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.

SOME EXTRACTS FROM THE AUTHOR’S PREFACE TO THE FIRST EDITION.

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.

In 1819 all Germany teemed with schemes and projects for new political institutions. Rulers and subjects, nobles and plebeians, officers of State and men of learning, were all occupied with them. Germany was like an estate which had been ravaged by war, whose former owners on resuming possession of it are about to arrange it afresh. Some wanted to restore everything exactly as it had been, down to every petty detail; others to have everything on a new plan and with entirely modern implements; while some, who paid regard both to common sense and to experience, desired to follow a middle course, which might accommodate the claims of the past with the necessities of the present. Everywhere were contradiction and conflict of opinion, everywhere leagues and associations for the promotion of patriotic objects. The constitution of the Diet itself was new, framed in a hurry, and regarded by the most enlightened and thoughtful diplomatists as merely an embryo from which a more perfect state of things might be hoped for in the future. One of its articles (the 19th) expressly left thedoor open for the establishment of a
national commercial system. This article appeared to me to provide a basis on which the future industrial and commercial prosperity of the German Fatherland
might rest, and hence the idea arose of establishing a league of German merchants and manufacturers for the abolition of our internal tariffs and the adoption of a common commercial policy for the whole of Germany. How this league took root, and led to united action between the noble-minded and enlightened rulers of Bavaria and Würtemberg, and later to the establishment of the German Zollverein, is well known.

As adviser of this German commercial league, I had a difficult position. All the scientifically educated Government employés, all the newspaper editors, all the writers on political economy, had been trained up in the cosmopolitical school, and regarded every kind of protective duty as a theoretical abomination. They were aided by the interests of England, and by those of the dealers in English goods in the ports and commercial cities of Germany. It is notorious what a powerful means of controlling public opinion abroad is possessed by the English Ministry in their ‘secret service money’; and they are not accustomed to be niggardly where it can be useful to their commercial interests. An innumerable army of correspondents and leader-writers, from Hamburg and Bremen, from Leipzig and Frankfort, appeared in the field to condemn the unreasonable desires of the German manufacturers for a uniform protective duty, and to abuse their adviser in harsh and scornful terms; such as, that he was ignorant of the first principles of political economy as held by the most scientific authorities, or else had not brains enough to comprehend them. The work of these advocates of the interests of England was rendered all the easier by the fact that the popular theory and the opinions of German learned men were on their side.

The contest was clearly being fought with unequal weapons. On one side a theory thoroughly elaborated and uncontradicted, a compact school, a powerful party which had advocates in every legislature and learned society, but above all the great motive power—money. On the other side poverty and want, internal divisions, differences of opinion, and absolute lack of a theoretical basis.

In the course of the daily controversy which I had to conduct, I was led to perceive the distinction between the
theory of values and the
theory of the powers of production, and beneath the false line of argument which the popular school
has raised out of the term
capital. I learned to know the difference between
manufacturing power and
agricultural power. I hence discovered the basis of the fallacy of the arguments of the school, that it urges reasons which are only justly applicable to free trade in agricultural products, as grounds on which to justify free trade in manufactured goods. I began to learn to appreciate more thoroughly the principle of the division of labour, and to perceive how far it is applicable to the circumstances of
entire nations. At a later period I travelled through Austria, North Germany, Hungary, Switzerland, France, and England, everywhere seeking instruction from observation of the actual condition of those countries as well as from written works. When afterwards I visited the United States, I cast all books aside—they would only have tended to mislead me. The best work on political economy which one can read in that modern land is actual life. There one may see wildernesses grow into rich and mighty States; and progress which requires centuries in Europe, goes on there before one’s eyes, viz. that from the condition of the mere hunter to the rearing of cattle—from that to agriculture, and from the latter to manufactures and commerce. There one may see how rents increase by degrees from nothing to important revenues. There the simple peasant knows practically far better than the most acute savants of the old world how agriculture and rents can be improved; he endeavours to attract
manufacturers and artificers to his vicinity. Nowhere so well as there can one learn the importance of means of transport, and their effect on the mental and material life of the people.

That book of actual life, I have earnestly and diligently studied, and compared with the results of my previous studies, experience, and reflections.

And the result has been (as I hope) the propounding of a system which, however defective it may as yet appear, is not founded on bottomless cosmopolitanism, but on the nature of things, on the lessons of history, and on the requirements of the nations. It offers the means of placing theory in accord with practice, and makes political economy comprehensible by every educated mind, by which previously, owing to its scholastic bombast, its contradictions, and its utterly false terminology, the sound sense of mankind had been bewildered.

I would indicate, as the distinguishing characteristic of my system, NATIONALITY. On the nature of
nationality, as the intermediate interest between those of
individualism and of
entire humanity, my whole structure is based. I hesitated for some time whether I should not term mine the
natural system of political economy, but was dissuaded from so doing by the remark of a friend, that under that title superficial readers might suppose my book to be a mere revival of the physiocratic system.

I have been accused by the popular school, of merely seeking to revive the (so-called) ‘mercantile’ system. But those who read my book will see that I have adopted in my theory merely the valuable parts of that much-decried system, whilst I have rejected what is false in it; that I have advocated those valuable parts on totally different grounds from those urged by the (so-called) mercantile school, namely, on the grounds of history and of nature; also that I have refuted for the first time from those sources the arguments urged a thousand times by the cosmopolitical school, and have exposed for the first time the false train of reasoning which it bases on a bottomless cosmopolitanism, on the use of terms of double meaning, and on illogical arguments.

If I appear to condemn in too strong language the opinions and the works of individual authors or of entire schools, I have not done so from any personal arrogance. But as I hold that the views which I have controverted are injurious to the public welfare, it is necessary to contradict them energetically. And authors of celebrity do more harm by their errors than those of less repute, therefore they must be refuted in more energetic terms.

To candid and thoughtful critics I would remark (as respects tautology and recapitulation), that everyone who has studied political economy knows how in that science all individual items are interwoven in manifold ways, and that it is far better to repeat the same thing ten times over, than to leave one single point in obscurity. I have not followed the prevailing fashion of citing a multitude of quotations. But I may say that I have read a hundred-fold more writings than those from which I have quoted.

In writing this preface I am humbly conscious that much
fault may be found with my work; nay, that I myself might even now do much of it better. But my sole encouragement lies in the thought, that nevertheless much will be found in my book that is new and true, and also somewhat that may serve especially to benefit my German Fatherland.

Cf. ‘England and America, 1660 to 1760,’ in
Economic Surveys, by Professor Ashley, and Dr. Cunningham’s
Growth of English Industry and Commerce, vol. ii. (edition 1903).

‘The principle of retaliation is reasonable and applicable only if it coincides with the principle of the
industrial development of the nation, if it serves as it were as an assistance to this object’ (p. 255).

Memoir, by J. Shield Nicholson

Abridged from
Friedrich List, ein Vorläufer und ein Opfer für das Vaterland. (Stuttgart, 1877.)

Chapter I

Categories: Friedrich List