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How does the later Keynesian defence of Mercantilism challenge the neoclassical theory that trade liberalisation is...

How does the later Keynesian defence of Mercantilism challenge the neoclassical theory that trade liberalisation is an unambigiously good thing?

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Answer #1

Keynesian defense goes with the Mercantilism, because mercantilism promotes exports and it helps to meet the demand in some other nations. While doing so, it creates wealth for the firms and jobs for the people. But, it does not propose that trade liberalization is always good, because international trade should take place when there are regulatory framework in place to deal with the challenges of the international trade. Not doing so, will harm the domestic, industrial structure, promote economic rent, exploitation and corruption. So, it will create more harm than the good. These aspects are overlooked by neoclassical approach. It makes the philosophy of liberal trade always a good thing to be challenged by Keynesian approach.

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