Commentary on Political Economy

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.

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