Capitalism vs mercantilism

Capitalism vs mercantilism – Which economic system is better?

The aim of this post is to compare these two economic systems by looking at today’s world as well as some economic theory of the past.

Mercantilism definition and criticism

Though the encouragement of exportation, and the discouragement of importation, are the two great engines by which the mercantile system proposes to enrich every country. – Adam Smith

Adam Smith went on to write something that might seem very unsettling at first glance. But in reality makes perfect sense if you yield to the logic of his argument.

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

  • The average citizen in a mercantilist country does not benefit much. Only the owner of the factory. It is really just an extension of feudalism. Workers receive wages but wages or money that is not worth much if their quality of life is not improved.
  • An oligarch class is formed
  • Karl Marx was really criticizing mercantilism, not capitalism

Adam Smith went on to write:

In the restraints upon the importation of all foreign commodities which can come into competition with those of our own growth or manufacture, the interest of the home consumer is evidently sacrificed to that of the producer. It is altogether for the benefit of the latter, that the former is obliged to pay that enhancement of price which this monopoly almost always occasions.

The average citizen pays for the oligarch’s lifestyle. Much of Smith’s book Wealth of Nations was a criticism of the mercantilist economic system. For nations and people, there is a difference between acting on enlighten self-interest (capitalism) and selfishness (mercantilism).

Chinese neo-mercantilsm vs US and EU capitalism

Although mercantilism does not exist today, neo-mercantalism lives on in countries like China, Japan, and Russia. The Chinese neo-mercantalist economic model is often praised by outsiders as the only country in the world that is really manufacturing, exporting and growing. Many people point out the USA and EU should protect their own industries and pursue a course of capitalism mixed with encouraging and export-driven economy.

Let us compare a citizen in China or the Czech Republic, Hungary or Poland.  I live in Poland. I would 100% rather be a Polish citizen which participates in free movement of labor and capital in the EU the largest free trade zone in the world, than a citizen in China, the largest mercantile economy in the world. Poland had nothing in 1980. Now in a few us it is pretty rich.  Some Chinese are rich but most are not.

Look at Russia another mercantilist country ( trying to play t[topicblocks id=”/en/mercantilism” comment=”When you publish this post, this WordPress shortcode will display the TopicBlock you created about ‘Mercantilism’.” params=”blocks=%5B%7B%22block%22%3A%22weblinks%22%7D%2C%7B%22block%22%3A%22full_info%22%7D%5D”]his game with the former members of the Soviet Union). There is no way I would want to be an average Russian citizen. Oligarchs who benefit from mercantilism makes the rest of the country pay for this.

Wealthy USA and UK capitalist countries

Is capitalism bad? People in the UK and USA criticises capitalism because they have never lived under another system. Lets some of these neomercantilists or anti-capitalists or socialists live under another system and they will change their minds fast. If you compare counties that use capitalism and observe how rich and happy the citizens are vs other countries and how the citizens are not as free or wealthy I think you will see the answer to which is  economic system is better capitalism or mercantilism.

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3 responses to “Capitalism vs mercantilism”

  1. Shon Drexel Carpenter

    I am a Bible believer and a capitalist. It is now required that I acquire a state license to work in Arkansas, starting January 1st 2012. I refuse to acquire a license. How can it be capitalism when there is a third-party who can find you or throw you in jail if you do not submit. Would this be called statism or socialism or communism. What happened to the tariffs to protect the people. In school in the 70’s I read it. This is not happening today.

    1. Douglas

      The actual y System economic in USA is the Mercantilist, Since the 70’s when someone “intelligent” came exporting our labor and our factories. Adams Smith took refuge in his book “The Wealth of Nations’” to escape the mercantilist at this time. Back to the sources of sustainable capitalism would be a solution to our nation. And be coasting, with the growing recession that is coming.

  2. pbbrown

    Lets simplify this. The mercantile concepts developed among the wealthy and influential (including royalty) with the desire to gain economic advantage for their spheres of interest (nations). This perspective and attitude evolved from the feudal organization of power among fiefdoms. The point was to “gain more strength for our side.” This same attitude still intrudes into the thinking of the leaders of modern capitalist nations in their attempts to better the circumstances of the countries for which they have been granted responsibility. It is very difficult for those in positions of power to let go of the economic and social reins of the country they are expected to govern.

    Capitalism assumes individual freedom, but there is a conundrum regarding how to be a leader or ruler of a free people. Furthermore, many of those people who are being led and governed assume that the leaders are responsible for the economies improving or declining. These people expect rules and measures should be enacted by the leaders to assure the economic success of their country.

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