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Source link: http://archive.mises.org/12689/mercantilism-a-lesson-for-our-times/

Mercantilism: A Lesson for Our Times?

May 12, 2010 by

Mercantilism was 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. FULL ARTICLE by Murray N. Rothbard

{ 2 comments }

RTB May 12, 2010 at 9:22 pm

Good stuff. I never cease to be amazed at the breadth and width of Mr. Rothbard’s knowledge, and his piercing insight into the underlying factors that move our world. Every word he writes opens new vistas to be explored.

P.M.Lawrence May 14, 2010 at 4:00 am

“Mercantilism, which reached its height in the Europe of the 17th and 18th centuries, was 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. Thus, mercantilism held that exports should be encouraged by the government and imports discouraged. Economically, this seems to be a tissue of fallacy; for what is the point of exports if not to purchase imports, and what is the point of piling up monetary bullion if the bullion is not used to purchase goods?”

Rothbard has completely missed the point. It wasn’t a question of economics as such at all; rather, it was about making the state stronger by making it able to support a war machine. For that, piling up bullion for a war chest was very important – because it would be needed to pay soldiers in emergencies, not for purchasing goods in the ordinary way. The fact that there was no economic justification for this, as such, simply didn’t come into it in reality (although, of course, special pleaders tried to spin justifications like that too).

“The famous English Navigation Acts, which played a leading role in provoking the American Revolution, are an excellent example of the structure and purpose of mercantilist regulation. The network of restriction greatly penalized Dutch and other European shippers, as well as American shipping and manufacturing, for the benefit of English merchants and manufacturers, whose competition was either outlawed or severely taxed and crippled.”

That is wrong in one crucial respect: they did not favour the English in particular but the British in general, including many American interests, which is why they favoured tobacco growing in Virginia at the expense of that in England (in Gloucestershire).

“In the first place, inflation did not benefit the poor; wages habitually lagged behind the rise in prices during inflations, especially behind agricultural prices”.

That is also incorrect, for the times and places in question. Quite simply, the real poor were generally paid on the “truck system”, mostly in kind rather than cash. People dependent on cash wages were actually a rung above those.

‘Early iron mines in America were small and located in coastal swamps (“bog iron”); and primarily manufactured, or “wrought,” iron was made cheaply in local bloomeries, at an open hearth’.

The iron was not made in open hearths but in enclosed mounds of charcoal and prepared ore. Open hearths were used at a later stage, to keep the iron hot while impurities were removed.

“Massachusetts has the dubious distinction of having promulgated the first governmental paper money in the history of the Western world — indeed, in the history of the entire world outside of China”.

That is wrong. In his “The Conquest of Granada”, Washington Irving records a 15th century case in a city under Christian control that was besieged by the Moors.

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