Economic nationalism

Economic nationalism refers to an ideology favoring 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 may include such doctrines as protectionism, mercantilism, or import substitution.

Historical examples

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, particularly tax structure and discretionary spending, to stimulate economic growth. 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.

• The Italian City State of Venice designed its whole economy around expanding its national power. For example, Venice mandated that all trade carried on Venetian ships must stop in Venice, regardless of its origin and destination. This guaranteed Venice a bigger share of any profits made in the spice trade. Although this was less economically efficient, the cost was passed onto consumers, while Venice benefited from its position as middleman. Venice also only imported raw materials, leaving the refining and processing to be done by Venetian craftsmen. The success of this strategy was noted by a prominent Venetian businessman:

Nothing is better to increase and enrich the condition of our city than to give all liberty and occasion that commodities of our city be brought here and procured here rather than elsewhere, because this results in advantage both to the state and to private persons.^[1]

• 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%.^[2] This shut out foreign manufactured goods from British markets, and was one of the primary conditions enabling the Industrial Revolution.
• 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 develop and protect Canadian industries, protectionist programs such as the National Policy. It lasted from 1879 until sometime in 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", Malaysia's imposition of currency controls in the wake of the 1997 currency crisis, 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:

• Proposed takeover of Arcelor (Spain, France and Luxembourg) by Mittal (India).^[3]
• French governmental listing of Danone (France) as a 'strategic industry' to pre-empt a potential takeover bid by PepsiCo (USA).^[4]
• Blocked takeover of Autostrade, an Italian toll-road operator by the Spanish company Abertis.^[5]
• Proposed takeover of Endesa (Spain) by E.ON (Germany), and the counter-bid by Gas Natural (Spain).^[6]
• Proposed takeover of Suez (France) by Enel (Italy), and the counter-bid by Gaz de France (France).^[7]
• United States Congressional opposition to the takeover bid for Unocal (USA) by CNOOC (PR China), and the subsequent takeover by Chevron (USA).^[8]
• Political opposition in 2006 to sell port management businesses in six major U.S. seaports to a company DP World based in the United Arab Emirates
• Case of new draft legislation at the beginning of 2007 restricting foreign companies' access to Russia's natural-resource wealth and selected Russian industries.^[9]
• The New Zealand Government veto of the Canada Pension Plan Investment Board's bid for a majority stake in Auckland Airport in 2008.^[10]
• The renationalization since 2003 in Argentina of numerous formerly state-owned firms privatized during the 1990s; some of the most significant firms controlled by foreign ownership at the time of their renationalization include Aguas Argentinas (the water utility serving Buenos Aires), Aerolíneas Argentinas, the energy firm YPF,^[11] and Metrogas.^[12]
• Italian ministers Pier Carlo Padoan and Carlo Calenda have criticized French government for decision to nationalize the STX France shipyards in order to prevent Fincantieri taking majority control.^[13]

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.

Trumponomics

More recently, the emergence of Trumponomics in the United States in the wake of the United States presidential election, 2016 was considered by some as a (partial) return to the economic nationalism of the Theodore Roosevelt Era.^[14]

Economic patriotism

Economic patriotism is the coordinated and promoted behaviour of consumers or companies (both private and public) that consists of favoring the goods or services produced in their country or in their group of countries. Economic patriotism can be practiced either through demand stimulation (encouraging consumers to purchase the goods and services of their own country) or through supply protection, the shielding of the domestic market from foreign competition through tariffs or quotas (protectionism). A recently emerging form of economic patriotism is financial protectionism, the hostility against acquisitions by foreign groups of companies considered of "strategic value"^[15] for the economy of the country.

Objectives

The objective is to support economic activity and promote social cohesion. The supporters of economic patriotism describe it as a kind of self-defence of local economic interests (national or supranational in case of the countries of the European Union). Some manifestations of economic patriotism are attempts to block foreign competition or acquisitions of domestic companies. An often cited example is France, where economic patriotism was the main rationale used in the Pepsico-Danone, Mittal-Arcelor, and GDF-Suez affairs.

In the United States, an example of economic patriotism would be the numerous bumper stickers: "Be American, Buy American".

Criticism

Consumer preference for local goods gives local producers more market 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.

See also

• Business nationalism
• Mercantilism → Neomercantilism
• National champions
• Producerism
• The Wimbledon Effect
• Foreign ownership of companies of Canada

References

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)

External links

• The Economic Nationalist(US) 23 November 2012
• BBC: Patriotism and protectionism in the EU, 23 March 2006
• 'Buy American' is UN-American by Harry Binswanger, Capitalism Magazine
• Russian Cabinet approves draft bill on restricting foreign investment IHT
• Moscow Spells Out Limits On Access to Resources WSJ 2006