Friedrich List (1789–1846) was born in Reutlingen, Württemberg, in what was not yet a united Germany. As a young economics professor in the aftermath of the Congress of Vienna (1815), he worked for German unity and protective tariffs among the tiny, feudal-ruled German principalities. His German Trade and Tradesmen's Union (Allgemeiner Deutscher Handels- und Gewerbeverein) advocated a free republican constitution and the national promotion of domestic industries. List demanded protection from cheap imports from Britain’s global slave empire that were flooding German markets, fearing that the German people would end up as "drawers of water and hewers of wood for Britain." Austria's Prince Metternich regarded List as an intolerably dangerous "agitator" and arranged for his arrest and imprisonment, eventually forcing him to emigrate to the US in 1824.
» The power to create wealth is infinitely more important than wealth itself. «
Contrary to Metternich's intention, this led to List's most fertile period of collaboration with Americans such as Henry Carey and Henry Clay. In a speech before the Pennsylvania Society for the Promotion of Manufactures and the Mechanic Arts in 1827, List threw down the gauntlet: "I herewith declare war against the system of Adam Smith on behalf of the American System of Political Economy." His book 'Outlines on American Political Economy' was written that same year.
While in the US, List opened coal mines, helped plan a canal system, designed rail transportation, and proposed the construction of a Panama Canal. He returned to Germany in 1830 and became the American Consul to Leipzig. There, he launched his program for a national railway network and became known as the "Father of the German Railways." His program for the expansion of the Zollverein (Customs Union) was implemented in 1834. In 1841, List published what remains one of the most important works in the history of political economy, 'The National System of Political Economy,' in which he launched a devastating critique of British free-trade ideology:"The causes of wealth are something totally different than wealth itself. An individual can possess wealth, i.e., exchange value, but if he does not have the power to create more valuable items than he consumes, he will become impoverished. An individual may be poor, but if he has the power to create a larger amount of valuable items than he consumes, he becomes rich.
The power to create wealth is therefore infinitely more important than wealth itself; it guarantees not only the possession and increase of what has been acquired, but also the replacement of what has been lost. This is even more the case with whole nations, that cannot live on pensions, than with private persons.
Germany has been ravaged in every century by plague, by famine, or by internal and external wars, but it has always managed to save much of its productive forces, and so it returned quickly to prosperity, while the rich and powerful, but despot- and priest-ridden Spain, in full possession of domestic peace, sank ever deeper into poverty and misery. The same Sun shines upon the Spaniards, they have the same earth and land, their mines are just as rich, they are the same people as before the discovery of America and before the introduction of the Inquisition; but this people has gradually lost its productive power, so it has become poor and miserable. The North American liberation war has cost that nation hundreds of millions, but through the acquisition of national independence their productive power was strengthened immeasurably, so they could create much greater riches within a few years after the peace than they had ever possessed.
[...] The motto, 'laissez faire, laissez passer' is [...] one that sounds no less pleasant to robbers, cheaters, and thieves than to the merchant, and therefore one ought to regard this maxim with suspicion [...] This perversity, to surrender the interests of manufacturing and agriculture to the unfettered demands of trade, is a natural consequence of that theory, which universally looks only at prices, never allowing for the work required to produce, and views the entire world as one single and indivisible republic of merchants.
This school of thought [Adam Smith's] does not see that the merchant can achieve his purpose—obtaining profits by trade, even at the expense of agriculture and manufacturing, at the expense of the productive forces—just as easily through the independence and autonomy of nations. It’s all the same to him, and it is in the nature of his business and his aspirations that he cannot give a fig about the effect that the way in which he imports or exports goods might have upon the morality, the prosperity, and the power of the nation. He imports poisons just as he imports medicines. He enervates entire nations with opium and distilled spirits. Whether he provides hundreds of thousands of jobs and livelihood through his imports and chicanery, or whether an equal number are thus brought to beggary, it means nothing to a businessman, so long as it improves his balance sheet."
The core of List's argument is straightforward: surrendering everything to the "invisible hand" of the market amounts to an anarchistic conception of freedom that deliberately refuses to distinguish between theft and productive investment. From this perspective, the British doctrine of free trade had already been challenged by thinkers such as Gottfried Leibniz and Jean-Baptiste Colbert in the seventeenth century, Alexander Hamilton in the eighteenth century, and, again, Henry Carey, Sergei Yulevich Witte, and many others in the nineteenth century.
In more recent times, however, British Prime Minister Margaret Thatcher (1979–1990) became a fervent follower of the Austrian School's economic liberalism. She had read Friedrich von Hayek's The Road to Serfdom with enthusiasm and subsequently argued that social spending was tantamount to socialism. One simplification followed another: free trade became synonymous with freedom. The October 1986 "Big Bang" was presented as Thatcher's great blow for financial freedom: the sudden and radical deregulation of London’s financial markets. With the abolition of capital controls and the enormous bonuses paid to executives, financial elites from around the world were able to operate with unprecedented freedom in London. London became the largest financial center in the world, accompanied by spectacular growth in the newly deregulated financial sector.
In the US, the deregulation of infrastructure and the systematic reduction of investment in the real economy were promoted by certain Rockefeller protégés of the Mont Pelerin Society and were ultimately set into place under President Jimmy Carter (1977–1981). The process was accelerated significantly under Ronald Reagan (1981–1989). Three decades later, much of the US' industrial and productive employment had disappeared. The example of Detroit became a subject of study for Asian anthropologists examining the collapse of urban culture in a formerly major industrialized nation.
Free trade and deregulation, the argument continues, have produced devastating consequences wherever they have been implemented on a large scale. They contributed to the conditions underlying the current global crisis, which the author characterizes as being orchestrated by a financial oligarchy centered in Wall Street, the City of London, Paris, Frankfurt, Riyadh, and Doha. According to this view, these financial interests employ institutions and mechanisms associated with the Federal Reserve, ECB, IMF, WTO, UN, and NATO to generate enormous profits for a small minority while producing misery and failed states for the many.
At the same time, countries participating in institutions and initiatives such as the Shanghai Cooperation Organization (SCO), the Eurasian Union, and the Belt and Road Initiative (BRI) are presented as evidence that economic growth and human progress remain possible in the contemporary world. Students of Leibniz, Colbert, and Hamilton, as well as List, Carey, and Witte, continue to advocate the use of state power to create wealth through industrial production, regulate the financial sector, expand high-quality public education and scientific research, strengthen healthcare and productive investment, and establish and protect the social and economic rights of working people and their families.
We see the same struggle through the ages, with financial elites opposing any government power capable of restricting their self-serving rent-seeking and creditor power at society’s expense. We see it today in the pro-creditor economic policies of the International Monetary Fund, the World Bank, and the ‘libertarian’ ideology, all of which seek to centralize power to allocate resources and plan economies within the financial sector instead of democratic governments. Today’s neoliberal idea is to eliminate government authority (except where it is controlled by rentier sectors) and let banks in the privatized financial sector control money and credit, which is the most important public utility.
