Mercantilism

"I like this book partly because it’s economic history written in the way economic history should be written. It’s not one of those boring tracts of economic history that is full of agricultural production statistics in various small localities around the world 300 years ago. It’s a book that tries to tell the larger story about how Europe changed from the 17th century onwards. And I think that’s also what makes it a bit unique. Before it was published, mercantilism was often seen as the set of policies you would go to if you had the same problems that they had at that period of time. So there was a logic to mercantilism. There was a problem and a policy was devised to address it, and that policy was mercantilism. No, Heckscher didn’t really agree with that view and rather thought of mercantilism as a broader societal system, an economic practice that was built on broader ideas about how the state and how society should work. That is what connects it to economic nationalism. Mercantilism can be seen as the first cut of economic nationalism. And mercantilism, of course, arose when many countries in Europe were trying to define what was unique about their own national culture, and were thinking about how to build a state around that culture. What Heckscher says is that, if you go through mercantilist economic policies—the fear of foreign goods, for example, or the strong desire to increase your balance of payment surplus and hoard gold—all of that was part of a unitary system. These policies were integrated parts of a larger notion about power, the state and how the state should function. And I think that that is what made Heckscher’s book unique at that time. I should also say that many people have criticized Heckscher for his treatment of mercantilism in history, and I don’t think his book should be seen as the final answer to what defines mercantilism. But he opened up a new discussion around mercantilism, which I think was very helpful. So if you want to understand economic nationalism, Heckscher’s book is a good start. Economic nationalism isn’t just a few economic policies that one or several governments are playing around with. It’s rooted in an idea of how you want to organize society and the state and—not to forget—the subjugation of the individual to the state. That’s very much the debate that emerged after this book was published. It came out in the 1930s. And a bit more than 10 years later another seminal contribution to the idea of mercantilism was published by an American economist called Jacob Viner. He was pretty close to Heckscher, both ideologically and in treating mercantilism not just as an economic theory or as an economic policy, but as part of an idea of how you obtain and manage political power. Viner, perhaps more than Heckscher, was influenced by contemporary politics. He wrote it just after the Second World War , and his idea of mercantilism reflected the emerging conflict between the free market democratic West and the Soviet Union. In a way, Viner could see the use of mercantilism as part of American foreign policy. Get the weekly Five Books newsletter Heckscher didn’t like what he was seeing in the 1920s and the 1930s, but I think his intention, and the way that he was influenced by contemporary thought, was to try and save Adam Smith ‘s critique of mercantilism, especially from the type of German economic thought that developed in the 19th century and which had been a lot more positive towards mercantilism. They had actually treated mercantilism in the same way as Heckscher, as part of a broader idea of society and the state—but, obviously, giving it a much more positive gloss. Heckscher started out as a political conservative, but gradually became an economic liberal. He gradually took on many of the ideas that Adam Smith had outlined, especially around the notion of a harmonious economic system, this idea that you can actually have peaceful economic relations between different interests and different people, between companies and between countries. Absolutely. The Wealth of Nations is first and foremost a book against mercantilism. Yes. He shared that with other Scottish Enlightenment philosophers who took a bottom-up view of society, basically assuming that an ordered society can be spontaneous and varied, rather than unitary and planned. But I wouldn’t say that Smith had a larger theory about nationalism or internationalism and he doesn’t challenge what I would say is the core plank of economic nationalism, namely nationalism. That is partly because nationalism wasn’t a fully developed idea in his time. Smith and others were more preoccupied by mercantilism and how it led to bad economic practices through imperialism and colonialism. Adam Smith is one of the first economic anti-colonialists, one of the first to make a strong economic case against British imperialism and keeping the colonies. Smith was pretty good at demonstrating that the British Empire and imperialism were actually an economic cost. They didn’t benefit the welfare of Britain. But I don’t think he laid out an alternative vision of what society would look like without empires. He wasn’t a nationalist."