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1885:
The National System of Political Economy
by Friedrich List
translated by Sampson S. Lloyd
Ch. 8 = The Russians
Ch. 9 = The North Americans
Ch. 10 = The Teachings of History
with highlighted suggestion as to List's central thesis
[WEB-SOURCE evaporated]
Chapter 8
The RussiansRussia owes her first progress in civilization and industry to her intercourse with Greece [ID], to the trade of the Hanseatic Towns with Novgorod [ID] and (after the destruction of that town by [tsar] Ivan Vasil'evich [ID]) to the trade which arose with the English [ID] and Dutch, in consequence of the discovery of the water communication with the coasts of the White Sea.
But the great increase of her industry, and especially of her civilization, dates from the reign of Peter the Great [ID]. The history of Russia during the last hundred and forty years offers a most striking proof of the great influence of national unity and political circumstances on the economic welfare of a nation.
To the imperial power which established and maintained this union of innumerable Barbaric hordes, Russia owes the foundations of her manufactures, her vast progress in agriculture and population, the facilities offered to her interior traffic by the construction of canals and roads, a very large foreign trade, and her standing as a commercial power.
Russia's independent system of trade dates, however, only from the year 1821 [ID].
Under Catherine II [ID]. trade and manufactures had certainly made some progress, on account of the privileges she offered to foreign artisans and manufacturers; but the culture of the nation was still too imperfect to allow of its getting beyond the first stages in the manufacture of iron, glass, linen, &c., and especially in those branches of industry in which the country was specially favored by its agricultural and mineral wealth.
Besides this, further progress in manufactures would not, at that time, have been conducive to the economic interests of the nation. If foreign countries had taken in payment the provisions, raw material, and rude manufactures which Russia was able to furnish if, further, no wars and exterior events had intervened, Russia by means of intercourse with nations more advanced than herself would have been much more prosperous, and her culture in general would in consequence of this intercourse have made greater progress than under the manufacturing system. But [Napoleonic] wars and the Continental blockade [ID], and the commercial regulations of foreign nations, compelled her to seek prosperity in other ways than by the export of raw materials and the import of manufactures. In consequence of these, the previous commercial relations of Russia by sea were disturbed. Her overland trade with the western continent could not make up for these losses; and she found it necessary, therefore, to work up her raw materials herself. After the establishment of the general peace, a desire arose to return to the old system. The Government, and even the Emperor, were inclined to favor free trade. In Russia, the writings of Herr Storch enjoyed as high a reputation as those of Mons Say in Germany. People were not alarmed by the first shocks which the home manufactories, which had arisen during the Continental Blockade, suffered owing to English competition. The theorists maintained that if these shocks could only be endured once for all, the blessings of free trade would follow. And indeed the circumstances of the commercial world at the time were uncommonly favorable to this transition. The failure of crops in Western Europe caused a great export of agricultural produce [ID], by which Russia for a long time gained ample means to balance her large importation of manufactured goods.
But when this extraordinary demand for Russian agricultural produce had ceased, when, on the other hand, England had imposed restrictions on the import of corn for the benefit of her aristocracy, and on that of foreign timber for the benefit of Canada, the ruin of Russia's home manufactories and the excessive import of foreign manufactures made itself doubly felt. Although people had formerly, with Herr Storch, considered the balance of trade as a chimera, to believe in the existence of which was, for a reasonable and enlightened man, no less outrageous and ridiculous than the belief in witchcraft in the seventeenth century had been, it was now seen with alarm that there must be something of the nature of a balance of trade as between independent nations.
The most enlightened and discerning statesman of Russia, Count Nesselrode, did not hesitate to confess to this belief. He declared in an official circular of 1821 [ID]: "Russia finds herself compelled by circumstances to take up an independent system of trade; the products of the empire have found no foreign market, the home manufactures are ruined or on the point of being so, all the ready money of the country flows towards foreign lands, and the most substantial trading firms are nearly ruined." The beneficial effects of the Russian protective system contributed no less than the injurious consequences of the re-establishment of free trade had done to bring into discredit the principles and assertions of the theorists. Foreign capital, talent, and labor flowed into the country from all civilized lands, especially from England and Germany, in order to share in the advantages offered by the home manufactories.
The nobility imitated the policy of the Empire at large. As they could obtain no foreign market for their produce, they attempted to solve the problem inversely by bringing the market into proximity with the produce -- they established manufactories on their estates. In consequence of the demand for fine wool produced by the newly created woolen manufactories, the breed of sheep was rapidly improved. Foreign trade increased, instead of declining, particularly that with China, Persia, and other neighboring countries of Asia. The commercial crises entirely ceased, and one need only read the latest reports of the Russian Minister of Commerce to be convinced that Russia owes a large measure of prosperity to this system, and that she is increasing her national wealth and power by enormous strides.
It is foolish for Germans to try to make little of this progress and to complain of the injury which it has caused to the north-eastern provinces of Germany. Each nation, like each individual, has its own interests nearest at heart. Russia is not called upon to care for the welfare of Germany; Germany must care for Germany, and Russia for Russia. It would be much better, instead of complaining, instead of hoping and waiting and expecting the Messiah of a future free trade, to throw the cosmopolitan system into the fire and take a lesson from the example of Russia.
That England should look with jealousy on this commercial policy of Russia is very natural. By its means Russia has emancipated herself from England, and has qualified herself to enter into competition with her in Asia [ID]. Even if England manufactures more cheaply, this advantage will in the trade with Central Asia be outweighed by the proximity of the Russian Empire and by its political influence. Although Russia may still be, in comparison with Europe, but a slightly civilized country, yet, as compared with Asia, she is a civilized one.
Meantime, it cannot be denied that the want of civilization and political institutions will greatly hinder Russia in her further industrial and commercial progress, especially if the Imperial Government does not succeed in harmonizing her political conditions with the requirements of industry, by the introduction of efficient municipal and provincial constitutions, by the gradual limitation and final abolition of serfdom, by the formation of an educated middle class and a free peasant class, and by the completion of means of internal transport and of communication with Central Asia. These are the conquests to which Russia is called in the present century, and on them depends her further progress in agriculture and industry, in trade, navigation and naval power. But in order to render reforms of this kind possible and practicable, the Russian aristocracy must first learn to feel that their own material interests will be most promoted by them.
Chapter 9
The North AmericansAfter our historical examination of the commercial policy of the European nations, with the exception of those from which there is nothing of importance to be learnt, we will cast a glance beyond the Atlantic Ocean at a people of colonists which has been raising itself almost before our eyes from the condition of entire dependence on the mother country, and of separation into a number of colonial provinces having no kind of political union between themselves, to that of a united, well-organized, free, powerful, industrious, rich, and independent nation, which will perhaps in the time of our grandchildren exalt itself to the rank of the first naval and commercial power in the world. The history of the trade and industry of North America is more instructive for our subject than any other can be, Because here the course of development proceeds rapidly, the periods of free trade and protection follow closely on each other, their consequences stand out clearly and sharply defined, and the whole machinery of national industry and State administration moves exposed before the eyes of the spectator.
The North American colonies were kept, in respect of trade and industry, in such complete thralldom by the mother country, that no sort of manufacture was permitted to them beyond domestic manufacture and the ordinary handicrafts. So late as the year 1750 a hat manufactory in the State of Massachusetts created so great sensation and jealousy in Parliament, that it declared all kinds of manufactories to be 'common nuisances,' not excepting iron works, notwithstanding that the country possessed in the greatest abundance all the requisite materials for the manufacture of iron. Even more recently, namely, in 1770, the great Chatham, made uneasy by the first manufacturing attempts of the New Englanders, declared that the colonies should not be permitted to manufacture so much as a horseshoe nail.
To Adam Smith [ID] belongs the merit of having first pointed out the injustice of this policy.
The monopoly of all manufacturing industry by the mother country was one of the chief causes of the American Revolution [ID]; the tea duty merely afforded an opportunity for its outbreak.
Freed from restrictions, in possession of all material and intellectual resources for manufacturing work, and separated from that nation from which they had previously been supplied with manufactured goods, and to which they had been selling their produce, and thus thrown with all their wants upon their own resources: manufactures of every kind in the North American free states received a mighty stimulus during the war of revolution, which in its turn had the effect of benefiting agriculture to such an extent that, notwithstanding the burdens and the devastation consequent upon the then recent war, the value of land and the rate of wages in these states everywhere rose immensely but as, after the peace of Paris, the faulty constitution of the free states made the introduction of a united commercial system impossible, and consequently English manufactured goods again obtained free admission, competition with which the newly established American manufactories had not strength enough to bear, the prosperity which had arisen during the war vanished much more quickly than it had grown up. An orator in Congress said afterwards of this crisis: 'We did buy, according to the advice of modem theorists, where we could buy cheapest, and our markets were flooded with foreign goods; English goods sold cheaper in our seaport towns than in Liverpool or London. Our manufacturers were being ruined; our merchants, even those who thought to enrich themselves by importation, became bankrupt; and all these causes together were so detrimental to agriculture, that landed property became very generally worthless, and consequently bankruptcy became general even among our landowners.'
This condition of things was by no means temporary; it lasted from the peace of Paris until the establishment of the federal constitution, and contributed more than any other circumstance to bring about a more intimate union between the free states and to impel them to give to Congress full powers for the maintenance of a united commercial policy. Congress was inundated with petitions from all the states -- New York and South Carolina not excepted -- in favor of protective measures for internal industry; and Washington, on the day of his inauguration, wore a suit of home-manufactured cloth, 'in order,' said a contemporary New York journal, 'in the simple and impressive manner so peculiar to this great man, to give to all his successors in office and to all future legislators a memorable lesson upon the way in which the welfare of this country is to be promoted.' Although the first American tariff (1789) [ID] levied only light duties on the importation of the most important manufactured articles, it yet worked so beneficially from the very first years of its introduction that Washington in his 'Message' in 1791 was able to congratulate the nation on the flourishing condition of its manufactures, agriculture, and trade.
The inadequacy of this protection was, however, soon apparent; for the effect of the slight import duties was easily overcome by English manufacturers, who had the advantage of improved methods of production. Congress did certainly raise the duty on the most important manufactured articles to fifteen per cent, but this was not till the year 1804, when it was compelled, owing to deficient customs receipts, to raise more revenue, and long after the inland manufacturers had exhausted every argument in favor of having more protection, while the interests opposed to them were equally strenuous upon the advantages of free trade and the injurious effects of high import duties.
In striking contrast with the slight progress which had, on the whole, been made by the manufacturers of the country, stood the improved condition of its navigation, which since the year 1789, upon the motion of James Madison, had received effectual protection. From a tonnage of 200,000 in 1789 their mercantile marine had increased in 1801 to more than 1,000,000 tons. [Re. USA mercantile marine and Russia] Under the protection of the tariff of 1804, the manufacturing interest of the United States could just barely maintain itself against the English manufactories, which were continually being improved, and had attained a colossal magnitude, and it would doubtless have had to succumb entirely to English competition, had it not been for the help of the embargo and declaration of war of 1812 [ID]. In consequence of these events, just as at the time of the War of Independence, the American manufactories received such an extraordinary impetus that they not only sufficed for the home demand, but soon began to export as well. According to a report of the Committee on Trade and Manufactures to Congress in 1815, 100,000 hands were employed in the woolen and cotton manufactures alone, whose yearly production amounted to the value of more than sixty million dollars. As in the days of the War of Independence, and as a necessary consequence of the increase in manufacturing power, there occurred a rapid rise in all prices, not only of produce and in wages, but also of landed property, and hence universal prosperity amongst landowners, laborers, and all engaged in internal trade.
After the peace of Ghent, Congress, warned by the experience of 1786, decreed that for the first year the previous duties should be doubled, and during this period the country continued to prosper. Coerced, however, by powerful private interests which were opposed to those of the manufacturers, and persuaded by the arguments of theorists, it resolved in the year 1816 to make a considerable reduction in the import duties, whereupon the same effects of external competition reappeared which had been experienced from 1786 to 1789, viz. ruin of manufactories, unsaleability of produce, fall in the value of property and general calamity among landowners. After the country had for a second time enjoyed in war time the blessings of peace, it suffered, for a second time, greater evils through peace than the most devastating war could have brought upon it. It was only in the year 1824, after the effects of the English corn laws [ID] had been made manifest to the full extent of their unwise tendency thus compelling the agricultural interest of the central, northern, and western states to make common cause with the manufacturing interest, that a somewhat higher tariff was passed in Congress, which, however, as Mr Huskisson immediately brought forward counteracting measures with the view of paralyzing the effects of this tariff on English competition, soon proved insufficient, and had to be supplemented by the tariff of 1828, carried through Congress after a violent struggle.
Recently published official statistics (1) of Massachusetts give a tolerable idea of the start taken by the manufactures of the United States, especially in the central and northern states of the Union, in consequence of the protective system, and in spite of the subsequent modification of the tariff of 1828. In the year 1837, there were in this State (Massachusetts) 282 cotton mills and 565,031 spindles in operation, employing 4,997 male and 14,757 female hands; 37,275,917 pounds of cotton were worked up, and 126,000,000 yards of textile fabrics manufactured, of the value of 13,056,659 dollars, produced by a capital of 14,369,719 dollars.
In the woolen manufacture there were 192 mills, 501 machines, and 3,612 male and 3,485 female operatives employed, who worked up 10,858,988 pounds of wool, and produced 11,313,426 yards of cloth, of the value of 10,399,807 dollars on a working capital of 5,770,750 dollars.
16,689,877 pairs of shoes and boots were manufactured (large quantities of shoes being exported to the western states), to the value of 14,642,520 dollars.
The other branches of manufacture stood in relative proportion to the above.
The combined value of the manufactures of the State (deducting shipbuilding) amounted to over 86 million dollars, with a working capital of about 60 million dollars.
The number of operatives (men) was 117,352; and the total number of inhabitants of the State (in 1837) was 701,331.
Misery, brutality, and crime are unknown among the manufacturing population here. On the contrary, among the numerous male and female factory workers the strictest morality, cleanliness, and neatness in dress, exist; libraries are established to furnish them with useful and instructive books; the work is not exhausting, the food nourishing and good. Most of the women save a dowry for themselves.(2)
This last is evidently the effect of the cheap prices of the common necessaries of life, light taxation, and an equitable customs tariff. Let England repeal the restrictions on the import of agricultural produce, decrease the existing taxes on consumption by one-half or two-thirds, cover the loss by an income tax, and her factory workers will be put into the same position.
No nation has been so misconstrued and so misjudged as respects its future destiny and its national economy as the United States of North America, by theorists as well as by practical men. Adam Smith and J. B. Say had laid it down that the United States were, 'like Poland,' destined for agriculture. This comparison was not very flattering for the union of some dozen of new, aspiring, youthful republics, and the prospect thus held out to them for the future not very encouraging. The above-mentioned theorists had demonstrated that Nature herself had singled out the people of the United States exclusively for agriculture, so long as the richest arable land was to be had in their country for a mere trifle. Great was the commendation which had been bestowed upon them for so willingly acquiescing in Nature's ordinances, and thus supplying theorists with a beautiful example of the splendid working of the principle of free trade. The school, however, soon had to experience the mortification of losing this cogent proof of the correctness and applicability of their theories in practice, and had to endure the spectacle of the United States seeking their nation's welfare in a direction exactly opposed to that of absolute freedom of trade.
As this youthful nation had previously been the very apple of the eye of the schoolmen, so she now became the object of the heaviest condemnation on the part of the theorists of every nation in Europe. It was said to be a proof of the slight progress of the New World in political knowledge, that while the European nations were striving with the most honest zeal to render universal free trade possible, while England and France especially were actually engaged in endeavoring to make important advances towards this great philanthropic object, the United States of North America were seeking to promote their national prosperity by a return to that long-exploded mercantile system which had been clearly refuted by theory [ID]. A country like the United States, in which such measureless tracts of fruitful land still remained uncultivated and where wages ruled so high, could not utilize its material wealth and increase of population to better purpose than in agriculture; and when this should have reached complete development, then manufactures would arise in the natural course of events without artificial forcing. But by an artificial development of manufactures the United States would injure not only the countries which had long before enjoyed civilization, but themselves most of all.
With the Americans, however, sound common sense, and the instinct of what was necessary for the nation, were more potent than a belief in theoretical propositions. The arguments of the theorists were thoroughly investigated, and strong doubts entertained of the infallibility of a doctrine which its own disciples were not willing to put in practice.
To the argument concerning the still uncultivated tracts of fruitful land, it was answered that tracts of such land in the populous, well-cultivated states of the Union which were ripe for manufacturing industry, were as rare as in Great Britain; that the surplus population of those states would have to migrate at great expense to the west, in order to bring tracts of land of that description into cultivation, thus not only annually causing the eastern states large losses in material and intellectual resources, but also, inasmuch as such emigration would transform customers into competitors, the value of landed property and agricultural produce would thereby be lessened. It could not be to the advantage of the Union that all waste land belonging to it should be cultivated up to the Pacific Ocean before either the population, the civilization, or the military power of the old states had been fully developed. On the contrary, the cultivation of distant virgin lands could confer no benefit on the eastern states unless they themselves devoted their attention to manufacturing, and could exchange their manufactures against the produce of the west. People went still further: Was not England, it was asked, in much the same position? Had not England also under her dominion vast tracts of fertile land still uncultivated in Canada, in Australia, and in other quarters of the world? Was it not almost as easy for England to transplant her surplus population [ID] to those countries as for the North Americans to transplant theirs from the shores of the Atlantic to the banks of the Missouri? If so, what occasion had England not only continuously to protect her home manufactures, but to strive to extend them more and more?
The argument of the school, that with a high rate of wages in agriculture, manufactures could not succeed by the natural course of things, but only by being forced like hothouse plants, was found to be partially well-founded; that is to say, it was applicable only to those manufactured goods which, being small in bulk and weight as compared to their value, are produced principally by hand labor, but was not applicable to goods the price of which is less influenced by the rate of wages, and as to which the disadvantage of higher wages can be neutralized by the use of machinery, by water power as yet unused, by cheap raw materials and food, by abundance of cheap fuel and building materials, by light taxation and increased efficiency of labor.
Besides, the Americans had long ago learnt from experience that agriculture cannot rise to a high state of prosperity unless the exchange of agricultural produce for manufactures is guaranteed for all future time; but that, when the agriculturist lives in America and the manufacturer in England, that exchange is not infrequently interrupted by wars, commercial crises, or foreign tariffs, and that consequently, if the national well-being is to rest on a secure foundation, 'the manufacturer,' to use Jefferson's words, 'must come and settle down in close proximity to the agriculturist.'
At length the Americans came to realize the truth that it behooves a great nation not exclusively to set its heart upon the enjoyment of proximate material advantages; that civilization and power -- more important and desirable possessions than mere material wealth, as Adam Smith himself allows -- can only be secured and retained by the creation of a manufacturing power of its own [ID]; that a country which feels qualified to take and to maintain its place amongst the powerful and civilized nations of the earth must not shrink from any sacrifice in order to secure such possessions for itself; and that at that time the Atlantic states were clearly the region marked out for such possessions.
It was on the shores of the Atlantic that European settlers and European civilization first set a firm foot. Here, at the first, were populous, wealthy, and civilized states created; here was the cradle and seat of their sea fisheries, coasting trade, and naval power; here their independence was won and their union founded. Through these states on the coast the foreign trade of the Union is carried on; through them it is connected with the civilized world; through them it acquires the surplus population, material, capital, and mental powers of Europe; upon the civilization, power, and wealth of these sea-board states depend the future civilization, power, wealth, and independence of the whole nation and its future influence over less civilized communities. Suppose that the population of these Atlantic states decreased instead of growing larger, that their fisheries, coasting trade, shipping engaged in foreign trade and foreign trade itself, and, above all, their general prosperity, were to fall off or remain stationary instead of progressing, then we should see the resources of civilization of the whole nation, the guarantees for its independence and external power, diminish too in the same degree. It is even conceivable that, were the whole territory of the United States laid under cultivation from sea to sea, covered with agricultural states, and densely populated in the interior, the nation itself might nevertheless be left in a low grade as respects civilization, independence, foreign power, and foreign trade. There are certainly many nationalities who are in such a position and whose shipping and naval power are nil, though possessing a numerous inland population!
If a power existed that cherished the project of keeping down the rise of the American people and bringing them under subjection to itself industrially, commercially, or politically, it could only succeed in its aim by trying to depopulate the Atlantic states of the Union and driving all increase of population, capital, and intellectual power into the interior. By that means it would not only check the further growth of the nation's naval power, but might also indulge the hope of getting possession in time of the principal defensive strategic positions on the Atlantic coast and at the mouths of the rivers. The means to this end would not be difficult to imagine; it would only be necessary to hinder the development of manufacturing power in the Atlantic states and to insure the acceptance of the principle of absolute freedom of foreign trade in America. If the Atlantic states do not become manufacturers, they will not only be unable to keep up their present degree of civilization, but they must sink, and sink in every respect. Without manufactures how are the towns along the Atlantic coast to prosper? Not by the forwarding of inland produce to Europe and of English manufactured goods to the interior, for a very few thousand people would be sufficient to transact this business. How are the fisheries to prosper? The majority of the population who have moved inland prefer fresh meat and fresh-water fish to salted; they require no train oil, or at least but a small quantity. How is the coasting trade along the Atlantic sea-board to thrive? As the largest portion of the coast states are peopled by cultivators of land who produce for themselves all the provisions, building materials, fuel, &c. which they require, there is nothing along the coast to sustain a transport trade. How are foreign trade and shipping to distant places to increase? The country has nothing to offer but what less cultivated nations possess in superabundance, and those manufacturing nations to which it sends its produce encourage their own shipping. How can a naval power arise when fisheries, the coasting trade, ocean navigation, and foreign trade decay? How are the Atlantic states to protect them selves against foreign attacks without a naval power? How is agriculture even to thrive in these states, when by means of canals, railways, &c. the produce of the much more fertile and cheaper tracts of land in the west which require no manure, can be carried to the east much more cheaply than it could be there produced upon soil exhausted long ago? How under such circumstances can civilization thrive and population increase in the eastern states, when it is clear that under free trade with England all increase of population and of agricultural capital must flow to the west? The present state of Virginia gives but a faint idea of the condition into which the Atlantic states would be thrown by the absence of manufactures in the east; for Virginia, like all the southern states on the Atlantic coast, at present takes a profitable share in providing the Atlantic states with agricultural produce.
All these things bear quite a different complexion, owing to the existence of a flourishing manufacturing power in the Atlantic states. Now population, capital, technical skill and intellectual power, flow into them from all European countries; now the demand for the manufactured products of the Atlantic states increases simultaneously with their consumption of the raw materials supplied by the west. Now the population of these states, their wealth, and the number and extent of their towns increase in equal proportion with the cultivation of the western virgin lands; now, on account of the larger population, and the consequently increased demand for meat, butter, cheese, milk, garden produce, oleaginous seeds, fruit, &c., their own agriculture is increasing; now the sea fisheries are flourishing in consequence of the larger demand for salted fish and train oil; now quantities of provisions, building materials, coal, &c. are being conveyed along the coast to furnish the wants of the manufacturing population; now the manufacturing population produce a large quantity of commodities for export to all the nations of the earth, from whence result profitable return freights; now the nation's naval power increases by means of the coasting trade, the fisheries, and navigation to distant lands, and with it the guarantee of national independence and influence over other nations, particularly over those of South America; now science and art, civilization and literature, are improving in the eastern states, whence they are being diffused amongst the western states.
These were the circumstances which induced the United States to lay restrictions upon the importation of foreign manufactured goods, and to protect their native manufactures. With what amount of success this has been done, we have shown in the preceding pages. That without such a policy a manufacturing power could never have been maintained successfully in the Atlantic states, we may learn from their own experience and from the industrial history of other nations.
The frequently recurring commercial crises in America have been very often attributed to these restrictions on importation of foreign goods, but without reasonable grounds. The earlier as well as the later experience of North America shows, on the contrary, that such crises have never been more frequent and destructive than when commercial intercourse with England was least subject to restrictions. Commercial crises amongst agricultural nations, who procure their supplies of manufactured goods from foreign markets, arise from the disproportion between imports and exports. Manufacturing nations richer in capital than agricultural states, and ever anxious to increase the quantity of their exports, deliver their goods on credit and encourage consumption. In fact, they make advances upon the coming harvest. But if the harvest turn out so poor that its value falls greatly below that of the goods previously consumed; or if the harvest prove so rich that the supply of produce meets with no adequate demand and falls in price; while at the same time the markets still continue to be overstocked with foreign goods -- then a commercial crisis will occur by reason of the disproportion existing between the means of payment and the quantity of goods previously consumed, as also by reason of the disproportion between supply and demand in the markets for produce and manufactured goods. The operations of foreign and native banks may increase and promote such a crisis, but they cannot create it. In a future chapter we shall endeavor more closely to elucidate this subject. NOTES: 1. Statistical Table of Massachusetts for the Year ending April 1, 1837, by J. P. Bigelow, Secretary of the Commonwealth (Boston, 1838). No American state but Massachusetts possesses similar statistical abstracts. We owe those here referred to, to Governor Everett, distinguished alike as a scholar, an author, and a statesman. 2. The American papers of July 1839 report that in the manufacturing town of Lowell alone there are over a hundred workwomen who have each over a thousand dollars deposited to their credit in the savings bank.
Chapter 10
The Teachings of HistoryEverywhere and at all times has the well-being of the nation been in equal proportion to the intelligence, morality, and industry of its citizens; according to these, wealth has accrued or been diminished; but industry and thrift, invention and enterprise, on the part of individuals, have never as yet accomplished aught of importance where they were not sustained by municipal liberty, by suitable public institutions and laws, by the State administration and foreign policy, but above all by the unity and power, of the nation.
History everywhere shows us a powerful process of reciprocal action between the social and the individual powers and conditions [ID]. In the Italian and the Hanseatic cities, in Holland and England, in France and America, we find the powers of production, and consequently the wealth of individuals, growing in proportion to the liberties enjoyed, to the degree of perfection of political and social institutions, while these, on the other hand, derive material and stimulus for their further improvement from the increase of the material wealth and of the productive power of individuals.
The real rise of the industry and power of England dates only from the days of the actual foundation of England's national freedom, while the industry and power of Venice, of the Hanse Towns, of the Spanish and Portuguese, decayed concurrently with their loss of freedom [ID]. However industrious, thrifty, inventive, and intelligent, individual citizens might be, they could not make up for the lack of free institutions. History also teaches that individuals derive the greater part of their productive powers from the social institutions and conditions under which they are placed.
The influence of liberty, intelligence, and enlightenment over the power, and therefore over the productive capacity and wealth of a nation, is exemplified in no respect so clearly as in navigation. Of all industrial pursuits, navigation most demands energy, personal courage, enterprise, and endurance; qualifications that can only flourish in an atmosphere of freedom. In no other calling do ignorance, superstition, and prejudice, indolence, cowardice, effeminacy, and weakness produce such disastrous consequences; nowhere else is a sense of self-reliance so indispensable. Hence history cannot point to a single example of an enslaved people taking a prominent part in navigation. The Hindoos, the Chinese, and the Japanese have ever strictly confined their efforts to canal and river navigation and the coasting trade. In ancient Egypt maritime navigation was held in abhorrence, probably because priests and rulers dreaded lest by means of it the spirit of freedom and independence should be encouraged. The freest and most enlightened states of ancient Greece were also the most powerful at sea; their naval power ceased with their freedom, and however much history may narrate of the victories of the kings of Macedonia on land, she is silent as to their victories at sea.
When were the Romans powerful at sea, and when is nothing more heard of their fleets? When did Italy lay down the law in the Mediterranean, and since when has her very coasting trade fallen into the hands of foreigners? Upon the Spanish navy the Inquisition had passed sentence of death long ere the English and the Dutch fleets had executed the decree. With the coming into power of the mercantile oligarchies in the Hanse Towns, power and the spirit of enterprise took leave of the Hanseatic League.
Of the Spanish Netherlands only the maritime provinces achieved their freedom, whereas those held in subjection by the Inquisition had even to submit to the closing of their rivers. The English fleet, victorious over the Dutch in the Channel, now took possession of the dominion of the seas, which the spirit of freedom had assigned to England long before; and yet Holland, down to our own days, has retained a large proportion of her mercantile marine, whereas that of the Spaniards and the Portuguese is almost annihilated. In vain were the efforts of a great individual minister now and then under the despotic kings of France to create a fleet, for it invariably went again to ruin.
But how is it that at the present day we witness the growing strength of French navigation and naval power? Hardly had the independence of the United States of North America come to life, when we find the Americans contending with renown against the giant fleets of the mother country. But what is the position of the Central and South American nations? So long as their flags wave not over every sea, but little dependence can be placed upon the effectiveness of their republican forms of government. Contrast these with Texas [ID], a territory that has scarcely attained to political life, and yet already claims its share in the realm of Neptune.
But navigation is merely one part of the industrial power of a nation -- a part which can flourish and attain to importance only in conjunction with all the other complementary parts. Everywhere and at all times we see navigation, inland and foreign trade, and even agriculture itself, flourish only where manufactures have reached a high state of prosperity. But if freedom be an indispensable condition for the prosperity of navigation, how much wore must it be so for the prosperity of the manufacturing power, for the growth of the entire producing power of a nation? History contains no record of a rich, commercial, and industrial community that was not at the same time in the enjoyment of freedom.
Manufactures everywhere first brought into operation improved means of transport, improved river navigation, improved highways, steam navigation and railways, which constitute the fundamental elements of improved systems of agriculture and of civilization.
History teaches that arts and trades migrated from city to city, from one country to another. Persecuted and oppressed at home, they took refuge in cities and in countries where freedom, protection, and support were assured to them. In this way they migrated from Greece and Asia to Italy; from Italy to Germany, Flanders, and Brabant; and from thence to Holland and England. Everywhere it was want of sense and despotism that drove them away, and the spirit of freedom that attracted them. But for the folly of the Continental governments, England would have had difficulty in attaining supremacy in industry. But does it appear more consistent with wisdom for us in Germany to wait patiently until other nations are impolitic enough to drive out their industries and thus compel them to seek a refuge with us, or that we should, without waiting for such contingencies, invite them by proffered advantages to settle down amongst us?
It is true that experience teaches that the wind bears the seed from one region to another, and that thus waste moorlands have been transformed into dense forests; but would it on that account be wise policy for the forester to wait until the wind in the course of ages effects this transformation?
Is it unwise on his part if by sowing and planting he seeks to attain the same object within a few decades? History tells us that whole nations have successfully accomplished that which we see the forester do? Single free cities, or small republics and confederations of such cities and states, limited in territorial possessions, of small population and insignificant military power, but fortified by the energy of youthful freedom and favored by geographical position as well as by fortunate circumstances and opportunities, flourished by means of manufactures and commerce long before the great monarchies; and by free commercial intercourse with the latter, by which they exported to them manufactured goods and imported raw produce in exchange, raised themselves to a high degree of wealth and power. Thus did Venice, the Hanse Towns the Belgians and the Dutch.
Nor was this system of free trade less profitable at first to the great monarchies themselves, with whom these smaller communities had commercial intercourse. For, having regard to the wealth of their natural resources and to their undeveloped social condition the free importation of foreign manufactured goods and the exportation of native produce presented the surest and most effectual means of developing their own powers of production, of instilling habits of industry into their subjects who were addicted to idleness and turbulence, of inducing their landowners and nobles to feel an interest in industry, of arousing the dormant spirit of enterprise amongst their merchants, and especially of raising their own civilization, industry, and power.
These effects were learned generally by Great Britain from the trade and manufacturing industry of the Italians, the Hansards, the Belgians, and the Dutch. But having attained to a certain grade of development by means of free trade, the great monarchies perceived that the highest degree of civilization, power, and wealth can only be attained by a combination of manufactures and commerce with agriculture. They perceived that their newly established native manufactures could never hope to succeed in free competition with the old and long established manufactures of foreigners; that their native fisheries and native mercantile marine, the foundations of their naval power, could never make successful progress without special privileges; and that the spirit of enterprise of their native merchants would always be kept down by the overwhelming reserves of capital, the greater experience and sagacity of the foreigners. Hence they sought, by a system of restrictions, privileges, and encouragements, to transplant on to their native soil the wealth, the talents, and the spirit of enterprise of the foreigners. This policy was pursued with greater or lesser, with speedier or more tardy success, just in proportion as the measures adopted were more or less judiciously adapted to the object in view, and applied and pursued with more or less energy and perseverance.
England, above all other nations, has adopted this policy. Often interrupted in its execution from the want of intelligence and self-restraint on the part of her rulers, or owing to internal commotions and foreign wars, it first assumed the character of a settled and practically efficient policy under Edward VI, Elizabeth, and the revolutionary period. For how could the measures of Edward III work satisfactorily when it was not till under Henry VI that the law permitted the carriage of corn from one English county to another, or the shipment of it to foreign parts; when still under Henry VII and Henry VIII all interest on money, even discount on bills, was held to be usury, and when it was still thought at the time that trade might be encouraged by fixing by law at a low figure the price of woolen goods and the rate of wages, and that the production of corn could be increased by prohibiting sheep farming on a large scale?
And how much sooner would England's woolen manufactures and maritime trade have reached a high standard of prosperity had not Henry VIII regarded a rise in the prices of corn as an evil; had he, instead of driving foreign workmen by wholesale from the kingdom, sought like his predecessors to augment their number by encouraging their immigration; and had not Henry VII refused his sanction to the Act of Navigation as proposed by Parliament?
In France we see native manufactures, free internal intercourse, foreign trade, fisheries, navigation, and naval power -- in a word, all the attributes of a great, mighty, and rich nation (which it had cost England the persevering efforts of centuries to acquire) -- called into existence by a great genius within the space of a few years, as it were by a magician's wand; and afterwards all of them yet more speedily annihilated by the iron hand of fanaticism and despotism.
We see the principle of free trade contending in vain under unfavorable conditions against restriction powerfully enforced; the Hanseatic League is ruined, while Holland sinks under the blows of England and France.
That a restrictive commercial policy can be operative for good only so far as it is supported by the progressive civilization and free institutions of a nation, we learn from the decay of Venice, Spain, and Portugal, from the relapse of France in consequence of the revocation of the Edict of Nantes, and from the history of England, in which country liberty kept pace at all times with the advance of industry, trade, and national wealth.
That, on the contrary, a highly advanced state of civilization, with or without free institutions, unless supported by a suitable system of commercial policy, will prove but a poor guarantee for a nation's economic progress, may be learnt on the one hand from the history of the North American free states, and on the other from the experience of Germany.
Modern Germany, lacking a system of vigorous and united commercial policy, exposed in her home markets to competition with a foreign manufacturing power in every way superior to her own, while excluded at the same time from foreign markets by arbitrary and often capricious restrictions, and very far indeed from making that progress in industry to which her degree of culture entitles her, cannot even maintain her previously acquired position, and is made a convenience of (like a colony) by that very nation which centuries ago was worked upon in like manner by the merchants of Germany, until at last the German states have resolved to secure their home markets for their own industry, by the adoption of a united vigorous system of commercial policy.
The North American free states, who, more than any other nation before them, are in a position to benefit by freedom of trade, and influenced even from the very cradle of their independence by the doctrines of the cosmopolitan school, are striving more than any other nation to act on that principle. But owing to wars with Great Britain, we find that nation twice compelled to manufacture at home the goods which it previously purchased under free trade from other countries, and twice, after the conclusion of peace, brought to the brink of ruin by free competition with foreigners, and thereby admonished of the fact that under the present conditions of the world every great nation must seek the guarantees of its continued prosperity and independence, before all other things, in the independent and uniform development of its own powers and resources.
Thus history shows that restrictions are not so much the inventions of mere speculative minds, as the natural consequences of the diversity of interests, and of the strivings of nations after independence or overpowering ascendancy, and thus of national emulation and wars, and therefore that they cannot be dispensed with until this conflict of national interests shall cease, in other words until all nations can be united under one and the same system of law. Thus the question as to whether, and how, the various nations can be brought into one united federation, and how the decisions of law can be invoked in the place of military force to determine the differences which arise between independent nations, has to be solved concurrently with the question how universal free trade can be established in the place of separate national commercial systems.
The attempts which have been made by single nations to introduce freedom of trade in face of a nation which is predominant in industry, wealth, and power, no less than distinguished for an exclusive tariff system -- as Portugal did in 1703, France in 1786, North America in 1786 [ID] and 1816, Russia from 1815 till 1821 [ID], and as Germany has done for centuries -- go to show us that in this way the prosperity of individual nations is sacrificed, without benefit to mankind in general, solely for the enrichment of the predominant manufacturing and commercial nation. Switzerland (as we hope to show in the sequel) constitutes an exception, which proves just as much as it proves little for or against one or the other system.
Colbert [ID] appears to us not to have been the inventor of that system which the Italians have named after him; for, as we have seen, it was fully elaborated by the English long before his time [ID]. Colbert only put in practice what France, if she wished to fulfill her destinies, was bound to carry out sooner or later. If Colbert is to be blamed at all, it can only be charged against him that he attempted to put into force under a despotic government a system which could subsist only after a fundamental reform of the political conditions. But against this reproach to Colbert's memory it may very well be argued that, had his system been continued by wise princes and sagacious ministers, it would in all probability have removed by means of reforms all those hindrances which stood in the way of progress in manufactures, agriculture, and trade, as well as of national freedom; and France would then have undergone no revolution, but rather, impelled along the path of development by the reciprocating influences of industry and freedom, she might for the last century and a half have been successfully competing with England in manufactures, in the promotion of her internal trade, in foreign commerce, and in colonization, as well as in her fisheries, her navigation, and her naval power. [Consider these four paragraphs on a parallel situation in Post-Soviet Russia.]
Finally, history teaches us how nations which have been endowed by Nature with all resources which are requisite for the attainment of the highest grade of wealth and power, may and must -- without on that account forfeiting the end in view -- modify their systems according to the measure of their own progress: in the first stage, adopting free trade with more advanced nations as a means of raising themselves from a state of barbarism, and of making advances in agriculture; in the second stage, promoting the growth of manufactures, fisheries, navigation, and foreign trade by means of commercial restrictions; and in the last stage, after reaching the highest degree of wealth and power, by gradually reverting to the principle of free trade and of unrestricted competition in the home as well as in foreign markets, that so their agriculturists, manufacturers, and merchants may be preserved from indolence, and stimulated to retain the supremacy which they have acquired. In the first stage, we see Spain, Portugal, and the Kingdom of Naples; in the second, Germany and the United States of North America; France apparently stands close upon the boundary line of the last stage; but Great Britain alone at the present time has actually reached it.
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