Don’t Succumb to Fatalism—or Mercantilism

Governments needn’t inflict economic harm on their own citizens

Letters to The WSJ. 

"Greg Jensen concludes that “we are all mercantilists now, and the implications are profound and unavoidable” (“We Are All Mercantilists Now,” op-ed, Dec. 13). The implications of the world-wide turn to mercantilism truly are profound, but if enough people resist the fatalism that seems to afflict Mr. Jensen, this turn isn’t unavoidable.

A good start is to recognize that many of the facts on which mercantilists today rest their case are, in reality, false. For example, mercantilist sympathies in the U.S. today cannot, contrary to Mr. Jensen’s claim, be explained by “lost domestic manufacturing jobs” as a result of the rise of China’s economy. As a share of total nonfarm employment, manufacturing jobs peaked during World War II and have fallen steadily ever since. Since China joined the World Trade Organization in December 2001, the average monthly decline in U.S. manufacturing jobs as a share of nonfarm employment has been slightly lower than was this monthly decline from the end of World War II until China’s membership in the WTO.

While it’s true that “each time another country adopted mercantilist policies, it pushed others to react similarly,” nothing is inevitable about such reactions. They are chosen, and they’re unequivocally foolish. If more people understood that mercantilist policies damage all economies that adopt them, each government would be less inclined to inflict economic harm on its own citizens simply because foreign governments inflict economic harm on their citizens.

People of good sense will warn of the dangers of mercantilism rather than succumb to Mr. Jensen’s fatalism.

Prof. Donald J. Boudreaux

George Mason U., Mercatus Center

Fairfax, Va.

Much like the dinosaurs in the op-ed’s cover art, mercantilism is an idea best left in the past. Mercantilists would have us believe that what makes us wealthy is the amount of money we have. But this can’t be the case. Tom Hanks’s character in “Cast Away” would have fared worse, not better, if a crate of money had washed up on shore instead of a volleyball.

Mercantilists have the relationship between imports and wealth backward: Imports are the benefit of production, not a cost to it. Mr. Jensen understands this perfectly fine in other contexts. He exports investment advice to his clients each day. In return, he imports food from the grocery store, electricity from the power plant and internet from the cable company. It isn’t the exporting that makes him wealthy; it is the ability of his household to import goods and services that makes him so.

If we want to see Americans continue to flourish, we need to increase their access to goods and services, not hinder it. To do this, we must lower barriers to trade, not erect new ones.

David Hebert

American Inst. for Economic Research"