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And, so, the founders too practiced mercantilism as the economic system for the new America. England gave up mercantilism for free trade in the late 1800’s and later lost half of its national wealth. The US continued mercantilism until the early 1900’s when President Wilson and the early progressives traded the tariff system for the personal / corporate income tax. It took an awful long time, but just like England lost its way, the US is now in a post-industrial period and if we don’t do something about it soon, we will all be speaking either Chinese or Russian in a few years.
The way the US can get back on track and become the winner nation again is to adopt the RRR plan with its inherent dependence on a new form of mercantilism. We can call this neo-mercantilism to formalize its differences with the old “government calls all the shots” style as practiced by England in colonial times. The last thing we need of course is for government to call all the shots. When the US in its early days practiced mercantilism, its form is very similar to the recommendation in this article, but the government was just a tad more honest.
What is mercantilism?
Mercantilism is an economic philosophy in many ways similar to capitalism but the invisible hand, which Adam Smith saw as the key point of capitalism was partially controlled by the government to assure all went well for the home country. Quite simply, mercantilism is a philosophy of nation building. It includes a series of economic controls exercised by government that are intended to strengthen a country and its colonies against any antagonistic empire (or separate business entity).
Smith’s invisible hand approach (capitalism) can be described as a free-market economy in which the butcher, the baker, and the candlestick maker provided what people needed and for that, charged a fair price. It was as though an invisible hand guided the actions of producers to meet the needs of customers. Unfortunately in recent times the invisible hand convinced the butcher, the baker and the candlestick maker to leave town. But first, a voice in the dark suggested they fire all employees and set up shop in foreign countries. This is surely not what Adam Smith expected from capitalism.
I believe in capitalism, but since free choice is a necessary requirement, in this century, it clearly has failed the US in a big way. Capitalism with the needed constraints can be called neo-mercantilism. Mercantilism can be thought of as capitalism with a brain. Capitalism’s free nature provides no inherent way of controlling itself. For example, there is no mechanism built-in to account for the impact of corporate greed and simple human piggishness upon the nation, which hosts the enterprise. There is no referee for low blows. And so as we learned, capitalism can be used by a country to hurt itself, whereas a basic tenet of mercantilism is to help the home country and the people of the country. Businesses are only helpful in mercantilism to the extent they help the country and the people in the country.
Capitalism even in America was not supposed to reign supreme over the government itself. The founders handled corporate power by simply banning corporations. They despised corporations. In fact, the Boston Tea Party was not brought upon the King of England but upon the East India Trading Company, a corporation chartered by the English.
Corporations represented the moneyed interests much like they do today and they often wielded political power, sometimes to the point of governing a colony all by themselves like the Massachusetts Bay Company did. After the revolution, the founders permitted corporations only to exist 20 or 30 years and they had to dissolve. During their brief life, they could deal in only one commodity. They could not hold stock in other companies, and they were not permitted to accumulate property holdings any larger than the minimum necessary for them to accomplish their business goals. Over time, the wealthy in America, who saw great opportunities in corporations to extend their wealth, became politically inclined or they bolstered the purses of our representatives to change the laws to suit their needs.
While corporations were trying to gain more power, it was duly noted by Thomas Jefferson in 1816: “I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.” Perhaps no humans can be trusted but we’ll talk about that another day. Today, I have hope that reindustrialization can change US for the good.
Despite Jefferson, Adams, and a number of the founders who warned US of corporate power, corporations gained more and more freedom and were eventually declared citizens with far greater powers than desired by the founders.
Corporations were never loyal to America but they obeyed America’s laws to the extent they could not do otherwise. As an example of their abject independence, during the Civil War, the scoundrel nature of corporations came through loud and clear as they made an effort to profit from the war. They sold products at high prices, especially to the government, and they sold to both sides throughout the war. Corporations proved even then that they had no allegiance to any country when great profits are at stake. Abraham Lincoln had a great disdain for corporations.
Consequently it is no wonder why corporations gave up on America to increase profits by moving their plants and sometimes their entire enterprises to foreign countries. They are unabashed scoundrels and have always been scoundrels. Back when foreign imports were selling cheaper than American goods, these same corporations would insist that tariffs be placed on the imports to give their domestic business the upper hand. When their once domestic business actually began to make products in foreign countries and import them to the United States, they wanted no tariffs imposed.
Our government should have begun imposing tariffs immediately to reward the domestic American businesses that continued to help the home country and its people. In other words, tariffs should even now be placed on all imported goods from faux American corporations as well as any imported services. This is the first act required for reindustrialization on the part of our government, and it fits in nicely with RRR and neo-mercantilism.
Though we the people elect representatives regularly, for their own unexplainable reasons, our representatives chose not to impose restrictions on companies that operate in ways that hurt the people and our country. Nobody in government was minding the store or offshoring never could have occurred. Offshoring is a product of government malfeasance. So, one day we woke up and all the jobs were gone and the stores were stocked with American products that somehow were built overseas. And your representative was OK with that!
What Congressional representative can look a jobless American in the eye and tell them that offshoring has helped them? The only Americans seeing any benefit are shareholders and their corporate CEOs. This is the worst economic trick that could happen to the American people. Do our representatives have the chutzpah to spin the message that “no jobs” is actually good for the country and good for Americans? For years, the elected honorables tried to spin this as if it were a temporary situation. It is permanent, however, until we change the country to neo-mercantilism economics.
Offshoring surely is good for business and it is good for politicians who play ball with businesses to gain special favors from the special interests. It is also good for the receiving country such as India, Mexico or China as it raises their standards of living. But, it is not good in any way for America nor is it good for Americans. Neo-mercantilism changes the country and the business paradigm and it makes the country people-first once again. That’s why Americans must choose this new way or we will find all our jobs being done by foreigners in foreign lands, while we get accustomed to serving a world that once shined our shoes.
By having few high paying jobs, the US standard of living has decreased. How about the notion of US sovereignty? Why should the US trade its sovereignty and ability to be a superpower for corporate profit? Even in defense contracting, our bidding process permits foreign firms and or foreign locations to win bids for strategic weapons systems for US defense. Can you see the GPS system in a missile control system built by China being programmed to disable the missile if the coordinates showed it was being launched at the People’s Republic? And why would they not add such a safeguard? When your enemy makes your rifles, do you really expect the rifles to shoot straight?
Ironically, in the 1800’s, many of the same US businesses that today are offshoring, begged the government for protection from imports and they were granted the favor and so the US gained strength to match and exceed all other countries. In the late 1900’s American companies got the notion that America was not such a good place in which to build products, pay taxes, and generally do business.
Stifling regulations and high corporate tax rates were bad enough they said but unions played such hardball with corporations that the companies believed it was better for them to get out of Dodge than to stick it out as good American corporate citizens. When they left, they took their jobs and the promise of a successful America with them. But, the axe did not fall in one night. It was many years. Now, it has caught up with America, and now it is clear that for our own survival, we can no longer accept corporate greed first and permit America and Americans to be in second place.
We now have a President who is too smart to be a buffoon but he sure acts like one. He simply does not understand or chooses not to understand that for America to be at its greatest, citizens must hold good paying jobs that are part of the business sector, not the siphon sector. This President, elected in the first decade of the 21st century does not seem to believe in capitalism at all. Worse than that, he does not believe America is any better than the Mexican Baha or Bangladesh, the NY lands in which Woodstock was performed, or any “other” Banana Republic.
If a poll were taken this minute and then, in the next minute this President were to learn, even mistakenly, that he could get elected only if he would swear off capitalism, the preacher and the press would be at the White House for the confession. You and I both know that. “Mea Maxima Culpa” may do it for those who love this President intrinsically but it does not do it for me. President Obama’s ideology clearly is progressive, and progressives use socialism as their base for ideas. If I screamed out, “Bravo Karl Marx,” I would expect the White House to exclaim, “Bravo Herr Marx!” Bravo! What would you expect? Don’t expect a neo-mercantilist solution while Obama is in office.
Today, conservatives have the right notion about how America can recover but all the i’s are not dotted and all the t’s are not crossed. A few more years of liberalism and progressivism, and even the conservatives will be looking for the second Bolshevik Revolution. As you may recall, in the first revolution, the have-nots were permitted to kill the haves, and then acquire their property. I hope it does not come to that here. Yet, I can’t see how a country with no manufacturing capability will be permitted to survive. Surely there is no hope in such a scenario to ever be number one. Russia and China would love to hoist their flags on this land.
Many smart people study the works of Milton Friedman and Friedrich von Hayek. Those of us, who want to see economic opportunity unshackled, espouse the principles of both the Chicago and the Austrian Schools of economics. No real American is interested in the theories of the Frankfurt School of economic thought, which has moved this country towards a centrally planned nation, from which President Obama, can dictate all policy. Yet, there are parts of the idea of knowing where you are going, that are most certainly appealing. Neo-mercantilism’s central planning is tempered with a big dose of moderation. After all, it was laissez-faire capitalism that brought us offshore outsourcing. We can no longer tolerate that in America. Offshoring and free trade are anathema to neo-mercantilism so a government with its head in the game would have stopped the bleeding as soon as it was discovered. Somebody has to look out for all the people. That is why we elect a government of the people.
Back when people were mostly honest and therefore more trusting, and thus trustworthy, capitalism provided an effective environment. With some help from tariffs and a wise government, it set America on its way to achieve both material riches and industrial power? Today, there is little trust in power structures, capitalism, government, or for that matter, anything else. Humans have really messed things up. Most of the humans, who messed it up big-time, were politicians that promised too much and then they stole from others, via taxation, to fulfill their empty self-serving promises.
If you hear in my words, something of value, you were raised in a time or by people who lived when American History was a positive, and America was a model about which, nothing could compare. If all humans in America were tuned into how far off the mark we have gone, I would hope we all would choose to make it better. Neo-mercantilism is a great start as part of the 13-point RRR program, described in other Conservative Action Alerts op-eds.
For years, America never started a war and never lost one. Things have changed but the biased progressive press has kept us from learning the truth as their goal is to protect the leadership they admire. I know that when I was a kid, rugged individualism was the byword for American success. Our pioneer ancestors carved out the US Empire from a raw wilderness of nothingness. Nobody doubted that capitalism with a paved the way and in many ways, it paid the way to America’s success; but it was not just capitalism.
At the hazard of being branded an apostate to conservatism I must continue to ask the question: “Was capitalism the catalyst for America’s industrial power or do we labor under the after-glow of a time when American History was taught in such a way as to magnify present circumstances by projecting them into the past?” Are we looking to a myth of free enterprise to recreate what it had never created in the first place? Was it capitalism that fostered the founding of the colonies, which became the seedbed of the United States? I think it was partly that, but an honest government placed many restrictions on the power of business so that the people controlled the country, bot the businesses or the business owners. We can say it was capitalism with a mercantilist twist! The government set up by the founders was honest and it took an awful long time to be corrupted. It assured America’s success.
For those who like to tell the truth about the economy when it was highly successful, it helps to remember that mercantilism, a superset of capitalism, was the economic engine that preceded capitalism in the US version of western civilization. As discussed previously, mercantilism was a simple system of economic nationalism, based on capitalism and freedom. It added the notion that a strong country was a necessary ingredient for any of its citizens to be successful in commerce. So, mercantilism fostered maintaining a favorable balance of trade and thus the country would become self-sufficient.
Said, differently, there were no powerful corporations in the late 1700’s so corporate power had no role in early America, and when good people made decisions, they were enforceable. Free trade was a system designed by fools for fools. Mercantilism as an economic tool would always leave the free traders in the dust. So, why in the second decade of the 21st century do all politicians from both parties embrace free trade? Maybe our leaders all are anti-American people, or simply anti-American. Maybe they have not thought it out. You tell me. Who do you trust?
The notion of mercantilism was one of the primary reasons why the sea-going European powers sought to start colonies wherever they could be established. Powerful countries wanted to secure sources of raw materials for their developing industrial sectors and to control external markets. This allowed them to produce and sell products all within their domestic economy, keeping all the gold at home.
Inherently old-time mercantilism necessitated a centrally planned and controlled economy. Neo-mercantilism, as adopted by the RRR plan also requires the hand of government but not in a dictatorial role. With mercantilism, the parts of the economy that benefitted the nation were permitted and encouraged. Whatever did not benefit the nation was prohibited and discouraged. It was under this system that the English colonies were founded, and the lessons of mercantilism were never far from the minds of our founders.
When the US was looking at its own opportunity for success, it practiced hard ball mercantilism until just before the 1920’s. The US won the markets in which it engaged. Progressivism, the philosophy that wants the producers to take care of the non-producers, was reaching its strongest period when the US abandoned mercantilism, and began a very slow slide to the economic perdition we now suffer. Obama was not responsible for the entire slide. However, he is the guy that greased up the sides of the pit so now we cannot get out.
Progressive / socialist President Wilson thought that his progressive way of spreading the wealth was a better way for the country than using mercantilism, so he lowered protectionist tariffs to the extent that he could and he brought in the personal income tax, which brought in “unlimited” revenue for the times. Wilson figured out how to get back at the rich Robber Barons that had become extremely successful without being as benevolent to their employees as they should have been. Just like corporations who offshore today, the Robber Barons surely could have been better Americans.
The Income Tax was intended to whack only the rich initially. Though the poor and the middle class were soon to be included in the personal income tax scheme and the associated pain, the original intent gave President Wilson a good feeling that he was stiffing the rich while being Robin Hood to the poor. One gets the feeling that President Obama would give up a lot to be able to bask in one of those Wilsonian moments.
Today, whether we pay the personal income tax or not, as many of us, including myself, are unemployed, how many of us have cursed President Wilson for being the greatest advocate of the IRS and the personal income tax? I know I can be included for there were times in my life when the tax burden was not even close to being light. For those who believe we should all work for what we receive in life, we are right in recognizing President Wilson for being the main man who brought redistribution in as a tool for American government. Consequently over time, Presidents would trade off offshoring for redistribution and so we Americans got more of two bad medicines than any country should have had to endure.
Back then, the revenues from the income tax provided a nice base from which Wilson could begin to engage in socialistic / redistributive experiments. Wilson was not a mercantilist but he did believe government should take an active part in efforts for social reforms. He substantially reduced protectionist tariffs in favor of increases in the personal income tax as this was an easier way to redistribute earnings. Wilson would have lowered tariffs even further but he could not convince most Americans it was a good idea. Ironically, it took a long time for progressivism to come back after being discredited after the Wilson years.
As we all know from history, not long after Wilson, after a brief respite known as the roaring twenties; along came the Great Depression. Without mercantilism, with its inherent protectionist tariff structures as the tool to restart the US economy, the depression lasted until after World War II. We’ll let it up to modern day economists to suggest there may have been a cause and effect relationship here.
If we rewind to the founding of the United States, we do not find the government meddling in things unessential to the well being of the country as the natural state of the Republic? As we look today at what comes from our leaders, we must wonder if there is a day in the future in which we will not be able to buy one ply toilet paper or a 17 ounce Coca Cola in New York Coty?
In 1791, Alexander Hamilton’s report to Congress envisioned an America that was “independent of foreign nations for military and other essential supplies.” This is the heart of any mercantilist program. Hamilton proposed subsidies to encourage US industry to be successful. A few of the mercantilist policies advocated by Hamilton also encouraged an honest central government. He offered specific requests to the new government of the US so that its leaders could choose the best of many alternatives. Hamilton was not interested in rewarding do-nothings at the expense of do-everythings. His bottom line was that if honest men were in charge, none of us need worry. That, my dear readers, unfortunately, is exactly why we must worry today!
Hamilton completely believed that America was founded, launched, and nurtured as the successor to and the continuation of mercantilist, not capitalist policies.
So, let’s take a better look at these Hamiltonian notions. If these were the policies of economic nationalism, which helped foster America’s rise to industrial greatness wouldn’t it seem appropriate for these policies to be the ones that would help the US rise again in its reindustrialization? There is only one national figure who has consistently urged a return to economic nationalism. That man is Patrick Buchanan.
Buchanan has pointed out for years that our rush to embrace so-called free trade has put American workers at a decided disadvantage. The dissolution of tariff protection forced our workers to compete against people who will work for a small percentage of what Americans can afford to work for in societies with little or no regulation.
How do we get back all the jobs that have been exported in the last 30 years? If we want to re-industrialize America we must protect our markets and support our industry. There is no other way. Otherwise we will soon sink to being a mere supplier of raw materials for Chinese manufacturing as well as being a market for China and the other rapidly rising industrial powers of Asia. What about US?
What will be the consequences of taking the bold steps necessary to make America once again become the engine that drives the world’s economy onward as we reindustrialize this country? It really does not matter. Wimps do not and never have ruled the world. For the US to take back its industrial strength, it must use the strength of its people, and be confidant that America is the exceptional nation that Americans know it is.
Such a policy for the reindustrialization of America would need to be calculated to re-build our industry and re-capture our domestic markets from China, and any other country that thinks it can take us on. Just as any predator will react to resistance on the part of its prey so too if we, the US, choose to enact tariffs on Chinese goods or anybody else’s goods, it may well ignite a trade war. So what? It is time for Americans to decide to win in anything in which we engage!
What will be the result of failing to rebuild our industrial sector?
Some may deride this proposed return to mercantilist policies as isolationism. However, just as a nation without borders will soon cease to be a nation, any nation that fails to protect and encourage its industry will find itself an agricultural and raw material colony in all but name.
Tariffs are the tool of the mercantilist nation to create an environment in the home country so it can be successful. If other countries are not successful because the home nation is successful, that is a lot better than the home nation not being successful. If foreign countries get upset, they will get over it. Anything worth having is worth fighting for. If we want to once again rise to the top of the industrial world to have a favorable balance of trade, we need to look at what is best for America, not the countries that are scobbing us in the world’s markets. This includes looking at American companies that have gone offshore as if they are foreign companies. What is best for the U.N. or what is best for the globalization or the free trade lobby should be understood but mostly ignored. Free trade does not help strong nations. It helps weak nations and it helps strong nations become weak. Neo-mercantilism says let’s do what we must to make the home country successful. Who can argue with that?
Let’s reindustrialize America, please!
Welcome to America! There is another word besides carrot to describe why American companies will come back for the great reindustrialization party. The word is stick. The proverbial carrot and the proverbial stick must be used by our government to induce companies to manufacture in America. Those proud corporations that left our shores, and are now enjoying the profit bask in foreign lands need some inducement to return to America. The carrot, a part of the RRR plan, is an extremely favorable corporate income tax rate of less than 8% for goods produced in America. Come back and avoid a high corporate income tax on all offshore income. The stick is in the form of tariffs that will make it very painful for any once American corporation to export goods produced in foreign lands to America for resale. Domestic firms will not pay the tariff. The objective is to make the price of domestic items less than the price of once American goods manufactured elsewhere. l.
Free trade is only free if you give nothing up. For US citizens, we have given up our jobs and our futures for the sake of higher corporate profits. This was not a good trade for US and it surely was not free. We need neo-mercantilist protectionist tariffs to protect the US people from once loyal American corporations taking our jobs offshore. A tariff is a really simple notion and these, at a minimum will be used to protect America from its own corporations
Today, protectionist tariffs need to be applied against American corporations that build products overseas. The businesses need American markets in order to sell their goods so we have the upper hand. Domestic corporations and foreign corporations producing goods in America in the same industries should be given a clear benefit. The tariff will be the great equalizer.
Tariffs on the offshore manufactured products of formerly loyal American corporations are good for the people; good for unions; and they are good for the loyal American corporations that continue to operate in America. Even I admit that they will not be good at all for corporations that took their jobs out of town, until they choose to come back. So, IBM and Apple will whine until they bring operations back to the US. Even then, Americans may choose to go elsewhere for their products because right now, both Apple and IBM could care less if Americans work or not.
If companies choose not to come back, it will cost them in terms of access to the US marketplace. It will no longer be a free sure thing. It will in essence cost them with increased tariffs. The tariffs will bring companies to America to provide jobs and to build their products and when faux US companies resist coming back, it will help the US treasury on the revenue side. I predict a big building boom and it might just be called “reindustrialization!”
You see, America is about its people, not about companies. Harmony was breached between the people and so-called American businesses with the offshoring of whole industries which neutered the US manufacturing base and took out millions of American jobs. During the reindustrialization, we will reestablish the harmony of the people with business. Companies that operate the major facets of their businesses within the United States will reap huge rewards for being American. Thank you.
Brian Kelly is a business owner and former assistant professor at Marywood University; he and his wife live in Northeastern Pennsylvania. Kelly is running for Senate in his state and believes limited government brings liberty and freedom.
About Brian Kelly
Brian Kelly is a business owner and former assistant professor at Marywood University; he and his wife, Pat live in Northeastern Pennsylvania. Kelly ran for COngress and for the US Senate in his state and he believes limited government brings liberty and freedom. Brian's 48th book is titled, Saving America, The How-To Book. It is available at www.checkoutking.com and www.itjungle.com.