We have given the name "Natural System" to the economic doctrine that we have put forward in this treatise. We have not made any a priori assertions and then attempted to prove them. We have arrived at our conclusions by proving the truth of principles derived from what actually happens in the real world. We are not numbered among those who deny that nations have individual characteristics and special interests. We have not ignored the fact that these interests give rise to special relationships between them. For our part we favour the eventual unification of all the peoples in the world on the basis of the existence of different nations. We regard both free trade and a universal republic as the natural consequence of the harmonious and uniform development of the political and social institutions of all countries.
Doctrinaire economists cannot accuse us of defending the policy of protection on the ground that we propose - as the mercantilists proposed - to secure wealth for a nation at the expense of other countries. Nor do we propose to keep our gold and silver within the frontiers of our own country, to attract precious metals from other states, and to secure a favourable balance of trade. Our opponents cannot accuse us of failing - as the supporters of the " manufacturing system" have failed - to appreciate that nature has favoured some countries with regard to certain products and other countries with regard to other products. We advocate the greatest possible measure of freedom of commerce as far as foodstuffs and raw materials are concerned. Our opponents cannot accuse us of wishing to keep the world divided for ever into different nations which are continually hostile to one another. We regard nationalism as
1. [List did not give his treatise a title but the heading which he gave to Chapter 34 justifies the use of the title The Natural System of Political Economy]
simply one particular stage of human development, which will one day be replaced by cosmopolitanism. Our opponents cannot accuse us of failing to appreciate the great merits of the "cosmopolitan system" since we have accepted its theory of value. We have merely argued that there is also a theory of productive powers and that when questions of international trade are under discussion the theory of value should be regarded as subordinate to the theory of productive powers. Our critics cannot accuse us of failing to appreciate the significance of Adam Smith's book although we have rejected his view that labour is the origin of wealth. J.B. Say has shown that Adam Smith's definition of "labour" is much too narrow. We believe that we have shown that the conception of "industrious classes" that Say puts in place of Adam Smith's "labour" is also a very narrow definition which interprets productive powers in far too materialistic a fashion.
Practical men, for their part, cannot accuse us of failing to appreciate that every nation has its own particular problems and interests. They cannot allege that we pretend that humanity is in a situation that does not exist at present although it may exist one day. They cannot suggest that we have tried to support our conclusions with arguments that defy common sense and universal experience. They must recognise that we have advanced theoretical arguments in favour of more than half of their demands for tariff protection. The only difference of opinion between ourselves and the practical men is that they wish to stimulate agriculture by the imposition of import duties and that they propose that all tariffs should last for ever.
We call our doctrines the "Natural System" because we believe that they enable us to draw attention to the mistakes and contradictions of the supporters of the " cosmopolitan system'' and that we have been able to show how a harmonious relationship can be established between economic theory and economic practice.
CHAPTER THIRTY FIVE
The Question posed by the Academy
We HAVE now completed our treatise which answers the question:
"If a country proposes to introduce free trade or to modify its tariff, what factors should it take into account so as to reconcile in the fairest manner the interests of producers with those of consumers?"
1. A distinction should be made between countries which have reached different stages of economic development.
We consider first a country which is retarded with regard to its cultural, moral, social, and political development. It has no independent prosperous middle class. Its land, capital, and technical knowledge are in the hands of a small privileged class. Agriculture is relatively backward and those who work on the land have little technical knowledge. To promote the rapid economic expansion of such a country it will be necessary to encourage the import of manufactured goods - assuming of course that the country supplying these goods does not impose import duties or prohibitions upon the import of foodstuffs and raw materials in exchange. In these circumstances the agrarian country should trade with those industrialised countries offering the best terms and it should reserve the right to extend its commerce in the future to any other industrialised country which is prepared to do business on similar terms.
2. Secondly, we will examine the position of a country which has all the necessary cultural qualifications for future industrial progress, but has only a small territory and cannot expect to be able to set up manufactures on a substantial scale because it lacks both adequate natural resources and a large enough home market. Such a country should endeavour to expand its markets either by entering into a customs union or by concluding commercial treaties with other countries.
3. Thirdly, we will deal with a country in which all the conditions for future industrial expansion are satisfied. When considering such
a country - one which has reaches t first stage of industrialisation - it is necessary to know
(a) if the country already operates a system of prohibitions or high import duties. If this is the case the rates of the duties should gradually be lowered until protection is afforded only to those branches of manufacture which appear to stand a good chance of being profitable at some time in the future.
(b) if the country has no protective tariff but proposes to establish one. In this case the best policy to adopt would be gradually to protect and to foster the development of those branches of manufacture which appear likely to be successful in the future.
4. We shall now consider a country in which all the conditions for future industrialisation have been satisfied. This is a country which is capable of progressing to the most advanced stage of industrialisation. If such a country has already fully developed its productive powers by means of a prohibitive system, it should be prepared to change gradually to a protective system.
5. Finally, we will consider an industrialised country in which manufactures have developed to such an extent that - even if it adopts a policy of free trade - it is in a position to compete successfully with any other country. Such a country should gradually reduce its import duties so as to allow foreign manufactured goods to come on to the home market to compete with native products.
In Chapter 12 to 26 we have discussed the desirability of complete freedom of trade in all agricultural products; the need to be prepared to change from one fiscal system to another; the circumstances under which a country should protect native industries, as well as various aspects of foreign competition.
The author refers his readers to the long note on page 17.' The hour has struck when he has to deliver the manuscript of his treatise to the Academy. He has not had sufficient time either to correct numerous slips made by the copyist or to add a number of notes and references.
[I.e. page 17 of List's manuscript (Chapter 4). This note is printed below as an appendix.]
List's Note to Chapter 41
The steel pen with which I have written both the rough copy and the final version of this treatise, and the fine paper on which it has been written may serve as an excellent example to illustrate clearly and simply the differences between the doctrines of exchange-value and productive powers.
At first I thought that it would be wasteful to use fine paper for the rough copy as well as for the final version but then I realised that my steel pen wrote much better on fine paper than on paper of poorer quality. Moreover the steel pen makes a noise when I write on paper of poor quality and this disturbs my train of thought. So I made a calculation. To live by my pen as an author I must earn 40 francs a day. The treatise has taken me 40 days to write, representing an earning power of 1,600 francs. Had I lost time by sharpening my pen or by writing more slowly and had I been disturbed by the noise caused by writing on poor paper I might have taken 70 days to write the treatise at a loss to my earning power of 2,800 francs. Under the most favourable circumstances I might not have gained an "exchange-value".2
By using better tools I have been able to reduce my costs to 1,600 francs. The better pens and the finer paper have cost 40 francs at the most so I have made a net saving of 1,560 francs. This calculation is based upon the theory of value. But a calculation based upon the theory of productive powers would give a different result. In this case the gain by using better pens and finer paper is much greater. Assuming that my annual output of new ideas exercises some influence upon the productive powers of people like myself - which is not very likely - I would be able to double my influence over the
1. [List wrote this long note to Chapter 4 after his manuscript had been completed. It is printed at the end of the book as an appendix. Although List purports to discuss the theories of value and productive powers examined in Chapter 4, the note is really an apology for having written the treatise in a very short time.]
2. [I.e. List might not win the prize offered by the Academy.]
general public. But if this treatise should possess any intellectual merit it would be due entirely to the speed of its composition. For over 20 years I have been making observations and I have been thinking about what I discuss in my manuscript but it has taken me only 40 days to plan the enterprise, to read the necessary books, to make the necessary notes, and to write down my views and criticisms. In addition I have had to supervise the making of a fair copy. To complete my task in time I could not wait until the whole of the original rough copy was finished before starting on the fair copy, although this would have been desirable when composing a treatise of this length. I have had to hand my rough draft to the copyist as soon as it was written. At the same time I was afraid that I might have dealt with some aspects of the problem too fully or not fully enough. In the first case there was a danger of submitting an ill-digested treatise. In the second case there was a danger that the adjudicators - who set such high standards for themselves - might consider that my work had fallen below the standard that they had a right to expect. In either case I would have failed to achieve my aim which is to be worthy of the votes and the support of the learned body which takes the first place in the world in every branch of knowledge to which it has turned its attention. It is a body which has the power to confer the greatest distinction or to deliver the most damning criticism on any literary project.
Were my treatise so imperfect or so incomplete as to merit my own condemnation I would not have submitted it to the Academy. Since I mistrust my own abilities when my initial efforts have been unsuccessful, I would probably have left the work unfinished and I would have troubled myself no more about it. If, despite all the unfavourable circumstances connected with its composition, I have nevertheless been able to produce something worth while, this has been due to the increase in my productive powers brought about by my good pens and my fine paper. At the same time this is also a striking proof of the possible harmful consequences of prohibitions since both pens and paper have been made in England.
I must explain why I have had so short a time in which to write my treatise. I was under the impression - by what mischance I do not know - that the adjudication of the essays answering the Academy's question had already taken place. It was only two months ago that I learned that this was not the case. I could not start work on the manuscript for a fortnight owing to other literary commitments.
I hesitate to explain the particular circumstances of the composition of the manuscript but I think that I should do so in the hope of securing the indulgence of the adjudicators. I have not had time either to check my first rough draft or my fair copy. The style of the composition will inevitably bear witness to my haste. The final copy has been written by two persons1 and I am unable to assess the competence of one of them. Even as I write this note (on the last day before the expiry of the extended time limit for submitting the treatise) I do not know if I can find time to number the chapters and the notes and to fill in any gaps left by the copyist because he has not been able to read what I have so hurriedly written.
A candidate for an Academy award may presume to hope that he may succeed in winning the prize. Should this treatise, despite its imperfections, be so fortunate as to gain the prize, the author is confident that he will be able to expand it and improve it so as to justify the decision of the Academy.
1. [One of the copyists was List's daughter Emilie. The identity of the other copyist is not known.]
Academy, French 3, 4, 5, 20, 25, 192, 195
Africa 49, 50, 137
"Agricultural System" 179. See Physiocrats
Agriculture 8, 54-66, 76-9, 85-94,191
America. See Canada, South America, United States American war of independence 171