The battle is renewed: state capitalism, mercantilism, and liberalism

My new Project Syndicate column deals with the age-old battle between the liberal and mercantilist models of capitalism.  While liberalism has won the intellectual fight, the real-world battle is still on, and is likely to shape the future of the world economy.

[I]t is more accurate to think of mercantilism as a different way to organize the relationship between the state and the economy – a vision that holds no less relevance today than it did in the eighteenth century. Mercantilist theorists such as Thomas Mun were in fact strong proponents of capitalism; they just propounded a different model than liberalism.

The liberal model views the state as necessarily predatory and the private sector as inherently rent-seeking. So it advocates a strict separation between the state and private business. Mercantilism, by contrast, offers a corporatist vision in which the state and private business are allies and cooperate in pursuit of common objectives, such as domestic economic growth or national power.

The mercantilist model can be derided as state capitalism or cronyism. But when it works, as it has so often in Asia, the model’s “government-business collaboration” or “pro-business state” quickly garners heavy praise. Lagging economies have not failed to notice that mercantilism can be their friend. Even in Britain, classical liberalism arrived only in the mid-nineteenth century – that is, after the country had become the world’s dominant industrial power.

Coincidentally, my good friends Daron Acemoglu and Jim Robinson pre-empted me by a couple of days with their own Project Syndicate piece on “state capitalism”: 

state capitalism is not about efficient allocation of economic resources, but about maximizing political control over society and the economy. If state managers can grab all productive resources and control access to them, this maximizes control – even if it sacrifices economic efficiency.

As this excerpt makes clear, their take is complementary to (but also partially at odds with) mine.  The two pieces make great companions and should be read together.

Comments

[Martcb007]

Dr Rodrik,
Having read both articles, there are a few points I'd ask you to adress.
First, A&R believe state capitalism will be incapable of sustained economic growth, but only catch up growth. It seems their hypothesis is that state capitalism is decreasingly effective as a country develops. Would you consider mercantilism a viable alternative for the developed countries as well?
Second, were the previous answer to be positive, it still seems like mercantilism is a good option when only a few countries follow this model. What if, however, mercantilist practices were the norm?
My last comment is that the difference in the conclusions of both articles is, in part, a question of semantics. Your definition of mercantilism is that of an alliance between private and public sectors; meanwhile, R&A rely on a self-interested government to express their point.
Whatever the case, I found both pieces most enlightening. Keep up the good work.

[Montwithin.wordpress.com]

Martcb007,

If you have been following Prof. Rodrik's works, you will know his answer to your first question already: "state capitalism" does have diminishing returns. According to the second-best model, or "mercantilism" as it is called in this article, which Prof. Rodirk is a strong advocate of, the state is supposed to initiate a new round of reform to overcome the institutional limits.

Industrial policy or whatever names we want to call it, does allow developing economies to catch up by handing out rents; this is predicted by the big push model as well. The question is what comes next and how to prevent it from turning into crony capitalism or a kleptocracy. We don't even need to talk about China; Japan and Korea are still far from being the liberal, transparent and deliberative democracy that we come to admire.

The problem is not so much with the economics as with the politics. Politically, there is no or very little incentive for a new round of political and democratic reform, when the ruling party can reap so much benefit from and with the power of the state.

As for your second question, developed countries do practice mercantilism in some capacity. The internet is the outcome of that (A&R is wrong about state capitalism is all about getting power). If that is extended to trade more generally, my guess would be intrastate or regional trade will replace part of the international trade. Mayhaps it will not be a bad thing.

[D]

i read your article, could you please explain pro-business state?

kamagra oral jelly

[Happy Adapter]

HP Pavilion DV6000 ac adapter
HP Pavilion DV9000 ac adapter
HP Pavilion DV6500 adapter
HP Pavilion DV8000 ac adapter

hp dv1000 ac adapter

[GeekJust]

it still seems like mercantilism is a good option when only a few countries follow this model.

قوالب بلوجر
tech tricks
http://www.acnetreatmentreviews.biz/

[Anna Maria]

Nice article, thanks for the information.
Anna @ sewa mobil jakarta

[Tom Watson]

business. Mercantilism, by contrast, offers a corporatist vision in which the state and private business are allies and cooperate in pursuit of common objectives, such as domestic economic growth or national power. Click here

[Linda Roverson]

Your work is very good and I appreciate your work and hopping for some more informative posts.
essay writing

[John Marson]

Thanks for providing us with such a useful information. Keep up the good work and continue providing us more quality information from time to time.
Business and Financial News

[Vu Huynh]

I like your post .
Hinh anh dep
Truyen cuoi hay
Xem boi tinh yeu
Biking Vietnam to Cambodia

[Bernard Atkinson]

I'm glad you loved this. Even though it didn't blow me away, I really enjoyed it and I'm looking forward to the sequel.
uk college

[mewbartholo]

Iam evaluation your position and respect that you posted editorial very good which gives users bunch of information .
sociology dissertation

[Michael Pina]

I enjoyed reading your post. Thanks for sharing such a nice post… keep providing useful information.

SPINX Inc.

[Fairley]

http://tech-kinodeon.blogspot.com/2013/01/bank-mandiri-bank-terbaik-di-indonesia.html Bank Mandiri Bank Terbaik di Indonesia

http://seofirst.faa.im/bank-mandiri-bank-terbaik-di-indonesia.xhtml Bank Mandiri Bank Terbaik di Indonesia

http://wadahpromoindonesia.blogspot.com/2013/02/bank-mandiri-bank-terbaik-di-indonesia.html Bank Mandiri Bank Terbaik di Indonesia

http://seostandard.blogspot.com/2013/01/bank-mandiri-bank-terbaik-di-indonesia.html Bank Mandiri Bank Terbaik di Indonesia

[Fairley]

http://taruhanolahraga.com Taruhan Bola
http://taruhanolahraga.com Taruhan Bola
http://taruhanolahraga.com Taruhan Bola
http://taruhanolahraga.com Agen Bola
http://taruhanolahraga.com Agen Bola
http://taruhanolahraga.com Agen Bola
http://taruhanolahraga.com Judi Bola
http://taruhanolahraga.com Judi Bola
http://taruhanolahraga.com Judi Bola

[Okadapter]

laptop ac adapter
Compaq Laptop AC Adapters
HP Laptop AC Adapters
Dell Laptop AC Adapters
Acer Laptop AC Adapters

[sandy]

In Asia,it is really that the mercantilist model can be derided as state capitalism or cronyism.
Samsung Carregador

[David Rice]

I am looking forward to reading more.

Dissertation Writing

[Rahul Khanna]

Very interesting article, really things are getting complicated in the countries day by day.

Computer Tricks and Tips

[Okadapter]

laptop ac adapter
HP Compaq Laptop AC Adapters
Dell Laptop AC Adapters
Acer Laptop AC Adapters
Toshiba Laptop AC Adapters

[Okadapter]

hp pavilion DV5 ac adapter
hp pavilion DV6 ac adapter
hp pavilion DV7 ac adapter

[Okadapter]

HP Compaq Presario CQ60 Adapter
HP Compaq Presario CQ40 Adapter
HP Compaq Presario CQ70 Adapter

[Okadapter]

HP Pavilion DV6700 ac adapter
Dell latitude E5500 ac adapter
Dell latitude E6400 ac adapter
Dell latitude E6500 ac adapter

[Okadapter]

Dell Latitude D620 Adapter
Dell Inspiron E1505 AC Adapter
Dell Inspiron 1501 AC Adapter
Dell Inspiron 6400 AC Adapter
dell inspiron 1525 ac adapter

[peter]

When the laptop is not in use, such as at bedtime, plug it into an outlet and leave it to charge until the battery power is full.
Asus 90-NY81B1000Y
Bateria Dell Inspiron 2000
Dell Vostro 1310 Akku
Dell 312-0724

Dell U661H Akku

[peter]

A cotton swab and alcohol can be used to clean notebook battery contacts. 
ASUS 07G016DH1875
ASUS 70-NY81B1000Z
Bateria Dell Inspiron 2800
Akku VGP-BPS9/S
Dell Latitude E6500 Akku

[Skin Whitening Forever]

Great post

[smart forex mama]

Your article is very good

[grow taller]

Good luck

[gray hair]

congratulations!!!

[eye floaters]

Thanks for the info

[Nikola Tesla]

super ok

[Www]

I do not know the things I would've worked on without the techniques revealed by you over this subject

http://ocim.web.id/

[Grosirbajumuslim-modern.blogspot.com]

Nice :)

http://grosirbajumuslim-modern.blogspot.com/

[heronuliz001]

Express capitalism could be the ownership and management regarding corporations with a sovereign federal government. This arises generally within energy, healthy reference, and armed forces technological know-how areas. Common for example the actual countrywide gas corporations regarding Italy and Venezuela. In certain varieties, the state of hawaii performs freely traded in corporations, while other options entail companies financed and used fully via federal government routes. As a hybrid type of open public and exclusive organization, the appropriate function and features about point out capitalism remain questionable.

ailments|low crab|anti deppresion|liquid vitamins|best vitamins

[Liza Rock]

The question is what comes next and how to prevent it from turning into crony capitalism or a kleptocracy. We don't even need to talk about China; Japan and Korea are still far from being the liberal, transparent and deliberative democracy that we come to admire.Click here

[sabil]

Thanks for providing us with such a useful information.
Cream Pembesar Penis
Cream Pembesar Alat Vital
Cream Pemanjang Penis
Cream Kuda Hitam
Cream Kuda Jantan

[eri alaspari]

Thank you very much for the information ciri jantung koroner

[DjNasir]

There are so many battles that we have to fight in order to get success. I do Forex trading, it is an awesome business, but we need to be really good at managing things in order to get success. I trade with OctaFX broker and they help me with keeping things tight with their swap free account option, it really helps me with long term trading without any to pay any charges, so that’s why I am really happy with everything.

[Keith Righte]

Thanks for giving great kind of information. Very useful and practical for me. Nice work keep it up thanks for sharing the knowledge.

Laptop hire