The new mercantilism
The mercantilism that Adam Smith denounced in the Wealth of Nations seems to be having another ascendency. When Smith wrote, trade was seen as a zero-sum game in which it was thought that from a fixed supply, more for one meant less for others. The aim was to run trade surpluses to accumulate wealth, especially gold. Governments intervened heavily in the economy, and state-favored corporations or monopolies dominated commerce.
Smith argued instead for free markets with minimal government interference, trusting that “the uniform, constant, and uninterrupted effort of every man to better his condition” would allocate resources efficiently. Trade enriched both parties in an exchang because each gained something that to them represented greater value.
Recent developments suggest that industrial policy and protectionism are now very much in the front line. The US, EU, and China have all embraced forms of industrial strategy. The Trump tariffs indicate the rise of an ‘America First’ policy that seeks trade surpluses instead of mutual growth. Trade is seen as strategic leverage
Global cooperation (e.g., the WTO) is giving way to bilateral deals and geopolitical blocs. Access to critical minerals and rare earths is driving competition reminiscent of mercantile resource hoarding. Governments are funding or shielding ‘national champions’ in energy, defense, and the tech sector, sometimes fostering quasi-monopolistic firms.
While we’re not returning to mercantilism wholesale, we're clearly seeing a shift away from a pure free market outlook toward a more state-influenced capitalism, especially in strategic sectors. This hybrid model, sometimes called economic nationalism or geo-economic statecraft, blurs the old lines between market and state, and does echo some of what Adam Smith warned against.
To those of us who want people everywhere to have more access to food and the good things in life, this is not a welcome development. It means that the global wealth creation of the past few decades that has lifted hundreds of millions from subsistence and poverty is unlikely to continue. It is quite possible that our successors, looking back, will think that the best economic years are behind them.
There is, of course, still time to reverse this trend. But that would take political will and leadership that do not currently seem to be in plentiful supply.
Madsen Pirie