Revisiting Friedrich List's National System of Political Economy

Abstract

This paper traces a historical origin of the idea that the state (government) can and should implement a series of industrial policies to nurture domestic infant industries, in order to show how this economic theory sheds new light on contemporary debates regarding the proper relation between the state and market. Many scholars on the East Asian development experience have correctly focused on developmental states’ industrial and trade policies for promoting outward, export-led growth. However, least attention was paid to (the historical origin of) the economic theory that justifies this highly unorthodox policy measures by the state. The author claims that the original idea in the history of economic thought is best exemplified by the early 19th century German political economist Friedrich List, and examines how his infant industry protection policy proposals have been widely used by almost all advanced economies. This historical investigation of economic thought and the survey of actual capitalist economic development process shows that the East Asian development experience is not unique to this region and virtually almost all advanced economies had relied on a certain forms of policy of protection that List once emphasized. In addition, the same policy measures for protecting particular domestic industries are frequently used by the government in advanced capitalist economies even nowadays.