China is buying up the world’s finite industrial resources to feed its industrial growth. From Africa and the Americas to its own territory, Chinese state-run companies are acquiring access to oil, iron, copper, soybeans, and pork. China now controls 90 percent of the world’s rare earth industry—the minerals necessary for the production of technologies such as cellphones and computers—and strictly limits their export.
To political scientists, it can be difficult to characterize the current Chinese system. It defies definitions like communist, fascist, or even totalitarian. Yet to the historian, China’s mix of tight state control over the economy and its attempt to gain control over masses of natural resources actually looks remarkably familiar. It is a mercantilist approach that has already been tried—and that briefly succeeded—under Louis XIV’s finance minister, Jean-Baptiste Colbert, in 17th-century France.
Mercantilism is the idea that the world’s supply of gold and raw materials is finite, and that whichever country dominates these supplies will, in turn, dominate the world economy. And that entails a state managing its economy directly. To achieve this in France, Colbert created a program of state-sponsored colonies, scientific academies, industries, and monopolies, while taxing and, sometimes, forbidding imports of foreign goods. The idea was to amass natural resources, close the French economy to outside competition, and ultimately dominate the world export market.
That attempt was, in many ways, a failure, and Colbertism—or dirigisme, as the state ownership of industry is called—is largely seen as discredited today. But China has industry, population, and global reach that Colbert could not have conceived of, and today it seems to be following Colbert and succeeding.
China’s increasing dominance offers something of a surprise: It suggests that Colbert’s philosophy could actually work better than long believed. But it also offers a cautionary lesson for China, and perhaps an encouraging one for its Western rivals. The experience of France suggests that the most important resource of all—human capital—may be, paradoxically, very difficult for a centralized state to capture.
WHEN KING LOUIS XIV of France took the throne in 1654, France was the most populous and agriculturally rich country in Europe, with more than 23 million inhabitants. Yet as rich as France was, the crown was virtually broke. Louis needed his new finance minister, Colbert, to increase the demand for French goods by bringing the fight to the Dutch Republic in terms of both industrial and naval power. At the time, the Dutch Republic dominated world trade; it also countered the Sun King’s monarchical might by promoting a free market, political freedoms, and religious tolerance.
To counter Holland and start amassing wealth, France needed to build its own shipping and industrial sector, and only the state could do it quickly. Colbert believed that state-sponsored and managed “manufactures” could compete with Holland and employ a million “idle” workers.
Colbert’s administration issued strict rules and regulations, and the state became a vast industrial machine. Colbert built entire ports and ship-building cities, cloth and porcelain factories, and giant infrastructure projects, like the Canal du Midi, which created a national transport network for internal trade.
In terms of what it created, Colbert’s project was a success. During his time in power, the navy grew sixfold to 250 boats, with more battle-ready ships of the line and naval personnel than either Holland or Britain. He founded the Academies of Sciences and Arts as well as the Royal Observatory, hiring foreign scientists to run the institutions. Colbert brought technicians and skilled artisans from Italy, Holland, and England to aid in key industries like cannon manufacturing. He founded the famous Gobelins tapestry works and the Royal Glass Works that made Versailles’ Hall of Mirrors (and which still is in business today as the company Saint-Gobain). He invested state money in the East India Company and expanded French colonies in Canada and Louisiana (the Mississippi River was, for a time, named the Colbert River). And he personally oversaw the building of Versailles, the greatest palace of its time, which served as a showcase for French luxury goods.
Colbert’s financial and legal administration was the envy of the world. From Samuel Pepys, the British chief secretary to the admiralty, to American founding father Alexander Hamilton, who designed the US government’s early financial system, state administrators dreamed of centralizing industrial management as Colbert had done.Continued...