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The Mind Behind Early American Protectionism

Before free trade became a consensus, Friedrich List argued that U.S. industry should be put first.

General consensus doesn’t get much more general than U.S. and European economists’ nearly universal support for unrestricted trade and opposition to most or all forms of economic protectionism.

More than 1,100 economists signed an open letter in May 2018 warning Congress and the president against “misguided calls for new tariffs.”

In December PolitiFact cited an untold number of “economic experts” and “specialists in international trade” (four were quoted) to debunk a putative claim that “protectionism offers Americans the road to riches.”

The free-trade consensus is so broad that Trump’s case against it is viewed with remedial disdain, as one of the negotiator-in-chief’s fleeting, laughable enthusiasms. The Harvard Business Review cites “the greatest economists in history” in its case against tariffs, while National Review’s online editor Charles C.W. Cooke tweets, “I’m still waiting for hard evidence that Donald Trump actually knows what tariffs are.”

Reporters, this time, are not wrong. Support for free trade routinely tops 80 percent in polls of Western economists, nearly all of whom dismiss economic nationalism. But there are two problems with the consensus.

First, the president has spent many years—almost certainly more years than his media detractors—developing his thoughts on the national system of political economy. Many of his competitive actions toward China mirror policies Trump proposed toward Japan in public comments dating back to the early 1980s.

Second, it is not Trump who stands outside the mainstream of American economic policy. It’s the free traders. Flagrant and conspicuous protectionism was the default U.S. trade policy beginning with Alexander Hamilton and continuing well into the 20th century. One of the first important American economists, German-born Friedrich List (1789-1846), codified this national system in works that are now neglected stateside but widely read among the non-Western economic powers. That America should set up its economy to favor American manufacturers rather than American (or any other) consumers was considered an unremarkable piece of common sense through the entire period of this country’s growth into a global superpower. It was not until after World War II that the free-trade consensus became first the dominant, then the default, and finally the unquestioned school of thought on trade—protected against all skeptics through a combination of silence and scientistic ridicule.

“Listian theories as such are hardly taught and discussed in modern economic or even policy discourse,” Avner Offer, Chichele professor of economic history at Oxford University, told The American Conservative.

Yet protectionism is still with us, and throughout the age of free-trade agreements, duties on imports went up or down but did not disappear. How can free-trade theory maintain its power to define all terms of debate when inter-government competition—for resources, for money, for prestige, for the loyalty of citizens—never went away?

“This is the question I asked myself many years ago when I started to work on these topics,” said Henryk Szlajfer, a professor of economics and political science at the University of Warsaw. “Although I have no answer as to why there is no renewal of interest in this economic history among the academic community, my intuition is that our colleagues are trained very well in neoclassical or mainstream economics, so for them the question of nationalism is noneconomic, nonscientific. It’s strange because when you look at your own country, there is a tremendous tradition of protectionism and many great thinkers on the issue of economic nationalism.”

For most economists, there is no mystery about the fading of these ideas. They have simply been supplanted by better theories.

“I’m not gonna piss on the national plan,” said Gary Burtless, senior fellow in Economic Studies at the Brookings Institution, “but in the competition of ideas, the Adam Smiths and the David Ricardos of the world have won, and the Friedrich Lists of the world have lost—even though a lot of economists appreciate some of these ideas in their proper place.”

Bits of List’s theories do turn up in mainstream economics, most significantly his concept of “infant manufactures”—industries a polity seeks to develop through preferential treatment. Within this concept rests the essential flaw of protectionism: it’s impossible to favor a particular industry in a way that financially benefits 100 percent of the nation. Tariffs beggar the entire population for the benefit of the few. This point, wittily illustrated by Frédéric Bastiat in his essays, is generally considered kryptonite to protectionist theory, and most popular writing on the topic simply reiterates it.

List’s answer: “A tailor is no nation and a nation no tailor.” Nationality and national interests continue to exist, even if you ignore them. A developed economy is manifestly preferable to an economy of raw materials or services. Laws that restrict international trade in slaves, forbid importation of hazardous materials, and prohibit business with the king’s enemies are uncontroversial. And the benefits of developing the communal, educational, technological, and popular support for advanced industry—a “balance or harmony of productive powers”—outweigh the costs in measurable business activity.

List’s best-known work, The National System of Political Economy (1841), is supported by ancient and modern examples. An argument runs through the book that 19th-century England, having built the world’s preeminent economy through relentless and innovative mercantile tactics, was engaging in a great shuck to convince the rest of the world that Britain’s wealth was created “in spite of that system and not in consequence of it.”

“[O]nly where the interest of individuals has been subordinated to those of the nation,” List wrote, “and where successive generations have striven for one and the same object, the nations have been brought to harmonious development of their productive powers.”

Despite or because of these promising insights, List’s name today is as unspoken as the Candyman’s. Szlajfer recalls how some Swiss colleagues were “outraged” when he proposed a study of protectionism. U.K. economic historian Keith Tribe told TAC he proposed a List reader to an Anglo-American publishing giant, “but it was the U.S. office that dismissed the project as of no commercial interest.”

Tribe is skeptical of protectionist arguments and took pains to distance himself from the current trend toward nationalist politics in the United States, the United Kingdom, Europe, Asia, and South America. “There are no good economic arguments for [Brexit],” he said, “only bad political ones.” But he called 19th-century U.S. trade theory and policy “poorly covered in the academic literature, because American historians and economists do not really warm to this history and have preferred other stories.”

But the global wave of triumphs by populist candidates and initiatives with explicitly protectionist goals and rhetoric has exposed an intellectual cleavage on the topic of free trade—between economists and the people whose collective daily business forms the economy.

“Economics is an ideal system, whereas the general public live in the real world,” said Oxford’s Offer. “Even free-trade economists often concede that while free trade in theory is the most efficient form of exchange (i.e. provides the greatest advantage in the aggregate), there might still be winners and losers. The numbers and clout of the latter could be large, hence the difference. In recent decades the number of losers has mounted and even more people regard themselves as losers from free trade even if their disadvantage might arise from other aspects of modern capitalism or indeed state action.”

Even without the political upheaval, it’s hard to justify ignoring this portion (arguably the most dramatic and important portion) of U.S. economic and intellectual history. Behind the mockery of Trump’s trade policies and the othering of Brexit voters lies a presumption that the argument between low and high tariffs is not just a disagreement over allocation of resources but a twilight struggle between science and cant. The idea is not just that protectionist policies will increase the cost of consumer goods but that they are as foolish and baseless as astrology.

This is a serious misrepresentation of protectionist theory. While List is best known for his arguments against Smith and Ricardo, and one of his aims was to persuade the disunited German states to form an American-style economy, much of The National System of Political Economy is practical rather than polemic, and it can still be read for its ideas about how to manage trade in an international system where patriotism hasn’t gone away, governments still manage trade, and the Department of Commerce regularly publishes reports with titles like “Certain Helical Spring Lock Washers From the People’s Republic of China and Taiwan.”

“I think it’s fair to say that Friedrich List’s protectionist theories were probably the most influential of the modern era, even if they’ve become marginalized in the academic and public sphere until relatively recently,” said Marc-William Palen, senior lecturer in history at the University of Exeter. The academic respectability of protectionism, he said, may be starting to catch up with political reality. He pointed to work being done by researchers such as Tribe and Mauro Boianovsky, an economist at the University of Brasília who has considered List’s assertion that the tropical nations are “unsuited by nature” for the development of manufacturing power.

“With the return of a protectionist president to the White House, I predict that these are only the early stirrings of what will become a much bigger resurgence of Listian scholarship,” said Palen, whose 2016 book The “Conspiracy” of Free Trade argued that America’s Gilded Age of the late 19th century was characterized more by tight protectionism than by the laissez-faire doctrine depicted in popular history. “As [University of Colorado historian] Tom Zeiler recently noted, President Donald Trump himself has ushered in a return of late-19th and early-20th-century-style Listian nationalism in the United States—and perhaps across the globe.”

Such a change would run counter to strong academic belief in the sanctity of free trade, the ignorance of Trump, and the stupidity of voters. As the eager vigil for the Trump recession stretches on, the free trade consensus is increasingly a matter of how many economists can be made to agree. “Economists united: Trump tariffs won’t help the economy,” Reuters reported recently, and claims of global-warming levels of consensus among free-trade experts are only getting easier to find.

“I don’t believe in such claims about what one hundred economists agreed,” said University of Warsaw’s Szlajfer. “Give me one economist who said something interesting.”

Tim Cavanaugh is a reactionary writer and journalist in Alexandria, Virginia. He has been a reporter and editor for the Los Angeles Times, The Daily Caller, National Review, the Washington Examiner, and many other publications.