Introduction

In this paper, I will argue that states’ international economic policies derive from their underlying political philosophies.  The paper first derives from mercantilist Friedrich List’s writings a philosophical dichotomy – between clashing valuations of individual and collective rights – that animates disputes between liberal and non-liberal economic policy recommendations.  It then employs this philosophy-based explanation of international political economy (IPE) outcomes to evaluate the utility of – and to suggest directions for future research in – three modern approaches to IPE.

List on Economics

In The National System of Political Economy, List defends the practice of protectionism on the grounds of national interests.  Assuming the existence of “a universal union or confederation of all nations as the guarantee for an everlasting peace,” writes List, “the principle of international free trade seems to be perfectly justified.”[1]  Indeed, he correlates the increasing concord among “the civilised [sic] nations of the earth” with the increasing commercial “prosperity of mankind.”[2]

At present, however, the assumption of global political unity remains inaccurate: “[T]he race is still separated into distinct personalities each held together by common powers and interests…which in the exercise of their natural liberty are opposed to one another.”[3]  The “prevailing school” of liberal economists who deny this fact – not the fact that separate states exist in reality, but the fact that they exist “with their distinct nature and interests”[4] – therefore is unjustified in espousing “the principle of international free trade.”

Conversely, List is justified in denouncing that principle insofar as he can explain two points.  First, he must clarify why national “powers and interests” matter: He need not dispute Francois Quesnay’s physiocratic claim that free trade augments “the well-being of the whole human race,” but he does need to argue that, in some way, “[t]he well-being of the individual”[5] in a particular nation depends more on the prosperity of that nation than on that of the human race.  Second, he must describe how free trade harms particular nations’ “powers and interests.”

List makes an plausible case in favor of this second point.  He asserts that free trade is in the interest of prosperous states: “[C]ivilized nations are driven on with irresistible power to extend or transfer their powers of production to less cultivated countries,” thereby benefiting both parties.[6]  However, the “less advanced nations” ought not to adopt free trade, lest they fall “[subject] to the supremacy of the predominant manufacturing, commercial, and naval power.”[7]  In List’s day, for example, free trade would have permitted England to specialize in manufactures, to import from Germany only “children’s toys, wooden clocks, and philological writings,” and to export its “excess of capital” to the colonies.[8]  Therefore List recommends that states such as Germany turn to protectionism, “inasmuch as it forms the only means of placing those nations which are far behind in civilisation [sic] on equal terms with the one predominating nation.”[9]

List on Politics

Here List poses a revealing question.  Having described some of the economic consequences of protectionism, he asks on behalf of “[p]olitical science” – not economics – why liberal economists “utterly ignore” these consequences “of the system of protection” when they compare “[its] advantages and [its] disadvantages.”[10]  Yet the question implies its own answer.  Whether these liberal economists address the interests of the family, the nation, or the human species, they study the decisions made by individual men and women within that economic domain.  “Liberalism,” write George Crane and Abla Amawi in their discussion of The Theoretical Evolution of International Political Economy, “conceptualizes political economy almost wholly in terms of interrelationships among rational individuals.”  “At the core of [Adam Smith’s liberal] system,” they find, “is an assumption…of rational egoism,” and David Ricardo’s great contribution to that system is to “[build a] foundation of methodological individualism.”[11]

List does not escape these methodological restrictions; for example, even as he seeks to ascertain a policy’s impact on national interests, he must determine whether that policy causes individuals to behave in a way that furthers those interests.[12]  Consequently, liberal economics offers few categories of “advantages and… disadvantages” with which to evaluate alternative political policies: It recognizes the welfare of the individual as the motive that impels economic action, and it recognizes the state as the source of constraints on that action.  Yet it lacks any concept of a state’s wellbeing apart from that of the sum of its citizens.[13]

Thus, insofar as the “powers and interests” of a nation signify merely the welfare of its individual citizens, the economic school of Quesnay, Smith, and Ricardo champions those “powers and interests.”  For example, Smith believes that “[e]very individual in pursuing his own interests necessarily promotes thereby also the interests of the community”[14]; therefore he concludes that, “in order to attain the highest degree of national prosperity, we have simply to follow the maxim of letting things alone” and abstain from “[r]estrictions on trade.”[15]

List, on the other hand, does not consider a nation’s interests to be congruent with those of its individual citizens.  This theme is implicit in his very advocacy of protectionism[16]: He challenges the belief that “it is folly to suppose that the community is something quite different from the individuals of whom it is composed.”[17]  List evinces a clear reverence for the interests of the former over the latter.  His basic argument against absolute free trade – that “private industry can only lay claim to unrestricted action so long as [it] consists with the well-being of the nation” – is an outgrowth of the dictum that “individual liberty is in general a good thing so long only as it does not run counter to the interests of society.”[18]

Thus, whereas List successfully explains how free trade harms certain nations’ “powers and interests,” he cannot explain why these “powers and interests” matter from the economic perspective that this paper discusses above.  He describes the economic consequences of protectionism, but he decides not to appraise those consequences using one criterion of value that the discipline of economics has to offer (the maximization of individuals’ welfare).  Therefore he reduces the economic controversy over free trade’s utility to the political philosophy question of whether “the interests of society” outweigh “individual liberty.”

This is an inadvertent admission that, before a state can formulate any economic policies, and even before it can select its national interests, it must decide on a more fundamental philosophical stance in favor of either collective or individual rights.  We might rephrase and concretize the principle by asserting that, before a state can decide that protectionism is the optimal means of augmenting its productive powers – and even before it can decide that the growth of its productive powers is a national interest – it must decide whether it will adopt national interests that undercut its individual citizens’ interests.

Thus Crane and Amawi miss something when they argue that List’s “argument is basically ad hoc, arguing why certain states, Germany in particular, should be given a chance, through protectionism, to ascend the ranks to industrialized status.”[19]  List’s economic recommendations are not ad hoc refutations of liberal IPE’s economic models; rather, he tries to systematically apply those liberal models in order to practically pursue his political philosophy.  His recommendations therefore diverge from those of other economists because they hold differing assumptions on the philosophical level, not because List makes ad hoc arguments regarding economics.

List on Philosophy

For example, List perceives a nation’s interests to encompass “the convenience and the wants of the most distant generations” and “the thousand other objects which can only be attained by the aid of the whole community.”  Moreover, these collective interests supersede individuals’ interests, such that “the State require[s] that they should sacrifice for these” by ceding some of their money, their labor, or even their lives.[20]  In the specific case of trade policy, a nation’s interest in “increasing the amount of its productive powers” may justify “commercial restrictions” even at the price of constraining immediate growth in “the amount of the values of exchange in the nation.”  Individual citizens forfeit some gains from trade, but they acquire the national “privilege” of membership in a “home market which is thus secured to native industry.”[21]

List does not flesh out the reasoning behind his high esteem for this “privilege” or for a nation’s “productive powers” in general, but this is not relevant.  There are other, stronger arguments in favor of collectivist ideals, but this, too, is not relevant.  Instead, List’s great theoretical contribution is his implicit specification of the two fundamental political alternatives that all states must weigh before formulating their trade policies.  This principle is perhaps the most important theoretical point in the current week’s readings, and it should serve as a starting point for evaluating other schools of IPE discussed by Crane and Amawi.  Accordingly, the remainder of this paper examines the implications of that principle for the three modern IPE approaches with which those authors conclude their introductory chapter.

Rational Choice Analysis

The first such approach is rational choice analysis.  Crane and Amawi write that it “is grounded in liberalism, constructing abstract models from the premise of rational egoism” and explaining “why individuals make choices that lead to suboptimal economic outcomes.”  Employing such concepts as “free-rider” problems and Prisoners’ Dilemma games, rational choice studies have advanced several explanations for “the persistence of protectionism.”  Crane and Amawi appear to believe that, while this approach uses the liberal premise of methodological individualism, it overcomes classical liberalism’s “economic focus,”[22] whereby “[p]ersistence and economically inefficient political intervention in the market is not explained; rather, it is dismissed as ‘irrational.’”[23] 

However, List’s writings suggest an alternative solution to this explanatory gap: Classical liberalism should restrict itself to economics; its core assumptions describe individuals’ economic goals.  A liberal political theory – encompassing IPE – should retain the methodology of individualism, but its supplementary assumptions should detail individuals’ political aims.  And the fundamental political choice that an individual must makes – before he or she can make any other decisions in the realm of IPE – is to decide whether to favor a philosophy of individual or of collective rights.  Thus, only by grounding itself upon this type of philosophical basis can rational choice analysis realize its potential as a model for explaining political outcomes, in IPE and elsewhere.

Hegemonic Stability Theory

Crane and Amawi next discuss hegemonic stability theory, which – in all of its major variants – “[correlates] a relatively open international economic system and a concentration of global political-economic power in a single ‘hegemonic’ state.”  Hegemons like Britain or the United States enforce “orderly international economic relations” – but do they intend “to provide public goods” and to “serve the interest of the system as a whole,” or do they “act out of self-interest…creat[ing] specific international regimes to defend its interests systemwide”?  Which “specific political interests” do states pursue as they win, exercise, and lose their hegemony?[24]  Again, the philosophical dichotomy revealed by List can play a key explanatory role.  If the rulers of a hegemonic state embrace a philosophy that champions individual rights, then the “specific political interests” they defend may be their citizens’ property rights.  Leaders who favor collective rights may adopt a less self-interested approach, depending on whether the collective they esteem is that of their nation or of humanity as a whole.

Conclusions: Epistemic Communities

Finally, Crane and Amawi introduce “the concept ‘epistemic community,’” referring to “groups of technical experts” – e.g., on “environmental studies” – who share basic worldviews and cause-and-effect beliefs.”  Though their members are “dispersed around the globe,” they “can exercise influence on national policy”: “[N]etworks of expertise bring worlds of specific knowledge into domestic policy processes.”[25]

This concept suggests a possible mechanism by which the types of political philosophies discussed above might come to influence international policies.  Fruitful avenues for future research may include the historical tracing of political and economic concepts’ transmission from philosophers, to international networks of technical or academic experts, and finally to politicians and other policymakers.  For example, scholars might study the origins of the philosophical beliefs upon which John Maynard Keynes grounded his economic recommendations – in particular, his advice for minimizing unemployment[26] – as well as any additional philosophies to which those recommendations appealed, and the role of dispersed international networks in advancing both Keynesian policies and the philosophies with which they are compatible.  IPE models that incorporate political philosophies can provide us with a simple but powerful tool for explaining states’ international economic policies.