Blog author: sstanley
Monday, February 15, 2016


“Donald Trump” Greg Allen/ Invision/ AP

Being “pro business” doesn’t necessarily mean “pro free markets.” Reality TV star and wannabe Republican presidential nominee, Donald Trump reminds us of this. Writing for The Stream, Acton’s Director of Research, Samuel Gregg, argues that not only does Trump seem to be a mercantilist, but, if implemented, this medieval economic system would weaken the United States.

What exactly is mercantilism? This system was popular between the 1500s and 1700s and was particularly good to government officials and their allies in the business world. Gregg explains:

At the core of mercantilism were two things. The first was cozy relationships between certain business leaders and the government. The second was the extensive use of tariffs, quotas and even bans on certain imports to protect domestic manufacturers. Mercantilists wanted to limit competition (particularly from foreigners) rather than embrace competition as a discipline that helped companies and countries discover and develop what they did best in terms of low-costs and high-returns relative to everyone else.

Much of Adam Smith’s Wealth of Nations amounts to a shattering critique of what he called “the mercantile system.” Smith observed that, contrary to mercantilist doctrine, free trade encourages people to specialize in what they are good at, or what economists call “comparative advantage.” This promotes economic growth and lowers prices over time, something that directly benefits lower-income people.

Smith didn’t think the collusion between rich government officials and established merchants was particularly good for nations as a whole. It especially hurt regular people who lacked political connections, consumers who were forced to pay high prices for goods, and the employees who stayed in increasingly less competitive industries. Mercantilism ceased being the norm, partially because Smith’s critique was so effective, but also because the system was incredibly expensive. It encouraged “businesses to become complacent, sluggish, and slow to adapt to technological change.” Despite western society moving on from mercantilism, Gregg describes the close similarities between this bygone system and Trump’s plans:

Trump, for instance, has talked about imposing tariffs ranging from 25 to 35 percent on imports until China (which in Trump’s lexicon seems to function as a catch-all phrase for all foreign competition) plays ball. That would most likely provoke a trade war with China. Unfortunately, a trade war would make both China and the United States poorer.

But even before such a trade war, the costs of such tariffs would be passed onto ordinary Americans. They would find themselves paying far more for all kinds of things, and not just for retail items imported from abroad. It’s easy to forget, for instance, that your average American car built in Michigan or Kentucky consists of materials from all over the world.

Likewise, Trump’s vocal defense of broad interpretations of eminent domain comes straight out of a mercantilist playbook. The primary purpose of eminent domain is to allow governments to undertake certain indispensable functions (building roads, bridges, etc.) by expropriating private property for public use, while generously compensating private owners. But the Supreme Court’s ruling in Kelo v. City of New London, 545 U.S. 469 (2005) allowed governments to permit specific businesses to take over even perfectly nice, non-blighted private property so they could build, say, strip-malls or limousine parking-lots, as Trump sought to do back in the mid-1990s. It is hard to imagine a more mercantilist tactic.

This anti-competitive system will not fix any problems supposedly caused by the free market. As Gregg puts it, “[i]t may enrich the Donald and his well-connected friends, but it won’t make America great again.”

Read “Trump is a mercantilist, and mercantilism will weaken America” in its entirety at The Stream.

Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future

Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future

In Becoming Europe, Samuel Gregg examines economic culture - the values and institutions that inform our economic priorities - to explain how European economic life has drifted in the direction of what Alexis de Tocqueville called "soft despotism", and the ways in which similar trends are manifesting themselves in the United States.

Visit the official website at

  • Roger McKinney

    Exactly! He’s an old fashioned mercantilist from the 17th century.

  • GreenAdamSmith

    Adam Smith wrote The Theory of Moral Sentiments (1759) some 17 years prior to “An Inquiry into the Nature and Causes of the Wealth of Nations” (1776).

    In The Theory of Moral Sentiments he wrote of “an invisible hand” that is markedly different from the one published in Wealth.

    Here’s the excerpt:

    “The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements.

    They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.

    When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life, they are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.”