Saturday, 21 April 2018

Friedrich List and the Wealth of Nations

The ideology of free trade, and the reality behind it of what we call loosely “globalisation”, is one that must and will die if we are to defeat those truculent dictatorships such as the Chinese and those betrayers of democracy among us who exploit it and are nurtured by it. “Must”, because it is deleterious to the highest values of which the West has been the inspirer and promoter (hypocritically or not), and “will”, because as it stands globalisation and free trade does not and cannot lead to the convergence - economic, political and cultural - of the society of nations founded as it is on the internal contradictions of the capitalist system that engenders this process. 

Like many misguided “beautiful souls” in the liberal and democratic West (the “and” here is disjunctive because the two do not go together necessarily at all, contrary to those who believe in “liberal democracy”), Friedrich List believed that economic development would lead eventually to a homogeneous and pacified global community of nations. But unlike these deluded progressives, List was also the first notable European thinker (even before the other Friedrich - Nietzsche) to perceive with clear insight that the pursuit of “wealth” in a global capitalist system served merely to hide but in fact engendered catastrophic conflict within and between nations leading inexorably to global warfare. Rather than revel in idiotic platitudes about “the wealth of nations”, then, List set out to study punctiliously and scrupulously the precise political antagonism that the claptrap terminology of “the science of economics” propagated by the British theoreticians merely tried to hide and dissimulate. If we are to emerge from the paltry “confusionism”  of free-trade ideology (let alone the deplorable and contemptible dross of what the Chinese Dictatorship peddles as “Confucianism”), it is List’s incisive thoughts of the essentially Political nature of economic production that we must tackle first. 

Make no mistake: for the precise reasons that we outline here, “the Chinese Model” is bound to failure, the Chinese Dictatorship that trumpets it is destined to a rapid and ignominious fall, which we are beginning to witness already - in a nutshell, because dictatorial and totalitarian rule may work “strategically” in the short term but is catastrophic in the longer run: first, because it rips apart political legitimacy and social cohesion; second, because it saps enterprise and innovation; third, because it drives out talent and investment, foreign and domestic (capital flight); last but far from least, because it blocks those “market signals” that are the most evident institutional features of capitalism that drive the ability of an economic system toward that “ability to produce wealth” that List identified as the core of his “national political economy”. 

In short, vis-a-vis the dictatorial totalitarian powers that threaten the still-democratic West, principally the Chinese and Russian Dictatorships, “we have nothing to fear but fear itself”. The capitalist and democratic West is still far and away the most powerful alliance this world has ever known and is destined to defeat totalitarianism for a long time to come. But defeatism (fear) and complacent greed (the temptation to use these dictatorship as a source of cheap labour and consumer goods, and therefore profits in the West) are dangers against which we must be powerfully vigilant.


The ultimate aim of all political domination is to disguise the abuse of power and coercion as either “nature” or irresistible logic - and, in either case, as technical-neutral “science”. Having established its industrial domination the world over, the British industrial capitalist bourgeoisie now wishes to present its politico-economic interests under the ideological guise of political economy or “the science of economics”. This “science” wishes to present “wealth” (the subject-matter of economics) as a universal category to which all human beings aspire whether as individuals or as nations, and most of all as an end-product whose maximisation can be achieved “scientifically”, that is to say, independently of the conflicting interests of human beings and of nation-states. Seizing on the very title of Adam Smith’s economic bible, it is the evident apory between “the Nature and Causes of Wealth”, on one side, and “the Nature and Causes of the Wealth of Nations”, on the other, that Friedrich List exposes ruthlessly as the ideology of one Nation in particular - Britain - against the interests of all other Nations. 

The British “science” of Political Economy, argues List, presents wealth as a universal good achievable through homogeneous policies applicable to all Nations without regard to the specific antagonistic interests of these Nations - whence the absolute and unquestioning faith of the British economists on the equally absolute necessity of “free trade” as the indispensable path to the optimisation of “wealth” for all nations (“the wealth of nations”) through the exploitation of their “comparative advantage”. Yet, it s the very existence of Nations with opposing, conflicting and antagonistic political interests that explodes the “technical-neutral science of economics” that the British ideologues wish to foist upon all other Nations. British Political Economy, insists List, leaves out of its “science” the very element - the Political - that would unmask it as the hypocritical peddling of the interests of its own industrial and financial capitalist bourgeoisie! Which is why List sternly champions on behalf of his nascent German nation his novel “national political economy” against the “cosmopolitical economics” trumpeted by his British counterparts.

The Listian distinction between “wealth”, on one side, and “the ability to produce wealth” on the other establishes a dramatic and irresoluble schism at the very heart of the concept of “wealth”. Like nuclear fission, List’s splitting and scission of the notion of “wealth” engenders a chain reaction of truly apocalyptic proportions for the entire conceptualisation and theory of economics. For if indeed “wealth” consisted of a quantity of use values or resources available socially for consumption to the whole of humanity, then it would make absolutely no sense whatsoever to distinguish between “wealth” as an end result, on one side, and “the ability to produce wealth” as an intermediate process on the way to the final attainment of this “wealth”! The “wealth” referred to by British economists is the end-result use value of production - it is a universal or “cosmopolitical” wealth as List styles it. By contrast, the “wealth” referred to by the phrase “the ability to produce wealth” is a very different type of wealth! The former we may call “wealth-for-consumption” and the latter we may call “wealth-for-production”. 

The distinction makes sense only if there exist differentials between economic agents in their ability to produce wealth, that is to say, only if wealth is subject to property rights that turn economic agents into competitors! Whereas “wealth” can exist on its own as a resource that can be shared by all humanity collectively, the notion of “the ability to produce wealth” can make any sense at all if and only this “ability” separates human groupings and hence sets them against one another - individual against individual, nation against nation - according to their different “ability” to produce wealth. For humanity as a whole, there can be no difference between wealth and the ability to produce it for the simple reason that the end of production is wealth that belongs to humanity as a totality. It is palpably and incontrovertibly clear from the outset that for List’s distinction between actual wealth and its potential production to make any sense at all, “actual wealth” cannot be aggregated socially but must exist in the form of “property rights to wealth” or as “estate” (recall John Locke’s famous formulation of the protection of “life, liberty and estate” as the sole purpose and goal for the existence of civil society or the State). Only then can the distinction of wealth-for-consumption (existing wealth) and wealth-for-production (the ability to produce wealth) have any validity and purpose whatsoever. 

In line with and in anticipation of Neoclassical Theory, the objection of List to the “cosmopolitical economics” of the British Labor Theory of Value espoused by Smith and Ricardo is that it considers wealth as a “positive substance”, as being “created” by human labour - as useful content for humanity as a whole or for individuals in isolation -, and not as property, as the possession of private individuals safeguarded and guaranteed by nations. Clearly, the antagonism between property owners - people with legally and politically antagonistic claims to wealth - must be resolved in favour of those property owners who possess, not the greatest wealth, but rather the greatest ability to produce wealth because - provided that property rights are enforced and the process of production is not interfered with through violence - it is those with the greatest ability to produce wealth who will end up with the greatest accumulation of wealth. 

Furthermore, and much more important, the distinction between wealth and ability to produce wealth makes sense if and only if wealth-for-consumption is no longer the actual objective of production but rather if it is the accumulation of wealth-for-production itself that becomes the paramount pursuit wholly separate from its consumption! The real “wealth”, according to List, is not “wealth” itself but rather the ability to produce “it”. It follows that this “it” - existing wealth or wealth-for-consumption - is something categorically different from the “wealth” that consists of “the ability to produce” wealth itself. 

This splitting of the notion of wealth itself is consistent with the negatives Denken headed by Arthur Schopenhauer as a reaction to Classical German Idealism from Kant to Hegel, a philosophical doctrine that will characterise German thinking from philosophy to economics and even science itself from the beginning of the nineteenth century to the present day. In nature, claims Bohm-Bawerk at the very outset of his seminal The Positive Theory of Capital, in line with the Law of Conservation in physics, “nothing is created, everything is transformed”. This means that wealth cannot be “created”; wealth is simply the trans-formation of existing resources into different more useful forms. Human beings “work” nature - they transform it through their labour. But labour does not “create” anything. Quite to the contrary, labour is only consumption of resources - it has no utility but is sheer dis-utility: labour is want, the satisfaction or fulfilment or momentary extinguishment of want. Labour cannot do more than extinguish want through consumption of existing resources. But in order to shorten the time taken for the satisfaction of want, it is necessary for producers to delay or abstain from consumption at least in part so as to be able to construct labour-saving tools that will reduce the time taken - and thus the “labour” - to satisfy want. It is these labour-saving tools that constitute capital or “the ability to produce wealth”. Wealth here is intended as “transformation of existing resources”, not as the “creation” ex nihilo of new wealth! Assuming, as did all of political economy (including the Neoclassical) that labour is the ultimate factor of the production of wealth-for-consumption (even Bohm-Bawerk agrees), then those owners are wealthiest who have the ultimate command over the living labour of workers (even the accumulation of means of production is meaningless without the ability of the wealth produced to enable the owner to command living labour). 

For the most belligerent and sophisticated and erudite exponent of Neoclassical economic theory, the Austrian School, labour is the immediate satisfaction of needs, it is “hand-to-mouth” subsistence. Labour in and of itself, without the labour-saving tools needed for production, without the means of production, is utter and destitute dis-utility. Only with the deferral of consumption can labour be dedicated to the production of “labour-saving” tools that lead to the development of wealth-for-production and thence to the accumulation of wealth - again, not as “creation” but as the deferral of its consumption through labour-saving tools in a never-ending spiral. It follows that labour does not “create” wealth: it is the employer (Arbeit-Geber) through his deferral of and abstinence from immediate consumption of wealth (labour-as-want) who is able to “give labour” to ( to em-ploy) the worker: - the worker here is only the “taker of labour” (Arbeit-nehmer). Without the labour-saving tools (capital) of the employer who obtained them by renouncing and abstaining from consumption, the worker would be condemned to mere subsistence. The worker’s only “possession” is labour, which is the immediate satisfaction of need - hence, labour in itself is pure dis-utility because without means of production it is unable even to feed itself! Labour has no “utility”: it is pure dis-utility. For the negatives Denken and then for Neoclassical Theory, wealth quite simply cannot be “pro-duced” by labour; it can only be consumed. Only the intervention of capital through the deferral of consumption gives claim to greater wealth-for-consumption as well as more wealth-for-production (tools). This diversion of wealth-for-consumption to the production of labour-saving tools (capital) does not “create” wealth, but rather trans-forms existing wealth into products that can save labour in that it allows the employment of workers (labour) for their expanded reproduction (procreation) and for the production of more labour-saving tools through the employer’s abstinence from consuming at least part of the fresh production. 

“Capital” here is not seen as an inert pile of labour-saving goods but rather as the pro-duct of the capitalist’s wilful “renunciation” of consumption represented by the diversion of labour time from consumption to the production of labour-saving tools! By renouncing or deferring consumption indefinitely, the capitalist dedicates the saved labour to the production of “labour-saving” tools. Thus, capitalist accumulation or profits is the ever-expanding domination and acquisition of workers’ labour-power through the production of labour-saving machinery (capital). Quite simply, capital is the capitalist’s will to employ labor and to dominate or command labor, that is, the workers, on an ever-expanding scale through the expanded reproduction of the working population made possible by the production of more means of consumption by means of “labour-saving” machinery!  

The negatives Denken for the first time in the history of human thought presents this domination by the employer over the employee as “renunciation” and “abstinence”, as “self-abnegation”, as “sacrifice” (Opfer) - Schopenhauer. The essence of wealth is consumption because wealth exists to be consumed. In a rational society at peace with itself, with no internal antagonism, wealth and the ability to produce it are one and the same thing. This is the kind of wealth envisaged by the British political economists. But as soon as wealth becomes subject to property rights that are antagonistic by definition (“what is yours and what is mine”), then the ability to produce wealth becomes in essence entirely different from wealth as the final product: in such an antagonistic society based on private property the two types of “wealth” are entirely different and, what is more, it is the ability to produce wealth that takes prominence over wealth as the final product to be consumed! Consumption is “want”, annihilation of wealth. The essence of the ability to produce wealth is not wealth itself but the accumulation of wealth-producing property or factors of production (machinery and labour-power), and therefore the accumulation of wealth-as-capital. Unproductive labour consumes wealth and therefore it is wasteful; productive labour is productive not because it produces wealth (which is merely consumption), but because it produces means to produce wealth (capital as means of production), that is, it produces the means to support more productive labour arithmetically or geometrically (through innovation).

It is evident that when characterising a particular form of wealth as either wealth-for-consumption or as wealth-for-production and consequently the living labour engaged in its production as either productive labour or unproductive labour, what becomes central to the categorisation is the part played by a specific form of social wealth in the process of production and therefore in the division of social labour. That is the reason why List, in his elaboration of the vital distinction between wealth and the ability to produce wealth turns immediately to the examination of the division of labour and of national industrial sectors. In his memorable analysis of specialisation in pin production, Adam Smith saw only that the division of labour increased the production of social wealth. By contrast, Hegel sharply perceived  the contradiction in the Labor Theory of Value as applied to a capitalist economy because specialisation did not enrich the worker (the presumed “giver” of work), but rather it enriched the employer (the presumed taker of labour). Marx seized upon this Hegelian insight and concluded correctly that the capitalist uses the higher productivity of the worker, and so the greater produced wealth that the capitalist appropriates from the worker, to employ ever more workers! The accumulation of wealth is divided in part in wages for workers to consume to reproduce themselves on an expanded scale, and in part in profits for capitalists to employ more workers, and thus to accumulate more wealth-as-capital in terms of means of production (machinery) and labour-power (wages) - what Marx called constant and variable capital, respectively.

We shall turn to List’s all-important examination of the precise historical dynamics of (domestic) industrial and (foreign) trade policy in the very near future.

Saturday, 14 April 2018

Politics and Metaphysics in Friedrich List’s “National System of Political Economy”

In our previous few contributions, we have sought to elaborate on a new definition of economic wealth or “value” that takes its departure from Friedrich List’s notion of “National Political Economy” in contrast to what he called the “cosmopolitical economy” theorised by the Anglo-Saxon economists, from Adam Smith to the present day. Although ultimately contradictory in that List affirms the validity of the “cosmopolitical” definition of economic value, still his critique of Anglo-Saxon economic theory opens the door to a much more incisive and insightful definition of wealth and value than has been proposed thus far in the history of economic thought.

Two types of “wealth”, then. One abstract and the other concrete. The first is “objective” in the sense of non-political: individualistic and subjective for the utilitarians yet objective because determined by the conflictual tug-of-war of the market; and the other, based on the Labor Theory of Value, more essentialist because determined by socially necessary elements such as labour-time or “real cost”. These “objective” definitions of value or “wealth” are clearly non-political because, regardless of the distribution of wealth in a society, provided the market mechanism of free competition and trade is left to operate unhindered, the quantity of wealth available to a given society is a “given”, a datum that cannot be altered given the technological state of development of a society. This objective approach to value treats value as a quantity that is fixed categorically as a totality that is capable of being altered only in its distribution, not in its quantum. Both Classical and Neoclassical economic theories were theories of distribution of value, not of its production or creation. As such, any attempt to quantify value amounts to sheer metaphysics - which is the critique that neoclassical marginal-utility theoreticians moved against the “essentialist” labour theory of value” of Smith, Ricardo and Marx. 

In reality, of course, the neoclassical theoreticians themselves were open to the “metaphysical” critique in that the very notion of “utility” that “the market mechanism” is supposed to distribute via “marginal exchange” is nothing other than pure metaphysics! Yet, that is not to say that neoclassical value theory is purely subjective. To put it with Weber, subjective evaluations of economic value - institutionalised in market prices - does not mean that they are arbitrary. Indeed, subjective evaluations are objective to the extent that they are made freely - and therefore, in Weber’s sharp observation, also made rationally. Weber refutes the notion that “freedom” is subjective in the sense of irrational: free human beings act rationally, and therefore the outcome of their collective free actions is rational and objective - objective in the sense of rational (cf. Bohm-Bawerk on whose neoclassical analysis Weber relied). 

Even the division of labour or specialisation can result in higher productivity of a given amount of labour time or labour power — but not through scientific advances and different social relations, which are all deemed to be exogenous to the creation of value through labour (classics) or through market exchange (neoclassics). Here production techniques are exogenous to value and market mechanism - and thus non-political because objective, and objective because non-political - the objective resultant of subjective opposed forces or the objective product of the labour time employed in production - which can diverge from its real value in distributive terms, but not in terms of the quantum of wealth produced). 

The “national political economy” that List proposes starts from premises that are radically different  from those of Anglo-Saxon political economy - premises that are quite irreconcilable with the latter theory of economics, despite List’s insistence to the contrary. List’s national-economic theory in fact does not treat wealth as a universal value whose quantity and optimal distribution can be scientifically determined. Instead, List’s distinction between “wealth” and “ability to produce wealth” lays clear and incontrovertible emphasis on “the ability to produce wealth” as the ability for the more productive agent to overwhelm and subjugate the less productive one. The only reason why List would make such a distinction must be, and could only be, his emphasis on the ability of a nation to overtake other nations in the ability to produce offensive capabilities in the event of conflict and war. In the absence of such a premise, List’s distinction would be deprived of all sense - for the simple reason that no-one would prefer a future reward (the ability to produce) to an existing one (the actual possession and enjoyment of wealth) if not with a view to being able to control the present wealth and future productive capability of other economic agents! We have here once again the Schopenhauerian Entsagung (renunciation) that will form the basis of Bohm-Bawerk’s “positive theory of capital”. In fact this is a “negative” theory because wealth is not created but simply re-distributed according to the individual ability to defer or abnegate or delay its consumption. Here “renunciation of present consumption” becomes the basis of all claim to wealth, of its distribution from an initial position. But for List, anticipating Nietzsche and Bohm-Bawerk as well as Schopenhauer, this posticipation of consumption implies that the entire scope of wealth is not and can never be its presence (the ability to be consumed), but its potential for competitive advantage, for greater power of acquisition in future from less patient economic agents! (Note here the Ancient Greek word for “property” as analogous to “being” or “pre-sence”, the Heideggerian Da-sein, being there, ec-sisting in the Latin equivalent. Of course, Hegel’s entire phenomenology or dialectic of self-consciousness begins with the unforgettable chapter on “Lordship and Serfdom” - a dialectic that Marx will reprise masterfully with his critique of political economy based on the “Doppelcharakter” (double character) of human living activity or “labour” under capitalism - as use value, first, as the real valorisation of capital in the form of means of production, and, second, in its commodified form as labour-power that can be purchased and sold as if human living labour were a commodity equivalent and tradeable with objectified labour. The inability of the bourgeois notion of value as a mere objectified quantum to explain the phenomenon of economic “growth” not just as quantitative accumulation (Wachstum) but as political innovation and transformation, as trans-crescence, as “development” (Entwicklung), is what led Schumpeter to propose his revolutionary “theory of economic development” (wirtschaftliche Entwicklung) in which the capitalist entrepreneur has this formidable “enlivening” will to power to deflect and disrupt the sterile “Kreislauf” [stagnant circular flow] of the market economy by jolting it out of its deadening “equilibrium”. What characterises capitalism for Schumpeter is the central role that it reserves through institutional and legal protections provided by “the market” to the Entrepreneur (literally, under-taker, Unter-Nehmer) to subvert the market status quo (the stagnant, frozen “circular flow” of the economy) by means of Innovation. For Schumpeter, the differentia specifica of capitalism is to provide an institutional Innovations-prozess which is the “transformation mechanism” (Veranderungs-mechanismus) that allows the “entrepreneurial spirit” (Unternehmer-Geist) to breathe new life into the productive system and to jolt it out of its stagnant equilibrium. Of course, there is a clear dichotomy and apory here between institutional “mechanism” and entrepreneurial “spirit” that evinces the insuperable difficulties into which Schumpeter’s otherwise enthusing schema quickly runs as a theory of capitalist industry.

Wednesday, 4 April 2018

The Wealth of Nations - on Friedrich List

The ultimate aim of all political domination is to disguise the abuse of power and coercion as either “nature” or irresistible logic. It is this subtle and hypo-critical (literally, beneath criticism) Eskamotage that List eschews in the British “political economists”, Adam Smith and David Ricardo, and that he steadfastly confutes historically and refutes logically - precisely by opposing the teachings of history to the flawed logical deductions that the British economists counterfeit as the epitome of reason and natural instinct. Ultimately, List’s inability to comprehend the political reality of capitalist industry leads him to the same circuitous universalistic definition of wealth for which he criticises Smith. Yet his initial objection to Smith’s “logical”, and therefore “unhistorical” account of political economy is simply stating the obvious reality that logic itself has no deontological or empirical content - and for that reason alone it can never replace history, whose true realm is the quest for facts understood not as objective events but rather as human activities.

The contradiction between historical substance and logical form, List asserts conclusively, is apparent right from the very title of Smith’s magnum opus on which all later developments of “economic science” are founded - “The Nature and Causes of the Wealth of Nations”. For here already Smith draws a valid distinction between, on one hand, the nature and causes of “wealth” and, on the other, the existence of “nations” themselves. On one hand, List contends, we have “wealth” as welfare, - a universal, cosmopolitical, entity that abstracts from the existence of individual nations as separate “owners and possessors of wealth”. And then on the other hand we have wealth as property that is utilised by these individual owners themselves as real historical entities with divergent and conflicting political aims! Clearly, the first kind of “wealth” (welfare) is radically and categorically (toto genere) different from the second kind of “wealth” (property). The first type of wealth, welfare, can be viewed as a mere quantity, as a static substance. But the second type, property, the type that is measured not universally but rather in direct opposition to and conflict with other property owners - that type of antagonistic wealth is entirely different in that it refers to the ability of a nation to dominate others by means of its ability to convert its industrial base into commercial and military means of domination! It is to this second type of wealth that List refers when he prefers his own “national political economy” to Smith’s and the British economists’ specious “cosmopolitical” - not “political”! - economy, that is, a universalist economics entirely devoid of the essential political element! Although List still pledges allegiance to the universalist cosmopolitical economics of the British theoreticians, his own exposition - properly pursued and explicated - contains an implicit refutation of “economics” as a neutral-scientific, universalist “science”. A Nietzschean thinker ante litteram, List is already laying down the theoretical premises for Marx’s later critique of political economy - that is to say, the ineluctably and intrinsically political nature of all economic activity based on private property.

Returning to Smith, at first, the Scotsman pretends to explain how individual nations acquire “wealth” understood as “private property” - as “the wealth of nations”, not of “humanity”. But then, surreptitiously, he pretends to prove how such individual national wealth is in reality spread to all other individual nations by means of free trade or exchange so that it can finally turn into “cosmopolitical” (universal) wealth or welfare! Smith pretends therefore to transmute, as if by magic, private national  or “political wealth” - property - into something absolutely and categorically different - “cosmopolitical or universal wealth” or human welfare! He pretends to prove that “self-interest” - which, by definition, can only be instinctive and blind to other self-interests - can actually turn into “enlightened self-interest” for the achievement of universal welfare. In the event, Smith’s explication of how free exchange of private wealth or produce leads to the maximisation of “wealth” understood as a universal good rests on a circuitous logical identity whereby his apparently historical premises are in reality logically (and that means, tautologically, because all logic is tautology) tied to the theoretical conclusions he draws - which thus boil down to sterile logical deductions emptied of all factual historical substance.

The insuperable problem with Smith’s attempt to found Political Economy as a science is that his “science” is not “scientific” - and therefore “historical” - at all because science evolves with fresh historical and empirical facts (dis-coveries and in-ventions). His political economy is rather a “logical” structure that considers what “wealth” would be for human beings.... if actual individual ownership and possession of wealth (property) - and therefore individual political nations as the chief historical guarantors of “legal” ownership and possession - did not exist at all! To demonstrate the “logical” - and therefore unscientific and unhistorical - derivation of Smith’s economic theory, List quite correctly attacks what is the original sin of the Scotsman’s exposition - and that is, Smith’s account and analysis of the origin and spread of the division of labour. For here is to be found the fundamental error, the proton pseudon, that leads Smith and classical political economy astray.

As I have shown elsewhere, Smith’s fundamental error is to think of “labour” as an essentially individual human activity. He therefore proceeds to think of “labour” as an abstract activity and not as a concrete human activity, not as “social labour”. Had Smith seen human labour as an ineluctably, unavoidably “social” activity - as “social labour” -, he would have realised instantly that there is no “division of labour” as an abstract entity that can be parcelled out to human beings taken as abstract in-dividuals, as a-toms! Rather, there is “social labour” because human beings cannot survive without sharing multiple tasks and functions. It follows therefore that it is not human individuals that exchange the products of their individual (abstract) labours. Instead, human beings exchange produce - precisely for the reason that they engage in social labour, so that the things and services they produce must of necessity be exchanged, that is to say, shared in symbiotic relation! It is not the exchange of products, then, that engenders or causes the division of “labour” into individual labours or specialisation. Quite to the contrary, it s the indivisibility of “social labour” that renders specialisation and therefore the exchange of products between individuals necessary!

This is the Achilles’ heel from which List successfully and devastatingly attacks Smith’s “political economy”. And given the abstractness of the “labour” Smith considers, List is then able to show that the Scotsman’s is not and cannot be a truly “political” economy based on concrete human societies or “nations”, but rather an abstract generalisation of “labour” and “exchange” founded on human individuals and therefore on universal or “cosmo-political” principles. The “wealth” that Smith analyses is not the wealth “of nations”, but it is instead an abstract universal idea of “wealth” that can only improve the welfare of individuals engaged in the “free exchange” of human produce. As a result of his unhistorical generalisation of “wealth”, Smith does not and cannot consider how human relations change after every “exchange” of produce depending on the real concrete conditions in which produce is produced and then exchanged! Once he assumes that all production is through individual “labours” and all exchange is “free”, Smith cannot but conclude that exchange (a) maximises the welfare of individuals through the optimal distribution of utility and (b) leads inexorably to “specialisation”, that is, to the division of (individual) labour precisely for the purpose of maximising collective production and therefore the “individual wealth” of all trading parties. Smith never questions what this “labour” is in concrete historical terms: he simply treats it as a homogeneous quantity that can be allotted and divided among and between “individuals”.

Whereas Smith plunges instantly into the analysis of the division of “labour” right from Book Two of his “Wealth of Nations”, List in contrast begins his “National Political Economy” from the historical record of entire nations and societies in their productive relations internally, in terms of the historical growth of various industries, and externally in terms of the interaction of domestic industries with their inter-national counterparts as mediated by private and national interests. 

Two types of “wealth”, then. One abstract and the other concrete. The first is “objective” in the sense of non-political, individualistic and subjective for the utilitarians yet objective because determined by the conflictual tug-of-war of the market, and the other more essentialist because determined by socially necessary elements such as labour-time. These “objective” definitions of value or “wealth” are clearly non-political because, regardless of the distribution of wealth in a society, provided the market mechanism of free competition and trade is left to operate unhindered, the quantity of wealth available to a given society is a “given”, a datum that cannot be altered given the technological state of development of a society. Even the division of labour or specialisation can result in higher productivity of a given amount of labour time or labour power — but not through scientific advances and different social relations, which are all deemed to be exogenous to the creation of value through labour (classics) or through market exchange (neoclassics). Here production techniques are exogenous to value and market mechanism - and thus non-political because objective and objective because non-political - the objective resultant of subjective opposed forces. To put it with Weber, subjective does not mean arbitrary. Subjective forces are objective to the extent that they must act rationally if they act freely. Weber refutes the notion that “freedom” is subjective in the sense of irrational: free human beings act rationally, and therefore the outcome of their collective free actions is rational and objective - objective in the sense of rational (cf. Bohm-Bawerk on whose neoclassical analysis Weber relied).

Saturday, 17 March 2018

Friedrich List and the Myth of 'Free Trade'

The Chinese Dictatorship, now in its death throes, just like Putin's Russia, has been facilitated in its malevolent and pernicious ascent by false humanistic ideas prevalent in the West that are the fruit of Christian-bourgeois society and ultimately of capitalist ideology. It is this ideology of power-lessness, harmful in the extreme to our own democratic institutions, that we must counter if we wish to defeat once and for all the Chinese and Russian Dictatorships. The work of Friedrich List - on which these dictatorships rely absolutely to game the indolent and gullible West - offers essential clues as to how to begin this task in earnest.

…[L]ife itself is essentially appropriation, injury, conquest of the strange and weak, suppression, severity, obtrusion of peculiar forms, incorporation, and at the least, putting it mildest, exploitation [Ausbeutung]; -- but why should one for ever use precisely these words on which for ages a disparaging purpose has been stamped? Even the organisation within which, as was previously supposed, the individuals treat each other as equal--it takes place in every healthy aristocracy -- must itself, if it be a living and not a dying organisation, do all that towards other bodies, which the individuals within it refrain from doing to each other: it will have to be the incarnated Will to Power, it will endeavour to grow, to gain ground, attract to itself and acquire ascendancy - not owing to any morality or immorality, but because it lives, and because life is precisely Will to Power. (Nietzsche, Beyond Good and Evil, Aphorism 259.)

In The National System of Political Economy, Friedrich List lays bare in the starkest terms the ultima ratio that forms the backbone of his diatribe against the “cosmopolitan” school of political economy propounded by the Anglo-Saxons from Smith to Ricardo and then Mill, against the “national” doctrine that List expounds and propounds as the future economic strategy of a powerful Germany against the dominance of Britain and France.

Without explicitly addressing the question of the meaning of “wealth” in economics at the level of human individuals or of humanity as a whole, List is already confronting the stark reality that the “wealth of a nation” cannot and must not be understood purely in terms of “utilitarian exchange” but rather in terms of “national power”, of Macht - in terms, that is, of the ability of a nation to impose itself over other nations….in the event of war! 

EXTRACTS FROM AUTHOR’8 PREFACE xliii I would indicate, as the distinguishing characteristic of' my system, nationality. On the nature of nationality, as the intermediate interest between those of individualism and of entire humanity, my whole structure is based.

The “cosmopolitan” view of the British economists contains three non sequiturs: it assumes that all exchange of goods, all trade between nations, is an equal exchange not only because equal values or wealth are exchanged, but also because such exchange necessarily increases the wealth of each trading nation by virtue of its being “free and equal”, free and fair - and therefore it must benefit each trading party. This is a non sequitur, of course; but List only sees the second part of it - that free trade does not necessarily enrich all parties. He totally misses the first part, the “equal exchange” in terms of “value” and “wealth” as quantifiable or objective entities. And he totally ignores the fallacy of “free” trade - the fact that a decision to trade cannot be free because “freedom” is irrelevant in trade for the simple reason that trade ineluctably establishes a “bond” between trading parties!

Let us examine the second part of the non sequitur.

4 The prosperity of a nation is not, as Say believes, greater in the proportion in which it has amassed more wealth (i.e. values of exchange), but in the proportion in which it has more developed its powers of production' (p. 117).

It is not the present wealth of a country, then, that determines its prosperity; rather, it is a country’s present ability to produce wealth that determines its pre-eminence among nations, again, not in terms of its present stock of wealth, but in terms of its future flow of wealth or prosperity (Latin pro and spes, hope for the future). For List, then, the prosperity of a nation is measured by its present ability to produce wealth on such a scale as “secures to the nation an infinitely greater amount of material goods [than is the case for other nations], but also industrial independence in case of war”!

‘ It is true that protective duties at first increase the price of manufactured goods; but it is just as true, and moreover acknowledged by the prevailing economical school, that in the course of time, by the nation being enabled to build up a completely developed manufacturing power of its own, those goods are produced more cheaply at home than the price at which they can be imported from foreign parts. If, therefore, a sacrifice of value is caused by protective duties, it is made good by the gain of a power of production, which not only secures to the nation an infinitely greater amount of material goods, but also industrial independence in case of war9 (Friedrich List, The National System of Political Economy, p. 117).

Therefore, “cosmopolitical” economy can be valid only if the trading nations have similar industrial structures. Where these industrial structures differ, inter-national trade and exchange cannot be “equal” because even where the value of the exchange is equal, the ability of the trading nations to produce those values will differ! List has in mind, as we saw earlier, the ability of a nation to prepare for war and to dominate other nations.

[T]he idea struck me that the theory was quite true but only so in case all nations would reciprocally follow the prin-
ciples of free trade.... This led me to consider the nature of nationality. I perceived that the popular theory took no account of nations, but simply of the entire human race on the one hand, or of single individuals on the other. 

I saw clearly that free competition between two nations which are highly civilised can only be mutually beneficial in case both of them are in a nearly equal position of industrial development, and that any nation which owing to misfortunes is behind others in industry, commerce, and navigation, while she nevertheless possesses the mental and material means for developing those acquisitions, must first of all strengthen her own individual powers, in order to lift herself to enter into free competition with more advanced nations. In a word, I perceived the distinction between ] cosmopolitical and political economy. I felt that Germany must abolish her internal tariffs, and by the adoption of a common uniform commercial policy towards foreigners, strive to attain to the same degree of commercial and industrial development to which other nations have attained by means of their commercial policy.

If indeed, List reasons, nations could trade as individual human beings whose power to accumulate “wealth” is limited by their physical abilities, then trade between individuals could be said hypothetically to be free and fair or equal. The same applies to humanity as a whole because in that case “wealth” would be an abstract notion in the aggregate. But where individual nations or nation-States are concerned, the notion of “wealth” or “value” must extend to the ability of each trading nation to subjugate the others!

Here List incurs a blinding contradiction between a notion of “wealth” or “value” which he entirely shares with the “cosmopolitan” economists (Smith and Ricardo) - and a wholly different notion of “value” or “wealth” that his stance of trade-as-conflict between nations clearly entails! It is simply impossible to speak of “value” as if it were an economic category entirely independent of the “nationality” implied by his countervailing notion of “national economy”! List himself concedes that “free trade” can be “fair and equal” provided that trading nations are at a similar stage of industrial development. Yet, such a concession is tantamount to falling into the fallacy of “cosmopolitan economics” divulged by the British under the false pretence of “neutral science”! For if indeed “the ability to produce value” is even more important than value itself, then the notion of “value” must be re-evaluated or reinterpreted to allow for the novel category of “ability to produce”!

(We have here a dramatic precognition on List’s part of what would later become Nietzsche’s “transvaluation of all values” - cf. my “Nietzsche and Economics”.) The “value” of the British political economy simply cannot be the same as the value of List’s “national economics” or “National-oekonomie”! The first notion of value (Smith, Ricardo, Marx) refers to an apolitical quality or substance - be it subjective utility or objective wealth (labour-time) - whereas the second, List’s, refers to a broader category of political control and domination through the production and exchange of goods. The difference is not simply one of “stocks” and “flows” of one and the same entity. Rather, the two kinds of “value” refer to completely distinct entities - one utilitarian or absolute, and the other clearly political and even military in nature!

Equally, if we follow this reasoning with cold and calculated logic, we will see that the notion of “free trade” is meaningless for the simple reason that the category of “freedom” is quite meaningless when applied to that of “trade”! No “trade” can ever be “free” for the simple reason that “trade” itself, the exchange of produce, already implies a “bond” between the trading parties that negates or at the very least obliterates the notion of “freedom”. By changing the real status of the trading parties from before the trade takes place to after it does, trade also transforms the status of the parties vis-a-vis each other in such a way as to render the notion of “freedom” entirely irrelevant to the reality of exchange by trade! Parties to trade may well be “free” to engage in the trade - but this “free choice to trade” becomes irrelevant and meaningless once the trade is executed - for the crushing reason that, in the absence of an objectively quantifiable “value”, the exchange has transformed the material standing of the trading parties! It is quite simply a wanton and gratuitous exercise to speculate on whether a trade is “free” or otherwise because (a) it is impossible to determine the real motives of traders, (b) traders may not be aware of their and other traders’ motives, and ©, whatever the motives and interests, the very effecting of a trade creates a new set of circumstances that make the “freedom” or less of the trade completely irrelevant to its material consequences. The mythology of “free trade” (either a pleonasm or an oxymoron) stems from the legal interpretation of contractual arrangements whereby a contract represents an “agreement” or “a meeting of the minds”. But, as we have succinctly explained, the reaching and closing of a contractual arrangement tells us nothing about the “freedom” of the contracting parties! (This point is outlined with characteristic insight and perspicacity, as well as vitriolic acuity, by Nietzsche in The Genealogy of Morals - discussed in my own “Nietzsche and Economics”.)

Contemporaneously to List, Nietzsche demolished the naive “cosmopolitanism” of British Political Economy with a single stroke of his pen in Human All-Too Human:

25 Private- and World-Morality - The older morality, namely Kant's ,25 demands from the individual those actions that one desires from all men--a nice, naive idea, as if everyone without further ado would know which manner of action would benefit the whole of mankind, that is, which actions were desirable at all. It is a theory like that of free trade, which assumes that a general harmony would have to result of itself, according to innate laws of melioration. (HATH)

To argue that trade, in and of itself, ameliorates the lot of the exchanging parties is pure Kantian universalist idealism - sheer wishful-thinking! It is to presume that human beings, let alone nations, enter trade with the intention to improve the lot of all participants (hence Kant’s Categorical Imperative: do unto others as you would have them do unto you). - Even worse, it is to assume that trade in reality does improve the lot of participants! And worst of all, it assumes that individuals, let alone nations, know their own best interests - and that these are constructive rather than destructive

This is the false, fictitious (“cosmopolitan”!) logic - this is the Ohn-macht, the power-lessness, of Western thought and logic propmulgated by cohorts of “enlightened” literati, humanists and, of course, economists that Nietzsche denounces and to which he opposes his Will to Power (Wille zur Macht). It is, in political reality, just that - mere, pure logic, a useless and meaningless tautology with no substantive content! (Cf. On this point, the brilliant demolition of free-trade liberalism as a purely “logical” construction in M. DeCecco, Moneta e Impero. Like List, whom he invokes, however, DeCecco falls short of debunking the mythology of “value” and “free trade”.)

List himself falls into this “cosmopolitan” trap simply because he is unable to relinquish the notions of “wealth” and “value” as (mythical, as it turns out) universal homogeneous substances or substrata that are objectively measurable and identifiable - and to which all human beings aspire. It is on this mythology that the “freedom” of “free trade” is founded as the summum bonum, the highest aim of human aspiration. Nevertheless, his alertness to the problem is evident in the orientation of his historico-economic research and in his policy recommendations.

In the course of the daily controversy which I had to conduct, I was led to perceive the distinction between the theory of values and the theory of the powers of production, and beneath the false line of argument which the popular school
has raised out of the term capital. I learned to know the difference between manufacturing power and agricultural power. I hence discovered the basis of the fallacy of the arguments of the school, that it urges reasons which are only justly applicable to free trade in agricultural products, as grounds on which to justify free trade in manufactured goods. I began to learn to appreciate more thoroughly the principle of the division of labour, and to perceive how far it is applicable to the circumstances of entire nations.

We will turn to these policies next.

Wednesday, 7 March 2018

Foreign Trade and the Nation-State - Reply to Martin Wolf

Martin Wolf, in an FT Column, contends that trade barriers reduce the "wealth" of all countries without advantaging the countries that impose them, with or without "retaliation".

Mr. Wolf bases his argument on a neat distinction between “trade” - which presumably does not affect “macroeconomics” - and “macroeconomics” proper, which is presumably governed by a different set of principles. In the world of Classical (Smith, Ricardo, Mill) and Neo-classical economics (from Jevons to Hayek), trade is merely an “exchange”, a “free exchange”, between nation-State countries that does not and cannot affect the “national” economic policies, but can rather only “reflect” them. In this perspective, it is “logical” that trade barriers can only affect national economies “globally” - all of them “negatively” - simply because, to repeat, “trade” is merely a “free exchange” that merely “reflects” the productive conditions (“macroeconomics”) “within national economies”.

 Yet, this “logical” reasoning breaks down once we abandon the world of British “political economy” and we examine instead the “National-oekonomie” that formed the basis of German economic thought from Friedrich List through to Klein and ultimately even Schumpeter (especially in the ‘Theory of Economic Development’). It is clear from this latter viewpoint, that economic reality (“national” or “political” economy) differs violently from the “logical” framework of Classical and neo-Classical equilibrium developed by the English, and later the American, economists. In this “national-economic” perspective, trade is not simply an “equal exchange”; rather, it is a form of political interaction that is vital to determining the relative “dominance” of one nation-State over another. The aim of all capitalist exchange is “profit” - the “wealth of nations” to which Smith (not Ricardo, and least of all the neo-classics, with the great exception of Keynes!) referred. But what is this “wealth of nations”? what is “profit”? Ina nutshell, profit is the ability to dominate other nations by “commanding” their living labour. (Marx came closest to this realisation.) It is clear therefore that trade is an attempt by nation-states to project their Political Might, their Power (Macht) over other nations. (See, on this theoretical point, M. DeCecco, Money and Empire.)

To the extent that “free trade” served the national-political needs of the Anglo-Saxons, the “science of economics could easily defend and propagate the theory of equilibrium and market-based international trade, reliant on the Gold Exchange Standard. Now that these “equilibria” are breaking down, it is time to revise the entire philosophical and political foundations of Western economics. - Something I have attempted in this Blog.

Perhaps I ought to add that, from this perspective (amply explored in this Blog), Western “economic science” represents the ultimate form of “power-lessness” (Ohn-Macht) that Nietzsche, and then Weber (who was close to the German Historical School of Economics), and ultimately Schumpeter openly denounced. In “Imperialism and Social Classes”, Schumpeter exposed the “will to power” (Nietzsche’s expression) that the German ruling class espoused to extend its economic domination over Central Europe, resulting ultimately in Hitler’s Lebensraum. Again in this German perspective - a “mercantilist” one -, the brutal racist-imperialist will to power of the Chinese Dictatorship is keenly displayed. It behoves us as inheritors of Western democracy to expose the “power-lessness” of Western “economic science” and to fight back those dictatorships that wish to adopt these bland logical tautologies into tools of politico-economic domination!  

Saturday, 3 March 2018

The Chinese Catastrophe

In this post, we wish to advert to a number of misconceptions surrounding the coming co-optation by the Chinese Dictatorship of Big Brother Xi Jin Ping to a lifelong term as President Of His (not the People’s!) Republic of China.  First, contrary to what all media seem foolishly to believe, the centralisation of all decision-making power in Big Brother is the final confirmation of the weakness and fear of the Chinese Dictatorship: it most certainly is not a statement of strength. Had the Dictatorship been confident about (a) the chances of social development and economic growth of Chinese society, and (b) its ability to impose its socio-economic system outside China, it would never have agreed to this act of suicide.

It is almost self-evident, and historia docet (history teaches), that a confident and exuberant regime or indeed polity would never consciously decide to let one Dictator arrogate all social and political power in his hands. It had long been known that the Dictatorship’s choices were either to save Party and lose the country or else to save the country and dissolve the Party. This latest desperate act of hara kiri shows conclusively that it has chosen the former course.  Cornered and besieged on all sides, with the economy close to contraction and a collapsing financial system, the Dictatorship knew that any further opening of Chinese economy and society would result in its repentine irrelevance. Given that the Chinese Politburo is made up of a kleptomaniac plutocracy, these inveterate murderers must know that their fate and that of their families would soon be sealed. The only solution, of course, is a return to the totalitarian genocide of Mao Tze Dung's infamous "Cultural Revolution".

Similarly, in this perspective, the One Belt One Road strategy is one last desperate stratagem on the Dictatorship‘s part to achieve two fundamental aims: one, to preempt encirclement in the form of a cordon sanitaire on the part of parliamentary democracies from India to Japan, and two, to unload its internal contradictions by exporting them over a formal and informal empire in terms of (a) the migration and overseas posting of potentially dangerous elements and (b) the requisition of economic resources needed to pacify the Chinese population - which, be it noted, remains among the very poorest in the world.. This project  - this "final solution", Hitler's Lebensraum - is common to all dictatorships: imperialism is vital to their survival - in the guise not merely of nationalism but rather of fascist and racist expansion - because they need to unload their internal conflict outside their borders through territorial expansion, absolute exploitation of occupied territories, loot and rapine. (For an elementary exposition of this point, please refer to J. Schumpeter, Imperialism and Social Classes; also to H. Arendt, Imperialism; and finally to M. De Cecco, Money and Empire.)