Commentary on Political Economy

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.

No comments:

Post a Comment