Read the Footnotes Posted October 8, 2019 Share Posted October 8, 2019 Buffett Frequently lists Adam Smith right up there with Ben Graham and Phil Fisher as being the biggest influences on him. Buffett frequently recommends The Wealth of Nations, which Buffett frequently seems to rank it among the top 3-5 most important books to read. I was going to write an original post on Trump's Mercantilism and contrast that to Adam Smith's Classical Economics. Before writing something original, I did a search to see if anyone reputable had written something on the subject. Turns out Robert Barro, the number 3 ranked economist in the world, wrote a nice piece about it just a few days ago. I have a funny story about how I thought to look up Barro's current ranking. A few years ago, I knew that the guy who had been hanging out in my living room with some regularity was a Harvard economist. I just didn't realize that at the time he was the NUMBER ONE ranked economist at the time. I felt kind of stupid afterwards not realizing all he had accomplished as you can imagine. Hopefully any of my economic arguments were not that dumb. Of course, I had also been spending a good bit of time with Chip Case (Schiller's partner) so hopefully Chip's influence and mentorship helped keep me from saying anything too stupid. Robert Barro's article: https://www.project-syndicate.org/commentary/trump-trade-policy-mercantilism-by-robert-j-barro-2019-09 If you're not aware of Mercantilism, it was a belief system from the 16th to 18th centuries based on the idea that the world was a zero sum game and that you can only win if someone else loses. Sounds a lot like Trump's world view right? Barro does a good job. I'll leave the rest to him. If you want to know more about Mercantilism, the wikipedia article does a good job including being sure to mention that Adam Smith and David Hume were the chief anti-mercantilists. https://en.wikipedia.org/wiki/Mercantilism Quote Link to comment Share on other sites More sharing options...
Gregmal Posted October 9, 2019 Share Posted October 9, 2019 I'm looking forward to your post of Trump's Art of The Deal vs. C.S. Lewis and the Chronicles of Narnia! Quote Link to comment Share on other sites More sharing options...
LC Posted October 9, 2019 Share Posted October 9, 2019 I actually think it's a fair point. I'll admit I haven't recalled the era of Mercantilism since my high school econ days! But I think the analogy is apt: playing games with a zero-sum output in mind alters your decision making and limits your options. Thanks for the Barro article. Quote Link to comment Share on other sites More sharing options...
Read the Footnotes Posted October 9, 2019 Author Share Posted October 9, 2019 Trump’s signature trade policy was debunked by Adam Smith more than 200 years ago https://qz.com/894085/donald-trumps-mercantilist-trade-policy-was-debunked-by-economist-adam-smith-more-than-200-years-ago/ Quote Link to comment Share on other sites More sharing options...
Read the Footnotes Posted October 10, 2019 Author Share Posted October 10, 2019 Fill the Swamp! Couple of points on corruption in relation to mercantilism. One of the primary criticisms of mercantilism is that it breeds corruption. So if you really wanted to fight corruption, why would you bring back mercantilism? It's important to note that the US declaration of independence was a reaction in part to the corruption of mercantilism. It's no coincidence that The Wealth of Nations was published in 1776. http://www.ushistory.org/declaration/lessonplan/mercantilism.html The Navigation Acts and the Sugar Act were two of the laws enacted to restrict colonial trade. Acts like these led to rebellion and corruption in the colonies. Colonists, particularly in New England, rebelled against these acts by illegally smuggling goods in and out of the colonies. Ships from the colonies often loaded their holds with illegal goods from the French, Dutch, and Spanish West Indies. The smugglers would pay bribes to British customs officials who were hired to regulate trade in the colonies. These officials also made a modest salary from the British, so they were benefitting from all sides. The American juries that tried smugglers, in times when they were actually caught, rarely found them guilty. Because they were gaining so much power, smugglers increased their secret trade to almost every port in the colonies. It is estimated that over 700,000 British pounds were brought into the American colonies each year at this time. In addition to the bribery at lower levels and smuggling, one of the biggest problems with mercantilism was that it allowed politicians at the top of the political food chain to insert themselves in to any import/export business they want to. Basically they could go to anyone they wanted to and say "that's a nice business you've got there. It would be a shame if something happened to it." The shakedown to get a taste of the action would begin. In addition the granting of and competition for concessions was also an issue. I would not be too surprised if this type of behavior has been rampant behind the scenes in the Trump administration. This behavior is not far from some of the alleged conspiracy in Ukraine. Quote Link to comment Share on other sites More sharing options...
Spekulatius Posted October 10, 2019 Share Posted October 10, 2019 Yes, it occurred to me a while ago that Trump really followed a mercantilistic playbook of controlling the trade with tariffs and regulations. It may have contributed to the American revolution and most likely to the beheading of the French king eventually. The Dutch and later the British had a more flexible approach to trade and fared better than the French. Mercantilism works best with absolute power ( hard to control trade and the economy without it and while it is considered a precursor of capitalism, it really isn’t capitalism. It’s interesting to see Trump offering to buy Greenland from Denmark, which is a typical mercantilistic move. Funny how you can bring back a 300 year old defunct economic theory, give it a new name - MAGA, and sell it as something new. Quote Link to comment Share on other sites More sharing options...
LC Posted October 10, 2019 Share Posted October 10, 2019 Funny how you can bring back a 300 year old defunct economic theory, give it a new name - MAGA, and sell it as something new. ^Good insight Quote Link to comment Share on other sites More sharing options...
Read the Footnotes Posted October 11, 2019 Author Share Posted October 11, 2019 Mercantilism works best with absolute power Do you think that might have anything to do with the fact we find ourselves cruising toward what is likely to become the biggest constitutional crisis in more than 200 years? Mercantilism is basically a form of economic warfare. Conducting economic warfare tends to create enemies which tends to lead to war. Also, if you believe that your economy is a fixed pie, then the only way to expand your pie is to take someone else's pie, which leads to war, or to offers to buy Greenland. I don't have a citation for this (maybe someone else could find one?) but I seem to remember that Mercantilism was the period with the most conflict and wars. Being in a constant state of war actually reduced the economies while at the same time resulting in extremely high TAXES and national debt to fund all the wars. It was all the taxes, tariffs, state monopolies, and graft that led to the Boston Tea Party over a tea tariff. Quote Link to comment Share on other sites More sharing options...
Spekulatius Posted October 11, 2019 Share Posted October 11, 2019 Mercantilism works best with absolute power Do you think that might have anything to do with the fact we find ourselves cruising toward what is likely to become the biggest constitutional crisis in more than 200 years? Mercantilism is basically a form of economic warfare. Conducting economic warfare tends to create enemies which tends to lead to war. Also, if you believe that your economy is a fixed pie, then the only way to expand your pie is to take someone else's pie, which leads to war, or to offers to buy Greenland. I don't have a citation for this (maybe someone else could find one?) but I seem to remember that Mercantilism was the period with the most conflict and wars. Being in a constant state of war actually reduced the economies while at the same time resulting in extremely high TAXES and national debt to fund all the wars. It was all the taxes, tariffs, state monopolies, and graft that led to the Boston Tea Party over a tea tariff. I know that the failure of mercantilism has been linked to revolutions, especially the French and the American revolution. The latter simply due to the fact that the mercantilistic trade was designed to benefit the motherland to the detriment of the colonies. I Am not sure it lead to wars directly, but certainly economic wars can lead to real wars. The simple fact why absolute power is needed is that in order for mercantilism to work, you can’t real have a free capitalistic economy, you need to control it to achieve the goals, it’s really more like the Chinese economy which have their own version of mercantilism and they also happen to have a party with almost absolute power. Quote Link to comment Share on other sites More sharing options...
Read the Footnotes Posted October 13, 2019 Author Share Posted October 13, 2019 Here's another affront to free markets. Anyone who is a landlord or would like to be one, should read this proposal. https://ocasio-cortez.house.gov/sites/ocasio-cortez.house.gov/files/A%20Just%20Society-%20A%20Place%20to%20Prosper%20Act.pdf Chilling. Hopefully there will be a viable moderate option for voters, or a true option for free markets and less regulation and less corruption. Right now I am not sure there is a single option for that other than Bill Weld, and he is unlikely to be viable Quote Link to comment Share on other sites More sharing options...
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