http://www.econlinks.uma.es/Escuelas/mercant.htm http://www.econlib.org/library/Enc/Mercantilism.html mer·can·til·ism (mûrkn-t-lzm, -t-)
n.
1. The theory and system of political economy prevailing in Europe after the decline of feudalism, based on national policies of accumulating bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade.
2. The practice, methods, or spirit of merchants; commercialism.

The Mercantilists

For Europe, the 17th century was "the most horrible century", engulfed by interminable national, religious and civil wars, made memorable for their particularly savage brutality. From ashes and smoke, the national state was formed and enshrined in the Reformation-inspired contractual "natural law" philosophy of Grotius, Hobbes and Pufendorf.
With the rise of the State, the 17th Century marked the ascendancy of two classes of peoples needed by the State: bureaucrats to run it and merchants to finance it. It was from the assorted pamphlets, studies and treatises of these groups of practitioners that Mercantilism developed. In England and Holland, the bulk of the economic writing was done by merchants drawn from their rising bourgeois communities -- thus the term "Mercantilism". In France and Germany, where the bourgeoisie was smaller, economic arguments were articulated largely by state officials -- thus French Mercantilism is better known as "Colbertisme" (named after Jean-Baptiste Colbert, French minister of finance) and German Mercantilism as "Cameralism" (after the German term for the royal chamber).
This difference in background between English-Dutch and French-German Mercantilists did not imply much difference in their economic doctrine. Both groups recognized the intimate, symbiotic relationship between the wealth of merchants and the power of the State: the flourishing of business meant more revenue and thus power for the State; the power of the State could secure the profitable trading routes and grant the monopolies desired by the merchants. English Mercantilism is often divided into three phases: the crude "Bullionist" stage lasting roughly from the 1580s to 1620, the "Traditional" stage lasting from 1620 to about 1700, overlapping with the "Liberal" stage which stretched from the 1680s to the 1750s. French Colbertisme is said to have lasted between 1660s and 1750s, while German Cameralism had perhaps the longest time span, stretching from 1560s to 1750s and, through the hands of Neo-Cameralists, stretching even beyond 1800.
At the heart of the Mercantilist system is an obsession with the positive feedback between growth and wealth accumulation: more economic activity meant more wealth (for merchants and the State), more wealth meant more activity. They recognized two basic preconditions for increasing enterprise: the existence of profit opportunities and flexible credit facilities. The Mercantilists proposed that activity rose whenever prices rose (because they believed higher prices meant higher profits) and interest rates fell (thus easier credit). Both of these things occur, they noted, when the quantity of money in a country is increased. Money, in the those days, was gold and silver. Thus, in order to increase national output, the early Mercantilists recommended, every effort, fair or foul, must be made by the State to ensure that, whether bullion or coins, as much gold and silver as possible enters that country and as little as possible leaves the country.
Initially, this was thought to involve direct restrictions on the export of gold, a practice highly recommended by the Bullionist strain of Mercantilists, notably Thomas Milles and Gerald de Malynes. This brought the protest of the charter companies, notably the Society of Merchant Adventurers and the British East India Company, which traded extensively overseas and needed the gold export restrictions relaxed (cf. Wheeler, 1601). The influential Malynes (1601, 1621) inveighed thunderously against the companies, blaming them and their allies for the ruin of England. He protested to the English Court that the Charter companies, by setting an exchange ratio for English currency below its intrinsic worth (which had been so "wisely" decided upon the court) were not only undermining royal authority and Divine justice, but by encouraging the exportation of specie were thus a "cancer" on the Commonwealth. He recommended even more draconian restrictions on export of specie as a way to fix the problem and "reflate" the economy. No friend to financiers, Malynes resurrected the old Scholastic arguments against usury, arguing that interest created an unnatural cost of credit and held back enterprise.
Against Malynes's recommendations were arrayed two formidable writers, Thomas Misselden and Thomas Mun -- the former more of a agitator, the latter more of a scholar, but both charter company men. Misselden and Mun admitted the benefit of specie inflow, but did not blame outflows on "evil financiers" and charter companies maintaining a separate exchange ratio for currency, but rather on the external balance of trade. Mun, in particular noted that outflows/inflows of gold are determined by the balance of payments, which includes the balance of trade, but also capital transfers. Their recommendation was that the state can only stem the outflow of gold not by restrictions on gold movements, but rather by encouraging exports and discouraging imports. This trade-specie flow mechanism, they argued, could not be disabled by royal dictation but was a mechanism forced upon the nations of the world by "natural law". It cannot be stopped, but it can be encouraged in the right direction. The optimal formula had already been laid out years earlier by Jean Bodin: impose high tariffs and duties on the export of raw materials and the import of finished goods, and low tariffs and duties on the import of raw materials and the export of finished goods.
Another contribution of Mun was the recognition that perhaps rising prices were not all that desirable: they decrease the competitiveness of exports, thus worsening the balance of trade and lead to gold outflow. This had not been recognized by Malynes or Misselden, who had argued repeatedly for the benefits of price inflation. The Mercantilists struggled with, but never actually resolved, the contradiction between the industry-stimulating but export-crippling price rises.
Another concern was the possibility of rising prices and industry might also lead to rising wages that might cut into those profits and thus reduce output. The Mercantilists did not mince words on this: they recommended that wages should be kept as low as possible. They believed that low real wages actually increased the productivity of laborers (an effect later disputed and reversed by Cantillon and the Ricardians). To keep wages low, the Mercantilists applauded policies aimed at increasing population and recommended the use of labor-saving machinery whenever possible.
The watershed in Mercantilist thinking was the work of William Petty (1690). He began focusing attention on income distribution and the relative values of the contributions of "factors of production", which, for him, was basically labor and land. It was Petty that initiated the idea that rent on land was a surplus above wage payments. Petty's exercise anticipated that of Ricardian rent -- indeed, he went so far as to talk about diminishing returns to land on the basis of their distance from the market.
Wages, for Petty, were determined by what was necessary for the laborer "Live, Labor and Generate". Petty used this to initate the "labor theory of value" whereby the relative values of goods were determined by the relative amounts of labor-time involved in producing them. He justified this equality of relative labor time and relative prices on the basis of arbitrage. He also used arbitrage reasoning to argue that the interest on capital would be equated with the rent on land (but Petty did not really have a good, independent theory of capital). Thus, Petty anticipates many of the later Classical Ricardian doctrines.
Mercantilism was given another twist in its "liberal" phase by Sir Dudley North (1691) and Sir Josiah Child (1693), who were perhaps the first to recognize that international trade, far from being a zero-sum game, could be mutually beneficial to both parties. North was also one of the first to begin talking about "profit" and "capital" as a distinct factor of production, and recognized that money was only of value when lent out for capital. The theory of money was also given more careful consideration by John Locke (1692), who formulated the concept of "velocity" and effectively initiated the Quantity Theory of Money.
Mercantilist doctrine maintained itself throughout much of the 18th Century. The rise of the Enlightenment, however, changed things substantially. The works of Richard Cantillon, Jacques Turgot and the Physiocrats in France and David Hume and his friend Adam Smith in Great Britain, were often designed to go directly against Mercantilist opinion. Their new view that the wealth of a nation really arises from circulating income flows and their insistence on the neutrality of money, undermined the Mercantilists's "stock-of-money" concept of wealth. The Enlightenment economists also introduced the idea of "natural balance" of those flows, which effectively replaced the "growth obsession" of the Mercantilists with the "equilibrium obsession" of the Enlightenment economists.
These new ideas were not immediately successful. The Physiocrats remained in the shadows of the French court, with the Colbertistes and anti-Physiocrats such as Forbonnais still maintaining their great influence on policy. Great Britain, on the dawn of its industrial revoltuion, was somewhat more receptive to the new doctrines, although it could still produce remarkable semi-Mercantilists such as Sir James Steuart (1767). Germany, for the most part, remained immune from the new theories, and safely in the hands of the Neo-Cameralists well into the 19th Century.
The Bullionists * homas Milles, c.1550-1627. * Radical British official who wanted to impose severe restrictions on trade to particular ports and companies and legally force foreign merchants to purchase British goods with export proceeds. * Gerard de Malynes, c.1586-1641. (1) , (2) . * Saint George for England Allegorically Described, 1601. * A Treatise on the Canker of England's Commonwealth , 1601. * Consuetudo vel Lex Mercatoria or the Ancient Law- Merchant, 1622. * The Maintenance of Free Trade , 1622. * The Centre of the Circle of Commerce , 1623. * Ally of Milles whose misfortunes as a merchant led him to denounce the trading policies of chartered companies and financiers. Promoter of heavy restrictions on trade and supervision of the export of bullion. Outlined, following Bodin, how the influx of American gold had risen prices abroad and thus deteriorated the terms of trade for England. Argued that as exchange rates are determined by the evil maneouvres of wily financiers allied with the charter companies, damaging bullion exports will always ensue. Thus, the only way to avoid this would be to fix exchange rates to parity and control the export of bullion.
"Traditional" English Mercantilists * John Wheeler, c.1553-1611. * Treatise on Commerce, 1601. * Leader of the Society of Merchant Adventurers, promoter of low interest policies and of exclusive rights in charter company trade. Opponent of Milles and Malynes. * Edward Misselden, 1608-1654. (1) , (2) . * Free Trade and the Means to Make Trade Flourish, 1622. * Circle of Commerce 1623. * Argued that exchange rates and gold movements were determined by the balance of trade (and not by Malynes's "evil financiers"). Argued for government policies to maintain favorable trade balance to insure inflow of bullion. Also promoted devaluation of British money in order to promote favorable trade balance - a move opposed vociferously by Malynes and developed into a lively debate between them. * Thomas Mun, 1571-1641. (1), (2 ), (3) , (4) * A Discourse of Trade from England unto the East- Indies, 1621. * England's Treasure by Forraign Trade , 1664. * East India Company official who is perhaps most identified with "the" quintissential Mercantilist position. Argued, with Misselden, for government to keep favorable trade balance by promoting exports and restricting imports in order to bring more money into home country. Also promoter of devaluation and charter companies to aid this. Doubted that rising prices was a good policy. * John Locke, 1632-1704. * Rice Vaughan, ??-1672. (1) , (2) * Discourse on Coins and Coinage, 1675. * Promoted "metallist" theory of money.
The Econometricians * Sir William Petty, 1623-1687 * John Graunt, 1620-1674 * Natural and Political Observations...Upon Bills of Mortality, 1662. * A friend of Petty's and compiler of a 1662 treatise on demographics and social statistics. His method of disentangling data was remarkable for his prescient use of the "law of large numbers" logic. * Gregory King, 1648-1712. * A Scheme of the Rates and Duties Granted to His Majesty upon Marriages, Births and Burials, 1695. * Natural and Political Observatons and Conclusions, 1696. * Of the Naval Trade of Great Britain, 1697. * English surveyor and mapmaker. His 1695 survey of taxes and their geographical and demographic distribution in Great Britain include some of the first estimates of population in Great Britain. His 1696 examination of family income and expenditure include his famous calculation of the relationship between quantity of wheat and price of wheat, what could be considered the first econometric demonstration of the "Law of Demand", later taken up by D'Avenant. * Charles D'Avenant, 1656-1714. (1) , (2) . * An Essay on the Ways and Means of Supplying the War, 1695. * A Memorial Concerning the Coin of England, 1695. * A Memorial Concerning Credit, 1696 * Essay on the East India Trade , 1696. * Discourses on the Public Revenue and on the Trade of England, 1698. * Essay on the Probable Means of Making a People Gainers in the Balance of Trade , 1699. * Dramatist, politician and promoter of Petty. Davenant was a traditionally-minded Mercantilist along the lines of Mun. In his 1699 Essay, Davenant depicted the first "demand schedule" by expostulating the inverse statistical relationship between price and quantity of corn. As he acknowledged Gregory King for the observations, this subseqently became known as the "King-Davenant Law". * William Fleetwood, 1656-1723 * Chronicon Peciosum, or an account of English money, the price of corn and other commodities for the last six hundred years. 1707 * Not really a Mercantilist thinker in any sense. His principal claim to be on his list was his massive 1707 collection of historical price statistics.
"Liberal" English Mercantilists * Sir Josiah Child, 1630-1699. (1) , (2) , * Brief Observations Concerning Trade and Interest on Money, 1668. * A New Discourse of Trade , 1693. * A Discourse Concerning the Having Many Children, 1695. * East India Company merchant and the wealthiest man in Britain - which seems to contradict his call for liberal trading policies. Strong promoter of legal restrictions to maintain low interest rates to make financing of British trade easier (and thus more competitive with the cheap- financed Dutch). It was propositions on interest rates spurred John Locke into action. * Sir Dudley North, 1641-1691. (1) , (2) , Portrait * Discourses Upon Trade , 1691 * Obscure free trader, advocate of low interest to promote trade and wealth accumulation. Saw trade as a "commutation of superfluities" as opposed to a way a nation could acquire treasure. First to distinguish capital as a separate factor of production. * Isaac Gervaise, 1680-1720. (1) , (2) . * A System or Theory of the Trade of the World , 1720. * Developed a multi-country system of international trade. A articulate proponent of free trade. * Samuel Fortrey, 1622-1681. (1) , (2) . * England's Interest and Improvement, 1673. * Provided rudiments of the theory of comparative advantage. * Nicholas Barbon, 1637-?1698. (1) , (2) . * Discourse of Trade , 1690 * A Discourse Concerning Coining the New Money Lighter, 1696. * Physician and businessman, Barbon was one of the more careful Mercantilist writers. He promoted the idea that "utility" or "use" and scarcity to confer value on goods. Also the first to discuss the idea of interest as the payment of a "rent on stock". * Roger Coke, ?-1704? (1) , (2) . * A Discourse of Trade , 1670. * Reasons of the Increase in Dutch Trade, 1671. * England's Improvement, 1675. * Traced the rise of Dutch prosperity, linking it to the advantages of liberalizing trade and recommended similar course of action for Britain. * Bernard de Mandeville, 1670-1733. * Sir James D. Steuart, 1713-1780
French Colbertisme * Jean Bodin, 1530-1596. * Antoine de Montchrétien, 1575-1621. * Traite de l'oeconomie politique, 1615. * French hardware manufacturer and poet who originated the term "political economy". * Jean Baptiste Colbert, 1619-1683. * François Veron de Forbonnais and the 18th Century Neo-Colbertistes
German Cameralism * Veit Ludwig von Seckendorff, 1626-1692. * Der Teutsche Fürsten Staaten, 1655. * Der Christern Staat, 1688. * German camerialist, outlined the paternalistic role of the State in the economy, notably its responsibility for increasing population, education, control of usury, regulation of trade, upholding contract law and encouraging the right resource allocation, which were to become the dominant concerns of the Cameralists. * Johann Joachim Becher, 1625-1685. * Politicischer Discurs von den eigentlichen Ursachen des Auf- und Abnehmens der Städte, länder und Republiken, 1668. * Emphasized the importance of artisans and manufacturing, vigorously opposed to monopolies. * Philip Wilhelm von Hornick, 1638-1712. * Österreich uber Alles, 1684. * As the title of his book indicates, Hornick was a radical Austrian cameralist. Defined natural resources, rather than money, as the wealth of a nation. * The Neo-Cameralists (Justi, Darjes, Sonnenfels)
Resources on Mercantilism * "The Tory Origins of the Free Trade Doctrine" by William J. Ashley, 1897, QJE * Mercantilism at Britannica.com * El Pensiamento Mercantilista - by C.M.Gómez Gómez * "The Industrial Revolution and Birth of the Anti-Mercantilist Idea" by Daniel J. Whiteneck * Pages on Mercantilism and American Colonies - (1), (2). * A Century of War and Revolt, 1560-1640 - basic point-by-point historical account of the period. * Notes on the Mercantilists by Zhang and Sicilian * (1), * Feudalism and Capitalism in Europe * Mercantilism is economic nationalism for the purpose of building a wealthy and powerful state. Adam Smith coined the term “mercantile system” to describe the system of political economy that sought to enrich the country by restraining imports and encouraging exports. This system dominated Western European economic thought and policies from the sixteenth to the late eighteenth centuries. The goal of these policies was, supposedly, to achieve a “favorable” balance of trade that would bring gold and silver into the country and also to maintain domestic employment. In contrast to the agricultural system of the physiocrats or the laissez-faire of the nineteenth and early twentieth centuries, the mercantile system served the interests of merchants and producers such as the British East India Company, whose activities were protected or encouraged by the state. * The most important economic rationale for mercantilism in the sixteenth century was the consolidation of the regional power centers of the feudal era by large, competitive nation-states. Other contributing factors were the establishment of colonies outside Europe; the growth of European commerce and industry relative to agriculture; the increase in the volume and breadth of trade; and the increase in the use of metallic monetary systems, particularly gold and silver, relative to barter transactions. * During the mercantilist period, military conflict between nation-states was both more frequent and more extensive than at any other time in history. The armies and navies of the main protagonists were no longer temporary forces raised to address a specific threat or objective, but were full-time professional forces. Each government’s primary economic objective was to command a sufficient quantity of hard currency to support a military that would deter attacks by other countries and aid its own territorial expansion. * Most of the mercantilist policies were the outgrowth of the relationship between the governments of the nation-states and their mercantile classes. In exchange for paying levies and taxes to support the armies of the nation-states, the mercantile classes induced governments to enact policies that would protect their business interests against foreign competition. * These policies took many forms. Domestically, governments would provide capital to new industries, exempt new industries from guild rules and taxes, establish monopolies over local and colonial markets, and grant titles and pensions to successful producers. In trade policy the government assisted local industry by imposing tariffs, quotas, and prohibitions on imports of goods that competed with local manufacturers. Governments also prohibited the export of tools and capital equipment and the emigration of skilled labor that would allow foreign countries, and even the colonies of the home country, to compete in the production of manufactured goods. At the same time, diplomats encouraged foreign manufacturers to move to the diplomats’ own countries. * Shipping was particularly important during the mercantile period. With the growth of colonies and the shipment of gold from the New World into Spain and Portugal, control of the oceans was considered vital to national power. Because ships could be used for merchant or military purposes, the governments of the era developed strong merchant marines. In France, Jean-Baptiste Colbert, the minister of finance under Louis XIV from 1661 to 1683, increased port duties on foreign vessels entering French ports and provided bounties to French shipbuilders. * In England, the Navigation Act of 1651 prohibited foreign vessels from engaging in coastal trade in England and required that all goods imported from the continent of Europe be carried on either an English vessel or a vessel registered in the country of origin of the goods. Finally, all trade between England and its colonies had to be carried in either English or colonial vessels. The Staple Act of 1663 extended the Navigation Act by requiring that all colonial exports to Europe be landed through an English port before being re-exported to Europe. Navigation policies by France, England, and other powers were directed primarily against the Dutch, who dominated commercial marine activity in the sixteenth and seventeenth centuries. * During the mercantilist era it was often suggested, if not actually believed, that the principal benefit of foreign trade was the importation of gold and silver. According to this view the benefits to one nation were matched by costs to the other nations that exported gold and silver, and there were no net gains from trade. For nations almost constantly on the verge of war, draining one another of valuable gold and silver was thought to be almost as desirable as the direct benefits of trade. Adam Smith refuted the idea that the wealth of a nation is measured by the size of the treasury in his famous treatise The Wealth of Nations, a book considered to be the foundation of modern economic theory. Smith made a number of important criticisms of mercantilist doctrine. First, he demonstrated that trade, when freely initiated, benefits both parties. Second, he argued that specialization in production allows for economies of scale, which improves efficiency and growth. Finally, Smith argued that the collusive relationship between government and industry was harmful to the general population. While the mercantilist policies were designed to benefit the government and the commercial class, the doctrines of laissez-faire, or free markets, which originated with Smith, interpreted economic welfare in a far wider sense of encompassing the entire population. * While the publication of The Wealth of Nations is generally considered to mark the end of the mercantilist era, the laissez-faire doctrines of free-market economics also reflect a general disenchantment with the imperialist policies of nation-states. The Napoleonic Wars in Europe and the Revolutionary War in the United States heralded the end of the period of military confrontation in Europe and the mercantilist policies that supported it. * Despite these policies and the wars with which they were associated, the mercantilist period was one of generally rapid growth, particularly in England. This is partly because the governments were not very effective at enforcing the policies they espoused. While the government could prohibit imports, for example, it lacked the resources to stop the smuggling that the prohibition would create. In addition, the variety of new products that were created during the industrial revolution made it difficult to enforce the industrial policies that were associated with mercantilist doctrine. * By 1860 England had removed the last vestiges of the mercantile era. Industrial regulations, monopolies, and tariffs were abolished, and emigration and machinery exports were freed. In large part because of its free trade policies, England became the dominant economic power in Europe. England’s success as a manufacturing and financial power, coupled with the United States as an emerging agricultural powerhouse, led to the resumption of protectionist pressures in Europe and the arms race between Germany, France, and England that ultimately resulted in World War I. * Protectionism remained important in the interwar period. World War I had destroyed the international monetary system based on the gold standard. After the war, manipulation of the exchange rate was added to governments’ lists of trade weapons. A country could simultaneously lower the international prices of its exports and increase the local currency price of its imports by devaluing its currency against the currencies of its trading partners. This “competitive devaluation” was practiced by many countries during the Great Depression of the 1930s and led to a sharp reduction in world trade. * A number of factors led to the reemergence of mercantilist policies after World War II. The Great Depression created doubts about the efficacy and stability of free-market economies, and an emerging body of economic thought ranging from Keynesian countercyclical policies to Marxist centrally planned systems created a new role for governments in the control of economic affairs. In addition, the wartime partnership between government and industry in the United States created a relationship—the military-industrial complex, in Dwight D. Eisenhower’s words—that also encouraged activist government policies. In Europe, the shortage of dollars after the war induced governments to restrict imports and negotiate bilateral trading agreements to economize on scarce foreign exchange resources. These policies severely restricted the volume of intra-Europe trade and impeded the recovery process in Europe in the immediate postwar period. * The economic strength of the United States, however, provided the stability that permitted the world to emerge from the postwar chaos into a new era of prosperity and growth. The Marshall Plan provided American resources that overcame the most acute dollar shortages. The Bretton Woods agreement established a new system of relatively stable exchange rates that encouraged the free flow of goods and capital. Finally, the signing of the GATT (General Agreement on Tariffs and Trade) in 1947 marked the official recognition of the need to establish an international order of multilateral free trade. * The mercantilist era has passed. Modern economists accept Adam Smith’s insight that free trade leads to international specialization of labor and, usually, to greater economic well-being for all nations. But some mercantilist policies continue to exist. Indeed, the surge of protectionist sentiment that began with the oil crisis in the mid-1970s and expanded with the global recession of the early 1980s has led some economists to label the modern pro-export, anti-import attitude “neomercantilism.” Since the GATT went into effect in 1948, eight rounds of multilateral trade negotiations have resulted in a significant liberalization of trade in manufactured goods, the signing of the General Agreement on Trade in Services (GATS) in 1994, and the establishment of the World Trade Organization (WTO) to enforce the agreed-on rules of international trade. Yet numerous exceptions exist, giving rise to discriminatory antidumping actions, countervailing duties, and emergency safeguard measures when imports suddenly threaten to disrupt or “unfairly” compete with a domestic industry. Agricultural trade is still heavily protected by quotas, subsidies, and tariffs, and is a key topic on the agenda of the ninth (Doha) round of negotiations. And cabotage laws, such as the U.S. Jones Act, enacted in 1920 and successfully defended against liberalizing reform in the 1990s, are the modern counterpart of England’s Navigation Laws. The Jones Act requires all ships carrying cargo between U.S. ports to be U.S. built, owned, and documented. * Modern mercantilist practices arise from the same source as the mercantilist policies of the sixteenth through eighteenth centuries. Groups with political power use that power to secure government intervention to protect their interests while claiming to seek benefits for the nation as a whole. In their recent interpretation of historical mercantilism, Robert B. Ekelund and Robert D. Tollison (1997) focused on the privilege-seeking activities of monarchs and merchants. The mercantile regulations protected the privileged positions of monopolists and cartels, which in turn provided revenue to the monarch or state. According to this interpretation, the reason England was so prosperous during the mercantilist era was that mercantilism was not well enforced. Parliament and the common-law judges competed with the monarchy and royal courts to share in the monopoly or cartel profits created by mercantilist restrictions on trade. This made it less worthwhile to seek, and to enforce, mercantilist restrictions. Greater monarchical power and uncertain property rights in France and Spain, by contrast, were accompanied by slower growth and even stagnation during this period. And the various cabotage laws can be understood as an efficient tool to police the trading cartels. By this view, the establishment of the WTO will have a liberalizing effect if it succeeds in raising the costs or reducing the benefits of those seeking mercantilist profits through trade restrictions. * Of the false tenets of mercantilism that remain today, the most pernicious is the idea that imports reduce domestic employment. Labor unions have used this argument to justify protection from imports originating in low-wage countries, and there has been much political and media debate about the implications of offshoring of service sector jobs for national employment. Many opponents have claimed that offshoring of services puts U.S. jobs at risk. While it does threaten some U.S. jobs, it puts no jobs at risk in the aggregate, however, but simply causes a reallocation of jobs among industries. Another mercantilist view that persists today is that a current account deficit is bad. When a country runs a current account deficit, it is either borrowing from or selling assets to the rest of the world to finance expenditure on imports in excess of export revenue. However, even when this results in an increase of net foreign indebtedness, and associated future debtservicing requirements, it will promote economic wealth if the spending is for productive purposes that yield a greater return than is forgone on the assets exchanged to finance the spending. Many developing countries with high rates of return on capital have run current account deficits for extremely long periods while enjoying rapid growth and solvency. The United States was one of these for a large part of the nineteenth century, borrowing from English investors to build railroads (see international capital flows). Furthermore, persistent surpluses may primarily reflect a lack of viable investment opportunities at home or a growing demand for money in a rapidly developing country, and not a “mercantile” accumulation of international reserves at the expense of the trading partners.