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Nice mercantilism

By Daniel M. Ryan
web posted August 9, 2010

The Left has a book by the title Friendly Fascism, by Bertram Myron Gross, which squares with the standard leftist line about corporations taking over society by hijacking the government. The "friendly" part of Gross' emerging fascism comes with the use of opinion polls, and pragmatic information management to elicit passive acquiescence with the corpocratic status quo.

Since the term "fascism" is increasingly being used by conservatives, this kind of book is ripe for being turned on its head like some Tea Party activists have turned Alinsky's credis on their head. In a book like Gross', there are two important lacunae: the natural top of a fascist hierarchy, and the overall constraint of taxes plus regulations. When the government subsumes every significant activity, with universal rules and regulations constraining any significant economic activity, there's a lot of power at the top of the government. Such power invites a lot of competition for the top government slots, which eventually get filled by people who know full well they're in charge should the chips go down. The end of the road for fascism comes when the military and/or police are the top dogs. The reason for why can be put politely or rudely.

The polite answer is, soldiers and police officers not only kill for the State but also die for the State. Those two professions are the only one where risking one's life not only comes with the territory but also is part of the job. In a system where the State is all, risking one's life for the State carries with it a lot of prestige. It's only a matter of time, if the spirits be willing and the government unlimited, before that prestige turns into power. Who else – including a magnate – can claim to risk his or her very life for the State? Note that someone who does so has some grounds to look down on those who don't. Expertise in killing and duress add to that disdain. Under fascism, where the government is not subordinated to anything except foreign governments, that disdain can have free rein (or reign.)

The rude answer is simpler, more to the point, and gets to the heart of the tyranny: People with guns, expertly trained to use them, can blow the head off someone who does not have that advantage. Rich people may be harder targets in some respects, but they're normally not that hard to corner or expropriate in absentia. Granted that the military would have the upper hand vis-à-vis a rogue police force; the former have access to a more variegated armory than the latter, and training to match. When it comes down to the crunch, a company of properly-equipped soldiers might be all that it takes to take even the richest man down. In some cases, an appropriately equipped squad. It might be worthwhile pausing and thinking about what that power imbalance implies for tax policy, and how much any privileges accorded to corporations and businesspeople amount to a feast in fear.

In a liberal democracy, this realization is essentially theoretical. An important point to remember is the military and police under a free society attract people of fundamentally different character than those two occupations do under a fascist government. Needless to say, liberals and some simple folk don't realize it. In order to risk life and limb for a polity, you have to believe in it and its norms. People who do so, ones trainable as soldiers or police officers, are those inclined to believe in the laws and procedures of liberal democracy. The soldiers believe in protecting the liberal-democratic State itself as well as the people who inhabit it. The police officers tend to believe in norms of justice appropriate for such a society.

Under fascism, anyone with their attitude would likely sign up for the resistance or go wallflower. On the other hand, the ranks of the military and police force under a fully fascist society would be filled with people we know as criminal or deviant. When government is supposed to be unlimited, categorical restraints only get in the way. Once the military dictatorship arrives, a new and less restrained breed of cat always winds up in charge.

What's known as "fascism" in common parlance is really a transitional stage. It could, but only potentially could, metamorphosize into the full-blown iron-caged variety. I'd like to suggest an alternative, which resembles fascism but is more business-oriented than the real thing. It places a high value on economic growth, albeit not as high as government control of the economy, and it does not offer a red carpet for a military takeover. It tends to come about when earlier aggressive or ill-thought-out governmental interventions, not to mention debilitating taxes, lead to a stifling of the economy. For some people, it's the closest they'll ever get to understanding laissez-faire; hence their confusion between it and a genuine market economy. The system I'm referring to is mercantilism.

Mercantilism In A Nutshell

Mercantilism is an English term, and it's associated with government policy from the Tudors to the repeal of the Corn Laws. Back in the day, the favorite policy tools were targeted taxes in the form of tariffs, plus laws and regulations designed to organize the economy in what was seen as a more efficient manner through grants of monopoly privilege. That was the best the pre-laissez faire age had to offer. Statistics were rudimentary and the income tax as we know it didn't exist, so a favorable balance of trade - bullion inflow - was used as a proxy for economic growth instead of the unemployment level; tariffs were the favored taxes. Despite England's patrimony, their brand was fairly light. The world's champeen when it comes to all-out mercantilism is Bourbon France.

In a nutshell, mercantilism treats a nation as if it were a company. Like socialism, government is head office; but unlike socialism, government control of the economy isn't rigidly hierarchical. The head-office government is more like a co-ordination center than a command-and-control center. Unlike under socialism, mercantilism permits a fair degree of economic autonomy outside of the imposed restraints. Rather than direct orders, mercantilism relies on subsidies, taxes, regulations and exhortations. Those tools were regularly used by the most archetypical mercantilist manager, Jean de Colbert.

Government revenue is, of course, part of the prioritizing but mercantilists tend not to see maximizing revenue as the be-all and end-all of economic policy. Economic growth, or some substitute like full employment, tends to be. The typical mercantilist does aim at national prosperity, and sees taxes, subventions and wisely-crafted economic laws and regulations as essential to that goal. The government skimming taxes off the economy is for governmental purposes (war, national glory, upkeep, direct subsidization of the poor, etc.) as well as for subsidies. However, mercantilists are known for tinkering with the tax system to tweak economic output. To the mercantilist mind, it's natural to think of tax relief as a "tax expenditure."

The old-style mercantilism was also known for being pretty harsh. Since the government has lots of power and pelf to help as well as hurt, and because people are given real input into the process and are not crushed under the governmental boot, there's a wide temptation to angle for favors from the government. The main Achilles heel of mercantilism is rent-seeking.

No wonder the mercantilist mind is saturnine with regard to private pursuits. A mercantilist regards the private sector as full of people who wouldn't hesitate to take advantage of each other like they try to take advantage of the government. Under monarchy, mercantilists held as an article of faith that the only individual not tainted by private self-interest was the Sovereign. Under a republic, it's assumed that everyone is angling to take advantage; everyone is after some kind of plum.

Unfortunately, businessmen and executives tend to be natural mercantilists. It's easy for a manager to see the ideal government as a manager's government, with economic growth and prosperity substituting for profits. Sad to say, but it's shown all the time in the business world. A CEO who aims at becoming the "CEO of the nation" is going to be a mercantilist. No other economic system dovetails with the head of State as top boss. Leftist conflations aside, a businessman's government is a mercantilist government. Businesspeople who become laissez-faireists under such a system are either educated to be so or find out the hard way that the governmental economy-managers can't hack it. Because of the managerial commonality, there is no invisible hand that leads businesspeople to support laissez-faire.

Mercantilism's Mean Streak

With the saturnine view of human nature that mercantilists tend to acquire, it's no wonder why mercantilists tend to acquire a mean streak. Jean de Colbert found it easy to work laziness into his overall cynicism. He strongly supported measures to arrest vagrants and press the idle into forced labor.  Laziness was the poor man's answer to a rich man's rent-seeking; both consorted with Abraham Lincoln's "the same old serpent who says you work and I eat, you toil and I will enjoy the fruits of it."

Because it's grown in the framework of democracy and a largely Christian civilization, present-day mercantilism actually isn't that mean-minded. Truly demotic politicians tend to see ordinary people as naturally good. Thus, they tend to deny the evidence of rent-seeking except amongst people who come across as shifty or unctuous. To the extent to which it's displacement, the underlying cynicism induced by mercantilism does tend to foster scapegoating.

But even that tendency is limited because many rich people in established democracies are hard-working and disinclined to lord their wealth over their fellow humans. They're also the go-to people when it comes to making prosperity work, provided they're co-operative and don't mind eating the downside. The meanness is also limited by Christian norms: even a Samaritan can be a Good Samaritan, and even a tax collector can become a saint. Plus, being naturally nice tends to be a competitive advantage for a demotic politician.

Mercantilism in a mature democracy: that's what's given us nice mercantilism. We might as well enjoy it, as best we can, while it lasts.

Particularly since the easiest way to be nice is to push off the full costs by governmental borrowing and near-permanent deficit spending: to borrow while the borrowing's good. We have the vast pools of capital in the sovereign-debt market to thank for mollifying mercantilistic meanness. 

While it lasts… ESR

Daniel M. Ryan is currently watching The Gold Bubble.

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