theoretical conversations in ipe: economic nationalism and

Transcription

POLS/ECON 426 International Political Economy
theoretical conversations in ipe: economic
nationalism and mercantilism
professor timothy c. lim
cal state los angeles
tclim@calstatela.edu
theoretical conversations in ipe
economic nationalism and mercantilism
what is mercantilism?
 mercantilism is both a theory about how the international
political economy works and an intellectual defense of
mercantilist policies
 mercantilism is based on the very simple assumption that the
international political economy is governed, first and foremost,
by state power
mercantilist policies are any type of policy that seeks to
protect domestic industries at the expense of foreign industries.
these include tariffs, quotas, subsidies, tax breaks, and so on
 mercantilism is strongly related to realism, a dominant theory
about international (political) relations

one of the most important assumptions of realism is that the
international system is fundamentally different from the
domestic system: domestic systems are premised on
hierarchical relations of power, while the international
system is premised on anarchy
it is because of anarchy that the
international political economy is
characterized by constant struggle for
power and wealth

 to realists, we live in a “dog-eatdog” world: in a world without an
overarching authority, only the
strong survive and prosper
 to see this, consider an environment
with no coherent and effective system
of justice, with nothing to protect
the weak or punish the strong
 in this environment, you can only rely
on self-protection or self-help, and
in a self-help world, power is everything
(the “biggest” dog always wins)
 the emphasis on the state is based on a number of additional
assumptions: one of the most important of these is that states are
rational, unitary actors
rational means that states seek are fundamentally
self-interested actors; in making decisions or
pursuing policies, the overriding objective is to
maximize benefits and minimize costs
unitary means that states are conceived
of as acting with a single mind; in other words, the
actions of state are guided by a core
principle—i.e., the national interest—which
makes domestic disagreements largely irrelevant
to an analysis of state action
mercantilism and power
in the mercantilist view, power is understood--and
exercised--in a specific way
 power is used to protect the domestic
economy from foreign competition
 power is used to enhance the competitiveness
of domestic producers in the world market and
against foreign rivals
 power is used to control natural
resources, by force, if necessary
continued on next slide
mercantilism and power
 power is used by dominant states to force
open foreign markets, to exploit foreign labor
 power is used by the dominant states to write-or rewrite--the rules of economic game with the
goal of creating a system that systematically
and permanently favors their interests
power, in sum, is used to
increase national wealth,
at the expense of other states;
the struggle for power is never
ending
mercantilism and friedrich list
who is friedrich list?
List was a critic of liberal economic
theory and one of the forefathers of the
German Historical School. His bestknown work, The National System of
Political Economy (1841) was written as
against the free-trade doctrines that
permeated classical economics. However,
his was not a polemical defense
of protectionism: he argued it on the
basis of his analysis of economics,
which stressed political factors -notably, the "nation" -- in economics.

f. list provided an intellectual (as opposed
to just practical) justification for state
intervention in a national economy
 he argued, in brief, that state intervention
was necessary if a country wished to
develop productive power
why do states have to play
this role? why not just rely
on markets?
why do states have to play
this role? why not just rely
on markets?
 short answer: markets may allocate
resources efficiently, but markets cannot
guarantee the development of
industries that are necessary to
build and sustain national strength.
only states can do this.
so what kind of industries are
need to build and sustain
national strength?
 short answer: productive or
manufacturing industries (as opposed
to agricultural or service industries)
 list was particularly concerned with
productive power as the basis
of national strength
friedrich list and productive power
The power to produce is the
foundation of human skills,
technological know-how,and
industrial expertise.
The power to produce is the
key to national strength.
as he put it …
alexander hamilton, a key architect of
the US economy in the 1700s,
expressed very similar sentiments,
“those who do not industrialize
become hewers of wood and
haulers of water”
key lesson
ignoring the role of power in international economic relations
is foolish and self-destructive; failing to nurture productive
power is equally foolish and will lead to national disaster
the key economic role of states, therefore, is first and foremost to
ensure the development of the country’s manufacturing
or productive power
friedrich list: historical perspective

it is also important to understand that list’s argument was based,
from his perspective, on a clear-eyed reading of history

list argued, with a great deal of evidence, that the strongest
economy of his time—england—was a pure mercantilist
country for several centuries

the next great economic power, the united states,
was also founded on mercantilist principles
friedrich list: historical perspective
Is itNeed
an accident
some more
thatexamples?
both England
and
Consider
the U.S.
Japan,
rose Germany,
to dominance
South
as
Korea
mercantilist
and Taiwan.
nations,
Needand
onethen,
more?
conveniently,
Just look at began
China right
espousing
now. “free
All
trade”?*
show
I think
unequivocally
not! But, that
I wouldn’t
expect
mercantilism
them toworks,
do anything
and works
else.
They are,
extraordinarily
after all, rational
well!actors.
*of course, when it serves the interests
of the more powerful states to disregard the
ideology of free trade, they will do so in the
blink of an eye!
fallows: how the world works
another way of understanding mercantilism is in relation to angloamerican capitalism. on this point, j. fallows provides a useful
overview of key differences between the two perspectives. he
discusses these differences in terms of six dichotomies
 automatic growth versus deliberate development
 consumers versus producers
 process versus result
 individuals versus the nation
 business as peace versus business as war
 morality versus power
fallows: how the world works
note: some of what we cover in the following slides will be
repetitious: this is partly intentional to help you focus on and better
remember key principles of the mercantilist perspective
automatic growth versus deliberate development
 to repeat, list’s basic argument was simply that the adoption of
free trade or principles of the free market do not guarantee that
an economy will develop in manner that best promotes the
national interests
 in list’s time, this meant the development of basic industry;
today, it might mean the development of a high-tech sector, or
some other high-value added activity, that will ensure the country
a sustainable basis for the creation of national wealth
contemporary examples. consider the development of steel
production worldwide (see next slide); the automobile industry; the
global competition in high-tech sectors
steel production, by country (2007)
Country/Region
S teel production (million
tonnes)
W o r l d
1,343.5
1
C h i n a
489.0
2
J a p a n
120.2
3
United
4
Russia
72.2
5
India
53.1 [1]
States
outh Korea
97.2
at first glance, the fact that so many
countries produce their own steel may
seem natural, but why should it be? from a
liberal perspective, it doesn’t really make
sense, but mercantilists have a ready
explanation …steel = national power
6
S
7
Germany
48.5
8
Ukraine
42.8
9
Brazil
33.8
10
I t a l y
32.0
26
Romania
6.3
11
Turkey
25.8
27
E g y p t
6.2
12
Taiwan
20.5
28
M a l a ys i a
6.1
13
France
19.3
29
Sweden
5.7
14
S p a i n
19.1
30
Thailand
5.5
15
Mexico
17.2
31
Argentina
5.4
16
Canada
16.4
32
Slovakia
5.1
17
United
14.3
33
Venezuela
5.0
18
Belgium
10.7
34
19
Poland
10.7
35
Saudi
20
I r a n
10.1
36
Finland
4.4
21
S
9.1
37
I n d o n e s ia
3.9
22
Australia
7.9
38
Luxembourg
2.9
23
Austria
7.6
39
Greece
2.6
24
Netherlands
7.4
40
Belarus
2.4
25
Czech
7.1
41
Others
K ingdom
outh Africa
Republic
51.4
why so many steel producers?
K
azakhsta n
Arabia
4.8
4.6
29.2 (est.)
automobile production, by country (2007)
for decades, auto production was
considered the main engine of industrial
growth, so many countries (including Japan)
used mercantilist policies to ensure that they
would be a global player: is Japan worse
off today because of state intervention
in the auto industry?
consumers versus producers
 anglo-american economies put the consumer first, or at least give no
special priority to producers
 list argued (as we already know) that this was wrongheaded, because a
society’s well being and its overall wealth are determined not by what
the society can buy, but by what it can make
in list’s view, nations ended up being dependent or independent
according to their ability to make things for themselves. why were
latin americans, africans, and asians subservient to england
and the west in the 19th century? because they could not make
the machines and weapons europeans could. conversely, why did
japan avoid the fate of some many non-western countries? because
the japanese learned how to manufacture things for themselves!
consumers versus producers
“the forces of
production are
the tree on which
wealth grows”
to repeat, the basic problem according to
list was that an overemphasis on
consumption would eventually become selfdefeating, since it would bias the system
away from wealth creation, and ultimately
make it impossible to consume as much
process versus result
 anglo-american systems assumes that how the game is played is the
most important thing; if the rules are fair, then we should let the chips fall
where the may
the logic of this argument is that the “winners”
will be the most efficient, most competitive
producers, therefore, we will all benefit
 in list’s view, however, a “fair” process is
meaningless if your nation consistently “loses”;
moreover, because the process is never really
fair to begin with (this is only a myth propagated
by those in power), then it would be foolish to
“play by the rules”
a fair game? mercantilist tell us that the
process is meaningless when some players
can never, ever win the “free trade game”
individual versus nation
 in the anglo-american system emphasis is put on individual
prosperity, since it is assumed that individual prosperity will
automatically contribute to national prosperity
 in the mercantilist view, much greater emphasis is put on the welfare of
the people as a whole and, of course, on the state
this ties in with the earlier difference between the consumers and
producers. the emphasis on producers is meant to increase national
prosperity and national strength. to do this, may require the
individuals make sacrifices for the sake of the nation as a whole
business as war versus business as peace
 the anglo-american system is based on the assumption that economics
is a win-win situation, a positive sum game; thus, there is no need for
states and peoples to fight over economic issues
 in the mercantilist view, win-win situations may be possible, but
they are not inevitable
why? because power matters, states will always try to tweak
the rules of the game in their favor; over time, those states that
consistently win, will gain power and control more resources, they will
then use this control to dominate others
morality versus power
 american and british policy makers often accuse others of cheating or
not playing fairly; in other words, they portray the liberal economic
system as not just an economic system, but a moral system as well
 list, however, understood that economics is not a matter of right or
wrong, or cheating or playing fair; it is merely a matter of strong and
weak: the gods of trade will help those who help themselves
again, this boils down to an issue of power: the basic problem with the angloamerican model is that it is based on a false assumption, which is that the world
is composed of equally strong nations, all of whom agree with one another to
share the benefits of trade. take away this assumption, however, and the
whole liberal argument unravels
concluding questions
 does mercantilism make
good sense?
 is the argument persuasive?
why or why not?
 what are strengths? what
are the weaknesses?

theoretical conversations in ipe: economic nationalism and

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