THE MERCANTILE MARKET-STATE

 

This model relies upon a strong central government to protect national industries, subsidize crucial research and development, and steer certain important enterprises toward success. Artificially low prices are set for export goods and artificially low interest rates are maintained that depress currency values. This would lead to capital flight except that capital flows are also regulated by governments and forced savings are extracted from all incomes. Under the Mercantile Model, the opportunities available to the consumer, which have been exalted under the Entrepreneurial Model, are sacrificed to the long-term opportunities of the society. These societies are able to maintain social cohesion—to a far greater degree than entrepreneurial market-states—in part because income disparities are suppressed, variations in take-home pay between manufacturing workers and service workers are rationalized, and elaborate social welfare subsidy systems, including public housing and access to education, are put in place for those—this must be emphasized—who are eager to work. It is important for the states that follow this model to monitor the collusion between the large corporate structures endemic to this model and their bureaucratic allies. Otherwise, the predictability sought and prized by this model will also bring potentially crippling inefficiencies and even corruption. Educational curricula must be tempered by some sense of the demands of the market; otherwise far too few persons will emerge from the educational system with the skills that fit them for employment (a problem that plagues he Managerial Model as well, though the latter's difficulties stem not from a refusal to give technical training so much as a willingness to underwrite costly studies with no professional future).

Mercantile market-states have achieved impressive growth rates: Singapore and Hong Kong have higher living standards than the United Kingdom. But this has not been accomplished through the efficient use of scarce resources. In terms of sheer efficiency, Taiwan, South Korea, and Hong Kong are in about the same productivity class as Egypt, Greece, Syria, and Cameroon. Rather, the mercantile states have succeeded by mobilizing the labor of the total society, and by encouraging very high accumulations of capital. Investment is subsidized and promoted in these states, and although exports generate considerable revenue for investment, it is savings by individuals, corporations, and governments that account for the high levels of investment in Taiwan, South Korea, Singapore, and Japan. Thus although this model may attract adherents because of its historic record of high growth, there is a limit to the performance a state can wring from increased inputs of capital and labor without increased efficiency.

There are several challenges that face this model wherever it has been adopted: opening up domestic markets to foreign competition; reforming the banking sector to bring greater scrutiny to credit transactions; allowing access to cheaper credit for smaller firms that are usually restricted to rela-tively high priced domestic finance and letting the cost of capital to the few dominant firms rise.

All of these challenges confront the inefficiencies of concentrated economic power that is a notable feature of the Mercantile Model. For example, the Korean version is characterized by the concentration of power in four great companies (Samsung, Hyundai, Lucky-Goldstar, and Daewoo) that together account for over half of that country's exports and a third of its sales. These companies are both the instruments of and the beneficiaries of government policy. Yet between 50 percent and 60 percent of the equity of the top thirty companies in Korea is held by the founding families. In Japan, the largest six great companies account for over half the total assets of all listed enterprises. Furthermore, some three-quarters of all shares are mutually held between companies and their financial institutions.