Mercantilism: Towards National Economics

David A. Reisman’s Mercantilism: Towards National Economics provides a history of economic thought of English mercantilists. History of thought books in general are like more complex book reviews. Instead of necessarily focusing on one book, historians of thought can dive into particular topics within a single book or survey a topic or concept across a series of books, papers, and authors. In a way, this is a simple book review of a more complex book review.

It is worth bringing attention to the similarities between history of thought writing and book reviews because both writing formats are limited by similar constraints: the reader must put their faith in the author to present the book or books he or she is commenting on in a helpful framework. Does the author capture the essence of the book well? How does the author’s own perspective seep into his or her history or review? These are questions not easily answered without fully reading the original material commented on by the author.

Reisman seems somewhat strange in regard to how he frames history of thought in general. His introduction and conclusion seem to suggest that there is no way of knowing or adjudicating which school of thought is correct, that different philosophies simply appeal to different intellectual consumers. He says:

• “The fringe and the fringy will welcome the reassurance that there are alternatives to the win-win international economics they learned in school. Different people like different dogs. This book gives long-forgotten dogs a chance to make a case for themselves. A long-forgotten case does not stand a chance.” (p. 1)
• “Some readers. Other readers. Dogs. Cases. The most that can be said is that in the marketplace for ideas and insights, none of them the rock-solid truth, the consumer of comparative worldviews must forever be the king.” (p. 2)
• “The history of ideas is a roller-coaster ride and a kaleidoscope of surprise. There are many battles but no final victories in political economy. It is never good to say what is right and what is wrong for all times and places.” (p. 171)

It seems out of place for a historian of economic thought to think that the customer should be king in the market of comparative worldviews. Intellectuals engaged in research are supposed to be saying something true about the world, providing something like a better picture of the world we live in as research progresses. There should be no doubt that false ideas can be taken as true, intellectual endeavors can be fruitless, and research can hit dead ends. But despite those difficulties, the people involved at least typically believe that there is truth and that truth is worth pursuing. If the consumer of ideas is king, then ideas are reduced to post-hoc justifications for preferences.

Despite the questionable framing surrounding the book, the general content is quite good. The style of the book works to present the mercantilists in a positive light, more like how they would see themselves instead of how a modern neoclassical economist would see them. Reisman frequently writes in the present tense to make the early modern issues the mercantilists were wrestling with feel more pressing to the reader. He also frequently uses punchy, short sentences to make the reader feel a sense of urgency. “Liberty is inferior to leadership if it leaves the nation underpopulated and the fishing grounds in the hands of the Dutch” (p. 19), “Wealth is bullion. Money is power” (36), “We want their wealth. They want ours” (p. 70), and “Trade is war” (p. 72).

In many ways, Reisman’s portrayal of the mercantilists makes them a more sympathetic lot. They did not have a leader, founder, central text, or guiding organization, all the while trying to make sense of a developing, post-feudal England. They were not trying to suppress an otherwise free society; they were trying to help England grow in the wake of the end of feudalism while not making England vulnerable to foreign adversaries.

They also partially inherited the medieval framework. Economics for them was a thoroughly moral science. It was surprising how frequently they pushed for individual austerity and discouraged indulgence on (foreign) luxuries. Much of their commentary sounds less like modern economics and more like commentary decrying the amount of credit card debt people hold. The mercantilists saw trade as an instrument of war. Frivolous foreign purchases were akin to colluding with the enemy.

They were also almost unanimous in their unreserved support for population growth, whether that be from reproduction or immigration. People increased productive capacity, economic growth, and military strength. They typically did not fear Malthusian pressures; they were confident that agricultural productivity would keep up to sustain growing populations. Further, if population growth took off too suddenly, England had her colonies as an escape valve to relieve population pressure.

Learning about the mercantilists in more detail also inspires greater appreciation for Adam Smith’s Wealth of Nations. Some attacks against mercantilism by Smith are so clear and so consistent that you cannot miss what he is arguing against and why; no one reading Wealth of Nations should have any doubt about what the mercantilists thought of the balance of trade and why Smith thought the doctrine of the balance of trade was ridiculous.

Other points in Wealth of Nations are more subtle. Smith is clear that domestic trade is more important than foreign trade, but some of the significance of that point can be lost on modern readers. Mercantilism: Towards National Economics makes the point abundantly clear. Mercantilists saw trade as zero sum, so internal trade neither helped nor hurt a nation. Foreign trade was potentially beneficial or harmful because it was what allowed gold and silver to flow in and out of the country. Smith’s system flipped this logic on its head: the division of labor is what spurs economic growth, and internal trade is less roundabout and has no national security implications compared to foreign trade, so domestic trade serves as the backbone for economic growth in Smith’s system.

Smith also reveals how unsophisticated the mercantilist understanding of war financing was. The mercantilists wanted to increase treasure in the kingdom to stockpile for future wars, without any consideration of how wars were actually paid for. Smith pointed out that domestic production, not precious metal hoards, paid for wars in the early modern era. War was funded from the proceeds of domestic production and debt, not from steady withdrawals from a treasure hoard.

Many of the mercantilists described by Reisman recognize some limitations to their ideas of defense financing, whether it be how paper money can serve as a viable alternative to gold and silver or that importing gold and silver creates inflation and distorts exchange rates. However, the mercantilists never put the pieces together to see the folly of their plans. Reisman, although he acknowledges the limitations that the mercantilists saw themselves, never signals to the reader that the mercantilists’ treasure hoard theory of defense financing had been outdated for centuries.

Mercantilism: Towards National Economics is best read as a companion to Smith’s Wealth of Nations. It provides more color, detail, and nuance to the mercantilist vision than Smith provides in his attack on it. Getting a fuller sense of their perspective can make them seem somewhat more sympathetic, and somewhat more ridiculous, than their portrayal in Wealth of Nations. A better understanding of the positions Smith was writing against makes his work come to life.

Reisman does not successfully rehabilitate the mercantilists, however. He tries to frame the differences between liberals and mercantilists as a philosophical division between individualism and collectivism and between globalism and nationalism, and that there cannot be a resolution to these differences. “Liberals are attracted to I am I. Mercantilists cluster around We are We. The specifics change. The East India Company and Navigation Acts belong to the past. The criteria and justification do not” (p. 167).

This framing does not do justice to the actual classical liberal point of view. While liberals tend to be individualists and globalists, there are and have been serious liberal engagements on how to promote the common good and provide national security. Liberals do not ignore issues of the common good and national defense. Rather, liberals argue that the means promoted by protectionists fail to achieve their stated ends. Reisman’s framing understates the feasibility of liberalism to justly defeat mercantilism in the war over ideas.

While Mercantilism: Towards National Economics has serious issues with its framing, it serves as an excellent survey of the beliefs of English mercantilists to read alongside classical economists.