April 27, 2023


The Revival of Neomercantilism

Global rivalries and prospects for cooperation

Amid intensifying geopolitical and economic rivalries, policymakers around the world—including those in the United States and European Union—are increasingly turning to neomercantilist industrial policies to promote the wealth and power of their states. This trend has been reinforced by the pandemic’s disruptions to international supply chains, the growing weaponization of economic interdependence, and the broader backlash against free trade in many countries. 

The sudden popularity of neomercantilist policies—typically characterized by forms of trade protectionism and activist economic policy—has been deeply disorienting to economic liberals whose preferences for free trade and free markets have dominated global politics in recent decades. But it appears less unusual when placed in historical context. Prior to 1945, neomercantilist perspectives on international economic relations were prominent and diverse. Though they were commonly overlooked in the Cold War struggle between Marxism and economic liberalism, earlier neomercantilists held innovative views on issues ranging far beyond trade. Contrary to popular perceptions which link neomercantilism only with heightened national tensions, this tradition even promoted compelling ideas in pursuit of international cooperation. Among the broader relevance of this school for contemporary global debates, this latter point is perhaps most important for coping with the challenges ahead.

Hamilton, List, and beyond

Neomercantilist thinkers in the pre-1945 era reacted against the liberal free trade advice of Adam Smith and his followers. Building on pre-Smithian mercantilist ideas, they called for strategic trade protectionism and other forms of government economic activism to promote the wealth and power of their state. Of these thinkers, the best-known today in Western scholarship are Alexander Hamilton and Friedrich List. As the first US Secretary of the Treasury, Hamilton developed an important case for activist policies to promote American industrialization in 1791. Half a century later in Germany, List built upon Hamilton’s critique to develop a more generalized case for state-led industrialization in his 1841 book The National System of Political Economy, soon cited by neomercantilist thinkers and policymakers around the world.

In contrast to economic liberals of the time—and like many policymakers drawn to neomercantilist ideas today—Hamilton and List emphasized the importance of the connections between state wealth and power, highlighting the particular significance of manufacturing for national independence and security. 

The thinkers also deviated from the economic consensus in liberal circles by outlining many economic rationales for activist industrial policies, many of which are reappearing in contemporary discourse. Those rationales included the need to overcome private sector inertia as well as to counteract the advantages that powerful foreign firms derived from their established market positions and the support of their home states. As a broader economic rationale, List also emphasized the state’s role in cultivating the aggregate “productive powers” of a country over time, a task that he argued could only be successful “where the interest of individuals has been subordinated to those of the nation, and where successive generations have striven for one and the same object.”1

Less noted, but equally important to today’s context, were Hamilton and List’s warnings on the dangers of excessive state economic activism. List insisted that trade restrictions ought to be moderate, carefully targeted, and temporary in order to prevent local firms from falling prey to “indolence.”2 Hamilton shared this concern and argued that trade restrictions should only be used if enough domestic competition existed to prevent a monopoly. Hamilton was also wary of how trade barriers would, in the short-term, increase import prices, smuggling, and scarcities. To avoid these kinds of problems, Hamilton preferred to promote local industry with targeted and temporary government subsidies. As he put it, “it is a species of encouragement more positive and direct than any other, and for that very reason, has a more immediate tendency to stimulate and uphold new enterprises, increasing the chances of profit, and diminishing the risks of loss, in the first attempts.”3

Other pre-1945 thinkers developed different versions of neomercantilism, including the American Henry Carey, whose mid-nineteenth century writings achieved similar levels of international acclaim as List’s. For Carey, strategic trade protectionism was needed not just to promote local industry but also to curtail rising inequality and poverty generated by free trade and international market forces. Although neither Hamilton nor List showed much interest in this kind of “social neomercantilism,” Carey foreshadowed the populist rhetoric of many contemporary advocates of industrial policies, who blame the free trade policy paradigm for rising domestic inequality.4

In another antecedent to contemporary debates, Carey combined neomercantilist goals with a concern for environmental protection. Drawing on the ideas of the German scientist Justus von Liebig, he blamed free trade for exhausting local soils through its promotion of unsustainable monocrop agriculture that served export markets. The fostering of local industry, he argued, would enable farmers to serve domestic markets instead, using more diverse kinds of agriculture to restore the health of local soils and draw useful fertilizer from the human waste of nearby industrial towns. Unlike most political economists of his day, Carey called for an environmental ethic to inform his discipline: “It is singular that modern political economy should so entirely have overlooked the fact that man is a mere borrower from the earth.”5 A parallel can be drawn to today, as the push for decarbonization has bolstered support for green industrial policy. In an era when environmental concerns have much higher political salience than in Carey’s time, this new “developmental environmentalism” is redrawing political coalitions across the world.6

Going beyond Hamilton and List, Carey stressed the universal utility of neomercantilist tools. Whereas the former two thinkers saw state interventionism as a means for late industrializing countries to catch up with Britain (the most powerful industrialized state in their era), Carey argued that Britain itself would also benefit from these policies. Some of Carey’s arguments about the social devastation caused by free trade in Britain were remarkably similar to contemporary criticisms of free trade in the United States. Carey was not the only pre-1945 thinker to see neomercantilist logics as relevant to a dominant power. Just as prescient were the arguments of British critics of free trade in the late nineteenth century, who warned that rising economic powers, especially Germany, used unfair trade practices such as subsidies and dumping.7 Substitute China for Germany, and their arguments were almost identical to those of American neomercantilists today. Then as now, neomercantilism was not just an ideology for late industrializers.

Neomercantilist thought appeared across the political spectrum. List, for example, combined his neomercantilist ideas with a strong defense of the values of political liberalism. But some of his followers in the late nineteenth and early twentieth centuries were much more politically conservative, endorsing authoritarian values or, by the interwar years, fascist politics.8 Neomercantilists also existed on the political left, including the best-known Chinese advocate of this ideology in the early twentieth century, Sun Yat-sen, who was drawn to socialist thought.9 The political malleability of neomercantilist thought has reemerged in the current era. As in the past, unusual political alliances are being forged amongst groups whose views are otherwise very divergent.

Like their contemporary counterparts, pre-1945 neomercantilists disagreed on the kinds of activist policies to promote local industries and firms. While Hamilton promoted the use of subsidies, List and Carey focused on the role of trade restrictions at the border. Later neomercantilists backed even more ambitious policies. Sun, for example, urged a state-led, export-oriented industrialization strategy that also employed state-owned enterprises, national economic planning, and public management of foreign capital. Although rarely cited in Western political economy scholarship, Sun’s ideas garnered renewed attention in China in the late 1970s when officials began to pursue a development strategy similar to the one he had recommended. Chinese officials—including President Xi Jinping—have continued to invoke these ideas.10

In the early 1920s, Sun also offered advice to future Chinese leaders who might be ruling a wealthier and more powerful China that resulted from the application of his neomercantilist advice. In that time ahead, he hoped those leaders would assume the “great responsibility” of assisting less powerful states to resist the imperialism of Western powers to which China had earlier been subjected. As he put it:

Let us to-day, before China’s development begins, pledge ourselves to lift up the fallen and to aid the weak; then when we become strong and look back upon our sufferings under the political and economic domination of the Powers and see weaker and smaller peoples undergoing similar treatment, we will rise and smite that imperialism.11

Sun was speaking in the context of reviving responsibilities that some Chinese authorities had felt towards their empire’s “tributary” states in East Asia before the Opium Wars. Sun’s mixing of neomercantilist ideas with a reference to China’s older tributary model of international economic relations represented a very distinctive approach within neomercantilist circles at the time. These views may be relevant for interpreting China’s foreign economic policies today, in an age when some analysts argue that Chinese initiatives such as the Belt and Road Initiative bear some resemblance to the tributary model.12 Indeed, Xi Jinping himself has cited Sun’s idea, arguing that China needs to assume “great responsibilities for the world” as its wealth and status rise, albeit without mentioning the anti-imperialist conviction within Sun’s conception of that responsibility.13

Neomercantilism and international cooperation

Given the revival of neomercantilism and concern over global rivalries today, it is important to consider how neomercantilist thinkers before 1945 differed over their views on international cooperation. Economic liberals today warn that this revival will generate growing international conflict and economic warfare; indeed, the views of many historical neomercantilists do give reason for concern. Focused on maximizing the wealth and power of their state, neomercantilists often gave little thought to the more cooperative goals of enhancing global peace and prosperity that animated their liberal counterparts in the nineteenth and early twentieth centuries. Instead, many saw world politics as a kind of high-stakes struggle for survival between states which required the aggressive projection of power abroad, including through imperial conquest and rule. In the economic realm, they were also often keen—like Donald Trump—to fight trade wars.14

But disagreement between neomercantilists themselves suggests the possibility of a different future. Carey, for example, advised countries to cultivate state wealth and power only for the defensive purpose of protecting their sovereignty. He also suggested that neomercantilist policies would strengthen the prospects for international peace and cooperation by ushering in a world of more equal states, in contrast to free trade which, in his eyes, only reinforced the oppressive power of a dominant industrial country. If all states embraced his recommended policies, he envisioned a peaceful world where all countries had domestically-diversified economies and each respected the other’s sovereignty, while engaging in various kinds of mutually beneficial trade.15

List, too, saw his neomercantilist advice as serving not just the interests of individual states. Dedicating his 1841 book to “la patrie et l’humanité,” List, like Carey, argued that the embrace of neomercantilist policies by less industrialized states would enhance the prospects for international cooperation by ushering in a world of more equal states. But List’s s vision of equal, industrialized states applied only to countries in “temperate” regions of the world—he argued that “tropical” regions were destined to be in a subordinate, commodity-exporting roles, and often subject to imperial rule, of which List approved. Carey did not endorse this view and was a strong critic of imperialism.16 List’s vision of international cooperation was still in some ways more ambitious than Carey’s, involving the creation of a “universal confederation” of all states that resulted in a political “union of the whole human race.17 List also suggested that free trade would ultimately prevail; neomercantilism was merely a temporary strategy to create greater equality among states—after which it would no longer be needed. 

Before reaching that point, List was interested in how international institutions could foster economic cooperation. In 1837, he advanced what he called a “somewhat daring suggestion” to create a “world trade congress” that “should consider how the common interests of the various nations can best be served and how opposing interests could be reconciled.” For those concerned that rising neomercantilism today will undermine the multilateral trading system, it may be somewhat reassuring to learn that one of the first-ever proposals for a multilateral trade organization was, in fact, advanced by a neomercantilist thinker.

List’s pioneering ideas on the topic should not be surprising. In contrast to many economic liberals of his time, List did not assume that market processes had the potential to create a harmonious world that satisfied the economic interests of humanity as a whole. Instead, he believed that countries’ economic interests were often “opposing” and needed to be “reconciled” politically in an international body. To be sure, List hoped this forum could advance issues of common interest to all countries, such as “the freedom of the seas,” “universal free trade in raw materials and agricultural products,” and “common measures to secure universal peace, public order, and security of persons and property.” But he also insisted that the world trade congress “consider the varied interests of regions and societies at different stages of economic development—such as industrialized, agrarian, colonial, and primitive societies” and that any trade treaties negotiated in it give “equal advantages” to all its member countries and secure “guarantees for the future survival and prosperity of their industries.”18

List was not alone among neomercantilists in developing innovative ideas about multilateral economic cooperation. In 1920, Sun Yat-sen advanced one of the first proposals for a multilateral development institution—the “International Development Organization” (IDO), which was to be established through the newly created League of Nations with a mandate to channel foreign capital and expertise through its multilateral mechanism to support China’s state-led industrialization. Sun argued that the IDO would benefit not just China but also industrialized countries, which would find a new outlet in China for their exports and excess savings. More generally, the new multilateral institution would also “strengthen the Brotherhood of Man,” not just by generating mutual economic benefits but also by diminishing inter-imperialist rivalries.19

Nine years later, Mihail Manoilescu’s The Theory of Protectionism and International Trade, the most prominent neomercantilist book published during the interwar years, advanced yet another proposal for multilateral economic cooperation. Manoilescu’s 1929 book updated List’s case for strategic protectionism to support industrialization, but the Romanian was also interested in how List attempted to reconcile “national interests with the general interest of the Society of Nations.” To this end, Manoilescu suggested that the League of Nations abandon its promotion of free trade and instead support the principle that the use of protectionism was a “reasonable and legitimate” right of countries. In addition to supporting the efforts of agricultural countries to industrialize, he argued that this move would bolster international peace and cooperation through creating more equality between states and new markets for the exports of already-industrialized countries. Manoilescu challenged the idea that protectionism would undermine peace: “Nobody, up to the present, has shown any coincidence between protection and political aggressiveness. Nor does protection oppose the principle of universal solidarity. At most, protection opposes monopolies and exploitation.”20

In 1931, two years later, the Indian neomercantilist thinker Benoy Kumar Sarkar—who had translated List’s writings into Bengali—offered an even more expansive proposal. After traveling through Europe at the height of the Great Depression, Sarkar proposed to officials in the League of Nations and the International Labour Organization that industrialized countries be encouraged to “export capital to those regions which are seeking to industrialize themselves” as a way of creating new markets for the former’s products. The proposal was reminiscent of Sun’s IDO but on a grander scale, involving the export of capital not just to China but to “the Balkan states, Russia, China, India, Latin-America, and the African Continent.” The industrialization of these regions, Sarkar argued, would accelerate a “Second Industrial Revolution” in the already-industrialized world, allowing both parts of the world to advance economically in a complementary and mutually-beneficial fashion that generated a massive economic transformation on a global scale.21

These proposals demonstrate how some pre-1945 thinkers saw neomercantilist thought as more compatible with international cooperation than conflict. A few of their innovative ideas later came to fruition. List’s 1837 proposal for a world trade congress was realized 110 years later with the 1947 creation of the General Agreement on Tariffs and Trade (GATT).22 The establishment of the International Bank of Reconstruction and Development at the 1944 Bretton Woods conference also finally gave life to Sun’s idea of a multilateral development institution. Manoilescu’s proposal for the League to endorse the use of protectionism was also subsequently implemented—in a very limited fashion—through the GATT’s Article XVIII which allowed trade restrictions for economic development purposes. Even Sarkar’s vision was echoed in broad-based global development cooperation that emerged gradually in the post-1945 years.

Back to the future

Neomercantilist thought preceding 1945 contains many ideas that resonate in the contemporary age. An examination of these ideas sheds light on the diversity of this intellectual tradition, with different views on many topics such as activist economic policy, social issues, and even core political ideology. From a global systemic standpoint, the different perspectives around international cooperation are the most significant. As contemporary policymakers return to parts of the neomercantilist tradition, they should also pursue new ways to strengthen international cooperation, instead of embracing a more narrow and exclusive focus on maximizing the wealth and power of their state.23 The future of the world economy now rests on which of these paths prevails.

This essay draws on ideas in The Neomercantilists: A Global Intellectual History (Cornell University Press 2021) and The Contested World Economy: The Deep and Global Roots of International Political Economy (Cambridge University Press, 2023).

  1. Friedrich List, The National System of Political Economy [1841], trans. Sampson Lloyd (London: Longmans Green, 1909), p.132.

  2. List, 93.

  3. Alexander Hamilton, Report on Manufactures [1791]. In The Reports of Alexander Hamilton, edited by Jacob Cooke, 115–205. New York: Harper and Row, 1964).

  4. For Carey and his contemporary relevance, see Helleiner, The Neomercantilists, 137-99, 353-5.

  5. Henry Carey, Principles of Social Science, vol.1 (Philadelphia: J. B. Lippincott, 1858), p.336.

  6. For “developmental environmentalism”, see Elizabeth Thurbon, Sung-Young Kim, John Mathews, and Hao Tan, Developmental Environmentalism: State Ambition and Creative Destruction in East Asia’s Green Energy Transition (Oxford: Oxford University Press, 2023). For an example of the redrawing of coalitions, see also Thea Riofrancos, “The security-sustainability nexus: lithium onshoring in the Global North”, Global Environmental Politics 23(1)(2023), 20-41.

  7. Helleiner, The Neomercantilists, pp.103-7.

  8. Helleiner, The Neomercantilists, ch. 3.

  9. Ibid, 245-59.

  10. Ibid, pp.350-53.

  11. Quotes from Sun Yat-sen. San Min Chu I: The Three Principles of the People, Translated by Frank Price, Edited by L. T. Chen (Shanghai: Commercial, 1928), pp. 147–48.

  12. For a recent analysis, see John Hobson and Shizhi Zhang, “The return of the Chinese tribute system? Re-viewing the Belt and Road Initiative” Global Studies Quarterly (2)(4)(2022) https://doi.org/10.1093/isagsq/ksac074.

  13. Helleiner, The Neomercantilists, p.352.

  14. See Trump’s 2018 comment that “trade wars are good and easy to win.” (quoted in Eric Helleiner, “Varieties of American neomercantilism: From the first years of the Republic to Trumpian economic nationalism”, European Journal of International Studies, 6(3)(2019), p.22.

  15. Helleiner, The Neomercantilists, ch.5.

  16. Ibid, ch.2, 5.

  17. List, The National System, 100, 101.

  18. Quotes from Friedrich List, The Natural System of Political Economy, translated and edited by W. O. Henderson (London: Routledge, [1837]1983). 125-7.

  19. Quotes from Sun Yat-sen, The International Development of China (New York: G. P. Putnam’s Son, [1920]1922), p.9.

  20. Quotes from Mihail Manoilescu, The Theory of Protectionism and International Trade (London: P. S. King and Son, [1929] 1931), p.250, 222, 218.

  21. Quotes from Benoy Sarkar, Studies in Applied Economics, vol. 1 (Calcutta: Chuckervertty Chatterjee, 1932), pp.290-2.

  22. Earlier, the League of Nations hosted the world’s first large-scale multilateral trade negotiation that resulted in a 1927 treaty which was never ratified.

  23.  See also Nic Johnson and Robert Manduca, “After Free Trade” Boston Review, May 25, 2022 https://bostonreview.net/articles/after-free-trade/.

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