Neoclassical versus Neomercantilist Economics: Theory and Reality

Abstract

Until the twentieth century, the concepts of political liberty and equality — majority rule, minority rights — was expressed by only a handful of political philosophers and practiced by even fewer societies. The words of thinkers like Locke, Montesquieu, Jefferson, and Mill, and the republics of ancient Athens and Rome, and eighteenth- and nineteenth-century Holland, Britain, and America are small islands in the vast ocean of history; virtually all other civilizations preached and practiced various forms of authoritarianism in which a small hereditary class ruled, usually unhindered, over everyone else. In some civilizations, there were some restrictions on power — in China rebellion was justified against unvirtuous rulers who had lost “the mandate of heaven” — and absolute elsewhere — the divine rights of some eighteenth-century European kingdoms. Not much has changed now-a-days; although the United Nations Charter and virtually all governments pay at least lip service to democratic notions, in 1988 less than one-quarter of the world’s 167 nation-states were considered political democracies.¹

Government is not the solution, it’s the problem … We need to unleash the “magic of the marketplace”.

(Ronald Reagan, 1980 and 1984 campaign speeches)

Capital is wayward and timid in lending itself to new undertakings, and the State ought to excite the confidence of capitalists, who are ever cautious and sagacious, by aiding them overcome the obstacles that lie in the way of all experiments.

(Alexander Hamilton, Report on Manufacturers, 1791)