Commentary on Political Economy

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).

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