he remarks very naïvely, ‘Dans le second article que vous annoncez, il est bien inutile de revenir sur cette polémique,
par laquelle nous pouvions bien ennuyer le public.‘

At the present day the school of Smith and Say has been exploded in France, and the rigid and spiritless influence of the Theory of Exchangeable Values has been succeeded by a revolution and an anarchy, which neither M. Rossi nor M. Blanqui are able to exorcise. The Saint-Simonians and the Fourrierists, with remarkable talent at their head, instead of reforming the old doctrines, have cast them entirely aside, and have framed for themselves a Utopian system. Quite recently the most ingenious persons among them have been seeking to discover the connection of their doctrines with those of the previous schools, and to make their ideas compatible with existing circumstances. Important results may be expected from their labours, especially from those of the talented Michel Chevalier. The amount of truth, and of what is practically applicable in our day, which their doctrines contain, consists chiefly in their expounding the
principle of the confederation and the harmony of the productive powers. Their annihilation of individual freedom and independence is their weak side; with them the individual is entirely absorbed in the community, in direct contradiction to the Theory
of Exchangeable Values, according to which the individual ought to be everything and the State nothing.

It may be that the spirit of the world is tending to the realisation of the state of things which these sects dream of or prognosticate; in any case, however, I believe that many centuries must elapse before that can be possible. It is given to no mortal to estimate the progress of future centuries in discoveries and in the condition of society. Even the mind of a Plato could not have foretold that after the lapse of thousands of years the instruments which do the work of society would be constructed of iron, steel, and brass, nor could that of a Cicero have foreseen that the printing press would render it possible to extend the representative system over whole kingdoms, perhaps over whole quarters of the globe, and over the entire human race. If meanwhile it is given to only a few great minds to foresee a few instances of the progress of future thousands of years, yet to every age is assigned its own special task. But the task of the age in which we live appears not to be to break up mankind into Fourrierist ‘phalanstères,’ in order to give each individual as nearly as possible an equal share of mental and bodily enjoyments, but to perfect the productive powers, the mental culture, the political condition, and the power of whole nationalities, and by equalising them in these respects as far as is possible, to prepare them beforehand for universal union. For even if we admit that under the existing circumstances of the world the immediate object which its apostles had in view could be attained by each ‘phalanstère,’ what would be its effect on the power and independence of the nation? And would not the nation which was broken up into ‘phalanstères,’ run the risk of being conquered by some less advanced nation which continued to live in the old way, and of thus having its premature institutions destroyed together with its entire nationality? At present the Theory of Exchangeable Values has so completely lost its influence, that it is almost exclusively occupied with inquiries into the nature of Rent, and that Ricardo in his ‘Principles of Political Economy’ could write, ‘The chief object of political economy is to determine the laws by which the produce of the soil ought to be shared between the landowner, the farmer, and the labourer.’

While some persons are firmly convinced that this science is complete, and that nothing essential can further be added to it, those, on the other hand, who read these writings with philosophical or practical insight, maintain, that as yet there is no political economy at all, that that science has yet to be constructed; that until it is so, what goes by its name is merely an astrology, but that it is both possible and desirable out of it to produce an astronomy.

Finally, we must remark, in order not to be misunderstood, that our criticism of the writings alike of J. B. Say and of his predecessors and successors refers only to their national and international bearing; and that we recognise their value as expositions of subordinate doctrines. It is evident that an author may form very valuable views and inductions on individual branches of a science, while all the while the basis of his system may be entirely erroneous.

96.

Louis Say,
Etudes sur la Richesse des Nations, Preface, p. iv.

97.

The following are the actual words of Louis Say (p. 10): ‘La richesse ne consiste pas dans les choses qui satisfont nos besoins ou nos goûts, mais dans le pouvoir d’en jouir annuellement.’ And further (pp. 14 to 15): ‘Le faux système mercantil, fondé sur la richesse en métaux précieux, a été remplacé par un autre fondé sur la richesse en valeurs vénales ou échangeables, qui consiste à n’évaluer ce qui compose la richesse d’une nation que comme le fait un marchand.’ And (note, p. 14): ‘L’école moderne qui refute le système mercantil a elle-mêmecréé un système qui lui-même doit être appelé le système mercantil.’

98.

Etudes sur la Richesse des Nations, p. 36 (quoting J. B. Say’s words): ‘Que cette méthode était loin d’être bonne, mais que la difficulté était d’en trouver une meilleure.’

99.

Say,
Cours complet d’Economie politique pratique, vii. p. 378.

Chapter XXXIII

Categories: Friedrich List