Chapter One: Economic Globalization

VII. The Economic Weapons Of Nationalism

'Crony capitalism' neatly sums up the common view of how countries often approach economic activity. For the unreformed robber baron state, business is a source of revenue, an instrument of policy, and a means of rewarding its servants.

European monarchs and their governments from the 15th to the 17th centuries routinely created licensing or taxation regimes to extract revenue from trade and business activity. Then there was (and is) seignorage, the profits to be had from management of currencies. The heads of licensed monopolies were seldom appointed for their skill in managing commercial activity, but almost always as a reward for services in another direction. As a result, economic activity was less efficient and rewarding than it could have been if carried out in a free market.

The 18th century brought enlightenment, with the work of such great economic rationalists as David Ricardo and Adam Smith, resulting in a stupendous economic leap forward for most of the nations of Europe and their colonies. However the 19th century saw the arrival of social, doctrinal and political agendas for governments: the State began to assume responsibility for the regulation of economic affairs and not just to use or abuse business on a pragmatic basis.

Mercantilism led to the erection of trade barriers,socialism led to the State take-over of large tranches of most economies, and dirigisme led to their mis-management. By mid-20th century, in most countries more than 50% of the economy was being throttled in this way; in the 'command' economy countries such as the USSR, that figure was close to 100%.