Mercantilism is one of classical theories in international political economy (IPE) along with economic liberalism and neo-Marxism. Mercantilism believes the world is in struggle of power and security between each national interest, in order to grow their economy, they need to limit the imported goods by using tariffs while at the same time increasing their export instead (List, 1841), and also without the existence of hegemonic power the liberal world economy will not exist (Gilpin, 1987). This theory is the oldest among the other three, it was speculated already exist in 16th century but one of the most popular works regarding this theory is ‘The National System of Political Economy’ by Friedrich List in 1841. Despite being the oldest, mercantilism gained its own revival after the World War II in 20th century. The noticeable example is how Japan emerged as a successful economic superpower in a few decades after World War II, some people argue they executed neo-mercantilism in almost the perfect way, following Japan other states were also started to adopt the same strategy such as China, South Korea, and Taiwan (Lim, Timothy, 2014).
There are some characteristics and function of mercantilism. Robert Jackson & Georg Sorensen (2013) have summarized the main characteristics of mercantilism. Firstly, they put economy beneath political power, supports the hegemonic stability theory, limiting imported goods while maximizing exports and see economic and military power as a complimentary to pursue national interest (not a goal) (p.164-180). Mercantilism is a suitable strategy for states that seek protection to their infant industries from external competitors, which already proved by Japan after World War II, and for states that pursue national economic interest like what European did in imperialism era where they coercively imperialized Asia and Africa to expand their markets (Lim, Timothy, 2014).
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Like any ideology, mercantilism has its obvious pros and cons. They are closely related from one to another. Analyzing the pros, first of all, it should be noted that mercantilism encourages the development of natural resources, as it encourages more exports than imports, ensuring that the country enjoys better balances of trade. Moreover, it enhances trade deficits for foreign countries. Secondly, as mercantilism improves the levels of innovation in the country, an increase in job opportunities becomes inevitable. So, it helps to reduce the unemployment rate. Thirdly, it improves foreign relations, since with the focus on international trade, there is always a need to maintain cordial relationships with other states in the long run. All this, in turn, contributes to the economic development of the country and its prosperity.
Although in the context of advantages, mercantilism offer to be a suitable strategy to pursue economic development, but on the other hand, to guarantee such a plan to success they (states) must have a fairly high capacity of political–administrative sector, which eventually means this strategy is not generally apply-able to every states. Taking example from Japan that succeeded to explode their economy by using mercantilism, but in sub-Saharan Africa where corruption widely spread and the governmental people is rotten, instead of improving this strategy will most likely halting their growth (Robert Jackson & Georg Sorensen, 2013, p. 193). Moreover, mercantilism is completely focused on making money, forgetting that people have rights. This is a huge minus of this system in social terms, since it is difficult to determine the well-being of any country without taking into account the will and rights of the people.
In conclusion, mercantilism has its pros and cons. In general, it is aimed at enriching various people and developing the country. While this is an easy approach for those who want to use natural resources, it does not seem easy in the long run. Moreover, this system does not pay due attention to the rights of workers, which makes it socially imperfect.
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