Guest Post: The Return of Mercantilism

Tyler Durden's picture

Via John Aziz of Azizonomics blog,

Mercantilist trade policies have returned in a big, big way.

Dani Rodrik:

The liberal model views the state as necessarily predatory and the private sector as inherently rent-seeking. So it advocates a strict separation between the state and private business. Mercantilism, by contrast, offers a corporatist vision in which the state and private business are allies and cooperate in pursuit of common objectives, such as domestic economic growth or national power.


The mercantilist model can be derided as state capitalism or cronyism. But when it works, as it has so often in Asia, the model’s “government-business collaboration” or “pro-business state” quickly garners heavy praise. Lagging economies have not failed to notice that mercantilism can be their friend. Even in Britain, classical liberalism arrived only in the mid-nineteenth century – that is, after the country had become the world’s dominant industrial power.


A second difference between the two models lies in whether consumer or producer interests are privileged. For liberals, consumers are king. The ultimate objective of economic policy is to increase households’ consumption potential, which requires giving them unhindered access to the cheapest-possible goods and services.


Mercantilists, by contrast, emphasize the productive side of the economy. For them, a sound economy requires a sound production structure. And consumption needs to be underpinned by high employment at adequate wages.


These different models have predictable implications for international economic policies. The logic of the liberal approach is that the economic benefits of trade arise from imports: the cheaper the imports, the better, even if the result is a trade deficit. Mercantilists, however, view trade as a means of supporting domestic production and employment, and prefer to spur exports rather than imports.


Today’s China is the leading bearer of the mercantilist torch, though Chinese leaders would never admit it  – too much opprobrium still attaches to the term.

I have three things to add.

First, states around the world including in the West, and especially America, have massively adopted corporatist domestic policies, even while spouting the rhetoric of free trade and economic liberalism publicly. One only has to look at the growth trend in American Federal spending to see that America has drifted further and further and further away from its free market rhetoric, and toward a centrally planned economy.

Second, the key difference between a free market economy, and a corporatist command economy is the misallocation of capital by the central planning process. While mercantile economies can be hugely productive, the historic tendency in the long run has been toward the command economies — which allocate capital based on the preferences of the central planner — being out-innovated and out-grown by the dynamic free market economies, which allocate capital based on the spending preferences of consumers in the wider economy.

Third, these two facts taken together mean that the inherent long-term advantage of the free market system — and by implication, of the United States over the BRICs — has to some degree been eradicated. This means that the competition is now over who can run the most successful corporatist-mercantilist system. The BRIC nations, particularly China, are committed to domestic production and employment, to domestic supply chains and domestic resource strength. America continues to largely ignore such factors, and allow its productive base to emigrate to other nations. And the production factor in which America still has some significant advantage — design, innovation, and inventions — has been eroded by the fact that the BRIC nations can easily appropriate American designs and innovations, because these designs are now being manufactured predominantly outside of America, and because of (American) communication technologies like the internet. This is the worst of both worlds for America. All of the disadvantages of mercantilism — the rent-seeking corporate-industrial complex, the misallocation of capital through central planning, the fragility of a centralised system — without the advantage of a strong domestic productive base.

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Shizzmoney's picture

It won't last.  Ask Hitler.

NotApplicable's picture

"competition is now over who can run the most successful corporatist-mercantilist system"

You should've quit there, John, as the word "successful" is wholly dependent upon perspective. Not only that, you've tied the idea to that of an acting collective, as if it has a singular focus (when no such entity exists). Which prompted you to write a bunch of gobbledygook along the lines of collectivist conventional wisdom that amounts to nothing more than fairy tales and wishful thinking.

Success, like any other human form of measure, lies entirely within the mind of the beholder. To pretend it is externalized within a collective is to fall victim to the trap of flawed thinking, and all of the flawed solutions that go along with it.

economics9698's picture

Mercantilist systems of England and France always go their ass handed to them by free states with capitalism like the Dutch.  Rothbard writes about the mercantilist always crying foul every time  a free enterprise nation kicked their ass in trade, excuses and excuses given to the king, the interest rate is too high, we are losing too much gold, one bull shit excuse after another.

In other words nations that adopt mercantilism will always be at a disadvantage to capitalist nations.  Even at the height of the mercantilist age, 1500-1750, there were always nations that were capitalist and benefitting from the stupidity of England and France.

Reading Rothbard is quite amusing, one bull shit excuse after another from the great thinkers of the day as to why they were getting their ass kicked by the capitalist.

NidStyles's picture

His essays on: "Tthe History of Economic Thought before Adam Smith", I assume.


At least credit the name of the work so people can find it. Very good collection IMO, and it's free to read at that.

overmedicatedundersexed's picture

econ9698, would you please define- Mercantilist systems - seems many use that phrase yet the meaning seems to be confused and varied depending on the poster and press source--thanks

DR's picture

Hitler was defeated by war, not by economic collaspe. He aimed at creating an economy that would be independent from foreign capital and supply-he didn't trust the International bankers.


economics9698's picture

The Hitler economy would have collapsed the day the world realized there was no more Jew property to confiscate.  

A Nanny Moose's picture

All empires a defeated, not by war, but from within, economically. PERI-FUCKING-OD

UrbanBard's picture

Why did Hitler go to war? There is a clue at the secret Hossbach Conference in Nov 1937. Hitler expressed the fear that there would be mass starvation in Germany by 1945. Hence, he believed that Germany needed 'living room'. This could only come from the conquest of neighboring countries.

It was Mercantilism which fueled the belief that a person, or a country, could win only at anothers expense. Mercantilist countries don't create wealth the way that capitalist countries do.

This is why Mercantilists favor birth control, especially for its subject people. It's why DDT was suppressed: to kill off as many of the inferior races as possible. There has never been proof that DDT harms people, the environment or predator birds. Rachel Carson faked a report of a flawed study, which has never been duplicated.

geekgrrl's picture

Your comment doesn't even make logical sense. The "suppression" of DDT didn't have anything to do with "killing-off inferior races," it was because the chemical was causing major problems with bird reproduction. 

And I dispute your claim that there has never been proof that DDT harms people. Its endocrine disrupting properties have caused unrecognized problems. See for a few papers on DDT and endocrine disruption, but these papers only scratch the surface.

According to the authors, "DDT and related compounds act in a number of ways to disrupt endocrine function by binding with the estrogen receptor, including estrogen mimickry and antagonism, altering the pattern of synthesis or metabolism of hormones, and modifying hormone receptor levels"

While it's true DDT has low acute toxicity, this has led to widespread use without consideration of the endocrine-disrupting properties. As far as I know, there are no studies that have examined second-generation effects in humans exposed to DDT in-utero, and I know for a fact there are no multi-generational studies. Your argument rests on a lack of evidence, and in my view, is indefensible. A lack of evidence is not a proof.

overmedicatedundersexed's picture

geekgrrl, the fact that a world wide ban was put in place had nothing to do with the public image of ddt.

ddt, was too cheap vs what the chemical industry wanted to sell, all products which were much less effective and to which many insects became tolerant or had the added bonus of killing millions of poor by insect borne disease  in third world -which the socalled reptile elite found a big plus. it is much more complicated then birds being harmed, and you should know better.

geekgrrl's picture

I've read a lot of studies on DDT, and it is my opinion that nobody would ever use it if they understood the real cost.

Of course, the manufacturers see no problems.

overmedicatedundersexed's picture

as a dealer in poisons, all chemicals have benefits and risk, the risks with ddt seem somewhat unproven vs the the tremendus benefits it provided in the fight against malaria and other insect borne disease, pick you poison.

ps ddt was and is very effective on bed bugs which have become very resistant to other agents and with that the joy of most travellers and hotels at the infestations now rampant.

geekgrrl's picture

Somewhat unproven? My friend, open your eyes.

overmedicatedundersexed's picture

geek, from a text of clinical toxicology i keep around; ddt has a wide margin of safty when used judiciously and few document cases of poisoning in man goes on to how to treat massive overdoses as this text is written for practicing health care givers  ER's and such..I  as a dealer in poisons see how ddt could safely be used with very low risk to animals and man, and very big benefits to both. pick your poison.

Stuck on Zero's picture

DDT didn't lose out because of bans.  It stopped being effective.  Insects were adapting to it and starting to thrive on it.  More and more was being applied with less and less effect.  Essentially no bans were palced on the use of DDT in the third world but they stopped using it because it lost effectiveness.  And yes, it did cause a lot of problems in the environment. 


overmedicatedundersexed's picture

stuck , what do you do.. because your post seems very lacking in any fact ddt is still the most effective safe agent against the scurge of africa- malaria.

geekgrrl's picture

Again, the true costs of DDT are uncounted because its endocrine disrupting properties are ignored. There is really no debate that DDT technical mixtures are both estrogenic and anti-androgenic, and the environmental health literature is just full of papers chronicaling the cost. You can make the argument that DDT is "safe" but there are literally thousands of scientific papers that dispute that claim. Denial is not just a river in Egypt. 

Whenever I see someone arguing for DDT to combat malaria in Africa, there is a big red bullshit alert that pops up. I really have to question where you're coming from, and whether your salary depends on the beliefs you hold.

geekgrrl's picture

You need to get beyond the 16th century thinking of Paracelsus, and consider matters of developmental biology. You need to ask yourself the question: what is the significance of exposing a fetus (at various points in development) to hormonally-active agents. Until you seriously address this issue, I think you are a danger to yourself and others.

NidStyles's picture

He lost the war because he couldn't afford the oil anymore ;-)

bobthehorse's picture

Mechantilism is just another word for fascism.

I just sadly shake my head.

Is this our true path?

What a pisser.

A Nanny Moose's picture

not quite sure I understand the down vote here? please explain?

francis_sawyer's picture

Don't tell Spielberg that there's any such thing as a 'Return of Mercantilism'... His movie 'LINCOLN' seemed to portray that the Civil War was all about abolishing slavery... It got a lot of 'Oscar' nods [so it must be true]...


I'll have to fact check it with SNOPES to be sure...

Dr. Engali's picture

You mean that Lincoln didn't actually campaign on the status quo and he didn't actually use emancipation as a way to undermine the south and to bolster the northern military? Where the fuck have I been? Thank you Hollywood for setting me straight.

francis_sawyer's picture

Lincoln never quite understood the 'spirit' of the Monroe Doctrine... You can thank Hollywood for helping you to forget that... Oh ~ that ~ and the "never before" known fact that Lincoln, was, in fact, a hobbyist vampire hunter who weilded a mean axe...

falak pema's picture

the world moves back to neo feudalism big time; this time with the ecological gun to its head. 

AnAnonymous's picture

the world moves back to neo feudalism big time;

Good one. So the world was neo feudal before?

Thanks. I was under the impression that neofeudalism was a term invented by 'americans' to avoid facing the fact that the world is an 'american' world and nothing else.

So glad to learn that the world was in fact under neo feudalism before.

Did it happen before or after the world knew feudalism? Just wondering.

Mad Mohel's picture

They're talking trillion dollar coins man! It's game fucking over! It's Wiley E. Coyote time, even if we hit the brakes our ass is already way over the cliff.

devo's picture

Seriously. If minting that coin doesn't make people ask "wtf?" then......something.

AgAu_man's picture

Dude, has anyone ever seen the humor in your Moniker?  If you're the NYC Orthodox variety, Christopher Hitchens might have a thing or two to say about that particular group's practices (according to his book "God is Not Great" in Chapter 4 (  Either way, makes no difference to me.  But I do see the humor in the name + pic.

devo's picture

I'm not sure if anyone but hardcore Devo fans know it stands for "de-evolution"...but glad you get it.

geekgrrl's picture

Not a big Devo fan (like some of their songs), but anyone with a pulse in the 80s would know DEVO stands for de-evolution. They were prescient.

Mad Mohel's picture

LOL You're the first one to notice and mention it. Big ups.

dick cheneys ghost's picture

She didnt show any leg..................

devo's picture

She doesn't look as good on yahoo, and I don't like how they have clearly coached her. Bummer. She was good on RT.

NidStyles's picture

The tiny Asian girl was hotter.

Half_A_Billion_Hollow_Points's picture

that shit is MSM.  Total sellout.  Where's that greek fuck Demetri when you need it?  


I'm listening to buy "Index funds"???  WTF Lauren...  

Seasmoke's picture

Wow did Lauren get uglier ???? What happened !! .....Guess i will not be masturbating for a few months

devo's picture

Bad makeup and bad studio lighting. Yahoo's studio looks like a Greyhound bus stop.

She lost her glow. I knew this would happen. Moral of the story: never mess with a good thing, kids.

Go Tribe's picture

I thought I was tuning into a babe! At this rate she'll end up looking like hillary.

e-recep's picture

i didn't watch the rest, did she show some leg?

ebworthen's picture

The un-reformed Ebeneezer Scrooge would heartily agree.

A_S's picture

Mercantilism is dying, the creditor nations have to short their own currency to keep the game going, this is not going to last. In times of crisis things change. I think we will leave the most succesfull way of foreign trade of the last century's behind us this time. The scene is perfectly set for it now the west is not anymore the only one with some wealth.

francis_sawyer's picture

You'e probably cringing in terror now that the so-called 'Jew hater' francis_sawyer is agreeing with you...


I've stated this in many ways & in various posts [very few of which are TRULY understood]... The day of the 'monopoly' on PRINTED DEBT MONEY will come to a end sooner or later... It is the FORCE OF NATURE that will bring that about... Those [cough cough] who, at present, control the aforesaid monopoly will suffer a terrible backlash... What's worse is that the backlash will [as backlashes tend to do], overreach...

It's NOT too late to avoid that backlash [but it actually probably is ~ given anyone's even 'simple' capacity to acknowledge things as they are]...

Harbanger's picture

I wonder if the world will ever stop buying our pop culture.

NidStyles's picture

They did the day Gundam Style made #1. That song is everywhere, and K-Pop is exploding everywhere with it. J-Pop wishes it was this popular at any point in time.

creeper's picture

"The better to control you with, my dear", said the wolf.