Friedrich List - Economics Based On Nations

Economics Based On Nations

List's theory of "national economics" differed from the doctrines of "individual economics" and "cosmopolitan economics" by Adam Smith and J.B. Say. List contrasted the economic behaviour of an individual with that of a nation. An individual promotes only his own personal interests but a state fosters the welfare of all its citizens. An individual may prosper from activities which harm the interests of a nation. "Slavery may be a public calamity for a country, nevertheless some people may do very well in carrying on the slave trade and in holding slaves." Likewise, activities beneficial to society may injure the interests of certain individuals. "Canals and railroads may do great good to a nation, but all waggoners will complain of this improvement. Every new invention has some inconvenience for a number of individuals, and is nevertheless a public blessing". List argued that although some government action was essential to stimulate the economy, an overzealous government might do more harm than good. "It is bad policy to regulate everything and to promote everything by employing social powers, where things may better regulate themselves and can be better promoted by private exertions; but it is no less bad policy to let those things alone which can only be promoted by interfering social power."

Due to the "universal union" that nations have with their populace, List stated that "from this political union originates their commercial union, and it is in consequence of the perpetual peace thus maintained that commercial union has become so beneficial to them. … The result of a general free trade would not be a universal republic, but, on the contrary, a universal subjection of the less advanced nations to the predominant manufacturing, commercial and naval power, is a conclusion for which the reasons are very strong. … A universal republic …, i.e. a union of the nations of the earth whereby they recognise the same conditions of right among themselves and renounce self-redress, can only be realised if a large number of nationalities attain to as nearly the same degree as possible of industry and civilisation, political cultivation and power. Only with the gradual formation of this union can free trade be developed, only as a result of this union can it confer on all nations the same great advantages which are now experienced by those provinces and states which are politically united. The system of protection, inasmuch as it forms the only means of placing those nations which are far behind in civilisation on equal terms with the one predominating nation", appears to be the most efficient means of furthering the final union of nations, and hence also of promoting true freedom of trade."

In his seventh letter List repeated his assertion that economists should realise that since the human race is divided into independent states, "a nation would act unwisely to endeavour to promote the welfare of the whole human race at the expense of its particular strength, welfare, and independence. It is a dictate of the law of self-preservation to make its particular advancement in power and strength the first principles of its policy". A country should not count the cost of defending the overseas trade of its merchants. And "the manufacturing and agricultural interest must be promoted and protected even by sacrifices of the majority of the individuals, if it can be proved that the nation would never acquire the necessary perfection … without such protective measures."