The Deep and Global Roots of International Political Economy

Political Economy author Eric Helleiner released his most recent book The Contested World Economy: The Deep and Global Roots of International Political Economy. You can buy the book through Cambridge or Amazon. He expanded on the premise of his 2nd most recent book The Neomercantilists which focused on the history of a subset of political economic thought. I interviewed Helleiner on my podcast on that book which you can find here.

I have not gotten a chance to read through the new book yet but its general theme points to an important lesson in understanding how we see economics or political economy historically and presently. The mainstream narrative is that Adam Smith invented economics in 1776 with his book The Wealth of Nations. He argued for free market capitalism and created the foundation that later capitalist economists expanded on throughout the subsequent centuries. By the 1840s, Karl Marx invented socialism with a myriad of writings of which the most polemical was The Communist Manifesto in 1848 and the most technical Das Kapital in 1867. Although Marxism ultimately proved to be a failure in the extreme, with the most evident example being the Soviet Union, capitalist economists were informed by his movement’s criticisms and reformed capitalism. This is why we have things like the welfare state and social security in capitalist economics advocated by capitalist economists.

Much of the economic intellegisia is dominated by the perspective that the intellectual development of economics is over and all that remains to do is tinkering around with tax rates, tax credits, welfare allocation, and marginal technicalities. There is a healthy minority of Marxist economists that seek to subvert economic policy into their own doctrinal ideal but for the most part they feed into the consensus of the capitalist orthodoxy. Ultimately, the current consensus leaves out a much wider, deeper, and accurate picture of the history of economic intellectual thought.

The most notable of these forgotten schools of economic thought is Neomercantilism. This features in Helleiner’s new book and was the center of his 2nd most recent mentioned earlier. As defined by Helleiner, “neomercantilists…back strategic protectionist policies and other forms of government economic activism to promote state wealth and power.” Mercantilism was the economic attitude (more so than a theory) of the 18th century which centered around state competition for resources and most acutely acquiring the most gold. Adam Smith responded to that attitude with criticisms. The “neo” in neomercantilism refers to the reaction to Smith by those that evolved mercantilism into something that could respond to Smith’s attacks. Other terms can be used to describe this school of thought like realist, developmentalist, or nationalist. One of its greatest thinkers was Friedrich List who wrote The National System of Political Economy in 1841. In it he highlighted the need for economics to focus on the national unit rather than the individual or the global as it was the most critical in policy formation and economic relationships.

It became apparent that much of the neomercantilist thought was written from a perspective of weakness. Its writers looked at their nations compared to other more powerful ones and wondered why that was. The conclusion many came to was that the more powerful ones propagandized a system of economic policies on weaker nations that they themselves did not follow. List called this “kicking away the ladder” and in 2002 Ha-Joon Chang titled his book Kicking Away the Ladder in reference to List, where he used modern research and methods to prove the general case in favor of the neomercantilist school of thought. List juxtoposed his native weak Germany of the 1840s to the powerful English empire. In this analysis, the theory of free trade capitalism, of which most of its foundational works were sourced in the United Kingdom, appeared to be a cynical product of imperialism used to keep competing nations down. And thus much of free market capitalism can be described as imperialist and much of neomercantilists can be described as anti-imperialist. List argued that England itself used neomercantilist or nationalist economic policies to grow past its European neighbors and the only way for those neighbors to catch up would be to emualte such policies. Chang offered a similar portrayal and added expansion into the 20th century and East Asian geographies.

While Helleiner might insist on a purely descriptive account of his history, I would go further into the prescriptive. What this intellectual history revealed was that the neomercatilists were often practical people interested in developing their nations and combatting imperialism. Reading up on the individual development histories of each nation also illuminates the conclusion that, possibly, only neomercantilism has the ability to develop nations. Free market capitalism and Marxism both seem like post-hoc overlays on what is often neomercantilism. Negative outcomes like wealth inequality or poverty can often be explained by unique tenets within those ideologies while there positive outcomes can often be explained by hidden neomercantilism. Neomercantilism’s alleged invention in the 19th century is also a slight misnomer. While certainly we can parameter a specific period of specific economic thought in the 19th century and call it neomercantilism, as noted above by List and Chang neomercantilism is just the evolving and perennial doctrine of how you effectively develop a national economy. Even Helleiner accounted for this and he made a special effort to highlight very old East Asian thought that mirrored such ideas.

The lesson here is to open up our minds to different ways of thinking about economics and that often requires historical research which is often neglected for statistics in mainstream economics. Once we do that are assumptions and data that feed into our statistical research may change. The Full Stack Economy is itself a derivative of neomercantalist thinking and embraces holistic and develop-oriented policy solutions. Please buy Helleiner’s books and give our podcast a watch to become more informed on these topics.