Friedrich List Doctrines

Friedrich List

His Influence Upon Subsequent Protectionist Doctrines

The question of the origin of List's Protectionist ideas has frequently been raised. The works of the Frenchmen Dupin and Chaptal un­doubtedly gave him some material for reflection, but he was really confirmed in his opposition to laissez-faire by the men whom he met in America. While there he came into intimate contact with the members of a society which had been founded at Philadelphia for the encouragement of national industry. The founder of this society was an American statesman named Hamilton, the author of a celebrated report upon manufactures, who as far back as 1791 had advocated the establishment of Protection for the encouragement of struggling American industries. Hamilton's argument, as List fully recognized, bears a striking similarity to the thesis of the National System The Philadelphian society, which was then presided over by Matthew Carey (the father of the economist of whom we shall have to speak by and by), immediately after List's arrival in America inaugurated an active campaign on behalf of a revision of the tariffs. Ingersoll, the vice-president, persuaded List to join in the campaign, which he did by publishing in 1827 a number of letters which caused quite a sensation. They are really just a resume of the National System. The policy which in the course of a few years he was to advocate in Germany he now recommended to the consideration of the Americans.

But facts were even more eloquent than books, and what chiefly struck the practical mind and the observant eye of List was the material success of American Protection, just as in Germany he had been im­pressed by the beneficial effects which temporary Protection enforced by the Continental Blockade had produced there.

Far from being injurious to the economic development of the United States, it seemed as if Protection had really helped it. What it actually did was to quicken by the space of a few years an evolution which Nature herself was one day bound to accomplish. So vast was the territory, so abundant the natural resources, and so advantageously were they placed for the application of human energy that no system, however defective, could long have delayed the accumulation of wealth. The similar condition of Germany lent colour to the belief that the same experiment carried on in similar circumstances would also succeed there.

Accordingly, List's work, though not directly connected with any known American system, is the first treatise'which gives a clear indica­tion of the influence upon European thought of the economic ex­periences of the New World.
In a beautiful paragraph in the National System List has himself confessed to this.

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.

Though from this point of view List's Protectionism seems closely connected with the most modern of economic units, a still closer tie links him to the Mercantilism of old. Nor did he ever dissemble his love for the Mercantilists, especially for Colbert. He accused Smith and Say of having misunderstood them, and he declared that they themselves more justly deserved the title of Mercantilists because of their attempt to apply to whole nations a very simple conception which they had merely copied from a merchant's note-book, namely, the advice to buy in the cheapest and sell in the dearest market. He distinguishes between two classes of Mercantilists according as they are influenced by one or other of two dominating ideas. On the one hand we have those who emphasize the importance of industrial education, which is the dominant note in List's philosophy. This idea has quite taken the place of the older idea of a favourable balance of trade, and has been adopted by such a Liberal thinker as John Stuart Mill, whereas the other has been definitely rejected by the science. Furthermore, the Mercantilism of the seventeenth century was a special instrument employed in the interests of a permanent policy, which was exclusively national; while List's Protection, according to his own opinion, was merely a means of leading nations towards the possibility of union on a footing of equality. It was a mere transitory system, a policy dictated by circumstances.

List's system cannot be regarded as the inspirer of modern Protec­tion, any more than he himself can be regarded as a direct descendant of the old Mercantilists. Even in Germany, despite the great literary success of his work, its influence was practically nil, unless we credit it with the slight increase of taxation upon which the Zollverein decided in 1844, and couple with it the Protectionist campaign afterwards carried on by List in the columns of his newspaper. But the Lib­eral reforms carried out by the English Parliament under the Premiership of Peel were during that very same year crowned by the abolition of the Corn Laws. This measure caused much consternation throughout Europe, and the confirmation which Cobden's ideas thus received influenced public opinion a good deal and gave a Liberal trend to the commercial policy of Europe during the next few years. The regime of commercial treaties inaugurated by Napoleon III was an outcome of this change of feeling.

Towards the end of 1879 a vague kind of Protectionism made its appearance in Europe. Tariff walls were raised, but they never seemed to be high enough. One would like to know whether these new tariffs, established successfully by Germany and France, were in any way inspired by List's ideas.

It does not seem that they were. Neither of the two countries which have remained faithful to a thoroughgoing Protection any longer needs industrial education. Both of them have long since arrived at that complex state which, according to List, is necessary for the full develop­ment of their civilization and the expansion of their power. Were he to return to this world to-day, List, who so energetically emphasized the relative value of the various commercial systems, and the necessity of adapting one's method to the changing conditions of the times and the character of the nation, but always laid such stress upon the essentially temporary character of the tariffs raised, would perhaps find himself ranged on the side of those who demand a lowering of those barriers in the interest of a more liberal expansion of productive forces. Has he himself not declared that "in a few years the civilized nations of the world, through the perfection of the means of transport, through the influence of material and intellectual ties, will be as united, nay, even more closely knit together, than were the counties of England, a hun­dred years ago"?

Even the profound changes in the international economic situation during the nineteenth and twentieth centuries fail to supply a serious justification for the Protectionist policy of the great commercial nations, and the essential traits of this new regime differ toto ccelo from the outlines supplied by List. Far from allowing agriculture to develop naturally, there has arisen the cry for some protection for the farmer, which has served as a pretext for a general reinforcement of tariffs in many cases, notably in France and Germany. The competition of American corn has hindered European agriculture from benefiting by the advancement of industry as List had predicted. Modern tariffs, in­volving as they do the taxation of both agricultural and industrial pro­ducts, imply a conception of Protection entirely different from List's. He would have confined Protection to the most important branches of national production—to those industries from which the other and secondary branches receive their supplies. Only on this ground would he have justified exceptional treatment. It is an essentially vigorous conception, and what he sought of Protection was an energetic stimu­lant and an agent of progress. But a tariff which indifferently protects every enterprise, which no longer distinguishes between the fertilizing and the fertilized industries, and increases all prices at the same time, can have only one effect—a loss for one producer and a gain for another. Their relative positions remain intact. It is no longer a means of stimulating productive energy; it is merely a general instru­ment of defence against foreign competition, and is essentially con­servative and timorous.

To speak the truth, tariff duties are never of the nature of an application of economic doctrines. They are the results of a com­promise between powerful interests which often enough have nothing in common with the general interest, but are determined by purely political, financial, or electoral considerations. Hence it is futile to hope for a trace of List's doctrines in the Protective tariffs actually in operation. His influence, if indeed it is perceptible anywhere, must be sought amid the subsidiary doctrines which uphold them.

The only complete exposition of Protectionism that has been given us since List's is that of Carey, the American economist. Carey was at first a Free Trader, but in 1858 became a Protectionist, and his ideas, which were expounded in his great work The Principles of Social Science, published in 1858-59, bear a striking resemblance to those of his German predecessor.

Carey, like List, directs his attack against the industrial pre­eminence of England, and substitutes for the ideal of international division of labour the ideal of independent nationality, each nation devoting itself to all branches of economic activity, and thus evolving its own individuality. According to him, Free Trade tends to "estab­lish one single factory for the whole world, whither all the raw produce has to be sent whatever be the cost of transport." The effect of this system is to hinder or retard the progress of all nations for the sake of this one. But a society waxes wealthy and strong only in proportion as it helps in the development of a number of productive associations wherein various kinds of employments are being pursued, which in­crease the demand for mutual services and aid one another by their very proximity. Such associations alone are capable of developing the latent faculties of man and of increasing his hold upon nature. These two traits help to define economic progress. Under a slightly different form we have a picture of the normal nation or the complex State so dear to the heart of Friedrich List—an ideal of continuous progress as the object of commercial policy being substituted for one of immediate enrichment.

Following List, but in a still more detailed fashion, Carey sought to show the beneficial effects that the proximity of protected industry would have upon agriculture. But unfortunately there are other arguments upon which Carey lays equal stress that are really of a much more debatable character.

Protection, according to Carey, by furnishing a ready market for agricultural products, would free agriculture from the burden of an exorbitant cost of carriage to a distant place. This argument, which List merely threw out as a passing suggestion, continually recurs with the American author. But, as Stuart Mill justly remarked, if America consents to such expenditure it affords a proof that she procures by means of international exchange more manufactured goods than if she manufactured them herself.

Another no less debatable point: The exportation of agricultural products, says Carey, exhausts the soil, for the products being con­sumed away from the spot where they are grown, the fertilizing agents which they contain are not restored to the earth; a manufacturing population in the immediate neighbourhood would remedy this. But, as John Stuart Mill again remarks, and justly enough, it is not Free Trade that forces America to export cereals. If she does so, it is because exhaustion of soil appears to her an insignificant inconvenience compared with the advantage gained by exportation.

Carey, finally, was one of the first to discover in Protection a means of increasing wages. Once the complex economic State is established there arises a keen competition between the entrepreneurs who require the service of labour—a competition which naturally benefits the work­man. But this advantage, granting that it does exist, is more than counterbalanced by the increased price of goods.

We see that Carey, although sharing the fundamental conceptions of List, employs arguments that are much less valid. Both in power of exposition and in the scientific value of his work, the German author shows himself vastly superior to his American successor. He is also much more moderate. Carey is not content with industrial Protection; he demands agricultural Protection as well, and the duties, though they are a little higher than those proposed by List, seem hardly sufficient for him.
Despite all this similarity of views, Carey does not owe his inspira­tion to List. He was acquainted with the National System and he quoted it. But American economic literature had already supplied him with analogous suggestions. Even more than books, the economic life of America itself as it evolved before his very eyes had contributed to the formation of his ideas. It was the progress of America under a Protec­tive regime, it was the spectacle of a country as yet entirely new and sparsely populated, increasing the produce of her soil as colonization extended, and multiplying her wealth as population became more dense, that inspired him with the idea of a policy of isolation with a view to hastening the utilization of those enormous resources. More fortunate than List, Carey lived to see his ideas accepted, if not by the scientific experts of his country (who on the whole remained aloof), at least by the American politician, who has applied his principles rather freely.
Carey's doctrine, accordingly, cannot be attributed directly to the influence of List. It remains to be seen whether List had any influence upon European doctrines.

He undoubtedly succeeded in forcing the acceptance of the idea of a temporary Protection for infant industries even upon Free Traders. The most notable convert to this view was John Stuart Mill. But it was a somewhat Platonic concession that he made. He thought it inapplicable to old countries, for their education was no longer in­complete, and at best useful only for new countries.

Can modern Protectionists claim descent from List? In the absence of any systematic treatise dealing with their ideas, it is not always easy to glean the significance of their doctrines from the various articles, discourses, and brochures amid which they are scattered. Neglecting those writers who are merely content to reproduce the old fallacies of the Mercantile arguments concerning the balance of trade, the majority of them appear to base their case more or less explicitly upon two principal arguments: (1) the necessity for economic autonomy; (2) the patriotic necessity of securing a national market for national products. These two points of view, which are more or less clearly avowed and accepted as political maxims, would, if applied with logical strictness, result in making all external commerce useless. Each nation would thus be reduced to using just those resources with which Nature had happened to endow it, but it could get little if any of the goods produced by the rest of mankind. These two ideas were not absolutely foreign to List's thought, although they never assumed anything more than a secondary or subordinate character. He never considered them as the permanent supports of a commercial policy.

List frequently spoke of making a nation independent of foreign markets by means of industry. He considered that nation highest which "has cultivated manufacturing industry in all its branches within its territory to the highest perfection, and whose territory and agricultural production is large enough to supply its manufacturing population with the largest part of the necessaries of life and raw materials which they require." But he also recognized that such advantages were exceptional, and that it would be folly for a nation to attempt to supply itself by means of national division of labour— that is, by home production—with articles for the production of which it is not favoured by nature, and which it can procure better and cheaper by means of international division of labour, or, in other words, through foreign commerce. Complete autonomy is accordingly an illusion. But we cannot deny that some of his expressions seem to give credit to the false idea that a country which obtains a considerable portion of its consumption goods from foreigners must be dependent upon those foreigners. In fact, it is no more dependent upon the foreigner than the foreigner is upon it. In the case of a buyer and seller who is the dependent person? There is but one instance in which the expression is justified, and that is when a foreign country has become the only source of supply for certain commodities. Then the buyer does become dependent, and List rightly enough had in view the manufactur­ing monopoly enjoyed by England—a monopoly that no longer exists. He also spoke of retaining the home market for home-made goods; but he thought that this guarantee would of necessity have to be limited to the period when a nation is seeking to create an industry for itself: at a later period foreign competition becomes desirable in order to keep manufacturers and workmen from indolence and indifference.

At no period was List anxious to make economic autonomy or the preservation of the home market the pivot of his commercial policy. The creation of native industry is the only justification of protective rights, but this is the one point which modern Protectionists cannot insist upon without anachronism.

List left no marked traces of his influence either upon practical politics or upon Protectionist doctrines. It is in his general views that we must seek the source of his influence and the reason for the position which he holds in the history of economic doctrines.