According to the mercantilist dogma held by nearly all politicians and pundits (and, yes, also by the People), the best possible outcome for any country – call it country A – whose government is negotiating a trade deal is the following: the government of A arranges for the maximum possible number of citizens of A to work the maximum possible number of hours producing goods and services of maximum possible value to be exported to the maximum possible number of foreigners whose governments agree to prevent those foreigners from ever sending in return to the people of country A even as much as a single wooden toothpick.
The optimal trade deal for country A – according to mercantilist dogma – is one that commits the people of A to work for foreigners without compensation. This optimal trade deal, in effect, turns the workers of country A into slaves for foreigners. (Such a deal would have country A workers paid, in real goods and services, absolutely nothing – which is a wage well below the minimum wage that many of the mercantilist leaders, in other contexts, support!)
According to mercantilist dogma, were the diplomats and ‘leaders’ of country A able to negotiate such an outcome, those diplomats and ‘leaders’ would be hailed has having secured a huge and unconditional trade victory of the sort that history has never before witnessed. Country A would be renowned worldwide as the greatest “winner” ever in matters of international trade.
According to mercantilist dogma, it is therefore unfortunate for the people of country A that the diplomats and ‘leaders’ of countries B through X are unwilling to grant such splendid terms to A. The diplomats and ‘leaders’ of countries B through X each would also like to secure such an ideal outcome, as described above, for their countries. But the necessity of compromise prevents any country from winning such an unalloyed and stupendous victory. The result of the compromise for all countries is an imperfect trade deal under which each country reluctantly agrees to receive valuable goods and services from foreigners as the price that must be paid for the privilege of sending domestically produced good and services to foreigners.
The above is no parody or even an exaggeration of the express mindset that guides trade policies. According to that mindset, exports are benefits, while imports are the unfortunate price that “we” must pay to secure these benefits.
Can any mindset about economic matters be more backward, more unrealistic, and more bizarre than mercantilism? While economists have long seen through and exposed the imbecility of mercantilism, economists have done a poor job of revealing this imbecility to the general public. Most members of the general public of country A continue – as actual voters if not as actual workers and actual consumers – to cheer the hours they toil and the resources they use to produce goods and services for shipment to foreigners, and continue to hiss at any goods and services that foreigners manage to successfully ship to country A.
The above originally appeared at Cafe Hayek.