Friedrich list


CHAPTER THIRTY FOUR The Natural System of Political Economy1



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CHAPTER THIRTY FOUR

The Natural System of Political Economy1

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]

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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.

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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

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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.



APOLOGY

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.]

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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.]

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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.

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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.]

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INDEX

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

Ancien regime. See Eden Treaty, Louis XVI,

Physiocrats, Turgot

Anderson, Adam 4, 131, 134, 152, 157

Arkwright, Richard 35

Asia 49, 139, 168

Australia 50

Baldwin, Henry 140

Baltic Sea 153

Basra 153

Belgium 45

Berg, Grand Duchy 11

Bergen 155, 156

Beukel, Willem 133

Bilbao 163

Biscay, Bay of 163

Bismarck 2

Brazil 175

British Merchant 131, 166

Bremen 161

Bruges 155

Bullion 164, 168, 177

Canada 50, 176

Canning, George 24,137-40, 148-50, 176

Cape of Good Hope 136, 160, 165

Carey, Mathew 4, 172

Castlereagh, Lord 138, 148

Catherine the Great 127

Chaptal, J. A.C. 4, 6, 61, 65, 66, 87, 150,186


Child, Sir Josiah 171

China 151,168,169

Colbert, Jean-Baptiste 42, 141, 142-4, 146, 163, 182

Cologne 157

Colonies, North American 170-1

Commerce 14-104

Commercial treaties. See Eden, Methuen

Commons, House of 170

Condorcet, Antoine 143

Congress, American 171-3

Continental System 9, 10, 51, 148, 150

Commercial treaties. See Treaties

Corn Laws (British) 6, 138, 174

Corvee 173, 175

"Cosmopolitan System" 27-9, 70, 180, 181,183,186 Cotton 173,175

Customs union, German. See Zollverein

Davenant, Charles 134,171

Denmark 156-8

Diet, Imperial 157-8

Dresden 3, 8

Droz,Joseph 181,186

Dupin, Charles 4, 6, 7, 21, 68, 86-71, 121, 127,150-1,

186

Economic growth, Phases of 52-65



Economists. See Chaptal, Droz, Dupin,

Encyclopaedists, Ferrier, McCulloch, Physiocrats, Quesnay, J.B. Say, Adam Smith

Eden Treaty 147, 149, 166

Edict of Nantes 144-5

Edward III 42, 129

Edward IV 129, 155

Edward VI 129, 155

Egypt 165, 175


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Elizabeth, Queen 42, 129, 132, 134, 157 Encyclopaedists 21

England 11, 22, 24, 45-8, 50-1, 108, 121, 128-40, 147-

9,153, 157-77, 188

Ericeira, Luis de Menesses 130

Esprit des Lois. See Montesquieu

Exchange value. See Value, theory of

Ferrier, F.L.A. 4, 6

Fisheries 132-3, 155-6



Foedera. See Rymer

France 1, 11, 19, 42, 45, 50, 52, 64-6, 110-13, 125-

7, 137-8, 141-52, 176, 186

Francis I (France) 141

Free Trade. See Encyclopaedists, McCulloch,

Physiocrats, Quesnay, J.B. Say, Adam Smith

Genoa 136, 165

German customs union. See Zollverein

Germany 1, 19, 43, 45, 50, 136, 139, 151-62

Gilpin, George 157

Greece 165

Hamburg 154, 157, 161

Hamilton, Alexander 4, 6, 172
Hanseatic League 70, 128-9, 132, 134-6, 154-60, 165,

183. See Cologne, Hamburg, Lubeck, Steelyard

Henry I (Emperor) 153

Henry II (England) 163

Henry IV (England) 132

Henry IV (France) 141

Henry VI (England) 132

Henry VII (England) 134


Henry VIII (England) 129
Herrings 133

Holland 129-35, 140, 142, 154, 157, 160, 164, 170

Holy Roman Empire 153, 157, 160

Huguenots 144-5

Huskisson, William 24, 138, 140, 148, 149, 173-6

India 136, 138, 160, 165, 168-9, 175

Ingersoll, Charles 1

Inquisition 164

Iran. See Persia
Italy 43, 50, 137, 165

Jacobins 148

James I 132, 134

Jews 164


King, Charles 4

Lamballe, Princess 148

Leipzig 3, 8

List


Emilie (daughter) 195

Karoline (wife) 4

London 155

Louis XIV 141, 144-5

Louis XVIII 113

Low Countries. See Holland

Lübeck 154, 157, 161

Luther 160

McCulloch, J.R. 36

Madison, James 172

Mary, Queen 155

Mazarin, Cardinal 141

Mediterranean 165

Mercantile system 19, 178

Merchants. See Commerce

Methuen Treaty 124, 130-1, 149, 151, 166-9, 176 Montesquieu, Charles 25, 187

Morea 165

Nantes, Edict of 144-5

Naples. See Italy

Napoleon 9, 10, 11, 111, 112, 161, 177

National Economics 29-33, 41-5

National System of Political Economy 2, 3, 5

"Natural System" 189, 190

Navigation code 103, 133, 134, 137

Nesselrode, Karl Robert 178

Netherlands. See Holland

Newcastle upon Tyne 133

New York state 171

Nile, River 153

North Sea 154

Novgorod 153

Octroi 120, 121, 162

Ottoman Empire. See Turkey

Outlines of American Political Economy 1,3, 125, 170,

198
Paris 3, 83, 87, 149, 151

Persia 153

Philadelphia 1, 92

Physiocrats 19, 146, 179

Pisa 165

Port Clinton 8

Portugal 43, 50, 124, 130-1, 137, 147, 159,166-9,183.

See Ericeira, Methuen Treaty

Priestley, Joseph 139

Productive powers 8, 9, 34-6, 52-75, 187

Protection 105-124

Prussia 43. See Zollverein

Quesnay, Francois 19,146

Reformation 160

Refugees, French 144-5

Richelieu, Cardinal 141

Ruhr 11

Russia 1, 4, 45, 127, 137, 145, 155, 156, 158, 177-8 Rymer, Thomas 129



Saint Simon, Comte de 78

Say, Jean-Baptiste 4, 12, 19-21, 34, 37-41, 104-5, 113,

124, 143, 149, 180-3

Scott, Sir Walter 148

Sheep 151, 158,163

Sicily. See Italy

Sigismund, Emperor 158

Silk industry 116, 125, 139, 141, 151

Smith, Adam 1, 4, 12, 17, 19, 21, 22, 37,

39, 40, 41, 76, 77, 79-80, 101, 104, 128, 132, 134, 142-3, 146, 159, 160, 167-9, 171, 180, 183, 186, 190

South America 43, 44, 49

South Carolina 171

Spain 43, 50, 136-7, 149, 162-5, 183

Stapleton, A. G. 150


Steelyard (London) 159

Storch, Heinrich 4, 177

Strabo 130

Subsidies 123,138

Sweden 156,158

Switzerland 106-7, 145

Tamaqua 8

Tibet 151

Treaties, Commercial. See Eden, Methuen

Tubingen 13

Turgot, A.R.J. 19, 143, 146

Turkey 50, 165

Two Sicilies. See Italy

Ulloa, Bernardo 4,163

United States 1, 19, 35, 44, 50, 52, 92, 125, 134, 137,

170-5


Union of German Merchants 2, 12

Ustiris, Jeronymo 4, 162-3

Utrecht, Treaty of 129

Value, theory of 36-41

Venice 136, 153, 157, 165, 166, 183

Villèle, Joseph 149, 150, 166

Virginia 170

Viscaya (Spain) 163

Washington 174

Washington, George 127,171

Watt, James 35

Wealth of Nations. See Adam Smith

Werdenhagen 157

Whaling 165

Wheat. See Corn Laws

Wine 65, 124, 139, 147, 166

Witte, Sergei 2

Woollen industry 139, 141, 168, 172

World trade congress 126-7

Zollverein 2, 43, 45, 161


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