The National System of Political Economy (1)

Friedrich List

The National System of Political Economy (1)

The National System of Political Economy

by Friedrich List translated by Sampson S. Lloyd, 1885

First Book: The History

Chapter 1

The Italians

At the revival of civilisation in Europe, no county was in so favourable a position as Italy in respect to commerce and industry. Barbarism had not been able entirely to eradicate the culture and civilisation of ancient Rome. A genial climate and a fertile soil, notwithstanding an unskilful system of cultivation, yielded abundant nourishment for a numerous population. The most necessary arts and industries remained as little destroyed as the municipal institutions of ancient Rome. Prosperous coast fisheries served everywhere as nurseries for seamen, and navigation along Italy’s extensive sea-coasts abundantly compensated her lack of internal means of transport. Her proximity to Greece, Asia Minor, and Egypt, and her maritime intercourse with them, secured for Italy special advantages in the trade with the East which had previously, though not extensively, been carried on through Russia with the countries of the North. By means of this commercial intercourse Italy necessarily acquired those branches of knowledge and those arts and manufactures which Greece had preserved from the civilisation of ancient times.

From the period of the emancipation of the Italian cities by Otho the Great, they gave evidence of what history was testified alike in earlier and later times, namely, that freedom and industry are inseparable companions, even although not unfrequently the one has come into existence before the other. If commerce and industry are flourishing anywhere, one may be certain that there freedom is nigh at hand: if anywhere Freedom was unfolded her banner, it is as certain that sooner or later industry will there establish herself; for nothing is more natural than that when man has acquired material or mental wealth he should strive to obtain guarantees for the transmission of his acquisitions to his successors, or that when he has acquired freedom, he should devote all his energies to improve his physical and intellectual condition.

For the first time since the downfall of the free states of antiquity was the spectacle again presented to the world by the cities of Italy of free and rich communities. Cities and territories reciprocally rose to a state of prosperity and received a powerful impulse in that direction from the Crusades. The transport of the Crusaders and their baggage and material of war not only benefited Italy’s navigation, it afforded also inducements and opportunities for the conclusion of advantageous commercial relations with the East for the introduction of new industries, inventions, and plants, and for acquaintance with new enjoyments. On the other hand, the oppressions of feudal lordship were weakened and diminished in manifold ways, owing to the same cause, tending to the greater freedom of the cities and of the cultivation of the soil.

Next after Venice and Genoa, Florence became especially conspicuous for her manufactures and her monetary exchange business. Already, in the twelfth and thirteenth centuries, her silk and woollen manufactures were very flourishing; the guilds of those trades took part in the government, and under their influence the Republic was constituted. The woollen manufacture alone employed 200 manufactories, which produced annually 80,000 pieces of cloth, the raw material for which was imported from Spain. In addition to these, raw cloth to the amount of 300,000 gold gulden was imported annually from Spain, France, Belgium, and Germany, which, after being finished at Florence, was exported to the Levant. Florence conducted the banking business of the whole of Italy, and contained eighty banking establishments.(1*) The annual revenue of her Government amounted to 300,000 gold gulden (fifteen million francs of our present money), considerably more than the revenue of the kingdoms of Naples and Aragon at that period, and more than that of Great Britain and Ireland under Queen Elizabeth.(2*)

We thus see Italy in the twelfth and thirteenth centuries possessing all the elements of national economical prosperity, and in respect of both commerce and industry far in advance of all other nations. Her agriculture and her manufactures served as patterns and as motives for emulation to other countries. Her roads and canals were the best in Europe. The civilised world is indebted to her for banking institutions, the mariner’s compass, improved naval architecture, the system of exchanges, and a host of the most useful commercial customs and commercial laws, as well as for a great part of its municipal and governmental institutions. Her commercial, marine, and naval power were by far the most important in the southern seas. She was in possession of the trade of the world; for, with the exception of the unimportant portion of it carried on over the northern seas, that trade was confined to the Mediterranean and the Black Sea. She supplied all nations with manufactures, with articles of luxury, and with tropical products, and was supplied by them with raw materials. One thing alone was wanting to Italy to enable her to become what England has become in our days, and because that one thing was wanting to her, every other element of prosperity passed away from her; she lacked national union and the power which springs from it. The cities and ruling powers of Italy did not act as members of one body, but made war on and ravaged one another like independent powers and states. While these wars raged externally, each commonwealth was successively overthrown by the internal conflicts between democracy, aristocracy, and autocracy. These conflicts, so destructive to national prosperity, were stimulated and increased by foreign powers and their invasions, and by the power of the priesthood at home and its pernicious influence, whereby the separate Italian communities were arrayed against one another in two hostile factions.

How Italy thus destroyed herself may be best learned from the history of her maritime states. We first see Amalfi great and powerful (from the eighth to the eleventh century).(3*) Her ships covered the seas, and all the coin which passed current in Italy and the Levant was that of Amalfi. She possessed the most practical code of maritime laws, and those laws were in force in every port of the Mediterranean. In the twelfth century her naval power was destroyed by Pisa, Pisa in her turn fell under the attacks of Genoa, and Genoa herself, after a conflict of a hundred years, was compelled to succumb to Venice.

The fall of Venice herself appears to have indirectly resulted from this narrow-minded policy. To a league of Italian naval powers it could not have been a difficult task, not merely to maintain and uphold the preponderance of Italy in Greece, Asia Minor, the Archipelago, and Egypt, but continually to extend and strengthen it; or to curb the progress of the Turks on land and repress their piracies at sea, while contesting with the Portuguese the passage round the Cape of Good Hope.

As matters actually stood, however, Venice was not merely left to her own resources, she found herself crippled by the external attacks of her sister states and of the neighbonring European powers.

It could not have proved a difficult task to a well-organised league of Italian military powers to defend the independence of Italy against the aggression of the great monarchies. The attempt to form such a league was actually made in 1526, but then not until the moment of actual danger and only for temporary defence. The lukewarmness and treachery of the leaders and members of this league were the cause of the subsequent subjugation of Milan and the fall of the Tuscan Republic. From that period must be dated the downfall of the industry and commerce of Italy.(4*)

In her earlier as well as in her later history Venice aimed at being a nation for herself alone. So long as she had to deal only with petty Italian powers or with decrepid Greece, she had no difficulty in maintaining a supremacy in manufactures and commerce through the countries bordering on the Mediterranean and Black Seas. As soon, however, as united and vigorous nations appeared on the political stage, it became manifest at once that Venice was merely a city and her aristocracy only a municipal one. It is true that she had conquered several islands and even extensive provinces, but she ruled over them only as conquered territory, and hence (according to the testimony of all historians) each conquest increased her weakness instead of her power

At the same period the spirit within the Republic by which she had grown great gradually died away. The power and prosperity of Venice — the work of a patriotic and heroic aristocracy which had sprung from an energetic and liberty-loving democracy-maintained itself and increased so long as the freedom of democratic energy lent it support, and that energy was guided by the patriotism, the wisdom, and the heroic spirit of the aristocracy. But in proportion as the aristocracy became a despotic oligarchy, destructive of the freedom and energies of the people, the roots of power and prosperity died away, notwithstanding that their branches and leading stem appeared still to flourish for some time longer.’(5*)

A nation which has fallen into slavery,’ says Montesquieu,(6*) ’strives rather to retain what it possesses than to acquire more; a free nation, on the contrary, strives rather to acquire than to retain.’ To this very true observation he might have added — and because anyone strives only to retain without acquiring he must come to grief, for every nation which makes no forward progress sinks lower and lower, and must ultimately fall. Far from striving to extend their commerce and to make new discoveries, the Venetians never even conceived the idea of deriving benefit from the discoveries made by other nations. That they could be excluded from the trade with the East Indies by the discovery of the new commercial route thither, never occurred to them until they actually experienced it. What all the rest of the world perceived they would not believe; and when they began to find out the injurious results of the altered state of things, they strove to maintain the old commercial route instead of seeking to participate in the benefits of the new one; they endeavoured to maintain by petty intrigues what could only be won by making wise use of the altered circumstances by the spirit of enterprise and by hardihood. And when they at length had lost what they had possessed, and the wealth of the East and West indies was pouted into Cadiz and Lisbon instead of into their own ports, like simpletons or spendthrifts they turned their attention to alchemy.(7*)

In the times when the Republic grew and flourished, to be inscribed in the Golden Book was regarded as a reward for distinguished exertions in commerce, in industry, or in the civil or military service of the State. On that condition this honour was open to foreigners; for example, to the most distinguished of the silk manufacturers who had immigrated from Florence.(8*) But that book was closed when men began to regard places of honour and State salaries as the family inheritance of the patrician class. At a later period, when men recognised the necessity of giving new life to the impoverished and enfeebled aristocracy, the book was reopened. But the chief title to inscription in it was no longer, as in former times, to have rendered services to the State, but the possession of wealth and noble birth. At length the honour of being inscribed in the Golden Book was so little esteemed, that it remained open for a century with scarcely any additional names.

If we inquire of History what were the causes of the downfall of this Republic and of its commerce, she replies that they principally consisted in the folly, neglect, and cowardice of a worn-out aristocracy, and in the apathy of a people who had sunk into slavery. The commerce and manufactures of Venice must have declined, even if the new route round the Cape of Good Hope had never been discovered.

The cause of it, as of the fall of all the other Italian republics, is to be found in the absence of national unity, in the domination of foreign powers, in priestly rule at home, and in the rise of other greater, more powerful, and more united nationalities in Europe.

If we carefully consider the commercial policy of Venice, we see at a glance that that of modern commercial and manufacturing nations is but a copy of that of Venice, only on an enlarged (i.e. a national) scale. By navigation laws and customs duties in each case native vessels and native manufactures were protected against those of foreigners, and the maxim thus early held good that it was sound policy to import raw materials from other states and to export to them manufactured goods.(9*)

It has been recently asserted in defence of the principle of absolute and unconditional free trade, that her protective policy was the cause of the downfall of Venice. That assertion comprises a little truth with a great deal of error if we investigate the history of Venice with an unprejudiced eye, we find that in her case, as in that of the great kingdoms at a later period, freedom of international trade as well as restrictions on it have been beneficial or prejudicial to the power and prosperity of the State at different epochs. Unrestricted freedom of trade was beneficial to the Republic in the first years of her existence; for how otherwise could she have raised herself from a mere fishing village to a commercial power? But a protective policy was also beneficial to her when she had arrived at a certain stage of power and wealth, for by means of it she attained to manufacturing and commercial supremacy. Protection first became injurious to her when her manufacturing and commercial power had reached that supremacy, because by it all competition with other nations became absolutely excluded, and thus indolence was encouraged. Therefore, not the introduction of a protective policy, but perseverance in maintaining it after the reasons for its introduction had passed away, was really injurious to Venice.

Hence the argument to which we have adverted has this great fault, that it takes no account of the rise of great nations under hereditary monarchy. Venice, although mistress of some provinces and islands, yet being all the time merely one Italian city, stood in competition, at the period of her rise to a manufacturing and commercial power, merely with other Italian cities; and her prohibitory commercial policy could benefit her so long only as whole nations with united power did not enter into competition with her. But as soon as that took place, she could only have maintained her supremacy by placing herself at the head of a united Italy and by embracing in her commercial system the whole Italian nation. No commercial policy was ever clever enough to maintain continuously the commercial supremacy of a single city over united nations.

From the example of Venice (so far as it may be adduced against a protective commercial policy at the present time) neither more nor less can be inferred than this — that a single city or a small state cannot establish and maintain such a policy successfully in competition with great states and kingdoms; also that any power which by means of a protective policy has attained a position of manufacturing and commercial supremacy, can (after she has attained it) revert with advantage to the policy of free trade.

In the argument before adverted to, as in every other when international freedom of trade is the subject of discussion, we meet with a misconception which has been the parent of much error, occasioned by the misuse of the term ’freedom.’ Freedom of trade is spoken of in the same terms as religious freedom and municipal freedom. Hence the friends and advocates of freedom feel themselves especially bound to defend freedom in all its forms. And thus the term ’free trade’ has become popular without drawing the necessary distinction between freedom of internal trade within the State and freedom of trade between separate nations, notwithstanding that these two in their nature and operation are as distinct as the heaven is from the earth. For while restrictions on the internal trade of a state are compatible in only very few cases with the liberty of individual citizens, in the case of international trade the highest degree of individual liberty may consist with a high degree of protective policy. Indeed, it is even possible that the greatest freedom of international trade may result in national servitude, as we hope hereafter to show from the case of Poland. In respect to this Montesquieu says truly, ’Commerce is never subjected to greater restrictions than in free nations, and never subjected to less ones than in those under despotic government.’(10*)


1. De l’Ecluse, Florence et ses Vicissitudes, pp. 23, 26, 32, 163, 213.

2. Pechio, Histoire de l’Economie Politique en Italie.

3. Amalfi contained at the period of her prosperity 50,000 inhabitants. Flavio Guio, the inventor of the mariner’s compass, was a citizen of Amalfi. It was the sack of Amalfi by the Pisans (1135 or 1137) that that ancient book was discovered which later on became so injurious to the freedom and energies of Germany — the Pandects.

4. Hence Charles V was the destroyer of commerce and industry in Italy, as he was also in the Netherlands and in Spain. He was the introducer of nobility by patent, and of the idea that it was disgraceful for the nobility to carry on commerce or manufactures — an idea which had the most destructive influence on the national industry. Before his time the contrary idea prevailed; the Medici continued to be engaged in commerce long after they had become sovereign rulers.

5. “Quand les nobles, au lien de verser leur sang pour la patrie, au lieu d’illustrer l’etat par des victoires et de l’agrandir par des conquetes, n’eurent plus qu’a jouir des honneurs et a se partager des impots on dut se demander pourquoi il y avait huit ou neuf cents habitants de Venice qui se disaient proprietaries de toute la Republique.” (Daru, Histoire de Venise, vol. iv. ch. xviii.)

6. Esprit des Lois, p. 192.

7. A mere charlatan, Marco Brasadino, who professed to have the art of making gold, was welcomed by the Venetian aristocracy as a saviour. (Daru, Histoire de Venise, vol. iii. ch. xix.)

8. Venice, as Holland and England subsequently did, made use of every opportunity of attracting to herself manufacturing industry and capital from foreign states. Also a considerable number of silk manufacturers emigrated to Venice from Luces, where already in the thirteenth century the manufacturer of velvets and brocades was very flourishing, in consequence of the oppression of the Lucchese tyrant Castruccio Castracani. (Sandu, Histoire de Venise, vol. i. pp. 247-256.)

9. Sismondi, Histoire des Republiques Italiennes, Pt. I, p. 285.

10. Esprit des Lois, livre xx. ch. xii.