Friday, 16 August 2013

The return of mercantilism

My simplistic understanding of mercantilism is it’s a notion of the economy wherein the total sum of wealth is essentially fixed, this reflecting how mercantilist ideas were pre-industrial i.e. when agriculture dominated the economy and land, which is unavoidably finite, was regarded as  the basis of wealth.

A different way of describing this would be mercantilism views an economy/wealth as a cake, hence mercantilists engaged in fights over how it got cut. By contrast, capitalism, aided by the division of labour and what no, is, its ideologues tell us, all about making the cake bigger. Like, why does so and so earn £10 million a year? Because every year he makes the cake that bit bigger that’s why.

Except, what if capitalism stopped making the cake bigger, would that mean the mercantilists were right after all? Well that’s obviously a fanciful, 17th or 18th century notion isn’t it? ..... isn't it?

Well in 2006 the “Gross Domestic Product: chained volume measures” i.e. the basic measure of the size of the UK economy was 150,1528. 6 years later in 2012 it was 150,4777 meaning it had grown a stonking great 0.22% i.e. it hadn’t grown at all. Over the same period, as I’m sure you’re aware, average incomes have fallen in real terms, a lot. And unemployment has also increased. Wealth? Less so, which is hardly surprising given monetary policy has fixated on boosting the value of assets i.e. wealth via quantitative easing and what not.  So mebbe, instead of being distracted by how big it might be tomorrow, we should start thinking about how the cake is gets cut today.

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