Eli Heckscher
However, in the interwar period, the most influential work was Heckscher’s Mercantilism. In it he explained that mercantilism was but an “instrumental concept” that gave meaning to a particular period in the history of economic policy, that of the transition between medieval municipal policies and the policy of laissez-faire.
This presupposed a certain uniformity of thought among the writers of the period (Heckscher 1931 [1955], I: 27). Smith saw mercantilism mainly as a protectionist and a monetary system, Schmoller as a system of unification and reorganisation of the economy and society around a state and a national market, and Cunningham as a system of power in a context of national rivalries. In a way, Heckscher tried to bring together these three interpretations by arguing that Smith’s criticism, although theoretically sound, lacks historical relativity, a failing that could be compensated for by the Historical School.At the heart of Heckscher’s synthesis was the idea that the specificity and coherence of mercantilism lay in its perfect adequacy with the early modern period, just as with laissez-faire in the following period. As the Historical School noted, the specificity of the first modernity was to make the State the subject of economic policy and consecutively to make wealth a “basis for state power” (Heckscher 1931 [1955], I: 21, 25), while laissez-faire understood wealth as a mainly individual subject. Thus, on the question of objectives, Heckscher followed Cunningham: mercantilism placed the objective of power before that of plenty, while laissez-faire reversed their relationship. The reason for this ranking derived mainly from a “static” and finite vision of world economic resources that inevitably led to conflicts over their allocation, as each nation can only improve its position “through acquisitions from other countries”.
This led to frequent trade wars in the seventeenth and eighteenth centuries that often turned into military wars (ibid., I: 25-6; see also Heckscher 1936-37 [1969]: 25).Mercantilist policy broke with medieval policy. It was no longer based on the dominant feeling of the “love of goods”, but on the “fear of goods”, namely, the fear of not selling goods justifying a policy of exporting goods rather than importing them and of protection rather than provision. As for the “monetary aspect”, which according to Heckscher was less important than the “commodity aspect”, the main element of mercantilism was the doctrine of the balance of trade and the dominant feeling would tend to be that of the love of money, although he did not use this expression in his book.
Ultimately, what unified and particularised the mercantilists and divided them from economic liberals were the different beliefs and “conceptions of society” (Heckscher 1931 [1955], I: 28). It was not freedom of trade that the mercantilists “harped upon”, but the doubt that there was “a pre-established harmony” and therefore the free play of economic forces (Heckscher 1936-37 [1969]: 32).