Visionary Realism of German Economics: From the Thirty Years' War to the Cold War

608 Pages·43.225 MB·English

by  Erik S. Reinert

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The Visionary Realism of German Economics
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ANTHEM OTHER CANON ECONOMICS
The Anthem Other Canon Economics series is a collaboration between Anthem
Press and The Other Canon Foundation. The Other Canon – also described as ‘reality
economics’ – studies the economy as a real object rather than as the behaviour of a model
economy based on core axioms, assumptions and techniques. The series includes both
classical and contemporary works in this tradition, spanning evolutionary, institutional
and Post-Keynesian economics, the history of economic thought and economic policy,
economic sociology and technology governance, and works on the theory of uneven
development and in the tradition of the German historical school.
SERIES EDITORS
Erik S. Reinert – Chairman, The Other Canon Foundation,
Norway and Tallinn University of Technology, Estonia
Rainer Kattel – University College London, UK
and Tallinn University of Technology, Estonia
Wolfgang Drechsler – Tallinn University of Technology, Estonia
and Davis Center, Harvard University, USA
EDITORIAL BOARD
Ha-Joon Chang – University of Cambridge, UK
Mario Cimoli – UN-ECLAC, Chile
Jayati Ghosh – Jawaharlal Nehru University, India
Steven Kaplan – Cornell University, USA
Jan Kregel – Levy Economics Institute of Bard College, USA
and Tallinn University of Technology, Estonia
Bengt-Åke Lundvall – Aalborg University, Denmark
Keith Nurse – University of the West Indies, Barbados
Patrick O’Brien – London School of Economics and Political Science (LSE), UK
Carlota Perez – London School of Economics
and Political Science (LSE), UK; University College London, UK;
SPRU – University of Sussex, UK and Tallinn University of Technology, Estonia
Alessandro Roncaglia – La Sapienza University of Rome, Italy
Jomo Kwame Sundaram – Institute of Strategic and International Studies, Malaysia
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The Visionary Realism of German

Economics: From the Thirty Years’
War to the Cold War
Erik S. Reinert
Edited by Rainer Kattel
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Anthem Press
An imprint of Wimbledon Publishing Company
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This edition first published in UK and USA 2019
by ANTHEM PRESS
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© 2019 Rainer Kattel editorial matter and selection;
individual chapters © individual contributors
The moral right of the authors has been asserted.
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British Library Cataloguing- in- Publication Data
A catalogue record for this book is available from the British Library.
ISBN- 13: 978- 1- 78308- 903- 1 (Hbk)
ISBN- 10: 1- 78308- 903- 2 (Hbk)
This title is also available as an e- book.
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CONTENTS

Introduction 1
Chapter 1 German Economics as Development Economics: From the
Thirty Years’ War to World War II 15
Chapter 2 The Role of the State in Economic Growth 37
Chapter 3 A Brief Introduction to Veit Ludwig von Seckendorff
(1626– 1692) 95
Chapter 4 Exploring the Genesis of Economic Innovations: The
Religious Gestalt- Switch and the Duty to Invent as
Preconditions for Economic Growth (with Arno Daastøl) 107
Chapter 5 Johann Heinrich Gottlob von Justi (1717– 1771): The Life
and Times of an Economist Adventurer 163
Chapter 6 Jacob Bielfeld’s “On the Decline of States” (1760) and
Its Relevance for Today 203
Chapter 7 Raw Materials in the History of Economic Policy; or,
Why List (the Protectionist) and Cobden (the Free Trader)
Both Agreed on Free Trade in Corn 243
Chapter 8 Compensation Mechanisms and Targeted Economic
Growth: Lessons from the History of Economic Policy 267
Chapter 9 Karl Bücher and the Geographical Dimensions of
Techno- Economic Change: Production- Based Economic
Theory and the Stages of Economic Development 289
Chapter 10 Austrian Economics and the Other Canon: The Austrians
between the Activistic- Idealistic and the Passivistic- Materialistic
Traditions of Economics 321
Chapter 11 Nietzsche and the German Historical School of Economics
(with Sophus A. Reinert) 365
Chapter 12 Creative Destruction in Economics: Nietzsche, Sombart,
Schumpeter (with Hugo Reinert) 385
Chapter 13 Schumpeter in the Context of Two Canons of Economic
Thought 413
Chapter 14 The Role of Technology in the Creation of Rich and Poor
Nations: Underdevelopment in a Schumpeterian System 431
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vi THE VISIONARY REALISM OF GERMAN ECONOMICS
Chapter 15 Towards an Austro–German Theory of Uneven Economic
Development? A Plea for Theorising by Inclusion 457
Chapter 16 The Qualitative Shift in European Integration: Towards
Permanent Wage Pressures and a ‘Latin- Americanization’
of Europe? (with Rainer Kattel) 477
Chapter 17 Primitivization of the EU Periphery: The Loss of
Relevant Knowledge 513
Chapter 18 Mechanisms of Financial Crises in Growth and
Collapse: Hammurabi, Schumpeter, Perez, and Minsky 529
Chapter 19 Full Circle: Economics from Scholasticism through
Innovation and Back into Mathematical Scholasticism:
Reflections on a 1769 Price Essay: “Why Is It That
Economics So Far Has Gained So Few Advantages from
Physics and Mathematics?” 555
Chapter 20 Werner Sombart (1863–1941) and the Swan Song of
German Economics 569
Index 577
1
INTRODUCTION

Erik S. Reinert

This volume attempts to present a period of around three hundred years of the German-
language tradition in economic theory. The German tradition originated as part of a
larger Continental tradition in economics, the origin of which can be seen as the massive
impact of Italian economist Giovanni Botero’s 1588 bestselling On the Greatnesse of Cities1—
soon incorporated into a larger work on the Reason of State— which appeared in about
45 editions in Italian, Latin, Spanish, French and German between 1588 and 1666.
Reflecting the cosmopolitical nature of Jesuit activism, Botero’s connection to Germany
and Mitteleuropa was strong. His first four publications appeared, respectively, in Krakow,
Würzburg, Nürnberg and Frankfurt.2 Before the Thirty Years’ War—w hich marks the
starting point for the present volume—t here were already four Latin editions of Botero’s
Greatnesse of Cities published in Germany.3
The broad and cross- disciplinary social science tradition started by Botero came to
dominate economics in Germany more and longer than in other nations. We can find par-
tial explanations for this in the fact that Germany—c ompared to countries like Holland,
England or France— was a relative latecomer: eine verspätete Nation. Until the end of the
nineteenth century, Germany also consisted of many states— several hundred states after
the Thirty Years’ War (1648) and still around 30 three centuries later. We can speculate
if the diversity and large number of small competing states with small populations may
have encouraged researchers to be cross-d isciplinary. To paraphrase Adam Smith, the
small size of the partly regional markets for social sciences may have limited the division
I would like to thank Rainer Kattel for all his assistance in the publication of this volume. A
note of deep gratitude goes to Fernanda Aars Reinert, my wife, librarian, muse, and proof-
reader for the last almost 50 years. The Heilbronn Symposia, organized by Jürgen and Ursula
Backhaus, provided a demand which led to the production of several chapters in this volume.
Theirs has been a most important work.
1 For a discussion of Botero and his influence on economics, see Reinert, Erik, and Kenneth
Carpenter, “German Language Economic Bestsellers before 1850, with Two Chapters on a
Common Reference Point of Cameralism and Mercantilism”, The Other Canon Foundation and
Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics, No.
58, 2014, technologygovernance.eu/ eng/ the_ core_ faculty/ working_ papers/ .
2 See Firpo, Luigi, Gli scritti giovanili di Giovanni Botero, Florence: Sansoni, 1960, pp. 12– 22.
3 The first edition in German followed in Frankfurt only in 1657.
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of labor. This may also have reinforced a cultural tendency to attempt to understand
large and complex structures in a holistic way: the desire for a Ganzheitslehre.4
German philosopher Johann Gottlieb Fichte (1762– 1814) certainly thought German
political diversity, rather than unity, would cause increased learning and emulation:5
How fortunate we are in this regard that there are still so many distinct and separate German
states! What is so often said to be to our disadvantage can perhaps work to our advantage in
this important national matter. Perhaps imitation on the part of the majority, and the desire
to get ahead of the others, will bring about something that the tranquil self-s atisfaction of
the individual states would not; for it is plain that the one state among all German states that
makes a start with this will gain a definite lead in the respect, love, and gratitude of all; it will
be the supreme benefactor and true founder of the nation. It will give the others courage,
provide an instructive example, and become their model.6
Until its swan song as a result of World War II, German economics followed Botero’s
approach of blending economics, in its narrow sense, not only with what is now called
sociology but also with anthropology, political science, demography, and facts and figures
from any other field that seemed to be relevant for the questions at hand. Relevance, as
opposed to available tools, was the starting point for any analysis in this tradition. Botero’s
second major work, Relazioni Universali,7 is organized more by geography and ethnicity than
by nation-s tates proper. As one observer says, Botero “brought together an immense mass
of geographical and anthropological information, which he tried to organize according to
broad methodological categories (like ‘resources’, ‘government’, and ‘religion’).”8 During the
200 years following the first 1591 Italian edition, Botero’s Relazioni Universali was published in
an incredible 84 editions9—i n Italian, German, Latin, English, Spanish and Polish.10
The first six chapters of this book trace the German tradition as it was methodo-
logically part of mainstream Continental European economics. Already early on, in the
seventeenth century, English economics, so- called mercantilism, started to be dominated
by commercial interest and traders, men like Thomas Mun, Josiah Child and John Cary.
4 Austrian economist Othmar Spann (1878– 1950) represents both an extreme example of this
holistic approach and how it could degenerate into totalitarianism.
5 For the role of emulation in the growth and development of Europe, see Reinert, Sophus,
Translating Empire: Emulation and the Origins of Political Economy, Cambridge, MA: Harvard
University Press, 2011.
6 Fichte, Johann Gottlob, Addresses to the German Nation, trans. with introduction and notes by
Isaac Nakhimovsky, Béla Kapossy and Keith Tribe, Indianapolis, IN: Hackett, 2013, p. 141.
Originally published in 1808.
7 The first three parts of which were published in Rome in 1591 (presso Giorgio Ferrari).
8 Rubies, Joan- Pau, Travel and Ethnology in the Renaissance, Cambridge: Cambridge University
Press, 2000, p. 294.
9 The main bibliographical source on Botero is Assandra, Giuseppe, “Giovanni Botero.
Note biografiche e bibliografiche di Giuseppe Assandra suo concittadino” (edited by Gino
Borghezio), in Bollettino storico- bibliografico subalpino, vol. XXVIII, Turin, 1926, pp. 407–4 2, and
vol. XXX, 1928, pp. 29– 63, 307– 51.
10 There were three early Polish translations: 1609, 1613 and 1659. Botero’s biographer Assandra
indicates that the lack of a French translation was the result of this work being banned there.