Introduction
This study aims to explore how the manifestation of mercantilism has provided support to globalization. There is an understanding that financial developments have helped sustain globalization amidst internal hindrances mostly involving the emergence of monopolies and external interferences in the form of market globalization. At the same time, however, financial developments became a sustainer of globalization due to its depreciative effects to excess capital. It is therefore noteworthy to investigate globalization, in light of the events that triggered the global financial crisis of 2008 – something that this study seeks to discuss (Blankenburg & Palma, 2009; Boyer, 2000, pp. 111-145; Helleiner, 1995, pp. 315-341).
Key Ideas
Mercantilism, Neoliberalism and Globalization
Mercantilism at the onset of globalization became apparent with the spread of capitalism to territories outside the colonial powers, otherwise known as economic imperialism. Capitalism outside the colonial powers has a two-fold characteristic consisting of domestically produced value and loans from the colonial powers. Put in another way, colonial powers have prompted the spread of capitalism worldwide through the loans they have endowed to several territories outside their own (Broz & Frieden, 2001, pp. 317-343). The reason why colonial powers invest outside their territories is the fact that particular resources are cheaper abroad. Such allows colonial powers to reap vast benefits from their investments abroad, while territories that have received investments gain exposure to the workings of the global market. Therefore, employment in new capitalist territories can find guarantee from constant engagement in export, rather than import, activities. To sustain exportation within new capitalist territories, free trade policies must take place to dismantle barriers to global trade effectively. Such has also provided for the current setup characterizing globalization called neoliberalism, which pertains to free trade activities between nations. The fact that nations thrive under the neoliberal setup means that there are less barriers to international trade. Although neoliberalism runs counter to mercantilism, the latter has emanated from globalization in the sense that economic imperialism has transpired among colonial powers – many being among the most economically powerful nations in the world, and their former colonial strongholds. The concept of mercantilism in such case does not extend to the creation of trade restrictions hindering neoliberalism to work, although the economic relationship between colonial powers and their former colonies appear to involve incentives against full-fledged neoliberal practices (Eichengreen, 1996, pp. 91-184; Kirshner, 2000, pp. 407-436).
Yet, the profitability of trade between developed and developing nations may take place through a reasonable tradeoff offsetting their respective gaps. Developed nations must invest their disposable savings to developing nations, which in turn must use those for financial investments or purchasing new technologies. One daunting problem in this respect is the role of large corporations, whose monopolistic tendencies could lead the investment of disposable savings from developed nations in developing nations to have impacts that are shallower than that optimally expected. The monopolistic behavior of large corporations may stunt the expected development of developing nations from the investments of developed nations due to their control over the flow of said investments (Kirshner, 2000, pp. 407-436; 2001, pp. 41-70). Being self-interested, large corporations may not necessarily use their investments to the fullest within developing nations as they could base their investment behavior on more profitable prospects, not on the overall well-being of recipient developing nations. Therefore, mercantilism in globalization only produces restricted and short-term effects, in that it does not focus on the improvement of developing nations incorporated within global capitalism, particularly in terms of their living standards. Rather, mercantilism in globalization only focuses on the immediate fulfillment of the interests of large corporations in terms of achieving maximum profitability. The fact that large corporations has provided a strong case against the further development of developing nations has further defied neoliberalism, in the sense that free trade is affected by barriers related to monopolization (Eichengreen, 1996, pp. 91-184; Kirshner, 2000, pp. 407-436).
Mercantilism in the Global Financial Crisis
Capitalism, as it has extended worldwide, has already reached its limit in terms of stimulating production in different territories and attaining profitability from the exploitation of various resources worldwide. Given the global reach of production supporting the global market, increasing production is not the main concern of the need to support global capitalism. Rather, the need to stimulate innovation presently stands as the most compelling concern for the sustenance of capitalism worldwide. To enable the development of innovation within global capitalism, the need to establish series of knowledge-based networks have emerged (O’Brien & Williams, 2013). Overall, knowledge based networks focus on the production of research and development efforts through the involvement of various dedicated institutions alongside producers. Thus, large corporations connive with education institutions such as universities and research think tanks, consultancies, start-up companies and organizations dedicated to funding new knowledge, among many others, in order to form knowledge-based networks. With the foregoing regard, knowledge-based networks stand to provide producers in global capitalism to develop innovative products constantly that are profitable and enticing to consumers with reference to their needs (Sinclair, 2005, pp. 119-148).
A closer look at the global financial crisis that happened in 2008 thus reveals that the anomalies therein did not come from any questionable activity on the part of those involved in the operation of global capitalism. Rather, the global financial crisis stands as a natural result of the normal operation of global capitalism, which contradicts hindrances in the internal and external spheres. In such instance, an anomaly arose from the relationship of financial developments and commercial production. Large corporations are those that benefit from financial developments, yet their continued sustenance in such manner tends to block opportunities for new ventures that are more profitable from arising. Put in another way, investments have become concentrated on large corporations, whose self-interests have hindered the growth of potential developments within markets, particularly those within developing nations. The development of knowledge-based networks has since found conflicts with the interests of self-interested large corporations, in that those new enterprises with promising prospects on both profitability and innovations have failed to prosper against such monopolistic scenario (Stiglitz, 2010, pp. 1-26, 58-76).
Conclusion
The reason behind the global financial crisis that happened in 2008 is not due to any anomalous activity on the part of actors within global capitalism. Rather, such was the result of the natural process of global capitalism, which has strongly derived from mercantilism. The spread of capitalism to different parts of the world alone has proceeded in a mercantilist fashion, such that it has involved the investment by the colonial powers of loans to new capitalist territories in order to enable them to produce their own value domestically. Neoliberalism, ideally the setup that best describes globalization in terms of free trade, has faced defiance from the mercantilist relationship of colonial powers and their former colonies, which has partly funded the latter through loans in order to foster capitalism. Thus, the emergence of large corporations, being monopolistic in nature, served as a large anomaly that has led global capitalism to the direction it has turned in 2008. Instead of directing disposable savings coming from developed nations to the welfare of developing nations, large corporations have instead taken control of those investments in the name of greater profitability, without credence to developmental agendas. Large corporations have thus undermined the importance of knowledge-based networks, which are otherwise beneficial to the overall sustenance of global capitalism through the development of new ventures that are more profitable due to its prospects on accommodating the constantly changing needs of consumers. Therefore, focusing on developmental investments arises as an important implication of this study. Future studies on the matter may further develop arguments supporting the relationship between developmental investments and improvements to the process of capitalism, particularly within developing nations and including the further incorporation of knowledge-based networks – seen as important channels of innovation.
References
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