اتل شمس:Is there such a mechanism as FREE TRADE?

GetAttachment

Is there such a mechanism as FREE TRADE? A short evaluation of German economist

of nineteen century, Friedrich List’s critique of free trade.

The aim of this paper is to critically re-evaluate some of Friedrich List’s Critique of free trade and also to draw attention to the significance of economic nationalism and the persistence of nationalist economic thought. To begin with this paper will explore some of the key point of disagreement concerning classical liberal political economy and the nationalist political economy school of thought.

Mercantilism was one of the imperative economic theory, which was dominant mainly around 17th to 18th century in Europe, that attached to early modern State building during the period of merchant capitalism. Most countries around Europe were not industrialized by mid nineteen century almost all countries comprehended that the only way to power and wealth will be the industrialization. Mainly the question arose how to get to this pathway. The two school of thought, classical liberalism economic theory which believe to be conveyed by Adam Smith, who promoted that the minimum interference of the State in market economy, they were off course aiming to promote free trade where they considered the best way to become industrialized without government intervention. On the other hand there were some classical nationalist economists theory that, they were more prudent to the transforming of agricultural to industrial system. The classical economic nationalists were critiquing the measurement of liberal theory.

The economic nationalism is sometime compared to neo mercantilism; this refers back to older doctrine of mercantilism of 1500s to 1800s that Smith protested against it. Friedrich List (1789-1846) on of the extremely strong critique of classical liberal economy (Amawi, 2013). For List the essence of political economy was the discovery of the means by which national economies grow and developed, liberal political economy was misnamed according to List, it was merely a to used by more advanced developing nation such as England and this liberal political economy of free trade was aiding only strong economies in the market. Despite the critiques of classical liberal economy, List did not attack the core principle of the liberalism theory of free trade. To some extent List did accepted the benefits of free trade, in order to advance nations economy and develop industrial society. Most scholars misunderstood List; he pursued to build on what he perceived to be Smith’s ideas rather then rejecting it absolutely.

As a robust critique of Smith, List rejects the methodological individualism that was very central to liberal political economy. As cited (Clift, 2014) “Smith’s idea of political economy was not a system of national economy, but of individual economy and therefore classical liberal political economy does not comprehend nationality or national interest”. Smith did not perceive the individual as citizen instead the individual were simply producers and consumers. In order to develop and progress the national economy List suggested that collective commitment is necessary for the improvement of the national economy. For Lists individual were only pursuing their private self-interest where this was hardly helping nations economy, it is unfavorable to social goods.

List argued that the ultimate source of the power of nation is their productive power (Clift,2014) . Where in contrast for Smith material capital was the productive source of wealth. List explicitly defines there are three distinctive capital, which are capital of nature, for instance lands, seas, rivers to name few, capital of material such as consist of machines, raw materials, that are used directly or indirectly in the production process and lastly the capital of mind which is imperative, one should say the productive powers cannot be define entirely as whichever these three forms of wealth. More importantly Lists argues that the mental capital is significant that incorporate the political and economical advantages of industry and human abilities into distinct conception. List also criticizing Liberals that they fail to understand the difference between productive value and exchange value, within the social condition, that the vaster part of productive power is entails in the intellectual of the individual where List call it capital of mind. List proposes there are many other ways to promote industrialization, for instance, establishment of technical schools, giving some finance backing for infant industries also to building new roads, highways, rail systems and canals.

Here List is emphasizing on the quality of education to enhance the mental capital, so therefore List is primarily focusing on the education and mental capital as the source of wealth. He suggests educating the nation economically in order to prepare them take a proper action is needed universally in order to progress in the future.

The other important theme that, the economic nationalists vigorously argued that markets are not natural phenomena- they have to be politically constructed and politically maintained. List’s main argument was that there is no such a things as free trade or free market. Furthermore he adds that political meddling in the market means that all economic activity is greatly shaped by political powers such as state (Clift, 2014). One should say List is aiming that free trade overall needs government back up in order to prosper and develop, without the strong military might its impossible to develop once economy, to illustrate this point, List is given an example of British Empire, “ Prosperous manufacturing industry a considerable marine, and a vas external commerce, and that can only be acquired by the intervention and aid of government” For List free trade meant only a political tool that for the promotion of national interest by the strongest.

List even goes further and added that despite uninterrupted intervention over centuries, the British were disingenuously acknowledging laissez faire and free trade to the world in the mid nineteen century. So for List the Smith’s idea of free trade was only benefitting England’s manufacturing industry, while Britain’s industry already was far ahead of any other European countries, its was literally impossible for newly emerging infant industry to compete with Britain under the banner of free trade. Furthermore List adds that since the early 1700 England had become wealthy and powerful not on account, but in spite of her protective policy that later on allowed England to diminishes its industrial products in other foreign markets.

For List it was important to escape the oppression of British imperial economic, military and political dominant power, he suggested when the countries are not at the similar even industrialization it’s crucial to defend the infant industries and to augment productive power of the nation which are low manufacturing base (Shafaeddin, 2000). List suggestion was one should help and raise the level of less agriculturally develop nation first only subsequently allow the freedom of trade by accomplishment of this process only then might the freedom of trade will operate naturally, his he was pointing at England, he wanted all European states to develop similarly in level plain field then everyone will benefit the free trade operation. This could only be achieved by protecting the infant industry domestically; it’s essential for the nation to develop economically. As Henderson, 1983 stated how crucial tariffs and protectionism were for Germany’s economic develop despite of growing almost parallel in the presents of more advance and developed economy such as industrialized British and their empires, if one take Henderson’s analysis into consideration, the only way that Germany could achieve to that level, of development, protectionism was indispensable and the only way forward.

Market size was also important in order to compete in international market, what needed to be done in order for small size market or nation to survive and compete. List favored the protection system. The protective system was the only means which small nation can cope with international free market, one should remind that the Germany yet not to be unified. List offered an idea of custom union, Zollverien, the German speaking cities of custom union, also a strong advocate of Germany’s railway system although Germany physically was not yet unified, one should say, List’s original idea of unification was to unite the small 39 states into one strong union where later List’s idea led to unification of Germany by Otto von Bismarck.

To conclude, List rejects the merely proposal of political economical liberalism, according to List he does not completely rejects the idea of Smith’s free economy, free trade is only a tool that been used by the strong and more dominant power to stay ahead of the game, however List does accepts the benefits of free trade. In order for less develop nations to prosper economically rather the best way would be protection system tariff only for time being.

References:

Paul,D & Amawi,A. (2013). The theoretical evolution of international political economy. 3rd ed. United States:Oxford university press.

Clift,B. (2014). Comparative political economy: states, markets and global capitalism.United kingdom: palgrave macmilan.

List,F, & Henderson, W.(1983). The natural system of political economy. Frank cass publisher.

SHAFAEDDIN M (2000). What did Friedrich List actually say. Some claricfication on the infant industry. No 149.

 

 

 

 

 

Text Widget

Aliquam ut tellus ligula. Nam blandit massa nec neque rutrum a euismod t ellus ultricies! Phasellus nulla tellus, fringilla quis tristique ornare, condi mentum non erat. Aliquam congue or nare varius, tristique ornare, condi mentum non erat. Aliquam congue or nare varius, tristique ornare, condi mentum non erat. Aliquam congue or nare varius.