The Real Global Conflict: Free Trade vs. National Development

Why the fight between finance capital and industrial capital matters more than the clash between democracy and authoritarianism

Editorial Analysis | September 2026

The framework that locates contemporary geopolitical conflict within a struggle between two opposed systems of economic governance has considerable explanatory power that conventional left-right analysis lacks. The British system of free trade, refined by the stewards of the British Empire after 1815, is characterised by the removal of barriers to the worldwide free flow of capital in pursuit of the highest possible return. This system extracts wealth from the periphery and concentrates it in the commercial and financial centres of London and New York, and it obliges nations to compete for investment capital by systematically depressing wages, job security, pensions, healthcare, and education. The national system of political economy, by contrast, seeks to create protective barriers to foreign trade to give domestic manufacturing a chance against foreign competition, accumulates capital at home, and invests it in manufacturing, infrastructure, education, and the productive capacity of the nation. These two systems are engaged in a conflict that constitutes the fundamental dynamic of global politics, and the empirical record provides substantial support for this claim.

The British system of free trade produced the outcomes that its critics predicted, and the historical record validates the characterisation of free trade as a system that concentrates wealth while impoverishing the productive classes. The repeal of the Corn Laws in 1846, which was a pivotal moment in the consolidation of the free trade system, led to rural outmigration, increased urbanisation, structural transformation away from agriculture, increases in rural poverty, and sizable changes in property values. Quantitative analysis suggests that the repeal left Britain’s overall welfare roughly unchanged, as the static efficiency gains were offset by adverse terms-of-trade effects, with labourers and capital owners gaining slightly at the expense of landowners whose income fell about three to five per cent. The top ten per cent of income earners lost while the bottom ninety per cent of income earners gained, which suggests that the distributional consequences were more complex than a simple narrative of decline allows, but the rural poverty and displacement were real and lasting. The Long Depression of 1873 to 1896, during which price levels fell by approximately forty per cent, ruined farmers, destroyed businesses at mass scale, and subjected the British people to crushing poverty, homelessness, and hopelessness, and this occurred even as the British Empire was at the zenith of its global power. These are not the outcomes of a system that serves the interests of the nation, and they provide empirical support for the critique of free trade.

The national system of political economy, as implemented by the United States and Germany, produced dramatically different outcomes, and the empirical record supports the claim that this system enriches producers and raises living standards. Alexander Hamilton’s Report on the Subject of Manufactures, submitted to Congress in 1791, proposed a specific industrial policy for the United States designed to encourage the development and growth of manufacturing, and it consisted of eleven principles including protective tariffs, export restrictions, direct government subsidies to targeted industries, tax exemptions for manufacturing inputs, and support for infrastructure improvements. Although Hamilton’s proposals for subsidies failed to receive support, virtually every tariff recommendation was adopted by Congress in early 1792, and these tariffs were not highly protectionist because Hamilton feared discouraging imports, which were the critical tax base on which he planned to fund the public debt. Henry Carey, the Philadelphia economist whose work influenced the high US Tariff Act of 1861, argued that the only way to overcome the baneful effect of British imperialism was through the protective tariff, and he contrasted the British System of laissez faire free trade capitalism with the American System of developmental capitalism -. Carey’s vision of an ideal America in which small manufacturing towns would spread across the land and through the free association of co-operating individuals, town and country and capital and labour achieved harmony, was a vision of class compromise between industrial capital and the working class.

Friedrich List, the German economist whose work provided the theoretical foundation for the national system, argued that less developed economies required protective tariffs on manufactured goods to allow their fledgling industries to grow, and his book on The National System of Political Economy was concerned with the problem of Germany overtaking England. List advocated not only protection of infant industries but a broad range of policies designed to accelerate or to make possible industrialisation and economic growth, and most of these policies were concerned with learning about new technology and applying it. The results were dramatic: Germany’s total domestic output increased fivefold compared to the 1850s, per capita output increased by 250 per cent, and real industrial wages doubled from 1871 to 1913. Germany’s coal output increased by nearly 225 per cent between 1890 and 1910, while British output grew by only 45 per cent, and German steel output increased by 1,000 per cent between 1880 and 1900, leaving British production far behind. The national system, in short, produced the outcomes that its advocates promised, and it did so by prioritising the development of productive capacity over the free flow of capital.

The case of Enrico Mattei and the Italian state energy company ENI provides a concrete illustration of both the potential and the limits of the national system, and it demonstrates the violent means through which the free trade system defends its monopoly. Mattei was named head of the state-controlled oil company Agip in 1945 and founded ENI in 1953, and he engaged the company on two fronts: he sought to develop domestic energy resources, and he challenged the Seven Sisters oil cartel by offering terms to producing countries that were more favourable than those offered by the Anglo-American companies. Mattei coined the term “Seven Sisters” to refer to the seven largest oil companies that effectively controlled almost all of the world’s oil production for twenty years, from the end of the Second World War until the early 1970s, and he presented ENI as a “Third-Worldist model” for countries on the path towards decolonisation. Mattei’s efforts to secure independent energy supply channels led him to open negotiations with the Shah of Iran in 1957, and he cut deals not in US dollars but in kind, exchanging Italian industrial products for Russian oil. His plane crashed on 27 October 1962, killing him, and subsequent investigations have suggested that the CIA, the OAS, and the Mafia had reasons for wanting to see him dead. The lesson is clear: the free trade system is a closed, membership-only club, and those who attempt to opt out are marked as targets.

The materialist analysis of this conflict must begin by identifying the class forces and material interests that structure the struggle between the two systems. From a Marxist perspective, the distinction between the British system of free trade and the national system of political economy is not a conflict between capitalism and socialism, but rather a conflict between two fractions of the capitalist class. The free trade system represents the interests of finance capital, the banks, investment funds, and multinational corporations that profit from the global circulation of capital and the extraction of rents from productive enterprises and workers. The national system represents the interests of industrial capital, the manufacturers, infrastructure builders, and productive enterprises that profit from the expansion of domestic production and the exploitation of a national labour force. Following a class-focused Marxist approach, the total surplus generated in an economy from different class processes can be divided between production surplus and social surplus, and the contest is between the production surplus and social surplus on the one hand and financial surplus on the other hand. Today, finance capital has emerged as a power-bloc serving the interest of the rentier class or unproductive capitalists in the financial sector and overpowers industrial capital and thus real economic growth.

The class dimension of this conflict is evident in the discussion of the “harmony of interests,” which Carey advanced as the rationale for protective tariffs. Carey argued that protective tariffs were essential to create better, more lucrative employment for ordinary Americans who would spend their earnings on domestically produced goods, further contributing to economic growth in a self-reinforcing virtuous cycle. This is a vision of class compromise between industrial capital and the working class, in which the exploitation of labour is tempered by rising wages and the expansion of domestic consumption, and it stands in contrast to the free trade system, which obliges nations to compete for investment capital by systematically depressing wages, job security, pensions, healthcare, and education. The working class under the national system may enjoy higher wages and better conditions than under the free trade system, but it remains a class exploited by capital. The “harmony of interests” is a harmony between the national bourgeoisie and the labour aristocracy of the developed countries, not a harmony between capital and labour as such. The national system does not abolish the exploitation of labour; it merely redirects the surplus toward domestic accumulation rather than foreign extraction.

The case of China, which represents one of the most remarkable examples of the national system of political economy in all of history, requires particular attention because it combines state-directed industrial policy with a socialist-oriented political framework. China’s industrial policies are ambitious and use many tools such as subsidies, tax credits, cheap land, government procurement, localisation requirements, and state-linked loans and investments, and the political economy of China’s party-state is characterised by centralised planning and direct intervention that allows it to strategically guide industries and the financial sector. The Chinese model has been able to generate rapid economic growth, technological advancement, and rising living standards while avoiding the worst effects of the free trade system, and it has done so by maintaining a degree of independence from global finance capital. However, it also exhibits tendencies toward authoritarianism, inequality, and the concentration of power in the hands of a party-state elite, and this illustrates the contradictions that persist even in a system that has broken free from imperialist domination. The Chinese model is not socialism in the sense that Marx envisioned, but it is a form of state capitalism that has been able to resist the hegemony of finance capital and to direct the surplus toward productive investment rather than speculative accumulation.

The lineage of thinkers who kept the knowledge of the national system alive during the period of its suppression includes Lyndon LaRouche, whose politics were idiosyncratic and whose movement has been described as a fascist cult by some observers, but whose influence on Sergei Glazyev and the BRICS movement is documented . Glazyev forged relationships with LaRouche around the time he was elected to the Duma in 1994, and the LaRouchites praised Glazyev as a leading economist and published his interviews and articles in their weekly Executive Intelligence Review . Glazyev was in close contact with the LaRouche couple, whose journals disseminated his texts and interviews in English, and their publishing house published one of his books in 1999 . LaRouche’s thought also influenced Burkina Faso’s reformer Thomas Sankara, who was tutored in economics by LaRouche’s French disciple Jacques Cheminade. The lesson that can be drawn from this lineage is that the knowledge of the national system was systematically scrubbed from economic curricula, and that a small network of intellectuals kept it alive, but the materialist analysis must be careful not to romanticise LaRouche’s politics or to treat his influence as a substitute for the class analysis that the national system framework requires.

The ultimate lesson of this analysis, from a materialist perspective, is that the conflict between the two systems is not a contest between good and evil, or between freedom and tyranny, but a struggle between different fractions of the capitalist class over the distribution of surplus value. The working class has an interest in supporting the national system to the extent that it raises wages and living standards and defends against imperialist extraction, but it must also recognise that the national system is not socialism and that the ultimate solution to exploitation lies in the abolition of capitalist relations of production altogether. The “two systems” are both capitalist systems, and the choice between them is not a choice between exploitation and liberation, but between different forms of exploitation and different possibilities for working-class struggle. The national system is better for workers than free trade imperialism, and it provides a framework within which the working class can organise and advance its interests, but it is not the end of history and it is not the final stage of human emancipation. The working class must support the national system where it serves its interests, while simultaneously building the organisations and consciousness necessary to transcend the capitalist system altogether.

The implications of this analysis for contemporary politics are significant. The US-China trade war, the Ukraine conflict, and the sanctions regimes imposed on Russia, Iran, and other countries that have attempted to opt out of the global free trade system are all manifestations of the conflict between finance capital and industrial capital. The United States, as the guardian of the free trade system, seeks to prevent any nation from developing a national system of political economy that would allow it to escape the discipline of global finance. China, as the most successful example of the national system in the contemporary world, represents a model that other nations could follow, and this is why it is the primary target of American hostility. The working class in the developed countries has an interest in supporting the national system, because it offers the possibility of higher wages, better conditions, and a more secure future than the free trade system can provide. But the working class must also recognise that the national system is a form of capitalism, and that the ultimate solution to the problems of exploitation and inequality lies not in the choice between two fractions of capital, but in the abolition of the capitalist system itself.

Authored By: Global GeoPolitics

Thank you for visiting. This is a reader-supported publication. If you believe journalism should serve the public, not the powerful, and you’re in a position to help, becoming a PAID SUBSCRIBER truly makes a difference. Alternatively you can support by way of a cup of coffee:

https://buymeacoffee.com/ggtv |

https://ko-fi.com/globalgeopolitics |

Bitcoin: 3NiK8BoRZnkwJSHZSekuXKFizGPopkE7ns

References

[1] AEA (2024) ‘Alexander Hamilton’s Report on Manufactures and Industrial Policy’, Journal of Economic Perspectives, 38(4), pp. 111-130. Available at: https://www.aeaweb.org/full_issue.php?doi=10.1257/jep.38.4 (Accessed: 23 September 2026).

[2] Freeman, C. (2013) ‘National systems of innovation’, in Economics of Industrial Innovation. London: Taylor & Francis, pp. 25-40. Available at: https://www.taylorfrancis.com/chapters/mono/10.4324/9780203064474-25/national-systems-innovation-chris-freeman (Accessed: 23 September 2026).

[3] NBER (2020) ‘The Economic Consequences of Sir Robert Peel: A Quantitative Assessment of the Repeal of the Corn Laws’, NBER Working Paper, 30 November. Available at:

https://www.nber.org