A Presentation of a Dissertation for the degree of PhD ( Dr. rer.pol )

1. ‘A Logical List’ - An attempt to unearth the principles ofFriedrich List’s international system of innovation and progressby Arno Mong Daastøl A Presentation of a Dissertation for the degree of PhD (Dr.rer.pol) Sept. 2011at the University of Erfurt, Germany

2. This dissertation • Is a systematised and thematic study of Friedrich List’s economic approach, showing: 1) The fundamental importance of immaterial production factors, and (as such) 2) How the ‘capital of mind’ binds together a multitude of issues into a coherent system

3. List’spracticalreputation • PromotedGermanunityby: • A Germanrailroadnetwork(as theHarkort brothers; von der Heydtbrothers; Camphausen, Hansemann etc.) • A Germancustoms union - the "Zollverein"- elaboratingthe "infantindustry" argument(as Ferrier, Ganilh, L. Say, Chaptal)

4. List alsopromoted • ProductiveForces(as Müller, 1809 & Dupin, 1827) • Spiritual Capital as core(as Müller, 1809) • Noneoftheabovewereoriginal to List: • But, he fusedthese elements and changedtheemphasistowardstheimmaterial (intelectual and social)

5. List’sbooks • Outlines (1827): USA in debt due to deficits (lackingproductivepower – remedy is clear) • Natural System (1837): Trade Theory and HistoryA RealisticStrategy for Free Trade • + Rise & Fall of Great Nations (ch.27>) • National System (1841): History; Theoryand PoliticsRise & Fall of Great Nations (ch.1-10) • City States (Italy, Hanse, Netherlands) • Nation States (Spain, Portugal, Russia, France, Germany, England) • Contintents (America, Europe)

6. List’s system is simple in principle, and yet complex in reality: • The human spirit creates culture which creates wealth – or in more detail: Q: Mental capital creates innovation, constitutes and reshapes collaboration, which constitutes and reshapes nations and (defines and) creates wealth. Q: Greater part of the productive power consists in the intellectual and social conditions of the individuals, which I call capital of mind. (List, 1827b, p. 63)

7. Using List’s terminology: • The task of political economy is to contribute to individual and social progress: The goal is elevation of global civilisation by moral and material improvement • Mental capital, individual and collective, is the prime source of wealth and constitutes the essence of; • The Confederation of Labour, which both constitutes and continuously reshapes the nation, both its civic institutions (Civil Society”) and the State • The nation is the main vehicle for the individual person’s quest for freedom, happiness and wealth • The ultimate confederation of Labour lies in global free trade, making the selfish colonial system as well as navies obsolete

8. Ad 1) Progress • The task of political economy is to contribute to individual and social progress: • The goal is elevation of global civilisation by moral and material improvement. Q: We have already observed that the fortunes or misfortunes of individuals are dependent upon the maintenance of the independence and progress of the whole nation. (List, 1837, p. 33) Q: But politics demands, in the interests of each separate nation, guarantees for its independence and continued existence, special regulations to help its progress in culture, prosperity, and power, to build its society into a perfectly complete and harmoniously developed body politic, self-contained and independent. (List, 1841, Introduction, in Hirst, 1909, p. 291)

9. Freedom and liberty • Freedom- essenceofGermanthoughtsincebefore Kant Q: The spirit of enterprise, economic progress, technical knowledge, and artistic skill develops only in countries enriched by political and religious freedom. (List, 1837a, p. 164) Q: … liberty and civilisation have everywhere and at all times emanated from towns… (List, 1841, p. 204) Q: Manufactories and manufactures are the mothers and children of municipal liberty, of intelligence, of the arts and sciences, of internal and external commerce, of navigation and improvements in transport, of civilisation and political power. (List, 1841, p. 140)

10. Ad 2) ‘Mental capital’ • - is the founding stone of List’s system of productive powers. It alone can utilise the resources given by nature: • Promote: Morality and knowledge; education, innovation, research, communication: Elevationof Labour Q: Greater part of the productive power consists in the intellectual and social conditions of the individuals, which I call capital of mind. (List, 1827b, p. 63)

11. List’s inspiration (Re: Capital of Mind) Takesus back to: • Philosophical tradition: German Idealism(Cusa, Kepler, Leibniz: - Kant, Hegel, Fichte ... Müller) • Economic tradition: Cameralism and Renaissance statecraft (Regulation for common weal) • - and in both the above instances: the ancient Greeks)

12. The Idealist Tradition • Renaissance and Cameralist ideal: • Man in the image of God: Imitate God: • Perfecting the State into Heaven on Earth Q: National economy teaches by what means a certain nation, in her particular situation, may direct and regulate the economy … to create … perfect nations … (List, 1827b, Letter I, pp. 25)

13. Ad 3) Confederation of Labour • Mental capital is the essence of the intergenerational ‘Confederation of Labour’:- Intergenerational social networks and institutions such as trust, credit, knowledge: “Civil Society” • Constitutes the nation as a home market and as a national system of innovation and production • It reaches its furthermost potential in an urban-industrial civilization, or as List termed it: The Industrial System

14. Fragile • Although effective, mental capital is fragile; • Home market needs to be wisely nurtured and protected against the gusts of the world markets, payments imbalances and economic crises • Physical capital move and perish less easily

15. Ad 4) The Nation • - Delivers collective services that an individual cannot – such as traditions, arts, freedom, security, and major investments • It can only progress well through a carefully balanced development of all vital sections of agriculture, trade, and industry, and furthermore their efficient interconnection through state of the art institutions, standards, communications, and the establishment of towns • The nation resembles a large company, constituted by the Confederation of Labour

16. Ad 5) Global free trade • The ultimate confederation of Labour lies in global free trade • Making the selfish colonial system as well as navies obsolete Q: The highest aim of rational politics … the uniting of all nations under a common law of right, … (List, 1841, p. 410) Q: The system of protection … appears to be the most efficient means of furthering the final union of nations, and hence also of promoting true freedom of trade. (List, 1841, p. 126)

17. English Classical School • Largely ignored (real estate and labour market) intangiblecapital, and therefore focused on: • Increased division of labour(Smith)- through free trade and expanding markets; • Increased accumulation of material capital through savingi.e. austerity / cost cutting (Smith follows the Physiocracts) • Exchange values (‘Monetarism’) (Smith - Ricardo) • Curtailing populationgrowth (having little faith in human abilities – Malthus/Ricardo)

18. Adam Smith’s materialism … Led him to: • Gross and fatal generalisations(time and space, capital, branches, nations) • Misunderstand the nature of capital (and growth) (save corn – material ‘stock’ - for next spring’s labour) • Ignore immaterial factors and therefore: Social cohesion; co-operation; civil society; institutions; (such as the nation); Stabilityand economic regulation

19. England’ssuccess • Ironically, England was the nation that more than any had used every trick in the book of government intervention to promote industrialisation, and then prevent other nations from doing the same • Smith’s doctrine therefore seen as propaganda, designed to fool other nations – "pulling up the ladder" that England had used

20. England Modelled and Challenged • Religious and politicalfreedom; technology; infrastructure, institutionsand regulations • But, copying England created a challenger … • List thereforeblamed- for Germanexpansionismand wars • List’ssolution: (removingneed for colonies and navies)Free trade and worldgovernment(graduallythroughprotection, trade conferences and agreements)

21. As opposed to Smith • Revealing the materialistically based errors of Adam Smith’s theory of capital and growth: • Investmentmatters - intoinfrastructure: health, education; research; communication, transport(less focusonsaving and costcutting) • Co-operation matters – networkstability(less focusoncompetition) • Balance of trade matters – for financial stability, growth and sovereignty

22. Smith versus List 1 – ‘Monetarism’ Exchange Value ProductivePowers Understandingthe nature ofcredit and money as ideas (jurisprudence; human relationships) Manykindsofcapital(Different branches and occupations) Limited movability- Pathdependence • Money as material • One similar and abstractdenominator: Money • Movecapitaleasyand swiftlybetweenbranchesand occupations

23. Smith versus List 2 – Growth and Trade Materialist Capital Ideal Capital Invest in infrastructure(health, education, research, communication, transport + machinetools) Fragile; protectand nuture Dynamictheoryof trade - Learnnew profitable trades Balance competitionwithco-operation – network • Accumulate(save, cutcosts, austerity) • Expanddivisionoflabour; markets – free trade • Statictheoryof trade (stay by your lest) • Promotecompetition

24. Smith versus List 3 – Method Axiomatic-deductive Historical Inductive-empirical: Man is multifarious Returns aremultifarious(basedonpropertyrights, such as scarceknowledge; ) • Unrealisticaxioms: • Man is egotistical (Smith) • Decreasingreturns to scale (Malthus-Ricardo-Mill)

25. Major theoretical accomplishments • Pointing out immaterial factors as fundamental; • Refiningthe (inter)national system of innovation: ConfederationofLabour; – incentivesdriven - and therefore protection- • Laid the seedto the theory of productive credit creation