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
IN respect to temperament and manners, to the origin and language of their inhabitants, no less than to their political connection and geographical position, Holland, Flanders, and Brabant constituted portions of the German Empire. The more frequent visits of Charlemagne and his residence in the vicinity of these countries must have exercised a much more powerful influence on their civilisation than on that of more distant German territories. Furthermore, Flanders and Brabant were specially favoured by nature as respects agriculture and manufactures, as Holland was as respects cattle-farming and commerce.
Nowhere in Germany was internal trade so powerfully aided by extensive and excellent sea and river navigation as in these maritime states. The beneficial effects of these means of water transport on the improvement of agriculture and on the growth of the towns must in these countries, even at an early period, have led to the removal of impediments which hindered their progress and to the construction of artificial canals. The prosperity of Flanders was especially promoted by the circumstance that her ruling Counts recognised the value of public security, of good roads, manufactures, and flourishing cities before all other German potentates. Favoured by the nature of their territory, they devoted themselves with zeal to the extirpation of the robber knights and of wild beasts. Active commercial intercourse between the cities and the country, the extension of cattle-farming, especially of sheep, and of the culture of flax and hemp, naturally followed; and wherever the raw material is abundantly produced, and security of property and of intercourse is maintained, labour and skill for working up that material will soon be found. Meanwhile the Counts of Flanders did not wait until chance should furnish them with woollen weavers, for history informs us that they imported such artificers from foreign countries.
Supported by the reciprocal trade of the Hanseatic League and of Holland, Flanders soon rose by her woollen manufactures to be the central point of the commerce of the North, just as
Venice by her industry and her shipping had become the centre of the commerce of the South. The merchant shipping, and reciprocal trade of the Hanseatic League and the Dutch, together with the manufacturing trade of Flanders, constituted one great whole, a real national industry. A policy of commercial restriction could not in their case be deemed necessary, because as yet no competition had arisen against the manufacturing supremacy of Flanders. That under such circumstances manufacturing industry thrives best under free trade, the Counts of Flanders understood without having read Adam Smith. Quite in the spirit of the present popular theory, Count Robert III., when the King of England requested him to exclude the Scotch from the Flemish markets, replied, ‘Flanders has always considered herself a free market for all nations, and it does not consist with her interests to depart from that principle.’
After Flanders had continued for centuries to be the chief manufacturing country, and Bruges the chief market, of Northern Europe, their manufactures and commerce passed over to the neighbouring province of Brabant, because the Counts of Flanders would not continue to grant them those concessions to which in the period of their great prosperity they had laid claim. Antwerp then became the principal seat of commerce, and Louvain the chief manufacturing city of Northern Europe. In consequence of this change of circumstances, the agriculture of Brabant soon rose to a high state of prosperity. The change in early times from payment of imposts in kind to their payment in money, and, above all, the limitation of the feudal system, also tended especially to its advantage.
In the meantime the Dutch, who appeared more and more upon the scene, with united power, as rivals to the Hanseatic League, laid the foundation of their future power at sea. Nature had conferred benefits on this small nation both by her frowns and smiles. Their perpetual contests with the inroads of the sea necessarily developed in them a spirit of enterprise, industry, and thrift, while the land which they had reclaimed and protected by such indescribable exertions must have seemed to them a property to which too much care could not be devoted. Restricted by Nature herself to the pursuits of navigation, of fisheries, and the production of meat, cheese, and butter, the Dutch were compelled to supply their requirements of grain, timber, fuel, and clothing materials by their marine-carrying trade, their exports of dairy produce, and their fisheries.
Those were the principal causes why the Hansards were at a later period gradually excluded by the Dutch from the trade with the north-eastern countries. The Dutch required to import far
greater quantities of agricultural produce and of timber than did the Hansards, who were chiefly supplied with these articles by the territories immediately adjoining their cities. And, further, the vicinity to Holland of the Belgian manufacturing districts, and of the Rhine with its extensive, fertile, and vine-clad banks, and its stream navigable up to the mountains of Switzerland, constituted great advantages for the Dutch.
It may be considered as an axiom that the commerce and prosperity of countries on the sea coast is dependent on the greater or less magnitude of the river territories with which they have communication by water.
*31 If we look at the map of Italy, we shall find in the great extent and fertility of the valley of the Po the natural reason why the commerce of Venice so greatly surpassed that of Genoa or of Pisa. The trade of Holland has its chief sources in the territories watered by the Rhine and its tributary streams, and in the same proportion as these territories were much richer and more fertile than those watered by the Elbe and the Weser must the commerce of Holland exceed that of the Hanse Towns. To the advantages above named was added another fortunate incident—the invention by Peter Böckels of the best mode of salting herrings. The best mode of catching and of ‘böckelling’ these fish (the latter term derived from the inventor) remained for a long period a secret known only to the Dutch, by which they knew how to prepare their herrings with a peculiar excellence surpassing those of all other persons engaged in sea fishery, and secured for themselves a preference in the markets as well as better prices.
*32 Anderson alleges that after the lapse of centuries from the date of these inventions in Holland, the English and Scotch fishermen, notwithstanding their enjoyment of a considerable bounty on export, could not find purchasers for their herrings in foreign markets, even at much lower prices, in competition with the Dutch. If we bear in mind how great was the consumption of sea fish in all countries before the Reformation, we can well give credit to the fact that at a time when the Hanseatic shipping trade had already begun to decline, the Dutch found occasion for building 2,000 new vessels annually.
From the period when all the Belgian and Batavian provinces were united under the dominion of the House of Burgundy, these countries partly acquired the great benefit of national unity, a circumstance which must not be left out of sight in connection
with Holland’s success in maritime trade in competition with the cities of Northern Germany. Under the Emperor Charles V. the United Netherlands constituted a mass of power and capacity which would have insured to their Imperial ruler supremacy over the world, both by land and at sea, far more effectually than all the gold mines on earth and all the papal favours and bulls could have done, had he only comprehended the nature of those powers and known how to direct and to make use of them.
Had Charles V. cast away from him the crown of Spain as a man casts away a burdensome stone which threatens to drag him down a precipice, how different would have been the destiny of the Dutch and the German peoples! As Ruler of the United Netherlands, as Emperor of Germany, and as Head of the Reformation, Charles possessed all the requisite means, both material and intellectual, for establishing the mightiest industrial and commercial empire, the greatest military and naval power which had ever existed—a maritime power which would have united under one flag all the shipping from Dunkirk as far as Riga.
The conception of but one idea, the exercise of but one man’s will, were all that were needed to have raised Germany to the position of the wealthiest and mightiest empire in the world, to have extended her manufacturing and commercial supremacy over every quarter of the globe, and probably to have maintained it thus for many centuries.
Charles V. and his morose son followed the exactly opposite policy. Placing themselves at the `head of the fanatical party, they made it their chief object to
hispanicise the Netherlands. The result of that policy is matter of history. The northern Dutch provinces, strong by means of the element over which they were supreme, conquered their independence. In the southern provinces industry, the arts, and commerce, perished under the hand of the executioner, save only where they managed to escape that fate by emigrating to other countries. Amsterdam became the central point of the world’s commerce instead of Antwerp. The cities of Holland, which already at an earlier period, in consequence of the disturbances in Brabant, had attracted a great number of Belgian woollen weavers, had now not room enough to afford refuge to all the Belgian fugitives, of whom a great number were consequently compelled to emigrate to England and to Saxony.
The struggle for liberty begot in Holland an heroic spirit at sea, to which nothing appeared too difficult or too adventurous, while on the contrary the spirit of fanaticism enfeebled the very nerves of Spain. Holland enriched herself principally by privateering against Spain, especially by the capture of the Spanish
treasure fleets. By that means she carried on an enormous contraband trade with the Peninsula and with Belgium. After the union of Portugal with Spain, Holland became possessed of the most important Portuguese colonies in the East Indies, and acquired a part of Brazil. Up to the first half of the seventeenth century the Dutch surpassed the English in respect of manufactures and of colonial possessions, of commerce and of navigation, as greatly as in our times the English have surpassed the French in these respects. But with the English Revolution a mighty change developed itself. The spirit of freedom had become only a citizen spirit in Holland. As in all mere mercantile aristocracies, all went on well for a time; so long as the preservation of life and limbs and of property, and mere material advantages, were the objects clearly in view, they showed themselves capable of great deeds. But statesmanship of a more profound character was beyond their ken. They did not perceive that the supremacy which they had won, could only be maintained if it were based on a great nationality and supported by a mighty national spirit. On the other hand, those states which had developed their nationality on a large scale by means of monarchy, but which were yet behindhand in respect of commerce and industry, became animated by a sentiment of shame that so small a country as Holland should act the part of master over them in manufactures and commerce, in fisheries, and naval power. In England this sentiment was accompanied by all the energy of the new-born Republic. The Navigation Laws were the challenge glove which the rising supremacy of England cast into the face of the reigning supremacy of Holland. And when the conflict came, it became evident that the English nationality was of far larger calibre than that of the Dutch. The result could not remain doubtful.
The example of England was followed by France. Colbert had estimated that the entire marine transport trade employed about 20,000 vessels, of which 16,000 were owned by the Dutch—a number altogether out of proportion for so small a nation. In consequence of the succession of the Bourbons to the Spanish throne, France was enabled to extend her trade over the Peninsula (to the great disadvantage of the Dutch), and equally so in the Levant. Simultaneously the protection by France of her native manufactures, navigation, and fisheries, made immense inroads on the industry and commerce of Holland.
England had gained from Holland the greater part of the trade of the latter with the northern European states, her contraband trade with Spain and the Spanish colonies, and the greater part of her trade with the East and West Indies, and of her fisheries. But the most serious blow was inflicted on her by the Methuen
Treaty of 1703. From that the commerce of Holland with Portugal, the Portuguese colonies, and the East Indies, received a deadly wound.
When Holland thus commenced to lose so large a portion of her foreign trade, the same result took place which had previously been experienced by the Hanseatic cities and by Venice: the material and mental capital which could now find no employment in Holland, was diverted by emigration or in the shape of loans to those countries which had acquired the supremacy from Holland which she had previously possessed.
If Holland in union with Belgium, with the Rhenish districts, and with North Germany, had constituted one national territory, it would have been difficult for England and France to have weakened her naval power, her foreign commerce, and her internal industry by wars and by commercial policy, as they succeeded in doing. A nation such as that would have been, could have placed in competition with the commercial systems of other nations a commercial system of her own. And if owing to the development of the manufactures of those other nations her industry suffered some injury, her own internal resources, aided by founding colonies abroad, would have abundantly made good that loss. Holland suffered decline because she, a mere strip of sea coast, inhabited by a small population of German fishermen, sailors, merchants, and dairy farmers, endeavoured to constitute herself a national power, while she considered and acted towards the inland territory at her back (of which she properly formed a part) as a foreign land.
The example of Holland, like that of Belgium, of the Hanseatic cities, and of the Italian republics, teaches us that mere private industry does not suffice to maintain the commerce, industry, and wealth of entire states and nations, if the public circumstances under which it is carried on are unfavourable to it; and further, that the greater part of the productive powers of individuals are derived from the political constitution of the government and from the power of the nation. The agricultural industry of Belgium became flourishing again under Austrian rule. When united to France her manufacturing industry rose again to its ancient immense extent. Holland by herself was never in a position to establish and maintain an independent commercial system of her own in competition with great nations. But when by means of her union with Belgium after the general peace (in 1815) her internal resources, population, and national territory were increased to such an extent that she could rank herself among the great nationalities, and became possessed in herself of a great mass and variety of productive powers, we see the protective system established also in the Netherlands, and under its influence agriculture,
manufactures, and commerce make a remarkable advance. This union has now been again dissolved (owing to causes which lie outside the scope and purpose of our present work), and thus the protective system in Holland has been deprived of the basis on which it rested, while in Belgium it is still maintained.
Holland is now maintained by her colonies and by her transport trade with Germany. But the next great naval war may easily deprive her of the former; and the more the German Zollverein attains to a clear perception of its interests, and to the exercise of its powers, the more clearly will it recognise the necessity of including Holland within the Zollverein.