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Subject Area: Political Theory

Adam Smith vs. Neo-Mercantilism - Leonard P. Liggio, Literature of Liberty, Spring 1981, vol. 4, No. 1 [1981]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Adam Smith vs. Neo-Mercantilism

Chris R. Tame

“Against the New Mercantilism: the Relevance of Adam Smith.” Il Politico (Italy) 43, No. 4(1978):766–775.

Although his Wealth of Nations (1776) is one of the primary foundations of economics, Adam Smith's relevance to our time is not primarily as an “economist.” Smith's contributions were many: belles lettres, a speculative history of astronomy, his pioneering work in social psychology, The Theory of Moral Sentiment (1754), and his sociological observations and philosophy of history in such works as his Lectures on Jurisprudence. Smith's “economics” is actually a “political economy,” a comprehensive analysis “that took in the whole fabric of social life, its patterns of power, privilege and class in both their contemporary and historical setting.”

Interpreted as a far-ranging political economy, Smith's economics presents a sociological and political critique of this era's mercantilist system. Smith's exposure of the flaws in the older mercantilism of his day is especially relevant to our new twentieth-century revival of this dangerous system. There are instructive parallels between the old and new mercantilism. Both are harmful policies of state economic regulation to control trade and labor associations and attain “full” employment”, for the benefit of privilege interests who control legislation. Mercantilism in Smith's day and ours was a fatally conceived policy of economic protectionism, privilege, and exploitation.

What is the significance for us today of Smith's critique of mercantilism? Smith did not simply give an abstract economic analysis on how mercantilist obstacles hampered a competitive market system. He went deeper by radically exposing “the very driving motivation and political character of mercantilism,” the “wretched spirit of monopoly” and privilege chiefly practiced by merchants and manufacturers.

New scholarship (from both New Left historians and conservative “public choice” scholars) has dissected the true history of state intervention in the rise of the old and new mercantilism. Business interests build the corporate state by securing state intervention to preserve their protected niche from the risks of rival business competitors. Equally protectionist labor unions and class “new bureaucrats have joined in constructing modern neo-mercantilism and privilege. The implicit moral significant for our times of Smith's critiques of mercantilism is the “demystifying” of all the political and economic interests using protectionism. Smith's political economy allows us today to understand our contemporary social fabric as a whole.

In 1869 Smith's disciple, James E. Thorold Rogers, summed up the issue: “Smith's political economy was a war against privilege and monopoly as all honest political economy is whether it be privilege on the part of the landlords or masters, peasants or workmen.”