Friedrich List draws on his time in the United States to craft a nationalist theory of economic development. Contra Adam Smith, List argues that protectionism and tariffs are a better means for economic growth in the nation. Why read? List’s theory was the basis for the industrialization of Prussia, and later Japan. Listian economics lives on today in the developmental states of East Asia and Germany.
One of the first challenges to the orthodoxy of unfettered free trade, this book undertakes a comparison between the economies of the United States and Germany – who used protectionism – and the economy of Great Britain, which was broadly aligned to free trade. List demonstrates that the unbridled free trade acts to foster inequality and lopsided development; in the case of the British Empire, the colonized lands benefit far less than the colonizers. Domestic industry in Britain during the 19th century was characterized by extreme poverty of the workers; a dire situation which would eventually spur the creation of trade unions.
List notices that living standards in Germany and the USA during the 19th century consistently rose. In other nations the correlation between tariffs and protectionism, and general living standards for the wider populace, are established. While tariffs on foreign goods were incrementally imposed, the resulting taxes were reinvested into the domestic economy; industry and public infrastructure were improved, and standards for labor were higher, than those in the laissez-faire economy of Great Britain.
A stark opponent of unbridled capitalism, List instead favors a system whereby the state and the business economy work together to create decent conditions for all. He strongly believed that nations had a duty to look after their citizens, create an identity, promote industrial growth and prowess, and regulate both capital and labor to beneficent ends. This is contrasted with free markets, wherein the state’s role is minimal and the consequences are shown to be mass exploitation and poverty.