Has mercantilism ever been successful?

Question

Mercantilism, which includes protectionism, industrial policy, capital controls, and other distortions to trade, is generally viewed by economists today as unsound economic policy. An overwhelming majority of mainstream economists view trade restrictions as a net loss to society. For example, the United States' depression-era Smoot-Hawley Tariff Act is widely viewed as having made the depression longer and deeper. As such, it would seem that most successful countries that have used trade barriers in their history became successful in spite of this policy rather than because of it. Nevertheless, a small cadre of heterodox economists insists that protectionism and industrial policy can work.

Are there examples from history of countries that thrived because of their mercantilist policies? I'm looking for proper historical examples at least 50 years old, which rules out "socialism with Chinese characteristics" and other modern successes for which we do not yet have the proper perspective to judge.

Answer 1

There were a few successful instances of mercantilism by countries that started behind others, and needed to "catch up."

These include Russia under Peter the Great in the 18th century, and later, under Count Witte early in the 20th century.

Another example was Japan after the Meiji Restoration of 1868, and again, right after World War II.

China may be today's example (although the jury is still out on this one).

Such policies typically hurt the most ADVANCED countries such as Britain in the 19th century or the United States in the 20th. Being the most developed, they would logically benefit the most from free trade, and suffer the most from anything that distorts trade.

But it's the "second tier" countries that benefit the most from mercantilism, because it could well be that what it gains from modernizing a backward sector more than offsets the losses suffered by the rest of the country.

Answer 2

The Mexican economy flourished in the middle 20th century, transforming the country from a primarily agrarian economy to an industrial one. To achieve this, mining, oil, electricity and many other industries were nationalized, stiff taxes on imported goods were set, and tax cuts and other economic incentives were given to national industries. Monopolies were set in all types of industries.

This allowed the industries to narrow the gap compared to the industrialized nations, created a middle class, and created health and education systems in all the country.