Should the American State return to mercantilism?

The takeaway: Should the State change its economic policy …

The Government (the Executive and his Cabinet), with State approval, chooses capitalism and democracy as the political economic plan (policy) for managing the nation-state’s tax and profit extraction process. Since government is a human system, its managers will go off script and introduce chaos into the extraction system.

By chaos I am referring to spending decisions that go way beyond facilitating the movement of capital throughout America’s domestic markets. The programs proposed by the Executive and funded by the Congress are designed to garner and/or secure votes for the party in power so that they can continue monopolizing the political franchise over State power. But does this behavior increase State power?

If the answer is no, the State faces the problem of removing government actors. Democracy makes removal cumbersome because a narrative has to be crafted where the greatest number of voters are in lock step with the State’s desires. Should creation of that narrative require synchronizing all three powers of the State?

Democracy is also cumbersome because a candidate must be chosen that can on the one hand galvanize the populace but at the same time take actions that seem “anti-democratic”, anti-liberty”. and anti-freedom.” Shutting down the economy during the pandemic and requiring citizens take certain medical actions are two examples that come to mind.

If political packages (programs) do increase the State’s power, then, at least in the short run, status quo is maintained. But over a longer period especially as an economic competitor such as China continues to grow, should the Unted States throw off its “we’re all in this together, diversity and inclusion mantra?

Big tent democracy and a consumer credit-driven economy seemed to have worked during a three-decade period where China was perceived as an emerging economy that offered labor that sewed clothes and made consumer electronics. That perception has changed as the single-party state with a preference towards savings is giving the world a demonstration on how state-capitalism works.

I see state capitalism winning especially where its society is able to develop a knowledge base while importing the necessary resources for creating and selling product with which it can sustain itself. The only problem may be where would it deposit its savings. In the past the U.S. was the dumping ground for China’s savings but reportedly China has been weening itself off of the US debt markets. Does this mean that China will develop its own internal trade for debt?

If this is the state of competition that America may face over the next ten years, where it could be locked out of markets because its credit-driven capitalist model is no match for a state capitalist system that produces less expensive goods, then it may either go full isolationist or deciding to stay on the world stage, embark on a centralized or mercantilist policy.

Alton Drew

3 May 2023

Alton Drew

Thanks for reading my insights on the political economy. Your support is appreciated. Thank you!


The stats ….

30-Day Fed Funds Options: 95.20


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