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This is the BBC.

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thinking

0:30

called mercantilism. The key idea

0:32

in mercantilism is that exports should

0:35

be as high as possible and imports

0:37

minimized. For more than 300 years

0:39

almost every rural and political

0:41

thinker was a mercantilist. Eventually, Adam

0:44

Smith, in his groundbreaking work The Wealth

0:46

of Nations, 1776, and

0:48

other economists declared that it was a flawed concept

0:51

and it became discredited. However, a mercantilist

0:54

economic approach can still be found in modern

0:56

times and today's politicians sometimes still

0:58

use rhetoric related to mercantilism.

1:01

With me to discuss mercantilism are Damaris

1:03

Kaufman, professor in economics

1:06

and finance of the built environment at

1:08

University College London, Craig Muldrew,

1:10

professor of social and economic history at the University

1:13

of Cambridge and a member of Queens College,

1:15

and Helen Paul, lecturer in economics

1:17

and economic history at the University of

1:20

Southampton. Helen, in general, what

1:22

type of policies the governments implement

1:24

when they

1:24

pursue mercantilism? They

1:26

try to restrict trade, so

1:29

they do all kinds of things to increase exports

1:32

and to decrease imports. And that could be

1:34

setting up a regulatory body, like a board

1:36

of trade. It could be something like

1:38

tariffs. It could be simply banning

1:40

the export of bullion. There are all sorts

1:42

of things that they do to try

1:45

to increase exports and

1:47

decrease imports. But haven't they

1:49

been doing that all their lives? What's new about this? Well,

1:53

I think the focus is

1:55

on

1:55

trying to have a restriction

1:58

on imports and not pay for the

2:00

any attention to what they might be used

2:02

for. So the luxury

2:04

goods you could import, try to

2:07

go without those, try to

2:10

increase domestic production. It's

2:12

very much an idea of trade being

2:14

a zero-sum game. And it becomes

2:18

almost a trade war then leading to hotwars.

2:20

It means that

2:22

you become willing to back up your

2:25

trading policies with military force

2:27

and naval force.

2:28

I'm glad you brought up zero

2:30

some so early so we can get it out the way. Could you tell

2:32

the listeners what it means? Well,

2:34

it's a bit of jargon from game theory.

2:36

It basically means that if I win,

2:39

you have to lose and if you win,

2:42

I have to lose. There's no kind of gains from cooperation

2:44

or gains from trade. And

2:46

therefore, it's a very, shall we say,

2:49

cynical worldview.

2:51

So so if I went £100 off you, you

2:54

lose it, but there's no difference to the economy.

2:58

If we're in the same country then yes, but

3:00

if we're talking about different countries

3:02

that are competing against each other, they're

3:05

using trade and warfare together

3:07

to try to be dominant. So

3:09

there's not this sense of cooperation between

3:12

countries. You're

3:14

at war with each other in some way. It would

3:16

be worth restricting

3:19

your own economic activities if

3:21

you can somehow restrict someone else's economic

3:23

activities. So you

3:26

deny yourself goods that might be useful to

3:29

you in order to stop somebody

3:31

else from selling to you. It

3:34

becomes a way that

3:37

incorrectly ignores

3:39

the gains from trade. Mercantilism

3:41

is linked to another idea, bullionism. Would

3:44

you explain what bullionism is and

3:47

how it differs from mercantilism?

3:49

Well, bullionism is just that the

3:51

wealth of the country is its gold

3:53

and silver reserves. And that's a very

3:55

simplistic view of money, of capital,

3:58

of wealth. just a great heap of... gold

4:00

and silver. Oh, is it simplistic? Because

4:03

in reality people are trading with things

4:05

like bills of exchange and all sorts of other

4:08

types of monies, including book money.

4:10

It's not very convenient to take gold

4:12

coins around the place by ship. And

4:15

also there are impacts

4:17

of how if you bring in a lot

4:19

of gold, say, into a country, you might

4:23

have inflationary pressures and all these kinds

4:25

of issues. So just building up a great

4:27

stockpile of gold and silver,

4:30

that is an idea that really has a much older

4:32

history and it's often connected to

4:34

things like royal power and

4:37

the wish to pay for military power to

4:39

pay your soldiers

4:40

with gold coins. But

4:43

we know that we don't go around using

4:45

gold coins, so it's quite an unsophisticated

4:47

system. But it obtained for quite

4:49

a while, didn't it? the splendor

4:52

of the Spanish in the

4:54

Amada days or pre-Amada

4:57

days was a great deal down to bullionism.

5:00

Well, they certainly

5:01

thought that they were doing well by importing a

5:03

lot of silver from Potasi,

5:05

for example, but they also

5:07

then had a problem that it

5:09

damaged their home economy in many ways

5:12

that they weren't necessarily all that aware of,

5:14

because if you affect

5:17

how how

5:19

easy it is for you to export your own goods. Marius,

5:22

will you tell us something about whether and why

5:25

mercantilism came into being? Certainly,

5:28

I think that in a formal sense, mercantilism

5:30

came into being when Adam Smith undertook

5:33

to critique it, because Adam Smith

5:35

was collecting a body of writings

5:37

with some underlying ideas that he wished to critique

5:39

in the wealth of nations in order to disprove. But

5:42

what he was doing is looking at a

5:44

body of economic writings from the late

5:47

16th really through the 17th and

5:49

into the early 18th century. And

5:51

those economic writings

5:53

in the first instance were primarily by those

5:55

who were advising the Crown

5:58

on trade policy. Many of them were

6:00

actually members of prominent

6:02

trading companies, directors of the East India Company

6:05

or for that matter their adversaries who

6:07

were critiquing the activities of the East India

6:09

Company. And what these individuals were arguing

6:11

is that policies that would be beneficial to the East

6:13

India Company would also be beneficial to the king

6:15

and to the country as a whole. So it was very

6:18

much special pleading. But Adam

6:20

Smith saw in it, he understood that there

6:22

were some underlying economic ideas that tended

6:24

to connect this body of material. and

6:26

he tried to impose a degree

6:29

of coherence on

6:30

it in order to refute it. So in some

6:32

sense, where capitalism came into being with Adam Smith's

6:34

critique, but that body of economic writings

6:37

was very indeed influential for 200 years

6:39

before Adam Smith. Yeah. Why was it so

6:41

influential? It was its simplicity.

6:44

It sounds very simple. People listen and say,

6:46

okay, you were saved more than

6:48

you spend. What's complicated

6:50

about that? Well, I think there were several things

6:52

that were attractive about it. One is the notion that

6:55

the people are advising king were identifying

6:57

the wealth of the nation with

7:00

the king's treasure, the king's household, the

7:02

resources at the king's disposal. They

7:04

were also using writings that we

7:06

regard as mercantilists to justify the expansion

7:09

of on the colonial empire, the slave economy

7:11

in the Americas, the idea that

7:13

the desirable thing to do would be to extract resources

7:16

from overseas empires

7:19

to then enable the expansion

7:22

of domestic manufacturers then to either sell back

7:24

to those empires or to sell to Africa or

7:26

elsewhere. So the idea really was

7:28

that this seemed to explain the

7:31

economic world around them in a way that

7:33

was

7:34

straightforward, legible and convincing. It

7:36

also gave the king some idea of how

7:39

to raise revenue by taxing, by erecting

7:42

protective tariffs, not only to protect domestic

7:45

manufacturers, but also to generate

7:47

a source of revenue for the crown. So it seemed

7:49

to explain economic life. And I think in

7:51

some ways, Adam Smith's characterization

7:54

of recantilism was a bit risible

7:56

because he conflated elements of

7:58

it and didn't do justice to all of the right. years, but

8:00

he did identify a set of coherent

8:03

ideas that people did broadly accept because

8:05

it seemed to explain their world. So,

8:07

can you just say a little more about the coherent

8:10

ideas in Recantilism? Well, so

8:12

we wouldn't say that it was a coherent ideology from

8:14

a programmatic standpoint because people had different

8:17

programs, but in terms of the assumptions that underlie

8:19

it, to say coherence and more of a Gramshian

8:22

sense, what we see is this notion

8:24

of economic scarcity, the idea

8:26

that the total resources are limited

8:28

and that the Spanish get them or the French get them or

8:31

the British get them and that it's a struggle amongst

8:34

the great trading nations. It's

8:37

the idea that you benefit if

8:39

you have a positive balance of trade at the

8:41

expense of your neighbor, that in order to

8:43

do that you need to ensure that there are protective

8:45

tariffs that protect your industries, that

8:48

people aren't able to trade goods

8:50

on using their own fleets, using their

8:52

own navies to poach

8:54

on newer trading privileges, that it's the

8:57

proper role of the state to protect domestic

8:59

monopolies, to protect patents that

9:02

give exclusive access to trade. So, these

9:04

elements of mercantilism were,

9:07

again, not necessarily

9:09

programmatic because they were disagreements. And Thomas Moon,

9:12

for example, disagreed very vehemently

9:14

with Edward Mistleton,

9:17

whose I a trial disagreed with his contemporaries

9:19

as well in their attempts to attack and

9:21

defend the East India Company. But in reality,

9:23

there were some common assumptions underneath

9:26

it in which these debates played out. But

9:28

from what you said earlier, in just a few sentences

9:30

before the end of the, there was also plenty

9:32

of potential for antagonism. Oh, there

9:35

were loads of disagreements, of course, just as there were loads

9:37

of disagreements today within mainstream economics.

9:39

People do have debates about all sorts of things, but

9:42

the assumptions about the nature the world were

9:45

generally held. And I think what's

9:47

important in terms of understanding where journalism is coming

9:49

into being through Adam Smith's critique is that Adam

9:51

Smith was in a sense saying this

9:54

new world is different from that world. That

9:56

we're, you know, Smith saw himself as a modern and

9:59

saw these people almost

10:00

as medieval and was trying to characterize

10:02

this as bad economic thinking that

10:04

was a product of a medieval superstitious era.

10:07

And he particularly was keen to critique the slaving

10:10

empires in that context as well.

10:12

Yeah. So Smith's program,

10:15

he's very famous obviously for the Division of Labor,

10:17

but he also was a great

10:19

proponent of creating a financial

10:22

system based on banking. So

10:24

he takes the authors that DeMaris was

10:26

talking about and turns them into

10:28

straw men saying

10:30

What Helen said they just want to pile up money Because

10:33

he wants to promote the use of paper money

10:35

throughout society and so to

10:37

do that he has to say You

10:40

know using gold and silver coins is ridiculous

10:42

and in many ways by the time Smith was

10:45

writing it was But in the 1620s

10:47

in England, there's a big shortage of

10:49

coins and You know,

10:51

there's not much paper credit all most of the

10:53

credit is oral and informal.

10:56

So gold and silver does

10:58

play a limited but important

11:01

role in society. So what

11:03

they were saying was not ridiculous in terms

11:05

of the exact dates when they were writing.

11:08

I'd just like to get a grip on why you

11:10

thought the why the Cantilism had

11:12

such a hold for so long. I guess there

11:14

are a number of reasons. They're attractive

11:16

to rulers because they need to borrow

11:18

money from merchants. They're attractive

11:22

to, you know, the merchants themselves

11:24

that want to

11:25

engage in more trade,

11:28

overseas trade, make more profits.

11:31

And there's one aspect of mercantilism which

11:33

I like to stress but isn't that

11:36

common in the literature which is a concern

11:39

with employment at home and the creation

11:41

of industry. So the

11:43

industry happens at home, the employment happens at

11:45

home, but what you really want to do is sell

11:47

those industrial products abroad. Alan, you

11:49

want to come in?

11:51

Yes, and certainly I think there's something to do with the

11:53

fallacy of composition that people

11:55

understand. When does that mean? The fallacy composition

11:58

is when you look at one part of something

12:00

and you think that that's the same as the whole. So

12:02

if I look at my own household and then I

12:04

think well that's the same as the national economy

12:07

what I do should be done by

12:09

the government. So if I

12:12

it's bad for me to be in lots of debt the government

12:14

should have no debt. That kind

12:16

of idea is very hard to overturn

12:18

because it seems to be common sense. So

12:22

if you're a merchant or

12:24

if you're someone who works in a cottage industry whatever

12:27

you produce a lot of

12:28

stuff and you try to sell it out to your neighbours

12:30

and you're very cautious about buying in a lot

12:32

of imports into your house.

12:35

But that doesn't mean that the nation

12:38

can operate in that way because if you start

12:40

restricting imports your

12:43

neighbouring country ends

12:45

up in a trade war with you and that could end

12:47

up in a war. So

12:50

you're not the same as the state. Yeah

12:53

can I just go back to you for a moment, Craig.

12:57

One of the earliest statements on mercantilism policy

12:59

was discourse concerning

13:01

Western planting, published

13:03

in 1584. What did that say? Hello, this

13:06

is my fellow called Richard Hackloyt, who is

13:08

a sort of writer about colonial

13:10

expansion in general, merchant

13:12

as well. So the planting

13:15

he's talking about there are like the Ulster plantations.

13:17

This is the planting of colonies or people

13:20

rather than crops or something.

13:23

And what he's arguing in that,

13:25

which is a manuscript presented to

13:28

the Privy Council for Government Policy,

13:30

is very much

13:33

a policy paper to try

13:35

to counter the power

13:37

of the Spanish Empire in the Atlantic,

13:40

just a little while before the Armada, so there's

13:43

a purpose to it. And

13:45

he points out that, you know, as

13:47

we've been talking about, the Spanish have

13:50

a lot of silver coming in from their

13:53

mines in Peru and they can use that

13:56

to build huge armies which are

13:58

fighting in Europe. the wars of

14:00

religion and He says

14:03

well, we can't get any of that silver. We don't have

14:05

it There's no mines in

14:07

British Isles but what we can do

14:09

instead is go to North America and Plant

14:12

colonies and he suggests we can

14:15

also find some natural sources

14:17

to trade Resin tar

14:20

and things like that is it have

14:22

some blue sky ideas and and

14:25

then once Once we start

14:27

exploiting those natural resources, we

14:29

can send more people over, create

14:31

colonies, and they will then

14:34

be a source of demand for home industry.

14:36

So they'll send back natural products and

14:39

we'll send back finished products. And

14:42

that's what happens. Not the way he

14:44

described it, but tobacco became the

14:46

first agricultural product produced

14:49

in North America. I think Craig has very

14:51

nicely indicated the extent to which this is about

14:54

interstate competition. This is about competition

14:56

between the French, the Spanish, and the British.

14:59

And, as the late Estefan Hunt said,

15:01

the jealousies of trade, the mercantilist writings

15:04

seem to justify those jealousies of trade

15:06

and suggest ways in which they might be

15:08

realised to the advantage of a particular nation. Some

15:11

more things can be said about the East India Company and its... I want

15:13

to say them. Can I play an important

15:15

part in this argument? So could you tell us about the East

15:17

India Company and what part it played and why it

15:19

was allowed to play such a big part? Well,

15:21

the important thing about the East India Company is that it was

15:23

really founded in the the latter years

15:25

of Elizabeth's reign to contest

15:28

the Portuguese control of the

15:30

East Indies. And likewise, the Dutch did the

15:32

same thing. They established the Dutch

15:34

East India Company with the idea of wresting control

15:37

of the East Indies from the Portuguese who had

15:39

come to dominate that part of the world in the trading prospects.

15:42

And the East India Company did indeed

15:44

import both raw materials

15:47

and luxurious goods from

15:49

the East Indies. were some

15:51

people who, as Craig alluded to the controversies

15:53

about silver, saw the East company is

15:56

responsible for the export of silver to

15:58

pay for the luxurious goods.

16:00

Other people saw the importation

16:02

of raw materials, which then led to more domestic

16:04

manufacturers and the export of those to be a positive

16:07

aspect of the East India Company. But most

16:09

of the writers that we regard as mercantilists

16:11

are certainly at least Thomas Moon and Josiah

16:14

Child, who were engaged as directors of the East

16:16

India Company in defending the East

16:18

India Company. And also, writers like

16:20

Edward Mistleton, who was attacking the

16:22

East India Company from his point of view of a director

16:25

of the merchant adventurers, were arguing about

16:27

whether these great trading monopolies were good

16:29

things or

16:30

not and the mercantilists were generally defending

16:32

their trading monopolies or they were attacking somebody

16:35

else's and saying actually their company would be in a better

16:37

position to do this than the company that was doing it.

16:39

And the East India Company was the size

16:41

of a state, that its own army, its own administration.

16:44

Well by the 18th century it certainly was. It was

16:47

controlled about half of the world's trade and controlled

16:49

large swaths of British India. But

16:51

of course in the early days when it's just getting going

16:54

it is nothing like that size and there were people

16:56

who who had made credible attacks on it and there

16:58

were moments in the

17:00

17th century when it appeared as if it might lose its monopoly

17:03

and you know many of these mercantilist writers were

17:05

controversialists who were working on behalf

17:07

of the country company's interest in order to convince

17:09

the crown to let them keep their monopoly. This

17:12

seems to be directly to lead to

17:14

protectionism. It can do certainly

17:16

and I think that the the idea that

17:19

elements of the navigation acts can be seen and hackeleut

17:22

elements can also be seen. Can you talk about what navigation

17:24

acts are? So navigation acts very simply just

17:26

say any goods

17:28

being traded into

17:30

Britain or any of its colonies or out

17:32

have to be

17:33

carried in British ships. So

17:35

it's total protection, pure and

17:37

simple. Well, there's

17:40

a debate about that because it's obviously

17:42

very hard to enforce, especially in the colonies.

17:45

So writers on trade say it

17:47

worked best when British naval ships

17:49

could take a prize ship and then take

17:52

all the goods from the prize ship. But

17:54

in the colonies, it's quite easy to bribe

17:56

port officials and things. So, some

17:59

historians.

18:00

argue that it wasn't necessary,

18:02

it probably helped, but wasn't that important.

18:04

Others say it's quite crucial.

18:06

I mean, how you prove that one way or the other, I

18:09

don't know. But anyway, certainly it did

18:11

work in the sense that the British

18:13

merchant fleet grew quite

18:16

sizable. What seems to be the case

18:18

is that two of the leading English

18:20

writers on Mercantilism in the 17th century,

18:23

Thomas Moon and Josiah Child,

18:26

what points were they making? Helen?

18:28

Well, they were both merchants and they were both

18:30

trying to support the East India Company

18:33

about which we've been hearing quite a lot because...

18:35

Support them in such a way, in which way? Basically

18:38

one of the problems with the East India

18:39

Company is it wasn't suitable

18:42

for the bullionists. You have... Back

18:44

to the bullionists, they were as much silver

18:46

and gold as they could.

18:47

So the charter of the East India Company

18:49

said it could send out bullion

18:52

but on the grounds that it had to then bring back bullion

18:55

eventually by basically bringing

18:58

about something that could be then sold on. So a

19:00

re-export perhaps

19:01

of a manufactured good

19:03

or a luxury good or something of that kind. Munn

19:06

was happy with that idea, the idea of it's

19:10

fine to let bullion leave temporarily

19:12

because you're going to get it back later on as you

19:15

have this

19:16

luxury trade because you

19:19

sell East India goods to

19:21

somebody else. So you sell goods

19:24

that you've imported, you then re-export

19:27

them, you send them out of your country to

19:30

someone else and that other country

19:33

sends you bullion. So it's a triangle.

19:36

So it becomes triangle, exactly. So that's

19:39

all fine and conveniently it

19:41

then backs up the Stindia Company

19:43

which is what Munn and indeed Child

19:46

wanted because they were both associated with it.

19:49

What Munn also does is he starts to develop

19:52

other ideas about things like

19:54

how to set prices so So

19:56

if you have monopoly power, maybe

19:58

you should rack up price. but

20:01

if you are trying to sell English

20:04

made goods and there's a lot of competition

20:06

then

20:08

what you should do then is drop the price

20:10

so you can try

20:12

to flush out your competitors by undercutting

20:14

them and get into a price war. So

20:17

he has a lot of more sophisticated

20:19

ideas

20:20

generally he's one of the better mercantilist

20:23

writers and that's why he's well

20:25

known today. Child

20:27

is famous for being extremely wealthy and connected

20:30

to the East India Company. But amongst

20:32

other things, he thought that

20:34

he told people the East India Company was

20:37

a good thing because it brought together merchants and

20:39

the aristocratic class. And this was

20:41

there for some sort of improvement

20:44

socially. Through this time, it's

20:46

mercantilism maintaining

20:48

an intellectual coherence. And

20:50

is it a theory that's

20:53

running things that people say, oh, we're not quite

20:55

mercantilists enough, we'd better be mercantilists to

20:57

jump on the bandwagon. What's happening? There's

20:59

no programmatic element. There's no kind of ideological

21:01

purity to mercantilism. It is something

21:04

that was constructed by Smith in order for the

21:06

purpose of critiquing it. But there are

21:08

commonly accepted

21:09

economic ideas, which

21:11

Helen and Craig and I have alluded to, that

21:14

most people would take as reflections

21:17

of reality. And it's not until Smith

21:19

comes along and critiques these. And

21:21

part of it's also the vantage point, because as

21:23

Helen says, is this notion that mercantilists

21:26

are thinking about the wealth

21:28

of a nation as an extension of the king's

21:30

treasure and the wealth of the crown and

21:33

the crown domain, whereas Smith is

21:35

coming from a different level entirely

21:37

and is essentially saying the merchants are

21:40

not acting in the interest of the kingdom because

21:42

they have managed to align their interest

21:45

with the king's interest. And in fact, actually, the wealth

21:47

of the kingdom comes from land and the value

21:50

of labor, and this is an

21:52

entirely different way of conceiving the economy.

21:55

So it looks like

21:57

a coherent ideology if it's

21:59

being attacked.

22:00

people who were proposing an

22:02

entirely different model of the economy,

22:04

as Smith and the physiocrats were doing. But

22:07

actually, the Mercantilist writers themselves in

22:09

the 17th and early 18th century were disagreeing

22:11

with each other as much as they were agreeing, but

22:14

they were disagreeing from a common set of assumptions,

22:17

which then Smith attacks Hosell. Do

22:20

things get better after he's attacked it? It

22:22

certainly is the case that Smith won the argument.

22:24

Smith and Hume won this argument, And for

22:27

the better part of the following 230

22:30

years, people have essentially said that Smith and

22:32

Hume were correct, that there

22:34

are gains to trade, that free

22:36

trade is better than protectionism, that state

22:39

aid and industrial policy distort the economy

22:42

and create welfare losses. Much

22:44

of the basis of modern economics is

22:47

built on that critique. But

22:49

it's a question of what you read into it, because I think one thing

22:51

that is quite interesting is that we're

22:54

talking about mercantilism in terms of

22:56

protectionism, but there are people in North America

22:59

with the Adam Smith Society and others who would see the

23:01

state intervention in the economy, including

23:03

protectionism but the protection of monopolies as

23:07

just as much central to the point. And

23:09

there were certainly plenty of advocates

23:11

of state intervention in the economy in France and Germany

23:14

at the time, whose chief preoccupation

23:16

is not overseas trade, but is in

23:19

fact the regulation of the domestic economy. Colbertism

23:22

in France and Camarilism

23:24

in Germany are examples of that. Well, let's

23:26

move out. We're concentrating on what's

23:28

happening in this country

23:30

for a long time. But it's very much European

23:32

phenomenon. Can you touch on how

23:34

mechanicalism is working or

23:36

not working in France? So in

23:39

France, it's principally associated with Colbert,

23:42

who's the finance minister under

23:44

Louis XIV. And his challenge

23:46

is to encourage domestic

23:49

manufacturer and to reform the

23:51

French economy, which is still

23:53

freighted down by mineralism and feudalism

23:55

and tax farmers who are making large

23:58

economic rants at the expense of the crown.

24:00

And his program of reform

24:02

is very much top down. And it's a program

24:05

of reform that has

24:08

components of it that we would associate with industrial policy

24:10

or state aid today, protecting domestic manufacturers,

24:13

nurturing domestic manufacturers, taking

24:16

strategic decisions about monopolies. And

24:18

he was allowed to do this unimpeded, was he? He

24:20

was allowed to do this unimpeded. And I think what's

24:22

interesting in terms of the connections

24:24

with mercanilism is that his chancellor,

24:27

Seguir, commissioned the code Savory.

24:30

Jacques Savory was a very successful merchant. He

24:33

also asked Savory to produce a manual

24:35

called the Perfect Merchant that gave instructions

24:38

for the conduct of both domestic and overseas

24:40

trade. And this was something that merchants were expected

24:42

to read and internalize the disciplines, the

24:44

French merchants, to this new world in

24:47

which they were competing with the Spanish and the

24:49

British for the Americas, as

24:51

well as within Europe. And

24:54

that top-down approach is

24:57

the chief feature of French

24:59

recantalism

25:00

or Gilbertism and certainly

25:02

has echoes by the 18th century in the

25:04

Camelot's writings in Germany. Yes. Craig,

25:07

the Moise of religion was very...

25:11

How did they affect what was going on? They engulfed

25:13

Europe in the 17th century. Yeah, well

25:15

I've already referred to the Spanish,

25:17

I won't do that, but On the 17th century it

25:19

flows nicely from our discussion

25:22

of France, although we bring it back

25:24

home again, because it was

25:27

specifically after

25:30

Louis XIV invaded the Dutch

25:32

provinces and then England was

25:34

brought into the war with

25:36

the Glorious Revolution and William coming

25:39

over that England really

25:41

started enacting in Parliament a lot

25:44

of what we would call classic mercantilist

25:46

protectionist measures and especially

25:48

focusing on wool. So

25:51

the cloth industry, the woolen cloth industry

25:54

is by far England's largest export

25:57

industry or just home industry.

26:00

Macantalism is really difficult. Well, they wanted

26:02

to keep the wool in England, so they made it illegal

26:04

to export any raw wool

26:06

or certainly spun yarn to France.

26:09

So it all had to be done with... Because it's a dress wool. Relatively.

26:12

I mean, there's always quite a bit of smuggling and

26:14

the French have sources of their own wool,

26:17

but

26:17

the Europeans thought the English wool was the best. But

26:21

yes, they do spend quite a bit on policing

26:24

the coastline to try to prevent the wool. Did that give

26:26

Macantalism a bit of a jolt? I

26:28

guess so. in general. I

26:31

mean certainly not everyone supports this

26:33

because the will and interest is not

26:36

as

26:36

powerful as East India Company, but it's pretty

26:39

powerful. There are merchants

26:41

that would want to engage

26:43

in what

26:44

they call free trade. We haven't talked about free trade,

26:46

but free trade in England

26:49

is a really big intellectual concept. It doesn't

26:51

mean free trade the way Adam Smith thought

26:53

of it. It means free trade amongst

26:56

English merchants, So

26:57

against monopolies like the East India Company

26:59

and against the Will and Interest. But

27:01

overall, I think nationally it

27:04

was thought to be a good thing because

27:06

the Will and Interest was

27:08

very clever in arguing that

27:11

it supports employment. There

27:13

are perhaps as many as one and a half million women

27:16

and children employed by the mid-18th

27:18

century in the Will

27:20

and Cloth industry. And

27:22

they say, yeah, we need to protect the

27:24

jobs of those people who

27:27

are supporting our poor families in England.

27:29

Alan, let's turn to Italy.

27:34

Well, the idea about

27:36

the re-exports that we've mentioned with Munn,

27:39

that came from an Italian thinker called

27:41

Serra, and he was the

27:44

person who influenced

27:45

Munn. was

27:48

working in sort of the East

27:50

India Company, so he had to explain

27:52

why it was necessary for Bullion to leave

27:54

the country. Why was that a good idea?

27:57

Well, if if you brought something

27:59

back in.

28:00

that you could then sell on to

28:03

a different country and they would

28:05

send bullion to you, then

28:08

a bit more complicated system, you'd

28:11

actually be better off in the longer run. So

28:13

you'd get more bullion after

28:15

a couple more transactions,

28:18

if you like. You know, are these manus helping

28:20

anybody? Are they helping the challenge or the British or

28:22

the French?

28:23

Well, they're helping whoever's the middleman. Well,

28:26

who are the main middleman in this? That would

28:28

be the East India Company. So obviously, Munn

28:30

is writing in favor of that, but he's using

28:33

an idea from the Italian thinker,

28:35

Serra, who thought of it first.

28:38

And also in terms of Italy, it's really

28:40

not Italy as we would think of it as a modern country,

28:43

it's more city states that

28:45

are often in competition with each other

28:47

and often at war with each other. And

28:50

particularly, there's issues about paying for

28:52

large mercenary armies and that

28:55

sort of idea. We

28:57

can associate particularly with Machiavelli

29:00

and his ideas of really

29:02

cutthroat competition between Different

29:04

city-states that has an impact

29:06

as well in this idea that you are you

29:09

have to compete in This zero-sum

29:11

game or you will be trampled down and

29:13

minus coming out into Germany as we sweep

29:16

across Europe And their reaction

29:18

to and Prussian in particular and their reaction

29:20

to this. Okay, certainly the Prussians

29:23

are late arrivals to

29:25

this to a degree and the real challenge for

29:27

the Prussian state in the late 17th and 18th

29:30

century is one of state building and

29:34

certainly Frederick the Great but also his father

29:36

became interested in the

29:39

science of public administration as it were and

29:42

Camarilism which is the name that's given to this is

29:45

a body of thought in Germany, Saxony

29:47

and in Prussia which divides public

29:50

administration into public finance, public administration

29:52

and policy making and and is a really

29:55

technocratic, bureaucratic approach to

29:57

understanding the economy and

29:59

the... relationship between the state and other stakeholders

30:02

in the economy and to incur with the

30:04

aim of encouraging domestic manufacturers

30:07

encouraging domestic employment

30:09

to the extent possible and also

30:11

creating a other

30:14

locuses of economic power that could challenge landed

30:17

elites and as a consequence help provoke land

30:19

reform because Prussia is seen as very backward,

30:22

but it's also something that is taken up

30:24

by what we would loosely call enlightened absolutists

30:26

or enlightened despots in in Austria

30:29

and elsewhere, including

30:31

in the Austrian-Italian lands like Bakari,

30:33

who are very interested in state

30:35

intervention and state monitoring and

30:38

state

30:38

involvement in the economy. And

30:41

cameraism really is about that. It's not

30:43

principally concerned with overseas trade, although it is talking

30:45

about state aid in the form of protectionism, but

30:48

it's talking about trying to understand

30:50

and order the economy in such a way

30:53

as to promote the

30:55

growth of domestic manufacturing. Do

30:58

they apply to the system in Prussia?

31:00

And if so, is it successful? Well,

31:03

it certainly, it depends on your vantage

31:05

point. Prussia is the huge

31:07

success story of the 19th century. And,

31:10

you know, if you look at it from the standpoint

31:12

of 1870, then yes, it's stunningly successful

31:14

because the Prussians end up in control of the German

31:16

Empire. But it

31:19

is true that there is tension between Camarillism

31:22

as it develops, particularly after the Napoleonic

31:25

Wars and what the British perceived

31:27

as economic orthodoxy by that point. So there are

31:29

plenty of British envoys to

31:31

Prussia who come back and say they obviously haven't read

31:33

Adam Smith. Their

31:37

economic policies are antiquated, they're

31:39

medieval. So it came under

31:41

attack. But yes, within the German-speaking

31:43

glands, that is the economic consensus.

31:46

And you see it most fully expressed in the 19th century with

31:48

someone like Friedrich List, is

31:50

seen as somebody who's very

31:53

concerned about industrial policy, innovation

31:55

policy, and protectionism. So yes,

31:57

it does remain the economic work.

32:00

Orthodoxy

32:00

in German-speaking lands. So

32:02

why are you saying that Prussia gained ascendancy

32:04

in Germany because of mechanicalism? No,

32:06

I didn't say that but I'm saying that. No, I'm just

32:08

asking with you. It wasn't quite clear about it.

32:10

That's all. What I'm saying is when you say is it's stunningly

32:13

successful I was saying it's question

32:15

of how you measure success that what

32:18

it happened It's not so much do

32:20

we measure the success of the Prussian economy in terms

32:22

of its growth But that if you think

32:24

about the way state competition plays

32:26

out in the 19th century and you think about nation-building building,

32:29

the Prussians did

32:30

win in the sense that ultimately the

32:32

unification of Germany happened with Prussia

32:34

at the helm. Now there were political reasons for

32:36

that, but the notion of

32:39

the famous Prussian

32:41

bureaucracy, Prussian state building,

32:43

and Prussian top-down control

32:46

of the economy in the 19th century does

32:49

have its antecedents in 18th century

32:51

camera-lism. I

32:53

don't think it's why Prussia ended up in the

32:55

helm of Germany. But I do think that when

32:57

you say was it successful, it's a question

32:59

of it looks very different in 1870 than it did in 1815 or 1848. But

33:02

certainly there

33:06

are those within Germany who

33:08

would look to Friedrich List and say, you

33:10

know, what happened with the customs union,

33:12

it began a process of unifying Germany with

33:15

Prussia at the helm. So

33:17

yes, there are people who would make that argument, even

33:20

though I would not myself want

33:22

to suggest for a moment that that germinification

33:24

was the result of camera-lism. Yeah, um,

33:28

why did you remain successful for so long

33:31

with kind of realism? Appeal to... part

33:33

of it is that it appeals to some sort of

33:36

idea of common sense so the general

33:38

public can understand this and this is going

33:40

back to this fallacy of composition issue

33:42

that well if I'm producing lots

33:44

of goods and I'm not buying a lot in that must

33:46

be better. If I value

33:48

the gold stores that I have in my house, clearly

33:51

this state should have lots of gold. And you see that

33:53

even now, but also as as

33:56

we move on in time and

33:58

economics becomes its own.

34:00

discipline, it becomes taught at university,

34:03

becomes more complicated and the ordinary...

34:05

Why does it become more complicated? Well, because you start

34:07

building models and then you start building using

34:10

a lot of data and then

34:11

you start using a lot of mathematics and it

34:13

goes out of the basic

34:16

common sense understanding of the average

34:18

person. So it becomes a science,

34:21

or a social science, more to the point,

34:23

that

34:25

somewhat becomes a little obscure to

34:27

most people. But the sensible thing you said

34:29

at the beginning doesn't apply. People

34:31

don't understand why it doesn't apply anymore. I

34:34

think some people

34:36

do, but then they're

34:38

vulnerable to campaigns like buy

34:41

British, that would be better. So

34:43

sometimes you've got to say, well, you've

34:46

got to learn about Ricardian

34:48

comparative advantage. Ricardo

34:51

showed people how trade could

34:53

be beneficial to both countries.

34:56

And that idea of trading isn't necessarily

34:58

a

34:58

bad thing. Having an

35:00

import that you actually use isn't

35:02

a bad thing if you care about the welfare

35:05

of the general public. What

35:07

we've been talking about is the welfare of people

35:10

in the elite, the king, the

35:12

political leadership, the very wealthy

35:15

merchant, and everything else

35:17

has to be extracted for that

35:19

small group's benefit, whether it's environmental

35:22

damage, whether it's enslavement, whether

35:24

it's the warfare that goes on

35:26

with these trade wars, whatever

35:29

it is, it's not really borne by them. Mairis,

35:32

can you put your finger on why a councilism

35:34

declined when it did?

35:36

I think there are many answers to that question.

35:38

I think the one that I would tend to favor is actually

35:41

in terms of the Atlantic Revolution. So the

35:43

American, I am American in the American Revolution,

35:45

but also the other revolutions

35:48

in the Atlantic world, because that

35:50

fundamentally changed the political reality. And

35:52

certainly Adam Smith was trying to argue, well,

35:54

Adam Smith and Edmund Burke

35:56

were opposed to slavery

35:59

certainly. were actually on the side of the American

36:01

colonists at the same time. And the

36:03

reality is that once... That was quite tricky, wasn't it? Well,

36:05

it is quite tricky. And certainly it would have been

36:07

even trickier 20 or 30 years later. But

36:10

at the time, there was that sense for Adam Smith

36:12

that the best way to dismantle slavery

36:15

is to argue that it's economically unviable and

36:17

economically unhinged. And

36:19

he was employing his critique of

36:21

the mercantilists in part to

36:24

argue that actually slavery is a

36:26

flawed economic system and these overseas

36:28

empires and their slaving economies are flawed economic

36:31

ideas and are based on flawed economic

36:34

ideas and that what would be better is for all nations

36:36

to trade on an equal basis with each other in a world

36:38

of free trade. And I think absolutely-

36:41

Isn't that sort of a

36:42

by and the sky? Well it

36:45

is

36:45

whether it actually ever happens

36:48

that everybody trades on an equal basis or ever will

36:50

happen. It's very much baked into the World

36:52

Trade Organization and the post-war consensus after

36:55

the Second World War about how trade should be organized.

36:57

So Adam Smith won the argument for a very long time.

37:00

And my point is that what really killed off mercantilism

37:03

is the fact that these

37:05

overseas trading empires

37:08

in their 17th and 18th

37:10

century form collapsed with the Atlantic

37:12

revolutions. And although the East India Company

37:14

continued well into the 19th century,

37:17

as for that matter, did the South Sea Company, the

37:19

focus of mercantilism around

37:21

the organization triangular trade with

37:24

the American colonies was a nonstarter

37:26

after that. And I think that that Smith

37:28

and Burke in that sense did win the argument.

37:31

As Helen alluded to, mercantilism failed

37:33

to describe the economic realities

37:35

of the late 18th century in Britain with

37:38

budding industrialization and the loss

37:40

of overseas colonies and the

37:42

reorganization of economic life in

37:44

such a way that you were no longer thinking about

37:47

this jealousy of trade and instead we're

37:49

thinking about Britain's industrial

37:52

revolution being the engine of growth.

37:54

Not trade but industrialization.

37:57

Do you want to come in there, Helen? Yes, I

37:59

think this...

38:00

certainly something to be said for all of that but also

38:02

the growth of people power

38:04

so the idea of people being allowed

38:07

to vote and therefore

38:08

you have to concern yourself with what

38:10

we might call the utility value

38:13

of trade or various products

38:15

or working conditions the economic

38:17

life changes because the underlying political

38:20

systems change as well does

38:22

anything as it will replace

38:23

mercantilism.

38:26

It slowly leaves the scene. Does it on left? Does

38:28

anything come in stage right? Well, I mean,

38:31

England in the 19th century has been termed

38:33

the free trade nation, so it does become

38:35

an ideology. It was

38:38

a convenient ideology because England rules

38:40

the globe in terms of trade,

38:43

but it is an ideology that people believe

38:45

in and it does replace the

38:48

old mercantilism. Now

38:51

it takes a big hit after the first world

38:53

war and then you get a period of nationalism

38:56

where economies are sort

38:58

of not autarkic but much

39:01

more focused inwards or the British focused

39:03

on the empire. But

39:06

perhaps the most interesting phase is after

39:09

the second world war, after

39:11

Bretton Woods and the post-war consensus

39:14

where some economists like

39:17

John Kenneth Galbraith and others say

39:19

there is a limited role for protectionism

39:21

now. As Damar said, most economists

39:24

at this time really believe in free trade,

39:27

but they say with developing emerging

39:29

nations, they perhaps need a bit of protection

39:32

to help them kickstart their industries.

39:36

But for various reasons in the 70s, you

39:39

know, that is stagnating

39:41

and not working that well and then free

39:44

trade really takes over. But again,

39:46

you know, look at how long the easy

39:49

and how many rules it takes to

39:51

create what you want to call free trade. It's

39:54

a very rule-based type

39:56

of free trade. It's not

39:58

quite what Adam Smith... had in mind.

40:00

So we still think of that. And again,

40:02

it goes back to Helen's point about

40:05

democracy, because politicians have

40:08

to think about what the newspapers

40:10

are writing and by British or, you

40:13

know, against European regulations,

40:16

or very familiar with that kind of discourse

40:18

recently. And it

40:21

is an idealized system.

40:24

And we certainly have a lot more free tide

40:26

now than we did 30 years ago

40:28

because of things like NAFTA and European

40:31

Union. But it's still a very difficult

40:33

thing because we live in

40:35

national political systems. People

40:37

pay much more attention to the people

40:40

we vote for in parliament and perhaps the

40:43

people negotiating free trade

40:45

deals. Is mercantilism wiped

40:47

out altogether?

40:49

It's difficult to deal with

40:51

mercantilism as a state, nation-state

40:55

ideology when you have multinational companies

40:57

that are so very powerful. And

40:59

that's part of this very complicated

41:02

supply chains that

41:04

mean that you are bringing together

41:07

workers and

41:08

products in different

41:10

countries to form the final

41:12

product. Political rhetoric

41:15

often ignores that. Well

41:18

thank you all very much. Thank you Helen Paul,

41:20

Damaris Kaufman and Craig Muldroon

41:23

to our studio engineer Andrew Garrett. Next

41:25

week, sell on the Lawgiver, the

41:28

father of ancient Athenian democracy,

41:30

they say. Thanks for listening.

41:32

And the In Our Time podcast gets some

41:34

extra time now with a few minutes of bonus

41:36

material from Melvin and his guests.

41:38

What did you think we missed out?

41:40

What did you not say you liked or said? Over

41:43

to you, Helen, to start with. Why

41:45

is this all

41:46

about Europe? Why are these European writers?

41:48

And basically Europe is

41:51

a lot of small states that are at

41:53

war with each other and competition with each other relative

41:56

to say a country the size of China.

41:58

It's massive and doesn't...

42:00

need to worry so much about

42:02

these these ideas of trading games.

42:05

So that's why as well it's very Eurocentric

42:07

historiography that

42:11

leads into, as Damaris

42:13

is saying, of course, Smith's

42:15

great torch shone

42:17

down on mercantilism. It's all writers

42:19

he would be aware of coming out of

42:21

the European tradition. I think it really

42:24

links again what Helen was saying about this competing

42:28

states in Europe and

42:29

merchants being so important in

42:32

trading between states whereas in

42:34

a huge empire like China you

42:37

know the trading is within the state I mean

42:39

there is trade into the Chinese

42:44

into the Sea of China and into the Indian

42:46

Ocean as well and

42:49

there is a very strong Chinese

42:53

Confucian tradition a bit

42:55

more like Like Camelism, I don't think I would

42:57

want to call it Mercantilism because

42:59

the merchants in China are

43:02

always sort of kept

43:05

on a leash a bit by the government to

43:08

create social harmonies to not have

43:11

a powerful interest group in the state.

43:14

But certainly there's an awful lot of trade

43:16

in the empire and it's a very prosperous

43:19

area. And

43:22

the state takes a

43:23

big role in the well-being of the citizens

43:26

through the national

43:29

grain tray, you know, build

43:31

the great canals and state

43:34

granaries all over the place to try to

43:37

move grain and rice

43:39

around the kingdom

43:41

in case of any bad harvests.

43:44

So we do have a very strong

43:47

sense of the state looking after

43:49

the

43:51

well-being of the people. And

43:53

as I said, that was a part of quite

43:56

a few European mercantilist writers, but

43:58

they culture very much. in terms

44:00

of let's create employment for

44:02

a market-based solution, whereas

44:06

the Chinese one is more

44:11

based on keeping local

44:14

harmony rather than... it's a non-Smithian

44:17

solution, so we say. Yeah.

44:20

The Chinese aren't that interested in importing

44:22

a lot of goods, not because they have some kind

44:24

of theory about them, because they just don't particularly

44:27

want them. got all these great

44:29

things like porcelain and silk

44:31

that other people really want and they don't

44:34

want English woolens or what have you in

44:36

return. So there's that kind of underpinning

44:38

of telling people don't buy this

44:40

good. It's not really necessary if they

44:42

don't want it in the first instance. I

44:44

think the other interesting thing about China is that

44:48

it's certainly the case that there are many writers

44:50

that we might roughly describe as mercantilists or at least

44:52

friends of people who would describe as mercantilists who were interested

44:54

in the East for its exoticism

44:56

and we'll talk about the exotic goods you could obtain

44:59

from the East. But actually, the French

45:01

physiocrats, so Adam Smiths, interlocutors

45:03

in France, Francois, Kenny,

45:06

and Turgot were interested in China for

45:08

a different reason. They were more in keeping

45:10

with a kind of camera-less mentality.

45:13

They were interested in China for its administration.

45:15

And Kenny wrote a treaty

45:18

which we will roughly translate as the enlightened despotism

45:21

of the Chinese, although they didn't mean despotism

45:23

in a particularly bad sense. They were proud of themselves as

45:25

being enlightened despotism despots

45:27

as well. But that sense that the

45:30

Chinese case was interesting because the Chinese had cracked

45:33

public administration and that they were very good at ordering

45:35

their empire with this aim towards balance.

45:38

Now he did have critiques of it, but he was interested

45:40

in reflecting on China for that reason. He

45:42

wasn't particularly interested in its trading policies, but rather

45:44

the organization of the Chinese empire

45:47

as a whole. So there were thoughtful

45:49

reflections on Asiatic

45:51

empires, there were also more exoticized,

45:54

what we would call Orientalist reflections

45:57

as well on Asiatic empires, but there was certainly

45:59

a sense on the

46:00

of Mercantilists that they were trading

46:02

with these people to bring exotic luxuries to

46:05

the Metropole. And

46:08

I think that that's not really what

46:10

Smith's allies elsewhere or interlocutors

46:13

elsewhere were interested in. They were interested in a more comparative

46:16

account, almost in a sociological sense. I'm

46:18

quite interested in how it sort of caught on. Not

46:22

all of a sudden, but quite soon an awful lot of companies

46:26

in England and

46:28

European countries also taking

46:30

on the same ideological notion

46:33

about how to do business, how to

46:35

do trade, why this is the obtaining

46:37

thing almost like a religion really I'm not going to push

46:39

that or press it but it is I just

46:42

find it intriguing why you know after

46:44

a few decades why was everybody a

46:46

mercantilist? I

46:48

think it's because they're

46:50

all connected by trade.

46:54

This shows the importance of

46:56

trade within the European system

46:59

by the late

47:01

16th and 17th centuries.

47:04

So I mentioned, you know,

47:06

the English woolen trade. So since

47:10

Roman times, English wool has been

47:12

exported to

47:14

the continent and in the medieval

47:16

period, the cloth centers of Florence

47:19

and Flanders, Lowlands,

47:23

we're importing a lot of English wool

47:25

and then turning it into wonderfully colourful

47:27

cloth and you know

47:29

the English sort of mercantilist

47:31

pickup on this let's control

47:33

this wool trade and give us a big advantage

47:36

but what they never mention is of course you

47:39

need underwear if you're gonna wear

47:41

woolen clothes and that's linen right

47:43

and linen is coming from

47:45

Europe mostly from Silesia

47:48

and and Northern Europe. But

47:52

there is a sort of reciprocal trade

47:54

very much in the spirit of Ricardo

47:56

you know

47:57

they can produce lead and we produce wool. So

48:01

but they don't think of it that way. And

48:03

if you look at the trade statistics, you can

48:05

see quite clearly that there

48:07

is a reciprocal,

48:10

not quite, you know, it's not a balance, but it is

48:13

quite

48:14

large trade going both ways. I mean, I

48:16

agree with everything Craig said, but I think that there is

48:18

actually something baked into the discourse of mercantilism

48:21

that explains why it caught on because in

48:23

a book that made it quite an impression on me when it was written Taming

48:26

Capitalism before its triumph by

48:28

Koji Yamamoto, who's in Tokyo,

48:30

a British trained economic historian

48:32

who works in Japan. This argument

48:34

that all of these people who are more cancelist writers

48:37

and many other more besides were essentially projectors.

48:39

They were proposing concepts

48:42

to the crown in exchange. They hope

48:44

to win monopolies, or they hope to win patents,

48:46

or they hope to win privileges of various trading

48:48

privileges of various descriptions. And

48:51

everybody was trying to convince that

48:53

the crown or the king or his

48:55

ministers to grant them something. And

48:58

these were all couched in

49:00

terms of the best

49:02

interest of this group of merchants was kind

49:04

of synonymous with the best interest of the kingdom as a

49:06

whole. And there's an echo chamber

49:09

of this. Yeah, it is a great trick.

49:11

But it was an echo chamber as well, because everybody

49:14

couched their ideas this way. And they

49:16

recycled a lot of the same arguments. And as

49:18

a consequence, it became a dominant discourse almost

49:20

in a Gramshian sense because everybody used

49:22

it. And that is

49:24

one answer for why it became so heavily

49:27

accepted. I

49:28

suppose another thing is when you look at the luxuries

49:30

that you can get from the Dutch East India Company and people

49:33

wanted that. That's part of it is that this

49:35

is an elite and the elite

49:37

like luxuries. That's

49:39

why they're going to pick up on mercantilist

49:42

doctrines that say, you know, we can bring in East

49:44

India luxuries to you. It isn't for

49:46

the general public. It's not like a

49:48

generalised discussion with

49:51

an electorate the way we have today. We

49:54

have everyone has a vote. No, it's

49:56

just often about the luxury trade

49:58

and wealth for the top. Although the

50:00

same people today who are concerned about the loss of industrial

50:02

jobs don't want to pay four thousand pounds for an iPhone.

50:06

So the irony is that

50:08

the attitudes that made people self-interested about

50:11

consumption at the elite level also

50:13

do trickle down. But the consumption question being

50:15

pro-consumption is part of this. And I

50:17

think that that's right, that it

50:20

provides a justification for... That's

50:22

really interesting. So

50:25

nothing has replaced mercantilism

50:27

in the way that mercantilism operated?

50:30

No, I mean, as I think Craig alludes

50:32

to, there are the exceptions that prove the rule.

50:34

There are, you know, the people like Gilbraith

50:37

in his support of import substitution or various

50:40

heterodox economists today who attack elements

50:42

of the Washington Consensus and

50:46

argue that there's a place for industrial policy and

50:48

for state aid. And you even see that in

50:50

Britain in the discourses that are

50:53

rising in post Brexit, that this gives Britain the opportunity

50:55

to reintroduce state aid or reintroduce

50:57

industrial policy. But this is very much, these

51:01

are ideas that are somewhat marginal to the overall

51:04

consensus that the trading

51:06

regime that developed in the post-Second World

51:09

War period of the World Trade Organization is

51:11

something that underpins globalization and

51:13

is desirable. There is a big tension between,

51:16

you know, populism,

51:19

if you want to call it that, and reality, because

51:21

the reality is

51:23

exactly what Helen said. We've

51:27

read a lot about the trade

51:29

wars that Trump started with China, and yet

51:32

US trade with China has continued

51:35

to increase every year after that. It hasn't had

51:37

any effect apart from political

51:40

rhetoric. Yeah. Two things.

51:42

One is that I would agree, and I think that these great,

51:44

peristatal trading companies of the 18th century, the

51:46

East India Company, the

51:49

South Sea Company had the might of

51:51

the British Empire behind them, whereas now the

51:54

large multinational corporations don't really require

51:56

militaries behind them. benefit from the architecture

51:59

of global capital.

52:00

But I'm actually quite struck by that

52:02

trilemma that Denny Roderick posited

52:05

of this notion that you can have any two

52:08

of the following three, which is free elections,

52:11

national sovereignty, or free trade. You

52:13

can have free elections and free trade. You can have national

52:15

sovereignty, free elections, and you can have national sovereignty

52:18

and free trade, but you can't have all three.

52:21

And the tension, well, because of

52:23

precisely the people power that Helena alludes to

52:25

or or the internal contradictions of this,

52:28

that free trade does curtail national

52:30

economic sovereignty by telling you that you can't

52:32

erect barriers or

52:34

and you can't pursue certain policies. Likewise,

52:38

free movement of labor and capital may

52:41

be desirable in economic terms, but

52:43

to the extent that people feel threatened by, interest groups

52:45

feel threatened within a national economy, as

52:47

we see with the immigration debate today, then

52:50

the electoral calculus makes that impossible.

52:53

Likewise, you could have free

52:55

trade and free elections without national sovereignty,

52:57

but nobody seems very keen to have that at the moment. If

53:00

anything, nation states have reasserted themselves

53:02

in the 21st century with a vengeance. And

53:05

economic security and economic

53:07

warfare have made a comeback in the last 10

53:10

years. I think the question

53:12

post financial crisis, I think the question though

53:14

is that, are these doctrines

53:16

neo-McAnselist in any meaningful sense? I

53:19

mean, is it possible to say that industrial policy,

53:22

state-aid subsidies is

53:24

similar somehow to the East India Company's

53:26

attempts to protect its own monopoly or

53:29

someone's attempts to obtain a patent because

53:31

there are some conceptual similarities but they're very attenuated.

53:34

And I do think that critics

53:37

of globalization, and

53:39

I'm not a particularly strong one, but critics of globalization

53:42

would do well to find other arguments

53:44

than reviving

53:47

the mercantilists in the 17th century.

53:50

Yeah, and I think

53:51

that's the point. So

53:54

I think almost most economists would agree

53:56

that globalization has led

53:59

to... or accelerating

54:01

growth in global wealth and

54:03

certainly wealth outside what

54:06

used to be called first

54:10

nations or no it's the wrong term

54:12

first world countries yeah in the

54:15

rest of the world you know if you look at a

54:18

lot of different statistics like life expectancy

54:21

child mortality massive

54:23

increases in countries

54:26

that used to be called Third World, but we

54:29

can't even use that term anymore. There's much

54:31

of an equality going on. But

54:35

the sort of populist wave that led to

54:37

Trump and probably Brexit is

54:41

one of formerly secure industrial

54:43

jobs

54:44

being eroded and

54:48

a lot of talk about inequality. And

54:53

these people are then looking to the nation

54:55

state to try to address that

54:58

inequality and, you know, in

55:01

part blaming globalization,

55:04

free movement of capital as a cause

55:06

of the inequality,

55:10

which I think it is in a lot of

55:12

ways. It's

55:17

a sort of ironic situation where we

55:19

definitely have an increase in wealth, but

55:23

the way the wealth is increasing very

55:26

rapidly as well has led

55:28

to these political attentions within

55:30

the nation states, and the nation states

55:34

have not been very

55:37

good, as De Morris

55:39

alluded to, mostly because of the

55:41

financial crisis. that

55:44

everyone thought it was going swimmingly, actually

55:47

addressing this problem and dealing

55:50

with these sort of lost, or

55:52

not lost jobs because they have a lot of employment, but lost

55:54

income, I guess you would call it. I would think that critiques

55:57

of the global economic order going forward.

56:00

might pick up something that's actually present

56:02

in Physiocracy, which is that notion

56:05

of natural limits to growth in

56:08

terms of the physical world and the physical environment,

56:10

and that actually it's from environmental economics

56:12

that you'll get meaningful critiques of

56:15

free trade and globalization

56:17

in terms of climate change, the climate emergency,

56:19

and natural limits to growth than

56:22

you would from mercantilist doctrines, which

56:25

are about the jealousies of trade and which were

56:27

fundamentally extractive in their

56:29

sense of the

56:30

natural environment, extracting silver and

56:32

other raw materials. So

56:34

I think the future will be different from the past in that

56:36

respect.

56:37

Here comes the producer. Tell

56:40

him he has to stop. I want a cup of tea.

56:44

Yes, please.

56:45

BBC Sounds, music, radio,

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56:54

I'm Paris Lees, welcome to

56:56

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56:59

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57:01

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