Scanned and edited by Arno Mong Daastoel [email protected] 2005-10-23 Text on spine: FRIEDRICH LIST The Natural System of Political Economy Translated and edited by W.0. Henderson Backside: FRIEDRICH LIST: ECONOMIST AND VISIONARY 1789-1846 W. O. Henderson Dr. Henderson's account of the life and work of Friedrich List, the first English biography of this German economist to appear for 70 years, is based upon List's collected works and on his papers in the archives of the city of Reutlingen. In two major works — The Natural System of Political Economy and The National System of Political Economy — he attacked the theories of Adam Smith and his followers and enunciated his own doctrines of "productive powers" and stages of economic growth, and advocated the imposition of import duties to safeguard infant industries. He advocated the industrialisation of underdeveloped countries and championed the cause of the "third world" of his day. Dr. Henderson's discussion of List's eventful career in Germany, France, and the United States — as civil servant, professor, politician, and journalist — is followed by an examination of List as an economist, as a railway promoter, and as a champion of German unification. He was the driving force behind the construction of two of the earliest railways to be built in the United States and Germany. He promoted the establishment and expansion of the German customs union and he had visions of the economic expansion of Germany and Austria Hungary in central European the Balkans, and in the Near East. FRANK CASS FRIEDRICH LIST The Natural System of Political Economy * * * * Translated and edited by W.0. Henderson THE NATURAL SYSTEM OF POLITICAL ECONOMY Translated and edited by W. O. Henderson Friedrich List, a leading German economist in the first half of the nineteenth century, wrote his first substantial thesis in Paris in 1839. This book, The Natural System of Political Economy, was not published until 90 years later and has now been translated into English for the first time. The book is considerably shorter than List's well known The National System of Political Economy which appeared in 1841. The importance of The Natural System lies not so much in List's advocacy of the fiscal policy of protection as in the relatively new doctrines that he put forward. While the English classical economists had examined problems concerning population, exchange-value, money, rent, and the allocation of scarce resources, List discussed stages of economic growth, "productive powers", and the industrialisation of backward regions. As the German editor of The Natural System observes: "List's most important and fundamental teachings are fully developed in this book. Above all the theory of the stages of economic growth finds full classic expression as a central theme in List's thinking ... In his treatise List frequently gives clear, systematic, and brief explanations in numbered paragraphs of his most important doctrines, which are not so clearly stated in any of his other works". W. O. Henderson is well-known for his major contributions in the field of modern European economic history. After a first degree at Cambridge, and a doctorate at London, Dr. Henderson's university teaching career took him to Cambridge, Liverpool and Hull before the interruption of the Second World War. After the war, he joined Manchester University, where he was Reader in International Economic History until his retirement; he was also a frequent lecturer at German universities. The Genesis of the Common Market (1962) Industrial Britain under the Regency (1968) The Industrial Revolution on the Continent (1961) /. C. Fisher and his Diary of Industrial England 1814-1851(1966) Life of Friedrich Engels, 2 vols. (1976) Studies in the Economic Policy of Frederick the Great (1963) The Zollverein (1959,2nd ed. 1968) Dr. Henderson has also written Britain & Industrial Europe (Leicester U.P., 1965), The Industrialisation of Europe 1780—1914 (Thames & Hudson, 1969) and The Rise of German Industrial Power 1834—1914 (Temple Smith, 1975), and edited Engels: Selected Writings (Penguin Books, 1967). THE NATURAL SYSTEM OF POLITICAL ECONOMY FRIEDRICH LIST The Natural System of Political Economy 1837 Translated and edited by W.0. Henderson FRANSK CASS Jacket design by Andy Jones First published 1983 in Great Britain by FRANK CASS AND COMPANY LIMITED Gainsborough House, 11 Gainsborough Road, London Ell IRS, England and in the United States of America by FRANK CASS AND COMPANY LIMITED c/o Biblio Distribution Centre 81 Adams Drive, P.O. Box 327, Totowa, N.J. 07511 Copyright © 1983 W.O. Henderson British Library Cataloguing in Publication Data List, Friedrich The natural system of political economy 1837. 1. Microeconomics I. Title II. Henderson, W.O. III. Das nationale System der politischen Oekonomie. English 338.5 HB171.5 ISBN 0-7146-3206-6 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Frank Cass and Company Limited. Typeset by John Smith, London Printed in Great Britain by T. J. Press (Padstow) Ltd., Padstow, Cornwall CONTENTS Editor's Introduction 1 List's Introduction 17 1. Cosmopolitan Economics 27 2. National Economics 29 3. Theory of Productive Powers 34 4. Theory of Value 36 5. The Differences between Countries and their National Economies 41 6. The Dominant Nation 46 7. The Common Interest of all Manufacturing States in Free Trade 49 8. The Opposition of Countries to the Dominant Nation in Industry, Commerce, and Sea Power 51 9. The Productive Powers of Agriculture in the First Stage of Economic Development 52 10. The Productive Powers of-Agriculture in the Second Stage of Economic Development 54 11. The Productive Powers of Agriculture in the Third Stage of Economic Development 60 12. The Productive Powers of Industry 66 13. The Productive Powers of Industry (continued) 70 14. Does the Development of Industry withdraw Capital from Agriculture? 76 15. Does the Protection of Industry by a Tariff give Manufacturers a Monopoly Prejudicial to the Consumers of the Goods that they make? 80 16. Are the Interests of Consumers sacrificed if the Home Market is dominated by native Manufacturers? 82 17. Is it necessary to protect Agriculture and, if so, in what Circumstances? 85 18. Agriculture and Industry in the Fourth Period of Economic Development 91 19. The Productive Powers of Commerce 94 20. How do the Interests of Commerce differ from the Interests of Individual Merchants? 99 21. Protection by Means of a Tariff 105 22. Tariffs: Prohibitions and Duties on Imports and Exports 109 23. Tariffs: The Policy of Protection 114 24. Transition from the System of Prohibitions to the Policy of Protection 118 25. Transition from the Policy of Protection to the Policy of as much Free Trade as possible 122 26. How best to introduce and to foster Free Trade 124 27. History of England's Economic Policy 128 28. History of France's Economic Policy 141 29. History of Germany's Economic Policy 152 30. Economic Policy of Spain, Portugal and Italy 162 History of the Economic Policy of the United States of America 170 31. History of Russia's Economic Policy 177 32. The Spirit of different Economic Doctrines in Relation to Tariff Laws 178 33. The Natural System of Political Economy 189 34. The Question posed by the Academy 191 Appendix. List's Note to Chapter 4 193 Index 197 EDITOR'S INTRODUCTION FRIEDRICH LIST, a leading German economist and journalist in the first half of the nineteenth century, was one of the earliest and severest critics of the classical school of economists. He denounced Adam Smith and his disciples as the "cosmopolitan school" and advocated what he called first a "natural" and then a "national" doctrine of economics. He held that universal free trade was an ideal that might be achieved in the far distant future but, for the time being, each nation should foster the development of its own manufactures by prohibitions, import duties, subsidies, and navigation laws so as to restrict the flow of imports from more advanced industrial countries. Only by such means could countries like France, Germany, Russia, and the United States ever hope to reach a standard of industrial efficiency which would enable them to compete on equal terms with Britain which was at that time by far the most advanced manufacturing country in the world. List was no mere armchair critic of the free traders. He had taken an active part in fiscal controversies in America and in Germany. In the United States, where he lived from 1825 to 1832 (except for an interval of a year),1 List had become involved in the struggle between protectionists and free traders that preceded the passing of a new tariff law in 1828. He had vigorously supported the propaganda campaign in favour of higher import duties mounted by the Philadelphia Society for the Promotion of Manufactures and the Mechanic Arts. In a series of letters to Charles Ingersoll, published in the National Gazette (Philadelphia) in 1827, List had argued in favour of greater protection for the American iron and textile industries. In the same year the letters appeared in two pamphlets entitled Outlines of American Political Economy and Appendix to the Outlines of American Political Economy.2 In Germany List had taken a leading part in the agitation in favour of protection. In 1819, as a young man, he had drawn up a 1 petition on behalf of a Union of German Merchants for submission to the Federal Diet in which he had urged the German states to set up a customs union with a tariff "based upon the principle of retaliation against foreign countries".