Sunday, May 17, 2009

Mercantilism, a Truly Nationalist Economy

"But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade."
Carl Marx, "On the Question of Free Trade" (1848)

With these words, the Marxists and socialists joined the cause behind the greedy internationalists, who put Free Trade into the forefront. There it has stood as some unholy grail for the better part of 200 years. True, the Left drove this for revolutionary reasons, even sacrificing what was in the best interest of their workers, whom they claimed to represent.

There has always been a brand of men, a breed even, who have put their pocket books ahead of the well being of their nations and brothers. These "internationalists", who saw themselves as a regional, then continental, then global elite, were never satisfied with the fair profits to be made in their own countries. Nor were they ever bothered by any conscious thought of the moral debt to their nations or to their fellow citizens, not when cheaper foreign labor and greater profits were in the way. Is it any wonder that the Lord Christ commented that a camel had a better chance of pitting through a head of needle then a rich man getting into Heaven?

"Again I tell you, it is easier for a camel to squeeze through the eye of a needle than for a rich person to get into the kingdom of God." Matthew 19:24

However, there has always been a system that has put one's own nation in the forefront and has served to strengthen that nation economically and its people financially. The system, Mercantilism, was fully expressed in economic thought in the 1600s and served as the driving force of Europe until the mid 1800s. It is still in practice to some degree in many nations, though most suffer from the illness of Free Trade and the effects about which Marx spoke.

Let us, dear reader, be very straight about whom Free Trade benefits: fist and foremost it benefits the top .5% of the population, for whom it is a boom of untold proportions and maybe to some degree the next 3-5% of the top. It benefits the Marxists, as the victims of Free Trade are driven into their waiting grasp. It benefits the poor under developed nations, but mostly their elites as usually those nations' top advantage is their cheap labour and there is no reason to be rid of that, through fair pay, now is there?

The policies and actions of the WTO, World Bank and other Free Trade organizations have had a world wide effect of pushing up prices on controllable end user necessities, such as water and finished foods, while driving down prices on commodities such as steel, wheat and rubber. This double blow has staggered the working masses, driving up the rates of poverty even in the strong, advanced economies, while concentrating the wealth in the hands of the top 1-2%.

These organizations and their agendas further strip away key industrial protections from key national industries, thus crippling those nations and forcing them to be dependent and thus to live a the shim of foreign mega corporations. This is a direct threat to national sovereignty.

Unlike the modern proponents of Free Trade, Ivy league economists at the employ of billionaire Internationalists, the fathers of Mercantilism, such as Thomas Mun and Edward Misselden, were active merchants and patriots of their nations. They, unlike their modern contemporaries, favored their governments supporting protectionism that encourage exports while discouraging imports, thus safe guarding their nation's power and wealth. They understood full well that the prosperity of a nation depended on it supply of capital, which drove its industry and power. A loss of that capital, through large trade imbalances would always lead to the eventual collapse of the nation.

Mercantilism benefits the strong state, and the larger more powerful the nation, the greater the benefits to it and all of its citizens, for self sufficiency breeds stability and growth. Philipp Wilhelm von Hornick, in 1684, in his work "Austria Over All, If She Only Will" sets out the basic 9 tenants of Mercantilism:

1. All of a country be utilized by agriculture, mining or industry.
In other words, a nation must maximize the resources it has, putting all of these to the maximum benefits of its own economy, before seeking those resources outside its own borders.

2. Raw materials should not be sold off but should be processed internally, since finished goods have more value. Just like companies climb the value chain, so should whole nations. Furthermore, for the citizen of that nation, processing and manufacturing jobs hold more value and pay then simple extraction.

3. Large working population is encouraged. So, two thing stream from this: a demphasis on things such as abortion and welfare mentalities, and an ethos of hard work and production. All absolutely necessary for national survival and prosperity.

4. All exports of gold and silver prohibited and domestic money kept in circulation. One must take a step back here and remember that in this more sensible era, national currencies were actually backed on a substance of value rather then in fiat, valueless currencies built only on trust. An example of this effect was the large purchase of Asian goods in the 1600s for gold bullion. This had the effect of forcing down the amount of money in circulation and thus wages that could be paid. A deflation of sorts took place and was a clear sign that the society could no longer be maintained. The answer to how to conduct such trade lays in point 6.

5. Foreign goods imports discouraged. Foreign goods had the tendency of causing a nation to rely on a foreign power and to destroy or damage the nation's own industries, especially when it came from nations with absolutely cheap labour. A race to the bottom on wages could then easily ensue, forcing suffering on one's own citizens.

6. Indispensable imports, should be obtained in exchange for manufactured goods and not gold or silver. In this way, the nation sells off its excess production of high value finished goods, without devaluing its own currency and economic stability.

7. Imports should be confined to raw materials. Again, it is better to buy the raw and produce the finished goods and since few nations have absolute self sustainability, this is a key way to improve one's own economy. The Japanese economic modernization and continued supremacy as the 3rd largest economy while maintaining a resource poor land, is a prime example.

8. Surplus manufacturing should be sold to foreigners for gold and silver. No one ever said that trade should be an absolute win win, well no one until the Marxists. It is unrealistic and like all human endeavors, there are the primary winners and everyone else.

9. No importation of foods that can be manufactured at home. The worst thing any nation can do is put its very dietary existence into the hands of a foreign power(s). This is the epitome of stupidity or betrayal.

Examples of successes in Mercantalism range historically and abound in successful nations and nations on their way up. First an example of Free Trade's failure: in the 1860s, England removed the legislative barriers that kept its industries within the home countries and allowed them to seek cheap labour in the colonies, leading to an additional export of technologies world wide. By 1914, the nation that in the 1860s had more factories then the sum of the rest of the world combined, could no longer outfit her armies and navy in a war against a nation, Germany, which did not even exist in the early 1860s. Further, when those colonies broke away, they of course took the industry and technology and continued to defeat the mother country in the world market.

Now contrast this with the success stories of Mercantilism. In the 17th century, for example, French Finance minister Jean-Baptiste Colbert implemented mercantilism throughout the twenty two years he was in his position. The results were extremely successful, with French industry and economic output in general growing by leaps and making France one of the world's top four major trading and military powers. For once more, how can a nation, producing nothing or little value, thus lacking a proper economic base, hope to hold a large military? The United States, an aberration of this general economic rule, is being brought back to reality. Though it still hold a giant military based on fiat paper and incredible debt, it is already being forced to cut back new technologies and purchases, as its credit has gone bad and simply ran out.

Modern South Korea, starting in the 1950s, under the rule of General Park Chung-Hee, through strict protectionist measures and government support of key industries, raised itself from a basket case third world economy to become one of East Asia's premier economies. Mercantalism also lends itself to state-capitalism, which leads to a more stable economy and needed national direction to that economy, one that benefits both the corporate and governmental stake holders and the society in which they function. This is of course in absolute contradiction to the Anglo Sphere Lezzie Faire economic theory of the past. I say the past because the Anglo-Sphere is quickly transforming itself into the Anglo-Marxists Sphere, but one with a smiling, welcoming face.

A common argument of the Free Trade, Lezzie Faire crowd is that Mercantilism is a form of capitalism that is not directed by the consumer demand but by authoritarian decisions. This is a silly argument, of course, the furthest thing from the truth.

Firstly, the internal national market is still a free market and consumer demand, likes and dislikes will directly play upon and weed out the unfavored vs the favored products, services and enterprises.

Secondly, absolute Free Trade, Laize Faire economics eventually leads to the Wallmart effect, where by a few mega retailers, forcing their supplier base out of the home nation, first bankrupt their own people while secondly holding the main reins of overseas production, creating a monopoly of sorts, and thus narrowing the offered product range through these inevitable monopolistic processes and the lack of buying power in the original homeland's population.

Domestically, a Mercantilistic government works with its industries, providing key capital, exempting fledgling industries from taxation, prohibiting export of high technology and capital equipment which in turn limits foreign competition and when possible developing incentives to limit immigration of highly skilled talent. It further encourages direct foreign infrastructural investment in the country.

A final, excellent example of this is Russia. From 1991 through 1999 there was not a single new automobile assembly plant built in Russia but used cars and cheaply built foreign productions were flooding the country. In 1999, then President Putin, got a 33% tariff passed on all imports. The pundents of Anglo economics were all screaming like one unholy chorus that this spelled the end of the Russian auto market. Instead, what this spelled was the opening of 7 new large automobile plants through out Russia. Russia, through low internal taxes and a pro-business environment, became one of the few profitable markets for the American Chevrolet and GM, even though they were now competing in Russia not only with Russian cars but with BMW, Ford, Mercedes, Hynda, Renault and Toyota. Ford even tripled the size of its main plant, while opening two other smaller plants. Thus Russian workers built the cars Russian workers drove, money stayed in Russia and was spent in Russia, driving the economy forward.

Entering a Russian store, it is always pleasing to see not only labels for an items price but a listing of the items nation of origin, directly in front of me. More often then not, with the nation of origin directly in front of them, Russian consumers are choosing Russian production. The government, in a Mercantilistic move, is encouraging consumers to realize from whence cometh their products and to choose patriotically., thus ensuring their own prosperity. Nations must be self sufficient where and when ever it is possible.


Maxime said...

I agree about trade and I agree about Marx's original view of trade.

However, don't you think the socialist view of trade evolved with the rise of the gloablist capitalist class? Look at the KPRF, it is a very patriotic party, certainly economic nationalist to the core!

As the social-democratic parties in the West stopped talking about Marxism, they began to propagate global capitalism (or should I call it capitalist globalism?).

Man of the West said...
This comment has been removed by the author.
Man of the West said...

Excellent post. I will be linking to it. Thanks for writing it.

JazzyJ said...

Excellent article!

Had no idea that the concept of Mercantilism existed until i read your blog.

I also enjoy the patriosm and passion that you have for your country.