Fernando Alcoforado*
This article aims to present the evolution of mercantilist, classical liberal, Marxist, neoclassical and neoliberal economic thought that have been adopted by humanity throughout history with the presentation of its effects on the economic, political and social development of nations and the world. Mercantilism is a set of economic practices developed in Europe in the Modern Age, between the 15th century and the end of the 18th century. The classical liberal thought was developed in the 16th century with the clear intention of combating mercantilist. Marxism emerged in the second half of the 19th century as an economic theory, a sociological theory, a philosophical method and a revolutionary vision of social change to combat classical liberal capitalist thinking. The neoclassical liberal school of thought was in force between 1870 and 1929 to perfect classical liberal thought and to combat Marxist thought. Neoliberal economic thought is a socioeconomic doctrine that emerged in the 1970s in opposition to Marxism and Keynesianism linked to neoclassical liberal thinking, resuming the old ideals of classical liberalism by advocating the minimal intervention of the State in the economy.
Mercantilism is a set of economic ideas that was adopted for approximately three hundred years by European nations in the sixteenth, seventeenth and eighteenth centuries during the period of the great navigations and the establishment of the colonial system in the American continent in the period of transition from feudalism to the capitalism. The rise of mercantilism, as a set of economic practices, is directly linked to the end of feudalism and the formation of the Modern State. By Modern National State, it is understood the group of nations that emerged during the process of centralization of power in the figure of the king that occurred during the Middle Ages. Classic examples of Modern National States were England, France, Spain and Portugal, which emerged with power centralized in the figure of the king. The emergence of Modern States was directly supported by the power of the bourgeoisie in the struggle to end the privileges of the feudal nobility. With the support of the bourgeoisie, European monarchies invested in commercial and manufacturing development. This process of developing trade and manufacturing (the embryo of industry) was also supported by the intense colonial exploitation that took place on the American continent. The Modern State that emerged in this period with power centralized in the king took control of issues related to the economy as a way of guaranteeing its interests and resolving obstacles that prevented the strengthening of real power. Since these economic practices are considered embryonic to capitalism, some historians call mercantilism commercial capitalism. It was in this context of strong State intervention in the economy, expansion of trade through colonial exploitation by England, France, Spain and Portugal on all continents and growth of manufactures, especially in England and France, that it consolidated a series of economic practices that received the name of mercantilism. Mercantilism gave support to the great European monarchies in their colonial expansions, helped to start the process of globalization, but provided the advance of colonialism by European nations that, in the pursuit of wealth, practiced genocide against the peoples of the Americas and the slavery of the Africans peoples.
Classical liberal economic thinking emerged in the 16th century with the clear intention of combating mercantilism whose practices no longer met the new needs of capitalism. It is an ideology based on the organization of the economy based on individualism, rejecting state interventionism, which means that the largest possible number of economic decisions must be made by companies and individuals and not by the State. In the economic field, it was the ideas of the English philosopher and economist Adam Smith that predominated to establish the guidelines of this new economic thought. Economic liberalism consists in the understanding that the State must not interfere in the economy, since it must be done based on the free initiative of the citizens, who must be free to produce and trade, being responsible for themselves. Meritocracy and the valorization of individual effort are striking in liberal thought, which puts the individual as responsible for wealth and success. For Smith, there would be a kind of “invisible hand” that would cause the economy to develop autonomously in the power of the private sector, without needing the State, as it placed an obstacle in economic growth by wanting to claim its share of profits without offering anything in exchange. Throughout history, liberal states have emerged as a consequence of the progressive erosion of the king’s absolute power. While absolutism decays, liberal currents emerge, which end up coming together to establish the liberal state. The United States implanted the first liberal state in the world after the American Revolution or War of Independence in 1776 and France followed the same path after the French Revolution in 1789. These two countries served as a model for the implantation of liberal states worldwide. Liberalism argued that the State should be limited in its powers and functions and regulated through general rules, with the submission of all to the laws and respect for fundamental and inviolable human rights, generally recognized through some official document, such as the country’s Constitution. Liberalism became the dominant political force from the 19th century to the middle of the 20th century in virtually the entire West. When liberalism first emerged, it was opposed to absolutism (monarchical state) and, later, to socialism (socialist state) after the Russian Revolution in 1917. Economic liberalism was responsible for the advance of capitalism on the planet whose crises led the world to depressions economic events that broke out in 1873 and 1929, as well as the escalation of colonialism and imperialism in all quarters of the Earth and the advent of two world wars (1914-1918 and 1939-1945).
Marxist economic thought is a sociological, philosophical and political doctrine based on dialectical and historical materialism and scientific socialism created by Karl Marx and Friedrich Engels in the 19th century to combat classical capitalist liberal thinking. These thinkers were responsible for substantiating economically and sociologically the socialist ideas that already existed in Europe in the 19th century, stemming from anti-capitalist political theories that preached the need to think of an egalitarian society. Karl Marx unveiled in his work Capital the laws that govern capitalist economic systems that caused a revolution in economic thought and the social sciences in the following decades. It is a thorough investigative exercise by Karl Marx on the functioning of economic relations from the dawn of mankind to the nineteenth century by unraveling the laws that underlie economic activity. Karl Marx said that the driving force of capitalism is the production of surplus value, which is the value of unpaid labor for workers. If the working day is divided between necessary work and excess work, the rate of surplus value is the ratio between the two portions of the working day. Marx’s thinking is not restricted to the field of economics only, but also encompasses philosophy, sociology and history. It called for the overthrow of the capitalist order and the implantation of socialism. The Marxism that served as the basis for the construction of socialism in several countries in the world since 1917 in Russia failed after the success of its implantation in several countries because it conquered the power of the State and did not fulfill its historic promise to promote political and economic progress and social well-being of theirs populations, as well as failed with the restoration of capitalism in Russia, Eastern European countries and China from 1990.
Neoclassical liberal economic thought emerged in the period between the end of the 19th century and the beginning of the 20th century and sought to perfect classical liberal thinking, offer solutions to the crises of capitalism and combat Marxist economic thinking. From 1870, economic thought went through a period of uncertainty in the face of contrasting theories (Marxist and classical liberal). In this troubled period, the Neoclassical Theory emerged through which the methods of economic studies based on classical liberal thought were modified. Through these there was an attempt to rationalize and optimize scarce resources by studying the formation of prices, production and income distribution through the mechanism of supply and demand in the markets. It advocated a competitive economic system that would automatically evolve towards equilibrium, at a level of full employment of the factors of production. Neoclassical economic thought had four important schools: Austrian School, Lausanne School or Mathematical School, Cambridge School and the Swedish School. Austrian School stands out for formulating a new theory of value, based on utility (subjective theory of value), that is, the value of the good is determined by its quantity and usefulness. Also called The Theory of General Equilibrium, the Lausanne School emphasized the interdependence of all prices in the economic system to maintain balance. The Theory of Partial Equilibrium or Cambridge School considered that economics consisted of the study of human activity in economic affairs, therefore, economics would be a science of human behavior and not of wealth. Finally, the Swedish School was responsible for the attempt to integrate monetary analysis with the real analysis that was later made by John Maynard Keynes.
Among the four schools of neoclassical liberal economic thought, the Austrian School and the Swedish School stood out. The Austrian School had as one of its great exponents, Ludwig Von Mises, who published The theory of money and credit making profound criticisms against socialism that had a great influence on the economic thought of Friedrich von Hayek, who, although initially sympathetic to socialism, became one of the academic critics against socialist collectivism in the 20th century. In his book The Way of Serfdom, released in 1944, and his later works, Hayek claimed that socialism required central economic planning and that such planning, in turn, would lead to totalitarianism. Ludwig Von Mises and Friedrich von Hayek later became ideologues of neoliberal economic thought around the world that was to be implemented after the 1970s. Another illustrious economist at the Austrian school was Joseph Schumpeter best known for his works on economic cycles and innovation. He insisted on the role of entrepreneurs in an economy to promote economic development. In Theory of Economic Development, Schumpeter claims that economic life experiences non-continuous changes that called “revolutionary” which is the central problem in the process of economic development. According to Schumpeter, capitalism necessarily goes through long-term cycles, as it is based entirely on scientific inventions and innovations. An expansion phase is made possible by innovations, as they bring productivity gains and encourage entrepreneurs to invest. Schumpeter’s explanation of the importance of innovation as an engine of development has been proven in practice.
Another exponent of neoclassical liberal economic thought linked to the Swedish Neoclassical School was John Maynard Keynes who, with his works, promoted a revolution in economic doctrine, opposing, mainly, Marxist thought and classical liberal thought. His main work was The General Theory of Employment, Interest and Currency launched in 1936. Keynes’ economic thinking defends the state as an active agent against the recession and high unemployment. Because it requires a larger government as a decision maker in a country’s economy, Keynesianism took a stand against classical liberal thought and other schools of neoclassical liberal thought that defend a state as small as possible. Opposing Marxist thinking, Keynes believed that capitalism could be maintained, as long as significant reforms were made, since capitalism had proved incompatible with maintaining full employment and economic stability. Keynes advocated moderate state intervention to achieve economic stability and ensure full employment in the economy. He affirmed that there was no reason for the existence of socialism, since it would not be the possession of the means of production that would solve social problems and it is the State’s responsibility to encourage the increase of the means of production and the good remuneration of its holders. Keynesian thought left some trends that still prevail in the current economic system. Among the main ones, the adoption of macroeconomic models, moderate state interventionism and the use of mathematics in economic science. Neoclassical liberalism was successful with Keynesianism after the Second World War when it contributed to the economic development of most countries in the world until the 1970s and is succeeding in the Scandinavian countries that currently stand as the countries with the greatest political progress, economic and social, and also with the contribution of Joseph Schumpeter with his thesis that technological innovation operates as an engine for the economic development of nations.
Neoliberal economic thought is an economic and political doctrine that emerged in the 20th century based on theories formulated by economists Ludwig von Mises and Friedrich Hayek. Neoliberal theory emerges to oppose Marxist economic thought and Keynesian neoclassical liberal thought of social well-being and proposes the restoration of classical liberal economic thought based on a conservative economic view that aims to minimize the State’s participation in the economy. not only at the national level, but also at the global level. In general, it can be said that neoliberalism, according to the theories of scholars from the Austrian School, seeks to weaken the state by drastically reducing state participation in the economy and deregulating the economy at the national and world levels. Neoliberal theorists advocate minimal tax collection and privatization of public services. Neoliberal doctrine preaches the least possible participation of the State in the economy, giving preference to the private sector. An outline of the neoliberal plan came with the 10 rules of the Washington Consensus, which proposed a basic primer that neoliberal economies should follow. Neoliberalism was adopted in the world after Keynesianism ceased to be effective in the 1970s configured in the fall in world economic growth after the so-called “glorious years” (1950/1960), in the two oil crises and in the debt crisis most of the countries in the world that have become insolvent with international banks. Neoliberalism failed because social inequality and unemployment reached alarming levels all over the world, the world crisis of 2008 erupted and chaos ensued in the world economy thanks to the absence of global economic and financial regulation.
From the above, it can be concluded that, from a political point of view, mercantilism left the negative legacy of colonialism by European nations that, in the pursuit of wealth, practiced genocide against the peoples of the Americas and the slavery of African peoples from the 16th century to the XVIII century. Classical liberalism left the positive legacy of political democracy practiced by liberal states where it was implanted from the 19th century to the middle of the 20th century in practically the entire West, but it presented as a negative legacy that it did not prevent the emergence of Nazifascism between the two world wars. Marxism left the negative legacy of not exercising democracy by implanting dictatorships in socialist countries. Keynesian-inspired neoclassical liberalism leaves the positive legacy of the Scandinavian countries that currently stand as the countries with the greatest political, economic and social progress. Neoliberalism, in turn, is leaving a negative legacy by embracing modern totalitarianism called “liberal democracy” which should be called by its true name: totalitarian mercantile system in which man, society and the whole of our planet are at the service of this ideology in which the only the right it recognizes is the right to private property, the only god it adores is money, in addition to repressing all actions aimed at transforming man and the world.
It can be concluded that, from an economic point of view, mercantilism contributed to the advance of capitalism in Europe and initiated the process of globalization with the worldwide expansion of capitalism. Classical liberalism contributed to the advance of capitalism globally, but it failed economically because it did not prevent the outbreak of the economic depressions of 1873 and 1929 which resulted in two devastating world wars (1914-1918 and 1939-1945) that shook the world economy in the first half of the 20th century. Marxism failed economically because, despite the initial success in promoting economic development in the countries where socialism was implanted, it was unable to make this development sustainable, paving the way for the restoration of capitalism in Russia, Eastern European countries and China. Neoclassical liberalism emphasized the importance of technological innovation for economic development with the contribution of Joseph Schumpeter and, above all, with John Maynard Keynes’s contribution to Keynesianism after the Second World War in promoting the economic development of most countries in the world until the 1970s despite the failure after this period with the exception of the Scandinavian countries that currently stand as the countries with the greatest political, economic and social progress in the world. With neoliberalism, its economic failure materialized with the outbreak of the 2008 global crisis and the chaos that was established in the world economy thanks to the absence of global economic and financial regulation that can lead to the collapse of the international financial system and the explosion of the world debt.
It can be said that, from a social point of view, mercantilism, classical liberalism and neoliberalism have left negative legacies throughout history. Mercantilism left colonialism as a negative legacy with the practice of genocide by European nations against the peoples of the Americas and the slavery of African peoples. Classical liberalism left mass unemployment worldwide as a result of two major world economic depressions in 1873 and 1929 that resulted and two major world wars that resulted in 187 million deaths. Neoliberalism is leaving a legacy of extreme social inequality that has reached alarming levels around the world. Of all economic thoughts, Marxism deserves a positive highlight for its contribution to social development in the countries where socialism was implanted, as well as the Keynesian neoclassical liberalism with the success of its application in Scandinavian countries, which according to the UN are the best governed in the world with the Social Welfare State and are the countries of greatest political, economic and social progress whose peoples are the happiest in the world..
REFERENCES
ALCOFORADO, Fernando. As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo. Curitiba: Editora CRV, 2016.
MUNDO EDUCAÇÃO. Liberalismo. Available on the website <https://mundoeducacao.uol.com.br/historiageral/liberalismo.htm>.
MUNDO EDUCAÇÃO. Neoliberalismo. Available on the website <https://mundoeducacao.uol.com.br/geografia/neoliberalismo-1.htm>.
SILVA, Daniel Neves. O que é mercantilismo? Available on the website <https://brasilescola.uol.com.br/o-que-e/historia/o-que-e-mercantilismo.htm>.
* Fernando Alcoforado, 80, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018, em co-autoria) and Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019).
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