Mercantilism – Rejected by both the Left and the Right
Mercantilism has received very little attention in the twentieth century,[1] and much of the attention it has received has often used mercantilism as a straw-man against which to present other theories in a good light, with numerous misrepresentations often intentionally introduced. This has led to widespread acceptance of simplistic and erroneous views of mercantilism which in turn still further decreases attention to the subject. Paul Rich states that ‘There are few better examples of trying to lend misleading coherence to complex matters than the way in which mercantilism has been dismissed as a spent philosophy’ (Rich 2006, 183).[2]
Mercantilism seems to have been ignored and even disparaged by both the right and the left, accounting for the scant attention paid to the historical impact of these policies in the twentieth century. The left, while embracing the state’s role in development, rejects the capitalist and ‘internalist’ (and often, viewed as triumphalist) view of Europe as a region developing economically largely due to internal institutional development stimulated by its own internal dynamics of intra-state competition and commerce.[3] Conversely, the right, while embracing the emphasis of mercantilism on a ‘fragmented and thus competitive’ internalist model of European expansion, cannot embrace mercantilism because of its emphasis on the role of the state in development. Thus mercantilism has found little support or attention in the twentieth century from any side.[4]
Consequently, there are a number of widespread misunderstandings concerning mercantilist policies. One is that mercantilism is simply a naïve focus on the balance of trade (or worse still, as an even more simplistic focus on the stock of precious metals, properly called ‘bullionism’). The mercantilist approach to trade and development was in practice much more nuanced, based on views of ‘good’ trade and ‘bad’ trade. Good trade is trade that increases the amount of increasing returns activities (in that time especially, essentially manufacturing) within a country’s borders; bad trade is trade that increases a reliance on raw materials exports (see Reinert 1998). Crucially, much confusion also arises because of the difference in the significance of arguments concerning trade originating in the context of the country by far more industrialized (Great Britain, and later, also the US) and the significance of those arguments for everyone else: In the real world, the implications of ‘free’ trade turned out to be very different for the world leaders in industrial production than for less industrialized nations. It has seldom been grasped how fundamentally this influenced the interpretation of economic theory in different countries, especially in the English speaking countries vis-à-vis the rest of the world (Reinert 1998).
Mercantilism and the Zero Sum game fallacy
Another misunderstanding concerning mercantilist policies is that they are frequently portrayed as attempting to capture trade and industry due to a naïve belief that these are a ‘zero sum game’ when in reality trade and industrial growth are very much a non-zero sum game, with cooperative free trade increasing the total amount of goods for all. Mercantilists are portrayed, in effect, as believing (in their ignorance of the non-zero sum nature of development) that if considering two countries starting on equal terms, taking one country’s ten percent meant the winner would have sixty percent and the loser be left with forty percent of the pre-existing trade or industry levels, and ignorant of the possibility that with increased trade there may be 500 percent more goods and industry in the future for all to share.
However, in a non-zero sum world strongly marked by agglomerative forces (whatever these may be), mercantilist strategies make more, not less sense than non-competitive policies: that is, taking a rival’s ten percent now might leave the ‘winner’ with the lion’s share of the 500 percent more trade/industry in the future, and the loser with almost none, a more likely outcome in the real world of agglomeration than each ending up with greater equal amounts of growth. Crucially, in a non-zero sum world of increasing returns and agglomeration, mercantilist strategies were especially astute and beneficial, although only, of course, for the ‘winners’.
Based on these observations this work might be described as a ‘geography of mercantilism’ that seeks to understand how mercantilist policies, so intricately associated with both the military and commercial expansion of Europe that subsequently shaped global patterns of development, became spatially ‘centered’, as writers such as Blaut and A.G. Frank often characterize the process, on Europe.
Next Post – An Empirical Approach to the Geography of Mercantilism: Part III of Mercantilism and the Rise of the West
NOTES
[1] Mokyr, for example, in discussing Heckscher’s (1931) extensive treatment of mercantilism, observes ‘the book seems to have been strangely neglected by economic historians in recent decades. Mercantilism as a major topic in the institutional development of Europe has not yet been taken up by the New Institutional Economics.’ (Mokyr 2003, 1). In a footnote Mokyr notes: ‘Of the forty five references to Heckscher’s work on Mercantilism in the two leading Economic History journals, thirty five were made before 1971, and only four since 1980. Of the thirteen citations in the entire economics and history sections of JSTOR to Heckscher’s work on Mercantilism, only five papers qualify as economic history proper. A recent well-reviewed book (Epstein, 2000), clearly concerned with similar issues, does not even refer to it. (Mokyr 2003, 1). McCusker writes ‘Indeed, by mid-century, some were prepared to deny that mercantilism as an economic doctrine had ever existed’ (McCusker 2000, para. 1) and that after World War II ‘mercantilism was irrelevant. After the demise of the world of nation states, it seemed to some best forgotten and, with it, the doctrine that had served to underpin its foundation. By the middle of the twentieth century more than one writer on the early modern period of Western European history was prepared to deny mercantilism’s very existence. … The most extreme of these writers, D. C. Coleman (1980, p. 791), classed mercantilism with other “non-existent entities.”’. (McCusker 2000, para. 10).
More generally, if all of the JSTOR articles from history, political science, and economics from the entire twentieth century and to the present with any of the words ‘mercantilism’, ‘colbertism’, or ‘cameralism’ in the title are considered, there are only 46 articles, of which only 12 have been published after 1980 (the date of Coleman’s ‘Mercantilism Revisited’), and these are mostly either narrowly focused responses to Ekelund and Tollison’s (1982) public choice interpretation of mercantilism or discussions of modern trade theory as ‘neo mercantilism’.
[2] McCusker, for example, in discussing one of the few modern widely read discussions of mercantilism notes: ‘Unfortunately in their exploration of the subject Ekelund and Tollison offer little more than “poor history,” “circular arguments,” and a disinterest “in what the mercantilist writer actually wrote,” according to Magnusson (p. 50), an evaluation with which I can only agree, sadly’ (McCusker, note 8).
[3] Even in its ‘neo’ form mercantilism is criticized for its association with capitalism from the left. Lovering 1999 sees ‘new-regionalism’ as a form of neo-mercantilism and criticizes it accordingly as ‘instrumentalist’ ‘Hayekian rhetoric’. Simply (mis)applying the word to a description of policy automatically paints the policy in a bad light; e.g. ‘[Texas Governor] Perry’s economic vision is the kind of race-to-the-bottom mercantilism we’ve come to expect from developing nations in the globalized economy…’ (Meyerson 2011. The term is misapplied because capturing particular sectors of increasing returns industry and thus raising the wealth of a region or state was traditionally the goal of mercantilist policies, not reducing living standards to indiscriminately attract sectors that enrich a minority capitalist class).
[4] McCusker makes a similar argument in discussing the reception of Heckscher’s (1931) book on mercantilism: ‘The book and its subject had less play in the second half of the twentieth century when the worries of the world shifted from a fear of totalitarianism of the right to a fear of totalitarianism of the left. Indeed, by mid-century, some were prepared to deny that mercantilism as an economic doctrine had ever existed’ (McCusker 2000, para. 1)
and
As World War II came and passed, many thought they saw the future in an even newer and now victorious doctrine, socialism. For them Heckscher was even less relevant – or, better put, mercantilism was irrelevant. After the demise of the world of nation states, it seemed to some best forgotten and, with it, the doctrine that had served to underpin its foundation. By the middle of the twentieth century more than one writer on the early modern period of Western European history was prepared to deny mercantilism’s very existence. … The most extreme of these writers, D. C. Coleman (1980, p. 791), classed mercantilism with other “non-existent entities.” It was an invention, conjured up “to prevent the study of history from falling into the abyss of antiquarianism” (7). With hated capitalism under attack from the bastions of academe, mercantilism suffered the even worse fate of being ignored. (McCusker 2000, para. 10).