Book VIII: German National Economy, Chapter I: National Political Economy

1. High wages are not due to Protection, but to the scarcity of skilled labour; of the emigrants few are skilled artisans, the majority being casuals or agricultural labourers, the best of whom become farmers.

2. Americans are too modest in attributing their success to Protection. In their case, as in that of every other nation, it is due to great natural resources in pasturage, forests, and mines, and to the energy, mechanical genius, and capacity for organisation shown by their people. When they replace their protective by a revenue tariff they will advance by leaps and bounds.

Friedrich List—Colbert redivivus—National entity and the suppression of the individual—Against Adam Smith—His principles—Schmoller’s Orthodoxy—Failure.

In 1841, Friedrich List, a German who had for long resided in England and the United States, published a book entitled “A National System of Political Economy.” When no one paid any attention to it, he killed himself.

List revived the old Colbertism. According to him buying and selling is not done by separate individuals, but by nations. Anticipating the Collectivists, he made a single entity of the millions of men that form a nation, and set up this idea in opposition to the individualist school of economists who say that it is not the Government which creates the taxpayers, but the taxpayers who support the Government. He accused Adam Smith of cosmopolitanism when he asserted that the laws of exchange do not alter at every frontier; of materialism when he freed economic science from political and other considerations; of individualism when “he failed to understand the nature of social effort.” He himself formulated a principle that certainly was not new: “A nation should be self-sufficient: its statesmen should protect its industries against the competition of those of more developed nations.”

His imitation of Colbert made List a great man in Germany: since 1879 his spirit has governed its Government and inspired its professors. Schmoller, in his inaugural address as Rector of Berlin University, took care to warn the professors that “disciples of Adam Smith were no use there: if they did not wish to resign their chairs, their science must conform to the exigencies of politics.” At the Berlin International Statistical Institute, I heard Wagner, in a lecture on the incidence of Customs duties, speak of Bismarck as an infallible authority to whom every statistician must bow the knee. And what are the results of this national political economy, which is an instrumentum regni, and not a search for truth? what are the results of its axioms and the means employed to realise them?

In 1879 Bismarck embarked on a fiscal policy which led to the shipwreck of his political enterprise: until 1890 the Emperor William II. was faithful to his plans, only to throw them overboard; by a more than Swiftian irony the measures employed to assist national as a matter of fact assisted foreign industry: and all this forces us to the conclusion that the national Political Economy was but a will-o’-the-wisp: its pompous title a glittering covering for the old fallacies.