Mercantilist Roots of the Crisis

For several centuries, international relations have been structured by mercantilist practices. These aim at generating an external trade surplus to accelerate the pace of domestic accumulation. The countries that are subjected to these practices have a foreign trade deficit, which tends to handicap their growth. In the long run, countries with an external deficit must inevitably increase their foreign indebtedness, which can be hazardous to them. In a world where some countries have chosen strong mercantilist policies, deficit countries whose currency is not an international reserve one give the wrong answers to their crises if they choose to increase their foreign indebtedness beyond the level necessary to finance productive investments: their flight into indebtedness can only lead them into discrediting their currency and condemning them to vassalage. To avoid that, they must restore their foreign trade balance.