By Davies, Stephen
Freeman , Vol. 54, No. 1
World War I, or the "Great War" (as most Europeans still call it), was one of the biggest disasters in human history. It not only killed and maimed millions, the cream of a generation, it also destroyed the liberal, cosmopolitan system that had been created in the nineteenth century. It was, moreover, the direct cause of both the Bolshevik revolution of 1917 and the coming to power of Hitler in 1933, and all of the terrible consequences that followed from those events, not least another, even more terrible, war. In many ways, we have only just begun to recover from its effects.
all this makes the origins of the war a matter of concern for us all. One central part of the explanation bears repeating: the part played by bad economic ideas, and in particular the ideas of one man. This man, a mild, bespectacled German professor, can truly be seen as the progenitor of the great catastrophe of 1914-1918. His name was Friedrich List.
List (1789-1846) was a professor of political economy at Tubingen. A liberal in politics, he was forced to leave Wurtemburg in 1825 and emigrated, like so many of his countrymen, to Pennsylvania. There he became a journalist. Hc also became acquainted with the distinctive American tradition of economic nationalism and its leading advocate, Henry Charles Carey. In 1827 List published Outlines of American Political Economy. After his return to Germany in 1832 he further developed his ideas in his main work, 7%e Naimwal System of forçai EcoMowiy (1841). List killed himself in 1846 while terminally ill, but his ideas lived on and had enormous influence.
By 18JO the pressing question for all statesmen was that of the best route to economic modernity. The main model was the one put forward by classical economists such as Smith, Ricardo, and Say, which was based on the historical experience of Great Britain. The central prescriptions were for honest and effective but limited government, development driven and funded by private investment decisions, and free trade. This was the policy followed by successful economies, such as those of Britain, Belgium, France (after 1830), and much of Germany. The major counterexamples were the United States (in trade policy) and despotic Paraguay. It was these that List drew on.
List argued that the free-trade and limitedgovernment policy of Adam Smith was impractical, Utopian, and dangerous. His central idea was that nations, which stand between the human species and the individual, are the real actors in history and economics. Thus their interests are paramount. In a world of competing nations, the prime purpose of trade and production is the maximum power and prosperity for each nation's own citizens.
List argued that it was better for a nation to have a strong manufacturing and capitalgoods sector rather than to rely on agriculture, services, or raw materials, even if the return was lower in the short or medium term. This meant that industry had to be protected from foreign competition and that capital had to be politically forced or induced toward the industrial sector. he was not against trade as such, but argued that it could only exist between nations equal in economic development. Otherwise, nations should seek to import raw materials and export manufactured goods.
These ideas became increasingly influential, particularly in his native Germany after the rise of Bismarck. By 1878, when free trade was finally abandoned, the entire Listian program had been adopted. …