michael perelman wrote:
>
> When I look at the literature of mercantilist thought, I see that the
> early economists believed that the accumulation of gold was the key to
> development, until the London fire of 1670 (?) when the idea that
> domestic demand could also spur development. Also, profit meant the
> sale of a good for more than it cost, suggesting that Third World trade
> was important, since domestic trade could not add value through profit
> upon alienation. Finally, this literature put great emphasis upon
> keeping people working for his little as possible.
>
> Marx always suggested that the early economists were on to something. I
> agree. The early economists, as I read them, argued that both domestic
> and colonial exploitation were central to economic growth and the
> development of early capitalism.
>
The pre-Smithians had a lot of insights, they were much more
sensitive to the way the world actually works. This flows from their
methodology which does not divorce economics from history and politics.
As Schumpeter says in his History of Economic Analysis, the
Mercantilists knew their power politics. He also says "If Smith and his
followers had refined and developed the 'mercantilist' propositions
instead of throwing them away, a much truer and much richer theory of
international economic relations could have been developed by 1848..."
Hollander says "These kinds of arguments (the mercantilists) may
reflect aspects of 'under-development', they imply that without metallic
inflows from abroad, or direct stimulation of particular industries
coupled with the encouragement of raw materials imports, it would be
impossible to maintain full employment." *Classical Economics*,22. The
problem with Hollander is that he sees everything through the lense of
vulgar political economy. Classical and pre-classical political economy
only has value in so far as it anticipates what the neo-classicals have
to say. He says the only contribution of the physiocrats was that the
first instances of marginal analysis could be found in their work. Well,
so what? Isn't that a dubious honor?
The Mercantilists knew that the world economy tends to polarisation
rather than convergence.They gave the first 'infant industry' arguments.
They described *exactly* how countries like Japan, S.Korea and Taiwan
would later develop. Here's some quotations I culled from Hudson.
"The richer country is not only in Possession of the Things already made
and settled, but also of superior skill and Knowledge (acquired by long
Habit and Experience) for inventing and making more...Now,if so, the
poorer Country, however willing to learn, cannot be supposed to be
capable of making the same Progress in Learning with the Rich, for want
of equal Means of Instruction, equally good MOdels and Examples;-- and
therefore, tho' both may be improving every Day, yet the practical
Knowledge of the poorer in Agriculture and Manufatures will always be
found to keep at a respectful Distance behind that of the richer
country." J.Tucker, *Four Tracts* p24
"Infant trade, taken in a general acceptation, may be understood to be
that species, which has for its object the supplying the necessities of
the inhabitants of a country; because it is commonly antecendent to
supplying the wants of strangers...
A considerable time must of necessity be required to bring a people to
a dexterity in manufactures. The branches of these are many;....People
do not perceive this inconveniency, in countries where they are already
introduced; and many a projector has been ruined for want of attention
to it.
"if he intends to supply foreign markets, he must multiply hands; set
them in competition; bring down the price both of subsistence and work;
and when the luxury of his people render this difficult, he must attacke
the manners of rich, and give a check to the domestic consumption of
superfluity, in order to have the more hands for the supply of
strangers." James Steuart *Principles of Political Economy*424,(1767)
Sam Pawlett
