POLITICAL ECONOMY 389 by Smith, who makes it to arise out of a native bent for truck or barter; whilst its dependence on capital on the labours and accumulations of past generations is not duly emphasized, nor is the necessary counterpoise and completion of the division of labour, in the principle of the national combination of labour, properly brought out. Smith recognizes only material, not spiritual, capital ; yet the latter, represented in every nation by language, as the former by money, is a real national store of experience, wisdom, good sense, and moral feeling, transmitted with increase by each generation to its successor, and enables each generation to produce immensely more than by its own unaided powers it could possibly do. Again, the system of Smith is one-sidedly British ; if it is innocuous on the soil of England, it is because in her society the old foundations on which the spiritual and material life of the people can securely rest are preserved in the surviving spirit of feudalism and the inner connexion of the whole social system the national capital of laws, manners, reputa tion, and credit, which has been handed down in its integrity in consequence ot the insular position of the country. For the continent of Europe a quite dilferent system is necessary, in which, in place of the sum of the private wealth of individuals being viewed as the primary object, the real wealth of the nation and the production of national power shall be made to predominate, and along with the division of labour its national union and concentra tion along with the physical, no less the intellectual and moral, capital shall be embraced. In these leading traits of Muller s thought there is much which foreshadows the more recent forms of German economic and sociological speculation, especially those characteristic of the " Historical " school. i Another element of opposition was represented by Friedrich List (1798-1846), a man of great intellectual vigour as well as practical energy, and notable as having powerfully contributed by his writings to the formation of the German Zollverein. His principal work is entitled Das Nationale System der Politischen Oekonomie (1841; 6th ed., 1877). Though his practical conclusions were dilferent from Muller s, he was largely influenced by the general mode of thinking of that writer, and by his stric tures on the doctrine of Smith. It was particularly against the cosmopolitan principle in the modern eco nomical system that he protested, and against the absolute doctrine of free trade, which was in harmony with that principle. He gave prominence to the national idea, and insisted on the special requirements of each nation accord ing to its circumstances and especially to the degree of its development. He refuses to Smith s system the title of the industrial, which he thinks more appropriate to the mercantile system, and desig nates the former as "the exchange-value system." He denies the parallelism asserted by Smith between the economic conduct proper to an individual and to a nation, and holds that the immediate private interest of the separate members of the com munity will not lead to the highest good of the whole. The nation is an existence, standing between the individual and humanity, and formed into a unity by its language, manners, historical development, culture, and constitution. This unity is the first condition of the security, wellbeing, progress, and civiliza tion of the individual ; and private economic interests, like all others, must be subordinated to the maintenance, completion, and strengthening of the nationality. The nation having a continuous life, its true wealth consists and this is List s fundamental doctrine not in the quantity of exchange-values which it possesses, but in the full and many-sided development of its productive powers. Its economic education, if we may so speak, is more important than the immediate production of values, and it may be right that the present generation should sacrifice its gain and enjoyment to secure the strength and skill of the future. In the sound and normal condition of a nation which has attained economic maturity, the three productive powers of agriculture, manufactures, and commerce should be alike developed. But the two latter factors are superior in importance, as exercising a more effective and fruitful influence on the whole culture of the nation, as well as on its independence. Navigation, railways, all higher technical arts, connect themselves specially with these factors ; whilst in a purely agricultural state there is a tendency to stag nation, absence of enterprise, and the maintenance of antiquated prejudices. But for the growth of the higher forms of industry all countries are not adapted only those of the temperate zones, whilst the torrid regions have a natural monopoly in the pro duction of certain raw materials ; and thus between these two groups of countries a division of labour and confederation of powers spontaneously takes place. List then goes on to explain his theory of the stages of economic development through which the nations of the temperate zone, which are furnished with all the necessary conditions, naturally pass, in advancing to their normal economic state. These are (1) pastoral life, (2) agriculture, (3) agriculture united with manufactures; whilst in the final stage agriculture, manufactures, and commerce are combined. The economic taak of the state is to bring into existence through legislative and admini strative action the conditions required for the progress of the nation through these stages. Out of this view arises List s scheme of industrial politics. Every nation, according to him, should begin with free trade, stimulating and improving its agri culture by intercourse with richer and more cultivated nations, importing foreign manufactures and exporting raw products. When it is economically so far advanced that it can manufacture for itself, then a system of protection should be employed to allow the home industries to develop themselves fully, and save them from being overpowered in their earlier efforts by the competition of more matured foreign industries in the home market. When the national industries have grown strong enough no longer to dread this competition, then the highest stage of progress has been reached ; free trade should again become the rule, and the nation be thus thoroughly incorporated with the universal indus trial union. In List s time, according to his view, Spain, Portugal, and Naples were purely agricultural countries ; Germany and the United States of North America had arrived at the second stage, their manufactures being in process of development ; France was near the boundary of the third or highest stage, which England alone had reached. For England, therefore, as well as for the agricultural countries first-named, free trade was the right economic policy, but not for Germany or America. What a nation loses for a time in exchange values during the protective period she much more than gains in the long run in productive power, the tempor ary expenditure being strictly analogous, when we place ourselves at the point of view of the life of the nation, to the cost of the industrial education of the individual. The practical conclusion which List drew for his own country was that she needed for her economic progress an extended and conveniently bounded territory reaching to the sea-coast both on north and south, and a vigorous expansion of manufactures and commerce, cind that the way to the latter lay through judicious protective legislation with a customs union comprising all German lands, and a German marine with a Navigation Act. The national German spirit, striving after in dependence and power through union, and the national industry, awaking from its lethargy and eager to recover lost ground, were favourable to the success of List s book, and it produced a great sensation. He ably represented the tendencies and demands of his time in his own country ; his work had the effect of fixing the attention, 7iot merely of the speculative and official classes, but of practical men generally, on questions of political economy ; and he had without doubt an important influence on German industrial policy. So far as science is concerned, the emphasis he laid on the relative historical study of stages of civilization as affecting economic questions, and his protest against absolute formulas, had a certain value ; and the preponderance given to the national development over the immediate gains of individuals was sound in principle ; though his doctrine was, both on its public and private sides, too much of a mere chrematistic, and tended in fact to set up a new form of mercantilism, rather than to aid the contem porary effort towards social reform. Most of the writers at home or abroad hitherto mentioned continued the traditions of the school of Smith, only developing his doctrine in particular directions, sometimes not without one-sidedness or exaggeration, or correcting minor errors into which he had fallen, or seeking to give to the exposition of his principles more of order and lucidity. Some assailed the abuse of abstraction by Smith s successors, objected to the conclusions of Ricardo and his followers their non-accordance with the actual facts of human life, or protested against the anti-social con sequences which seemed to result from the application of the (so-called) orthodox formulas. A few challenged Smith s fundamental ideas, and insisted on the necessity of altering the basis of general philosophy on which his economics ultimately rest. But, notwithstanding various premonitory indications, nothing substantial, at least nothing effective, was done, within the field we have as yet surveyed, towards the establishment of a really new order of thinking, or new mode of proceeding, in this branch of inquiry. Now, however, we have to describe a great and growing movement, which has already considerably changed
the whole character of the study in the conceptions of