Essay on History: Mercantilism vs. Communism

Mercantilism became the determinative direction of the economic thought of the 15^th ”“ 17^th centuries and one of the early schools of economic theory development as a specific science. The essence of mercantilism in economic theory is to identify patterns in the field of circulation, i.e., in money turnover and trade with the primary task of the governmental regulation of the economy is to increase the scale of domestic wealth, primarily, by exceeding export over import and creating added value. The economy of mercantilism was in this or another way practiced by all the countries of the world, and some developing countries in Africa, South America and Oceania still continue traditionally using mercantilist positions. Though an economic system based on the principles of mercantilism has become the impetus for the development of subsequent economic concepts, it still has significant differences from both planned and market economy, and at the same time is desperately intertwined with capitalism and communism in the historical scale. Further in this paper, we will demonstrate these contradictions and interdependencies, basing on Voltaire’s Candide and Cafe Europa by Drakulic, as well as historic development of the economies of Western and Eastern Europe.

Above all, as a system in which regulation by a highly regimented state largely depended on the elites, which, in turn, were profited by state privileges, mercantilism was sharply rejected by both the founder of economic liberalism, Adam Smith, and the founder of communism, Karl Marx. In particular, while mercantilists proceeded from an assumption that the sphere of circulation plays the leading role in the creation of profit, and the wealth of a nation lies in the money, communism is extremely opposed to mercantilism as this economic system is seen as being based on full equality, public ownership of the means of production, and gradual dieback of money. As a fully utopian concept, it is supposed to generate places of calm and wealthy well-being for everyone, like Voltaire’s El Dorado[1].

Developing the concept of overcoming the alienation of labor by denying private property, communism as a society of justice is incompatible with private ownership of the means of production, of big business which should rather belong to the society, the workers and peasants, than to individuals. For instance, the utopian (or rather “optimist”, according to Voltaire) version of communism presented in Candide runs that all hotels of El Dorado arranged for passing merchants are maintained by the state, and the King met in the streets could just be greeted as a usual person. Being a prototype of a theoretic, communism state, El Dorado has no rich or poor as all are equal, no prisons as there are no criminals, no need for priests as everyone sings hymns to God each morning[2]. At the same time, Voltaire considered private property the prerequisite of a prosperous society. Only owners, by Voltaire, should be granted the political rights. Voltaire advocated the “freedom of labor,” by which he meant nothing else but the right to sell one’s labor to those who would offer the highest price for it, i.e., essentially the freedom of capitalist exploitation. Therefore, in contrast to communist ideas of endless happiness of equality, his Candide comes up to the idea of cultivating his garden and taking vegetable for sale as a life task, for only “our labour preserved us from three great evils ”“ weariness, vice, and want”[3].

However, the idealistic communist society described by Voltaire in the era of mercantilism had few things in common with real communism later practiced in post-war Eastern Europe. Basing on Drakulic’s confessions on how dented looked the post-communist states and their people, it is possible to note the following main features characteristic of the actual (not hypothetical) communism of theorists like Voltaire, which took place in Eastern Europe and in many ways was also similar to the realities of non-romanticized mercantilism:

-                 Authoritarian approach to legislation;

-                 Direct government intervention in the economy with government actions often replacing or distorting the market mechanism;

-                 Limited or no access to entrepreneurship for those who have no close ties with the government;

-                 Endless bureaucratization;

-                 Organization of the population in the redistributive syndicates and powerful professional associations;

-                 Protectionism disguised under the slogan of “self-reliance”.