Joe Biden wants to take a page from China’s economic playbook. In a recent speech, the president officially embraced the term “Bidenomics” to describe his economic policies, which he characterized as the federal government “investing in key industries of the future, making targeted investments to promote domestic production of semiconductors, batteries, electric cars, clean energy.” In other words, the administration is pursuing a government-directed industrial policy using taxpayer subsidies and mandates to pick economic winners and losers.
The administration is partly motivated by fears that the U.S. is falling behind China, where firms are openly subsidized by the government and have been gaining market share in industries once dominated by American companies. But three recent studies jointly authored by American economist Lee G. Branstetterand Chinese economist Guangwei Li suggest China’s industrial policy “successes” are overblown. China’s various industrial policies, such as “Made in China 2025”—which, like Bidenomics, targets direct subsidies, tax incentives and government loans to key sectors such as aerospace, robotics, energy-efficient automobiles and biopharmaceuticals—don’t just fall flat. They do more harm than good.
Bidenomics looks like a pale imitation of Chinanomics, which demonstrates why politicians shouldn’t play investment banker with taxpayer dollars. State-directed industrial policy undermines free enterprise and deprives entrepreneurs and innovators of the capital they need to improve consumers’ lives. Mimicking China’s folly surely isn’t in America’s economic interest.
Historical inquiry into neomercantilism illustrates that it is a mistake to view arguments about modern international political economy as a contest primarily between economic liberalism and Marxism. Neomercantilist ideas have long been an equal player in that competition, perhaps even a dominant one at times. But the more you learn about neomercantilism’s history, the more apparent become the contradictions of the neomercantilist outlook driving many policies being advocated across the political spectrum today.
These are just some reasons why The Neomercantilists: A Global Intellectual History, authored by the political scientist Eric Helleiner, is an especially timely work. For Helleiner, neomercantilism describes that set of ideas that emerged in response to Adam Smith’s demolition of the assumptions and policy preferences underpinning what Smith famously called the “mercantile system” that dominated the European economic world from the mid-1500s until the late eighteenth century.
Understanding many economic policymakers’ choices in the nineteenth and twentieth centuries across the globe is difficult if neomercantilism’s influence is insufficiently appreciated. Grasping the scale and nature of that influence was what drew Helleiner to study neomercantilism’s place in debates about international political economy in the first place. As he researched the topic, however, Helleiner was particularly “struck by the absence of a comprehensive analysis of [neomercantilism’s] intellectual origins.”
Another way of understanding this is that neomercantilists (much like their present-day successors) claimed to be realists. This is what made many neomercantilists hostile to the detailed theoretical structure of what many of them derided (again, like their intellectual descendants) as the “free trade religion” or “free trade theology.”
Helleiner points out, however, that free trade thinkers have just as much claim to being realists. Since Smith’s time, free traders have been concerned with knowing certain truths about human nature and their significance for economic life. That is realism in the deepest sense of the word. It is also the point of developing theories that reflects basic principles of reasoning associated with what Scottish Enlightenment thinkers called “the science of man.” The purpose of such theories was not abstraction for the sake of abstraction. It was to sift out the truth from the dross of error. What could be more realistic than that?
By contrast, the neomercantilists’ focus on the specifics of given situations made it difficult for them to develop an intellectually coherent position. They could not, for instance, provide principled reasons why one economic sector should receive favorable treatment from the government rather than another. The Romanian politician, fascist intellectual, and follower of List, Mihial Manoilescu (1891–1950), even conceded that protectionism was “bereft of any theoretical basis.” That shows up in the haphazardness characterizing the protectionist policies advocated by the neomercantilists covered in Helleiner’s book.
That inability to establish rational theoretical foundations explains the regular appeals to expediency by neomercantilists to justify their preferred policies. Over time, this led to serious inconsistencies in government economic interventions. Reliance on expediency to justify neomercantilist positions also created opportunities for what, in most cases, really underlies a tariff or industrial policy: the workings of special interests. The line between expediency and outright cronyism is a very fine one.
Social Security and Medicare drive the growth of debt but will not drive the 2024 political debate. The debt tsunami is the nation’s most important domestic problem, and it threatens national security via pressure to curtail defense spending. But regarding deficits, today’s reflexive, mindless partisanship is replaced by reflexive, mindless bipartisanship: Donald Trump and Joe Biden are joined at the hip. Trump: “Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security.” Biden: “If anyone tries to cut” either, “I will stop them.” Florida Gov. Ron DeSantis vows not to “mess with” them.
Each semester, I introduce the concept of scarcity in economics (there are not enough resources, least of all time, to do everything we wish) and then explain how that simple fact has influenced what I choose to cover. I am honest about who I am: I’m a kid from Cape Cod who roots for the Sox, Pats, Celtics, and Bruins and who was introduced to free-market economics when I was their age and studying at George Mason University. That training and experience influences my choices in my class. I encourage students to keep that information about me in mind and to search for the things I am leaving out. I encourage them to come to class with questions about what they have found. I challenge them to challenge me.
Students react positively to this level of honesty. As Adam Smith said, “Frankness and openness conciliate confidence.” Those who may be hostile find it much harder to think that some conspiracy or fraud is being perpetrated when you are honest. Indeed, one student at GMU (who was a self-described “UnKoch My Campus” progressive) said the honest approach forced him to reconsider his stereotype of economics. Plus, honesty encourages students to do outside research and to truly engage with the lessons.
Spain’s Ecological Transition Minister, Teresa Ribera, a member of the Spanish Socialist Workers’ Party, is hosting the event. To get things going on Monday she cruised on a city bike through the streets of the small metropolis on her way to the conference. Cameras were rolling. The message was unmistakable: Pedal to your destination like me and save the planet.
The proletariat wasn’t buying it. The video of the minister’s “green” bike ride shows her escorted by two security cars—one in front and one behind. Besides allegedly snarling traffic, her carbon footprint was twice what was required. Some reports said that the minister had emerged from a limousine 100 meters from the event and got on the bike there.
All of this is highly amusing because the climate glitterati want so much to appear virtuous but can’t give up the travel and other benefits of evil fossil fuels. Politico reported in March that European Council President Charles Michel used commercial aircraft for a mere 18 out of 112 flights from 2019 to December 2022. His use of chartered air taxis included his travel to the U.N. climate summits last year and in 2021. Jets for the grandees, but bikes for the masses.
Most fundamentally, the libertarian presumption is always for less government, whether regarding social, economic, or foreign policy. Conservatives now seem happy to endorse government control in any arena, so long as it pushes conservative values (e.g., mandates against “woke” themes in public education).