978-1138206991 Chapter 3

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CHAPTER 3

WEALTH AND POWER: THE MERCANTILIST PERSPECTIVE

Overview

We have not made major revisions to the version of this chapter in the 6th edition of

Introduction to International Political Economy. We continue to stress the main features

of mercantilism and contrast it with the other three IPE perspectives. There is a new box

on U.S. complaints about China’s industrial policies. Mercantilism continues to be one of

the mainstays of IPE perspectives and frameworks. Even though it is not as popular an

idea as it was in the past, it has always been a tool states use to achieve a variety of

economic and political objectives.

We begin by defining classical mercantilism and explaining its role from the sixteenth

until the nineteenth centuries. States focused on generating trade surpluses that were

supposed to contribute to state security and protect public and private groups within

Later in the chapter we examine how states are using a host of sophisticated technologies

to defend their economies in an era where it has become increasingly difficult to

determine whether or not competitors intend to physically harm one’s state and its

businesses. Complicated linkages between major international problems and states’

interests make it increasingly difficult for states to resolve disputes through negotiations.

The election of Donald Trump as president of the United States has accelerated the

weakening of the postwar international political-economy structure founded and

supported by the United States and its allies. Instead of the more subtle and acceptable

neomercantilist polices states have adopted in support of businesses and social groups,

In cases of mercantilism and especially neomercantilism, intentions mean a lot.

Curiously, Trump also often claims that he dislikes globalization and associates it with an

elitist corporate outlook, which is strange given his plethora of investments around the

world. Many critics of globalization are also critical of its free market outlook that

rewards the rich at the expense of the working class in many nations (see Chapter 4). We

suggest that Trump’s brand of mercantilism is less about protecting the United States

than an effort to support placate his base of supporters under the guise of defending the

United States.

Key Terms

•

mercantilism

•

classical mercantilism

•

zero-sum

•

Procurement

•

strategic resources

Teaching Tips

• Begin with an issue such as Trump’s willing to start a trade war to help U.S. businesses and

industries that he says have been treated unfairly. He also claims that some kinds of imports

from other states are undermining U.S. security. Show a brief YouTube video outlining the

issue. Ask students what they know about the issue and have them provide examples. Have

them do small group work for 10 minutes and then report their discussions to the class.

• There are two strong themes interwoven in this chapter, and it is a good idea to use them

explicitly to help students organize the large amount of information contained here. The first

theme is that mercantilism is three different things: a philosophy, a period of history, and a set

• Explain the relationship between mercantilism and realism. How are they similar and

different? Also, ask students why realism has remained more popular than mercantilism (or

has it?).

• There is a lot of historical detail in this chapter, and some specifics will be covered again later

in the text. Since students often know little of modern history, they may need some help with

• As you work through this chapter, stress the continued relevance of mercantilist–realist ideas,

especially related to globalization, the global financial crisis, or trade policies of the Trump

administration. Many students tend to view the subject of IPE through the lens of economic

liberalism and assume that there are few, if any, other important perspectives out there.

• A good class debate can be had over whether or not President Trump is truly a

neomercantilist. (See also a related essay question below.) Such a debate might clarify for

• Point out to students that states sometimes enact ostensibly mercantilist policies in pursuit of

non-military and non-economic goals. In this chapter we point to examples of the EU and

Canada seeking to preserve cultural sovereignty and the EU and African countries keeping out

GM crops on health and environmental grounds. Ask students what they think about these

forms of “protectionism”?

Sample Essay Questions

1. Explain the different ways that the term mercantilism has come to be used, both theoretically

2. Brief quotations from the writings of Alexander Hamilton and Friedrich List are given in this

chapter. Based on these short bits of writing, compare the ideas of these two political

economists with those of two contemporary political economists. What do they have in

common that makes them all mercantilists or neomercantilists? How do they differ in the

policies that they suggest nations take?

3. Kenneth Pomeranz and Steven Topik state that, historically, “bloody hands and the invisible

hand often worked in concert.” What do they mean? What examples do they provide to

illustrate this point? What other historical examples can you cite as supporting this point?

4. What major changes in the international economy and security structure caused states to

adopt more neomercantilist policies?

5. In what ways are defensive (benign) and offensive (malevolent) mercantilism different? Why

is it sometimes difficult to tell the difference between them? Give examples from the reading.

6. In the post-World War II era, what kinds of mercantilist policies has the United States

adopted, and in pursuit of what goals?

7. Balaam and Dillman argue that Trump is not a “genuine” neomercantilist, even though he

supports significant trade protectionism and increased military spending. What beliefs and

policies of President Trump appear to be inconsistent with the mercantilist perspective?

Sample Multiple-Choice Questions

1) Which period of history is often called the “mercantilist period”?

2) Which political economist stated that “the power of producing is infinitely more important

d) John Maynard Keynes

3) Which is the best statement of the relationship between wealth and power according the

d) If a nation has a large army, it will be wealthy.

4) Alexander Hamilton and Friedrich List both wrote that a strong state is necessary if a nation

intends to compete with the manufactured goods of the leading industrial power of its day.

The dominant industrial power at the time they wrote was

a) the United States.

5) A mercantilist would most likely agree with which of the following statements about trade?

a) Specialization in comparative advantage benefits all the parties engaged in trade.

6) Which of the following U.S. policies before World War II could be considered mercantilist?

a) Creating land-grant colleges

7) Which of the following nations have at various times used strongly neomercantilist policies

to achieve economic growth in the post-World War II era?

8) Neomercantilism differs from economic nationalism in that

d) neomercantilism favors free trade, whereas economic nationalism favors protectionism.

9) Which of the following neomercantilist policies is most likely to be viewed as malevolent?

a) Voluntary export agreements

10) The United States has a strategic stockpile of which resources?

11) The United States uses DARPA as an instrument of

d) job creation.

12) According to Patricia Goff, which non-traditional mercantilist goal have Canada and the EU

pursued in recent decades?

13) Some experts believe that the conflict over rare earths between Japan and China in 2010 was

really about control over resources in

14) Most members of the Arctic Council are eager to exploit oil and natural gas resources in the

Arctic region as its ice cover disappears. Which of the following countries is not a member of

the Arctic Council?

a) Russia

b) Denmark

c) Norway

d) United Kingdom*

e) Canada