Archive

Mercantilism

Following is a brief synopsis of the history of economics as i understand it together with a subjective viewpoint on its inherently oppressive nature. This viewpoint as written below does not necessarily reflect my personal opinion on economics, it is simply a viewpoint, that should stand alone in its own right.

-The Raj

Since industrialization humans have focussed on getting more efficient, becoming more profitable. I shouldn’t say humans in this regard, for it is mostly the capitalists who expound such thought processes into practical application. Economics after all, cannot be taken away from the self interest of its proponents, and when brought into the fray of politics, self interest largely depends on who is in power. And, money being tantamount to nearly everything in entering politics, most modern democracies flout the interests of capitalism over ‘what is good for the masses’. Of course this is cleverly disguised, more so from the politicians themselves, but GDP is not a measure of quality of life. Getting richer as a country, with it’s complete wealth distributed according to the laws of the Pareto Principle, is questionable as a purpose of being. Most modern economies can be highlighted as examples.

The prevailing ‘what is good for the powerful is good for the economy’ philosophy can be easily illustrated with simple look at the history of economics. Initial feudal establishments (which were centered around the absolute power of the landowning class and its default omni-ownership of all capital) crumbled with the increase of trade and the appearance of ‘marketplaces’. This only exacerbated with colonialism and eventually led to the Merchant class surpassing in wealth the landowning overlords of feudalistic society. Eventually, the reign of Merchants was the norm.

Mercantilism

‘Mercantilism’ was their philosophy. Mercanltilists were of the opinion that to prosper, a nation must sell more than it buys. In other words, its exports must exceed its  imports. This kind of thinking will seem absurd in the modern day world with interdependencies among nations causing more deficits than surpluses. A system like that cannot survive, for the simple reason that were every country in the world to follow identical princples, trade would simply halt! leading to eventual collapse of the system. As it happened Mercantilism survived for a long while, primarily due to cheap resources readily available from colonized nations and also by oppression of its own country’s peasant class, and economies in that day were controlled more by guilds of merchants that functioned more like cartels; monopolizing trade and commanding prices. Not very good for the quality of life of your average peasant, I would say.

Moving on, the rise of capitalism happened when the industrialists got into the game. They were a class of people who believed in the use of capital to control the arena of trade. They would supply capital to small scale artisans and contract merchants to sell them. This practice formed the basis of what would become the modern company.

Capitalism

‘Capitalism’ full blown, had names like the Dutch and British East India Companies as its flag bearers.  They allowed joint stock ownership and modern share markets found their origin here. They used their vast capital and trade monopolies to import cheap and sell dear. Making their owners’ wealth increase to previously unimagined proportions. Along with the emergence of capitalism, the seeds of the destruction of mercantilism were sown. Some advantage was gained to the common man with the abolition of protectionist measures like monopolies. And free market systems ensured competitive prices but along with its advantages the market economy also increased the sense of work ethic. Previously idyllic lives were now to be spent slaving at factories and workplaces eking out a living.

This hasn’t changed much. In the world of globalization and international trade, corporate interest is the main driving force behind ‘growth’. Obama treads lightly with BP because Obama possibly knows who has a fatal but light grip on his balls. The ecosystem and the small people making a living off it are not really significant. And this is not really a one off example. Trade barriers, free markets, international trade agreements, multinationals etc are all ‘good for growth’ but not really good for the increment of the quality of life of the small man. At least, such increment does not make the betterment of the common good its priority. Leading us to question the validity of the whole system, and our perceptions of human nature.

A mercantilist or neo mercantilist stance is what helped economies like China, India, Japan etc to rise to be the economic powerhouses they are today. it was also the cause behind most of the greatest empires ever seen on earth, and is the root of American industrial power.

It involves a bit of protectionism of course; no doubt angering most liberal thinkers on matters concernig the economy, but mostly this will involve a genuinely cooperative relationship between business and government.

We are talking about reduced red tape and corruption. The whole structure of the government should be geared to help business. Its more than just a set of policy actions; its a mindset of its own.

Right now the government is strapped for cash. 90% of current government revenue is also spent on servicing our debt. that is, our existing debt.

This is resulting in the crippling of business funds for certain essential industries like Tea and Coconut, which rely on reinvestment of the revenue they bring in to develop their industries, having a severe effect on the long term profitability of these businesses.

The government is absorbing cash fom any and every avenue they have access to and this is having disturbing and distorting effects on the economy. The recent stock market bull run has also now slowed as foreign investors begin to sell to cash in on their profits.

Draconian laws and pointless regulation cripple industry and business on many fronts and these will have to be eliminated. Most importantly the mentality of public servants must be changed and the public sector itself must be put through a restructuring process.

Special instances should be managed outside the normal vertical rigid structure of government. for example, this is how Malaysia coped through the Asian Crisis.

Right now all the government seems to be doing is fire fighting away; thats quite understandable seeuing as we just emerged from conflict. heres hoping we find out some concrete and practical vision like a Mahinda Chinthanaya for the economy soon.

%d bloggers like this: