A recent review of The Neomercantilists: A Global Intellectual History, a new book by political scientist Eric Helleiner, makes the book sound very interesting. Here's how the review describes the book: "A sweeping account of the men and women who argued for strategic protectionism and other forms of government economic activism to promote state wealth and power—an ideology he calls 'neomercantilism'—between the publication of the Wealth of Nations in 1776 and World War II, it offers the first comprehensive global study of this discourse’s diverse origins and political valences."
There has been plenty written about economic nationalism, and by economic nationalists, over the years, so it's not really a new subject. But obviously there has been a resurgence in this type of rhetoric and policy recently, especially in the U.S., so perhaps it's a good time to take a broad historical look at these views.
I haven't read the book yet, but the review triggered some reactions that I wanted to raise here. In a nutshell, it seems to me that the review reflects a triumphalist take I see from various people, asserting that their long fight against something -- "free trade"? "neoliberalism"? -- has finally been won, and now we can move on to a new and better period of economic policy-making. As you can imagine, I'm skeptical.
A bit of trade policy history
To start this off, let me examine a few statements from the review.
First up, there was this:
"On or around 1939 debates about international political economy changed. Over the course of the Cold War, economic nationalism—the attempt to use the state to advance a country’s economic interests—was crowded out of official discourse by two competing universalisms, communism on one side and liberalism on the other."
...
"Both sides of the so-called “new Cold War” between China and the West thus appear to be converging on a distinct but largely forgotten third tradition of political economy. This return of economic nationalism has troubled acolytes of the old religions. "
I have a hard time getting my head around these claims. Economic nationalism ended in 1939? It has been largely forgotten? Then how are all these trade lawyers buying multi-million dollar Palm Beach condos with the money they earn from lobbying for protectionism and from litigating trade disputes?
Now, it is true that over the past few decades, trade institutions were established, trade was liberalized to some degree, and there has been plenty of talk about free trade in the political arena. But I think it's fair to say (and some political scientists may have studied this), that there has been at least as much economic nationalist talk as trade liberalization talk from U.S. politicians and policy-makers over this period. For one thing, free trade is often qualified by "and fair trade," and what that qualifier often (but not always) means is protectionism. And for another, much of the trade conversation is just blatantly economic nationalist: What are Buy American laws if not economic nationalism?
And actual policy clearly reflects the strong position economic nationalism has held during this time. If you look through the WTO's tariff profiles publication, you see plenty of high tariffs in there. And while ordinary tariffs came down in the U.S., anti-dumping tariffs popped up to take their place. And then there's all the regulatory protectionism, the Jones Act, etc.
Of course, the economics profession mostly criticizes protectionism, but economists are not as influential on policy-making as some people seem to think. When it comes down to, say, professional economists vs. the domestic steel industry in terms of giving policy advice to the government, the domestic steel industry usually wins. Economists make powerful arguments, but the industry makes ones with a bigger financial payoff to politicians.
Thus, the reality here is that policy and the political discourse has never been all or nothing in this area. We never came close to reaching free trade, and have always had a mix of protectionism and liberalization. Protectionism may have been slightly moderated during the post-WWII period, but it was far from forgotten.
Going back even further in history, the book and the review spend some time highlighting the work of Henry Carey as an advocate of economic nationalism in the 19th century. At that time, the U.S. was the developing country, and was trying to catch up to the UK:
"In Carey’s eyes, it was therefore not a coincidence that Britain was simultaneously at the forefront of both free trade and “the power for oppression” of the domestic workforce. Since free trade benefited only the traders, impoverishing producers and consumers alike, implementing protectionist policies could achieve an internal “harmony of interests” within each country, aligning the incentives facing farmers, manufacturers, and consumers, allowing each to prosper without impoverishing the others. ... Protectionism was the anti-imperialist policy par excellence. Contrary to liberal expectation, it was free trade that ushered in militarism and violence: “look where we may, throughout history the trader and the soldier are found marching by each other’s side.”"
I think an important point here that gets overlooked sometimes is that the UK was a free trader in some narrow areas (repeal of the corn laws), but perhaps more importantly for this discussion, it was an imperial power. I'm having trouble plotting out in my head exactly how protectionism, free trade, and imperialism relate, but I think of imperialism and protectionism as two forms of state-led economics. The colonies that the UK traded with did not do so freely; the state was a key player here. Free trade, in contrast to those other two, limits the role of the state, and creates conditions by which individuals can engage in exchange across borders without facing state-created obstacles.
But putting those abstract points aside for a moment, I think the practical issue here is that the United States was playing industrial catch-up at the time, and was doing so against a country it had fought wars with in the not too distant past, and which was the most powerful empire in the world. In that context, it's not really surprising that there would be a push in the U.S. to manufacture its own versions of products with military implications. That's helpful in explaining the support for these policies at the time, but I'm not sure the "UK as free trader" and "U.S. as protectionist" distinction tells the full story here.
Did we lose the free trade debate? Or is there less here than meets the eye?
Shifting from the historical discussion to the current debate, to me the review comes across as part of the victory lap some people are taking because, in their view, we are finally moving on from a terribly unfair period of cruel and calculating economic policy, focusing on heartless and unfeeling concepts such as "efficiency," that has been dominant for decades now. In this regard, the title of the review includes the phrase "After Free Trade," and says "As the neoliberal order unravels, the international economic system can and must make room for cooperative forms of state-driven development." And I see plenty of other people out there declaring that "neoliberalism" is dead. For example, this NY Times article by David Leonhardt says: "As one Biden adviser told me, the new [Indo-Pacific Economic] framework is central to the Biden administration’s 'post-neoliberal foreign policy.'"
(At the same time, there are also people declaring that neoliberalism is alive and well, that they are neoliberals, and that neoliberalism is the best way forward to improve the economic well-being of people from all income levels. I tend to think that many political labels are unhelpful, and neoliberal is a particularly unhelpful one. But no matter how much I make fun of the term over on Twitter, people seem to want to keep using it, so we are probably stuck with it.)
One of the things I think the people taking victory laps are getting wrong here is that, to me, none of this seems new. State-oriented approaches to economic policy have been here the whole time. I remember when I was in college -- probably some time around 1992, so right smack in the middle of "neoliberalism" -- I read "Manufacturing Miracles" by Robert Wade in a Georgetown class about government-business relations. It was an interesting book and I learned a lot from it about the views of those who believe in state-oriented economics. And there were plenty of cites to Carey, as well as to Alexander Hamilton and Friedrich List, although I don't recall if that was in Wade's book or something else from the class.
So we've been through all this before, and I don't see what's going on today as some kind of big resurgence of intellectual activity around protectionism and mercantilism. That way of thinking has always been there, and in each generation, some people get excited to write articles about how it is being rediscovered. The United States had high tariffs in the 19th century? Wow, who knew! The answer is: Everyone. But nevertheless, there are periodic recurrences of books and articles excitedly telling everyone about this.
To be fair, Trump did give 19th century U.S. tariff policy a new prominence in recent years. But as I like to point out, Trump wasn't and isn't particularly popular. That may or may not be because of his protectionism, but regardless, I don't see any reason to think we have turned some corner and economic nationalism is about to rise to a new prominence.
Of course, as I said, economic nationalism is here and has always been here to a substantial degree, so I'm not trying to carry out my own celebration of free trade winning this battle. Rather, I'm just pointing out that we are pretty much where we have been for a while: A carefully constructed domestic balance of protectionism, subject to modest international constraints. There's no eye-catching headline in that, but as far as I can tell, that's where things stand.
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