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Martin Wolf, in an FT Column, contends that trade barriers reduce the "wealth" of all countries

without advantaging the countries that impose them, with or without "retaliation".

Mr. Wolf bases his argument on a neat distinction between “trade” - which presumably does not
affect “macroeconomics” - and “macroeconomics” proper, which is presumably governed by a
different set of principles. In the world of Classical (Smith, Ricardo, Mill) and Neo-classical
economics (from Jevons to Hayek), trade is merely an “exchange”, a “free exchange”, between
nation-State countries that does not and cannot affect the “national” economic policies, but can
rather only “reflect” them. In this perspective, it is “logical” that trade barriers can only affect
national economies “globally” - all of them “negatively” - simply because, to repeat, “trade” is
merely a “free exchange” that merely “reflects” the productive conditions (“macroeconomics”)
“within national economies”.

Yet, this “logical” reasoning breaks down once we abandon the world of British “political
economy” and we examine instead the “National-oekonomie” that formed the basis of German
economic thought from Friedrich List through to Klein and ultimately even Schumpeter
(especially in the ‘Theory of Economic Development’). It is clear from this latter viewpoint, that
economic reality (“national” or “political” economy) differs violently from the “logical”
framework of Classical and neo-Classical equilibrium developed by the English, and later the
American, economists. In this “national-economic” perspective, trade is not simply an “equal
exchange”; rather, it is a form of political interaction that is vital to determining the relative
“dominance” of one nation-State over another. The aim of all capitalist exchange is “profit” - the
“wealth of nations” to which Smith (not Ricardo, and least of all the neo-classics, with the great
exception of Keynes!) referred. But what is this “wealth of nations”? what is “profit”? Ina
nutshell, profit is the ability to dominate other nations by “commanding” their living labour.
(Marx came closest to this realisation.) It is clear therefore that trade is an attempt by nation-
states to project their Political Might, their Power (Macht) over other nations. (See, on this
theoretical point, M. DeCecco, Money and Empire.)

To the extent that “free trade” served the national-political needs of the Anglo-Saxons, the
“science of economics could easily defend and propagate the theory of equilibrium and market-
based international trade, reliant on the Gold Exchange Standard. Now that these “equilibria” are
breaking down, it is time to revise the entire philosophical and political foundations of Western
economics. - Something I have attempted in this Blog.

Perhaps I ought to add that, from this perspective (amply explored in this Blog), Western
“economic science” represents the ultimate form of “power-lessness” (Ohn-Macht) that
Nietzsche, and then Weber (who was close to the German Historical School of Economics), and
ultimately Schumpeter openly denounced. In “Imperialism and Social Classes”, Schumpeter
exposed the “will to power” (Nietzsche’s expression) that the German ruling class espoused to
extend its economic domination over Central Europe, resulting ultimately in Hitler’s
Lebensraum. Again in this German perspective - a “mercantilist” one -, the brutal racist-
imperialist will to power of the Chinese Dictatorship is keenly displayed. It behoves us as
inheritors of Western democracy to expose the “power-lessness” of Western “economic science”
and to fight back those dictatorships that wish to adopt these bland logical tautologies into tools
of politico-economic domination!

The Chinese Dictatorship, now in its death throes, just like


Putin's Russia, has been facilitated in its malevolent and
pernicious ascent by false humanistic ideas prevalent in the
West that are the fruit of Christian-bourgeois society and
ultimately of capitalist ideology. It is this ideology of power-
lessness, harmful in the extreme to our own democratic
institutions, that we must counter if we wish to defeat once
and for all the Chinese and Russian Dictatorships. The work of
Friedrich List - on which these dictatorships rely absolutely to
game the indolent and gullible West - offers essential clues as
to how to begin this task in earnest.

…[L]ife itself is essentially appropriation, injury, conquest of the strange and weak, suppression, severity,
obtrusion of peculiar forms, incorporation, and at the least, putting it mildest,
exploitation [Ausbeutung]; -- but why should one for ever use precisely these words on which for ages a
disparaging purpose has been stamped? Even the organisation within which, as was previously supposed,
the individuals treat each other as equal--it takes place in every healthy aristocracy -- must itself, if it be
a living and not a dying organisation, do all that towards other bodies, which the individuals within it
refrain from doing to each other: it will have to be the incarnated Will to Power, it will endeavour to
grow, to gain ground, attract to itself and acquire ascendancy - not owing to any morality or immorality,
but because it lives, and because life is precisely Will to Power. (Nietzsche, Beyond Good and Evil,
Aphorism 259.)
In The National System of Political Economy, Friedrich
List lays bare in the starkest terms the ultima
ratio that forms the backbone of his diatribe against
the “cosmopolitan” school of political economy
propounded by the Anglo-Saxons from Smith to
Ricardo and then Mill, against the “national” doctrine
that List expounds and propounds as the future
economic strategy of a powerful Germany against the
dominance of Britain and France.

Without explicitly addressing the question of the


meaning of “wealth” in economics at the level of
human individuals or of humanity as a whole, List is
already confronting the stark reality that the “wealth
of a nation” cannot and must not be understood purely
in terms of “utilitarian exchange” but rather in terms
of “national power”, of Macht - in terms, that is, of the
ability of a nation to impose itself over other
nations….in the event of war!

EXTRACTS FROM AUTHOR’8 PREFACE xliii I would indicate, as the distinguishing


characteristic of' my system, nationality. On the nature of nationality, as the intermediate
interest between those of individualism and of entire humanity, my whole structure is
based.
The “cosmopolitan” view of the British economists
contains three non sequiturs: it assumes that all
exchange of goods, all trade between nations, is an
equal exchange not only because equal values or
wealth are exchanged, but also because such exchange
necessarily increases the wealth of each trading nation
by virtue of its being “free and equal”, free and fair -
and therefore it must benefit each trading party. This
is a non sequitur, of course; but List only sees the
second part of it - that free trade does not necessarily
enrich all parties. He totally misses the first part, the
“equal exchange” in terms of “value” and “wealth” as
quantifiable or objective entities. And he totally
ignores the fallacy of “free” trade - the fact that a
decision to trade cannot be free because “freedom” is
irrelevant in trade for the simple reason that trade
ineluctably establishes a “bond” between trading
parties!

Let us examine the second part of the non sequitur.

4 The prosperity of a nation is not, as Say believes, greater in the proportion in which it has
amassed more wealth (i.e. values of exchange), but in the proportion in which it has more
developed its powers of production' (p. 117).
It is not the present “wealth” of a country, then, that
determines its “prosperity”; rather, it is a
country’s present ability to produce wealth that
determines its pre-eminence among nations, again, not
in terms of its present stock of wealth, but in terms of
its future flow of wealth or prosperity (Latin pro and
spes, hope for the future). For List, then, the prosperity
of a nation is measured by its present ability to produce
wealth on such a scale as “secures to the nation an
infinitely greater amount of material goods [than is the
case for other nations], but also industrial
independence in case of war”!

‘ It is true that protective duties at first increase the price of manufactured goods; but it is
just as true, and moreover acknowledged by the prevailing economical school, that in the
course of time, by the nation being enabled to build up a completely developed
manufacturing power of its own, those goods are produced more cheaply at home than the
price at which they can be imported from foreign parts. If, therefore, a sacrifice of value
is caused by protective duties, it is made good by the gain of a power of production,
which not only secures to the nation an infinitely greater amount of material goods,
but also industrial independence in case of war9 (Friedrich List, The National System of
Political Economy, p. 117).
Therefore, “cosmopolitical” economy can be valid only
if the trading nations have similar industrial
structures. Where these industrial structures differ,
inter-national trade and exchange cannot be “equal”
because even where the value of the exchange is equal,
the ability of the trading nations to produce those
values will differ! List has in mind, as we saw earlier,
the ability of a nation to prepare for war and to
dominate other nations.

[T]he idea struck me that the theory was quite true but only so in case all nations would
reciprocally follow the prin-

/ xl EXTRACTS FROM AUTHOR’S PREFACE

ciples of free trade.... This led me to consider the nature of nationality. I perceived that
the popular theory took no account of nations, but simply of the entire human race
on the one hand, or of single individuals on the other.

I saw clearly that free competition between two nations which are highly civilised can only
be mutually beneficial in case both of them are in a nearly equal position of industrial
development, and that any nation which owing to misfortunes is behind others in industry,
commerce, and navigation, while she nevertheless possesses the mental and material
means for developing those acquisitions, must first of all strengthen her own individual
powers, in order to lift herself to enter into free competition with more advanced nations.
In a word, I perceived the distinction between ] cosmopolitical and political
economy. I felt that Germany must abolish her internal tariffs, and by the adoption of a
common uniform commercial policy towards foreigners, strive to attain to the same degree
of commercial and industrial development to which other nations have attained by means
of their commercial policy.
If indeed, List reasons, nations could trade as
individual human beings whose power to accumulate
“wealth” is limited by their physical abilities, then
trade between individuals could be said hypothetically
to be free and fair or equal. The same applies to
humanity as a whole because in that case “wealth”
would be an abstract notion in the aggregate. But
where individual nations or nation-States are
concerned, the notion of “wealth” or “value” must
extend to the ability of each trading nation to
subjugate the others!

Here List incurs a blinding contradiction between a


notion of “wealth” or “value” which he entirely shares
with the “cosmopolitan” economists (Smith and
Ricardo) - and a wholly different notion of “value” or
“wealth” that his stance of trade-as-conflict between
nations clearly entails! It is simply impossible to speak
of “value” as if it were an economic category entirely
independent of the “nationality” implied by his
countervailing notion of “national economy”! List
himself concedes that “free trade” can be “fair and
equal” provided that trading nations are at a similar
stage of industrial development. Yet, such a concession
is tantamount to falling into the fallacy of
“cosmopolitan economics” divulged by the British
under the false pretence of “neutral science”! For if
indeed “the ability to produce value” is even more
important than value itself, then the notion of “value”
must be re-evaluated or reinterpreted to allow for the
novel category of “ability to produce”!

(We have here a dramatic precognition on List’s part


of what would later become Nietzsche’s
“transvaluation of all values” - cf. my “Nietzsche and
Economics”.) The “value” of the British political
economy simply cannot be the same as the value of
List’s “national economics” or “National-oekonomie”!
The first notion of value (Smith, Ricardo, Marx) refers to
an apolitical quality or substance - be it subjective
utility or objective wealth (labour-time) - whereas the
second, List’s, refers to a broader category of political
control and domination through the production and
exchange of goods. The difference is not simply one of
“stocks” and “flows” of one and the same entity. Rather,
the two kinds of “value” refer to completely distinct
entities - one utilitarian or absolute, and the other
clearly political and even military in nature!

Equally, if we follow this reasoning with cold and


calculated logic, we will see that the notion of “free
trade” is meaningless for the simple reason that the
category of “freedom” is quite meaningless when
applied to that of “trade”! No “trade” can ever be “free”
for the simple reason that “trade” itself, the exchange of
produce, already implies a “bond” between the trading
parties that negates or at the very least obliterates the
notion of “freedom”. By changing the real status of the
trading parties from before the trade takes place to
after it does, trade also transforms the status of the
parties vis-a-vis each other in such a way as to render
the notion of “freedom” entirely irrelevant to the
reality of exchange by trade! Parties to trade may well
be “free” to engage in the trade - but this “free choice
to trade” becomes irrelevant and meaningless once the
trade is executed - for the crushing reason that, in the
absence of an objectively quantifiable “value”, the
exchange has transformed the material standing of the
trading parties! It is quite simply a wanton and
gratuitous exercise to speculate on whether a trade is
“free” or otherwise because (a) it is impossible to
determine the real motives of traders, (b) traders may
not be aware of their and other traders’ motives, and
©, whatever the motives and interests, the very
effecting of a trade creates a new set of circumstances
that make the “freedom” or less of the trade
completely irrelevant to its material consequences.
The mythology of “free trade” (either a pleonasm or an
oxymoron) stems from the legal interpretation of
contractual arrangements whereby a contract
represents an “agreement” or “a meeting of the
minds”. But, as we have succinctly explained, the
reaching and closing of a contractual arrangement tells
us nothing about the “freedom” of the contracting
parties! (This point is outlined with characteristic
insight and perspicacity, as well as vitriolic acuity, by
Nietzsche in The Genealogy of Morals - discussed in my
own “Nietzsche and Economics”.)

Contemporaneously to List, Nietzsche demolished the


naive “cosmopolitanism” of British Political Economy
with a single stroke of his pen in Human All-Too
Human:

25 Private- and World-Morality - The older morality, namely Kant's ,25 demands from the individual
those actions that one desires from all men--a nice, naive idea, as if everyone without further ado
would know which manner of action would benefit the whole of mankind, that is, which actions
were desirable at all. It is a theory like that of free trade, which assumes that a general
harmony would have to result of itself, according to innate laws of melioration. (HATH)

To argue that trade, in and of itself, ameliorates the lot


of the exchanging parties is pure Kantian universalist
idealism - sheer wishful-thinking! It is to presume that
human beings, let alone nations, enter trade with the
intention to improve the lot of all participants (hence
Kant’s Categorical Imperative: do unto others as you
would have them do unto you). - Even worse, it is to
assume that trade in reality does improve the lot of
participants! And worst of all, it assumes that
individuals, let alone nations, know their own best
interests - and that these are constructive rather than
destructive!

This is the false, fictitious (“cosmopolitan”!) logic - this


is the Ohn-macht, the power-lessness, of Western
thought and logic promulgated by cohorts of
“enlightened” literati, humanists and, of course,
economists that Nietzsche denounces and to which he
opposes his Will to Power (Wille zur Macht). It is, in
political reality, just that - mere, pure logic, a useless
and meaningless tautology with no substantive
content! (Cf. On this point, the brilliant demolition of
free-trade liberalism as a purely “logical” construction
in M. DeCecco, Moneta e Impero. Like List, whom he
invokes, however, DeCecco falls short of debunking
the mythology of “value” and “free trade”.)

List himself falls into this “cosmopolitan” trap simply


because he is unable to relinquish the notions of
“wealth” and “value” as (mythical, as it turns out)
universal homogeneous substances or substrata that
are objectively measurable and identifiable - and to
which all human beings aspire. It is on this mythology
that the “freedom” of “free trade” is founded as the
summum bonum, the highest aim of human aspiration.
Nevertheless, his alertness to the problem is evident in
the orientation of his historico-economic research and
in his policy recommendations.

In the course of the daily controversy which I had to conduct, I was led to perceive the
distinction between the theory of values and the theory of the powers of production, and
beneath the false line of argument which the popular school

xiii EXTRACTS PROM AUTHOR’S PREFACE

has raised out of the term capital. I learned to know the difference between manufacturing
power and agricultural power. I hence discovered the basis of the fallacy of the arguments
of the school, that it urges reasons which are only justly applicable to free trade in
agricultural products, as grounds on which to justify free trade in manufactured goods. I
began to learn to appreciate more thoroughly the principle of the division of labour, and to
perceive how far it is applicable to the circumstances of entire nations.

We will turn to these policies next.

The ultimate aim of all political domination is to disguise the abuse of power and coercion as
either “nature” or irresistible logic. It is this subtle and hypo-critical (literally, beneath criticism)
Eskamotage that List eschews in the British “political economists”, Adam Smith and David
Ricardo, and that he steadfastly confutes historically and refutes logically - precisely by
opposing the teachings of history to the flawed logical deductions that the British economists
counterfeit as the epitome of reason and natural instinct. Ultimately, List’s inability to
comprehend the political reality of capitalist industry leads him to the same circuitous
universalistic definition of wealth for which he criticises Smith. Yet his initial objection to Smith’s
“logical”, and therefore “unhistorical” account of political economy is simply stating the obvious
reality that logic itself has no deontological or empirical content - and for that reason alone it can
never replace history, whose true realm is the quest for facts understood not as objective events
but rather as human activities.

The contradiction between historical substance and logical form, List asserts conclusively, is
apparent right from the very title of Smith’s magnum opus on which all later developments of
“economic science” are founded - “The Nature and Causes of the Wealth of Nations”. For here
already Smith draws a valid distinction between, on one hand, the nature and causes of “wealth”
and, on the other, the existence of “nations” themselves. On one hand, List contends, we have
“wealth” as welfare, - a universal, cosmopolitical, entity that abstracts from the existence of
individual nations as separate “owners and possessors of wealth”. And then on the other hand
we have wealth as property that is utilised by these individual owners themselves as real
historical entities with divergent and conflicting political aims! Clearly, the first kind of “wealth”
(welfare) is radically and categorically (toto genere) different from the second kind of “wealth”
(property). The first type of wealth, welfare, can be viewed as a mere quantity, as a static
substance. But the second type, property, the type that is measured not universally but rather in
direct opposition to and conflict with other property owners - that type of antagonistic wealth is
entirely different in that it refers to the ability of a nation to dominate others by means of its
ability to convert its industrial base into commercial and military means of domination! It is to this
second type of wealth that List refers when he prefers his own “national political economy” to
Smith’s and the British economists’ specious “cosmopolitical” - not “political”! - economy, that is,
a universalist economics entirely devoid of the essential political element! Although List still
pledges allegiance to the universalist cosmopolitical economics of the British theoreticians, his
own exposition - properly pursued and explicated - contains an implicit refutation of “economics”
as a neutral-scientific, universalist “science”. A Nietzschean thinker ante litteram, List is already
laying down the theoretical premises for Marx’s later critique of political economy - that is to say,
the ineluctably and intrinsically political nature of all economic activity based on private property.

Returning to Smith, at first, the Scotsman pretends to explain how individual nations acquire
“wealth” understood as “private property” - as “the wealth of nations”, not of “humanity”. But
then, surreptitiously, he pretends to prove how such individual national wealth is in reality
spread to all other individual nations by means of free trade or exchange so that it can finally
turn into “cosmopolitical” (universal) wealth or welfare! Smith pretends therefore to transmute,
as if by magic, private national or “political wealth” - property - into something absolutely and
categorically different - “cosmopolitical or universal wealth” or human welfare! He pretends to
prove that “self-interest” - which, by definition, can only be instinctive and blind to other self-
interests - can actually turn into “enlightened self-interest” for the achievement of universal
welfare. In the event, Smith’s explication of how free exchange of private wealth or produce
leads to the maximisation of “wealth” understood as a universal good rests on a circuitous
logical identity whereby his apparently historical premises are in reality logically (and that
means, tautologically, because all logic is tautology) tied to the theoretical conclusions he draws
- which thus boil down to sterile logical deductions emptied of all factual historical substance.

The insuperable problem with Smith’s attempt to found Political Economy as a science is that
his “science” is not “scientific” - and therefore “historical” - at all because science evolves with
fresh historical and empirical facts (dis-coveries and in-ventions). His political economy is rather
a “logical” structure that considers what “wealth” would be for human beings.... if actual
individual ownership and possession of wealth (property) - and therefore individual political
nations as the chief historical guarantors of “legal” ownership and possession - did not exist at
all! To demonstrate the “logical” - and therefore unscientific and unhistorical - derivation of
Smith’s economic theory, List quite correctly attacks what is the original sin of the Scotsman’s
exposition - and that is, Smith’s account and analysis of the origin and spread of the division of
labour. For here is to be found the fundamental error, the proton pseudon, that leads Smith and
classical political economy astray.

As I have shown elsewhere, Smith’s fundamental error is to think of “labour” as an essentially


individual human activity. He therefore proceeds to think of “labour” as an abstract activity and
not as a concrete human activity, not as “social labour”. Had Smith seen human labour as an
ineluctably, unavoidably “social” activity - as “social labour” -, he would have realised instantly
that there is no “division of labour” as an abstract entity that can be parcelled out to human
beings taken as abstract in-dividuals, as a-toms! Rather, there is “social labour” because human
beings cannot survive without sharing multiple tasks and functions. It follows therefore that it is
not human individuals that exchange the products of their individual (abstract) labours. Instead,
human beings exchange produce - precisely for the reason that they engage in social labour, so
that the things and services they produce must of necessity be exchanged, that is to say,
shared in symbiotic relation! It is not the exchange of products, then, that engenders or causes
the division of “labour” into individual labours or specialisation. Quite to the contrary, it s the
indivisibility of “social labour” that renders specialisation and therefore the exchange of products
between individuals necessary!

This is the Achilles’ heel from which List successfully and devastatingly attacks Smith’s “political
economy”. And given the abstractness of the “labour” Smith considers, List is then able to show
that the Scotsman’s is not and cannot be a truly “political” economy based on concrete human
societies or “nations”, but rather an abstract generalisation of “labour” and “exchange” founded
on human individuals and therefore on universal or “cosmo-political” principles. The “wealth”
that Smith analyses is not the wealth “of nations”, but it is instead an abstract universal idea of
“wealth” that can only improve the welfare of individuals engaged in the “free exchange” of
human produce. As a result of his unhistorical generalisation of “wealth”, Smith does not and
cannot consider how human relations change after every “exchange” of produce depending on
the real concrete conditions in which produce is produced and then exchanged! Once he
assumes that all production is through individual “labours” and all exchange is “free”, Smith
cannot but conclude that exchange (a) maximises the welfare of individuals through the optimal
distribution of utility and (b) leads inexorably to “specialisation”, that is, to the division of
(individual) labour precisely for the purpose of maximising collective production and therefore
the “individual wealth” of all trading parties. Smith never questions what this “labour” is in
concrete historical terms: he simply treats it as a homogeneous quantity that can be allotted and
divided among and between “individuals”.

Whereas Smith plunges instantly into the analysis of the division of “labour” right from Book Two
of his “Wealth of Nations”, List in contrast begins his “National Political Economy” from the
historical record of entire nations and societies in their productive relations internally, in terms of
the historical growth of various industries, and externally in terms of the interaction of domestic
industries with their inter-national counterparts as mediated by private and national interests.

Two types of “wealth”, then. One abstract and the other concrete. The first is “objective” in the
sense of non-political, individualistic and subjective for the utilitarians yet objective because
determined by the conflictual tug-of-war of the market, and the other more essentialist because
determined by socially necessary elements such as labour-time. These “objective” definitions of
value or “wealth” are clearly non-political because, regardless of the distribution of wealth in a
society, provided the market mechanism of free competition and trade is left to operate
unhindered, the quantity of wealth available to a given society is a “given”, a datum that cannot
be altered given the technological state of development of a society. Even the division of labour
or specialisation can result in higher productivity of a given amount of labour time or labour
power — but not through scientific advances and different social relations, which are all deemed
to be exogenous to the creation of value through labour (classics) or through market exchange
(neoclassics). Here production techniques are exogenous to value and market mechanism - and
thus non-political because objective and objective because non-political - the objective resultant
of subjective opposed forces. To put it with Weber, subjective does not mean arbitrary.
Subjective forces are objective to the extent that they must act rationally if they act freely.
Weber refutes the notion that “freedom” is subjective in the sense of irrational: free human
beings act rationally, and therefore the outcome of their collective free actions is rational and
objective - objective in the sense of rational (cf. Bohm-Bawerk on whose neoclassical analysis
Weber relied).

In our previous few contributions, we have sought to elaborate on a new definition of economic
wealth or “value” that takes its departure from Friedrich List’s notion of “National Political
Economy” in contrast to what he called the “cosmopolitical economy” theorised by the Anglo-
Saxon economists, from Adam Smith to the present day. Although ultimately contradictory in
that List affirms the validity of the “cosmopolitical” definition of economic value, still his critique
of Anglo-Saxon economic theory opens the door to a much more incisive and insightful
definition of wealth and value than has been proposed thus far in the history of economic
thought.

Two types of “wealth”, then. One abstract and the other concrete. The first is “objective” in the
sense of non-political: individualistic and subjective for the utilitarians yet objective because
determined by the conflictual tug-of-war of the market; and the other, based on the Labor
Theory of Value, more essentialist because determined by socially necessary elements such as
labour-time or “real cost”. These “objective” definitions of value or “wealth” are clearly non-
political because, regardless of the distribution of wealth in a society, provided the market
mechanism of free competition and trade is left to operate unhindered, the quantity of wealth
available to a given society is a “given”, a datum that cannot be altered given the technological
state of development of a society. This objective approach to value treats value as a quantity
that is fixed categorically as a totality that is capable of being altered only in its distribution, not
in its quantum. Both Classical and Neoclassical economic theories were theories of distribution
of value, not of its production or creation. As such, any attempt to quantify value amounts to
sheer metaphysics - which is the critique that neoclassical marginal-utility theoreticians moved
against the “essentialist” labour theory of value” of Smith, Ricardo and Marx.

In reality, of course, the neoclassical theoreticians themselves were open to the “metaphysical”
critique in that the very notion of “utility” that “the market mechanism” is supposed to distribute
via “marginal exchange” is nothing other than pure metaphysics! Yet, that is not to say that
neoclassical value theory is purely subjective. To put it with Weber, subjective evaluations of
economic value - institutionalised in market prices - does not mean that they are arbitrary.
Indeed, subjective evaluations are objective to the extent that they are made freely - and
therefore, in Weber’s sharp observation, also made rationally. Weber refutes the notion that
“freedom” is subjective in the sense of irrational: free human beings act rationally, and therefore
the outcome of their collective free actions is rational and objective - objective in the sense of
rational (cf. Bohm-Bawerk on whose neoclassical analysis Weber relied).

Even the division of labour or specialisation can result in higher productivity of a given amount
of labour time or labour power — but not through scientific advances and different social
relations, which are all deemed to be exogenous to the creation of value through labour
(classics) or through market exchange (neoclassics). Here production techniques are
exogenous to value and market mechanism - and thus non-political because objective, and
objective because non-political - the objective resultant of subjective opposed forces or the
objective product of the labour time employed in production - which can diverge from its real
value in distributive terms, but not in terms of the quantum of wealth produced).

The “national political economy” that List proposes starts from premises that are radically
different from those of Anglo-Saxon political economy - premises that are quite irreconcilable
with the latter theory of economics, despite List’s insistence to the contrary. List’s national-
economic theory in fact does not treat wealth as a universal value whose quantity and optimal
distribution can be scientifically determined. Instead, List’s distinction between “wealth” and
“ability to produce wealth” lays clear and incontrovertible emphasis on “the ability to produce
wealth” as the ability for the more productive agent to overwhelm and subjugate the less
productive one. The only reason why List would make such a distinction must be, and could
only be, his emphasis on the ability of a nation to overtake other nations in the ability to produce
offensive capabilities in the event of conflict and war. In the absence of such a premise, List’s
distinction would be deprived of all sense - for the simple reason that no-one would prefer a
future reward (the ability to produce) to an existing one (the actual possession and enjoyment of
wealth) if not with a view to being able to control the present wealth and future productive
capability of other economic agents! We have here once again the Schopenhauerian Entsagung
(renunciation) that will form the basis of Bohm-Bawerk’s “positive theory of capital”. In fact this is
a “negative” theory because wealth is not created but simply re-distributed according to the
individual ability to defer or abnegate or delay its consumption. Here “renunciation of present
consumption” becomes the basis of all claim to wealth, of its distribution from an initial position.
But for List, anticipating Nietzsche and Bohm-Bawerk as well as Schopenhauer, this
posticipation of consumption implies that the entire scope of wealth is not and can never be its
presence (the ability to be consumed), but its potential for competitive advantage, for greater
power of acquisition in future from less patient economic agents! (Note here the Ancient Greek
word for “property” as analogous to “being” or “pre-sence”, the Heideggerian Da-sein, being
there, ec-sisting in the Latin equivalent. Of course, Hegel’s entire phenomenology or dialectic of
self-consciousness begins with the unforgettable chapter on “Lordship and Serfdom” - a
dialectic that Marx will reprise masterfully with his critique of political economy based on the
“Doppelcharakter” (double character) of human living activity or “labour” under capitalism - as
use value, first, as the real valorisation of capital in the form of means of production, and,
second, in its commodified form as labour-power that can be purchased and sold as if human
living labour were a commodity equivalent and tradeable with objectified labour. The inability of
the bourgeois notion of value as a mere objectified quantum to explain the phenomenon of
economic “growth” not just as quantitative accumulation (Wachstum) but as political innovation
and transformation, as trans-crescence, as “development” (Entwicklung), is what led
Schumpeter to propose his revolutionary “theory of economic development” (wirtschaftliche
Entwicklung) in which the capitalist entrepreneur has this formidable “enlivening” will to power to
deflect and disrupt the sterile “Kreislauf” [stagnant circular flow] of the market economy by jolting
it out of its deadening “equilibrium”. What characterises capitalism for Schumpeter is the central
role that it reserves through institutional and legal protections provided by “the market” to the
Entrepreneur (literally, under-taker, Unter-Nehmer) to subvert the market status quo (the
stagnant, frozen “circular flow” of the economy) by means of Innovation. For Schumpeter, the
differentia specifica of capitalism is to provide an institutional Innovations-prozess which is the
“transformation mechanism” (Veranderungs-mechanismus) that allows the “entrepreneurial
spirit” (Unternehmer-Geist) to breathe new life into the productive system and to jolt it out of its
stagnant equilibrium. Of course, there is a clear dichotomy and apory here between institutional
“mechanism” and entrepreneurial “spirit” that evinces the insuperable difficulties into which
Schumpeter’s otherwise enthusing schema quickly runs as a theory of capitalist industry.

The ideology of free trade, and the reality behind it of what we call loosely “globalisation”, is one
that must and will die if we are to defeat those truculent dictatorships such as the Chinese and
those betrayers of democracy among us who exploit it and are nurtured by it. “Must”, because it
is deleterious to the highest values of which the West has been the inspirer and promoter
(hypocritically or not), and “will”, because as it stands globalisation and free trade does not and
cannot lead to the convergence - economic, political and cultural - of the society of nations
founded as it is on the internal contradictions of the capitalist system that engenders this
process.

Like many misguided “beautiful souls” in the liberal and democratic West (the “and” here is
disjunctive because the two do not go together necessarily at all, contrary to those who believe
in “liberal democracy”), Friedrich List believed that economic development would lead eventually
to a homogeneous and pacified global community of nations. But unlike these deluded
progressives, List was also the first notable European thinker (even before the other Friedrich -
Nietzsche) to perceive with clear insight that the pursuit of “wealth” in a global capitalist system
served merely to hide but in fact engendered catastrophic conflict within and between nations
leading inexorably to global warfare. Rather than revel in idiotic platitudes about “the wealth of
nations”, then, List set out to study punctiliously and scrupulously the precise political
antagonism that the claptrap terminology of “the science of economics” propagated by the
British theoreticians merely tried to hide and dissimulate. If we are to emerge from the paltry
“confusionism” of free-trade ideology (let alone the deplorable and contemptible dross of what
the Chinese Dictatorship peddles as “Confucianism”), it is List’s incisive thoughts of the
essentially Political nature of economic production that we must tackle first.

Make no mistake: for the precise reasons that we outline here, “the Chinese Model” is bound to
failure, the Chinese Dictatorship that trumpets it is destined to a rapid and ignominious fall,
which we are beginning to witness already - in a nutshell, because dictatorial and totalitarian
rule may work “strategically” in the short term but is catastrophic in the longer run: first, because
it rips apart political legitimacy and social cohesion; second, because it saps enterprise and
innovation; third, because it drives out talent and investment, foreign and domestic (capital
flight); last but far from least, because it blocks those “market signals” that are the most evident
institutional features of capitalism that drive the ability of an economic system toward that “ability
to produce wealth” that List identified as the core of his “national political economy”.

In short, vis-a-vis the dictatorial totalitarian powers that threaten the still-democratic West,
principally the Chinese and Russian Dictatorships, “we have nothing to fear but fear itself”. The
capitalist and democratic West is still far and away the most powerful alliance this world has
ever known and is destined to defeat totalitarianism for a long time to come. But defeatism (fear)
and complacent greed (the temptation to use these dictatorship as a source of cheap labour and
consumer goods, and therefore profits in the West) are dangers against which we must be
powerfully vigilant.

FRIEDRICH LIST AND THE CONCEPT OF WEALTH

The ultimate aim of all political domination is to disguise the abuse of power and coercion as
either “nature” or irresistible logic - and, in either case, as technical-neutral “science”. Having
established its industrial domination the world over, the British industrial capitalist bourgeoisie
now wishes to present its politico-economic interests under the ideological guise of political
economy or “the science of economics”. This “science” wishes to present “wealth” (the subject-
matter of economics) as a universal category to which all human beings aspire whether as
individuals or as nations, and most of all as an end-product whose maximisation can be
achieved “scientifically”, that is to say, independently of the conflicting interests of human beings
and of nation-states. Seizing on the very title of Adam Smith’s economic bible, it is the evident
apory between “the Nature and Causes of Wealth”, on one side, and “the Nature and Causes of
the Wealth of Nations”, on the other, that Friedrich List exposes ruthlessly as the ideology of
one Nation in particular - Britain - against the interests of all other Nations.
The British “science” of Political Economy, argues List, presents wealth as a universal good
achievable through homogeneous policies applicable to all Nations without regard to the specific
antagonistic interests of these Nations - whence the absolute and unquestioning faith of the
British economists on the equally absolute necessity of “free trade” as the indispensable path to
the optimisation of “wealth” for all nations (“the wealth of nations”) through the exploitation of
their “comparative advantage”. Yet, it s the very existence of Nations with opposing, conflicting
and antagonistic political interests that explodes the “technical-neutral science of economics”
that the British ideologues wish to foist upon all other Nations. British Political Economy, insists
List, leaves out of its “science” the very element - the Political - that would unmask it as the
hypocritical peddling of the interests of its own industrial and financial capitalist bourgeoisie!
Which is why List sternly champions on behalf of his nascent German nation his novel “national
political economy” against the “cosmopolitical economics” trumpeted by his British counterparts.

The Listian distinction between “wealth”, on one side, and “the ability to produce wealth” on the
other establishes a dramatic and irresoluble schism at the very heart of the concept of “wealth”.
Like nuclear fission, List’s splitting and scission of the notion of “wealth” engenders a chain
reaction of truly apocalyptic proportions for the entire conceptualisation and theory of
economics. For if indeed “wealth” consisted of a quantity of use values or resources available
socially for consumption to the whole of humanity, then it would make absolutely no sense
whatsoever to distinguish between “wealth” as an end result, on one side, and “the ability to
produce wealth” as an intermediate process on the way to the final attainment of this “wealth”!
The “wealth” referred to by British economists is the end-result use value of production - it is a
universal or “cosmopolitical” wealth as List styles it. By contrast, the “wealth” referred to by the
phrase “the ability to produce wealth” is a very different type of wealth! The former we may call
“wealth-for-consumption” and the latter we may call “wealth-for-production”.

The distinction makes sense only if there exist differentials between economic agents in their
ability to produce wealth, that is to say, only if wealth is subject to property rights that turn
economic agents into competitors! Whereas “wealth” can exist on its own as a resource that can
be shared by all humanity collectively, the notion of “the ability to produce wealth” can make any
sense at all if and only this “ability” separates human groupings and hence sets them against
one another - individual against individual, nation against nation - according to their different
“ability” to produce wealth. For humanity as a whole, there can be no difference between wealth
and the ability to produce it for the simple reason that the end of production is wealth that
belongs to humanity as a totality. It is palpably and incontrovertibly clear from the outset that for
List’s distinction between actual wealth and its potential production to make any sense at all,
“actual wealth” cannot be aggregated socially but must exist in the form of “property rights to
wealth” or as “estate” (recall John Locke’s famous formulation of the protection of “life, liberty
and estate” as the sole purpose and goal for the existence of civil society or the State). Only
then can the distinction of wealth-for-consumption (existing wealth) and wealth-for-production
(the ability to produce wealth) have any validity and purpose whatsoever.

In line with and in anticipation of Neoclassical Theory, the objection of List to the “cosmopolitical
economics” of the British Labor Theory of Value espoused by Smith and Ricardo is that it
considers wealth as a “positive substance”, as being “created” by human labour - as useful
content for humanity as a whole or for individuals in isolation -, and not as property, as the
possession of private individuals safeguarded and guaranteed by nations. Clearly, the
antagonism between property owners - people with legally and politically antagonistic claims to
wealth - must be resolved in favour of those property owners who possess, not the greatest
wealth, but rather the greatest ability to produce wealth because - provided that property rights
are enforced and the process of production is not interfered with through violence - it is those
with the greatest ability to produce wealth who will end up with the greatest accumulation of
wealth.

Furthermore, and much more important, the distinction between wealth and ability to produce
wealth makes sense if and only if wealth-for-consumption is no longer the actual objective of
production but rather if it is the accumulation of wealth-for-production itself that becomes the
paramount pursuit wholly separate from its consumption! The real “wealth”, according to List, is
not “wealth” itself but rather the ability to produce “it”. It follows that this “it” - existing wealth or
wealth-for-consumption - is something categorically different from the “wealth” that consists of
“the ability to produce” wealth itself.

This splitting of the notion of wealth itself is consistent with the negatives Denken headed by
Arthur Schopenhauer as a reaction to Classical German Idealism from Kant to Hegel, a
philosophical doctrine that will characterise German thinking from philosophy to economics and
even science itself from the beginning of the nineteenth century to the present day. In nature,
claims Bohm-Bawerk at the very outset of his seminal The Positive Theory of Capital, in line
with the Law of Conservation in physics, “nothing is created, everything is transformed”. This
means that wealth cannot be “created”; wealth is simply the trans-formation of existing
resources into different more useful forms. Human beings “work” nature - they transform it
through their labour. But labour does not “create” anything. Quite to the contrary, labour is only
consumption of resources - it has no utility but is sheer dis-utility: labour is want, the satisfaction
or fulfilment or momentary extinguishment of want. Labour cannot do more than extinguish want
through consumption of existing resources. But in order to shorten the time taken for the
satisfaction of want, it is necessary for producers to delay or abstain from consumption at least
in part so as to be able to construct labour-saving tools that will reduce the time taken - and thus
the “labour” - to satisfy want. It is these labour-saving tools that constitute capital or “the ability
to produce wealth”. Wealth here is intended as “transformation of existing resources”, not as the
“creation” ex nihilo of new wealth! Assuming, as did all of political economy (including the
Neoclassical) that labour is the ultimate factor of the production of wealth-for-consumption (even
Bohm-Bawerk agrees), then those owners are wealthiest who have the ultimate command over
the living labour of workers (even the accumulation of means of production is meaningless
without the ability of the wealth produced to enable the owner to command living labour).

For the most belligerent and sophisticated and erudite exponent of Neoclassical economic
theory, the Austrian School, labour is the immediate satisfaction of needs, it is “hand-to-mouth”
subsistence. Labour in and of itself, without the labour-saving tools needed for production,
without the means of production, is utter and destitute dis-utility. Only with the deferral of
consumption can labour be dedicated to the production of “labour-saving” tools that lead to the
development of wealth-for-production and thence to the accumulation of wealth - again, not as
“creation” but as the deferral of its consumption through labour-saving tools in a never-ending
spiral. It follows that labour does not “create” wealth: it is the employer (Arbeit-Geber) through
his deferral of and abstinence from immediate consumption of wealth (labour-as-want) who is
able to “give labour” to ( to em-ploy) the worker: - the worker here is only the “taker of labour”
(Arbeit-nehmer). Without the labour-saving tools (capital) of the employer who obtained them by
renouncing and abstaining from consumption, the worker would be condemned to mere
subsistence. The worker’s only “possession” is labour, which is the immediate satisfaction of
need - hence, labour in itself is pure dis-utility because without means of production it is unable
even to feed itself! Labour has no “utility”: it is pure dis-utility. For the negatives Denken and
then for Neoclassical Theory, wealth quite simply cannot be “pro-duced” by labour; it can only
be consumed. Only the intervention of capital through the deferral of consumption gives claim to
greater wealth-for-consumption as well as more wealth-for-production (tools). This diversion of
wealth-for-consumption to the production of labour-saving tools (capital) does not “create”
wealth, but rather trans-forms existing wealth into products that can save labour in that it allows
the employment of workers (labour) for their expanded reproduction (procreation) and for the
production of more labour-saving tools through the employer’s abstinence from consuming at
least part of the fresh production.

“Capital” here is not seen as an inert pile of labour-saving goods but rather as the pro-duct of
the capitalist’s wilful “renunciation” of consumption represented by the diversion of labour time
from consumption to the production of labour-saving tools! By renouncing or deferring
consumption indefinitely, the capitalist dedicates the saved labour to the production of “labour-
saving” tools. Thus, capitalist accumulation or profits is the ever-expanding domination and
acquisition of workers’ labour-power through the production of labour-saving machinery
(capital). Quite simply, capital is the capitalist’s will to employ labor and to dominate or
command labor, that is, the workers, on an ever-expanding scale through the expanded
reproduction of the working population made possible by the production of more means of
consumption by means of “labour-saving” machinery!

The negatives Denken for the first time in the history of human thought presents this domination
by the employer over the employee as “renunciation” and “abstinence”, as “self-abnegation”, as
“sacrifice” (Opfer) - Schopenhauer. The essence of wealth is consumption because wealth
exists to be consumed. In a rational society at peace with itself, with no internal antagonism,
wealth and the ability to produce it are one and the same thing. This is the kind of wealth
envisaged by the British political economists. But as soon as wealth becomes subject to
property rights that are antagonistic by definition (“what is yours and what is mine”), then the
ability to produce wealth becomes in essence entirely different from wealth as the final product:
in such an antagonistic society based on private property the two types of “wealth” are entirely
different and, what is more, it is the ability to produce wealth that takes prominence over wealth
as the final product to be consumed! Consumption is “want”, annihilation of wealth. The essence
of the ability to produce wealth is not wealth itself but the accumulation of wealth-producing
property or factors of production (machinery and labour-power), and therefore the accumulation
of wealth-as-capital. Unproductive labour consumes wealth and therefore it is wasteful;
productive labour is productive not because it produces wealth (which is merely consumption),
but because it produces means to produce wealth (capital as means of production), that is, it
produces the means to support more productive labour arithmetically or geometrically (through
innovation).
It is evident that when characterising a particular form of wealth as either wealth-for-
consumption or as wealth-for-production and consequently the living labour engaged in its
production as either productive labour or unproductive labour, what becomes central to the
categorisation is the part played by a specific form of social wealth in the process of production
and therefore in the division of social labour. That is the reason why List, in his elaboration of
the vital distinction between wealth and the ability to produce wealth turns immediately to the
examination of the division of labour and of national industrial sectors. In his memorable
analysis of specialisation in pin production, Adam Smith saw only that the division of labour
increased the production of social wealth. By contrast, Hegel sharply perceived the
contradiction in the Labor Theory of Value as applied to a capitalist economy because
specialisation did not enrich the worker (the presumed “giver” of work), but rather it enriched the
employer (the presumed taker of labour). Marx seized upon this Hegelian insight and concluded
correctly that the capitalist uses the higher productivity of the worker, and so the greater
produced wealth that the capitalist appropriates from the worker, to employ ever more workers!
The accumulation of wealth is divided in part in wages for workers to consume to reproduce
themselves on an expanded scale, and in part in profits for capitalists to employ more workers,
and thus to accumulate more wealth-as-capital in terms of means of production (machinery) and
labour-power (wages) - what Marx called constant and variable capital, respectively.

We shall turn to List’s all-important examination of the precise historical dynamics of (domestic)
industrial and (foreign) trade policy in the very near future.

The growing belligerence of the Chinese Dictatorship has inspired countless theoretical
approaches to the clash between Western market capitalism and the so-called command
capitalism peddled by the Dictatorship itself as a more efficient and egalitarian economic
system. These attempts all have some merits but most often they miss the mark totally - mainly
for the reason that whilst some of the commentators have a level of expertise in a particular area
(one may think of Martin Wolf in finance, or David Runciman in political studies, or even
Thomas Friedman in punditry), very few of them combine the requisite depth of knowledge in the
social sciences to confront what is a very complex knot of issues. Our study of Friedrich List’s
“national political economy” is meant as a prolegomenon to erecting a theoretical and political
bulwark against the threat that all dictatorships pose to democracy in a capitalist world
economy.

In the immediate past contributions, we have shown how List’s “national system of political
economy” contains an implicit contradiction in that, on one hand, List correctly exposes the
economic theory expounded by the British political economists as a “cosmopolitical” framework
of exchange between equal but self-interested producers as a theory that must logically result in
the maximisation of their individual welfare and the aggregate production of wealth for “the
nation” through specialisation; but then, on the other hand, List refuses to reject the theoretical
premises of this “cosmopolitical economy”!
Pg.99: For our own part, we are far from rejecting the theory of cosmopolitical economy, as it has been
perfected by the prevailing school; we are, however, of opinion that political economy, or as Say calls it
'économie publique,' should also be developed scientifically, and that it is always better to call things by their
proper names than to give them significations which stand opposed to the true import of words.

List calls this system “cosmopolitical” precisely because its purely logical and abstract
framework leads to the political convergence of self-interests into universal or “cosmic” interest
of all market participants. But then, on the other hand, in contrast to this universally harmonious
system (the Invisible Hand), List seeks to reintroduce the Political element of conflict between
market participants by showing that market exchange cannot be “equal” or harmonious unless
the participants are all at the same level of development - unless, that is, their ability to produce
wealth is the same. Whereas cosmopolitical economics pretends that free exchange will lead
automatically, as a matter of historical practice and fact, to a harmonious welfare maximisation
and stable price equilibrium, in reality - List correctly objects - far from occurring in historical
experience, this harmony is only the necessary logical result of the theory’s premises!

Pg.101: The popular school has assumed as being actually in existence a state of things which has yet to come
into existence. It assumes the existence of a universal union and a state of perpetual peace, and deduces
therefrom the great benefits of free trade. In this manner it confounds effects with causes. Among the
provinces and states which are already politically united, there exists a state of perpetual peace; from this
political union originates their commercial union, and it is in consequence of the perpetual peace thus
maintained that the commercial union has become so beneficial to them.

It is not free trade that leads to harmonious economic development; it is rather harmonious
economic development that leads to free trade. In reality, as List rightly contends, where nations
differ in the level of their industrial development, free trade can only exacerbate existing
inequalities and imbalances among nations - and therefore lead to further disharmony and
conflict!

Pg.101: All examples which history can show are those in which the political union has led the way, and the
commercial union has followed.68 Not a single instance can be adduced in which the latter has taken the lead,
and the former has grown up from it. That, however, under the existing conditions of the world, the result of
general free trade would not be a universal republic, but, on the contrary, a universal subjection of the less
advanced nations to the supremacy of the predominant manufacturing, commercial, and naval power, is a
conclusion for which the reasons are very strong and, according to our views, irrefragable.
Pg.100: The system of protection, inasmuch as it forms the only means of placing those nations which are far
[101] behind in civilisation on equal terms with the one predominating nation (which, however, never
received at the hands of Nature a perpetual right to a monopoly of manufacture, but which merely gained an
advance over others in point of time), the system of protection regarded from this point of view appears to be
the most efficient means of furthering the final union of nations, and hence also of promoting true freedom of
trade. And national economy appears from this point of view to be that science which, correctly appreciating
the existing interests and the individual circumstances of nations, teaches how every separate nation can be
raised to that stage of industrial development in which union with other nations equally well developed, and
consequently freedom of trade, can become possible and useful to it.

But how is such harmonious economic development or “political union” to be achieved so as to


result in “commercial union”? The contradiction in List’s argument lies in the fact that his
correct and valid distinction between wealth and ability to produce wealth means that market
participants will never reach “equality” for the evident reason that the notion of ability to
produce wealth implies and entails the existence of irresoluble conflict between market
participants - which free trade only makes worse, as he himself admits in the quotation above. In
other words, with or without free trade, where the aim of nations is to develop their individual
abilities to produce wealth, and therefore to accumulate wealth, the result of this overriding focus
is to sharpen and heighten economic conflict! List fails to realise that the notion of wealth itself
that he has now split between the universal cosmopolitical one of the British economists - as
wealth-for-consumption - and his own political conflictual notion as wealth-for-production
makes the attainment of a universal peace not only dependent upon resolving the imbalances
necessarily arising from accumulation but in fact it makes such resolution absolutely
impossible!

List’s distinction between wealth and ability to produce wealth is badly framed because both
phrases refer to wealth when in fact the first refers to use values and the other to capital
accumulation.

List’s inability to perceive the opposition of these two types of wealth - use value and capitalist
accumulation - prevents him from seeing the contradictory inconsistency between equal
exchange of wealth and equal rates of accumulation of wealth which are impossible given that
the accumulation of wealth must be antagonistic by definition because every “accumulation of
wealth” by one nation must be at the expense of other nations! Indeed, it is inconfutably obvious
that the entire rationale behind List’s distinction between wealth and ability to produce wealth is
- precisely! - that individual nations compete with one another for ultimately military
supremacy!

Whereas the cosmopolitical wealth of the British economists leads to a “static” notion of wealth
whose exchange leads inexorably to a logical system of general equilibrium; List’s own notion of
ability to produce wealth leads to a “dynamic” definition of wealth as capitalist accumulation
that is entirely antithetical to and irreconcilable with the wealth intended by the British
economists - and yet List aims to show that it is possible through restrictive trade practices for all
“nations” as market participants to achieve equal levels of development leading to fair and equal
market exchange or international free trade - and maybe finally to a full commercial and political
union! The static analysis is logical and based on the fixing of equilibrium rates of economic
exchange, whilst the dynamic analysis refers to economic development which as such is
impervious to logico-mathematical equilibrium analysis. The former theory is based on Logic
whilst the second is based on History (Marx and then Schumpeter).

But what does List mean by equal economic development? He says it is achieved when Nations
have achieved “freedom” as an institutional setup for governing themselves. We will see that this
freedom also is utopian and antagonistic under the notion of accumulation. Yet List is entirely
right to maintain that in a system of capitalist accumulation the freedom of the market
institutions is the only one consistent with the greatest ability to produce wealth as command
over living labour - destined to overcome “socialist” or “command” economies.

To anticipate our next instalment on Max Weber, the conclusion to be drawn from this study is
that in a capitalist world system both production and the exchange of production (trade) represent
political power struggles between workers on one side and employers on the other. This power
struggle concerns not just the distribution of production between social classes, but also what is
produced and how it is produced - as well as the composition of the producers as workers or
managers or indeed as investor-entrepreneurs. This struggle also plays out not just within nations
but, through international trade, also between nations. There are various elements that determine
what strategies are dominant or lead to politico-economic decline. One element is strategic
investment in industries that are capital-intensive and technically and scientifically advanced
with a highly paid and highly professional workforce. Here, relatively backward nations rely on
wage suppression and high savings to obtain the hard currency and capital investment needed to
support and foster strategic sector industries.

Yet this strategy inevitably runs against enormous barriers once the workforce is sufficiently
emancipated to be able to challenge the inequality in incomes and conditions between industrial
sectors. The emancipation of significant strata of society leads the leadership to a crossroads
where it must decide between further liberalisation and democratisation or a recidivist return to
authoritarian or even dictatorial and totalitarian way - but above all to imperialist ways (whether
formal or informal). The latter courses will surely end up isolating the nation and lead to the
flight of capital, a halt to foreign investment and to the exodus of the most creative sectors of the
labour force and of the entrepreneurial class.
Apart from industrial policy, then, the effective governance of a nation - the degree of inclusion
of the population through democratic processes, fairness of remuneration and income share - this
becomes crucial to the eventual emergence of less advanced economies. Above all, the market
mechanism plays a crucial role in (a) on the supply side, prodding productivity and innovation
through regulated, legal social conflict and (b) on the demand side, directing the choice of
demand to the most useful and cohesive products in terms of human needs. Market democracy,
so to speak, is essential - and the principal reason behind the failure of “command economies”. It
is at this cultural-political level, meeting with market mechanisms, that closed societies and
economies end up losing their productive drive, regardless of how strategically gifted their state
apparatuses are.

Authoritarian regimes have advantages in early stages of capitalist development in that they can
instore a wage-suppressive and high-savings regimen that serves to bolster capital inflows and
swell investment through balance of trade surpluses. They can mobilise internal resources and,
once that process is exhausted, they can then redirect that internal repression outwards,
imperialistically. But this results in ossification of the industrial asset and in emphasis on
absolute exploitation. Even in Britain the phase of original accumulation was enabled by a much
tighter centralised state apparatus (Tudor and Stuart administrative reforms) internally and
massification of the army and navy externally (Cromwell’s New Model Army).

List neglects the role of the internal market institutions in promoting the catch-up phase because
he assumes that they are universal rather than specific to capitalist society.

Pg.109: In order duly to estimate the influence which liberty of thought and conscience has on the productive
forces of nations, we need only read the history of England and then that of Spain. The publicity of the
administration of justice, trial by jury, parliamentary legislation, public control of State administration, self-
administration of the commonalties and municipalities, liberty of the press, liberty of association for useful
purposes, impart to the citizens of constitutional states, as also to their public functionaries, a degree of
energy and [110] power which can hardly be produced by other means. We can scarcely conceive of any law
or any public legal decision which would not exercise a greater or smaller influence on the increase or
decrease of the productive power of the nation.

With admirable prescience, Friedrich List foreshadows a most incisive and valid critique of the
labour theory of value first expounded by British political economy (Smith, Ricardo, Mill) soon
to be perfected by Marx, and also - as a corollary of that critique - he advances an early version
of the neoclassical value theory (Gossen, Menger, Jevons) that will rise out of the German
negatives Denken (Schopenhauer, Kierkegaard, Nietzsche, Weber). List sees quite correctly that
capitalism is not about wealth but rather about “the ability to produce wealth”. And he sees also
that capitalism is not about “economics” but rather about social and political institutions. In this
precise regard, List is contradicting what was to become one of Marxism’s main items of faith.
Lenin’s maxim that “politics is a concentrate of economics” lends itself to two possible
interpretations - one false and the other quite plausible. The first interpretation sees this maxim in
light of Marx’s theory of human historical social development as arising from “the law of value”
whereby human history is the tale of development of social relations of production that constitute
an “economic base”, a solid rock of reality upon which is erected a “political superstructure” of
ideological constructs from religion to culture and the State. In this optic, the history of human
society is one of conflict over the distribution of social wealth which, in turn, gives rise to
different modes of production. These conflicts represent diverse forms of social antagonism that
will ultimately result in the attainment of a communist republic that will see spontaneous social
harmony replace the violence of the State as the cement of social life. The compression of
socially necessary labour time for the reproduction of society as a result of the antagonism
between capital and workers will ultimately ensure that private property and the State, which
ensure the violent separation of workers from the means of production become “a miserable
basis” for social existence such that they are no longer legitimate and sustainable.

Central to this dialectical - quasi eschatological - interpretation of human history is the notion
that the amount of labour time socially necessary for the reproduction of society is quantifiable
for a given state of technology and, therefore, that the social needs of a specific social formation
are also materially quantifiable. In this Marxian perspective, it is clear that given that social
needs and the labour time socially necessary to satisfy them are both quantifiable entities, then
the political superstructure becomes a function of the distribution of the available social surplus
and therefore clearly deducible if not calculable from the economic base, that is to say, from “the
law of value” - which is why politics cannot but be... “a concentrate of economics”.

Apart from being a non sequitur (why should political institutions be determined by the
production of social wealth?), what is false in this Marxist reading of human social history is that
not only are human needs unquantifiable, and therefore it is impossible to determine what labour
time is “socially necessary” for the reproduction of society - and not only is “labour time” itself a
concept impossible to define with any clarity - but also and above all the very definition and
identification of what are “social needs” is an exquisitely political question that makes the
reduction of politics to economics wholly devoid of sense, let alone truth!

List’s attack on the labour theory of value is entirely valid and it relies intrepidly on challenging
the erroneous reduction by the political economists (British and Marxist) of all “value” to a
quantifiable entity, and then again to the conflation of intellectual and manual labour or, in other
words, the reduction of skilled labour to manual labour:
Pg.110: If we consider merely bodily labour as the cause of wealth, how can we then explain why modern
nations are incomparably richer, more populous, more powerful, and prosperous than the nations of ancient
times? The ancient nations employed (in proportion to the whole population) infinitely more hands, the work
was much harder, each individual possessed much more land, and yet the masses were much worse fed and
clothed than is the case in modern nations. In order to explain these phenomena, we must refer to the
progress which has been made in the course of the last thousand years in sciences and arts, domestic and
public regulations, cultivation of the mind and capabilities of production. The present state of the nations is
the result of the accumulation of all discoveries, inventions, improvements, perfections, and exertions of all
generations which have lived before us; they form the mental capital of the present human race, and every
separate nation is productive only in the proportion in which it has known how to appropriate these
attainments of former generations and to increase them by its own acquirements, in which the natural
capabilities of its territory, its extent and geographical position, its population and political power, have been
able to develop as completely and symmetrically as possible all sources of wealth within its boundaries, and
to extend its moral, intellectual, commercial, and political influence over less advanced nations and especially
over the affairs of the world.

The impossibility of reducing intellectual labour to its manual labour components is merely an
expression of the utter senselessness of reducing the question of value to mere quantities (the
Law of Value whereby values can be reconciled with prices). Once again, this is the precise
reason why politics cannot be reduced to economics:

Pg.110: The popular school of economists would have us believe that politics and political power cannot be
taken into consideration in political economy. So far as it makes only values and exchange the subjects of its
investigations, this may be correct; we can define the ideas of value and capital, profit, wages, and rent; we
can resolve them into their elements, and speculate on what may influence their rising or falling, &c. without
thereby taking into account the political circumstances of the nation. Clearly, however, these matters
appertain as much to private economy as to the economy of whole nations. We have merely to consider the
history of Venice, of the Hanseatic League, of Portugal, Holland, and England, in order to perceive what
reciprocal influence material wealth and political power exercise on each other.

Quite simply, the notion of “economic value” is inseparable from that of political power: the
word “value” itself (from the Latin valor, strength) has obvious political and even psychological
connotations. Yet there is a specificity to the sphere of economics at least to the extent that it
involves what List himself describes as “the productive power of the nation” - and that is the
point where the Political can be narrowed down to the Economic. For someone who must have
come across neo-Kantian thought, List fails almost completely to confront the crucial issue of
what, if anything, constitutes the discrimen - the distinction - between economics and politics. It
is certainly true that the Political cannot be reduced to Economics. But then, we still have to
tackle the very relevant question of what precisely constitutes the specificity of what we call
Economics. To do that, we will turn to the work of the great sociologist Max Weber in our next
post.
It is our personal misfortune that, from being raucous critics of capitalism, we are now forced to
come out in its defence by the appearance on the global scene of a monster - the Chinese
Dictatorship - that the international bourgeoisie is solely responsible for creating in the first
place! Given the defeatist and often treasonous chorus of voices - again from the bourgeoisie
itself, keen to undermine democratic institutions -, it is almost tragic that we are impelled to sing
the praises of “the market mechanism” and, specifically, its clear superiority over any kind of
autocratic “command economy” such as the one that the Chinese Dictatorship and its Western
saraband of traitors would like to foist upon us! Enjoy.

We saw in our previous post that List’s implicit critique of the Leninist-Marxist axiom “Politics
is a concentrate of Economics” is entirely correct. List’s own work, in the tradition of the
German Historical School of Economics, provides a healthy corrective to the later degeneration
of economic enquiry leading to Neoclassical and Marxist economics - and particularly their
erroneous and presumptuous scientistic attachment to “the Law of Value” according to which
economic value is a quantifiable entity that can be priced by “free markets”. Yet, List’s work and
that of his predecessors and successors in Political Economy fails to identify what Max Weber
(in true neo-Kantian fashion) called “the specificity of economics”. Here we argue that Weber
himself, despite taking the analysis of economics a sociological step forward from Marx’s great
oeuvre, still fails to hit the mark, but with the indisputable advantage, as we are about to
discover, of highlighting and uncovering essential truths and insights into the nature of modern
market capitalism. Thus, we can surely affirm, contrary to Lenin, that Economics is a concentrate
of Politics. But there is a sense in which Politics is a concentrate of Economics because the rise
of capitalism has shown that the ability of a society to produce wealth is dependent on its focus
on the satisfaction of material needs. This is the strict sense in which Lenin’s dictum has
validity!

Stricto sensu, Lenin’s facile reduction of the Political to Economics is valid for societies, such as
a capitalist one, in which the satisfaction of material wants and needs has attained overriding
importance. In this specific context, the centrality of work, of labour, in Judaeo-Christian
societies is undeniable. A careful revision of Weber’s insuperable work on the sociology of
Western society, following Marx’s own impressive foundations, reveals at once the centrality to
Western societies of what Hegel called “the system of needs”, and what Weber was later to
fashion as “the iron cage”. The ubiquitous misunderstanding is that by “the iron cage” (stahlharte
Gebaude) Weber meant the end-result of the Western Rationalisierung. Nothing could be further
from the truth! A meticulous reading of the Protesantische Ethik quickly reveals that by “iron
cage” Weber meant the evolution of the Hegelian “system of needs” in the sense of
individualistic material consumption. Even in the negatives Denken, Schopenhauer’s
“renunciation” (Entsagung) of the Arbeit (labour) for the Sisyphean futility of its satisfaction
(Voll-endung) of human needs, for its meretricious character, for its being futile operari, does
nothing else than confirm, precisely in its absolute negation of Labour, the equally absolute
centrality of it to the nascent capitalist society - a centrality that Schopenhauer’s pessimism
steadfastly “renounces” with its “withdrawal from the world” (Welt-flucht) and search for the
self-abnegation of Nirvana.
If, then, the Economic is precisely the study of how “the system of needs” or “the iron cage” has
evolved historically and institutionally, it is to the work of Marx and Weber - not to List and
others - that we must turn. Max Weber never understood the strictly economic meaning of
capitalism. He figured that profit - and therefore value - was the monetary difference between
investment and revenue. Unlike Marx, he never examined the nature of “value” - its dependence
on the commodification of human living labour into labour-power; and therefore he never
understood the nature of money in capitalism and of profits, or of what Marx called surplus
value, as its essential aim.

Weber’s “iron cage” referred specifically to the “system of needs” - which in turn required “the
rational organisation of the labour force” - and that again in turn the rise of “rational socialism”
as a Problematik raised peculiarly by capitalism as a specific form of social relations of
production requiring an organised labour force or working class.

In a nutshell, whereas Marx focused his sharp critical gaze on the antagonism of the wage
relation as the defining social and political reality of the capitalist mode of production, Weber’s
vast scholarship was concerned rather with understanding (Verstehen) the institutional means
from which capitalist industry derived its social and political legitimacy. Where Marx’s union of
theory and practice (praxis) sought to justify scientifically the necessity of revolution as the
resolution to capitalist exploitation arising from the internal contradictions of the wage relation,
Weber reflected wissenschaflich (sine ira et studio!) on the reasons for the political endurance of
capitalist industry and bourgeois parliamentary regimes in the face of the rising organisation of
the industrial workforce into a political class represented by mass socialist parties within
bourgeois parliamentary regimes. Revolution as catharsis from capitalist alienation on one side,
democratisation and legitimation of bureaucratic governance to stabilise bourgeois elitist rule on
the other: hence, Marxian Praxis vs. Weberian Objektivitat.

Yet, because Weber followed his insuperable sociological bent, unlike Marx, he never forgot that
capitalism is not at all “economics”; instead, economics is a set of social institutions concerning
the social production of material wants and needs - and these invariably involve the organisation
of labour. Marx identified the causes of capitalist exploitation in the “separation” (Trennung) of
workers from the means of production; Weber instead took both this separation and exploitation
as a given of social life - indeed, as a requirement of complex technical processes whereby
experts assume control and ownership over the means of production:
Everywhere we find the same thing: the means of operation within the factory, the state administration, the
army and university departments are concentrated by means of a bureaucratically structured human
apparatus in the hands of the person who has command over (herrschaft) this human apparatus. This is due
partly to purely technical considerations, to the nature of modem means of operation - machines, artillery and
so on - bur partly simply to the greater efficiency of this kind of human cooperation: to the development of
‘discipline’, the discipline of the army office, workshop and business. In any event it is a serious mistake to
think that this separation of the worker from the means of operation is something peculiar to industry, and,
moreover, to private industry. The basic state of affairs remains the same when a different person becomes
lord and master of this apparatus, when, say, a state president or minister controls it instead of a private
manufacturer. The ‘separation' from the means of operation continues in any case. As long as there are mines,
furnaces, railways, factories and machines, they will never be the property of an individual or of several
individual workers in the sense in which the materials of a craft in the Middle Ages were the property of one
guild-master or of a local trade cooperative or guild. That is out of the question because of the nature of
present-day technology.

Weber constantly confuses technical knowledge with legal ownership - despite the fact that he
ultimately conceded their profound inter-dependence in the late Munich lecture on Science
(Wissenschaft als Beruf), specifically the dependence of scientific research on the industrial
needs of capitalism and ultimately on “the iron cage”. It is the inevitability of the technical
stratification of production, between management and workers, between intellectual and manual
labour, that induces the equally inevitable necessity of profit as the unequal distribution of the
social product.

What, then, is socialism in relation to this fact? As I have already mentioned, the word has many meanings.
However, what one usually thinks of as the opposite of socialism is a private economic order, that is a state of
affairs in which provision for economic need is in the hands of private entrepreneurs and is so arranged that
these entrepreneurs procure the material means of operation, officials and labour force by means of contracts
of purchase and wage contracts, and then have the goods made and sell them on the market at their [281]
own economic risk and in the expectation of personal gain. Socialist theory has applied the label ‘anarchy of
production' to this private economic order because it is unconcerned whether the personal interest of the
individual entrepreneurs in selling their products (the profit interest) functions in such a way as to guarantee
that those who need these goods are indeed provided with them. Historically, there has been a change in the
question of which of a society’s needs should be taken care of by business (that is privately) and which should
be supplied not privately but socialistically in the widest sense, in other words by planned organisation.

Having identified, correctly, the specificity of economics in the production and distribution of
material goods and services, Weber now seems to move much closer to the specificity of
capitalist industry within the category of economics.

What characterises our current situation is firstly the fact that the private sector of the economy in
conjunction with private bureaucratic organisation and hence with the separation of the worker from the
means of operation (Betriebsmitteln), dominates an area that has never exhibited these two characteristics
together on such a scale at any time in history, namely the area of industrial production. Secondly there is the
fact that this process coincides with the introduction of mechanical production within the factory, and thus
with a local concentration of labour on one and the same premises, with the fact that the worker is tied to the
machine, and with common working discipline throughout the machine-shop or pit. Above all else, it is this
discipline which gives our present-day way of 'separating' the worker from the means of work
(Arbeitsmitteln) its special quality. It was life lived under these conditions, this factory discipline, that gave birth
to modern socialism.

It is not socialism that explains capitalism, argues Weber in his lecture on Sozialismus; to the
contrary, it is capitalism that explains socialism. In this forceful riposte to Marx’s saying that
“the steam engine explains the windmill”, to which he had already dedicated a long essay in
honour of Werner Sombart, Weber prepotently inverts Marx’s historical-materialist dialectic: it
is socialism, not capitalism, that is the weaker side in this historical and epochal confrontation.
The “separation” of workers and tools has always existed and always will exist - as will the
exploitation of workers on the part of the owners - in the army as in public administration as in
the mediaeval fief, as in the latifunds of Antiquity. It is not the case therefore that the
Sozialismus of social-democratic and communist parties, or indeed the anarcho-syndicalism of
trade unions, will replace capitalist industry anytime soon! Instead, presses Weber in his
harangue, it is this Sozialismus that is a temporary historical accident of capitalist industry and of
parliamentary democracy. The reason for this is that the sphere of industrial production serves to
satisfy individual physiological and intellectual needs - at least this regard, the labour market and
the industrial process operate in a manner entirely similar to that of natural selection in biology:

Socialism of the most diverse kinds has existed everywhere at every period and in every country in the world.
The unique character of modem socialism could grow only on this soil. This subjection to working discipline
is felt so acutely by the production worker because, in contrast to, say, a slave plantation or enforced labour
on a manorial farm,12 a modern production plant functions on the basis of an extraordinarily severe process
of selection. A modern manufacturer does not employ just any worker, just because he might work for a low
wage. Rather he installs the man at the machine on piece-wages and says: 'All right, now work! I shall see how
much you earn.' If the man does not prove himself capable of earning a certain minimum wage he is told: 'we
are sorry, but you are not suited to this occupation, we cannot use you. He is expelled because the machine is
not working to capacity unless

Weber: Political Writings

the man operating it knows how to utilise it fully. It is the same~ or similar, everywhere. In contrast to the
use of slave labour in antiquity, where the lord was tied to whatever slaves he had (if one of them died, it was
a capital loss for him), every modem industrial firm rests on the principle of selection (Auslese). On the other
hand this selection is driven to an extreme of intensity by competition between entrepreneurs, which ties the
individual entrepreneur to certain maximum wages; the inevitability (Zwangslaufigkeit) of the workers’
earnings corresponds to the inevitability of discipline.
The Darwinian and Nietzschean roots of Weber’s theoretical paradigm are absolutely
unmistakeable. It is competition between workers and capitalists and then again competition
among these social classes that imposes the industrial labour discipline on which capitalism is
founded! The market mechanism is a set of institutions that above all preserve the formal
freedom of the labour force - even down to the point where it organises or it is allowed by the
State or the bourgeoisie to organise as a political class! Not only is this crucial in terms of
dictating the direction of production through the relatively free choice of consumption by
workers, but it is also a powerful mechanism for mustering the productive force of workers. The
market mechanism is a set of institutions that regulate social conflict around these needs. It s the
continuation of politics by other means.

If the worker goes to the entrepreneur today and says, ‘We cannot live on these wages and you could pay us
more', in nine out of ten cases - I mean in peacetime and in those branches of industry where there is really
fierce competition - the employer is in a position to show the workers from his books that this is impossible:
'My competitor pays wages of such and such; if I pay each of you even only so much more, all the profit I could
pay to the shareholders disappears from my books. I could not carry on the business, for I would get no credit
from the bank.' Thereby he is often just telling the naked truth. Finally, there is the additional point that under
the pressure of competition profitability depends on the elimination of human labour as far as possible by
new, labour-saving machines~and especially the highest-paid type of workers who cost the business most.
Hence skilled workers must be replaced by unskilled workers or workers trained directly at the machine.
This is inevitable and it happens all the time.

This is a process of selection that operates as much among capitalist owners and managers as it
does among workers. As Maurice Dobb showed (in his seminal Studies in the Development of
Capitalism), the development of capitalism in Britain owed much to the rise of individual
workers and craftsmen as capitalist employers. The working class is the real motor of capitalist
development in driving productivity gains both in terms of expertise and know-how in the sphere
of production, and in terms of wage antagonism in the sphere of consumption. The New Deal is -
as a crisis of capitalism - very instructive in this regard. Then it was the capitalist State that had
to legislate the organisation of the labour force so as to revive consumption (aggregate demand)
and investment (higher productivity). This is what constitutes the Demokratisierung as a central
concept in Weber’s theorisation of industrial capitalism. The other central concept, of course, if
the Rationalisierung of industrial production made possible by the “exact calculation” (exakte
Kalkulation) of profit in monetary terms through the discipline of the market mechanism -
enabled in turn, as we saw above, by the formal freedom of workers.

Two elements, then, two ingredients characterise the specificity of capitalism: - the first is the
production of social needs through the privatisation of social means of production and most
important of the labour force through market forces, through private bidding. And the second is
the satisfaction and determination of these needs through the mechanism of the market as well!
But in both cases it is the formal freedom of workers that guarantees (a) the existence of multiple
capitalists and thence the competition for workers among capitalists; (b) the free antagonism
between workers and capital in the process of production; and (c) the relatively free choice of
consumption by workers. The market mechanism is all here. The formal freedom of workers is
the political and institutional framework that sets up the market mechanism by (i) ensuring that
workers do not own means of production; (ii) workers are forced to sell their labour-power; (iii)
that they do so as individuals and not in associations; (iv) that workers are paid money wages
and not through barter or other arrangements with capitalist employers; (v) as a corollary, there
are “many capitalists” and not One Capital, and finally (vi) workers are free to purchase products
with their wages from any capitalist.

Value Creation and the Coming World War

The world is moving inexorably toward a global conflict, one that will see the capitalist market
economies of the West confront and crush the Chinese Dictatorship and its Russian counterpart
- the latter already enfeebled by economic crisis, and the former already experiencing
insurmountable challenges on the financial and eventually on the industrial and political fronts.
The reasons for this seemingly apocalyptic conclusion can be drawn almost with the linearity of
logic from the study we have just conducted of Friedrich List’s political economy. To be sure,
List’s insightful analysis of the intrinsic conflictuality of capitalist industry still left room for his
avowed goal of a community of nations that could finally embody the idealistic premises of what
he called the “cosmopolitical economy” of the Anglo-Saxon economists from Adam Smith to J.B.
Say. In reality, however, whilst he correctly identified the different “stages of economic
development” as being the central reason for existing conflict between nations, List completely
failed to enquire into and to enucleate the meaning of “economic development” itself, as distinct
from just describing the extrinsic ectypal forms of these progressive “stages”. In the end, List’s
political economy amounts to a mere “classification” of stages of development which he
mistakenly thought could lead to the convergence of national economies without ever
penetrating the essential politico-economic meaning and dynamic of capitalist development that
leads - again, inexorably - to the divergence of national economies and eventually to open
warfare. Of course, the antagonism implicit in the wage relation - the violent “exchange” of living
labour with dead labour - is always tendentially leading to conflict - within nations, first, and then,
as nations seek to externalise this internal antagonism, also between nations. The challenge is
to identify the circum-stances, the con-ditions, that is to say, the surrounding events, the
ingredients that lead to war between capitalist nations.

Is there something in the notion of “value”, then, in the antagonism between workers and
capitalists, that leads all the way to international conflict and war? Let us first examine the more
visible notion of “profit”. Profit is the monetary difference between total investment and total
revenue. For a capitalist enterprise to be profitable, the products it sells must amount to more
than the cost of producing them with the cost of capital added (interest at the prevailing rate
over the period of production and sale). This means that in the process of production the inputs
have been “valorised” - their value has grown - and this is then reflected in the “realisation” of
the value through the sale process. But how can the components of production acquire value?
After all, objects (means of production - raw materials and machinery) are only inert objects and
they cannot possibly possess or acquire “value”. It is obvious that value, and the value added in
the process of production, can only be derived from living labour. Two things follow from this
conclusion: the first is that the value of a particular commodity cannot be determined until after it
is actually sold on the market - until its potential value is “realised”. And the second is that this
value is determined ultimately by the ability of this realised value “to purchase” labour-power on
the market as if it were a commodity like any other.

We have therefore a “double character” (Doppelcharakter) of human living labour: - on one side
it is the only possible source of value as living labour - that is its use value; and on the other it
can be “purchased” as labour-power through the violence of the wage relation “on the market”
like any other commodity through its exchange with produced commodities, that is to say, with
“dead labour”. Herein, therefore, lies the “specificity” of the Economic in a capitalist society, that
is to say, in the ability of capitalists to dominate living labour - workers - not through explicit
coercion but rather through a complex set of institutions that force workers to exchange their
living labour for the objects that they themselves have produced, with “dead labour” - again, not
through direct coercion from a particular capitalist toward particular workers because the
capitalist does not “own” the workers as is the case with slavery or with feudal relations where
the “serfs” are tied to the land, the feud or glebe. Nevertheless, it is equally obvious, first, that
the wage relation is one of violence in that workers would never accept to sell their living activity
in exchange for the product of their labour - that is surely an “exchange” that amounts to fraud (if
unwitting) or violence (if workers are aware of it) - Marx. But, second, it is also true that workers
could not preserve their “formal freedom” under the law if they rebelled against this violent
coercive transaction - one based on “the need to work”, “to put food on the table” - and the very
fact that workers are willing to work for “a fair wage” means that the capitalist mode of
production does have a minimum of legitimacy (Weber). Nevertheless, legitimacy does not
mean absence of conflict: capitalist society is founded on social antagonism between capitalist
and workers - and specifically on the antagonism of the wage relation. The question then arises
of why the antagonism of the wage relation has not exploded into open social conflict - into civil
war in many advanced industrial capitalist societies. The answer has to do with capitalist growth
and development. Let us see how this works.

Profit and Uneven Development

Profit in capitalist enterprise, and therefore surplus value, makes absolutely no sense at all
unless it is seen as value that can be (a) increased through the process of production or
“valorisation”, and (b) “realised” through the process of market sale. But for profit or surplus
value to be “realised” through sale, this profit realised by capitalists can have absolutely no
meaning unless it can be expressed as monetary purchasing power over fresh living labour!
This means that the process of realisation of profit can have meaning only through the exertion
of capitalist command over fresh living labour, over an ever-expanding population of workers. In
turn, this entails the presence of a reserve army of the unemployed that (a) provides competitive
tension on employed workers to drive down wages, and (b) provides a repository of further
investment for capitalists to expand their command over society so that there may be what is
called “capitalist accumulation”. In other words, capitalist accumulation through surplus value
and its monetary equivalent, profit, is nothing other than the expansion of excess labour-power
through overpopulation.

Thus, if we wish to understand why the global population keeps growing to the point where it is
becoming unsustainable for the ecosphere - then we have only the capitalist mode of production
to blame. But, the objection will be promptly moved, if that is so, why is it that the most
advanced capitalist countries are beginning to experience stable or stagnant or even declining
populations? The answer is relatively simple: as capitalist accumulation grows, the process runs
against political and environmental limits as capitalist ruling classes attempt, first, to keep their
own national populations pacified through rising living standards relative to other nations (!) - but
then, second, this first condition requires the presence of other nations (especially if under the
control of authoritarian dictatorships) where populations of potential workers are present that
can absorb the profits accumulated in the more advanced industrial capitalist countries. This
model of international capitalist division of social labour is premised therefore on the “uneven
development” of national economies - not just in terms of the level of “industrial” development,
but also and above all in terms of the “political-democratic” development of the nations involved!
As nations become more advanced from an industrial viewpoint, they also are left with no
choice but to emancipate their own working classes. Yet at the same time, these more
advanced capitalist nations need to find less advanced nations whose working populations they
can exploit and expand through higher rates of fertility! It goes without saying that this process
of “uneven development” gives rise to tremendous conflicts between the more advanced and
the less advanced capitalist countries - in all sorts of directions from migration pressures, to
international tensions as each capitalist nation seeks to unload its domestic wage antagonism
on other countries.

Friedrich List and Karl Marx - Or, Capitalism and the Dis-Location of the Bourgeois State

The implicit lie in all of bourgeois economics is that the sole aim and purpose of capitalism is to
increase - indeed, to maximise - ‘welfare’ in terms of the satisfaction of human needs. This is
especially true in trade theory where the creed of “free trade” as delivering welfare maximisation
between nations is deemed to be beyond all reasonable doubt as a tenet of “economic science”. But
the stark reality, as we have sought to demonstrate in our series on Friedrich List, is that capitalism
is founded on social conflict, on the antagonism of the wage relation. It is this antagonism - the
struggle of workers against capitalist command and for emancipation from the wage relation - that
compels capitalist employers to introduce technological innovations that seek, first, to defuse and
circumvent workers’ antagonism and, second, to make workers redundant in a given industry so as
to deflect their antagonism to other areas of production - and ultimately to other nation-states! In
other words, it is workers, not employers, who drive the push to productivity gains and innovation:
destroy the power of workers over production and you destroy productivity. The key to the
universal bourgeois deprecation of the recent stagnation in productivity is all here. As workers
have been disenfranchised in the capitalist metropole, productivity has stagnated.
The upshot of this analytical perspective of capitalist production is that the real effective aim of
capitalism is command over living labour through the production of ‘goods’ for sale: improvements
in living conditions for workers are only a consequence of this exquisitely Political conflict and
antagonism induced by capitalist command; they are not its direct aim and effect! The true essence
of capitalism is political command over living labour: welfare has never been and can never be the
real aim of capitalist industry. All those bourgeois economists and commentators - from Paul
Krugman to Martin Wolf - who sing the praises and celebrate the achievements of “free-trade
liberalism” as conducive to “economic growth and welfare” for the greatest number of humans - all
these imbeciles fail to perceive what List saw quite clearly and exposed with brutal lucidity: - that
the aim of the bourgeoisie is political power over workers by means of production - not welfare and
emancipation! And that invariably this quest for political power by the bourgeoisie must gravitate
and coalesce around the purveyors and holders of the means of violence over a given territory - that
is to say, the nation-state. The unquestionable truth that the sole purpose of capitalist production is
political domination through production - the exchange of living labour for dead labour - is
something that the saraband of morons who call themselves economists fail to perceive and
foolishly overlook in their analyses of the ever-widening trade battle between the US Republic and
the Chinese Dictatorship.

When Karl Marx derided “parliamentary cretinism”, he did so because in his view the violence of
the wage relation under capitalism made any form of political representation of the working class
in the bourgeois state entirely impotent and ineffectual, and all faith in it nothing more than either
bourgeois ideological mystification or working-class delusion. Although Marx always held firm to
the “political” nature of all economic relations as manifestations of an inherent “class struggle”, the
violence intrinsic in economic relations left little or no space between the factory and state
institutions. In other words, for Marx there was no “autonomy of the political”: in a capitalist
society, the State is nothing more than “a committee of the bourgeoisie” perpetrating and
perpetuating the naked violence of capitalist command in the workplace. Lenin’s reduction of all
politics to “a concentrate of economics” was made possible precisely by Marx’s insistence that the
State cannot be the heavenly resolution of the antagonism of the wage relation such as the
bourgeoisie wishes it to be, but must instead reproduce in all and for all the violence of capitalist
command over living labour. Because of this, it was not possible for Marx to explain how we have
come to have, at least in Western capitalist nations, a permissive society founded on an
authoritarian workplace.

Things stand in direct contrast to Marx in Friedrich List’s conception of economics. For List,
economics remains a science of welfare that can reconcile human interests: but it can do so only
when all nations reach a comparable level of economic development. Without economic equality
there can be no “free trade” and no “equal exchange” between nation-states. List shares with Marx
this “political” vision of economics - but only because for him economics is, as it were, “constrained”
by different levels of national development which in turn cause and justify open conflict between
those states. Thus, whereas Marx scrutinised political conflict at the microeconomic locus of
production - the factory or workplace -, List focused instead on the macroeconomic factors
involving national political idiosyncrasies. [Emanationism] The problem with List’s critique of
Anglo-Saxon ‘cosmopolitical’ economy is that nowhere does he explain (a) why different nations are
at different levels of economic development and, (b), how nations with different levels of economic
development can ever reach a convergence of this development such that equal exchange and free
trade become geopolitically possible!

The contrasting but related problems with both visions of economics and politics - that of Marx and
that of List - is evident: whereas Marx shatters the empyrean of the bourgeois “liberal-democratic”
parliamentary state against the hell of class antagonism over the capitalist wage relation, without
leaving any space, first, for the legitimacy of the bourgeois state and therefore, second, for national
politics, - List on the other hand leaves plenty of room for nationalist economic policies without
ever entering the realm of the factory!

As a result, Marx is unable to explain, first, how the bourgeoisie as a global entity whose interests
presumably converge in the class struggle against workers can obtain political legitimacy in a
capitalist economy - how it can present the State as a “neutral” representative political body
mediating the interests of all social classes -; and, second, how there can come to be separate
national bourgeoisies in conflict with one another! It is not pure accident that The Communist
Manifesto is the most internationalist document in social theory! In that short visionary pamphlet,
Marx avows his personal faith in the cosmic ecumenical mission of the bourgeoisie to homogenise
political systems across the globe and, thus, eventually to bypass the nation-state through the
establishment of a world market (what is known nowadays as “globalisation”). Marx is thereby
unable to explain the persistence of nation-states and inter-national conflict. For his part, List,
whilst starting from the existence of separate national bourgeoisies with conflicting economic
interests, is unable to explain how and why these national interests arise in the first place from the
differential economic development of each nation; and even less is he able to explain how these
conflicts can ever be reconciled under the “scientific” guidance of economics leading to convergent
national economic developments!

Our aim here has been to identify the complex dynamics whereby capitalist bourgeoisies seek to
gain hegemony over their working classes by mediating complex inter-national economic relations
that relate to exchange rates and trade policies in a manner that seeks to minimise the level of
domestic national class antagonism by “exporting” it to other bourgeoisies and workers in other
nations. It is true that such “export” is made easier by the so-called “globalisation” of international
financial movements - as theoreticians from Marx to List and even Benjamin Constant asseverated.
But far from leading to the homogenisation and convergence of bourgeois capitalist interests
against the global working class, this globalisation sets in motion fresh antagonisms that the
mobility of capital simply cannot resolve. In its monetary form, capital falls into the illusion that it
can move seamlessly from nation to nation. Yet in reality, however “global” it may pretend to be,
capital must always confront workers in flesh and blood in specific territories that correspond with
national states.
On one side, capitalist industry induces the homogenisation of capitalist command over workers
both in the sphere of production (the workplace) and in that of consumption (the market). But the
need to exploit rivalries and induce competition between different sets of workers is the unique
responsibility of finance capital - of capital in its most “liquid” or fungible form, capable of flowing
seamlessly from nation to nation, as Constant argued. In core capitalist societies (metropole), the
formal freedom of workers guarantees the existence of multiple poles of capitalist command - the
existence of many capitals in competition with one another - because otherwise the labour force
would be under the direct responsibility of one capitalist, wit the inevitable political complications.
There would be no “market” for living labour. The bourgeoisie can never take up the reins of society
entirely - because then it would cease to treat living labour as a commodity - there would be no
“market”. The existence of many capitals entails the existence of multiple poles of command over
living labour. The “exchange” or homogenisation of this command between different poles is
achieved through exchange rates between different monetary systems, where each monetary
system is known as a “currency area”.

The dis-location of the nation-state by the global bourgeoisie arises because of two competing and
conflicting needs of capitalist industry: the first need is to reduce class antagonism in each specific
area of capitalist production (the workplace, different branches of industry, different nation-states)
by dis-placing it through technological “innovation” or exporting this antagonism to other
geographical areas, including ultimately other nation-states, where the political strength of workers
is reduced (for example, totalitarian regimes such as China at present, or former ones like Japan,
South Korea and Taiwan in the recent past). In both cases, this first “need” induces the global
bourgeoisie to shift production to ever more authoritarian nation-states. On the other hand, the
second “need” of the global bourgeoisie is to place its capital holdings in as “liquid” a form possible
(money as currency, gold, jewellery) under the control of nation-states with the governance that
allows for impartial arbitration or resolution of inter-capitalist conflict and disputes. As we have
seen in our previous entry, this “need” for state justifiability of bourgeois property rights arises
because the formal freedom of the labour force requires the existence of many capitals: a capitalist
society with only One Capital simply cannot exist - because there would be no “labour market”.
(This is yet another reason why the Chinese Dictatorship will never be “capitalist” in China!)

The “free-dom” of capital requires a “liberal” political order - one in which (a) property rights and
(b) access to “markets” - above all the “labour market”, that is, access to “formally free labour” - is
absolutely sacrosanct and guaranteed constitutionally. Although a “liberal” State is not necessarily a
“democratic” one (as imbeciles who insist on the phrase “liberal democracy” imply) - nevertheless,
for workers to be “formally free” to sell their labour-power they need a minimal degree of political
representation. Thus, the first “need” induces the global bourgeoisie to support authoritarian
regimes, whilst the second “need” makes it lean toward more “democratic” or at least “liberal” ones
where at the very least an independent judiciary is present to adjudicate on property rights. The
bourgeoisie needs a “rule of law” or even a “State of Right” (Rechtsstaat) for capitalism to exist at
all!
A bourgeois state must therefore be somewhat schizophrenic in character: in foro interno, it must
be liberal and to some extent democratic; but in foro externo the bourgeoisie cannot but look with
languorous envy at the autocratic states and tyrants that enjoy unbridled dominion over their
workers! The liberal social contract celebrated from Hobbes to Locke, from Smith to Hayek, exists
only for those States under whose protection the global bourgeoisie places its wealth: everywhere
else, the global bourgeoisie seeks only its own brand of tyranny and domination! This abominable
reality flies right into the face of those liberal theoreticians (such as Benjamin Constant) who
argued that the freedom of capital movement would spread representative government across the
planet on the hypothesis that money capital and investments would flow to liberal nation-states.
These liberal theoreticians saw only one side of industrial capitalism - the need for “free markets”,
above all the “labour market”, that is, the “formal freedom of the labour force”. But they did not see
the other “need” of capital: - the need to dominate living labour (workers).

We can see now why and how this “schizophrenia” of the bourgeoisie leads to a dis-location of the
bourgeois State from representative government to outright totalitarian dictatorship. Next, we shall
see how this intra-cerebral problem is resolved by capital through monetary zones.