Americans are used to domestic mercantilism flying under liberal, or optimists’, colors. According to this kind of mercantilism, government subsidizing of business should be done in cases where there are talented and hard-working entrepreneurs who lack capital, due to short-sightedness on the part of capital suppliers. It is claimed by this kind of mercantilist that decisions on whether or not to lend money to, or invest money in, a fledgling business are made by an insular group of capital suppliers. Because of their insularity, they screen out unconventional but promising business ideas. Because of their mental limitations and clubbiness, they make the start-up sector economically inefficient. Thus, the government can, and should, step in and add value by providing funds that will bring forth new businesses. This intervention, so the liberal mercantilist claims, will thus add wealth, which would have never have been created in the absence of such promotions.
The fallacies in this argument are well-known, even to some of its proponents. It is never proven why a surface appearance of "clubbiness" implies that economically irrational decisions are made. It is never proven that the supposedly "hidebound" professional capital suppliers constitute the only source of capital. It is never proven that the supposedly "exclusionary" criteria exclude anyone other than the drawer to the inside straight. And, it is certainly never proven that the government is any better than already-established professional capital suppliers at spotting successful entrepreneurs, at picking winners.
Thus, liberal mercantilists usually resort to moralizing when making the case for such programs. Capital suppliers are never rationally ignorant, according to such a mercantilist; no, they’re benighted and bigoted. The would-be entrepreneur is always painted in the most favorable of lights. There’s never a dreamer, let alone a fantasizer, in the lot. None of the worthy recipients are in any way vain. Their reach never exceeds their grasp — not a one of them. Their innate level-headedness is so taken for granted, that it is not often asked why these worthy pragmatists aren’t resourceful enough to work their way around these supposedly iron constraints.
The fact is, we want to believe that the "kid with a big idea" is a magnate in the making. This is why the moralization usually works in business-friendly societies.
Also, a rebuttal of the claim that the government can pick ’em better than the private sector can, is a hard one to make because of the taboos surrounding democracy. We find it hard to admit that every successful politician stays a success because he or she fears losing. Doing so implies that a part of politics involves wiping the noses of people who would otherwise cause the incumbent to lose, including plain malcontents. Even if this categorization of democracy does imply that the democratic system is always sensitive to citizens’ complaints, it is much more stirring to proclaim, "democracy’s virtue is that it always nips tumult in the bud" than to admit, "democracy is the system where even the cur has his day." Never mind that the first argument implies the second, because curs cause tumult too.
Liberal-style mercantilism is obviously well-suited for a culture where entrepreneurship is generally known and valued. But what about a culture where it isn’t, one where it is generally believed that entrepreneurship is full of sharpsters, crooks and the undeserving lucky, and where the true facts of entrepreneurship are known only to a generally despised few?
There is a kind of mercantilism that rings true in such a culture, only it’s the more cynical sort — the toryish sort. It’s a variant that is not often seen in America, but is somewhat popular in Europe. It claims that government intervention is necessary, not because government money is needed to help the worthy but struggling entrepreneur, but because government authority is needed. In order to succeed, the worthy start-off needs the stamp of the State on his or her new business in order for it to prosper and thrive.
In this kind of mercantilism, there is very little moralizing. What stands in its stead is cynicism, of an élitist kind. According to this kind of mercantilist, the general public is too besotted by greed and freeloading to understand what it takes to succeed in business, let alone to identify with any business success. Patience, calculation and foresight are not for them; nor is the broader view encompassed by value-for-value. The immediacy of win-lose; that is all they understand.
Because of this widespread surliness, it is further asserted, there is only one way for a worthy would-be entrepreneur to succeed in any kind of business: the State must step in. With the State in his or her corner, this deserving person can achieve the wealth that he or she merits. The authority of the State will make the wolves turn tail.
This argument may seem to be more realistic, as it is not full of roses, sunshine and boosterism. Nevertheless, it is just as unrealistic as the more optimistic kind of mercantilism, for broadly the same reasons.
If a person is generally disliked, then why would he or she have a chance at succeeding in business at all? It may seem flinty-hearted to bring this point up, but a person who succeeds in ticking off the locals, at least presumably, could tick off the customer base as well. Getting a business up and thriving is hard enough; how much harder is it for someone who has already acquired a thriving base of anti-customers? Why would it be reasonable to assume that the perhaps mythical customer in the distant city will believe the new businessman and not the people who knew him or her ‘way back when?
When both cases are examined, they turn out to be variants of the same complaint: only the State has the inner excellence to see the true worth of my hot idea! Only the State can rescue me from the greed and gouging of the benighted [bankers and investors/yokels and freeloaders] who would otherwise stifle my most promising plan!
It doesn’t take much street smarts to see that the above double plaint amounts to this secret hope: only the State can force people to see things my way. In the first case, the State makes the capital market bend to the petitioner’s will (through the tax system); in the second case, the State makes the locals do so (through an appeal to patriotism).
There’s another commonality, which shows who really benefits from State mercantilism — the inflexible. The first plea can be deflated by the question, "why can’t you show around a prototype you can afford to put together, at least to test whether or not the big boys will blow you out of the water if you go for it?" The second plea can be deflated by the question, "if the locals are so bad, then why aren’t you at least making plans to move to a place where the locals are more business-minded?" The commonality is: "if you face an insurmountable obstacle, why aren’t you trying to go around it?"
Mercantilism is mercantilism, whether it be packaged as humane or hard-headed. Interventions are interventions, regardless of the justification for one of them. State force is State force, whether or not you sympathize with or loathe whomever is at the wrong end of the club.
Daniel M. Ryan [send him mail] is a Canadian with a known aversion to theocracy, whether real or covert. He is currently burning his pretty pink thumb with pen and paper.