• William Laraque, Managing Director at US-International Trade Services


• 01.12.2015 12:00 am
undisclosed

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.

Alibaba, E-Bay, Amazon, Walmart online et alia are modern platforms whose function is to sell the goods of a seller to a buyer. These are the modern version of the trading companies of the 19th and early 20th century. Emerging market goods are not often seen on these platforms and they function as a form of technological mercantilism whose purpose is to encourage exports of the goods of the country of origin of the platform. Alibaba, for example features Chinese-made goods of every variety including capital goods. The sale of such goods is encouraged by providing the seller with financing.

Here are three prominent examples of this financing:

• Amazon has provided hundreds of millions of dollars of financing to sellers via Amazon Lending which is now spreading to some eight countries.

• EBay Inc.'s PayPal has provided $500 million in loans to sellers since 9/2013.

• Alibaba through Ant Financial has provided $64.4 billion in seller financing throughout the globe, since 2011.

Mobile banking systems of emerging markets are largely a delusion when it comes to bilateral trade. M-Pesa and M-Kopa for example do little to promote the sale of Kenyan goods in global markets.

Economic and job growth will depend on an active engagement by all economies in the massive trade flows in goods, services and investment.