Economic nationalism

Economic nationalism, or economic patriotism, refers to an ideology that favors state interventionism in the economy, with policies that emphasize domestic control of the economy, labor, and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital. In many cases, economic nationalists oppose globalization or at least question the benefits of unrestricted free trade. Economic nationalism is the doctrine of mercantilism, and as such favors protectionism.

History

While the coining of the term "economic patriotism” has been attributed to French parliamentarian Bernard Carayon,[1][2] there is evidence that the phrase has been in use since earlier.[3] In an early instance of its use, William Safire in 1985, in defending President Reagan's proposal of the Strategic Defense Initiative missile defense system, wrote, "Our common denominator is nationalism - both a military and economic patriotism - which inclines us to the side of pervasive national defense."[4]

Historical examples

Average Tariff Rates for Selected Countries (1913-2007)
Tariff Rates in Japan (1870–1960)
Average Tariff Rates in Spain and Italy (1860-1910)
Average tariff rates (France, UK, US)
Average Tariff Rates in USA (1821–2016)
U.S. Trade Balance and Trade Policy (1895–2015)
Average Tariff Rates on manufactured products
Average Levels of Duties (1875 and 1913)
Trade Policy, Exports and Growth in European Countries

Governments have traditionally had a strong interest in preserving their economic, and therefore political, strength, and have therefore sought to use the tools at their disposal. This was especially true when warfare was endemic in the early-modern period: a strong economy often meant the difference between political independence, and conquest by a foreign power. This resulted in the economic system generally known as mercantilism.

  • Great Britain pursued economically nationalistic policies during the seventeenth and eighteenth centuries. The two pillars of its economic strategy were: (1) high tariff rates and (2) acquiring new markets for its products. In the mid-1700s, the average tariff rate in Britain was 30%, by the 1820s it had grown to 57%.[5]
  • Canada also practiced economic nationalism known as the National Policy Conservative governments in Canada, such as those of Sir John A. Macdonald, Sir Robert Borden, R. B. Bennett, and John Diefenbaker, were known for supporting an active role for government in the economy of the creation of government-operated businesses (early Crown Corporations such as the Canadian National Railway) to subsidize Canadian industries, protectionist programs such as the National Policy. It lasted from 1879 until sometime in the early 1950s.

Modern examples

Examples of this include Henry Clay's American System, French Dirigisme, Japan's use of MITI to "pick winners and losers", China's controlled exchange of the yuan, Argentina's economic policy of tariffs and devaluation in the wake of the 2001 financial crisis and the United States' use of tariffs to protect domestic steel production.

As a policy is a deliberate system of principles to guide decisions and achieve rational outcomes, the following list of would be examples of an economic nationalistic policy, were there a consistent and rational doctrine associated with each individual protectionist measure:

The reason for a policy of economic protectionism in the cases above varied from bid to bid. In the case of Mittal's bid for Arcelor, the primary concerns involved job security for the Arcelor employees based in France and Luxembourg. The cases of French Suez and Spanish Endesa involved the desire for respective European governments to create a 'national champion' capable of competing at both a European and global level. Both the French and US government used national security as the reason for opposing takeovers of Danone, Unocal, and the bid by DP World for 6 US ports. In none of the examples given above was the original bid deemed to be against the interests of competition. In many cases the shareholders supported the foreign bid. For instance in France after the bid for Suez by Enel was counteracted by the French public energy and gas company Gaz De France the shareholders of Suez complained and the unions of Gaz De France were in an uproar because of the privatization of their jobs.

More recently, the economic policies advocated by Donald Trump and Steve Bannon in the wake of the United States presidential election, 2016 has been considered by some as a (partial) return to the economic nationalism of the Theodore Roosevelt Era.[14][15]

Objectives

The objective is to support economic activity and promote social cohesion. Some manifestations of economic nationalism are attempts to block foreign competition or acquisitions of domestic companies.

Criticism

Consumer preference for local goods gives local producers monopoly power, affording them the ability to lift prices to extract greater profits. Firms that produce locally produced goods can charge a premium for that good. Consumers who favor products by local producers may end up being exploited by profit-maximizing local producers.[16] For example; a protectionist policy in America placed tariffs on foreign cars, giving local producers (Ford and GM market) market power that allowed them to raise the price of cars, which negatively affected American consumers who faced fewer choices and higher prices.[17]

Locally produced goods can attract a premium if consumers show a preference towards it, so firms have an incentive to pass foreign goods off as local goods if foreign goods have cheaper costs of production than local goods.[16] This is a viable strategy because the line between foreign-made and locally-made is blurry. However, as supply chains expand globally, the definition of local goods becomes hazy. For example, while a particular car may be assembled in America, its engine may be made in another country such as China. Furthermore, while the engine may be made in China, the engine's components may be imported from several other countries: the pistons may come from Germany and the spark plugs may come from Mexico. The components that make up the spark plugs and pistons may come from different countries and so on.

Notable countries that utilize economic nationalism are Venezuela, Cuba, the People's Republic of China, Zimbabwe, India, Russia, France, and Brazil.

See also

References

  1. 1 2 "French economic nationalism: Colbert was here". The Economist. 23 March 2006. Retrieved 22 May 2018.
  2. ↑ Callaghan, Helen; Lagneau-Ymonet, Paul (December 2010). "The Phantom of Palais Brongniart: "Economic Patriotism" and the Paris Stock Exchange" (PDF). MPIfG Discussion Paper 10/14: 6.
  3. ↑ Bump, Philip (2014-07-17). "'Economic patriotism': Explaining the vague, finger-wagging, immortal phrase". The Washington Post. Retrieved 2018-05-24.
  4. ↑ Safire, William (19 September 2985). "The Year of Dee-fense". The New York Times. Retrieved 24 May 2018. Check date values in: |date= (help)
  5. ↑ Chambers, J D (1961). Workshop of the World. London: Oxford University Press.
  6. ↑ Capron, Laurence; Guillén, Mauro (12 October 2006). "Fighting economic nationalism in deals". Financial Times. Retrieved 22 May 2018.
  7. ↑ "Europe's nascent merger boom". The Economist. 1 September 2005. Retrieved 22 May 2018.
  8. ↑ "Don't take the high roads". The Economist. 7 August 2006. Retrieved 22 May 2018.
  9. ↑ "To the barricades". The Economist. 2 March 2006. Retrieved 22 May 2018.
  10. ↑ "From Karl Marx's copybook". The Economist. 2 March 2006. Retrieved 22 May 2018.
  11. 1 2 Imad Moosa (1 January 2012). The US-China Trade Dispute: Facts, Figures and Myths. Edward Elgar Publishing. p. 62. ISBN 978-1-78100-155-4.
  12. ↑ Liuhto, Kari (March 2008). "Genesis of Economic Nationalism in Russia" (PDF). University of Turku. Retrieved 23 May 2018.
  13. ↑ Rutland, Peter (2016). "The place of economics in Russian national identity debates". In Pål Kolstø; Helge Blakkisrud. The New Russian Nationalism: Imperialism, Ethnicity and Authoritarianism 2000-2015. Edinburgh University Press. p. 348. ISBN 978-1-4744-1042-7. JSTOR 10.3366/j.ctt1bh2kk5.19.
  14. ↑ M. Nicolas J. Firzli : 'Understanding Trumponomics', Revue Analyse Financière, 26 January 2017 – Supplement to Issue N°62
  15. ↑ Hartwell, Christopher (11 April 2017). "What Trump has really learned from Russia". Financial Times. Retrieved 23 May 2018.
  16. 1 2 Harry Binswanger (5 September 2003). "'Buy American' is UN-American". Capitalism Magazine. Retrieved 17 April 2012.
  17. ↑ Daniel J. Ikenson (6 July 2003). "The Big Three's Shameful Secret". The CATO Institute. Retrieved 17 April 2012.

Further reading

  • Baker, David (2006), "The political economy of fascism: Myth or reality, or myth and reality?", New Political Economy, 11 (2): 227–250, doi:10.1080/13563460600655581 (a review of economic nationalism as manifested under the various forms of generic fascism)
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