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International
StudiesQuarterly
(1999) 43, 733-744
University
ofLeeds
The mischaracterizationoftheworksoftheearlyEconomicNationalists
and earlyEconomicLiberalshas obscuredboththevariety withineach
schooland theconnections betweenthem.Manyscholarshavewritten
aboutmisinterpretations ofAdamSmith'sideas,butfewhavecorrected
similarmisinterpretationsoftheideasoftheleadingEconomicNational-
ists,AlexanderHamiltonand Friedrich List.ListandHamiltonhavebeen
falselyportrayed advocatesof autarkyand unlimited
as mercantilistic
protectionism.A comparison oftheirworks withthoseoftheleadingearly
Liberals:AdamSmith,DavidRicardo,andJohnStuartMill,indicatesa
morecomplexpattern. Hamilton'sand List'sideas,ratherthanbeingthe
antithesisof Liberalism,are a synthesis of it and mercantilism.
This
reappraisalindicatesthatsome of the more controversial aspectsof
EconomicNationalism, such as its promotionof autarky, are not an
essentialpartofthisschoolofthought.
1976:418-19) believed that free trade would break down the negativeeffectsof
feudalism,but he ([1776] 1976:782) also feltthatthe divisionof labor would force
workersintorepetitiveworkthatwas mind numbing,renderingthemunable to be
good citizens.
In contrastto Smith,Mill emphasized the culturalbenefitsof trade. For Mill
(1848:119), theeconomicadvantagesofcommercewere "surpassedin importance
bythoseofitseffects whichare intellectualand moral."He argued thatinternational
trade had the power to improveinternationalmoralityby increasingthe sense of
internationalcommunity.Mill (1848:119) was optimisticthatcommercewas bring-
ingcivilizationto"barbarians"and teachingevenpatriotsto see theirownadvantage
in the wealthand progressof othercountries.He noted thatthe benefitsof trade
had alreadywon overeven the main supportersofmercantilism, thesellingclasses.
Whereas rival tradesmenhad once been unable to see how theirprosperityde-
pended on the fortunesof othercountries,theynow understoodhow commercial
countriesderivedtheirprosperityfromone another.
For Mill,trade'spositiveimpacton culturewas associatedwiththe thirdalleged
benefitoftrade,itsabilityto preventwar.He believedthattrade,bymakingpeople
aware of theircommon economic interests, would overcomethe different political
interestsamong nationsthatled to war. In fact,in his view,commercehad already
begun to develop an internationalcommunityof interest,"rapidlyrenderingwar
obsolete, by strengtheningand multiplyingthe personal interestswhich are in
naturalopposition to it" (Mill, 1848:120). Mill (1848:219) noted that the selling
classes' conversionto thecause offreetradehad transformed thecommercialspirit
froma principalcause ofwar into one of the strongestobstaclesto it. Because war
was the only event that could stop the progress of civilization,Mill (1848:120)
maintainedthat"internationaltrade,in being the principle[sic]guaranteeof the
peace oftheworld,is thegreatestpermanentsecurity fortheuninterrupted progress
of the ideas, the institutions,and the characterof the human race."
Mill'sfaithin trade'sabilitytocreateinternationalharmonyfollowsRicardo'sline
of thinking,but not Smith's.Ricardo ([1821] 1973:81) noted thata perfectlyfree
systemofcommerce"bindstogether,byone commontieofinterestand intercourse,
theuniversalsocietyofnationsthroughoutthecivilizedworld,"butdid notempha-
size this theme in his work. In contrast,as a number of scholars (Muller, 1993;
Wyatt-Walter, 1996; Earle, [1943] 1966) have noted,Smith'sworkdoes not support
theviewthattradeleads to increasedinternationalharmony.For Smith,national-
istic antagonismswere powerfulenough to overcome economic interests.For
example, Smith([1776] 1976:496) argued thatgreatertrade betweenFrance and
England would be advantageous, but "[b]eing neighbours,they are necessarily
enemies, and the wealth and power of each becomes, upon that account, more
formidableto theother."Therefore,paradoxically"whatwould increasetheadvan-
tageofnationalfriendshipservesonlyto inflametheviolenceofnationalanimosity."
National antagonismseven made war popular withthe residentsof greatempires,
to whom it was a source of amusement,"providinga thousandvisionaryhopes of
conquestand nationalglory"(Smith,[1776] 1976:920).
Despite theirdifferences, thesetheoristsgenerallyemphasized thatgovernment
intervention was less likelyto benefitthe nation than governmentalrestraint.As
Mill ([1871] 1965:950) expressed it, "laisser-faire[sic], in short,should be the
generalpractice:everydeparturefromit,unless requiredby some greatgood, is a
certainevil." Each theorist,however,came up witha different viewon whatgreater
goods mightjustifyprotectionism.AlthoughList ([1841] 1904:348) later charac-
terizedSmithas sayingthatthe stateshould do nothing,among the earlyLiberals
Smithallowed the greatestrole forgovernmentactivity.
CHRISTINE MARGERUM HARLEN 737
ClassicalLiberals'Justifications
forProtectionism
and IndustrialPolicy
One major classical Liberal rationale for protectionismwas the promotion of
national security.Adam Smith ([1776] 1976:689), in particular,emphasized the
importanceofgovernmentin thisarea, statingthat"[t]hefirstdutyofthesovereign"
was "thatof protectingthe societyfromthe violence and invasionof other inde-
pendent societies."For thisreason,Smith([1776] 1976:464-65) argued in favorof
theNavigationActs,protectionist measurescarriedoutfornationalsecurity reasons.
He even remarkedthat"[a]s defence,however,is of much more importancethan
opulence, the act of navigation is, perhaps, the wisest of all the commercial
regulationsin England." It seems paradoxical thata worklooking into the causes
ofthewealthofnationsshouldplace nationalsecurityin even higherregard.Smith
believed,however,thata nationthatwas unable to protectitselffromforeignattack
would lack the securitynecessaryto develop politicallyand economically.
Compared with Smith, Mill and Ricardo had much more negative views of
Britain'suse of protectionismto promotenationalsecurity.Writing just a fewyears
afterthe Napoleonic Wars,Ricardodoubted thatthe NavigationActsbenefitedthe
country.He ([1820] 1952:51) noted that they"enabled the ship-ownerand the
cotton manufacturerto injure the community"just as any protectionistmeasure
benefitedone trade but disadvantagedthe restof the country.Mill, on the other
hand, objected to the NavigationActs primarilybecause theyhad outlivedtheir
formerusefulness.Mill ([1871] 1965:920) noted thattheActs"thougheconomically
disadvantageous,[were]politicallyexpedient" at the timewhen the Dutch domi-
nated shippingand were hostileto Britain.In his opinion,at thattimeBritainhad
rightlysacrificedeconomicbenefitsforincreasedsecurity.
Anotherarea thatreflectsthepragmatismof the Liberalsis theirattitudetoward
agriculturalprotectionism.Again, Smith is the least laissez-faire.Smith ([1776]
1976:539) supportedfreetradein grainsin general,butnoted thata smallcountry
mighthave tolimitexportsduringa famineifothercountriesweredoing so,because
" [t]heverybad policyofone countrymaythusrenderitin some measuredangerous
and imprudentto establishwhatwould otherwisebe the best policy in another."
Furthermore,Smith ([1776] 1976:471-72) rejected the immediate abolition of
protectionism, includingagriculturalprotectionism, because he believed thatonly
a gradual decrease in protectionwould be fairto the producers.
In contrast,Ricardo ([1821] 1952:358) was a vocal opponent of agricultural
protectionism,noting that "no measures could so much contributetowardsour
wealth and prosperityas repealing the Corn Laws, and paying offour debt."
However,he followedSmith'sreasoning in opposing the immediateabolition of
those laws. Even so, Ricardo was stillless protectionistthan Smith,opposing the
idea that agriculturalprotectionismmight be necessaryduring a war. Ricardo
([1815] 1951:28-30) noted thatBritain'sexperience duringthe Napoleonic Wars
showed thatforeigncountrieswould not stop theirgrain shipmentsduringa war,
because theyneeded to continueexporting.
Like Ricardo,Mill sharplycriticizedSmith'sargumentforprotectingagriculture,
arguingthata cessationoffoodimportswas unlikelysincea countryprobablywould
not be at war withall foreigncountriesat once. Unlike Ricardo, Mill noted that
nationsoftendid stop theirgrainexportsduringa famine.Mill ([1871] 1965:594)
hoped, however,that such practices would decrease as internationalmorality
improvedfor"ifthe greatestamount of good to mankindon the whole,were the
end aimed at in the maximsof internationalconduct,such collectivechurlishness
would certainlybe condemned by them."
Smithand Mill also allowed nationsto protectthemselveswithretaliatory tariffs.
Smith ([1776] 1976:467) reluctantlyapproved of retaliatorytariffs as a means of
forcinganothercountryto open up itstrade.Mill([1871] 1965:856), however,shows
738 A Reappraisal
ofClassicalEconomic
Nationalism
Hamilton's emphasis on the power implicationsof trade and the need to foster
industry.List,however,also shared Mill's interestin the progressionof the world
toward universal free trade and political union. Whereas for Mill, the mutual
economic interestshighlightedbyfreetradecould lead to politicalunion, forList,
politicalunion had to come first.The securityofindividualnations,ratherthanfree
trade,was List's keyprerequisiteforpoliticalunion. Only when all of the nations
capable of industrializinghad attainedan equal degree ofcultureand powerwould
they have the level of secure independence necessaryto develop "a universal
republic."List (1841:103, 272) describedthisrepublicas "a union of nationsof the
earthwherebytheyrecognizethe same conditionsof rightamong themselvesand
renounceredress."Althoughthisunion has been likenedto theGATITorganization
(Levi-Faur,1997), List clearlyhad in mind a more ambitiousplan: the creationof
a "universalrepublic."This universalrepublicwould not onlypromotetrade,but
also bringabout "the establishmentof perpetualpeace" (List, 1841:103, 272).
List'sand Hamilton's
Restrictions and IndustrialPolicy
on Protectionism
Even thoughEconomicNationalismhas become associatedwiththeidea thatthere
is no naturalcomparativeadvantage (Gilpin, 1987:181), both Hamilton and List
emphasized that protectionwas suitable only under certain circumstances.List
made clear his beliefthatmostcountriesbenefitedfromfreetrade,whileHamilton
presented an infant-industry argument that differedonly slightlyfrom Mill's.
Furthermore, protectionismwasjust one of severalmeans to the real end: greater
nationalsecuritythroughindustrialization.
Hamilton has been viewed as a proponent of autarkybecause he ([1791]
1966:284) argued that every nation should aim to supply withinitself"all the
essentialsof nationalsupply.These comprisethe means of subsistence,habitation,
clothing,and defence" (Carr, 1941:155). Hamilton ([1791] 1966:291), however,
furthernoted that protectionto promote manufacturingshould only occur "in
certaincases and under certainreasonable limits."To receiveprotection,not only
should an industryideallybe importantto the national interest,it should also use
raw materialsthatare available in the country,have no or fewsubstitutes, be easy
to foster,and providematerialthatcould filla wide range ofuses (Hamilton,[1791]
1966:300). Even more important,Hamilton,foreshadowingMill, noted thatpro-
tectionshould be temporaryand only allowed for new undertakings.Hamilton
([1791] 1966:301) argued that"the continuanceof bountieson manufactureslong
establishedmustalmostalwaysbe of questionablepolicy"because it indicatedthat
therewere inherentimpedimentsto the successof an industry.
List also limited the justifiabilityof protectionism.List believed that some
protectionismwas necessary,but only because free trade alone would not bring
about the equalityessential for the creation of a universalrepublic. If a nation
capable of industrializinghad not yetdone so, it was in the internationalinterest
forthatcountry'sgovernmentto aid industrialization, since such aid would help
bring about the universalrepublic. Because protectionismwas onlyjustifiedif it
aided industrialization,List ([1841] 1904:273) disapprovedof agriculturalprotec-
tionismand criticizedmercantilists forendorsingsuch measures.
Like Hamilton,List approved of protectionismonlywhen itwas likelyto lead to
successfulindustrialization.List ([1841] 1904:247) ruled out the possibilityof
industrializationfor all tropicalcountries,because of theirclimate,and for any
countrylacking "an extensivecompact territory, large population, possession of
natural resources, far advanced agriculture,a high degree of civilizationand
politicaldevelopment."Listalso opposed theadoptionofprotectionism in countries
thathad not reached the necessarylevel of politicaland economic development.
Echoing Liberal statementson theeducativebenefitsoffreetrade,Listmaintained
742 A Reappraisal
ofClassicalEconomic
Nationalism
thatfreetradeaided thedevelopmentofthesecountriesbyexposingthepopulation
to greatercivilization.For example, List([1843] 1931:186-92) was highlycriticalof
the protectionistpolicies of Hungary,arguing that theywould failbecause Hun-
gary'sfeudalisticeconomic and social relationspreventedindustrialization.List
([1841] 1904:151) similarlycriticizedthe protectionist policies of South America.
List also argued against protectionistpolicies forany countrythathad already
achievedeconomicand manufacturing supremacy.List([1841] 1904:272) criticized
the mercantilistsfor failingto notice that such a manufacturingnation should
abolish protectionism"to preserve her own manufacturesand merchantsfrom
indolence,bypermittingfreecompetitionin her own markets."In thisregard,List
([1841] 1904:9) noted that"any powerwhichby means of a protectivepolicyhas
attaineda positionofmanufacturing and commercialsupremacy,can (aftershe has
attainedit) revertwithadvantage to the policyof freetrade."
Even when a nation was justifiedin using protection,List placed limitson the
amountand typeofprotectionitshould grant.He argued thattheprotectivetariffs
necessaryto begin industrialdevelopmentshouldbe verymoderateat firstand only
risegradually.When an industryhad become established,butwas notyetsupreme,
protectivetariffswere allowable"onlyso faras maybe necessaryforprotectingthe
inland manufacturing powerin itsveryroots"(List,[1841] 1904:144).
In short,List's argumentsdo not justifythe protectionistreputationhe has
acquired. Some of the misunderstandings seem to arise froma conflationof List's
works with those of the mercantilistsbecause he, like them, was interestedin
developingstatepower.Attimestheideas whichList([1841] 1904:272) emphasized
to separatehis ideas fromthoseofthemercantilists have been ignored.These ideas
include his muchmore limitedjustificationsforprotectionismand his beliefin the
futureunion of all nations.
Furthermore, forboth Listand Hamilton,protectionism wasjust one methodof
strengtheningthe industrialcapacity of a nation. Hamilton ([1791] 1966:292)
espoused a wide range of methodsto aid manufacturers, includingimprovingthe
rightsof inventors,increasingregulation,and improvingfinancialand transporta-
tion services.List devoted considerable energyto various causes that promoted
national strength,such as loweringtariffbarriersbetweenGerman statesbefore
unificationand buildinga Germanrailwaynetwork.
Conclusion
Althoughthe earlyEconomic Liberals and earlyEconomic Nationalistshave been
portrayedas two tightlyunified opposing schools, that view is oversimplified.
Among the earlyEconomic Liberals therewas a general beliefthatfreetradewas
the best policy,but therewas considerable disagreementbetweenSmithand his
successorson the issues of trade'seffecton cultureand war.Among the Economic
Nationalists,List's vision of politicalunion reflectslater Liberalismin a way that
would not have been possible forAlexanderHamiltonor Adam Smith.
While the unitywithinthe twodifferent groupsof theoristshas been overstated,
so have thedifferences betweenthetwogroups.Despite theirreputationsas staunch
advocates of laissez-fairepolicies, the early Liberals,especiallySmith,recognized
theneed to make exceptionsto freetrade.Similarly,Hamiltonand Listrecognized
the need to place restrictions on protectionism.Like the Liberals,Hamilton and
List sawuniversalfreetradeas a usefulgoal. However,theydid notbelieve thatthe
Liberalsprovideda realisticvisionformanyeconomicallyweak countriesin a world
where free trade was the exception. As a result,theyat timessupported Liberal
arguments,criticizingBritain'sCorn Laws as fiercelyas Ricardo had. However,the
CHRISTINE MARGERUM HARLEN 743
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