What’s clear from the extant literature is that mercantilism’s economic vision did not emphasize economic growth. Rather, economies were considered largely static. Wealth was thus not believed to come through entrepreneurship, competition, and free exchange. For mercantilists, countries prospered by acquiring as much of the world’s existing wealth as they could.
That basic conviction translated into several things. One was an effort by states to snap up as much territory and dominate as many trade routes as they could handle. Practically speaking, this meant European states like Britain encouraging or organizing colonial settlements around the world and barring British goods from being carried on non-British ships. These policies were backed up by a willingness to use force to protect territorial gains and enforce trade prohibitions.
To say that Adam Smith’s Wealth of Nations intellectually demolished mercantilism is an understatement. For one thing, Smith showed how mercantilist efforts to protect domestic industries didn’t increase a country’s total output. No regulation, Smith stated, “can increase the quantity of industry in any country beyond what its capital can maintain.” Instead, they divert part of a country’s capital “into a direction into which it might not otherwise have gone.” But, Smith added, “it was by no means certain that this artificial direction is likely to be more advantageous to the society than that into which it would have gone of its own accord.”
Smith’s point was that tariffs don’t bolster production. Output is driven by factors like efficiency, specialization, and the amount of capital invested in an enterprise. Tariffs can only encourage businesses to shift their investments elsewhere, and there is no possibility of knowing ahead of time if this will boost output.
What economic nationalists downplay or ignore is that it is precisely through serving consumers in a competitive market that businesses produce wealth. In these conditions, companies must constantly innovate, find efficiencies, and reduce their margins to outpace their competitors. In the process of doing so, they create new wealth. That same wealth allows businesses to employ millions of people, thereby providing individuals and families with the salaries, wages, and benefits that enable them to pursue numerous non-economic goals. How, I ask, is this materialistic?
But this is not the only reason why “consumer sovereignty,” as the German ordoliberal economist Wilhelm Röpke called it, matters. If the well-being of producers becomes the focus of economic life, it opens the door to the cronyism and often outright corruption that characterized the mercantile system. Certainly, many businesses and their armies of lobbyists insist that they deserve government assistance because they claim to be essential to the well-being of a town, blue-collar men, etc. But as Adam Smith observed of the commercial and political purveyors of mercantilist doctrines of his time, “I have never known much good done by those who affected to trade for the public good.”
The implicit promise of ESG investing is that you can do well and do good at the same time. Investors presume they can make a market return while advancing causes such as lowering carbon emissions and income inequality. But multiple studies find ESG strategies are doing little of either. Bradford Cornell of the University of California, Los Angeles and Aswath Damodaran of New York University reviewed shareholder value created by firms with high and low ESG ratings—scores provided by professional rating agencies. Their conclusion: “Telling firms that being socially responsible will deliver higher growth, profits and value is false advertising.”
What Messrs. Cornell and Damodaran found at the micro level is also apparent on a macro basis. Over the past five years, global ESG funds have underperformed the broader market by more than 250 basis points per year, an average 6.3% return compared with a 8.9% return. This means an investor who put $10,000 into an average global ESG fund in 2017 would have about $13,500 today, compared with $15,250 he would have earned if he had invested in the broader market.
Did the forgone $1,750 somehow do $1,750 worth of good for mankind? Apparently not. A new report from researchers at the universities of Utah, Miami and Hong Kong finds there is “no evidence that socially responsible investment funds improve corporate behavior.” But this shouldn’t come as a surprise. The same outcome followed decades of investors avoiding so-called sin stocks—alcohol, tobacco, firearms and gambling. In doing so, investors sacrificed returns while the behavior they disapproved of continued. Impact investors want their capital decisions to create outcomes that wouldn’t have existed otherwise, not perpetuate the status quo.
In June 2019, Tucker Carlson spent five full minutes during his prime-time Fox News show praising a plan from Sen. Elizabeth Warren (D–Mass.) to promote “economic patriotism.” The proposal, which called for “aggressive” government action to bolster domestic manufacturing and keep American companies from creating jobs abroad, “sounds like Donald Trump at his best,” Carlson enthused.
President Donald Trump exhibited a high degree of comfort wielding state power for mercantilist ends, from his imposition of tariffs to his use of subsidies and bailouts to support American companies facing competition. Now a rising cadre of nationalist conservatives (a.k.a. “natcons”) are happy to provide the intellectual ammunition for this America First agenda.
In 2019, Republican policy wonk Oren Cass appeared at the inaugural National Conservatism Conference to argue for industrial policy—a robust program of federal interventions meant to resuscitate American manufacturing. He went on to found a think tank, American Compass, that promotes such familiar policies as making corporations give board seats to labor representatives.
Whether from the left or from the right, such critiques suffer from the same accounting flaw: They see only the upsides of their proposed interventions and only the downsides of the status quo. Missing from the calculus is a recognition that tariffs, by driving up prices, hurt both American consumers and domestic producers who rely on inputs from abroad; that federal “buy American” mandates mean our tax dollars don’t go as far; that subsidies insulate incumbent players from competition and lock in old ways of doing things; that wealth expropriation is a death sentence for risk taking and innovation; that someone still needs to produce the goods and provide the services that have been “decommodified”; and that—as the labor market of the last year suggests—people become less willing to work the more they’re told that government is responsible for meeting their material needs.
But the book is also strange for what it takes for granted, namely that locking down is the proper path to deal with infectious disease. Viruses in all times and places arrive, infect some portion of the population depending on prevalence, bear responsibility for the death of others, and eventually become endemic, which is to say, something we live with. This one was no different in any of its properties. What made this one different was its politicization and the casual but universally held view that life itself had to be fundamentally disrupted by government because of it.
In case you are wondering, there is not one word about “Cuomo chips” in this book. That was the ludicrous mandate that all bars serve food with drinks else you can’t get a drink because somehow the virus spreads more in plain bars than in restaurants. True story.
In short, don’t read this book looking for an apology. These politicians all panicked, as John Tamny argued from the beginning. No matter the policy, the pandemic was going to recede into memory, as it has. No matter how badly this class of politicians performed, somehow they all managed to claim to have done the right thing, and to earn royalties on their ghost-written accounts of their genius.
Such defences fall flat, of course, because it’s now well-established that new daily infections were already falling several days before the first lockdown was imposed.
Some of the more hardcore pro-lockdown journalists have also sallied forth in defence of the old cause. Tom Chivers at the i is still clinging to the discredited claim that the U.K. lockdown saved 200,000 lives, even though there have only been 150,000 excess deaths in total over the past two and a half years (many of which are not due to Covid) and countries such as Sweden and states such as Florida which eschewed lockdown never saw anything like the predicted level of deaths.
Chivers mentions Sweden, but only to dismiss it. People in Sweden were “hiding in their homes anyway out of fear of a deadly virus” he claims, so not locking down made little difference. This claim is demonstrable nonsense, as Chivers should know as he was covering the pandemic at the time. The images of life continuing as normal in Stockholm were beamed round the world that spring.
“China Covid lockdowns leave residents short of food and essential items.” (DBx: But at least these people might delay that worst of all curses, namely, exposure to SARS-CoV-2!)
Covid-19 policy in China is a human rights disaster*
* Unless you equate ‘human rights’ to the avoidance of an endemic respiratory virus above all other human needs and believe the state should regulate human interaction using wartime social engineering techniques.