Immanuel Kant wrote that free trade creates perpetual peace. Under the mercantilist era which he had lived in, the truth behind such idea cannot be any clearer.

Mercantilism holds that trade is a zero-sum game with constant volume of global trade. As such, the most prosperous country is the country with the most supply of capital. To a mercantilist, this means export should be encouraged while import should be actively discouraged. One may recognize this as some sort of protectionism.

In a world dominated by mercantilists, low volume of trade would be a norm as each and every mercantilist seeks to accumulate vast amount of capital. This is so because everybody refrains from buying anything from anybody. Trade meanwhile is dependent on the act of buying and selling; without either one, there can be no trade. Mercantilism necessarily limits resources any mercantilist state could muster to only those found within its boundaries.

Individuals demand so many things and not all of those things could be obtained locally. Without trade, demand would be unfulfilled, turning life duller than it should be. Mercantilists of the past realized this and sought to solve it by expanding its boundaries; they internalized resources into their boundaries. In doing so, mercantilists eliminated the need for import and possibly maintained a positive trade balance. This requirement for expansion is one of many factors that fueled colonialism and wars in the past.

As demand becomes more sophisticated, it becomes impossible for local industry to satisfy local demand in the absence of trade. Boundaries of mercantilist states thus require further expansion to internalize more resources to satisfy greater demand. In the end translates into one conclusion: the biggest state, all else being equal, would have the greatest amount of resources. Britain of old, the great mercantilist state, was well on its way to be the largest empire the world has ever seen.

Alas, the Earth is only so big. Continuous expansion eventually will bring mercantilists to each other door step and finally, in absence of trade, the only way to obtain what a mercantilist state needs is by expanding its boundaries into other states’ borders. This typically means war and wars involving mercantilist states did happen from the 16th to the 18th century.

The madness brought by mercantilism was only suppressed after the rationale of trade overwhelmed the prevailing thinking in the late 18th century. Through trade, various states can obtain what it requires without the need to expand its boundaries, without going to war. Sooner or later, trading states will depend on each other to achieve prosperity. To quote Kant:

By virtue of their mutual interest does nature unite people against violence and war… the spirit of trade cannot coexist with war, and sooner or later this spirit dominates every people. For among all those powers… that belong to a nation, financial power may be the most reliable in forcing nations to pursue the noble cause of peace… and wherever in the world war threatens to break out, they will try to head it off through mediation, just as if they were permanently leagued for this purpose.

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