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The industrial revolution and the rise of Britain contributed to the dominance of Liberal political economic thought ever since the early 19th century. However, neo-Mercantilist economic nationalism and Marxist class analysis soon arose as reactions to both the British-led Liberal international order and the capitalist organization of the economy. In an essay, examine the rationale for neo-Mercantilist thought and outline what neo-Mercantilist policies exist today. Then, review the Marxist critique of industrial capitalism and the neo-Marxist/Structuralist critique of globalization.


Neo Mercantilist economic nationalism and Marxist


Introduction. 2

Neo-Mercantilist Arguments. 2

Neo-Mercantilist policies at the domestic level 4

Neo-Mercantilist policies at the international level 5

Neo-Marxist/structuralist arguments. 6

Conclusion. 8

References. 9



The dominance of liberal political and economic thought since the beginning of the 19th century was contributed to largely by industrial revolution. The rise of Britain also exerted a lot of influence on the emergence of liberal political-economic thought. However, two frontiers of opposition to this thought have emerged. One of them comprises of neo-mercantilist economic nationalism. The other frontier comprises of Marxist class analysis. These two frontiers have gained dominance as reactions to capitalist organization of the global economy as well as the British-led liberal international economic and political order. The aim of this essay is to examine the rationale for the neo-mercantilist thought and to outline the neo-mercantilist policies that continue to exist today. The paper also reviews the ways in which neo-Marxist/structuralist ideas have been used to critique industrial capitalism.

Neo-Mercantilist Arguments

Neo-mercantilists agree that liberal capitalism is productive and efficient. However, they are concerned that the most powerful states always stand to benefit disproportionately from the functioning of the free market (Cox & Schechter, 2002). To deal with this problem, neo-mercantilists are willing to alter the tenets of liberal capitalism in order to ensure that the state retains as much power as possible from participation in the international economy. When viewed from this perspective, neo-mercantilism is interpreted as a pursuit of state power.

Proponents of neo-mercantilism argue that it is essential for the nation-state logic to be articulated in the context of free market forces. In the contemporary context, this logic is often presented in the context of the international political economy. This is simply because of the existence of a transnational realm of economic transactions that are carried out in the context of a globalized world. This conception may seem somewhat paradoxical because mercantilism has historically been associated with the nation-state.

In neo-mercantilism, market outcomes are assumed to determine state power while states must focus on distributing relative gains from economic activity. This is in contrast with liberals, who emphasize absolute gains. To achieve the goal of distributing relative gains, many governments that promote neo-mercantilism focus on  increasing the international competitiveness of local industries. Some of the efforts aimed at promoting this goal include assumption of leadership roles by local elites, renewed investment in infrastructure, efforts to attract international capital, reorientation of the boundaries between multinationals and domestic capital, and reliance on the internal market as the main contributor to the process of capital accumulation. The objective of adopting these measures is to ensure that the wealth leads to an increase in political and economic power for the nation-state.

In this economic thought, success is gauged in relative terms. A case in point is the analysis of the number of jobs outsourced from the United States to China. Based on such comparison, nation-states are able to estimate the extent to which they should introduce stricter protectionist policies. Today, many Western economies are concerned that the globalization of capital in the context of the new economy is unfolding in favor of former communist states. Another trend that has not escaped the scrutiny of developed nation-states of the West is the recent neoliberal conquest of many Third World economies that previously used to implement protectionist strategies. In these countries, many public enterprises are increasingly being privatized. Such reference to relative terms during analyses of economic changes is at the heart of neo-mercantilism.

The bottom line is to ensure that nation-states take all the necessary steps to ensure that market outcomes are tipped in their favor. This has become a very challenging situation in the present economic dispensation. There is simply too much large-scale transnational movement of capital. In some cases, this movement is unfolding on a long-term basis. This phenomenon has led some analysts to conclude that capital has finally “outgrown” the contemporary nation-state (Aizenman & Lee, 2007). Such analysts give the impression that everyone should now be talking about the notion of “global capital”.  Such capital is said to be dissociated with any specific “state” location, meaning that it exhibits autonomy from political controls at the level of the nation-state.

The key question of international political economy is how economics affect state power. Therefore, although state capital has been transformed into global capital, the struggle for its control among nation-states continues. In this struggle, nation-states are concerned about issues such as the structure of this capital. A proper understanding of structural issues sheds a lot of light on location, sites of accumulation, and the identities of states that benefit most from the profits realized. Indeed, discussions on how profits are shared among states have come to dominate inter-regional, inter-state, and inter-economic relations.

Neo-Mercantilist policies at the domestic level

At the domestic level, emphasis is on industrialization. Consequently, sectors such as R&D (research and development) and manufacturing end up dominating high-growth sectors around the world. In the context of neo-mercantilism, governments tend to emphasize the need for high value-added industries. They even go to the extent of helping create advantage by simply altering the structure of national economies through industrial policies such as R&D aid, production subsidies, as well as increased spending on infrastructure and education.

Moreover, countries are keen to improve competitiveness at the domestic level by leveraging the power of technology and its ability to support the rise of infant industries. The objective is to win the race in the current environment of cut-throat competition in efforts to deliver next-generation technologies. The ongoing scientific-technological revolution is viewed as the latest source of competitive advantages for nation-states. For many countries, the objective is to invest heavily in the areas of information technology, biotechnology, and optic fibers. This new trend has greatly contributed to the dismantling of the business cycle that has traditionally been a defining feature of the so-called “old economy” (Aizenman & Lee, 2007).

In neo-mercantilism, there is also emphasis on the “senescent industry” that is characterized by the tendency to protect non-competitive, yet politically important, industries such as those that deal in automobiles and steel. Based on the arguments propounded for this move, one may expect the tendency to protect such industries to persist even if they were declining in terms of competitiveness and profitability. After all, owners of such economic establishments may lobby politicians for long-term protection, thereby mitigating the need for structural adjustment.

Neo-Mercantilist policies at the international level

At the international level, the core objective is to ensure that a state gains relatively more from all economic exchanges than other states. To make this assessment, neo-mercantilists look at terms of trade. In this case, they assess the value of the goods and services exported by a country relative to the country’s imports. They also assess the balance of trade of a country. A balance of trade is said to be in favor of a country if the value of the country’s exports is higher than that of its imports.

To ensure that the balance of trade remains favorable, countries are sometimes compelled to embrace protectionists. They simply introduce tariffs and quotas to restrict import trade. At the same time, they put in place economic structures that enhance the competitiveness of locally produced goods and services in the international market. The term “strategic trade” is sometimes used to refer to the approaches that governments take to protect their national economies. Some of these strategies include introduction of subsidies, legislation against dumping, and export promotion initiatives aimed at helping local industries gain market share internationally.

Investment controls in the realms of foreign direct investment and foreign portfolio investment also constitute a core component of strategic trade. Towards this end, national governments may seek to limit foreign ownership of national firms. This practice is common not just in the Third World but also in the developed economies of the West that supposedly support fully the provisions of liberal political and economic thought.

Neo-Marxist/structuralist arguments

Neo-Marxist /structuralist critiques of industrial capitalism have also gained prominence over the years. According to Robert Cox,  a respected political scientist and intellectual leader, “the capitalist basis of the world economy is founded on the union of the nation-state with productive forces of the capitalist class at the national level through economic regulation” (Cox & Schechter, 2002). In neo-Marxist critiques, emphasis is on the view that states are becoming “more effectively accountable” to the contemporary global economy while at the same being constrained by external accountability through interdependence, competitiveness, and globalization (Cox & Schechter, 2002).

Based on the structural power of capital, inflation is viewed as one of the factors that inhibit business by reducing profit margins. Yet in the past it was seen as stimulus to growth. On the same breath, businesses have come to blame unions for perennially increasing prices. At the same time, neo-Marxists and structuralists blame government for never-ending patterns of excessive taxing, borrowing, and redistribution. These critics caution the government regarding the importance of boosting investor confidence as a prerequisite for revival of economic growth. Other measures that governments must take include deregulation, tax reduction, and a reduction in the level of spending. Such efforts can go a long way in preventing capital flight and investment strikes.

Based on this critique, production also needs to be structured in a manner that marks a move towards economies of flexibility. Developed market economies are no longer focusing on mass production in large integrated plants; rather they are keen to embrace a new business model that is defined a core-periphery production structure. At the core, permanent-salaried employees handle aspects of R&D, finance, innovation, and technological organization. At the periphery, various aspects of the production process such as maintenance of fixed assets and operations of factory-line tasks and machines are handled. Neo-Marxist and structuralist critics argue that while the core tends to be highly integrated with capital, the periphery components are more loosely linked to the overall production process.

At the international level, global production processes are assumed to operate in the context of territorial divisions of the international economy. At the same time, it is expected that transnational capital will continue boosting economic interactions among communities through activities such as tax abatements, union crackdowns, and easing of regulations. Other themes that dominate critiques of international production processes touch on aspects of outsourcing, lean production, reduction of per-worker costs, and stagnation of wages in the developed market economies.

Finally, neo-Marxists and structuralist often highlight the need for capitalists to take a very cautious approach in regards to the role of debt. They are concerned that the liberal economic and political thought has created a phenomenon whereby governments and corporations have come to be heavily reliant on debt financing. The downside of a system of production that often resorts to credit default swaps (CDSs) and collateralized debt obligations (SDOs) is that it increases the amount of liquidity in financial markets (Cwik, 2011).

Critiques that run along these lines have culminated in the coinage of the term “casino capitalism” (Cwik, 2011).  In casino capitalism, the core objective of financial manipulation is to achieve immediate financial at the expense of long-term development of industry. This creates a scenario whereby the future of production is in the hands of global finance, which may continue to occupy a dominant position primarily because of its power over credit creation (Cwik, 2011). In other words, the gist of this critique is that if global finance continues to dominate the real economy, the outcome will be the destruction of productive capital as well as millions of jobs.


            The British-led industrial revolution and the accompanying liberal political-economic thought continue to influence contemporary neo-mercantilist arguments. In neo-mercantilism, the core argument is that although liberal capitalism is efficient and productive, it should be altered at both domestic and international levels to ensure that a state retains as much power as possible from participation in the international economy relative to other states. This explains the tendency to engage in protectionism by protecting non-competitive, yet politically important, industries. However, neo-Marxist and structuralist critics are concerned that governments and corporations have come to be heavily reliant on debt financing. This has created a situation whereby finance powers are increasingly dominating the real economy, thereby leading to the destruction of productive capital.



Aizenman, J. & Lee, J. (2007). International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence. Open Economies Review, 18(2), 191-214.

Cox, R. & Schechter, M. (2002). The Political Economy of a Plural World: Critical Reflections on Power, Morals, and Civilization. New York, NY: Routledge.

Cwik, P. (2011). The new neo-mercantilism: Currency manipulation as a form of protectionism. Economic Affairs, 31(3), 7–11.

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