HIST363: Global Perspectives on Industrialization

In the mid-twentieth century, most economists on both sides of the Atlantic came to accept that in some areas mercantilism was correct. The Great Depression had created doubts about the efficacy and stability of free-market economies, and an emerging body of economic thought ranging from Keynesianism to Marxist centrally planned systems created a new role for governments in the control of economic affairs. Also, the wartime partnership between government and industry in the United States created a relationship - the military-industrial complex - that also encouraged activist government policies.

Most prominently, the economist John Maynard Keynes explicitly supported some of the tenets of mercantilism. Adam Smith had rejected a focus on the money supply, arguing that goods, population, and institutions were the real causes of prosperity. Keynes argued that the money supply, balance of trade, and interest rates were of great importance to an economy. These views later became the basis of monetarism, whose proponents actually rejected most of the details of Keynesian monetary theory; monetarism developing as one of the most important modern schools of economics.

Keynes and other economists of the period also realized that the balance of payments is an important concern, and that a favorable balance of trade is desirable. Since the 1930s, all nations have closely monitored the inflow and outflow of capital. Keynes also adopted the essential idea of mercantilism that government intervention in the economy is a necessity. While Keynes' economic theories have had a major impact, few have accepted his effort to rehabilitate the word mercantilism. Today the word remains a pejorative term, often used to attack various forms of protectionism. In an essay appearing in the May 14, 2007, issue of Newsweek economist Robert J. Samuelson argued that China was pursuing an essentially mercantilist trade policy that threatened to undermine the post-World War II international economic structure.

The similarities between Keynesianism, and its successors' ideas about mercantilism, have sometimes led critics to call them neo-mercantilism. Some other systems that do copy several mercantilist policies, such as Japan's economic system, have also been referred to as neo-mercantilist.

In specific instances, protectionist mercantilist policies did have an important and positive impact on the state that enacted them. Adam Smith, himself, for instance praised the Navigation Acts as they greatly expanded the British merchant fleet, and played a central role in turning Britain into the naval and economic superpower that it was for several centuries. Some modern-day economists have suggested that protecting infant industries, while causing short term harm, can be beneficial in the long term.