GFPP 3114

Mercantilism
Emphasis
• Theory and Questions
• Mercantilism – the three questions
• Variants of Mercantilism and Policy
Implications
• Strengths
• Weaknesses
 Theory and Questions
• What is Mercantilism?

• What characterizes Mercantilism?

 Mercantilism – the THREE Questions
• What is the interest of state in IPE from the
perspective of Mercantilism?
• What is the interest of market in IPE from the
perspective of Mercantilism?
• What is the interest of society in IPE from the
perspective of Mercantilism?
Roots of Mercantilism
• Desire to protect national interest/wealth
• Priority: Politics
• Government should regulate the market à
supporting government intervention
• Gains: Zero sum game
• Perception of institutions/
measures/negotiation: National Interest
 Mercantilist Interpretation of Power-Wealth
relations (Viner 1948:10)

1. Wealth is an absolute essential means to

power, whether for security or for
aggression.

2. Power is essential or valuable as a means to

the acquisition or retention of wealth.
3. Wealth and power are each proper
ultimate ends of national policy.

4. There is a long-run harmony

between these ends, although in
particular circumstances it may be
necessary for a time to make
economic sacrifices in the interest
of military security and therefore
also of long run prosperity
Exercise: THREE Questions of Mercantilism

• What is the interest of state in IPE from the

perspective of Mercantilism?
• What is the interest of market in IPE from the
perspective of Mercantilism?
• What is the interest of society in IPE from the
perspective of Mercantilism?
VARIANTS OF MERCANTILISM
Classical Mercantilism
• Promote exports, discourage imports
• Protectionist measure

These policies which generated and

protected national wealth and security,
were often perceived to be at the
expense of another state
Classical Mercantilism
• Dominate the eras of 16th to 19th centuries
during the rise of modern state building in
Europe.

• The Political Philosophy: ‘Why and how

nation-states could generate the wealth and
power needed to protect their societies and
evolving economies from external threats’
(Balaam & Dillman 2014:77)
Classical Mercantilism
• Why?
(a) The War Factor (Tilly 1985),
(b) Industrial Policy (Han-Joon Chang 2007)
• Measures:
(i) Exploration of natural resources (raw
materials)
(ii) Colonialism (slavery & extraction of
economic commodity)
Economic Nationalism
Rationale:
v Economic nationalism helped generate foreign
imperialism by finding foreign markets for the
goods that productive power produced.

Policy Implications
v Protectionist measures
Infant Industries Argument: Alexander Hamilton (1791)
“!" #$ %&'' ()*%) +,)- .,/"#01',/ &2,3.'&$ #) "4&
0*1/$& *5 "4#$ /&.*/" %#'' 6& 0#"&-7 "4," 0&/",#)
),"#*)$ 8/,)" 6*1)"#&$ *) "4& &2.*/","#*) *5
.,/"#01',/ 0*33*-#"#&$9 "* &),6'& "4&#/ *%)
%*/(3&) "* 1)-&/$&'' ,)- $1..',)" ,'' 0*3.&"#"*/$9
#) "4& 0*1)"/#&$ "* %4#04 "4*$& 0*33*-#"#&$ ,/&
$&)": ;&)0& "4& 1)-&/",(&/$ *5 , )&% 3,)15,0"1/&
4,<& "* 0*)"&)- )*" *)'= %#"4 "4& ),"1/,'
-#$,-<,)",8&$ *5 , )&% 1)-&/",(#)89 61" %#"4 "4&
8/,"1#"#&$ ,)- /&31)&/,"#*)$ %4#04 *"4&/
8*<&/)3&)"$ 6&$"*%: >* 6& &),6'&- "* 0*)"&)-
%#"4 $100&$$9 #" #$ &<#-&)"9 "4," "4& #)"&/5&/&)0& ,)-
,#- *5 "4&#/ *%) 8*<&/)3&)" ,/& #)-#$.&)$,6'&?
Infant Industries Argument: Friedrich List (1966)

“The power of producing wealth is therefore

infinitely more important than wealth itself; it
insures not only the possession and the
increase of what has been gained, but also the
replacement of what has been lost”
 !"#$%&''()*+,-#.$/0($123456
• Resulted in the
increase of US tariff
rates for imported
goods
• Led to tariff conflict
between the US and
others and intensified
tense of the Great
Depression (1929-
1938)
!"#$%"&'()*+,+-.
• Evolved in the post-World War II
• End of WWII – interdependence between
the markets of nation states
• Emphasis:
(a) varied protectionist trade, finance,
development policies to generate wealth
& enhance security.
(b) tariffs and non-tariff barriers
Hegemonic Stability Theory
• ;&8&3*)= @",6#'#"= >4&*/=A !)"&/),"#*),'
&0*)*3#0 $=$"&3 #$ 3*/& '#(&'= "* 6& *.&) ,)-
$",6'& %4&) , -*3#),)" */ 4&8&3*)#0 $","& #$
%#''#)8 ,)- ,6'& "* ./*<#-& '&,-&/$4#.9 ,)- %4&)
3*$" *"4&/ 3,B*/ $","&$ <#&% "4& 4&8&3*)C$
.*'#0#&$ ,$ /&',"#<&'= 6&)&5#0#,':
• D&*EF&/0,)"#'#$3A ;&8&3*) 51/"4&/#)8 ),"#*),'
#)"&/&$" #) , -#$81#$& *5 ./*<#-#)8 .16'#0 8**-$
• >4& G@ ,$ ;&8&3*)H
• I 8/*1. *5 ),"#*)E$","&$ %#"4 $"/*)8 &0*)*3=
+#:&: "4& JG7 ,$ ;&8&3*)H
/012!"#$%"&'()*+,+-*23#,+'+"-
• 40"5",#6.")*(,27*(*"-829:(;"2<==>?@

• 7*(*"21(6+*(,+-.29AB&,()*C+'D2<=E<?2à *F"2
G#5"&).")*2/+)D";21#.6()+"-29G/1-?

• 1#,,"'*+5"2H'*+#)-2I JKL1-M2*F"21(+&)2
G&#B6M2&"N+#)(,2N&#B6+)N-2#O2/01-
1#)*".6#&(&P2!"#$%"&'()*+,+-*23#,+'+"-

(?22L);B-*&+(,2Q2L)O&(-*&B'*B&(,23#,+'+"-

• RS@2T#&"+N)21#.6()P8-2L)*"&"-*2+)2
7*&(*"N+'2R'#)#.+'27"'*#&

• 1(-"2U2G#5"&).")*23&#'B&".")*
1#)*".6#&(&P2!"#$%"&'()*+,+-*23#,+'+"-29'*;?

!"#$%&'%()*+#,(-./&+(-#0.1*+*(-

• 23(&)4
• 5*3(&'1-#
• 5(%'1
CONCLUSION