Developmental Realism

The Neomercantilists: A Global Intellectual History
By Eric Helleiner
Cornell University Press, 2021

In the wake of Donald Trump’s surprise victory in the 2016 US presidential election, defenders of the postwar liberal international order panicked over the return of their bête noire: neomercantilism. Signs of nationalist protectionism meant the revival of neomercantilism, a surge in trade wars, and the loss of the cooperation and openness that underpins globalization.

In light of the resurgent emphasis on the importance of energy independence, greater fixed investment, and reviving domestic production, now is a critical time to acquire a better understanding of this misunderstood and oversimplified philosophy. As defined by political scientist Eric Helleiner in his engrossing new book The Neomercantilists: A Global Intellectual History, neomercantilism was, before 1939, “a belief in the need for strategic trade protectionism and other forms of government economic activism to promote state wealth and power in the post-Smithian age.” Helleiner’s book is essential for grasping earlier theories of state-led development that diverged from classical liberalism, as well as their relevance in an era where pandemic-induced supply chain disruptions and Russia’s war in Ukraine have further eroded confidence in globalization.  

One of Helleiner’s central theses is that neomercantilism had a truly global span, with endogenous roots outside of Western Europe and North America. Friedrich List—the nineteenth-century German economist whom scholars of international political economy regard as the most consequential theorist of neomercantilism—is therefore not singularly representative of the school of thought. Placing List within a broader ferment of political and economic discourse about industrial growth, Helleiner provides an expansive framework to account for the diversity of neomercantilist thought and its contributors, while still underscoring that List was instrumental to its transnational spread. In particular, List was influential in propounding the hazards of raw export dependency; the “self-reinforcing” reciprocity between industrial progress and expanding agricultural markets; and the intellectual, scientific, and civilizational advances that industrialization would facilitate and multiply.

At the same time, Helleiner emphasizes that List’s contributions to neomercantilism were quite discriminating, both in regard to the legitimate applications of tariff protection and to who and what regions of the world may employ and benefit from it. In a period where Great Britain was aggressively promoting free trade, List cited its own history of mercantile development to endorse infant industry protection for an extremely narrow range of European countries that he believed already possessed the resources conducive to modernization. “The tropics,” he wrote dismissively, did not have this recourse, and would benefit instead from European colonization. 

Several neomercantilist thinkers disagreed with List’s strict parameters for legitimate protectionism and his chauvinistic notions about which countries could develop a diversified economy. The American economist Henry C. Carey, List’s closest intellectual rival, was among them. Originally a laissez-faire liberal, Carey became a chief theorist of the Republican developmental paradigm that catalyzed US industrialization from the Civil War through the early twentieth century. Helleiner explains that Carey justified tariffs on a number of grounds that went beyond shielding infant industries from international competition. Building on List and Alexander Hamilton, Carey argued that a tariff system, in addition to strengthening sovereignty, would launch technological progress and the development of a “home market” that fulfilled the reciprocal needs of industry and agriculture as well as producers and consumers. The economic relationships embedded in the home market’s multiple nodes would thus foster social and cultural progress through the spread of education. In turn, the encouragement of individual technical and creative faculties could serve commonly held, national goals. Carey believed the home market could indefinitely harmonize differences across sector, class, and region. While the ensuing inequalities of the Gilded Age, the struggles of the US labor movement, and agrarian populism disproved Carey’s more wildly optimistic forecasts, his associational ideals arguably resonated in the cities and towns where a burgeoning tariff complex appeared to undergird rapid economic growth and the emergence of an educated middle-class.  

One of the more distinctive yet limited elements of Carey’s thought is what Helleiner calls “social neomercantilism.” Carey, Helleiner writes, “put a much stronger emphasis on the domestic distributional and social costs of free trade than List did.” The consequences included declining wages, increased manipulation and monopolization of markets by international traders, social upheaval and emigration, and prostitution. In further contrast to List, “Carey was critical more generally of how free trade was leading to ‘barbarism’ in all countries of the world because it eroded the kinds of strong social association that existed in more healthy, diversified economies.” In fact, Carey was a critic of imperialism and disparaged its so-called civilizing mission, believing that colonization and free trade together drained the capacities of other societies to progress. Combined with his relatively enlightened view of the benefits of gender equality, Carey’s philosophy of human advancement was in some ways socially progressive, but it was still refracted through his nationalism and theory—shared by many other neomercantilists—that societies evolve through stages of progress, from the primitive to the technologically and culturally advanced. 

 Despite his concern for the social costs of international free trade, Carey did not advance the concept of a welfare state. Among neomercantilists, this task would be taken up by statist conservatives such as the German economist Gustav Schmoller, but also leaders who had decidedly stronger commitments to combine development with economic democracy. For example, Bolivia’s president from 1848 to 1855, Manuel Isidoro Belzu, rallied artisan producers and workers to a more egalitarian and leftwing developmental project that would inspire similar populist coalitions in the region. Though briefly mentioned, Uruguay’s early-twentieth-century president, José Batlle y Ordóñez, is one of Helleiner’s best examples of a neomercantilist who elaborated upon the social dimension of state-led development. Batlle’s notions of cross-class compromise and state activism laid the foundation for South America’s closest relative to the Nordic social democratic idea of a “people’s home,” as evidenced by the legacy that the center-left Frente Amplio coalition invoked when it implemented new anti-poverty measures in the wake of the early-2000s Southern Cone economic crisis.

In these and other intriguing case studies, Helleiner shows that neomercantilism could be highly exploitative and autocratic, harnessed for liberation movements, or provide a basis to pursue social reform. No neomercantilists were exactly alike, but beyond tariffs many supported manufacturing subsidies, state-supported infrastructure, state-owned investment banks, controls on foreign capital, technology transfers, and state firms in key extractive industries—beyond East Asia Helleiner highlights comparably expansive interpretations of neomercantilism in Egypt, Mexico, and Poland. In examining these arguments and proposals, Helleiner corrects the tendency, based on some thinkers’ gravitation to Social Darwinist views of international competition, to reduce neomercantilism to raw power politics. On the contrary, it was innovative and frequently combined harsh realism about developmental challenges with more utopian visions. Even as they harbored contradictory notions of mutually-respected sovereignty and regional spheres of interest, thinkers such as Fukuzawa Yukichi, a major intellectual of Meiji Japan, and the Chinese statesman Sun Yat-sen believed neomercantilist strategies could provide an alternate route to universal cosmopolitanism or at least yield a more stable and peaceful world system, superseding the core-periphery dynamics of European imperialism—a vision not so dissimilar from Carey’s particular form of liberal nationalism.

Helleiner thus demonstrates that neomercantilist thought, despite its core objectives of statecraft and international power, is complex and can ramify in different political directions. In addition, the appropriate level and form of state authority over industry and markets varies considerably. From Carey to imperial Russia to the mid-nineteenth-century and early-twentieth-century Latin American statesmen who articulated a developmental framework closer in spirit to social democracy, neomercantilitist ideas have served a range of political projects. Outcomes depend upon the broader political philosophy of neomercantilism’s proponents and the position of their state—or subnational, colonized, or otherwise non-sovereign people—within a capitalistic global order. This dynamic explains the wide-ranging appeal of neomercantilism during the epoch of imperialism, forced economic “openings,” and astonishing capital accumulation in the industrializing core regions of Western Europe and the United States.

Yet nearly all of Helleiner’s thinkers share a common thread beyond a basic faith in protectionist measures. In striving to build national wealth, they understood a fundamental relationship between the power of the state to grant privileges to domestic capital and the prospect of obtaining greater economic and military leverage in international affairs. Strategic tariffs were typically the first, but not the only, mechanism aimed toward the end of economic sovereignty. Neomercantilist policy thus contained many sociopolitical implications for the types of developmental coalitions that would be required of its execution; even its most egalitarian advocates tended to believe the productive forces of national progress would transcend class tensions if properly utilized, and that these capacities would shield society from the ostensible existential threat of predation in the emerging international state system. And for those theorists who contended with the extractive practices of colonial rule and state racism, such as the pan-Africanist Marcus Garvey and advocates of India’s Swadeshi movement, voluntarist efforts to cultivate autonomous manufacturing capacities were a practical means toward freedom and national liberation. As Helleiner suggests in his conclusion, the legacies of neomercantilism are further reflected in the range of developmental states that pursued import substitution industrialization but also the establishment of multilateral financial institutions with programs oriented to the objectives of late industrializers.

Helleiner’s several references to social neomercantilism also provide a bridge to contemplate the tensions, possibilities, and limitations that protectionist capitalism presented to establishmentarian reformers as well as more visionary American liberals in the middle third of the twentieth century. It seems at once an obvious and understated fact that neomercantilist practices were an integral component of the construction of welfare capitalism, even if that was not the intention or was at best an ancillary concern of neomercantilism’s most influential advocates.  By stimulating the tax revenue, technological progress, labor productivity, and interregional economic integration that modernized national economies, these practices typically intensified class conflict and yielded a viable remedy in the modern welfare state. Especially when accompanied by political liberalism and an openness to regulated trade, neomercantilist development created new conditions in which labor, capital, and the state were forced to negotiate social peace and the rights of citizenship. 

The book thus offers us an opportunity to assess the historiography of economic development of individual polities through the lens of something like developmental realism. This means examining more closely the political agents of industrialization and their decisions in relation to various antagonistic and cooperative forces, the conditions which cultivate and privilege a manufacturing core, and the societal and class pressures that emerge from within and without nodes of rapid growth. In the field of American political development, this approach may enrich our understanding of how regionally-accented developmental coalitions forged by one political party fragment, and become reconstituted under another—the most significant transition being that from Republican to Democratic hegemony in the epoch spanning the Progressive Era and New Deal.

In this uncertain moment for the terms of globalization, neomercantilism appears to only threaten more instability and conflict, yet its most innovative thinkers show there is a progressive side to its legacy. A careful amalgam and greening of certain historically neomercantilist ideas, such as industrial policy, with democratic finance, global debt relief, and related proposals for the green energy transition could foster new developmental coalitions with transnational aims to combat the climate crisis. Neomercantilists had an acute understanding of state capacity and infrastructural reach—conditions which are paramount to mitigating the kinds of domestic political problems that are inhibiting international cooperation towards sustainable development. The emergence of developmental coalitions that can foster a more durable basis for such cooperation would affirm the vision of the more humane and egalitarian neomercantilists documented in Helleiner’s book.