China's recent announcement that it would use its US$2 trillion of foreign reserves to boost its companies' overseas acquisitions tells us that its economic beliefs are neither those of Adam Smith, nor of Karl Marx, but of the 17th century mercantilist Thomas Mun. It is becoming clear that in economics, unlike in "hard" sciences, old belief systems never die.
Mun (1571-1641) wrote a classic magnum opus England's Treasure by Foreign Trade. Published only after his death in 1664, it was nevertheless very influential. Mun had been a director of the East India Company, and, unlike earlier theorists, believed that foreign trade was beneficial. However, he didn't hold with any high-faluting nonsense like comparative advantage or maximization of global economic welfare. For Mun, the purpose of foreign trade was to export more than you imported and, consequently, amass a huge store of foreign "Treasure," whichyou could then use to found colonies that would take control of natural resources.
To further this objective, countries should: cut back domestic consumption as far as possible; increase the use of land and other domestic resources to reduce imports; encourage the export of goods made with foreign raw materials; and export goods with price-inelastic demand because profits would be greater.
Okay, let's read not read too much into things, but clearly the Chinese growth model has a mercantilist element. So far, fair enough. But then Hutchinson goes off the deep end. He argues that the only two ways around this model are: a). Start extracting natural resources from Mars; b). Cull the human population by 6 billion or so to get back to the 1 billion that were alive in Adam Smith's day. I'm not exaggerating here. Hutchinson clearly claims that those are the only two possible outcomes. Here's his conclusion:
Returning to a global population of 1 billion would be difficult, but it may be more practicable than a gigantic interstellar exploration program. If so, it may form the only viable exit from the inexorable approach of the world of Thomas Mun.
Wha? Difficult? Some understatement. And I didn't realize that the concept of comparative advantage had a population limit.
On a quasi-related note, Hutchinson's invocation of Mun w/r/t China reminded me of James Fallows' 1993 invocation of Friedrich List w/r/t Japan. Fallows' piece is a much better article, but the general point is the shockingly similar: an Asian economy rises to power by eschewing the Smith/Ricardo model in favor of some other oft-forgotten political economist from yesteryear. In Fallows' case, it was List, a 19th-century German-born mercantilist who had some ideas in common with Alexander Hamilton.
I think Hutchinson and Fallows both over-state their cases that Japan and China are well-modeled by List or Mun, but at least Fallows isn't arguing in favor of intergalactic mining, or the "difficult" task of getting rid of 6 billion people.