How do you develop a successful government that will please an entire nation? Since colonization the United States has been a country in pursuit of economic dominance over nation states. Mercantilism, liberalism, and structuralism have at some point in time been used to accomplish this goal of subjugated national welfare. These philosophies can be thought of as blueprints by which the state operates and from which its policy emanates, always changing across nations never truly in a state of agreement.
Although there are many differences between international economic policy, without fundamental views such as mercantilism, liberalism, and structuralism humanity would quickly devolve into erratic economic policy. Which analysis of IPE is better than the other is up for debate, but there is a strong belief that mercantilism in the 1600’s and 1700’s was successful and mercantilism should be reincorporated into our governmental system today. Mercantilism has strong historical roots in British government.
It was the predominant school of economic thought throughout two centuries, spanning the 1500s to the 1700s. Adam Smith was the first to use the term Mercantile System, defined as a system based on the government actively fostering economic policies of protectionism that would promote export and discourage imports, so as to enhance capital. The intent is to maintain a positive balance of trade by facilitating the influx of gold and silver (bullion), the origin at that time for measuring the wealth of a nation.
It was during this era of mercantilism that much of what constitutes modern capitalism was instituted, as witnessed by the economic policies of government intervention and control. Historically it was a system that benefited the merchants and manufacturers since they enjoyed state protection and support. For example, capital for new businesses would come from the state, as would exemptions from taxes. The state would also reward high yield producers with titles or pensions.
And with regards to trade, the state would enforce tariffs and restrictions on importers so as to protect the local industries. It would even prohibit the export of skilled workers, tools and goods. Though mercantilism has been defined differently among other nations and over time, there are nine principles of national economy that represent mercantile ideas as a whole. First every inch of soil should be utilized either for agriculture, mining, or manufacturing. Second large working population should be encouraged.
Third all raw domestic resources should be used for producing final goods like tools and cloth that are of more value. Fourth only manufactured goods should be exported but raw materials are forbidden to export. Fifth no gold or silvers can/should be exported. Sixth if raw materials are imported, it should be paid for by exporting other goods. Seventh new market should be sought and extended for exporting its surplus goods. Eight Only raw materials can be imported, and lastly if a good is sufficiently and suitably supplied at home “your country”, it should not be prohibited to be imported.
These nine characteristics of mercantilism doctrine were a reaction against the economic problems of earlier times. States were too weak to lead their economies and every town implemented it own tariffs on goods passing through its borders. The modern age brought the rise of powerful nation states such as Holland, France, Spain and England it was almost immediately marked by constant warfare. underlying mercantilist theory was the belief that wealth was finite. If one nation hoped to grow richer, it had to do so at the expense of some other nation.
For mercantilists, the international economy is an arena of conflict between opposing national interests, rather than an area of cooperation and mutual gain. The economic competition between states is thus regarded as a ‘zero sum game’; one state’s gain is another’s loss. Additionally, states are wary of other state’s relative economic gain as the material wealth accumulated could be used for establishing military-political power to be used against other states. This clearly reflects much of the neorealist ideology of competition between states. Its central idea is that economic activities are and should be subordinate to the goal of state building and the interests of the state”. Gilpin suggests that the economic rivalry between states can take two forms; ‘benign’ or ‘malevolent’ mercantilism. Benign mercantilist states take a generally defensive position, attempting to look after their national economic interests in order to ensure their national security without having any overtly negative effects on other states. Some nationalists consider the safeguarding of national economic interests as the minimum essential to the security and survival of the state. ” Conversely, ‘malevolent’ mercantilist states attempt to exploit the international economy through expansionary policies for example, colonisation.
“There are those nationalists who regard the international economy as an arena for imperialist expansion and national aggrandizement. ” For mercantilists, economic strength and military political power are two important complementary goals for a state. Whereas liberal writers generally view the pursuit of power and wealth, that is, the choice between “guns and butter,” as involving a trade-off, nationalists tend to regard the two goals as being complementary. Mercantilists suggest that because economic resources are essential to maintain and assert national power, conflict is both political and economic. Mercantilists would assert that the pursuit of wealth and power are inextricable goals of states which inevitably overlap. Mercantilists pursue power, self-sufficiency and economic independence rather than interdependence.
Mercantilism was a cutthroat type of philosophy; its decline came at the end of the middle ages (c. 450–c. 1500)SITE. The merchant class eventually gave way and lost control of the new economic order to the emerging forces of capitalist competition where price and profits were regulated by the production and accumulation of capital. While trading was essential to the emerging industrial capitalist system, transactions were seen as merely a sharing out of the total selling price among the buyers and purchasers, including the merchant.
The mercantile idea that trade led to profits for the system as a whole gave way to the classical economist’s view that production and the reinvestment of profit was the true source of a nation’s wealth. SITE Mercantilism was a very important historical process. It eliminated the feudal self-sufficiency and enhanced the international trade, which was very different from the previous feudalism. However, it still has lasting and relevant prospective in today’s contemporary international political economy.
Mercantilists believe that one nations gain with regards to resources, power, markets, and monetary means other nations lose. They see the world as a fierce competition, and the role of the state is to insure that the national interests prevail. For this reason, you see mercantilists behind polices of trade protection, import, export tariffs, direct subsidies and Exchange Rate manipulation, where a government may intervene in the foreign exchange market to lower the value of its currency by selling its currency in the foreign exchange market.
Doing so will raise the cost of imports and lower the cost of exports, leading to an improvement in its trade balance. SITE Mercantilists love to build up walls to “protect” the society, culture, and there own economic nation from outsiders, and will try to use governmental policy and procedure to accomplish their independent interests. With respect to power, A Mercantilists strives to have more of it. They believe that all functions of society are, or should be geared toward creating more of it.
If they sense that another nation is rapidly approaching competitive equilibrium, they get nervous and look for ways to transfer some of the power back to their side using tactics like anti-dumping legislation, which prevents “dumping” of cheaper foreign goods that would cause local firms to close down. SITE along with Administrative Barriers: Countries are sometimes accused of using their various administrative rules (eg. regarding food safety, environmental standards, electrical safety, etc. ) as a way to introduce barriers to imports.
SITE Mercantilists believe that international trade has the potential to damage a nations ability to defend itself. According to the mercantilists, a nation is really not safe if it is reliant on another nation for one or all of its basic needs (food, energy, technology and or money). Mercantilists believe that it’s the government duty to set up rules that protect the national interests. People with a mercantilist’s perspective want the benefits of foreign trade, but they would claim that the idea of “free trade” is just a tool of the powerful to remain powerful, and to keep the less developed nations from closing the income gap.
Trade is a zero sum game to mercantilists, and they would argue that the benefits that the buyers receive in the US will automatically translate to a loss for the developing nations. The developing nation mercantilists would see the US subsidies of their own farmers as further evidence that the playing field is not level, and that the powerful nations were using their power to their advantage to create trading rules that favored their industries over those of the developing nations.
They would appreciate the efforts of groups to help diversify crops into other products (any FDI would be accepted), but they would be critical that these small efforts do not compensate them adequately for the loss of power that resulted when the powerful nations changed the rules of trade. SITE says it might be worth reconsidering mercantilism. “Nonetheless, the mercantilist mindset provides policymakers with some important advantages: better feedback about the constraints and opportunities that private economic activity faces, and the ability to create a sense of national purpose around economic goals.
There is much that liberals can learn from it. Indeed, the inability to see the advantages of close state-business relations is the blind spot of modern economic liberalism. Just look at how the search for the causes of the financial crisis has played out in the US. Current conventional wisdom places the blame squarely on the close ties that developed between policymakers and the financial industry in recent decades. For textbook liberals, the state should have kept its distance, acting purely as Platonic guardians of consumer sovereignty.
But the problem is not that government listened too much to Wall Street; rather, the problem is that it didn’t listen enough to Main Street, where the real producers and innovators were. That is how untested economic theories about efficient markets and self-regulation could substitute for common sense, enabling financial interests to gain hegemony, while leaving everyone else, including governments, to pick up the pieces. ”