The Neomercantilists: A Global Intellectual History, Eric Helleiner, Cornell University Press, 414 pages

What Russell Kirk’s book The Conservative Mind did for post-war conservatives, in relating a genealogy of ideas to a ragtag band of dissenters from the New Deal, Eric Helleiner’s recent book, The Neomercantilists: A Global Intellectual History (2021), could do for a motley crew of conservatives today, who dissent from the dominant post-Cold War policy vision of deregulated capitalism and globalization. If you believe America needs a reindustrialization strategy to rebuild national strength and working class prosperity, you are not a Marxist. Nor are you a classical liberal, the “small government conservative” of our time. You are a neomercantilist.

Old mercantile thought, the target of Adam Smith’s critique in Wealth of Nations, was oriented to conserving or growing the national wealth and power of a state. According to Helleiner—a historian at the University of Waterloo, whose prior works examined the international economic settlement after the Second World War and the global financial crisis in 2008—neomercantilism is a belief in the need for “strategic trade protectionism and other forms of government economic activism to promote state wealth and power in the post-Smithian age.” In other words, neomercantilists were engaged in responding to the new intellectual world stimulated by Smith’s work and in steel-manning mercantilist concerns and goals with updated argumentation and evidence. 

A common concern among neomercantilists was the societal divisions fostered by liberal individualism due to free trade. Neomercantilist arguments for national industrial and economic development rested on methodological groupism (i.e., treating sectors, populations, and nations as whole units in economic analysis), in contrast to classical economic liberals whose arguments rested on methodological individualism. For example, Canadian neomercantilist John Rae said in 1834 that “Man hardly exists but in the social state,” and each society had its own distinctive political economy. Compare this notion to the thought of classical liberals like Ludwig von Mises—and to neoliberals following him—who made “the sovereign consumer” (an abstraction from any particular society) the basic unit of his analytic method.

Moreover, free traders focused exclusively on individual interests without recognizing the need to subordinate or correlate them to community or country if the wellbeing of the latter required it. Neomercantilists demonstrated how individual interests diverged from national interests. They prioritized national unity over ideas of class struggle as well, differentiating them from Marxists. Most neomercantilists also observed that nineteenth century free trade was less a universal theory of general applicability than a cover for British interests. Turkish neomercantilist Ziya Gokalp praised the German Friedrich List, who published a famous critique of Smith in 1841, for discovering the “truth” that economic liberalism was “nothing but the national economics of England.”

However, none of the neomercantilists portrayed by Helleiner favored economic autarky or absolute self-sufficiency. Their trade protection entailed mechanisms intended not merely to raise tariff revenue, but also to yield strategic effects on the country’s industrial and productive powers to better compete with other states. Neomercantilists—especially those that developed sophisticated critiques of free trade, such as the American Henry Carey, who influenced the Lincoln administration and the post-Civil War Republican Party platform—believed the society of nations would be better off with internationally distributed production systems, rather than with global production concentrated in one or two countries. The fear of concentrated industrial power in the international system was about Great Britain, the “workshop of the world,” in the nineteenth century. This same fear registers now in policy debates over decoupling from the world’s workshop in the twenty-first century, communist China.

Helleiner’s book fills a major gap in alternatives to classical liberalism and Marxism in the study of international political economy. He shows that pro-labor protectionists, American anti-globalists, and working class social conservatives—with economic arguments long banished from board rooms, think tank events, and academic conferences—have a rich and diverse pedigree. Nineteenth and early-twentieth century African, American, Argentinian, Australian, Canadian, Chinese, Egyptian, Ethiopian, German, Indian, Japanese, Korean, Polish, Romanian, Russian, and Turkish thinkers who championed national economics were absorbed with the problems of industrial weakness, labor outsourcing, offshored manufacturing, and over-financialization. These are the problems in America that neoliberals justified, supply-siders ignored, and libertarians have excused since the 1990s. 

Consequently, The Neomercantilists is valuable for this genealogy of thought it relates to economic statecraft as practiced, and for a paradigm fit for the shape of things to come. We have entered a neomercantilist era. We realized too slowly that China’s geopolitical intentions made the post-Cold War period of globalization poisonous. China and the United States—the world’s two leading economies—now make moves and countermoves that erode the rules-based liberal international order. 

To rectify and adapt to globalization’s failures and excesses since the 1990s, there is a consensus emerging for new American policy in this era, albeit over the grumbling of neoliberals, supply-siders, and libertarians who deny the need for new (i.e., not their) economic ideas. As Oren Cass has written, “ideas harden into dogma around which politicians and economists build their careers, warding off the heresy of new thinking until they render themselves so irrelevant and inadequate to contemporary challenges that a crisis occurs, then chaos, and then a better framework emerges.”

That better framework is the tentative renaissance of American national economics. From the Trump administration’s tariffs, rejection of the Trans-Pacific Partnership, and exercise of the Defense Production Act, to the Biden Administration’s CHIPS and Science Act, semiconductor export controls, and domestic content requirements in the Inflation Reduction Act, these examples represent variously bipartisan or partisan attempts to direct and shape America’s neomercantile turn. Those attempts would benefit from a more disciplined account of what concerns and goals are important and why.

Overall, the protectionist concern rests on the experience that losing industrial production systems is far easier than reconstituting them, let alone building them in the first place. Relatedly, the goal of securing high returns to a nation’s skilled-labor force entails promoting industries with labor productivity rates above the national average. 

Four theses of neomercantilism can be distilled from Helleiner’s book.

First, nationality is central to political economy because it roots us in place and gives meaning to our collective sacrifices for the future. Nationality also implies particularity and experience over abstraction and theory. Consequently, neomercantilists’ emphasis on national experiences inspired eclectic experimentation rather than abstract theorizing meant to universalize an economic program for all nations. All neomercantilists rejected free trade to one degree or another because their national conditions were not ripe or would be degraded by it. Economic liberals, on the other hand, ignore the centrality of the national political community in shaping society’s economic arrangements, universalize their prescription of free trade, and downplay the fact that citizens struggle for economic and social existence as communities rather than individuals. 

Second, free trade advances whichever country is top dog with export-competitive production. Neomercantilists worried that British free trade policy would transform other states into commodity exporters for itself in exchange for finished manufactured goods sold back to them at higher prices. As Otto von Bismarck said, “[Great Britain] used to have the strongest protective tariffs until it had become so powerful under their protection that it could step out of those barriers like a gigantic athlete and challenge the world. Free trade is the weapon of the strongest nation.” A zone of free trade makes most sense if accompanied by political union to coordinate state sovereignty over economic life. This was Alexander Hamilton’s argument for federal union in Federalist No. 11, and List pointed out in the 1840s that the American Republic reaped enormous benefits of commerce that Hamilton foresaw in a continental market of free trade inside the Union.

Third, the long-term driver of economic development is productive innovation. Neomercantilists made their motto List’s declaration, “the power of producing wealth is infinitely more important than wealth itself.” For instance, the Canadian Rae in 1834 observed that a manufacturing base is “the power of invention,” which he saw as essential for national prosperity; the interaction of industry and technical improvements stimulated productivity and created a diverse economy. As opposed to the static assumptions about factor productivity in the analyses of liberal economists such as David Ricardo, a manufacturing base changes a nation’s productivity through innovation of tools, processes, and products. Rae criticized the theoretical basis of free trade, comparative advantage, for ignoring this basic difference between natural endowments pertaining to agricultural commodities and acquired advantages pertaining to industrial production: “Who can positively say what fifty years hence will be the productions of any country?” For example, there is nothing in the natural endowments of a craggy island off the coast of mainland China to have destined it to be the world’s most important semiconductor manufacturer. That comparative advantage was made in Taiwan.

Fourth and finally, an economy with widespread manufacturing arts is a boon to a citizenry’s vocational and political happiness. Neomercantilists believed each country needs an economy diverse enough to have dignified work for people of all stations of life. For example, the American Carey criticized those who told the unemployed from economic shocks to just move and find another line of work. Neomercantilists were concerned that trade liberalization created unequal impacts, because export-competitive sectors that gain from free trade cannot employ everybody, and a trade policy distributing benefits to one class of work over another (e.g., white collar vs. blue collar), is unjust. Ethiopian neomercantilist Gebrehiwot Baykedagn warned about the resentment of those immiserated by their dislocation from foreign trade, “The poor without food or clothing will have no reason to love their country of birth. They will not care whether their government is strong or if it perishes.” 

The Neomercantilists should be on the shelf of every skeptic of globalization and America’s neoliberal policies since the end of the Cold War. Advocates of American national economics will be in the driver seat with new ideas and responding to the reality of our time, so long as they are non-ideological, pragmatic, and eclectic. The center-left and center-right neoliberals, the supply-siders, and the libertarians have no ideas for the neomercantilist era we are in. 

Free trade agreements are over. The United States’s trade barriers are so low already that the last round of global free trade talks in Doha fizzled partly because our trade negotiators had nothing to offer states like India to get them to reduce their (much higher) barriers. In 2022, the U.S.-led Indo-Pacific Economic Framework was received tepidly for the same reason. U.S. markets are already wide open, whereas most countries see deeper market access to China as the real trophy.

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Supply-side tax cuts have little-to-no effect on the stock of U.S. capital formation. Global markets are already awash in trillions of dollars of financial capital that slosh around the world overnight. Our problem is not too few dollars for investment, but too many dollars chasing too few good ideas (which explains the crypto craze and crash). Supply-side tax cuts have given the economy a sugar rush by boosting consumption temporarily, but companies have channeled tax savings toward stock buybacks rather than capital expenditure or corporate R&D. Tax cuts do not fund basic and applied research, which is what pushes the frontier of the known into the unknown (innovation) and ultimately drives productivity growth and new wealth.

To the degree U.S. economic policy has weakened unions and other labor protections while also not unwinding trade liberalization, the American worker’s livelihood has suffered from insufficient protection. American trade policy did not begin to liberalize significantly until after the New Deal protected labor in alternative ways to high tariff barriers, namely by strengthening labor laws and producing the basic rudiments of earned benefit welfare programs like Social Security and later Medicare. 

Neoliberals, supply-siders, and libertarians will call neomercantilism a “big government” ideology, like socialism. But the diversity and universality of neomercantilism suggests it is not an ideology. It has no theory of history, no metaphysic, no gauzy vision of humanity’s future. Unlike liberalism or Marxism, it has no seminal thinker that promulgated doctrine, nor a movement that enforced orthodoxy. It is a practical program from experience to build up the wealth and power of your country.