The Real Enemy for Trump Is Mercantilism, Not Globalism

As in Adam Smith’s day, the state favors some firms through regulations, taxes, subsidies and licenses.

By Hernando de Soto in the WSJ. Excerpts:

"Mr. Trump said “Americanism, not globalism, will be our credo.” Perhaps he is unaware that the world outside of the U.S. faces similar challenges. That he is blaming America’s economic competitors for many of those challenge is an abandonment of U.S. global leadership.

Yet if America steps away from the world, another leader will emerge. Chinese President Xi Jinping was more than happy to tell attendees at the Asia-Pacific Economic Cooperation meeting in my home city of Lima, Peru, this month that his country would support all those who want to keep global markets open. Delegates from around the world rose to their feet and applauded."

"Adam Smith and other modernizers combated mercantilist governments for granting favored producer and consumer elites with special rights by means of complex regulations, subsidies, bailouts, taxes, licenses and bilateral treaties that allowed them to access large-scale global markets and import cheap labor."

"after the defeat of communism 27 years ago, ordinary people expected to be allowed to benefit directly from international trade agreements but most of them received only the kind of sops that mercantilism gave them.

What they didn’t get—and need the most to benefit from globalization—are the rights to form companies that can employ talent and build business hierarchies outside the family or tribal pecking order; to reduce risks with limited liability. They did not get the property and intellectual rights to divide and protect their assets, and pledge them to raise capital and credit. Nor did they get the transferable certificates to combine these rights to generate surplus value to capture, store and monetize it."

"bilateral treaties, which give partners the right to exclude and discriminate against countries not included in the agreement, have replaced multilateral global trade agreements whose benefits were automatically shared by all countries. This, says Mr. Bhagwati, creates a “spaghetti bowl” of regulations, armies of lawyers and new elites organized to cut their way through the morass.

In 18th-century France, six volumes of stifling regulations on the textiles trade led to the execution of 16,000 businessmen who could not comply."