Mercantilism, What is it Good For? Abosolutely Nothing!

Economist Murray Rothbard defined the system of mercantilism as “a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state.” (Rothbard 1997)

One example of “monopolistic privilege to individuals or groups favored by the state” can be witnessed in the history between Great Britain  and her colonies from the 1500s to 1700s. They imposed many regulations like the Navigation Acts, which brought restrictions upon British citizens living in the British colonies. If mercantilism was to benefit the British economy as a whole, like some scholars would claim, the colonies should have seen an increase in their wealth as well. However, these regulations and imposed tariffs forced the colonies to purchase goods at a much higher price through England, like sugar and molasses. They were also forced to buy manufactured goods from only England at inflated prices. These manufacturers in England had little to no competition thanks to these trade restrictions, so they could set their own prices.  

Mercantilism is the opposite of free trade, which benefits everyone. Protectionist tariffs imposed by a government only help special interest groups and these trade restrictions destroy competition. Competition in the market place is good for two reasons, 1) it drives market prices down for the consumer, and 2) it promotes innovation and development in new technologies.

The economic system of mercantilism promoted by the British Empire crisscrossed with the system of Imperialism for centuries. Today it is common for many people to mistakenly think that the system of capitalism and imperialism is one and the same. This couldn’t be further from the truth. Professor Stephen Davies, historian at the Institute of Economic Affairs, defined the two systems thusly 

Capitalism is a system of the free exchange of goods and services between individuals on a voluntary basis under the rule of law and in a system of private property rights. In other words, it is a system of voluntary exchange in which all parties to the exchange are better off. Now imperialism, by contrast, is a system of relations based upon power. Essentially, it’s a system in which certain groups of privileged people in one part of the world are able to extract unearned income from people in other parts of the world through the use of exploitative power relations, usually with the help of local collaborators. (LearnLiberty.org 2013)

            It is clear that the British were trying to create a “favorable balance of trade,” but in the favor of a few “privileged people” in England. By today’s standard we would call these privileged few by the title of “special interests groups.” It requires a special system of propaganda to persuade a people that such economic tactics which only benefit the special interests groups are for the best interest of the nation. According to Dr. Tom DiLorenzo (a professor of economics in the Sellinger School of Business and Management at Loyola College in Maryland) , when he was discussing the history of mercantilism, he said, “The public must be intentionally miseducated in economics in order for mercantilism to survive.”  (DiLorenzo 2002)

The public would not stay misinformed for too long. Well educated men like Thomas Paine, Samuel Adams, and Thomas Jefferson in the colonies would dispel the fallacies of the mercantilist system. A great revolution would free the colonies from this economic burdens and unfair taxes. 

Unfortunately for all their sacrifices, it would not take long for that same system of mercantilism to creep back into American government. Men like Alexander Hamilton, Henry Clay, and Abraham Lincoln would rename mercantilism as the “American System.” They would set up a a system with a central bank, promote corporate welfare, and push for internal improvement subsidies. Protectionist tariffs would manifest themselves again in our land. Government regulations and high taxes would once again destroy our economic wealth as a whole. The American Empire is growing as our individual freedoms and unalienable rights are dying.  

There is still hope for us. We just need to educate ourselves to see through the lies of the intellectuals and publicists who have been hired to confuse the public of their actual intentions. The plan is simple and has already been laid out for us. We just need to look back to the Constitution and restore our republic. 

Works Cited

DiLorenzo, Thomas J. "The Real Lincoln." 57. New York: Three Rivers Press, 2002.

LearnLiberty.org. Capitalism Is NOT Imperialism. June 3, 2013. http://www.learnliberty.org/videos/capitalism-not-imperialism (accessed October 19, 2013).

Rothbard, Murray N. "The Logic of Action II." 43. Cheltenham: Edward Elgar Pub, 1997.