The Unwitting Hand Their Wealth to the Cunning

Classical Economists Sir William Petty (1623-87) down through Sir James Steuart (1712-80) built the philosophical foundation for Adam Smith free trade. In a replay of controlling the countryside to control resources and markets, each classical philosopher pointed out the necessity of using the powers of government to restrict self-provisioning in the countryside so as to provide labor for new industries and a market for those industries.

“Classical political economy was, first and foremost, meant to be a formula for accelerating the overall accumulation process” and was meant to guide all wealth produced by the increased efficiencies of technology to the already wealthy.[1]

The primary means for “accelerating the overall accumulation process” were exclusive titles to nature’s resources and technologies denying others their equal share. This foundation stone for all monopolies before and since was so simple that it was kept hidden by most classical economists by simply not mentioning it.

The elimination of today’s inequalities and injustices, which have their foundation in those earlier classics addressed above, is the inherent goal of this work.

Most the early classical philosophers were members of polite society writing a philosophy for other elites, a process still ongoing yet today. Speaking for the common people were Gerard Winstanley in the 16th century, Jean Jacques Rousseau in the 17th century, Johann Herder in the 18th century, and Karl Marx in the 19th century.[2]

In 1841, Friedrich List, the primary source for this chapter, addressed the rights of European empires and the emerging United States but did not address rights of nations and people on the periphery of empire. Nor did he address those exclusive titles to nature’s resources and technologies, the primary wealth appropriation principle within internal economies and also applied deeply to control of world trade.

Borrowing heavily from Sir James Steuart without acknowledgment Adam Smith wrote his bible of capitalism, The Wealth of Nations, exposing mercantilism and promoting free trade.

In-depth descriptions of 18th century mercantilist trade describe well the proto-mercantilist trade between the cities and countryside 600 years earlier and mirror the neo-mercantilist trade between developed and undeveloped nations for the next 230 years when the world was supposedly operating under Adam Smith’s philosophy.

For neo-mercantilists to restructure their overt plunder of weak societies into covert plunder through inequalities of trade, it was necessary to ignore statements in The Wealth of Nations that contradicted neoliberal trade philosophy. Though more were included, Free Trade was diplomatic code for continued mercantilist unequal trade. Adam Smith again:

A small quantity of manufactured produce purchases a great quantity of rude produce. A trading and manufacturing country, therefore, naturally purchases with a small part of its manufactured produce a great part of the rude produce of other countries; while, on the contrary, a country without trade and manufactures is generally obliged to purchase, at the expense of a great part of its rude produce, a very small part of the manufactured produce of other countries. The one exports what can subsist and accommodate but a very few, and imports the subsistence and accommodation of a great number. The other exports the accommodation and subsistence of a great number, and imports that of a very few only. The inhabitants of the one must always enjoy a much greater quantity of subsistence than what their own lands, in the actual state of their cultivation, could afford. The inhabitants of the other must always enjoy a much smaller quantity…. Few countries … produce much more rude produce than what is sufficient for the subsistence of their own inhabitants. To send abroad any great quantity of it, therefore, would be to send abroad a part of the necessary subsistence of the people. It is otherwise with the exportation of manufactures. The maintenance of the people employed in them is kept at home, and only the surplus part of their work is exported…. The commodities of Europe were almost all new to America, and many of those of America were new to Europe. A new set of exchanges, therefore, began to take place which had never been thought of before, and which should naturally have proved as advantageous to the new, as it certainly did to the old continent. The savage injustice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and destructive to several [all] of those unfortunate countries.[3]

John C. Miller points out that Britain’s Navigation Acts were mercantilism translated into statute law with the Staple Act completing that structure.[4]

Before Britain’s near defeat by Napoleon and his continental system, these protectionist maxims later so vehemently denied under Adam Smith, were,

plainly professed by all English ministers and parliamentary speakers:

[1] Always to favour the importation of productive power, in preference to the importation of goods.

[2] Carefully to cherish and to protect the development of the productive power.

[3] To import only raw materials and agricultural products, and to export nothing but manufactured goods.

[4] To direct any surplus of productive power to colonization, and to the subjection of barbarous nations.

[5] To reserve exclusively to the mother country the supply of the colonies and subject countries with manufactured goods, but in return to receive on preferential terms their raw materials and especially their colonial produce.

[6] To devote especial care to the coast navigation; to the trade between the mother country and the colonies; to encourage sea fisheries by means of bounties; and to take as active a part as possible in international navigation.

[7] By these means to found a naval supremacy, and by means of it to extend foreign commerce, and continually increase her colonial possessions.

[8] To grant freedom in trade with the colonies and in navigation only so far as she can gain more by it than she loses.

[9] To grant reciprocal navigation privileges only if the advantage is on the side of England, or if foreign nations can by that means be restrained from introducing restrictions on navigation in their favor.

[10] To grant concessions to foreign independent nations in respect of the import of agricultural products, only in case concessions in respect of her manufactured products can be gained thereby.

[11] In cases where such concessions cannot be obtained by treaty, to attain the object of them by means of contraband trade.

[12] To make wars and to contract alliances with exclusive regard to her manufacturing, commercial, maritime, and colonial interests. To gain by these alike from friends and foes; from the latter by interrupting their commerce at sea; from the former by ruining their manufactures through subsidies which are paid in the shape of English manufactured goods.[5]

As William Pitt refined the First Earl of Shaftesbury’s formula for British trading supremacy, Britain seems to have decided the protectionist policies through which she had become immensely wealthy had all been a mistake. In his classic,

In The National System of Political Economy (1977 edition), Friedrich List outlines how Britain, under the guidance of William Pitt, for the first time eulogized Adam Smith’s doctrine of free trade.

While secretly maintaining the old maxim of becoming wealthy by selling expensive manufactured goods and buying cheap commodities from weak dependent societies as outlined in the above 12 protectionist maxims.

The British state department, British intelligence and British industry were funding think tanks, correspondents, writers, and lecturers to impose their interpretation of Adam Smith’s free-trade philosophy across the world.[6]

Friedrich List alerts us that, Adam Smith free trade—as interpreted, designed, and managed by neo-mercantilists—is a br’er rabbit-don’t throw me in the brier patch scam designed to prevent the rest of the world from industrializing. This maintains their technological dependence and protects the flow of the world’s resources cheaply to the imperial centers.

Friedrich List points out that the forces of production are the tree on which wealth grows and an individual may be better off purchasing something cheaper from another society, but collectively everybody is better off if a society produces its own basic commodities, machine tools, and finished products.[7] For those who understand the multiplier factor (economic multiplier) this is obvious. However, note the relative equality which must be assumed and it is specifically that equality which is missing.

Napoleon knew well that any nation would be impoverished if their industry and trade were dominated by another: “Under the existing circumstances … any state which adopted the principles of free trade must come to the ground … [and] a nation which combines in itself the power of manufacturers with that of agriculture is an immeasurably more perfect and more wealthy nation than a purely agriculture one.”[8]

And List tells us that both “Adam Smith and J.B. Say had laid it down that … nature herself had singled out the people of the United States [and most of the rest of the world] exclusively for agriculture.” The Wealth of Nations had no allowance for industrial development beyond a few select nations and Friedrich List, who challenged the philosophy of Adam Smith because his native Germany could not develop under a philosophy designed to maintain the supremacy of Britain, allowed only for the industrialization of the temperate zones.

Even List’s staunchest supporters criticized his philosophy for not considering the rights of all people throughout the world.[9] An honest philosophy for world development, as we are advocating, must put rights for all worldwide as a first consideration.

Adam Smith recognized that protection for an undeveloped nation could “raise up artificers, manufacturers and merchants of its own” but claimed this would lower the price of their agriculture products.[10]

Considering agricultural production would be marketed to those employed in the new local industries and dependency of others on British commodities markets and manufactures was the centerpiece for maintaining the wealth of his native Britain, this was a difficult logic.

This tells us Adam Smith was considering only the rights of an imperial center and had relegated the periphery to providers of resources for that empire.

For the newly-free American colonies, France, and later Germany, William Pitt’s philosophy was easy to see through:

Such arguments did not obtain currency for very long [in France]. England’s free trade wrought such havoc amongst the manufacturing industries, which had prospered and grown strong under the Continental Blockade system, that a prohibitive règime was speedily resorted to under the protecting aegis of which, according to Dupin’s testimony, the producing power of French manufactories was doubled between the years 1815 and 1827.[11]

List’s insights into the “distinction between the theory of values and the theory of the powers of production” and the “difference between manufacturing power and agricultural power” were gained through observing firsthand both the rapid development of the newly-free United States as they ignored Britain’s promotion of Adam Smith [unequal] free trade and “the wonderfully favourable effects [to the continent] of Napoleon’s Continental System and the destructive results of its abolition.”[12]

Adam Smith pointed out, “England had founded a great empire for the sole purpose of raising up a people of customers…. The maintenance of this monopoly has hitherto been the principal, or more properly perhaps the sole end and purpose of the dominion which Great Britain assumes over her colonies.”[13] Historian

Barbara Tuchman concurs:

Trade was felt to be the bloodstream of British prosperity. To an island nation it represented the wealth of the world, the factor that made the difference between rich and poor nations. The economic philosophy of the time (later to be termed mercantilism) held that the colonial role in trade was to serve as the source of raw materials and the market for British manufacture, and never to usurp the manufacturing function.[14]

Underpay Through Unequal Currency Values

When the IMF-World Bank-GATT-NAFTA-WTO-MAI-GATS-FTAA-CAFTA-military cartel forces other countries to devalue their currencies and reduce consumption to increase sales of their valuable natural resources to the developed world, this lowers the value of their labor and commodities, and raises the relative value of manufactured products from the developed world.

The claim is made that this is due to the inefficiencies of developing world industry and labor, but this is hardly so:

The low level of wages is intimately linked not to low productivity of labor-time, as classical economic theory would suggest, but to the undervalued exchange rates and the workings of the international monetary system…. The world’s monetary system does not set values of the currencies on the basis of relative productivity of workers…. The present system is based on balance of payments considerations and on capital flows…. [T]he Mexican currency is valued much lower than the relative productivity of Mexican workers collectively…. [W]hile the average amount produced per unit of time by workers in Mexico, Brazil or Bangladesh is lower than in France, the United States or Japan, the difference in wages at present exchange rates is much bigger than the difference in productivity. This explains why the purchasing power of American dollars, French francs or Japanese yen is much bigger in Mexico, Bangladesh or Brazil than it is in their countries of origin. [1]

One study concluded developing world workers were paid under 2% of the product sales price in the industrial world and in all cases they were paid under 5% of the final sales price.[2]

There is “a continuing South-to-North resource flow on a scale far outstripping any the colonial period could command.”[3] During Kennedy’s presidency there were $3 flowing north for every $1 going south; by 1998 the ratio was seven to one.

The Periphery of Empire Finances the Imperial Centers

Poor countries are financing the rich through the wealthy world underpaying equally-productive developing world labor, paying far less than full value for natural resources, and through primarily investing in commodity production for the wealthy world. In this process, between 1980 and 1990, when measured against the dollar, not internal PPP (purchasing power parity) relative values, “wage levels in Mexico declined by 60% [another 40% in 1994-95] …, in Argentina by 50%, and in Peru by 70%.”[1] This appears as IMF-World Bank-GATT-NAFTA-WTO-MAI-GATS-FTAA-CAFTA failures.

Not so, they are instead the successes of financial and economic warfare, not failures. (Note: All this is rapidly changing due to the worldwide populist revolution. The IMF, the World Bank, and those unequal trade agreements may soon be history.)

The prices of developing world commodities are lowered while the prices of developed world products are retained, siphoning ever more wealth to corporate imperialists:

Capital that has extended its influence over these new territories knows its own interests, works together in its common interests even while individual capitals compete, [and] coordinates its goals and its strategies in its common interest…. There will always be social inequality, because that increases profits; winners win more because losers lose more. Keeping the Third World in dependence and poverty is not an accident or a failure of the world capitalist system, but part of its formula for success.[2]

Holland consumes 14-times the natural resources obtained within its borders through far undervaluing developing world labor. Other European countries are more or less comparable, and the United States, with fewer than 5% of the world’s population, consumes almost 30% of the world’s natural resources.[3]

That there is any intention of the developing world succeeding under a philosophy siphoning such enormous wealth from the impoverished to the wealthy is an oxymoron. For the world’s poor to gain control of their destiny the wealthy world must pay them equally for equally-productive work, pay full value for their natural resources, and permit them equal access to finance capital, technology, and markets. The key, of course, is that access. With it they will attain equal pay.

If their wealth were not appropriated by the imperial centers, the impoverished world could rapidly develop

Train labor, build industries to scale for a region, build construction equipment with those industries, build that infrastructure, and the cost to a region is primarily importing modern tools for those factories.

Those undeveloped regions have most of the world’s natural resources and all manufactured wealth is processed from natural wealth. So, although it is necessary that the banking system be socially-owned, developing an economically viable region is primarily creating money to train and employ a region’s own labor force to build the necessary infrastructure.

To do this, their currency must have no value outside their borders, a dual currency system. (Our Conclusions outline that dual currency structure.)

That infrastructure and the wealth produced backs the newly-created money as it circulates producing more wealth. Surplus money is easily destroyed by increasing mandated reserves.

The circulation of base money producing and consuming within the borders of an economically-viable region is the economic multiplier of a prosperous community.

Current exclusive titles to nature’s resources and technologies and the many other monopolies copied from those original excessive rights structured within unequal property rights denies that simplicity to the world.

Those who figure this out face harsh treatment. Our next page, Orchestration of Death Squads and the Writing of History, tells that story.

Those crucial 170 words describing an honest, efficient, capitalist economy. Does anyone have the ear of President Barack Obama’s Economic Recovery Team?

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We need more cutting edge researchers. If you can broaden our understanding and that of our readers, have a high-quality book within you that you wish to use in class, or just wish to reach the world, please Contact Us.

[1] Michael Perelman, The Invention of Capitalism: Classical Political Economy and the Secret History of Primitive Accumulation (London: Duke University Press, 2000), especially p. 91: Thomas C. Patterson, Inventing Western Civilization (New York: Monthly Review Press, 1997). Classical economists translated mean “those within the empire’s university system whose philosophies are pushed by the current power structure.” The lure of prestige and advancement (peer pressure) forced most professors and intellectual to protect the then-current power structure. All career advancements and funding go behind those whose teachings and writings protect the current power structure. It is hard to believe but this system of control through peer pressure works so well that high quality philosophy is ignored, rejected, and essentially unknown to all but a few of the most serious researchers.

[1] Susan George, Fabrizio Sabelli, Faith and Credit (San Francisco: Westview Press, 1994); Duncan Green, Silent Revolution (London: Cassel, 1995), especially pp. 95-96; Hancock, Graham, Lords of Poverty (New York: Atlantic Monthly Press, 1989); James Petras, “Latin America’s Free Market Paves the Road to Recession,” In These Times, February 13-19, 1991, p. 17.

[2] Peter Marcuse, “Letter from the German Democratic Republic,” Monthly Review, July/August 1990, p. 61.

[3] David C. Korten, When Corporations Rule the World (West Hartford, CT, Kumarian Press, 1995), p. 33.

[2] Perelman, The Invention of Capitalism, chapter 3.

[3] Adam Smith, The Wealth of Nations (New York: Random House, 1965), pp. 413, 426, 642. For free trade philosophy before Adam Smith, see Perelman, The Invention of Capitalism and Douglas A. Irwin, Against the Tide: An Intellectual History of Free Trade (Princeton, N.J.: Princeton University Press, 1996), chapter 3.

[4] John C. Miller, Origins of the American Revolution (Stanford: Stanford U Press, 1959), pp. 4-6.

[5] Friedrich List, The National System of Political Economy (Fairfield, NJ: Auguatus M. Kelley, 1977), pp. 366-370.

[6] Ibid, pp. xxvii-xxviii, 368-69.

[7] List, The National System summarized.

[8] Ibid, p. 73. Earlier theorists on protection against mercantilists were: Alexander Hamilton, 1791; Adam Muller, 1809; Jean-Antoine Chaptal, 1819 and Charles Dupin, 1827, see Paul Bairoch, Economics and World History: Myths and Paradoxes (Chicago: University of Chicago Press, 1993), p. 17.

[9] List, National System, Memoirs and p. 99.

[10] Smith, Wealth of Nations, pp. 66-67, 636-37; see especially List, National System, pp. xxvi, xxvii, 11, 73-75, 150-55, 99-100, 351.

[11] List, National System, pp. 73-75.

[12] Ibid, p. xxv..

[13] Quoted by Herbert Aptheker, The Colonial Era (New York: International Publishers, 1966), pp. 23-24; taken from Smith, Wealth of Nations, pp. 579-80, 626.

[14] Barbara Tuchman, The March of Folly (New York: Alfred A. Knopf, 1984), pp. 130-31 (emphasis added). For early mercantilist theory see Irwin, Against the Tide, chapter 2.

[1] Makhijani, Economic Justice, pp. xv, 80-81, 121-22, 162-65; see also pp. 159, 167-70.

[2] Jack Epstein, “Dickens Revisited,” The Christian Science Monitor, August 24, 1995, pp. 1, 8; Amy Kaslow, “The Price of Low-Cost Clothes: U.S. Jobs,” The Christian Science Monitor, August 20, 1995, p. 4; Christopher Scheer, “Illegals Made Slaves to Fashion,” The Nation, September 11, 1995, pp. 237-38.

[3] Susan George, The Debt Boomerang (San Francisco: Westview Press, 1992), p. xvii.

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