Lister's Theory of Protection Trade

Adam Smith, the undisputed father of modern economics, seemed to favor the idea of free trade and competition between nations in the economy. By contrast, Richard Cobden and John Bright advocated the idea of protectionism, or placing tariffs on imported goods in order to protect domestic producers and stimulate the economy. However, in a strange twist of fate, it was one of Smiths students, Robert Torrens, who became the most visibly outspoken supporter of this idea. Whereas Smith himself was extremely skeptical and refused to even consider the idea, Torrens developed a theory that became known as the Protectionist Theory of Commerce.

The Protectionist Theory of Commerce is based on the idea that there is a need for the government to intervene and protect domestic producers from the influx of cheap imported goods. This is because in many cases, the domestic producers simply cannot compete on the same terms as their international counterparts. Furthermore, the theory claims that this intervention does not necessarily have to be in the form of tariffs and other restrictions, but it may also come in the form of grants and subsidies.

According to Torrens, tariffs and other restrictions on imported goods are necessary in order to protect the local industries and their workers. He argued that the cost of production would rise if the imported goods were allowed to enter the country without restriction, thus making the domestic products too expensive for the average consumer to afford. By preventing the influx of cheap imported goods, the government ensures that local businesses remain competitive and are able to supply the general public with reasonably priced goods.

Torrens also argued that the intervention of the government in trade and commerce was not just beneficial to the domestic producers, but also to the average citizen. This is because, when tariffs are placed on imported goods, their prices tend to be higher than those of domestically produced goods. Thus, the average citizen is able to save money while still buying high-quality and reliable products.

Overall, the Protectionist Theory of Commerce is an interesting and complex argument that has remained controversial to this day. While it has been widely accepted in certain nations, especially in developing countries, it remains controversial in certain European countries, such as Germany and England. Therefore, it is important to approach this theory with an open mind and appreciate the value of protectionism and its merits for both domestic producers and the citizens at large.

Adam Smith has long been regarded as the ‘Father of Economics’, however his contributions to economic thought have been challenged by some, such as Richard Cobden, who argued that free trade was superior to mercantilism. In contrast to Smith and Cobden, free trade was advocated by David Ricardo and Friedrich List, yet another proponent of free trade, was Friedrich List.

Friedrich List wrote a book, “The National System of Political Economy”, in which he argued that economic protectionism was necessary for economic development. List argued that economic protectionism was only necessary when a nation was at a disadvantage compared to other countries in terms of its level of development. He believed that nations should protect their fledgling industries from international competition until they were developed enough to compete on their own.

According to List, a nation might not have the resources or capital to compete effectively with its more prosperous counterparts. Therefore, by protecting its immature industries through tariffs and other means, a nation could develop these industries and make them more competitive. List believed that economic protectionism would help a nation to build up its industry and make it more attractive to foreign investors, allowing the nation to catch up to other nations in terms of development.

List had a tremendous influence on many politicians, including Robert Walpole and William Pitt the Younger, who used his theories to support their policies of mercantilism. It was through List’s influence that mercantilism was replaced in favor of protectionism. Although mercantilism enjoyed some success in the 18th and 19th centuries, it proved to be inadequate in the face of modern competition, and by the late 19th century, the only nation to embrace protectionism had been the United States, due largely to the influence of Lists theories.

Lists viewpoint on protectionism has not been universally accepted, as some economists argue that economically developed nations are actually harmed by excessive protectionism. Nevertheless, List’s contribution to economic theory cannot be denied and his advocacy of protectionism remains an important part of economic thought.