www.geocities.com/~econz/clip/1996726aIndependentList.html

by Chris Trotter, The Independent (NZ), 26 July 1996
 

Friedrich List? "Never heard of him."

Ask almost any New Zealand politician, commentator or economist to identify this dangerously under-rated German economist and blank incomprehension is almost certain to be their response.

In the English-speaking world, his long out-of-print works are virtually unobtainable except from university libraries - and even they don't have many.

An interesting anecdote quoted in The Atlantic Monthly notes that: "in 1992, Robert Wade, the author of the influential book Governing the Market, went looking in the MIT library for List's work. Wade had previously been teaching in Korea, where he had found plenty of copies of List's works in every campus bookstore. But in the catalogue of MIT's vast library system, Wade found an entry for just one single volume by List, The National System of Political Economy, in an edition published in 1885.

"When Wade finally obtained the book, he found that it had last been checked out in 1966."

Librarians, take note. New Zealand's politicians, commentators and economists may soon find themselves at the base of a steep learning curve when it comes to the ideas of Friedrich List.

Why? Because at least one politician in the New Zealand Parliament is already thoroughly familiar with List's economic philosophy.

Winston Peters has long admired the so-called "Asian tigers" for their dynamic, innovative and rapidly expanding economies. What is less well-known is his admiration for the economist whose theories provided the blueprint for Asian capitalism's phenomenal success - Friedrich List.

As the election draws nearer, and in the light of Peters' acknowledged sympathy for the ideas of a long-dead, largely unread (by English speakers) German economist, it will be interesting to observe the unfolding of NZ First's economic policies.

To understand Peters' admiration for List it is necessary to learn a little more about this obscure - at least, to English speakers - German academic.

List was born in the Württermberg city of Reutlingen in 1789. Largely self taught, he rose rapidly through the government service and was, for a brief period, a lecturer at Tubingen University. He came to prominence in central and southern Germany for his promotion of free trade between the multitude of kingdoms, principalities, free cities and duchies making up pre imperial Germany.

Exiled for his liberal ideas in 1825, List settled in the United States, where he quickly adopted the economic philosophy of Alexander Hamilton - the United States' first Secretary of the Treasury - who had advocated strong, centralised government dedicated to fostering industrial development through high tariffs.

List returned to Germany in 1832, convinced the "American System" would enable a united Germany to successfully compete against the economic might of the British empire.

Though List died in 1846, and the unification of Germany was not achieved until a quarter century later, the economic ideas he championed provided the foundation for that nation's rapid industrial development between 1850 and 1900.

In contrast to Adam Smith's individualism, List weighed in heavily on the side of nationalism.

Instead of focusing his attention on the rights of consumers, List argued in favour of protecting the rights of producers.

In his most enduring work, The National System of Political Economy, he argued the doctrine of free trade was a strategic, rather than a moral, imperative. A highly-developed economy - like that of Britain - used free-trade arguments to smother the growth of competing industries in other countries. For the "infant industries" of a developing economy such as his own to flourish, List believed it was necessary for the nation state to guarantee their survival.

This was certainly the view of American politicians who, for the best part of 150 years, fiercely protected the US economy from foreign competition

Indeed, the maintenance of high tariff barriers was the cornerstone of Republican Party policy right up until World War II. Nor were high tariffs the only tools for speeding up national development. The United States government fostered industrial expansion by providing lucrative government contracts to nascent munitions manufactures, and by granting the railway companies millions of acres of federal lands in the middle and far west - but not before dispatching federal troops to exterminate the native inhabitants.

In the aftermath of the American civil war (when, for a brief period, the United States was the world's greatest military power) the victorious Republican administration dispatched Commodore Perry Owen to "open up" the Japanese empire for American trade.

This conversion to "free trade" would surface again when the United States emerged as a military and economic super-power following World War II.

The Japanese response was to embark on a breakneck programme of modernisation Borrowing heavily from the German and US examples, the Japanese created a powerful, centralised government dedicated to fostering rapid economic development through tariff protection and industrial concentration.

Thus were the trajectories of the two lending non-English speaking industrial powers fixed. Throughout this century both the German and Japanese economies have continued to elaborate List's basic themes.

The results have been spectacular. Not only did both states embark on nearly-successful bids for global supremacy in the 1930s and '40s but, since their military defeat, both have constructed economic systems distinguished by a high level of political and social integration.

In both Germany and Japan, state ministries, the private sector and organised labour work together to ensure the nation's long-term strategic interests are protected. The Anglo-American laissez-faire model, based on what List called the "cosmopolitan" ideas of Adam Smith, has little to offer these disciples of List's "economic nationalism".

Winston Peters, writing in New Zealand Political Review two years ago, stated: "Some progressive non-English speaking countries have accepted other viewpoints, particularly those of the German Friedrich List. Adam Smith's philosophy is not universally; worshipped."

Peters clearly appreciates the Japanese model of economic development - the model inspiring the Asian tigers he so admires - requires a dramatic reversal of the ideological presuppositions driving free market reforms.

Central to such a reversal is Peters' belief in the power of the state to successfully integrate both the economic and the social realism.

Margaret Thatcher's quip: "There's no such thing as society - only individuals and families," is anathema to NZ First's vision of the future.

Peters' superannuation policy, for example, borrows heavily from Singaporean and Japanese reliance on massive private savings to underpin long-term economic strategies. NZ First understands that without a strong domestic capital base, the state's capacity to carry out its integrative social and economic functions is severely constrained.

ACT also recognises the huge potential for capital accumulation inherent in compulsory savings schemes, but unlike NZ First, which has no qualms about operating a state-controlled investment fund, their preference is to hand over the task to a selection of multinational fund managers.

Much has been made of Peters' supposedly anti-Asian prejudices. How ironic, then, that New Zealand's destiny may end up being shaped by a man whose radical economic ideas are drawn from the one part of the world where List's works are still read and debated: North-East Asia.
 

Chris Trotter is a political commentator and editor of NZ Political Review.