Hernando de Soto, the Peruvian economist and author of the very interesting book, "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else," made an important distinction in his Wall Street Journal opinion piece "The Real Enemy for Trump is Mercantilism, Not Globalism."
President-elect Donald Trump has made a lot of noise about bad trade deals, saying that he wants to protect American workers and increase barriers to trade that he has promised would allow U.S. industry to flourish.
The stated enemy is taken to be globalization, the spread of finance and trade throughout the world.
But de Soto said that globalization isn't the devil Trump has criticized and promised to attack once he takes office.
Globalization will continue and become more of a factor for both businesses and governments, and it can be slowed but not reversed entirely.
Fighting globalization would be foolish. If the U.S. sidesteps globalization, it will suffer the typical setbacks resulting from reducing trade and also give up the playing field to China, which is hoping that America backs away from its role in world commerce and finance.
"Chinese President Xi Jinping was more than happy to tell attendees at the Asia-Pacific Economic Cooperation meeting in my home city of Lima, Peru, this month that his country would support all those who want to keep global markets open," according to de Soto.
In essence, retreating isn't an option.
What de Soto emphasizes in his article is that it isn't globalism that is at fault but efforts to expand trade through bilateral trade agreements.
The reason is that bilateral agreements are helpful to special interests that get targeted assistance from "complex regulations, subsidies, bailouts, taxes, licenses and bilateral treaties that allowed them to access large-scale global markets and import cheap labor," according to de Soto.
By their very nature, others are excluded from the privileges that come from this assistance.
Well-known Columbia University Economist and Professor Jagdish Bhagwati has argued that these bilateral trade agreements "give partners the right to exclude and discriminate against countries not included in the agreement" and "have replaced multilateral global trade agreements whose benefits were automatically shared by all countries," according to de Soto.
These practices represent a form of "mercantilism," also known as "crony" or "non-inclusive" capitalism, according to de Soto.
In other words, Trump and others shouldn't be concerned about globalization.
But if globalization is to work, special dealing will have to be substantially reduced, de Soto said.
People must be treated equally when it comes to who can "play" and who must sit on the sidelines, he said.
What is happening throughout the world is that those who have been excluded are rebelling by taking over the ballot boxes in the democratic world, de Soto said.
This discontent is being studied more and more, but a crucial point in this discussion is that the problems connected with world trade aren't the direct result of the spreading impact of globalized finance and trade.
Instead, the problems are mostly the result of discriminatory, non-inclusive capitalism or the bilateral trade deals that don't deal everyone in.
The answer to this dilemma is to re-write not eliminate trade deals.
The U.S. must root out the cause of the discontent that results from the bilateral trade agreements and make these agreements more inclusive so that everyone can participate in the benefits.
Otherwise, the discontent will grow, putting more pressure on politicians to do something, even withdraw from the agreements as they are written.