The Neo-Mercantilists
By Peter Van Schaik




      We currently have an economic culture of neo-mercantilism. The mercantilists of old felt the wealth and strength of the state took precedence over the wealth and well being of the individuals which comprised the state. They believed that nothing could provide for the strength of the state as much as massive amounts of precious metals in their coffers. After all, it took gold and silver to finance their wars of exploitation and that was what made a nation strong.


      Modern technology has eliminated the necessity of gold and silver. In the age of computerized, paperless money and bank and financial market transactions, precious metals have lost their importance as money and wealth: they are merely another commodity to trade. To the neo-mercantilists, the wealth of the nation is the size and strength of its financial markets: It's not the goods and services that improve the daily lives of the average citizen, it's the volume of stocks, bonds, options, and the dozens of fancy financial derivatives that make a nation strong. 


       This doesn’t mean a neo-mercantilist doesn’t care about the production of real, beneficial goods and services. Of course they do. But they only care about actual production because it affects the bottom line of the highly capitalized international corporations and that's what drives the financial markets. The real goods and services are merely an unfortunate, but necessary, by-product of the economy as viewed by a neo-mercantilist.


       Adam Smith described the neo-mercantilists as well as the mercantilists of his era when he wrote



... it is by no means for the benefit of the workman, that they endeavor either to raise the price of the complete work, or to lower that of the rude materials. It is the industry which is carried on for the benefit of the rich and the powerful, that is principally encouraged by our mercantile system. That which is carried on for the benefit of the poor and indigent, is too often, either neglected, or oppressed.              

 (Wealth of Nations; Book IV, Chapter VIII)



       Smith offered some wise words to the mercantilists of his day and they are just as important now:



 Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.         

                                (Wealth of Nations; Book IV, Chapter VIII)



       Yes, in reality it's not the financial markets that matter most but the goods and services consumed by the average people. Our quality of life is not improved by a soaring Dow but by the goods and services we use every day of our lives. We are naive if we think we can all benefit from booming stock and bond markets. It is a simple mathematical impossibility for all to be wealthy in real terms from profits produced from the trading of paper.


       It is important to note that Smith did not suggest that all producers profit from a mercantile system. Smith realized some producers suffered more than the consumers.



It cannot be very difficult to determine who have been the contrivers of this whole mercantile system: not the consumers... whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to; and among this latter class our merchants and manufacturers have been by far the principal architects. In the mercantile regulations... the interest of our manufacturers has been most peculiarly attended to; and the interest, not so much as the consumers, as that of some other sets of producers, has been sacrificed to it.



      And who are these other producers whose interest has been most sacrificed to the interests of the merchants and manufacturers? He mentioned them briefly in an earlier quote: the producers of the crude materials whose prices the mercantilists try to lower. These are the real producers of real wealth. They are the producers of the raw materials which the manufacturers turn into finished goods and the merchants sell. They are the workers who produce the labor which turns the raw materials into finished goods for the manufacturer. They are the clerks who operate the cash registers and the workers who stock the shelves with the finished goods the merchants sell.



      Now it's 226 years after Adam Smith wrote Wealth of Nations and how little things have changed. The neo-mercantilists of today have bought the government and written the rules to benefit themselves and they completely neglect the interests of the consumers, the workers, and any business person whose business isn’t a major international corporation. The manufacturing neo-mercantilists send jobs overseas in search of cheaper labor so they can sell their products cheaper than their competitors but the primary goal isn’t to benefit consumers with lower prices but to gain market share and fatten their bottom line. The merchant neo-mercantilists, like Wal-Mart, force their suppliers to lower their prices using any and all means possible. They import profusely from low wage, no benefit countries. They pay their own employees low wages and work them less than full time to avoid paying benefits. Is their primary concern to provide consumers with the lowest prices possible? Don't be silly. Once again, their primary goal is to gain market share and fatten their bottom line



       Sure, lower prices benefit consumers. But lower prices only benefit those consumers who haven't lost their jobs to a low wage worker in a third world country. Lower prices only benefit those consumers who aren’t forced to take a job at low pay, no benefits and less than 30 hours per week of work: the very conditions Wal-Mart likes to offer their employees. Low prices mean nothing to the unemployed whose unemployment compensation is gone and they don't mean much more to the underemployed who have to work two or three jobs just to stay afloat while the CEO's of the neo-mercantilist corporations are raking in millions and millions.







Keeping It In Perspective...  





















Copyright 2008 – John Paul Jones