List, Friedrich (1789–1846)

FRIEDRICH LIST SUGGESTED ways to overcome poverty and the lack of industrialization. Neither Soviet-style planned nor Western capitalist market economies have brought about the development necessary to lift Third World countries out of poverty. Since the early 1950s, development has equaled economic growth; however, neoliberalism has missed the point of social justice, which is crucial for any strategy of development. Globalization has not necessarily helped Less Developed Countries (LDCs); on the contrary, statistics show that rich countries have become richer, poor countries poorer. The theories of industrialization have not delivered the “wealth for nations”; what has become obvious is the ineffectiveness of these theories.

For Germany the economic nationalist Friedrich List had advocated a self-sufficient economy, guided by a strong, interventionist government that would use its economic resources for national industrialization. List argues against David Ricardo's “free trade” and Adam Smith's policy of “laissez-faire.” He favored protectionism against the superior British-manufactured exports.

List lived for some years in the United States and read Alexander Hamilton's “Report on the Subject of Manufacturers,” where Hamilton advocated governmental measures for the encouragement and protection of domestic industries—the classic infant industry argument, whereby the government helps developing industries, protecting them from foreign competition, to catch up.

There is a direct link between the American critique of the English Navigation Acts and Hamilton's advocacy of national protection and encouragement of infant industries, and it stretches from Hamilton to List. Prussia became equal to Britain with the help of quasimercantilist, selective self-reliance organized by its strong state. Britain's technological superiority and industrial advance were the lynchpin of its hegemony. Because of its predominance, it could dictate the course of other states’ development.

During the 1800s all countries were confronted with two options. They could follow Ricardo's concept of comparative advantage and the advice of British industrialists and politicians and integrate into an international division of labor oriented toward Britain, whereby Britain produced manufactured goods for exports and imported resources from other countries. Or they could disregard the benefits of comparative advantage and enact a forced industrialization based on one's own national productive forces. The first option meant, besides the economic arrangement, a political arrangement of colonial or quasi-colonial status. The second option meant potentially political, if not military, conflicts as the country developed economically and politically, becoming an equal to Britain and remaining independent.

List considered that the seductive voice of British economic liberalism would, however, lead to dependence. Free trade was for him a cover-up for unequal relations among nations. That is why he advocated a vigorous and pervasive policy of state-led national development in the latecomer Germany, in which protectionism, [Page 644]investment infrastructure, and a strong emphasis on education were crucial.

For List “the power of producing wealth is infinitely more important than wealth itself,” as has been phrased by J.A. Tickner. The development of scientific, technological, educational, and transport infrastructure and industrialization became a necessary adjunct to politics.

Protectionism would vary from country to country and industry to industry and might not be necessary for some industries. The key point for List was for a country to develop its productive powers, even if this meant hardship for consumers—this was only a short-term effect, strengthening industries and benefiting consumers in the long term.

...