Liberal Mercantilism and Economic Capitalism

Friday, 28 September 2018, 10:32 am
Article: Keith Rankin

Liberal Mercantilism and Economic Capitalism: an Introduction

by Keith Rankin, 28 September 2018

Most of us realise that there is something wrong with capitalism as we know it. We also accept that capitalism is here to stay; the only practicable alternatives are evolutions of capitalism, not from capitalism.

For most of its history we have experienced capitalism as processes of inequality and contradiction. Capitalism as we know it exhibits the growth dynamics of a runaway train for which both stopping and not-stopping spell present or future disaster. We opt for future disaster. Economic growth is understood as the process of making money at an accelerated rate.

This is primitive capitalism. And it is the manifestation of a ubiquitous mode of modern thought that I refer to as liberal mercantilism. The principal metaphor of liberal mercantilism is gold, which in turn is the principal metaphor for money. Liberal mercantilism is the belief that the economic purpose of life is to make money, that the amount of money each of us makes is a measure of our success in life, and that the amount of money a country makes is the measure of its success.

There are two main strands of liberal mercantilism; conservative liberal mercantilism (which, in the past few decades, has embraced both neoliberalism and neoconservatism) and progressive liberal mercantilism (which embraces both social democracy and socialism). Progressive liberal mercantilism is about making money, taxing it, and governmental spending of it; conservative liberal mercantilism is just about making money. Progressive liberal mercantilists argue that you have to make money before you can spend it. Conservative liberal mercantilists argue that you have to spend (invest) money in order to make money. Both emphasise making money, and economic growth..

Liberal mercantilism is underpinned by a primitive capitalism that only acknowledges private property rights, or public property rights (as in state capitalism; government ownership) that are equivalent to private property rights. Primitive capitalism has no public hemisphere. It's analogous to a single-hemisphere brain.

Liberal mercantilism represents a wrong path; indeed a false path, much as Ptolemaic astronomy and alchemy have represented false paths in the history of science. In another sense, however, it is a real path, in that liberal mercantilism is truly the existential path that modern humanity is on, and uncritically so.

The alternative to liberal mercantilism is economic capitalism. Economics began as a project to rid capitalism of mercantilism, the crude belief that the economic purpose of countries was to operate ongoing trade surpluses. (Donald Trump is an unreconstructed mercantilist; in his way of thinking, countries wage trade wars, seeking victory through ongoing trade surpluses.)

Economics both succeeded and failed; in economics, wealth is utility (and the sources of utility), not money. Economics, though liberal in its origins, is not a part of liberal mercantilism. But most economists are, to a greater or lesser extent, infused with the liberal mercantilist belief system; especially those economists who, through specialising in finance, clearly equate wealth with money and monetary derivatives.

Capitalism – proper capitalism, full capitalism, economic capitalism – represents a balanced economic order that draws on both private and public property rights; that has private and public hemispheres that complement each other. Private income sources are both private equity (property) and labour; what individuals (and groups of individuals) own, and what they make and sell. Public income is sourced from public equity (the essence of capitalism's inchoate public hemisphere); it may be retained by public organisations (governments) to be spent on collective goods and services, or distributed, principally as benefits (using the proper capitalistic meaning of that word), to individuals (as economic citizens).

Most 'capitalists' are not proper capitalists; they are liberal mercantilists. Most people who advocate for capitalism as we know it are primitive capitalists. And many people who run businesses are mercantilists, drawn in the main by wanting money as an accumulating store of wealth, and not simply by wanting the means to acquire the consumer services that represent the actual purpose of market economic activity.

In economic capitalism, money is a means, not an end. It is not wealth; rather it is a social technology; arguably our most important social technology. Money is important as a technology, not as wealth. Wealth is the services that give us utility; wealth is whatever has value because of the happiness that such wealth enables us to enjoy. The economic purpose of life is to survive and prosper, where ‘prosper’ means to attain the higher forms of happiness.

Capitalism must evolve. Embrace that evolution.

ends

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Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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