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The National System of Political Economy; List, Friedrich
26 paragraphs found.

Among many other results expected from the repeal of the English Corn Laws, it was anticipated that that measure would lead to the abolition of the protective duties imposed by Germany on foreign manufactures. But, according to List, it is only when a nation has reached such a stage of development that she can bear the strain of competition with foreign manufactures without injury in any respect, that she can safely dispense with protection to her own manufactures, and enter on a policy of general free trade. This, in fact, is the central idea of List's theory, which in its economical aspect he opposed to the cosmopolitical theory of Adam Smith and J. B. Say, and in its political and national aspect to their theory of universal freedom of trade. These views he maintained in many of his essays, more particularly in those 'On Free Trade and Protection,' and 'On the Nature and Value of a National Manufacturing Industry.' It was not until List's articles appeared that any public discussion of these questions had taken place in Germany, and to him certainly belongs the credit of having first awakened any general public interest in them.

Book I, Chapter 2

These facts, it would appear, Adam Smith was not willing to know or to acknowledge; for indeed they belong to the category of those inconvenient facts of which J. B. Say observes that they would have proved very adverse to his system.

Book I, Chapter 4

Was England a fool in so acting? Most assuredly, according to the theories of Adam Smith and J. B. Say, the Theory of Values. For, according to them, England should have bought what she required where she could buy them cheapest and best: it was an act of folly to manufacture for herself goods at a greater cost than she could buy them at elsewhere, and at the same time give away that advantage to the Continent.


J. B. Say, though he might have known better from the experience of North America, here too, as in every instance where the principles of free trade and protection clash, goes still farther than his predecessor. Say reckons up what the cost of a sailor to the French nation is, owing to the fishery bounties, in order to show how wasteful and unremunerative these bounties are.

Book I, Chapter 6
A highly accomplished American orator, Mr. Baldwin, Chief Justice of the United States, when referring to the Canning-Huskisson system of free trade, shrewdly remarked, that, like most English productions, it had been manufactured not so much for home consumption as for exportation.

Shall we laugh most or weep when we call to mind the rapture of enthusiasm with which the Liberals in France and Germany, more particularly the cosmopolitan theorists of the philanthropic school, and notably Mons. J. B. Say, hailed the announcement of the Canning-Huskisson system? So great was their jubilation, that one might have thought the millennium had come. But let us see what Mr. Canning's own biographer says about this minister's views on the subject of free trade.

'Mr. Canning was perfectly convinced of the truth of the abstract principle, that commerce is sure to flourish most when wholly unfettered; but since such had not been the opinion either of our ancestors or of surrounding nations, and since in consequence restraints had been imposed upon all commercial transactions, a state of things had grown up to which the unguarded application of the abstract principle, however true it was in theory, might have been somewhat mischievous in practice.' ( The Political Life of Mr. Canning, by Stapleton, p. 3.)

In the year 1828, these same tactics of the English had again assumed a prominence so marked that Mr. Hume, the Liberal member of Parliament, felt no hesitation in stigmatising them in the House as the strangling of Continental industries.

Book I, Chapter 7

Next followed Napoleon's Continental blockade, an event which marked an era in the history of both German and French industry, notwithstanding that Mons. J. B. Say, Adam Smith's most famous pupil, denounced it as a calamity. Whatever theorists, and notably the English, may urge against it, this much is clearly made out—and all who are conversant with German industry must attest it, for there is abundant evidence of the fact in all statistical writings of that day—that, as a result of this blockade, German manufactures of all and every kind for the first time began to make an important advance; *61 that then only did the improved breeding of sheep (which had been commenced some time before) become general and successful; that then only was activity displayed in improving the means of transport. It is true, on the other hand, that Germany lost the greater part of her former export trade, especially in linens. Yet the gain was considerably greater than the loss, particularly for the Prussian and Austrian manufacturing establishments, which had previously gained a start over all other manufactories in the German states.

Book I, Chapter 9

No nation has been so misconstrued and so misjudged as respects its future destiny and its national economy as the United States of North America, by theorists as well as by practical men. Adam Smith and J. B. Say had laid it down that the United States were, 'like Poland,' destined for agriculture. This comparison was not very flattering for the union of some dozen of new, aspiring, youthful republics, and the prospect thus held out to them for the future not very encouraging. The above-mentioned theorists had demonstrated that Nature herself had singled out the people of the United States exclusively for agriculture, so long as the richest arable land was to be had in their country for a mere trifle. Great was the commendation which had been bestowed upon them for so willingly acquiescing in Nature's ordinances, and thus supplying theorists with a beautiful example of the splendid working of the principle of free trade. The school, however, soon had to experience the mortification of losing this cogent proof of the correctness and applicability of their theories in practice, and had to endure the spectacle of the United States seeking their nation's welfare in a direction exactly opposed to that of absolute freedom of trade.

Book II, Chapter 11

J. B. Say openly demands that we should imagine the existence of a universal republic in order to comprehend the idea of general free trade. This writer, whose efforts were mainly restricted to the formation of a system out of the materials which Adam Smith had brought to light, says explicitly in the sixth volume (p. 288) of his 'Economie politique pratique': 'We may take into our consideration the economical interests of the family with the father at its head; the principles and observations referring thereto will constitute private economy. Those principles, however, which have reference to the interests of whole nations, whether in themselves or in relation to other nations, form public economy (l'économie publique). Political economy, lastly, relates to the interests of all nations, to human society in general.'

Book II, Chapter 12

Adam Smith has on the whole recognised the nature of these powers so little, that he does not even assign a productive character to the mental labours of those who maintain laws and order, and cultivate and promote instruction, religion, science, and art. His investigations are limited to that human activity which creates material values. With regard to this, he certainly recognises that its productiveness depends on the 'skill and judgment' with which it is exercised; but in his investigations as to the causes of this skill and judgment, he does not go farther than the division of labour, and that he illustrates solely by exchange, augmentation of material capital, and extension of markets. His doctrine at once sinks deeper and deeper into materialism, particularism, and individualism. If he had followed up the idea ' productive power,' without allowing his mind to be dominated by the idea of 'value,' 'exchangeable value,' he would have been led to perceive that an independent theory of the 'productive power,' must be considered by the side of a ' theory of values' in order to explain the economical phenomena. But he thus fell into the mistake of explaining mental forces from material circumstances and conditions, and thereby laid the foundation for all the absurdities and contradictions from which his school (as we propose to prove) suffers up to the present day, and to which alone it must be attributed that the doctrines of political economy are those which are the least accessible to the most intelligent minds. That Smith's school teaches nothing else than the theory of values, is not only seen from the fact that it bases its doctrine everywhere on the conception of 'value of exchange,' but also from the definition which it gives of its doctrine. It is (says J. B. Say) that science which teaches how riches, or exchangeable values, are produced, distributed, and consumed. This is undoubtedly not the science which teaches how the productive powers are awakened and developed, and how they become depressed and destroyed. M'Culloch calls it explicitly ' the science of values,' and recent English writers ' the science of exchange.'


We must not believe that J. B. Say has remedied this defect in the doctrine of Adam Smith by his fiction of ' immaterial goods' or products; he has thus merely somewhat varnished over the folly of its results, but not raised it out of its intrinsic absurdity. The mental (immaterial) producers are merely productive, according to his views, because they are remunerated with values of exchange, and because their attainments have been obtained by sacrificing values of exchange, and not because they produce productive powers.*72 They merely seem to him an accumulated capital. M'Culloch goes still further; he says that man is as much a product of labour as the machine which he produces, and it appears to him that in all economical investigations he must be regarded from this point of view. He thinks that Smith comprehended the correctness of this principle, only he did not deduce the correct conclusion from it. Among other things he draws the conclusion that eating and drinking are productive occupations. Thomas Cooper values a clever American lawyer at 3,000 dollars, which is about three times as much as the value of a strong slave.


Into what mistakes the prevailing economical school has fallen by judging conditions according to the mere theory of values which ought properly to be judged according to the theory of powers of production, may be seen very clearly by the judgment which J. B. Say passes upon the bounties which foreign countries sometimes offer in order to facilitate exportation; he maintains that ' these are presents made to our nation.' Now if we suppose that France considers a protective duty of twenty-five per cent. sufficient for her not yet perfectly developed manufactures, while England were to grant a bounty on exportation of thirty per cent., what would be the consequence of the 'present' which in this manner the English would make to the French? The French consumers would obtain for a few years the manufactured articles which they needed much cheaper than hitherto, but the French manufactories would be ruined, and millions of men be reduced to beggary or obliged to emigrate, or to devote themselves to agriculture for employment. Under the most favourable circumstances, the present consumers and customers of the French agriculturists would be converted into competitors with the latter, agricultural production would be increased, and the consumption lowered. The necessary consequence would be diminution in value of the products, decline in the value of property, national poverty and national weakness in France. The English 'present' in mere value would be dearly paid for in loss of power; it would seem like the present which the Sultan is wont to make to his pashas by sending them valuable silken cords.

From the great number of passages wherein J. B. Say explains this view, we merely quote the newest—from the sixth volume of Economie Politique Pratique, p. 307: 'Le talent d'un avocat, d'un médecin, qui a été acquis au prix de quelque sacrifice et qui produit un revenu, est une valeur capitale, non transmissible à la vérité, mais qui réside néanmoins dans un corps visible, celui de la personne qui le possède.'
Book II, Chapter 14

Indeed, according to the prevailing theory, so analogous is national economy to private economy that J. B. Say, where (exceptionally) he allows that internal industry may be protected by the State, makes it a condition of so doing, that every probability must exist that after the lapse of a few years it will attain independence, just as a shoemaker's apprentice is allowed only a few years' time in order to perfect himself so far in his trade as to do without parental assistance.

Book II, Chapter 19

The school distinguishes fixed capital from circulating capital, and classes under the former in a most remarkable manner a multitude of things which are in circulation without making any practical application whatever of this distinction. The only case in which such a distinction can be of value, it passes by without notice. The material as well as the mental capital is (namely) bound in a great measure to agriculture, to manufactures, to commerce, or to special branches of either—nay often, indeed, to special localities. Fruit trees, when cut down, are clearly not of the same value to the manufacturer (if he uses them for woodwork) as they are to the agriculturist (if he uses them for the production of fruit). Sheep, if, as has already frequently happened in Germany and North America, they have to be slaughtered in masses, have evidently not the value which they would possess when used for the production of wool. Vineyards have (as such) a value which, if used as arable fields, they would lose. Ships, if used for timber or for firewood, have a much lower value than when they serve as means of transport. What use can be made of manufacturing buildings, water-power, and machinery if the spinning industry is ruined? In like manner individuals lose, as a rule, the greatest part of their productive power, consisting in experience, habits, and skill, when they are displaced. The school gives to all these objects and properties the general name of capital, and would transplant them (by virtue of this terminology) at its pleasure from one field of employment to another. J. B. Say thus advises the English to divert their manufacturing capital to agriculture. How this wonder is to be accomplished he has not informed us, and it has probably remained a secret to English statesmen to the present day. Say has in this place evidently confounded private capital with national capital. A manufacturer or merchant can withdraw his capital from manufactures or from commerce by selling his works or his ships and buying landed property with the proceeds. A whole nation, however, could not effect this operation except by sacrificing a large portion of its material and mental capital. The reason why the school so deliberately obscures things which are so clear is apparent enough. If things are called by their proper names, it is easily comprehended that the transfer of the productive powers of a nation from one field of employment to another is subject to difficulties and hazards which do not always speak in favour of 'free trade,' but very often in favour of national protection.

Book II, Chapter 20

Adam Smith passes over these conditions of the exchangeable value of land in silence. J. B. Say, on the contrary, believes that the exchangeable value of land is of little importance, inasmuch as, whether its value be high or low, it always serves equally well for production. It is sad to read from an author whom his German translators regard as a universal national authority, such fundamentally wrong views about a matter which affects so deeply the prosperity of nations. We, on the contrary, believe it essential to maintain that there is no surer test of national prosperity than the rising and falling of the value of the land, and that fluctuations and crises in that are to be classed among the most ruinous of all plagues that can befall a country.

Book II, Chapter 27

Adam Smith allows in three cases the special protection of internal industry: firstly, as a measure of retaliation in case a foreign nation imposes restrictions on our imports, and there is hope of inducing it by means of reprisals to repeal those restrictions; secondly, for the defence of the nation, in case those manufacturing requirements which are necessary for defensive purposes could not under open competition be produced at home; thirdly, as a means of equalisation in case the products of foreigners are taxed lower than those of our home producers. J. B. Say objects to protection in all these cases, but admits it in a fourth case—namely, when some branch of industry is expected to become after the lapse of a few years so remunerative that it will then no longer need protection.


J. B. Say has clearly perceived the contradictory character of this exception, but the exception substituted by him is no better; for in a nation qualified by nature and by its degree of culture to establish a manufacturing power of its own, almost every branch of industry must become remunerative under continued and powerful protection; and it is ridiculous to allow a nation merely a few years for the task of bringing to perfection one great branch of national industry or the whole industry of the nation; just as a shoemaker's apprentice is allowed only a few years to learn shoemaking.

Book III, Chapter 28

J. B. Say and M'Culloch appear to have seen and read only the title of this book: they each pass it over with the remark that it merely treats of money; and its title certainly shows that the author laboured under the error of considering the precious metals as the sole constituents of wealth. If they had read farther into it, and duly considered its contents, they might perhaps have derived from it some wholesome lessons. Antonio Serra, although he fell into the error of considering an abundance of gold and silver as the tokens of wealth, nevertheless expresses himself tolerably clearly on the causes of it.


He certainly puts mining in the first place as the direct source of the precious metals; but he treats very justly of the indirect means of acquiring them. Agriculture, manufactures, commerce, and navigation, are, according to him, the chief sources of national wealth. The fertility of the soil is a sure source of prosperity; manufactures are a still more fruitful source, for several reasons, but chiefly because they constitute the foundation of an extensive commerce. The productiveness of these sources depends on the characteristic qualifications of the people (viz. whether they are industrious, active, enterprising, thrifty, and so forth), also on the nature and circumstances of the locality (whether, for instance, a city is well situated for maritime trade). But above all these causes, Serra ranks the form of government, public order, municipal liberty, political guarantees, the stability of the laws. 'No country can prosper,' says he, 'where each successive ruler enacts new laws, hence the States of the Holy Father cannot be so prosperous as those countries whose government and legislation are more stable. In contrast with the former, one may observe in Venice the effect which a system of order and legislation, which has continued for centuries, has on the public welfare.' This is the quintessence of a system of Political Economy which in the main, notwithstanding that its object appears to be only the acquisition of the precious metals, is remarkable for its sound and natural doctrine. The work of J. B. Say, although it comprises ideas and matter on Political Economy of which Antonio Serra had in his day no foreknowledge, is far inferior to Serra's on the main points, and especially as respects a due estimate of the effect of political circumstances on the wealth of nations. Had Say studied Serra instead of laying his work aside, he could hardly have maintained (in the first page of his system of Political Economy) that 'the constitution of countries cannot be taken into account in respect to Political Economy; that the people have become rich, and become poor, under every form of government; that the only important point is, that its administration should be good.'


It is consequently only a conditional commonplace truth on the faith of which J. B. Say would exclude politics from his doctrine. In every case it is the chief desideratum that the administration should be good; but the efficiency of the administration depends on the form of government, and that form of government is clearly the best which most promotes the moral and material welfare and the future progress of any given nation. Nations have made some progress under all forms of government. But a high degree of economical development has only been attained in those nations whose form of government has been such as to secure to them a high degree of freedom and power, of steadiness of laws and of policy, and efficient institutions.

Book III, Chapter 32

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.


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.'


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.

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.'