Really appreciate this! Do you (or other readers or experts you know) have a sense of how best to understand the recession of mercantilism in response to classical liberalism?
- Classical liberalism is simply better, and 'invaded' the existing stable mercantilist ecosystem once innovated?
- Mutual mercantilism and mutual liberalism are approximate equilibria, and a sufficient shock (war? enlightenment?) jolted between them?
- Conditions (which?) were such that mercantilism was appropriate, perhaps optimal, for its age, but changes (which?) invalidated this?
I wonder if dynamics like industrialisation, literacy rates, or whatnot played a part?
Thanks! I think there's something to all three stories (though take my layman's attempts at economic history with a grain of salt). My general model is: if there's competitive intranational markets and somewhat competitive international geopolitical competition, paired with sufficiently high state capacity to sustain state finances through complex taxation as opposed to state tariffs, classical liberalism is a much more efficient economic doctrine. The shift was probably accelerated by some political flashpoints / reorderings of the broader economic order (American revolution and Napoleonic wars come to mind), which usually makes for quicker post-war reshufflings.
I think industrialisation and literacy rates fit into that picture from the intraeconomic/competition perspective; there's certainly a geopolitical element relating to the change in the character of British hegemony (from exclusive colonial spheres of influence, which other empires also had, to the modern liberal order that was more clearly dominated by Britain).
Seems to me like an interesting question is: Is there anything about the heyday of mercantilism that's more similar to today than to the 200 years inbetween that would justify thinking mercantilism could possibly be warranted? My tentative sense is no, not really - but this is really completely beyond my expertise.
What doesn’t fit into the strategy picture for me is the US‘ parallel antagonising of demand. Why not play ball with Europe on DSA/DMA (if it doesn’t actually cost your companies competitive advantage, which it doesn’t) to trade that for market share? Why not happily endorse, nay drive up regulatory burden for companies to comply with eg an EU AI Act if you know you have like 90% market share and access to capital so that you can comply but which will keep out local competition? Why make your demand start to panic (like with the recent DSA threats, but eg also infiltrating Greenland) and try to NOT buy from/ make yourself dependent on you? My read would be a) strong belief that local supply is just not going to happen and your stack is strong enough (but then why care about this strategy anyways), b) I’m missing sth around how Regulation does actually affect competitive advantage or c) disjointed/ chaotic vibes based mercantilism rather than strategic. I’d still guess it’s c).
I think a big part here is just the US being upset at European digital regulation for different, unrelated reasons - I wouldn't try too hard to understand this opposition in terms of the export strategy primarily. The admin really isn't monolithic here - the part that advocates for the mercantilist strategy is by and large not the same that opposes European ambitions; and I think the latter has some bad consequences for the export strategy, I agree with that.
That being said, if your goal as the US is to retain control over the makeup of your export stack wherever it is, it makes some sense to push back on European ambitions.
First, on 'Brussels effect' style thinking: of course you don't want one of your many target markets to set the rules for all of your stack, even if you had no specific objection to the current scope of the regulation. And they are worried about some of the regulatory contents, e.g. everything to do with antitrust, relating to training data, all kinds of things - effects they perceive as genuinely threatening to their companies' competitiveness. Relatedly, you also don't want your target markets to be able to extort your exporting firms for money through regulatory threats etc. - and they believe that is what Europe has been doing via fines based on its regulation. In short, they want to export on their terms, and they want that to be a unilateral relationship from the get-go; not co-decide on and co-tax American tech with the Europeans, but simply and only sell and have the Europeans pay for it. I think you can have a lot of discussions about how you evaluate that stance, but I think it's internally fairly consistent.
Appreciate the balance in this article. Agree that a nuanced analysis of this administration’s policies will be helpful in understanding the great power dynamics going forward.
The analogy of a full stack AI installation to a fortified trading post is very interesting!
In response to @Oliver’s very good questions, my sense is that mercantilism rewards corruption and oligarchy. Eventually, this spawns revulsion in the elites and a turn towards liberalism - the “enlightenment” philosophers like Adam Smith and Karl Marx are good sources for understanding these dynamics, although in a rather different social/industrial context.
Really appreciate this! Do you (or other readers or experts you know) have a sense of how best to understand the recession of mercantilism in response to classical liberalism?
- Classical liberalism is simply better, and 'invaded' the existing stable mercantilist ecosystem once innovated?
- Mutual mercantilism and mutual liberalism are approximate equilibria, and a sufficient shock (war? enlightenment?) jolted between them?
- Conditions (which?) were such that mercantilism was appropriate, perhaps optimal, for its age, but changes (which?) invalidated this?
I wonder if dynamics like industrialisation, literacy rates, or whatnot played a part?
Thanks! I think there's something to all three stories (though take my layman's attempts at economic history with a grain of salt). My general model is: if there's competitive intranational markets and somewhat competitive international geopolitical competition, paired with sufficiently high state capacity to sustain state finances through complex taxation as opposed to state tariffs, classical liberalism is a much more efficient economic doctrine. The shift was probably accelerated by some political flashpoints / reorderings of the broader economic order (American revolution and Napoleonic wars come to mind), which usually makes for quicker post-war reshufflings.
I think industrialisation and literacy rates fit into that picture from the intraeconomic/competition perspective; there's certainly a geopolitical element relating to the change in the character of British hegemony (from exclusive colonial spheres of influence, which other empires also had, to the modern liberal order that was more clearly dominated by Britain).
Seems to me like an interesting question is: Is there anything about the heyday of mercantilism that's more similar to today than to the 200 years inbetween that would justify thinking mercantilism could possibly be warranted? My tentative sense is no, not really - but this is really completely beyond my expertise.
What doesn’t fit into the strategy picture for me is the US‘ parallel antagonising of demand. Why not play ball with Europe on DSA/DMA (if it doesn’t actually cost your companies competitive advantage, which it doesn’t) to trade that for market share? Why not happily endorse, nay drive up regulatory burden for companies to comply with eg an EU AI Act if you know you have like 90% market share and access to capital so that you can comply but which will keep out local competition? Why make your demand start to panic (like with the recent DSA threats, but eg also infiltrating Greenland) and try to NOT buy from/ make yourself dependent on you? My read would be a) strong belief that local supply is just not going to happen and your stack is strong enough (but then why care about this strategy anyways), b) I’m missing sth around how Regulation does actually affect competitive advantage or c) disjointed/ chaotic vibes based mercantilism rather than strategic. I’d still guess it’s c).
I think a big part here is just the US being upset at European digital regulation for different, unrelated reasons - I wouldn't try too hard to understand this opposition in terms of the export strategy primarily. The admin really isn't monolithic here - the part that advocates for the mercantilist strategy is by and large not the same that opposes European ambitions; and I think the latter has some bad consequences for the export strategy, I agree with that.
That being said, if your goal as the US is to retain control over the makeup of your export stack wherever it is, it makes some sense to push back on European ambitions.
First, on 'Brussels effect' style thinking: of course you don't want one of your many target markets to set the rules for all of your stack, even if you had no specific objection to the current scope of the regulation. And they are worried about some of the regulatory contents, e.g. everything to do with antitrust, relating to training data, all kinds of things - effects they perceive as genuinely threatening to their companies' competitiveness. Relatedly, you also don't want your target markets to be able to extort your exporting firms for money through regulatory threats etc. - and they believe that is what Europe has been doing via fines based on its regulation. In short, they want to export on their terms, and they want that to be a unilateral relationship from the get-go; not co-decide on and co-tax American tech with the Europeans, but simply and only sell and have the Europeans pay for it. I think you can have a lot of discussions about how you evaluate that stance, but I think it's internally fairly consistent.
Congrats on the position Anton! Looking forward to your future writings.
Appreciate the balance in this article. Agree that a nuanced analysis of this administration’s policies will be helpful in understanding the great power dynamics going forward.
The analogy of a full stack AI installation to a fortified trading post is very interesting!
In response to @Oliver’s very good questions, my sense is that mercantilism rewards corruption and oligarchy. Eventually, this spawns revulsion in the elites and a turn towards liberalism - the “enlightenment” philosophers like Adam Smith and Karl Marx are good sources for understanding these dynamics, although in a rather different social/industrial context.
congrats!