The Rise of Economic Nationalism in the World

Understanding its Roots, Implications, and Contemporary Relevance

As the world continues to grapple with the consequences of globalization, economic nationalism has emerged as a force to be reckoned with. In today’s highly interconnected global economy, the idea of economic nationalism has gained renewed relevance as countries seek to protect their industries, their workers, and their national identities from the perceived threats of international trade and foreign investment. From Brexit to the Trump administration’s “America First” policy, economic nationalism has dominated the headlines in recent years, sparking intense debates among policymakers, academics, and the public at large. But what exactly is economic nationalism, and why is it so important today? In this blog post, we will delve into the concept of economic nationalism and explore its implications for the global economy in the 21st century.

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What is Economic Nationalism?

Economic nationalism is an ideology that has gained importance in the International Political Economy alongside Liberalism and Marxism. While Liberalism and Marxism are established bodies of economic theory, Economic Nationalism is more of a framework and general approach to political economy. It is often associated with policies such as market regulation, trade protectionism, and subsidies for firms. However, there has been confusion about the definition and meaning of economic nationalism, with political economists often mistaking the notions of nationalism and statism as the same.

To resolve this confusion, a new method of study has been introduced that draws a strong distinction between “the state” and “the nation” and focuses only on the latter. This method conceptualizes the ideology of economic nationalism in terms of a nationalist framework, rather than through the implementation of specific policies. By doing so, it has eliminated classical mercantilism from its ideology, since mercantilism existed before the emergence of modern nations. This means that many liberal economists who sought to enrich their respective nations could also be regarded as economic nationalists.

To understand economic nationalism better, it is necessary to first understand nationalism itself. According to French sociologist Emile Durkheim, the state is a special organ with the purpose of finding appropriate representations that are favorable for the collective good. The state has an established authority over its subordinates, and even though its decisions may not always reflect public opinion, they are still valid. The relationship between the state and its citizens, where the citizens obey the authority of the state and its institutions, is termed political society. Durkheim also argues that patriotism is the idea and feelings attached to the notion of accepting a certain state’s authority.

Therefore, “the nation” can be seen as a mixture of political society and patriotism. However, it is a subjective term, as even if there is a certain level of allegiance to the state, the people still need to perceive that state as a nation. For example, the Soviet Union was a state, but it cannot be perceived as a nation since the people who lived in the Soviet Union did not believe it was a nation.

It is important to recognize that nationalism is not a uniform concept, and different countries and cultures may have different perceptions and interpretations of it. For example, while economic nationalism may be embraced in some countries as a means to promote national economic growth, it may be viewed with skepticism or even hostility in other countries.

In this context, economic nationalism can be defined as a form of nationalism that emphasizes the protection and promotion of domestic economic interests. This can manifest in various forms such as protectionist trade policies, subsidies to domestic industries, and restrictions on foreign investment. The goal of economic nationalism is to promote national economic growth and development and protect national sovereignty.

A Short History of Economic Nationalism

The idea of economic nationalism has been around for centuries, with different variations and interpretations depending on the period and the country in question. However, its importance and relevance in the global arena have not waned over time. The fundamental idea behind economic nationalism is to prioritize the economic interests of one’s own country over others, to enhance national power and unity.

The roots of economic nationalism can be traced back to the early modern period when European states began to realize the potential benefits of international trade. However, they also recognized that trade could be a double-edged sword, with the potential to enrich one’s own country while weakening others. This led to the development of mercantilism, an economic theory that emphasized the accumulation of wealth through exports and the establishment of colonies. Mercantilism was a form of economic nationalism, as it prioritized the economic interests of the nation-state over those of other countries.

In the 19th century, economic nationalism took on a new form with the writings of Friedrich List and Alexander Hamilton. Both List and Hamilton believed that economic development was crucial to national power and unity and that the state had a role to play in promoting this development.

Friedrich List was a German-American economist who lived in the 19th century. He believed that economic power was a key component of national power and that the development of a strong national economy required protectionist policies to promote the growth of domestic industries. List was a vocal critic of British free trade policies, which he believed had contributed to the economic domination of Britain over other nations. He argued that protectionist policies such as tariffs and subsidies were necessary to promote the development of infant industries and ensure that domestic producers could compete with foreign ones. List’s ideas were influential in shaping economic policy in Germany, which became a leading industrial power in the late 19th and early 20th centuries.

Alexander Hamilton was a founding father of the United States and the first Secretary of the Treasury. He believed that the economic development of the United States required government intervention to promote the growth of domestic industries. Hamilton’s economic policies included protective tariffs to promote the growth of American manufacturing, and government subsidies to promote the development of infrastructure such as roads and canals. He believed that a strong national economy was essential for national security and independence. Hamilton’s ideas were influential in shaping American economic policy, and his vision of a strong, industrialized America continues to influence economic nationalists to this day.

While Friedrich List and Alexander Hamilton were from different countries and different periods, their ideas about economic nationalism shared many similarities. Both men believed in the power of protectionism and government intervention to promote national economic growth and development. Their ideas continue to be influential in shaping economic policy in many countries around the world today.

The idea of economic nationalism gained traction in the early 20th century, particularly in the aftermath of World War I. Many countries turned inward and implemented protectionist policies to strengthen their economies. However, these policies were largely seen as contributing to the Great Depression and the rise of fascism in Europe. After World War II, economic nationalism took a backseat to economic liberalism, as countries embraced free trade and international cooperation to prevent another global conflict.

Today, economic nationalism is once again on the rise. In the face of globalization, automation, and the shifting balance of power in the global arena, many countries are turning to economic nationalism as a way to protect their interests. The rise of China as an economic and military superpower has led many other countries to reexamine their economic policies and strategies. The COVID-19 pandemic has further highlighted the vulnerabilities of global supply chains and the need for greater self-sufficiency.

What are the True Goals and Aims of Economic Nationalism?

Economic nationalism is a term that is often used interchangeably with protectionism and autarky. It is a policy approach that emphasizes the importance of the nation, its sovereignty, and its economic power. However, it is often misunderstood and misrepresented, leading to misconceptions about its goals and aims.

One of the most significant misconceptions about economic nationalism is that it aims to achieve autarky, i.e., complete self-reliance. However, this is not entirely accurate. Economic nationalism is not in the pursuit of autarky, but rather of national unity, sovereignty, and enhancement of national power. The idea of autarky was never a fundamental proposition of Friedrich List and Alexander Hamilton. This is particularly true for smaller nations that cannot achieve self-reliance. For them, opting for free trade in the global market is their best survival strategy. Therefore, their choice of pursuing liberal policies and free trade is entrenched in economic nationalism. Protectionism, which is often seen as a key feature of economic nationalism, is not its end goal. Free trade is always preferable to protectionism if it successfully increases national power.

Although economic nationalists are often criticized for ignoring the importance of agriculture, neither Friedrich List nor Alexander Hamilton neglects the significance of agriculture. Moreover, economic nationalism is not just about industrialization. Although it plays an essential role in enhancing national power, it is not the end goal. They aspire to reach proportional advancement of the national economy and to achieve economic autonomy and national unity through congruity of industrial and agricultural interests. Therefore, economic nationalism cannot be equated with industrialization, but only with nationalism.

The Prevailing Relevance of Economic Nationalism in the Contemporary Global Economy

The COVID-19 pandemic has caused global economic turmoil, with inflation rates reaching an alarming 7.4% in 2022, more than double the rate of 2020, as a result of extensive printing of the US dollar, the global reserve currency. Scholars argue that the financial crisis and the 2008 housing market crisis played a significant role in the rise of populism in Europe in the 21st century. Financial crises not only damage national economies but also influence national policies towards protectionist measures.

Source: Authors’ elaboration based on Manifesto Project data (Volkens et al. 2018)

In Europe, populist politicians tend to lean towards nationalist policies, and economic nationalism is gaining prominence in post-communist countries. Economic nationalism emphasizes the role of national currencies as tools for economic policy, in which the government plays an active role in regulating the national economy to protect its citizens and increase the competitive advantage of national companies and industries in the global arena.

The military power of the US has been a defining feature of the post-Cold War era, as it played the role of the “global police officer” and maintained global order. However, the rise of China, Brexit, the Global Pandemic, the election of Donald Trump, and the Brexit vote signaled a crisis of the existing world order, and economic nationalism has gained prominence as a result. As we navigate these changing times, it is important to understand the power dynamics at play and the role of economic nationalism in shaping national policies and identities. While it may offer a unifying characteristic, it can also lead to unresponsiveness and the rise of populist leaders. For many countries in the Global South, neo-liberalism is seen as a tool for exploitation and a source of neo-colonialism. This has led to a resurgence of economic nationalism, especially in countries that are still underdeveloped. Only time will tell how this trend will continue to shape the world we live in.

Economic nationalism, in particular, emphasizes the importance of a nation’s economic power in ensuring its military security and shaping its identity in the global arena. Economic nationalists believe that a nation’s economic power and military security are strongly interconnected. Industrialization and economic autonomy are seen as critical factors in creating a purposeful global political economy. To secure their territories, nations must use their military strength, as well as enforce policies that can safeguard and stimulate strategic industries. Such policies not only benefit the military but also stimulate the development of the entire national economy.

In the 21st century, the relationship between technology and the national economy has become increasingly relevant. Technological progress has the potential to provide significant military and economic advantages to nations in the global arena. Greater technological development can lead to greater national power, as shown by the inventions and innovations that emerged from the Second World War, including the flu vaccines, penicillin, jet engines, blood plasma transfusion, electronic computers, and radars. Technology can play a vital role in creating national identity, and that national identity can shape the course of technological development. In other words, a nation’s identity can influence its technological goals, which can ultimately impact its economic and military power.

With the rapid advancements in technology and communication, companies and products from all over the world can easily enter any market. While this can create healthy competition and benefit consumers, it can also be detrimental to domestic industries that are just starting. These industries need time to develop and establish themselves before they can compete with established global players. By implementing protectionist measures such as tariffs, subsidies, and quotas, governments can give their domestic industries time to grow and become more competitive. This has been a common practice among many successful global economic powers, including the United States, Japan, South Korea, and China. These countries have used protectionist policies to develop their domestic industries in sectors such as electronics, automotive, and steel. Japan, for example, used import substitution policies to protect its domestic industries in the early stages of its economic development. South Korea also followed a similar strategy, protecting its nascent industries with government support and subsidies until they were strong enough to compete with foreign companies. Once their industries became established and competitive, they were able to compete on a global scale and contribute significantly to their country’s economic growth.

Domestic industries that are reliant on imports for essential goods can be vulnerable to disruptions in the global supply chain, which happened many times in the last decade. By developing domestic industries, countries can ensure that they have a reliable source of essential goods and reduce their dependence on foreign countries. This can provide greater economic and political stability in the long run. In a world without a global government, economic nationalism offers a framework for nations to ensure their security and prosperity in a highly competitive global arena.

Concluding Remarks

In conclusion, the rise of economic nationalism is a clear indication that the global economy is undergoing a significant transformation. The COVID-19 pandemic has exposed the vulnerabilities of the global supply chain and the need for greater economic self-sufficiency. Moreover, the ongoing trade tensions between major powers and the emergence of new geopolitical challenges have contributed to the resurgence of economic nationalism as a preferred strategy for countries to protect their interests and enhance their economic power.

While there are valid concerns about the negative impacts of economic nationalism on international trade and cooperation, it is important to acknowledge that the pursuit of economic nationalism is not a new phenomenon. It has been a defining feature of many successful countries throughout history, and its relevance continues to persist in the present day. Economic nationalism should not be seen as an alternative to international cooperation and globalization but rather as a complementary strategy that can enhance a country’s ability to compete and succeed in the global economy.

Therefore, policymakers need to adopt a nuanced approach to economic nationalism that recognizes its potential benefits while mitigating its negative consequences. A balance needs to be struck between protecting national interests and promoting international cooperation and economic openness. As we continue to navigate an uncertain global economic landscape, it is clear that economic nationalism will continue to play a significant role in shaping the economic policies of nations around the world.