September 29, 2008

We Are All Mercantilists Now


Marx was wrong: feudalism doesn't precede capitalism, it follows it.  And after feudalism comes this:

east india flag2.JPG

Welcome to 1600.


The schizophrenization of America becomes revealed. Was America too laissez faire, which lead to the crisis?  Or not enough, which lead to a bailout plan?  The answer depends, in large part, on whether you think it's your money at stake.

Whether it is a good plan or a bad plan remains to be seen.   Indeed, it will never be known since we will never really know what would have happened had the other course been taken.  If Depression is indeed averted, no one will thank Paulson.  Or, if Depression comes, whether it could have been averted by the plan.  So be it.

But is it socialism?

No.


II. What is mercantilism?

In a sentence, it is the belief that a country's strength is tied to how much money it can accumulate.  In the heyday of British mercantilism, 1600-1776, it meant the accumulation of bullion; favoring exports over imports; keeping money within the nation, not sending it elsewhere.  The money could be used to purchase commodities and fund armies-- which, in turn, helped bring money into the country.

Mercantilism was premised on the belief that there is a fixed quantity of wealth in the world, and everyone has to fight over it.  Economics, it was felt, is a zero sum game; and since not everyone can win, it becomes acceptable that they don't.

State policies reflected this.  "Free trade" meant "free trade for me."  Protectionist tariffs and regulations; international treaties that solidified trade superiority.  Colonies to sell the exports to.  And a tight control over the means of shipping.

Mercantilism also exerted influence not just on commerce but on thought and culture.  In order to maximize exports, it had to convince the populace that the export (or approved import) was necessary.  In the late 1600s, calicoes, previously the cloth of the poor, became a sought after fashion necessity-- entirely because it was what was being imported.  It wasn't sought after and therefore imported; it was imported and therefore sought after. Cleverly, British merchants made high profile gifts of the calicoes to prominent ladies; the nobility accumulated them; and then everyone had to have them.  They went into clothes, furniture, drapes.  Mercantilism had changed the aesthetic of the the entire nation-- the world.

Generally unimportant products took on gigantic importance, because the market convinced people they were important.  Here's an example: Columbus accidentally discovered America because he was looking for spices.

Capitalism identifies a market and then tries to maximize profit within it.  Mercantilism, by contrast, creates markets on purpose based on what it has to offer, and then controls those markets.


III. The Sudden Decline of Feudalism

What preceded British mercantilism?  Feudalism-- local, feudal power rather than a centralized government; vague territorial boundaries; and ever changing racial and cultural characteristics.  It was local, and fluid.  But as the world "shrunk" (or got flat) it could not adequately provide for its people.  Unemployment and poverty rose.  Meanwhile, the opening of trade and improvement in travel offered greater opportunities than farming someone else's land.

States formed, over time, and absorbed the fiefdoms, removed the existing lords, consolidated the power, and served the interests of its domestic merchants and producers.

And so the rise of the nation-state; racially homogeneous, with rigid territorial boundaries; partly feudal but with a new quasi-class system of nobility, merchants, workers, and slaves. 


IV. Wither American Feudalism?

As I have written before here and here, for some time in modern America, feudalism was the growing trend; but rather than lord-vassal, it was company-employee.  Government's role was secondary and shrinking; companies provided income, healthcare and retirement benefits, and, more importantly, a sense of identity and belonging.  The company provided protection in exchange for service.

Even two years ago, this was increasing.    These company-lords become even more powerful as they merged and privatized, going off the public exchanges but still wielding massive influence.

But for this progression was suddenly diverted.  Now, instead of companies going private, they are going government.

Who has the big money now?  Sovereign wealth funds, of which, if/when the Paulson Plan is passed-- for it is inevitable, in some form-- the U.S. will become.  In the past, there was a tug of war between private ownership and state ownership.  Now, instead of outright nationalization of a program (e.g. Social Security) governments own financial stakes in businesses, in sectors-- and in themost important sector of all, the financial sector.  The Chinese have this system firmly in place, but pretend it is "communism."  Saudis as well.  And now, soon, the U.S. 

How does the U.S. government separate its foreign policy with its fiduciary responsibility to its shareholders, which is you?  How does it separate its domestic policy from a revenue motive?  It can't.  They become one and the same. 

If the complaint in the past was that government is too influenced by big business, how does this change when government is Big Business? 

Put all this together with a growing protectionist sentiment, and you have our new economic model: mercantilism.

America can't move closer to socialism, if for no other reason than those in power are too young to remember what it really looks like and how to execute it; and with so much individual narcissism, no one could demote themselves so much to the state.

Such policies like the Paulson Plan appear socialist because the government seems highly involved in the control, in the regulation of an industry.  But this is exclusively in the service of the business franchises that it controls.  The analogy for todays events isn't The USSR or even France; it's the East India Trading Company; an independent, for profit, business arm of the state.  It was nearly a monopoly. It could even command the military, as needed.(1)

east india trading company.JPG


Within the East India Trading Company's flag was the union Jack-- Britain's flag-- contained in the canton.  Get it?  Britain at the service of the Company; the Company for the benefit of Britain.


V. Predictions


Reducing current events to historical -isms is a fool's game, for drunks in a bar or political scientists with tenure-- played when there is no accountability for the opinion.  It serves no purpose unless it can be used to make predictions.  So here they are, linked to the key characteristics of the mercantilism of old.  In general, the future holds increased protectionism, increased state control, increased classism, and the necessity of piracy.

1. Protectionism: Obvious.  Look for more, not less.  More tariffs; more treaties ensuring trade advantage. Not only will the movement be away from capitalism, but it will be considered obvious that capitalism is unworkable.  More emphasis on "Free Trade," as it is subtly redefined to mean "ensuring domestic products are not undercut by unfair foreign advantage such as low labor costs, etc."

2. National self-sufficiency: despite the importance of trade, the nation state sought to free itself from outside imports.   Domestic agriculture and manufacturing subsidies; "energy independence."  That means solar power, whether or not oil is expensive; increasing ethanol and agricultural subsidies.

3. Shipping: Most important to mercantilism was control of shipping.  While it was impossible to control what other countries tried to produce or export, Britain could control how and if it made it to Britain.  The Navigation Acts required that all imports to Britain or its colonies had to be done on British ships, or through British ports.(2)  Thus, cheaper goods from other countries could not be obtained, or were taxed so heavily as to make them impossible to afford.  So British West Indian sugar was cheaper to Americans than French West Indian sugar, but only because the actually cheaper French West Indian sugar was taxed so heavily. 

That "shipping" is nowadays done on the internet.  Look for the government or its business arms to try and regulate or even outright control it, and strongly discourage (read: tax)  the use of non-domestic providers accordingly.

4. The rise of the nation-state:
  In the past this meant racial homogeneity, but this will be replaced by regional and cultural homogeneity.  So Russia tries to reabsorb its former satellites; and America asserts its cultural identity by seemingly arbitrary emphasis on the use of English, stronger national boundaries; clearer divisions between American and "illegal immigrant" with accompanying restrictions (e.g. no driver's license, etc).

5. Stronger central government.  That this is happening is indisputable..  More monitoring, but as this is mercantilism and not fascism, the monitoring is in the service of commerce, e.g. Google, credit cards over cash, etc.  Surveillance is for the protection of the state which is at the service of commerce.

6. The primacy of the military:  economic disputes become political; and political disputes are settled, ultimately, by guns.  Look for corporations to have their own mercenary armies, or have ready access to America's.  And look for more wars, with the cover story of protecting Americans, stopping genocide, etc.

7. Colonialism:  rather than foreign nations being politically controlled, the control will be  economic or cultural.  The purpose of the British colonies was access to raw materials, and the creation of new markets for the mother country's products.  So too will come the need to convince foreign peoples that they need what we have, and need us to extract what they have.

8. Slavery: slavery will not return, but the use of groups of people who will work for much less than the citizens will be necessary to maintain competitiveness. Different from capitalism, however, will be that these people are purposely blocked from rising in class or wealth.  Moral justifications will be necessary, and of the form, "they're better off than they were."

9. Classism: unlike the boundariless possibilities of capitalism-- up or down-- mercantilism requires specific classes, especially a working class.  In America, classism will supersede all other internal disparities, including racial.  This suggests an Obama presidency and the replacing of interracial conflict with intraracial conflicts, along class lines.

10. Ban on luxury goods:  Sumptuary laws, though generally ignored, rigidly defined types of products that could be owned, and by whom.  The rationalization was that they prevented excess and waste and kept the money in the country, reinforced national pride and morals, and provided markers social class.    The modern twist: no goods are luxury goods.  Cars, GPS, brand name clothes-- they are all "necessities."  Waiting at the welfare office, applicants pass the time texting on Blackberrys.

It's not their fault.  The economy specifies that these are not luxuries.  They are lulled into low introductory rates, a free handset; no money down.  Those $400 shoes only cost $15 a month.  Forever.

In a truly capitalist system, one would have to aspire to aspirational goods.  The system is short circuited-- one can afford those goods without actually possessing the status or wealth that ownership implies.

Mercantilism maintains dominance not by best serving a market, but by best serving a market it creates.

11. Exports and Domestic Production: An emphasis on making specialized products of high quality to maintain export superiority (e.g. specialty goods over spatulas; services over durable goods.)

12. Inflation: If wealth is hoarded in the U.S., at the expense of another nation, than the value of the wealth falls in the U.S. and rises in the other nation.  Eventually, it will not be economically profitable to hoard wealth-- it will have more value abroad.

13. The end of mercantilism: when the end finally comes, as it must to all illogical economic systems, it will be replaced by what replaced it in 1776 with The Wealth Of Nations:  capitalism, and the beginning of the next Industrial Revolution.

That's some of what can be expected, albeit it gradually, so that no one notices.

VI.

There's one more important development, too large to be discussed adequately here.  The control over commerce, goods, and pricing meant that not everyone was able to get, or afford, what they wanted (or needed.)  Simultaneously, the state itself had to compete against other states for markets and materials.  This necessitated an underground economy and related class; a class so necessary to and intertwined with these untenable economic policies that they are celebrated even today: pirates.  They were the logical and inevitable extension of controlled commerce; were extremely skilled, and often navigated the shipping lanes with more knowledge and flexibility than even the military.  They worked for themselves, or they worked for the state, as the situation arose.

In the new world order, shipping is the internet; the goods are data.

Drink up, me hearties, yo ho.



------

1.  though in this case rather than the Company lending money to the Treasury for exclusive trading rights, the Treasury lends it to the Company for a cut of the profits and taxes-- which is in turn in exchange for protection.

2. The Boston Tea Party was not about the tea being too expensive because of tariffs; it was because British Tea Act allowed the EITC to sell the tea without a tariff, and therefore cheaper than even American smugglers-- Samuel Adams, John Hancock, and others-- could sell it.







 








Comments

i know i should at least rt... (Below threshold)

September 29, 2008 11:21 PM | Posted by the0ther: | Reply

i know i should at least rtfa before commenting, but right off the bat i see you're talking about zero-sum games. and taking the point of view that it is NOT a zero-sum game.

who's to say? if my main value is doing it raw-dog, which always ends up in making babies, which need to be fed/clothed/sheltered, and if everyone else tends to value the raw-dog the same way that i do, and they've got their reasons to not use birth control (weird hormonal effects, religious beliefs, etc etc), who's to say it's not a zero-sum game, really?

there's only SO MUCH food, and there's definitely only SO MUCH water. that's where the rubber really hits the road when you want to debate what is and what is not a zero sum game.

reading...

Vote up Vote down Report this comment Score: -4 (6 votes cast)
only so much food and water... (Below threshold)

September 30, 2008 4:55 AM | Posted by Anonymous: | Reply

only so much food and water? Better wanna rethink that one. What was lost in trade for the massive gain in jobs, wealth, and resources that is the computer revolution? Man's capacity to innovate means there is plenty for 6 billion souls and more. Our intellectual superiors such as Buckminster Fuller proved it. Man's inability to rise above pettiness means we'll never see the day when economics is conclusively proved not to be zero sum.

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I think you nail one very i... (Below threshold)

October 2, 2008 6:28 PM | Posted by Shipper: | Reply

I think you nail one very important point in your article - that shipping is the internet now. This is important in the fact that it is true and false. To discount all those other methods is foolhardy because that is really what our economy runs on.

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Did Noam Chomsky hijack you... (Below threshold)

October 12, 2008 8:04 PM | Posted by Anonymous: | Reply

Did Noam Chomsky hijack your blog?

Vote up Vote down Report this comment Score: -1 (9 votes cast)
still haven't given credit ... (Below threshold)

November 9, 2008 12:40 PM | Posted by bipolar2: | Reply

still haven't given credit to Wittgenstein. for shame. i'm sure that LW was rather cleverer than du. intellectual theft -- ah, well i shall continue to demand honesty whenever your blog appears via StumbleUpon.

bipolar2

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pretty interesting post, th... (Below threshold)

November 13, 2008 11:09 AM | Posted by sleeping disorders: | Reply

pretty interesting post, thanks for sharing.

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Calico alert - you got a LO... (Below threshold)

December 18, 2008 2:45 PM | Posted by La BellaDonna: | Reply

Calico alert - you got a LOT wrong on that one. The East India Company, et al.'s imports were popular because the colours were bright AND COLOURFAST, and the textiles were washable, comfortable and pretty. The textiles became so popular that laws were passed banning the import of calicos and chintzes because they were a threat to the home woolen, silk and linen industries, and there was rioting on the part of the workers in those industries in protest. In Britain, all imported PRINTED, PAINTED and DYED calicoes were banned [Acts (1700)(effective 1701)] (the "Calico Act") unless it was for immediate export to the colonies or Europe. The prohibitions were extended further by forbidding the use of decorative calicoes to make soft furnishings such as curtains and cushion covers [Acts (1720)]. British manufacturers made their own versions, and merchants sold and shipped the genuine article to their colonies and Europe. France didn't particularly appreciate that, as the French had banned imported calicoes since 1686 because of complaints from home textile manufacturers. The British Acts were repealed in 1774; the French gave up in 1759. England's cotton industry in Manchester and Oberkampf's toiles de Jouy in France owed their existence to the nationalist attempts to rival the Indian cottons.

Of course, banning the cottons didn't exactly have the desired effect, either; they became even MORE popular as a result of being contraband. Small wonder; the samples that are still extant are STILL BRIGHT, three hundred-odd years later. The Victoria and Albert, the Metropolitan Museum, and very particularly, the Kyoto Museum, have some beautiful samples, and there are wonderful prints in Barbara Johnson's Album (a series of dress swatches made over the life of one Englishwoman from the 18th through the early 19th centuries).

There's a nice little essay at http://www.firstulster.org/Pages/3_1_2_cotton_essay.html for anyone who might be interested which covers in brief most of my points.

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Every one understands that ... (Below threshold)

January 4, 2011 10:41 PM | Posted by MARYANNE19Dodson: | Reply

Every one understands that men's life seems to be high priced, but some people require money for various stuff and not every person gets big sums money. Thus to receive fast mortgage loans or just short term loan will be a proper solution.

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I vote MARYANNE19Dodson the... (Below threshold)

July 11, 2011 3:53 AM | Posted by Steven: | Reply

I vote MARYANNE19Dodson the best link spam of 2011.

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Can we get an update, if yo... (Below threshold)

October 1, 2011 4:33 AM | Posted by DGS: | Reply

Can we get an update, if you see this shift happening, or at all?

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Written in... 2008. You're ... (Below threshold)

February 27, 2012 11:19 AM | Posted by Gabe Ruth: | Reply

Written in... 2008. You're a little behind the times here, and not completely right on everything, but you're better than most. I second the call for revisiting some of your predictions. I think most of your error comes from not understanding who drives this merry little party, and what it takes to keep it all going.

Or maybe you're a fantastically designed Blue Pill? Just enough truth to keep the confused coming back. Anyway, I haven't enjoyed a blog this much since I first found Unqualified Reservations. Keep it coming.

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A few things. There will be... (Below threshold)

March 7, 2013 8:31 AM | Posted by Anonymous: | Reply

A few things. There will be no nationalism in this scenario, not for corporations anyway, for "citizens" sure but given that corporations in your scenario will run things then how do you forget that as already transnational entities corporations and therefore global governments will have no national loyalty but rather profit loyalty instead, whatever country produces less will be considered "hostile." Third world countries already are colonies and cheap justified labor is who made the jeans your wearing now, and the earrings too. Finally, given the acceleration of "historical events" with technology, tell me what future World War II will look like and who will go in the camps this time? Or am I jumping ahead and forgetting that there will have been a future "Great War" to end all wars? Trench foot anyone?

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Credit was given when you l... (Below threshold)

June 8, 2013 10:07 PM | Posted, in reply to bipolar2's comment, by Anonymous: | Reply

Credit was given when you looked up the quote.

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I agree with Anonymous who ... (Below threshold)

July 6, 2014 12:22 PM | Posted by Nikki: | Reply

I agree with Anonymous who posted on 7th March, the international government/corporations are too large a power-wielding force to ignore. Perhaps their job is to first build up the less economically developed countries first, then try to "unite" us all. I don't think we will see a rise of Nationalism anymore - technology has made sure of that, but will we see International Capitalism? I think so, but only the future will tell.

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