Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog

Some recent academic papers on mercantilism
Jesse Richman, 11/2/2012

A number of intriguing academic papers have appeared on mercantilism in 2012.  I summarize a few below.

Chinese economist Heng-fu Zou and coauthor Gaowang Wang presented a working paper on the relationship between mercantilism and global economic growth.  They integrate Zou's 1994 dynamic analysis of the Viner model of mercantilism with Obstfeld model.  The results are potentially quite important, and they point to the importance of including mercantilism in analysis of differential global economic outcomes.  

Zou and Wang show that higher levels of mercantilism increases demand for risky assets, and tends to harm overall global growth, but the economic effects of mercantilism on growth vary across countries.  Higher levels of mercantilism benefit some countries.  The paper can be downloaded at, though the reader is warned that (a) it still needs some copy-editing for English syntax, and (b) the math does not make for light reading.

Wang Hui, another Chinese scholar published a paper ( arguing that post-financial crisis shifts in world economic policy require China to shift to a more balanced and less export-driven economic model. 

JIA Gen-liang YANG published a paper arguing that U.S. quasi-mercantilist policies in the 19th century were an important inspiration for China's more recent policies, with a case study of U.S. iron and steel development.

In the book "U.S.-China Trade Dispute: Facts, Figures and Myths" By Imad Moosa Richman, Richman and Richman (2008) is cited.  The overall argument though is one that this Richman at least would not fully endorse: that the United States is being hypocritical in advocating free trade when in the past it engaged in a range of protectionist policies.

A paper by Samba MBAYE analyzes the effects of currency manipulation on trade balances and finds that currency manipulation increases the manipulator's trade surplus, and increases the trade deficits of trading partners.

J. Lee and J. Aizenman argue in "The Real Exchange Rate, Mercantilism and the Learning by Doing Externality,"  Pacific Economic Review, 2010, 15:3, pp. 324-335.  Learning by doing provides an incentive for either currency manipulation or subsidy of capital in the traded sector. 
Overall, these articles converge around several important arguments.  1. At times mercantilist policies can provide positive benefits for the mercantilist country (though benefits for the broader world economy are more doubtful). 2. Mercantilist countries that believe they are receiving substantial positive benefits from their policies are unlikely to respond readily to pious appeals for free trade based on economic orthodoxy.  There are many economists (though not many in the U.S.) who argue that mercantilism can be an effective economic  strategy.  

Your Name:

Post a Comment:

Comment by Howard Richman, 11/3/2012:

I wonder if these papers address the three important effects of mercantilism upon global growth:

1. Reciprocal Effects. Mercantilism has the equal and opposite effect upon its victims that it has upon its perpetrators. The perpetrator gets reduced consumption in the short run followed by increased consumption and power in the long run. The victim gets increased consumption in the short run followed by reduced consumption and power in the long run.

2. Less Technological Growth. Chinese mercantilism reduces the incentive to research new innovations. For example, why should GM, Fiat, and Caterpillar research innovations that they know that they will be forced to give them away to their Chinese competitors in order to have access to China's growing market?

3. Destroys World Trading System. By destroying the economies in the trade deficit countries, the mercantilist countries eventually destroy the markets for their own exports. The 2008 global crash and the EU's current troubles are both examples of this.

  • Richmans' Blog    RSS
  • Our New Book - Balanced Trade
  • Buy Trading Away Our Future
  • Read Trading Away Our Future
  • Richmans' Commentaries
  • ITA Working Papers
  • ITA on Facebook
  • Contact Us

    Sep 2021
    May 2021
    Apr 2021
    Feb 2021
    Jan 2021
    Dec 2020
    Nov 2020
    Oct 2020
    Jul 2020
    Jun 2020
    May 2020
    Apr 2020
    Mar 2020
    Dec 2019
    Nov 2019
    Oct 2019
    Sep 2019
    Aug 2019
    Jun 2019
    May 2019
    Apr 2019
    Mar 2019
    Feb 2019
    Jan 2019
    Dec 2018
    Nov 2018
    Aug 2018
    Jul 2018
    Jun 2018
    May 2018
    Apr 2018
    Mar 2018
    Feb 2018
    Dec 2017
    Nov 2017
    Oct 2017
    Sep 2017
    Aug 2017
    Jul 2017
    Jun 2017
    May 2017
    Apr 2017
    Mar 2017
    Feb 2017
    Jan 2017
    Dec 2016
    Nov 2016
    Oct 2016
    Sep 2016
    Aug 2016
    Jul 2016
    Jun 2016
    May 2016
    Apr 2016
    Mar 2016
    Feb 2016
    Jan 2016
    Dec 2015
    Nov 2015
    Oct 2015
    Sep 2015
    Aug 2015
    Jul 2015
    Jun 2015
    May 2015
    Apr 2015
    Mar 2015
    Feb 2015
    Jan 2015
    Dec 2014
    Nov 2014
    Oct 2014
    Sep 2014
    Aug 2014
    Jul 2014
    Jun 2014
    May 2014
    Apr 2014
    Mar 2014
    Feb 2014
    Jan 2014
    Dec 2013
    Nov 2013
    Oct 2013
    Sep 2013
    Aug 2013
    Jul 2013
    Jun 2013
    May 2013
    Apr 2013
    Mar 2013
    Feb 2013
    Jan 2013
    Dec 2012
    Nov 2012

    October 2012
    September 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    January 2012
    December 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010
    January 2010

    Book Reviews
    Capital Gains Taxation
    Corporate Income Tax
    Consumption Taxes
    Economy - Long Term
    Economy - Short Term
    Environmental Regulation
    Last 100 Years
    Real Estate Taxation


    Outside Links:

  • American Economic Alert
  • American Jobs Alliance
  • Angry Bear Blog
  • Economy in Crisis
  • Econbrowser
  • Emmanuel Goldstein's Blog
  • Levy Economics Institute
  • McKeever Institute
  • Michael Pettis Blog
  • Naked Capitalism
  • Natural Born Conservative
  • Science & Public Policy Inst.
  • Votersway Blog
  • Watt's Up With That


  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]