Thomas Mun set forth what would become the standard mercantilist line. He pointed out that there was nothing particularly evil about the East India Company trade. The company imported valuable drugs, spices, dyes, and cloth from the Indies, and it re-exported most of these products to other countries. FULL ARTICLE by Murray N. Rothbard
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The East India Company and Its 17th-Century Defenders
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There was an interesting parallel when Britain found itself importing a considerable amount of tea from China in the nineteenth century. China had prevented Britain from selling its goods in China by stopping the ships with such goods from entering Chinese ports, causing a serious trade imbalance in Britain. In retaliation, Britain began manufacturing opium in India and, by the threat of force, obliged China to buy it. This was the start of the opium wars and the decline of China because of addiction. Today, China imposes a twenty five percent tariff on all vehicles imported to China. Nothing has really changed, except for the West’s refusal to do anything about this. With China poised to export cheap cars to America, perhaps America should stand up to China’s mercantilist policies by demanding that the tariff be eliminated. Free trade must go both ways.
I have to disagree with Richard.
Free trade doesn’t have to go both ways. One country declaring free trade unilaterally is better than not doing so, and for their own benefit. Any country imposing tariffs or other trade obstacles harms themselves foremost.
Ah… only when the current arrangements are themselves near enough to perfect markets. When there are imperfections around, either in international trade or internal to some of the countries involved, protectionism can sometimes help the ones doing it – even if the imperfections are in the other countries; perhaps especially then, since the country choosing protectionism cannot reform out the imperfections elsewhere, which would be an even better alternative.
P.M. Lawrence is the intellectual equivalent of a dirty sanchez.
There was nothing ignorant about it. In an era of endemic war, in which nations needed to buy strategic materials with hard currency in times of trouble, it was indeed iniquitous to run down bullion reserves. As far as trade generally goes, Mun himself pointed out that paper currency, merchants’ bills, etc. presented no general difficulty and that internal trade could have been conducted with it.
He was actually right, as far as his particular time and place were concerned. That is just precisely how things worked out in many countries, because the specie came in on average and then went out on average at a later period, because it wasn’t just two countries involved, but several at different locations in the trade chain, each receiving a specie surge of a different size and duration at a different date. In the end, things worked out for England and Holland – but not because their goods were cheaper, because their carrying trade and infrastructure got built up at a crucial stage of these developments (which was what Mun was after, and got, even if only incidentally). England’s goods were not cheaper than the goods of countries further away like Poland and Turkey, yet Spain, which was more expensive, like many countries had a near monopoly of certain strategic necessities, e.g. saltpetre (the Baltic had shipbuilding supplies that were strategic necessities). As it happens, Spain ended up worse off one way, from something very like what the 20th century called the Dutch disease, and Poland and Turkey (and to some extent Scotland) ended up worse off another way, by making and sending goods and only getting money (and internal dislocation) in return. Eventually India did too, in the 19th century fall of the rupee (although other factors were involved as well).
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