International Studies Quarterly (1999) 43, 733–744

A Reappraisal of Classical Economic Nationalism and Economic Liberalism
The mischaracterization of the works of the early Economic Nationalists and early Economic Liberals has obscured both the variety within each school and the connections between them. Many scholars have written about misinterpretations of Adam Smith’s ideas, but few have corrected similar misinterpretations of the ideas of the leading Economic Nationalists, Alexander Hamilton and Friedrich List. List and Hamilton have been falsely portrayed as mercantilistic advocates of autarky and unlimited protectionism. A comparison of their works with those of the leading early Liberals: Adam Smith, David Ricardo, and John Stuart Mill, indicates a more complex pattern. Hamilton’s and List’s ideas, rather than being the antithesis of Liberalism, are a synthesis of it and mercantilism. This reappraisal indicates that some of the more controversial aspects of Economic Nationalism, such as its promotion of autarky, are not an essential part of this school of thought.

Although the classical works of Economic Nationalism and Economic Liberalism continue to influence opinion on the proper role of the state in promoting economic development, many understandings of the differences between these two schools of thought are mistaken or incomplete. Since other scholars have written extensively about the mischaracterization of the early Liberals, this article will focus more on the Economic Nationalists. Often there has not been enough recognition that Economic Nationalism and Economic Liberalism are neither as internally unified schools of thought as often portrayed nor as easily separated. In particular, the Liberal elements in the works of the most notable Nationalists, Alexander Hamilton and Friedrich List, have been underemphasized. The Mischaracterization of Economic Liberals and Economic Nationalists Partially accurate understandings of the early Economic Liberals and Economic Nationalists abound. Numerous authors have written about the ways in which Adam Smith’s work has been misinterpreted and how it differs from current understandings of Liberalism (Viner, [1926] 1966; Muller, 1993). As Wyatt-Walter (1996) has pointed out, Adam Smith’s view of international relations was often closer to the Realist or mercantilist traditions than to the Liberal Internationalism with which some scholars have associated him. In contrast to Smith, Ricardo and Mill fit better into commonly accepted understandings of Liberalism.

Author’s note: The author is grateful to Rhiannon Vickers, Ricardo Blaug, and anonymous referees for their valuable comments on earlier versions and to Meredith Woo-Cumings for her early encouragement of this project.
©1999 International Studies Association. Published by Blackwell Publishers, 350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 1JF, UK.

Copyright © 1999. All rights reserved.

” Gilpin (1987:181) likewise credits Hamilton’s ideas with supporting the high U. followers of Hamilton and List used the patriotic credentials of both men to give intellectual credibility to more protectionist ideas (Vandenberg. Hamilton identified national power with the development of manufactures” (Gilpin. Secretary of the Treasury and one of the authors of the Federalist Papers. tariff levels of the post–Civil War period and popularizing autarky. consistently draws parallels between the two theories: “the roots of economic nationalism can be found in the mercantilist writers of the seventeenth and eighteenth centuries. 1921:196). Rosecrance (1985:98) states that “[w]hen tariffs were reimposed in the 1880s. such as Henry Carey in his later years and Simon Patten. List’s ideas did not support the way in which Germany turned toward protectionism.” and “Like other mercantilists before him [emphasis added]. did support almost universal protection for industry and agriculture. the government protected industry with much higher tariffs and rejected bounties. The confusion over what List and Hamilton said is surprising. while List was a well-known proponent of German unification. agreed that nations ought to endeavor to possess within themselves all the elements of national supply. nations. even supported autarky. why is there so much confusion about them? First. for example. Second. 1987:180). Carr (1941:155). List himself had always argued against agricultural protectionism. Some Economic Nationalists. following the dictates of Alexander Hamilton and Friedrich List [emphasis added].S. states that Hamilton’s ideas support autarky. other Economic Nationalists were much more extreme. even though it is readily apparent in their writings. it would not be useful because the latter theorists have faded into relative obscurity. Such mischaracterizations are commonplace: even leading scholars have overemphasized the protectionist nature of List and Hamilton. they believed that free trade was only possible under certain conditions that did not exist for their economically weak. they supported limited types of protection to promote industrialization in countries with the necessary capabilities. 1959:299). Hamilton and List limit the conditions under which protection is justifiable because they accept some of the Copyright © 1999. international political economy scholars have credited Hamilton and List with the popularity of protectionism in the late nineteenth century. However. If Hamilton’s and List’s ideas can be explained so clearly. since their ideas can be expressed rather simply.734 A Reappraisal of Classical Economic Nationalism Like Smith. Gilpin. the United States and Germany. which List founded. Hamilton and List are sometimes portrayed as being successors of just the mercantilists. However. which cost money and did not retaliate directly against British merchants and manufacturers (Miller. Hamilton and List have not always been portrayed accurately. . Hamilton wanted to limit tariffs to 15 percent and use the proceeds solely for production bounties. for example.” “Hamilton modernized the eighteenth century mercantilist thesis. levels of protection rose much higher than either theorist would have endorsed. Under the tariff system of the late nineteenth century. such as Johann Gottlieb Fichte. Gilpin does not mention the strong influence of Liberalism on Hamilton and List. in the two countries where List and Hamilton had the most influence. As a result. Both men were national heroes. but relatively little has been written about the mischaracterization of their work. politically divided countries. Likewise. Others. Hamilton was the first U. More recently. Although the German Historical School. Hamilton and List both supported free trade in principle. has been credited with Bismarck’s extension of tariff protection to grains and manufactures in 1879 (Gilpin. All rights reserved.S. 1987:181). failing to note the qualifications Hamilton put on protectionism. The works of Hamilton and List have been more enduring than those of their more extreme counterparts because they provide an interesting synthesis of Liberalism and mercantilism. Although contrasting the early Liberals with the more extreme Economic Nationalists would be easy.

1987:171–72). On the second general aspect of Liberalism. Smith ([1776] Copyright © 1999. and countries. Mill’s development of the infant industry argument shows the pragmatic nature of his thinking. arguing that their sole effect was “[t]o divert a portion of capital to an employment which it would not naturally seek. The wealth-creating aspects of free trade played a central role in the thought of the early Economic Liberals. would promote wealth. Since the Liberals themselves recognized some limitations on the desirability of free trade. there is a sharp split between Smith and Mill.” because capital under free trade should go where it is most useful. who fits least well into general descriptions of Liberalism. was the contemporary of Ricardo and Mill and some of List’s ideas reflect later Liberal thought.” Smith argued that the mercantilists had erred in believing that there was a fixed amount of wealth. but provided an important exception to this general rule. . It causes a pernicious distribution of the general funds of the society—it bribes a manufacturer to commence or continue in a comparatively less profitable employment. but also consumers. While Smith believed that the division of labor. Ricardo ([1821] 1973:210) disapproved of high tariffs and export bounties because they decreased production. that it promotes economic growth and expands the possibilities of economic consumption. and Mill are at the roots of modern-day Liberalism. Of the leading three Liberals. Mill generally opposed government interference in free trade because it worked against the general good by preventing the most beneficial utilization of resources. Smith showed that a nation created wealth as it produced more. Yet while the three early Liberals all supported the first tenet of Liberalism mentioned.” Because of this less advantageous use of capital. the differences between these two schools on the issue of free trade are more complex than the simple endorsement of free trade versus protectionism. Free trade benefited not just producers. Ricardo. The third major classical Liberal. Gilpin lists three main general aspects of Liberals’ attitudes toward trade: they believed. He ([1821] 1973:214) argued that “the object of all trade is to increase productions. List. first. The time at which these theorists wrote also matters. he was ambivalent about its cultural effects. Moral philosopher Adam Smith appropriately titled his greatest work on political economy “An Inquiry into the Nature and Causes of the Wealth of Nations. and third. Ricardo emphasized that free trade would increase national wealth. generally agreed that trade promoted economic wealth.CHRISTINE MARGERUM HARLEN 735 Liberal arguments about free trade. however. and Mill on Trade As Gilpin notes. that it was “a force for peace because they believe that economic interdependence creates positive bonds among peoples and promotes a harmony of interests among societies” (Gilpin. which could exchange their excess goods for ones they needed (Smith. second. protectionism decreased wealth in general by not giving to the domestic economy all that it had taken from the foreign one (Ricardo. both nationally and internationally. Smith. who could purchase goods cheaply. All rights reserved. Like Smith. not because of an ideological aversion to protectionism. only Smith. the ability of trade to improve the cultural and political life of a country. John Stuart Mill. Ricardo. that it improves the values and ideas of society. By defining a nation’s wealth as the value of the produce of its land and labor. Mill argued that some industrializing countries could increase their wealth by protecting developing industries. the writings of Smith. Free-trade policies helped to increase national wealth by making possible a greater specialization of labor and thereby increasing production. [1776] 1976:446). was early enough to influence Hamilton’s writings. [1821] 1973:212–14). Smith’s work clearly does not support the last two tenets.

the selling classes. In contrast to Smith.736 A Reappraisal of Classical Economic Nationalism 1976:418–19) believed that free trade would break down the negative effects of feudalism. 1848:120). they are necessarily enemies. unless required by some great good. Despite their differences. For example. [1943] 1966) have noted. in being the principle [sic] guarantee of the peace of the world. He believed that trade. its ability to prevent war. Mill (1848:120) maintained that “international trade. nationalistic antagonisms were powerful enough to overcome economic interests. “laisser-faire [sic]. Mill (1848:219) noted that the selling classes’ conversion to the cause of free trade had transformed the commercial spirit from a principal cause of war into one of the strongest obstacles to it. by strengthening and multiplying the personal interests which are in natural opposition to it” (Mill. should be the general practice: every departure from it. Earle. Smith ([1776] 1976:496) argued that greater trade between France and England would be advantageous. is a certain evil. For Mill (1848:119). more formidable to the other. Smith’s work does not support the view that trade leads to increased international harmony. In contrast. they now understood how commercial countries derived their prosperity from one another. As Mill ([1871] 1965:950) expressed it. as a number of scholars (Muller. 1993. Wyatt-Walter.” but did not emphasize this theme in his work. the institutions. in his view. Copyright © 1999. Although List ([1841] 1904:348) later characterized Smith as saying that the state should do nothing. is the greatest permanent security for the uninterrupted progress of the ideas. trade’s positive impact on culture was associated with the third alleged benefit of trade.” Therefore. in short. All rights reserved. by making people aware of their common economic interests.” He argued that international trade had the power to improve international morality by increasing the sense of international community. by one common tie of interest and intercourse. commerce had already begun to develop an international community of interest. however.” National antagonisms even made war popular with the residents of great empires.” Mill’s faith in trade’s ability to create international harmony follows Ricardo’s line of thinking. For Smith. Mill emphasized the cultural benefits of trade. . In fact. [1776] 1976:920). and the wealth and power of each becomes. the economic advantages of commerce were “surpassed in importance by those of its effects which are intellectual and moral. and the character of the human race. “providing a thousand visionary hopes of conquest and national glory” (Smith. Ricardo ([1821] 1973:81) noted that a perfectly free system of commerce “binds together. Mill (1848:119) was optimistic that commerce was bringing civilization to “barbarians” and teaching even patriots to see their own advantage in the wealth and progress of other countries. Because war was the only event that could stop the progress of civilization. but he ([1776] 1976:782) also felt that the division of labor would force workers into repetitive work that was mind numbing.” Each theorist. but “[b]eing neighbours. paradoxically “what would increase the advantage of national friendship serves only to inflame the violence of national animosity. Whereas rival tradesmen had once been unable to see how their prosperity depended on the fortunes of other countries. 1996. upon that account. these theorists generally emphasized that government intervention was less likely to benefit the nation than governmental restraint. among the early Liberals Smith allowed the greatest role for government activity. would overcome the different political interests among nations that led to war. to whom it was a source of amusement. He noted that the benefits of trade had already won over even the main supporters of mercantilism. “rapidly rendering war obsolete. but not Smith’s. For Mill. came up with a different view on what greater goods might justify protectionism. rendering them unable to be good citizens. the universal society of nations throughout the civilized world.

Smith ([1776] 1976:471–72) rejected the immediate abolition of protectionism. Compared with Smith. because “[t]he very bad policy of one country may thus render it in some measure dangerous and imprudent to establish what would otherwise be the best policy in another. he followed Smith’s reasoning in opposing the immediate abolition of those laws. In contrast. including agricultural protectionism. Even so. emphasized the importance of government in this area. Mill ([1871] 1965:594) hoped. protectionist measures carried out for national security reasons. however. Writing just a few years after the Napoleonic Wars. stating that “[t]he first duty of the sovereign” was “that of protecting the society from the violence and invasion of other independent societies. All rights reserved. is of much more importance than opulence. the act of navigation is. Ricardo was still less protectionist than Smith. because he believed that only a gradual decrease in protection would be fair to the producers. that such practices would decrease as international morality improved for “if the greatest amount of good to mankind on the whole. Smith ([1776] 1976:539) supported free trade in grains in general. He ([1820] 1952:51) noted that they “enabled the ship-owner and the cotton manufacturer to injure the community” just as any protectionist measure benefited one trade but disadvantaged the rest of the country. Smith ([1776] 1976:467) reluctantly approved of retaliatory tariffs as a means of forcing another country to open up its trade. Ricardo ([1815] 1951:28–30) noted that Britain’s experience during the Napoleonic Wars showed that foreign countries would not stop their grain shipments during a war. shows Copyright © 1999. [were] politically expedient” at the time when the Dutch dominated shipping and were hostile to Britain. Mill noted that nations often did stop their grain exports during a famine. arguing that a cessation of food imports was unlikely since a country probably would not be at war with all foreign countries at once. Like Ricardo. were the end aimed at in the maxims of international conduct.” For this reason. Ricardo ([1821] 1952:358) was a vocal opponent of agricultural protectionism. Smith is the least laissez-faire. because they needed to continue exporting. however. Again. however. Mill and Ricardo had much more negative views of Britain’s use of protectionism to promote national security. Mill sharply criticized Smith’s argument for protecting agriculture.” Furthermore. Mill. Smith ([1776] 1976:464–65) argued in favor of the Navigation Acts. He even remarked that “[a]s defence. but noted that a small country might have to limit exports during a famine if other countries were doing so. . Mill ([1871] 1965:856). Another area that reflects the pragmatism of the Liberals is their attitude toward agricultural protectionism. however. opposing the idea that agricultural protectionism might be necessary during a war.” It seems paradoxical that a work looking into the causes of the wealth of nations should place national security in even higher regard. Unlike Ricardo. Smith believed. Mill ([1871] 1965:920) noted that the Acts “though economically disadvantageous.CHRISTINE MARGERUM HARLEN 737 Classical Liberals’ Justifications for Protectionism and Industrial Policy One major classical Liberal rationale for protectionism was the promotion of national security. that a nation that was unable to protect itself from foreign attack would lack the security necessary to develop politically and economically. the wisest of all the commercial regulations in England. and paying off our debt.” Smith and Mill also allowed nations to protect themselves with retaliatory tariffs. Adam Smith ([1776] 1976:689). in particular. Ricardo doubted that the Navigation Acts benefited the country. at that time Britain had rightly sacrificed economic benefits for increased security. noting that “no measures could so much contribute towards our wealth and prosperity as repealing the Corn Laws. on the other hand. objected to the Navigation Acts primarily because they had outlived their former usefulness. such collective churlishness would certainly be condemned by them. In his opinion. perhaps.” However.

[1926] 1966:148–49). since a permanent exclusion would disadvantage other subjects of the state. This change in the law. even in his first edition of The Principles of Political Economy. . the early Economic Liberals were no mercantilists. 182) notes that. . Mill (1848:487) argued that such infant industry protection should only be “confined to cases in which there is a good ground of assurance that an industry which it fosters will after a time be able to dispense with it. Smith ([1776] 1976:495) argued that the colonial system had on balance hurt Britain. All rights reserved. His main concern was that they be conducted in a way that least harmed others (Viner. Mill sounded a cautious note. arguing that “[t]he only mode by which a country can save itself from being a loser by the revenue duties imposed by other countries on its commodities.” Furthermore. producers were only to receive aid during “the time strictly necessary for a fair trial of what they are capable of accomplishing” (Mill.” Mill reasoned that an economically powerful nation might have an advantage in an industry simply because its people had acquired skill and experience by being the first producers. absurd regulations of commerce. Gilpin (1987:172.738 A Reappraisal of Classical Economic Nationalism an interesting willingness to impose retaliatory duties to raise government revenue. . which would be more readily discontinued when they were no longer needed. However. an area of great interest to Economic Nationalists.” but he notes that these duties must not be prohibitive. Smith ([1776] 1976:523) also suggested that the government encourage manufacturing by awarding premiums to artists and manufacturers who excelled at their crafts. is alone sufficient to make any country flourish. Mill offers less scope for government activity. such as the Corn Laws and colonial expansion. notwithstanding . Smith was aware that Britain had acquired considerable economic power at the time when it carried out mercantilist policies. when they are imposed temporarily (especially in a young and rising nation). whereas Economic Liberals view trade positively. he argued that these policies had done more harm than good. he ([1868] 1972:1520–21) came to favor replacing tariff protection for industry with direct annual grants. The most interesting classical Liberal exceptions to laissez-faire involve government promotion of industry. Smith’s concern with national wealth led him to approve even of measures to promote certain types of business activity. the granting of which was more subject to partiality. Smith. Copyright © 1999. . The monopoly was to be only temporary. Compared with Smith. Mill (1848: 487) noted just one case in which protectionist measures “on mere principles of political economy can be defensible .” Hamilton and List on Trade Economic Nationalism is often viewed as the opposite of Economic Liberalism. Despite some of the exceptions they made to laissez-faire principles. Smith ([1776] 1976:754–55) sanctioned the government’s granting of temporary monopolies in cases where merchants might not otherwise be willing to take the great risks necessary to establish a branch of trade. is to impose corresponding revenue duties on theirs. 1848:487). . Smith preferred these measures over bounties. by assuring “every man that he shall enjoy the fruits of his own labour. For Smith ([1776] 1976:540) the true cause of Britain’s prosperity was the contemporaneous improvement in the legal protection of property. makes it clear that he envisaged government’s role as primarily setting out the basic conditions necessary for an effective market. After special interest groups in the United States and Australia used the infant industry argument to call for tariffs that Mill felt were unwarranted. Nonetheless. Whereas the mercantilists had supported the development of trade networks with the colonies. He argued that it had made Britain depend on the American market and drawn its attention from more profitable ventures in and near Europe. The early Liberal closest to mercantilism.

While Alexander Hamilton’s Report on Manufactures was the first notable critique of Smith. Copyright © 1999. All rights reserved. In his Report on Manufactures. Neither List nor Hamilton approved of Britain’s Corn Laws and both were wary of unjustified protectionism. and sacrifice the interests of a mutually beneficial intercourse to the vain project of selling every thing and buying nothing [emphasis in original]. they often borrowed Liberal ideas. both believed that universal free trade was a worthwhile goal. As a result. List even shared the Liberals’ views of the cultural benefits of trade and faith in political union. Despite List’s and Hamilton’s greater emphasis on government activism to promote industrialization. however. particularly because of its negative cultural effects.CHRISTINE MARGERUM HARLEN 739 Economic Nationalists frequently regard trade negatively. Hamilton and List argued that while the Liberals were correct in identifying the benefits of free trade. both Hamilton and List make clear that free trade was often a good thing. including a long verbatim uncited quote on the advantages of transportation networks (Hamilton. which allowed the United States to import essential manufactured goods. List ([1841] 1904:272) in particular criticized mercantilism for encouraging unwarranted protectionism. At times. Both thinkers differed from the Economic Liberals in believing that it was not yet a completely desirable policy in certain economically weak countries for national security reasons and because economically strong countries retained protectionist policies. . Hamilton and List criticized protectionist practices. It therefore might be expected that the early Economic Nationalists would have a negative interpretation of trade that would preclude them from sharing the Liberals’ general faith in the progress toward peace. Hamilton harshly criticized the trade practices of industrialized nations. In their writings. List’s work was not a complete rejection of Smith. Hamilton and List argued that agricultural countries with the potential to industrialize might need to use protectionist measures. in their works Hamilton and List emphasized their disagreement with the Economic Liberals. but rather a caution against directly importing his ideas into countries that were less politically and economically developed than those Smith had analyzed.” as he called Liberalism. Nonetheless. [1791] 1966:311). most notably the Corn Laws. and favor economic protectionism. they did not adequately address the problems of how economically and politically weak countries might ensure their national security in a world where free trade did not exist. on how and when universal free trade might be achieved. Although List frequently criticized the “Smithian school. Hamilton and List disagreed with the Liberals on the actions that economically weak nations could and should take when faced with foreign protectionist tariffs and. but prevented it from exporting its agricultural commodities. One might also expect that Hamilton and List generally preferred protectionism and saw few cultural and political benefits in adopting free trade. Although List and Hamilton have acquired a reputation for being protectionists. emphasizing much more than Mill the importance of protecting infant industries. in ways reminiscent of Liberalism. Hamilton ([1791] 1966:258) argued that such agricultural protectionism benefited no one: [T]he manufacturing nations abrige [sic] the natural advantages of their situation. List in particular made clear that free trade was the optimal policy for most countries. While it is an exaggeration to describe List’s National System of Political Economy as the practical application of the Wealth of Nations in the commercial policy of a backward country (Anson-Meyer. through an unwillingness to permit the Agricultural countries to enjoy the advantage of theirs. 1982:186). his work also contains some key elements of Liberal thought. in the case of List. numerous passages in it follow those of Smith’s Wealth of Nations.

such tariffs would simply mean that it incurred high costs. List shared Copyright © 1999.” Since the United States could not export its agricultural goods. While the U. [1791] 1966:230). in part due to the strong influence of elements of nineteenth-century Liberalism. [1791] 1966:230). Hamilton ([1791] 1966:263) pointed out that the United States had a constant and increasing need of European goods. National security plays a somewhat different role in List’s work. As a result of the War of Independence. List and Hamilton argued that national security generally required the development of a manufacturing base. [1775] 1963:127–31). List was even more critical. If a nation engaging in retaliatory tariffs was not qualified to become a manufacturing power. Russia. 1970:292). At the time of Hamilton’s Report. Likewise. the United States was experiencing significant trade problems. The national security rationale of Hamilton’s major work on political economy. List ([1839] 1929:114) noted that Britain’s Corn Laws hurt England by limiting its manufacturing. Smith had restricted the national defense argument to commodities of direct relevance to the military. which could only be created by fostering domestic manufacturing (Hamilton. is clear. while Europe was only inconsistently and partially in need of U.740 A Reappraisal of Classical Economic Nationalism Like Hamilton. It developed out of a House of Representatives’ request for data on the country’s manufactures and for suggestions on “means of promoting such as will tend to render the United States independent of foreign nations for military and other essential supplies” (Hamilton. and Germany to retaliate by adopting successful measures to develop competing manufacturing industries. [1791] 1966:291). he differed from the Economic Nationalists in his prescription for how nations could cope with foreign protectionism. the protectionism of other countries hurt it (Hamilton. In contrast. Hamilton ([1774] 1963:56) had noted that greater American economic independence might render it more secure against the encroachments of European powers. it had lost its trading ties with the British Empire.S.” then “the arguments which dissuade a country in the predicament of the United States from the zealous pursuit of manufactures would doubtless have great force”. only to end it when the conflict subsided. . Hamilton. advocating retaliatory tariffs. it needed to develop a domestic market.S. In an argument foreshadowing models of economic dependency. Even before American independence. the prevalent policies of nations have “been regulated by an opposite spirit. Hamilton was particularly concerned that trade problems could compromise American neutrality (Lycan. The protectionism of the industrialized countries was a key reason why Hamilton and List argued for government support of industrialization in some less-developed countries. List ([1839] 1929:114) noted that it was Britain’s Corn Laws that caused North America. Whereas Smith ([1776] 1976:471) alone among the three classical Liberals had been very pessimistic about the establishment of free trade.S. All rights reserved. Hamilton ([1791] 1966:262) noted that “[i]f the systems of perfect liberty to industry and commerce were the prevailing system of nations. It also faced heavy tariffs from other European countries and lacked a navy strong enough to prevent disruptions of its foreign commerce (Cole. but that he had not gone far enough in applying this rationale. The emphasis on using industrial policies to deal with foreign protectionism marks a contrast between the Economic Liberals and the Economic Nationalists. [1841] 1904:318). his Report on the Subject of Manufactures. goods. If a nation was qualified to become a manufacturing power. stating that Smith’s retaliatory tariffs “would lead to the most absurd and most ruinous of measures” (List. Hamilton felt that such measures would be insufficient for the U. it made little sense to provide protection to an industry. was too weak to force other countries toward free trade. 1928:232. however. Hamilton and List furthermore felt that Smith was correct in noting that national defense was a solid justification for protectionism.

List’s and Hamilton’s Restrictions on Protectionism and Industrial Policy Even though Economic Nationalism has become associated with the idea that there is no natural comparative advantage (Gilpin. 272). and defence” (Carr. The security of individual nations. not only should an industry ideally be important to the national interest. rather than free trade. List approved of protectionism only when it was likely to lead to successful industrialization. List clearly had in mind a more ambitious plan: the creation of a “universal republic. since such aid would help bring about the universal republic. was List’s key prerequisite for political union. Furthermore. 1941:155). while Hamilton presented an infant-industry argument that differed only slightly from Mill’s. have no or few substitutes. All rights reserved. List also limited the justifiability of protectionism. the mutual economic interests highlighted by free trade could lead to political union. far advanced agriculture. it was in the international interest for that country’s government to aid industrialization. Echoing Liberal statements on the educative benefits of free trade. . List maintained Copyright © 1999. If a nation capable of industrializing had not yet done so. however. Hamilton ([1791] 1966:291). List ([1841] 1904:273) disapproved of agricultural protectionism and criticized mercantilists for endorsing such measures.” List (1841:103. habitation. a high degree of civilization and political development. but also bring about “the establishment of perpetual peace” (List. List ([1841] 1904:247) ruled out the possibility of industrialization for all tropical countries. Because protectionism was only justified if it aided industrialization. clothing. 1841:103.CHRISTINE MARGERUM HARLEN 741 Hamilton’s emphasis on the power implications of trade and the need to foster industry. Only when all of the nations capable of industrializing had attained an equal degree of culture and power would they have the level of secure independence necessary to develop “a universal republic. both Hamilton and List emphasized that protection was suitable only under certain circumstances.” To receive protection. also shared Mill’s interest in the progression of the world toward universal free trade and political union. political union had to come first. further noted that protection to promote manufacturing should only occur “in certain cases and under certain reasonable limits. 272) described this republic as “a union of nations of the earth whereby they recognize the same conditions of right among themselves and renounce redress. These comprise the means of subsistence. and provide material that could fill a wide range of uses (Hamilton.” This universal republic would not only promote trade. it should also use raw materials that are available in the country. noted that protection should be temporary and only allowed for new undertakings. because of their climate. for List. protectionism was just one of several means to the real end: greater national security through industrialization.” List also opposed the adoption of protectionism in countries that had not reached the necessary level of political and economic development. Like Hamilton. [1791] 1966:300). List believed that some protectionism was necessary. foreshadowing Mill. Hamilton ([1791] 1966:301) argued that “the continuance of bounties on manufactures long established must almost always be of questionable policy” because it indicated that there were inherent impediments to the success of an industry. 1997). Hamilton has been viewed as a proponent of autarky because he ([1791] 1966:284) argued that every nation should aim to supply within itself “all the essentials of national supply. however.” Although this union has been likened to the GATT organization (Levi-Faur. and for any country lacking “an extensive compact territory. but only because free trade alone would not bring about the equality essential for the creation of a universal republic. List. Whereas for Mill. List made clear his belief that most countries benefited from free trade. large population. possession of natural resources. be easy to foster. Hamilton. 1987:181). Even more important.

List ([1841] 1904:9) noted that “any power which by means of a protective policy has attained a position of manufacturing and commercial supremacy. they at times supported Liberal arguments. the Copyright © 1999. can (after she has attained it) revert with advantage to the policy of free trade. protective tariffs were allowable “only so far as may be necessary for protecting the inland manufacturing power in its very roots” (List. Hamilton and List saw universal free trade as a useful goal. Among the early Economic Liberals there was a general belief that free trade was the best policy. List devoted considerable energy to various causes that promoted national strength. While the unity within the two different groups of theorists has been overstated. so have the differences between the two groups. but was not yet supreme. Hamilton ([1791] 1966:292) espoused a wide range of methods to aid manufacturers. like them. Conclusion Although the early Economic Liberals and early Economic Nationalists have been portrayed as two tightly unified opposing schools. List placed limits on the amount and type of protection it should grant. criticizing Britain’s Corn Laws as fiercely as Ricardo had. by permitting free competition in her own markets. including improving the rights of inventors. However. List ([1843] 1931:186–92) was highly critical of the protectionist policies of Hungary. When an industry had become established. All rights reserved. He argued that the protective tariffs necessary to begin industrial development should be very moderate at first and only rise gradually.” Even when a nation was justified in using protection. such as lowering tariff barriers between German states before unification and building a German railway network. [1841] 1904:144). At times the ideas which List ([1841] 1904:272) emphasized to separate his ideas from those of the mercantilists have been ignored. Despite their reputations as staunch advocates of laissez-faire policies. they did not believe that the Liberals provided a realistic vision for many economically weak countries in a world where free trade was the exception.742 A Reappraisal of Classical Economic Nationalism that free trade aided the development of these countries by exposing the population to greater civilization. For example. List ([1841] 1904:151) similarly criticized the protectionist policies of South America. Like the Liberals. List’s arguments do not justify the protectionist reputation he has acquired. especially Smith. List ([1841] 1904:272) criticized the mercantilists for failing to notice that such a manufacturing nation should abolish protectionism “to preserve her own manufactures and merchants from indolence. Furthermore. List also argued against protectionist policies for any country that had already achieved economic and manufacturing supremacy. As a result. that view is oversimplified. and improving financial and transportation services. increasing regulation. the early Liberals. . In short. was interested in developing state power. for both List and Hamilton. protectionism was just one method of strengthening the industrial capacity of a nation. List’s vision of political union reflects later Liberalism in a way that would not have been possible for Alexander Hamilton or Adam Smith. but there was considerable disagreement between Smith and his successors on the issues of trade’s effect on culture and war. recognized the need to make exceptions to free trade. arguing that they would fail because Hungary’s feudalistic economic and social relations prevented industrialization. However. Hamilton and List recognized the need to place restrictions on protectionism. Similarly. These ideas include his much more limited justifications for protectionism and his belief in the future union of all nations. Some of the misunderstandings seem to arise from a conflation of List’s works with those of the mercantilists because he. Among the Economic Nationalists.” In this regard.

translated by S. E.” In John Stuart Mill: Collected Works. GILPIN. New York: Longmans. As one of the key theories of international political economy. ([1868] 1972) “Letter to Edward William Stafford. (1941) The Twenty Years’ Crisis. (1841) Das nationale System der politischen Ökonomie. edited by F. Syrett. pp. (1848) The Principles of Political Economy with Some of Their Applications to Social Philosophy. pp. 7. ([1871] 1965) The Principles of Political Economy with Some of Their Applications to Social Philosophy. MILLER. (1970) Alexander Hamilton and American Foreign Policy. has important implications. 1996:28). New York: Columbia University Press. ([1841] 1904) The National System of Political Economy.” In Friedrich List: Werke. ([1774] 1963) “A Full Vindication of the Measures of Congress. HAMILTON. E. The mischaracterization of Hamilton and List and. Vol. 230–340. MULLER. Copyright © 1999. London: Heinemann. so too the mischaracterization of List and Hamilton has weakened Economic Nationalism by unnecessarily associating it with autarky and the failure to recognize the benefits of free trade. S. ([1943] 1966) Makers of Modern Strategy: Military Thought from Machiavelli to Hitler. (1928) Industrial and Commercial Correspondence of Alexander Hamilton Anticipating His Report on Manufactures. H. . G. Z. New York: Columbia University Press. Because of the precarious situation of their countries. edited by E. ([1843] 1931) “Über die Zollvereinigung der österreichischen Provinzen mit Ungarn. ([1791] 1966) “Report on Manufactures. 81–165. 112–122. edited by H. The economic and political weakness of their countries caused them to expand greatly on Smith’s rationale for basing protectionism on national security considerations and to use the infant industry argument with fewer reservations than Mill later would. LIST. Parker. (1993) Adam Smith in His Time and Ours: Designing the Decent Society. Vol. (1979) The Economics of David Ricardo. Stuttgart: J. Vol. Stuhler. J. F. edited by H. pp. Norman: University of Oklahoma Press.” Allgemeine Zeitung article reprint. A. HAMILTON. J. Berlin: Reimar Hobbing. edited by H. London: John W. Economic Nationalism deserves to be better understood. XVI. 45–78. LIST. A. London: Routledge & Kegan Paul. 1919–1939.W. 1520–1521. HAMILTON. L. 192–205. J. Princeton. ([1839] 1929) “Die englische Kornbill und das deutsche Schutzsystem. Wiskemann. London: Routledge & Kegan Paul. S. Chicago: A. H. W. Lindley. pp. S. A. A. Shaw. (1982) Un économiste du développement au xixe siècle. LEVI-FAUR. Salin. and O. Princeton. Syrett. (1997) Economic Nationalism: From Friedrich List to Robert Reich. M. Green. MILL. In Friedrich List: Werke. References ANSON-MEYER. LIST. Farmer. (1959) Alexander Hamilton: Portrait in Paradox. LYCAN. (1987) The Political Economy of International Relations. E. F. M. Vol. I. MILL. Vol. S. Syrett. G. to some extent Smith. Lloyd. pp. S. C. F. C. A. New York: Macmillan. X. N. London: Macmillan. C. Sommer. R.” In The Papers of Alexander Hamilton. F. Mineka and D. edited by F. Berlin: Reimar Hobbing. NJ: Princeton University Press. All rights reserved. Vol. Cotta Verlag. MILL.CHRISTINE MARGERUM HARLEN 743 Economic Nationalists were generally more protectionist than the Economic Liberals. Lenz and E. ([1775] 1963) “The Farmer Refuted: or A more Impartial and comprehensive View of the Dispute between Great-Britain and the Colonies. Review of International Studies 23:359–370. Grenoble: Presses Universitaires de Grenoble. EARLE. COLE. 5. LIST. C. CARR. Intended as a Further Vindication of the Congress: In Answer to a letter from A. J. I.” In The Papers of Alexander Hamilton. NJ: Princeton University Press.” In The Papers of Alexander Hamilton. pp. List and Hamilton were more concerned about the dangers of laissez-faire than they were about the dangers of government intervention. Toronto: University of Toronto Press. J. Just as the misrepresentation of Smith has weakened Liberalism by unnecessarily linking it with utopianism (Wyatt-Walter. HOLLANDER. New York: Harper & Brothers. D. New York: Columbia University Press.

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