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
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]
J. Shield Nicholson, ed. Sampson S. Lloyd, trans.
First Pub. Date
London: Longmans, Green, and Co.
First published in German. First translated 1885.
The text of this edition is in the public domain. Picture of List courtesy of The Warren J. Samuels Portrait Collection at Duke University.
- Translators Preface to the First Edition
- Introductory Essay, by J. Shield Nicholson
- Extracts from the Authors Preface
- Book I, Chapter 1
- Book I, Chapter 2
- Book I, Chapter 3
- Book I, Chapter 4
- Book I, Chapter 5
- Book I, Chapter 6
- Book I, Chapter 7
- Book I, Chapter 8
- Book I, Chapter 9
- Book I, Chapter 10
- Book II, Chapter 11
- Book II, Chapter 12
- Book II, Chapter 13
- Book II, Chapter 14
- Book II, Chapter 15
- Book II, Chapter 16
- Book II, Chapter 17
- Book II, Chapter 18
- Book II, Chapter 19
- Book II, Chapter 20
- Book II, Chapter 21
- Book II, Chapter 22
- Book II, Chapter 23
- Book II, Chapter 24
- Book II, Chapter 25
- Book II, Chapter 26
- Book II, Chapter 27
- Book III, Chapter 28
- Book III, Chapter 29
- Book III, Chapter 30
- Book III, Chapter 31
- Book III, Chapter 32
- Book IV, Chapter 33
- Book IV, Chapter 34
- Book IV, Chapter 35
- Book IV, Chapter 36
- Appendix A
- Appendix B
- Appendix C
- Appendix D
IF any nation whatever is qualified for the establishment of a national manufacturing power, it is Germany; by the high rank which she maintains in science and art, in literature and education, in public administration and in institutions of public utility; by her morality and religious character, her industry and domestic economy; by her perseverance and steadfastness in business occupations; as also by her spirit of invention, by the number and vigour of her population; by the extent and nature of her territory, and especially by her highly advanced agriculture, and her physical, social, and mental resources.
If any nation whatever has a right to anticipate rich results from a protective system adapted to her circumstances, for the progress of her home manufactures, for the increase of her foreign trade and her navigation, for the perfecting of her internal means of transport, for the prosperity of her agriculture, as also for the maintenance of her independence and the increase of her power abroad, it is Germany.
Yes, we venture to assert, that on the development of the German protective system depend the existence, the independence, and the future of the German nationality. Only in the soil of general prosperity does the national spirit strike its roots, produce fine blossoms and rich fruits; only from the unity of material interests does mental power arise, and only from both of these national power. But of what value are all our endeavours, whether we are rulers or subjects, nobles or simple citizens, learned men, soldiers, or civilians, manufacturers, agriculturists, or merchants, without
nationality and without guarantees for the continuance of our nationality?
Meanwhile, however, the German protective system only accomplishes its object in a very imperfect manner, so long as Germany does not spin for herself the cotton and linen yarn which she requires; so long as she does not directly import from tropical countries the colonial produce which she requires, and pay for it with goods of her own manufacture; so long as she
does not carry on this trade with her own ships; so long as she has no means of protecting her own flag; so long as she possesses no perfect system of transport by river, canal, or railway; so long as the German Zollverein does not include all German maritime territories and also Holland and Belgium. We have treated these subjects circumstantially in various places in this book, and it is only necessary for us here to recapitulate what we have already thus treated.
If we import raw cotton from Egypt, Brazil, and North America, we in that case pay for it in our own manufactured goods; if, on the other hand, we import cotton yarn from England, we have to pay the value of it in raw materials and articles of food which we could more advantageously work up or consume ourselves, or else we must pay for it in specie which we have acquired elsewhere, and with which we could more advantageously purchase foreign raw materials to work up for ourselves, or colonial produce for our own consumption.
In the same way the introduction of spinning linen yarn by machinery offers us the means not only of increasing our home consumption of linen, and of perfecting our agriculture, but also of enormously increasing our trade with tropical countries.
For the two above-named branches of industry, as well as for the manufacture of woollens, we are as favourably circumstanced as any other nation, by an amount of water power hitherto not utilised, by cheap necessaries of life, and by low wages. What we lack is simply and solely a guarantee for our capitalists and artisans by which they may be protected against loss of capital and want of work. A moderate protective duty of about twenty-five per cent. during the next five years, which could be maintained for a few years at that rate and then be lowered to fifteen to twenty per cent., ought completely to accomplish this object. Every argument which is adduced by the supporters of the theory of values against such a measure, has been refuted by us. On the other hand, we may add a further argument in favour of that measure, that these great branches of industry especially offer us the means for establishing extensive machine manufactories and for the development of a race of competent technical instructors and practical foremen.
In the trade in colonial produce Germany, as France and England have done, has to follow the principle—that in respect to the purchase of the colonial produce which we require, we should give a preference to those tropical countries which purchase manufactured goods from us; or, in short,
that we should buy from those who buy from us. That is the case in reference to our trade with the West Indies and to North and South America.
But it is not yet the case in reference to our trade with Holland, which country supplies us with enormous quantities of her colonial produce, but only takes in return disproportionately small quantities of our manufactured goods.
At the same time Holland is naturally directed to the market of Germany for the disposal of the greater part of her colonial produce, inasmuch as England and France derive their supplies of such produce for the most part from their own colonies and from subject countries (where they exclusively possess the market for manufactured goods), and hence they only import small quantities of Dutch colonial produce.
Holland has no important manufacturing industry of her own, but, on the other hand, has a great productive industry in her colonies, which has recently greatly increased and may yet be immeasurably further increased. But Holland desires of Germany that which is unfair, and acts contrary to her own interests if rightly understood, inasmuch as she desires to dispose of the greater part of her colonial produce to Germany, while she desires to supply her requirements of manufactured goods from any quarter she likes best. This is, for Holland, an only apparently beneficial and a short-sighted policy; for if Holland would give preferential advantages to German manufactured goods both in the mother country and in her colonies, the demand in Germany for Dutch colonial produce would increase in the same proportion in which the sale of German manufactured goods to Holland and her colonies increased, or, in other words, Germany would be able to purchase so much the more colonial produce in proportion as she sold more manufactured goods to Holland; Holland would be able to dispose of so much more colonial produce to Germany as she purchased from Germany manufactured goods. This reciprocal exchange operation is, at present, rendered impracticable by Holland if she sells her colonial produce to Germany while she purchases her requirements in manufactured goods from England, because England (no matter how much of manufactured goods she sells to Holland) will always supply the greater part of her own requirements of colonial produce from her own colonies, or from the countries which are subject to her.
Hence the interests of Germany require that she should either demand from Holland a differential duty in favour of Germany’s manufacturing production, by which the latter can secure to herself the exclusive market for manufactured goods in Holland and her colonies, or, in case of refusal, that Germany should impose a differential duty on the import of colonial produce in favour of the produce of Central and South America and of the free markets of the West Indies.
The above-named policy would constitute the most effective means of inducing Holland to join the German Zollverein.
As matters now stand, Germany has no reason for sacrificing her own manufactories of beetroot sugar to the trade with Holland; for only in case Germany can pay for her requirements of this article by means of her own manufactured goods, is it more to her advantage to supply that requirement by an exchange trade with tropical countries, than by producing it herself at home.
Hence the attention of Germany should be at once chiefly directed to the extension of her trade with Northern, Central, and South America, and with the free markets of the West Indies. In connection with that, the following measures, in addition to that above adverted to, appear desirable: the establishment of a regular service of steamships between the German seaports and the principal ports of those countries, the promotion of emigration thither, the confirmation and extension of friendly relations between them and the Zollverein, and especially the promotion of the civilisation of those countries.
Recent experience has abundantly taught us how enormously commerce on a large scale is promoted by a regular service of steamships. France and Belgium are already treading in the footsteps of England in this respect, as they well perceive that every nation which is behindhand in this more perfect means of transport must retrograde in her foreign trade. The German seaports also have already recognised this; already one public company has been completely formed in Bremen for building two or three steam vessels for the trade with the United States. This, however, is clearly an insufficient provision. The commercial interests of Germany require not only a regular service of steam vessels with North America, especially with New York, Boston, Charleston, and New Orleans, but also with Cuba, San Domingo, and Central and South America. Germany ought to be behind no other nation in respect to these latter lines of steam navigation. It must certainly not be ignored that the means which are required for these objects will be too great for the spirit of enterprise, and perhaps also for the power of the German seaports, and it seems to us they can only be carried into effect by means of liberal subsidies on the part of the states of the Zollverein. The prospect of such subsidies as well as of differential duties in favour of German shipping, ought at once to constitute a strong motive for these seaports to become included in the Commercial Union. When one considers how greatly the exports of manufactured goods and the imports of colonial produce, and consequently also the customs revenue, of the states of the Zollverein would be increased by such a measure, one
cannot doubt that even a considerable expenditure for this object must appear as only a reproductive investment of capital from which rich returns are to be expected.
Through the increase of the means of intercourse of Germany with the above-named countries, the emigration of Germans to those countries and their settlement there as citizens would be no less promoted; and by that means the foundation would be laid for future increase of commerce with them. For this object the states of the Zollverein ought to establish everywhere consulates and diplomatic agencies, by means of which the settlement and undertakings of German citizens could be promoted, and especially to assist those states in every practicable way in giving stability to their governments and improving their degree of civilisation.
We do not share in the least the opinion of those who think that the tropical countries of America offer less advantages to German colonisation than those of temperate climate in North America. However great, as we have openly confessed, is our attachment for the last-named country, and however little we are able or desire to deny that an individual German emigrant who possesses a little capital has greater hope of permanently making his fortune in Western North America, we must nevertheless here express our opinion that emigration to Central and South America, if it were well led and undertaken on a large scale, offers in a
national point of view much greater advantages for Germany than emigration to North America. What good is it if the emigrants to North America become ever so prosperous? In their personal relation they are lost for ever to the German nationality, and also from their material production Germany can expect only unimportant fruits. It is a pure delusion if people think that the German language can be maintained by the Germans who live in the interior of the United States, or that after a time it may be possible to establish entire German states there. We once ourselves entertained this illusion, but after ten years’ observation in the country itself, on the spot, we have entirely given it up. It lies in the very spirit of every nationality, and above all in that of the United States, to assimilate itself in language, literature, administration, and legislation; and it is good that that is so. However many Germans may now be living in North America, yet certainly not one of them is living there whose great-grandchildren will not greatly prefer the English language to the German, and that for the very natural reason that the former is the language of the educated people, of the literature, the legislation, the administration, the courts of justice, and the trade and commerce of the country. The same thing can and will happen to the Germans
in North America as happened to the Huguenots in Germany and the French in Louisiana. They naturally must and will be amalgamated with the predominant population: some a little sooner, others a little later, according as they dwell more or less together with fellow-countrymen.
Still less dependence can be placed on an active intercourse between Germany and the German emigrants to the west of North America. The first settler is always compelled by necessity to make for himself the greater part of his articles of clothing and utensils; and these customs, which originated from mere necessity, continue for the most part to the second and third generation. Hence it is that North America itself is a country which makes powerful efforts in manufacturing industry, and will continually strive more and more to gain possession of her home market for manufactured goods, for her own industry.
On the other hand, we would on that account by no means maintain that the American market for manufactured goods is not a very important one, and well worthy of regard, especially for Germany. On the contrary, we are of opinion that for many articles of luxury and for manufactured articles which are easy of transport, and in which the wages of labour constitute a chief element of the price, that market is one of the most important, and must from year to year, as respects the articles above named, become more important for Germany. What we contend is only this, that those Germans who emigrate to the west of North America give no important assistance in increasing the demand for German manufactured goods, and that in reference to that object emigration to Central and South America requires and deserves very much more direct encouragement.
The above-mentioned countries, including Texas, are for the most part adapted for raising colonial produce. They can and will never make great progress in manufacturing industry. Here there is an entirely new and rich market for manufactured goods to acquire; whoever has here established firm commercial relations, may remain in possession of them for all future time. These countries, without sufficient moral power of their own to raise themselves to a higher grade of civilisation, to introduce well-ordered systems of government, and to endue them with stability, will more and more come to the conviction that they must be aided from outside, namely, by immigration. In these quarters the English and French are hated on account of their arrogance, and owing to jealousy for national independence—the Germans for the opposite reasons are liked. Hence the states of the Zollverein ought to devote the closest attention to these countries.
A vigorous German consular and diplomatic system ought to be established in these quarters, the branches of which should enter into correspondence with one another. Young explorers should be encouraged to travel through these countries and make impartial reports upon them. Young merchants should be encouraged to inspect them—young medical men to go and practise there. Companies should be founded and supported by actual share subscription, and taken under special protection, which companies should be formed in the German seaports in order to buy large tracts of land in those countries and to settle them with German colonists—companies for commerce and navigation, whose object should be to open new markets in those countries for German manufactures and to establish lines of steamships—mining companies, whose object should be to devote German knowledge and industry to winning the great mineral wealth of those countries. In every possible way the Zollverein ought to endeavour to gain the good-will of the population and also of the governments of those countries, and especially to promote by that means public security, means of communication, and public order; indeed, one ought not to hesitate, in case one could by that means put the governments of those countries under obligation to us, also to assist them by sending an important auxiliary corps.
A similar policy ought to be followed in reference to the East—to European Turkey and the Lower Danubian territories. Germany has an immeasurable interest that security and order should be firmly established in those countries, and in no direction so much as in this is the emigration of Germans so easy for individuals to accomplish, or so advantageous for the nation. A man dwelling by the Upper Danube could transport himself to Moldavia and Wallachia, to Servia, or also to the south-western shores of the Black Sea, for one-fifth part of the expenditure of money and time which are requisite for his emigration to the shores of Lake Erie. What attracts him to the latter more than to the former is, the greater degree of liberty, security, and order which prevails in the latter. But under the existing circumstances of Turkey it ought not to be impossible to the German states, in alliance with Austria, to exercise such an influence on the improvement of the public condition of those countries, that the German colonist should no longer feel himself repelled from them, especially if the governments themselves would found companies for colonisation, take part in them themselves, and grant them continually their special protection.
In the meantime it is clear that settlements of this kind could only have a specially beneficial effect on the industry of the states
of the Zollverein, if no obstacles were placed in the way of the exchange of German manufactured goods for the agricultural produce of the colonists, and if that exchange was promoted by cheap and rapid means of communication. Hence it is to the interest of the states of the Zollverein, that Austria should facilitate as much as possible the through traffic on the Danube, and that steam navigation on the Danube should be roused to vigorous activity—consequently that it should at the outset be actually subsidised by the Governments.
Especially, nothing is so desirable as that the Zollverein and Austria at a later period, after the industry of the Zollverein states has been better developed and has been placed in a position of greater equality to that of Austria, should make, by means of a treaty, reciprocal concessions in respect to their manufactured products.
After the conclusion of such a treaty, Austria would have an equal interest with the states of the Zollverein in making the Turkish provinces available for the benefit of their manufacturing industry and of their foreign commerce.
In anticipation of the inclusion in the Zollverein of the German seaports and Holland, it would be desirable that Prussia should now make a commencement by the adoption of a German commercial flag, and by laying the foundation for a future German fleet, and that she should try whether and how German colonies can be founded in Australia, New Zealand, or in or on other islands of Australasia.
The means for such attempts and commencements, and for the undertakings and subventions which we have previously recommended as desirable, must be acquired in the same way in which England and France have acquired the means of supporting their foreign commerce and their colonisation and of maintaining their powerful fleets, namely, by imposing duties on the imports of colonial produce. United action, order, and energy could be infused into these measures of the Zollverein, if the Zollverein states would assign the direction of them in respect to the North and transmarine affairs to Prussia, and in respect to the Danube and Oriental affairs to Bavaria. An addition of ten per cent. to the present import duties on manufactures and colonial produce would at present place one million and a half per annum at the disposal of the Zollverein. And as it may be expected with certainty, as a result of the continual increase in the export of manufactured goods, that in the course of time consumption of colonial produce in the states of the Zollverein will increase to double and treble its present amount, and consequently their customs revenue will increase in like
proportion, sufficient provision will be made for satisfying the requirements above mentioned, if the states of the Zollverein establish the principle that over and above the addition of ten per cent.
a part also of all future increase in import duties should be placed at the disposal of the Prussian Government to be expended for these objects.
As regards the establishment of a German transport system, and especially of a German system of railways, we beg to refer to a work of our own which specially treats of that subject. This great enterprise will pay for itself, and all that is required of the Governments can be expressed in one word, and that is—ENERGY.