states and markets nationalist political economy
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States and MarketsStates and Markets
Nationalist Political EconomyNationalist Political Economy
Friederich List, 1789-1846
The National System of Political Economy, 1841
In this lectureIn this lectureA recap on the conception of mercantilism
List’s national political economy
critique of Adam Smith
conception of the role of the state in promoting development
historical context – Germany, England and France
List’s policy prescriptions
state and economy
power balancing alliances
the German Zollverein
From Theory to Practice
the US, Bismarck and Japan
Contemporary relevance
an antidote to free market capitalism?
Mercantilism RevisitedMercantilism RevisitedKey role for the state in controlling the economy
Self-sufficiency the ultimate goal of economic policy
National pride built on military force
National wealth assessed by the amount of gold possessed – the concept of “bullionism”
the need for trade surplus to ensure national prosperitytariff policy should protect domestic producersdomestic sea force to control foreign markets
Agriculture the basis of national food security (and the base of the fiscal system)
Importance of colonies as suppliers of cheap raw materials and markets for finished goods
Adam Smith’s critique of mercantilism and the new orthodoxy
Classical Political Economy
List as a proponent of a return to mercantilism
sort of, but not quite
Preface to The National System Of Political Economy
"I have been accused by the popular school, of merely seeking to revive the (so-called) 'mercantile' system. But those who read my book will see that I have adopted in my theory merely the valuable parts of that much-decried system, whilst I have rejected what is false in it; that I have advocated those valuable parts on totally different grounds from those urged by the (so-called) mercantile school, namely, on the grounds of history and of nature"
The Philosophical Context - List on The Philosophical Context - List on SmithSmith
Although largely critical, List acknowledged Smith’s contribution
Smith as the first person to undertake a comprehensive study of this kind
Smith as the originator of the science of political economy
Smith’s work should be built on and taken further, not simply rejected
Smith and the Depoliticisation of Smith and the Depoliticisation of Political EconomyPolitical Economy
mathematical theory requires simplicity
but the real world of economics is complicated
Smith’s Comopoliticalism
the theoretical economythe world as a single entity
List’s Political Economy
the real world of rival nations
Smith’s conception of nations as a relic of the past that would simply disappear in an age of enlightenment – Smith as a liberal utopian?
BUT
“It is a dictate of the law of self-preservation [for a nation] to make its particular advancement in power and strength the first principles of its policy”
Economies are national, not individual
government’s must decide what is best for the nation
and what is best for the nation might not be what is best for individuals
eg: building canals goes against interests of waggoners
Governments must intervene in economy
but not too much – over-regulation is a problem
Economies are national, not Economies are national, not individual – hence “national political individual – hence “national political
economy”economy”
Smith Paid Too Much Attention to Smith Paid Too Much Attention to Exchange, and Not Enough to Exchange, and Not Enough to
ProductionProduction
natural capital – land, sea, rivers and mineral resources
material capital – machines, tools etc used in the production process
mental capital - skills, training, industry, enterprise, armies, naval power and government
Smith ignored mental capital – “productive” members of society doesn’t include professors and teachers!
need to consider what will create wealth in the future
not justnot just scientific discoveries, advances in technology, improvements in transport, the provision of
educational facilities
but alsobut also the maintenance of law and order
All things being equal, developing
mental capital should be the most effective in the long term in developing
the nation
Britain, Germany and FranceBritain, Germany and France
UK laissez faire policy only promoted when it suited the UK
eg: promotion of free trade with British colonies because the terms of trade benefited Britain
elsewhere, if laissez faire policies didn’t help the national interest, it was simply ignored
eg: high tariffs on imports
English as “bullies” and “good-for-nothing”
For List, it was always England not the UK
Apart from Prussia
“all the rest of Germany had for centuries been under the influence of free trade... that is to say, the whole world was free to export manufactured products into Germany, while no one consented to admit German manufactured goods into other countries.”
British Dominance and German British Dominance and German Development Development
Napoleonic Continental SystemNapoleonic Continental System
Napoleon’s economic war against Britain
1806 Berlin Decrees prevented any ship from Britain from landing in French controlled Europe
1807 extended to Russia via Treaty of Tilsit and extended to any ship from a neutral country (effectively America) transiting
through Britain
Impact of Continental SystemImpact of Continental SystemNegative impact on Britain – deemed as a good thing by List
Reduction in exports
Reduction in corn imports – c.33 % rise in prices 1807-8
Reduction in wages and employment
Depreciation of Sterling and increased inflation
Ultimately negative impact on France
Reduction in gold inflows to France
Reduction in French custom’s revenue needed to maintain Napoleonic armies
Reduction or elimination of imported goods from British colonies particularly new
“luxury” goods - coffee, sugar, tobacco, cocoa, and cotton textiles
But beneficial to German states
growth of domestic industries where British imports had previously flourished
growth of domestic industries to service the large internal continental market
contrary to “free trade theory”, protectionism helped German development and bolstered the “national” economy
“national” cause Germany not a nation state yet
End of the Continental System, 1812/13
supremacy of British naval power
growth of German nationalism
renewed flood of cheap British imports into Germany
List’s Policy PrescriptionsList’s Policy Prescriptions
A recognition of power in the global system and the importance of power balancing
List as Realist ??
Initial conception of England as the problemcalls for an alliance of nations to counter England
Subsequent conception of the emergence of Russia and the USA as the new global powers
need to ally against them to stop them becoming hegemonic
call for an Anglo-German alliance
Delink from free trade until you are strong enough to compete
“any nation which owing to misfortunes is behind others in industry, commerce, and navigation... must first of all strengthen her own individual powers, in order to fit herself to enter into free competition with more advanced nations.”
State should protect and nurture the productive powers
not just about bullion, but developing industries, transport and infrastructure, education, laws etc
more than just traditional mercantilism
State Led DevelopmentState Led Development
Towards a United GermanyTowards a United Germany
History had shown the importance of a large market protected from unfair competition from the predatory trade policies of more developed states (ie: England)
German confederation of 1815 – 39 sovereign states
each too small to compete in the international economy
The ZollvereinThe Zollverein
The American National EconomyThe American National Economy
Exiled to the US for political views, 1825(and later returned to Germany as US consul)
Impressed by John Quincy Adams and Henry Clay's “American System”
active government promotion of agriculture, industry and science
continental integration through government funded infrastructure developmentsFunded by high public land prices and external tariffs…
“Abominable Tariff” of 1828
… which also protected domestic producers
Importance of state control of banks to direct lending in support of government identified strategic objectives
Alexander Hamilton and the First National Bank of the United States
strong state to fund national economic integration and development (and to fight wars!)
(List supported Hamilton despite his policy of tariff reductions)
Listian Ideas Post-ListListian Ideas Post-List
1844 “The Politics” (fourth book of “the national system”
Calls for establishment of German State with single currency and flag, strong navy, single government, strong state led development, new national system of roads, railways and canals
1846 Dies in supposed suicide
Otto Von Bismarck – First Chancellor of Germany, 1871-1890
establishment of German State with single currency and flag, strong navy, single government, strong state led development, new national system of roads, railways and canals
Japanese IndustrialisationJapanese Industrialisation
Toshimichi Okubo and learning from Germany
the origins of Japanese industrialisation in the early 20th Century
The Ministry of International Trade and Industry
the origins of the post-War Japanese economic miracle
Listian Political Economy TodayListian Political Economy Today
Dominance of neo-liberalism as a development discourse
and negative examples of autarkic economies
eg: Burma and North Korea
(but neither are “Listian” in any real way)
A critique of rational choice theory?
theory only works if the messy complexity of real life is assumed away
the reality of real political economy is messy and complicated
The disjuncture between theory and practice
free trade only promoted when it serves national interests
agricultural protectionism in the USA, the EU and Japan
but …..but …..
An alternative model of development
Notwithstanding the current orthodoxy, development in the USA, Germany, Japan and the “late” industrialising East Asian NICS all originally occurred under Listian conditions rather than under free market capitalism
Han Deqiang and China’s “New Left”
critique of the impact of Chinese integration into the global economy
explicitly refers to the works of List
http://www.multiworld.org/m_versity/articles/deqiang.htm
ReadingReadingThe National System of Political Economy
http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/list/national.html
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