prioritizes national interests over global integration in international political economy. It advocates for protectionist trade policies, to support domestic industries, and skepticism towards multilateral economic institutions. This approach aims to maximize national economic power and self-sufficiency.
Historically rooted in and 19th-century , economic nationalism remains influential today. It contrasts with economic liberalism by emphasizing state control, self-sufficiency, and the protection of strategic industries. Critics argue it can lead to trade wars, reduced efficiency, and higher consumer prices.
Economic nationalism defined
Economic nationalism is an approach to international political economy that prioritizes national economic interests over global economic integration
Emphasizes the role of the state in managing and protecting the domestic economy from foreign competition
Often associated with protectionist trade policies, for domestic industries, and skepticism of multilateral economic institutions
Prioritizing national interests
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Economic nationalists argue that the state should prioritize the economic well-being of its own citizens and domestic industries
This may involve protecting domestic markets from foreign competition, even if it means foregoing the potential benefits of free trade
The goal is to maximize national economic power and self-sufficiency, rather than pursuing global economic efficiency
Protectionist trade policies
Economic nationalism often leads to protectionist trade policies designed to shield domestic industries from foreign competition
These policies may include (taxes on imported goods), quotas (limits on the quantity of imports), and non-tariff barriers (regulations that disadvantage foreign producers)
Protectionist policies are intended to give domestic firms a competitive advantage and allow them to capture a larger share of the home market
Promoting domestic industries
Economic nationalists often advocate for government policies that actively promote and support domestic industries
This may involve subsidies (financial assistance) for domestic firms, preferential treatment in government procurement, or targeted investments in strategic sectors
The goal is to nurture and strengthen domestic industries, particularly those deemed essential for national economic security (defense, energy, technology)
Historical context of economic nationalism
Mercantilism in early modern Europe
Mercantilism was an economic system that prevailed in Europe from the 16th to 18th centuries
Emphasized the accumulation of gold and silver through a positive balance of trade (exporting more than importing)
Mercantilist policies included protectionist trade barriers, colonial exploitation, and state support for domestic industries (chartered monopolies)
19th century American protectionism
The United States pursued protectionist trade policies for much of the 19th century, particularly in the decades following independence
High tariffs were imposed on imported manufactured goods to protect nascent American industries from British competition (Tariff of 1816, Morrill Tariff of 1861)
Protectionist policies were supported by Northern industrialists but opposed by Southern agricultural exporters
20th century import substitution industrialization
Many developing countries pursued (ISI) policies in the mid-20th century
ISI involved using trade barriers and state support to nurture domestic manufacturing industries, with the goal of reducing dependence on imported goods
Notable examples include Brazil, Mexico, and India, which achieved rapid industrial growth but often at the cost of economic inefficiency and trade distortions
Key principles and goals
Economic self-sufficiency
Economic nationalists prioritize national self-sufficiency and seek to reduce dependence on foreign goods, services, and capital
The goal is to develop a diverse and resilient domestic economy that can meet most of its own needs without relying on imports
Self-sufficiency is seen as a way to insulate the national economy from external shocks and vulnerabilities (supply chain disruptions, currency fluctuations)
Safeguarding strategic industries
Economic nationalists often identify certain industries as strategically important for national security or economic competitiveness
These may include defense-related sectors, critical infrastructure (energy, telecommunications), or high-tech industries with dual-use applications
The state may intervene to protect and promote these industries through trade barriers, subsidies, or direct ownership and control
Reducing foreign economic influence
Economic nationalists seek to limit the influence of foreign economic actors on the domestic economy and policy-making
This may involve restrictions on foreign investment, ownership of domestic assets, or participation in strategic sectors
The goal is to maintain national control over key economic resources and decision-making, rather than ceding power to foreign firms or investors
Preserving national sovereignty
For economic nationalists, preserving national sovereignty is a key priority in international economic relations
This means resisting the constraints and compromises required by multilateral trade agreements or international economic institutions (WTO, IMF)
Economic policy-making should be driven by national interests and democratic accountability, not by global rules or foreign pressure
Economic nationalist policies and tools
Tariffs and quotas
Tariffs are taxes imposed on imported goods, which raise their price and make them less competitive with domestic products
Quotas are quantitative limits on the amount of a particular good that can be imported, which restrict supply and drive up prices
Both tariffs and quotas are classic protectionist tools used to shield domestic industries from foreign competition
Subsidies for domestic producers
Subsidies are financial support provided by the government to domestic firms or industries
They can take the form of direct payments, tax breaks, low-interest loans, or other preferential treatment
Subsidies help domestic producers to lower their costs, invest in new technologies, or compete with foreign firms that may have their own government support
State-owned enterprises
(SOEs) are businesses that are wholly or partially owned and controlled by the government
SOEs are often established in strategic sectors (energy, telecommunications, transportation) or to achieve specific economic or social goals
Economic nationalists may favor SOEs as a way to maintain national control over key industries and pursue public policy objectives
Restrictions on foreign investment
Economic nationalists often seek to limit or regulate foreign investment in the domestic economy
This may involve screening or approval mechanisms for foreign acquisitions, ownership caps in sensitive sectors, or requirements for local content or technology transfer
The goal is to prevent foreign control over domestic assets and ensure that foreign investment serves national economic interests
Currency manipulation
Currency manipulation involves government intervention in foreign exchange markets to influence the value of the national currency
A country may seek to devalue its currency to boost exports (by making them cheaper for foreign buyers) or to protect domestic industries from import competition
Economic nationalists may view currency manipulation as a legitimate tool for advancing national economic interests, while critics see it as a form of unfair trade practice
Economic nationalism vs economic liberalism
Contrasting views on free trade
Economic nationalists are skeptical of free trade and argue that it can undermine national economic interests
They believe that unregulated trade can lead to the decline of domestic industries, loss of jobs, and increased dependence on foreign suppliers
In contrast, economic liberals (neoliberals) see free trade as a win-win proposition that benefits all countries by promoting efficiency, competition, and consumer choice
Debates over efficiency and growth
Economic liberals argue that free trade and open markets lead to greater economic efficiency and growth by allowing countries to specialize in their areas of comparative advantage
They believe that protectionist policies distort market incentives, reduce competition, and lead to higher prices and lower quality for consumers
Economic nationalists counter that short-term efficiency gains may come at the cost of long-term economic security and resilience, and that some industries are too important to leave to market forces alone
Political and security considerations
For economic nationalists, economic policy is closely linked to political and security considerations
They argue that a strong, self-sufficient economy is essential for maintaining national power, independence, and bargaining leverage in international affairs
Economic liberals, in contrast, tend to see economic integration as a way to promote international cooperation, reduce conflict, and spread democratic values
Contemporary examples of economic nationalism
China's state capitalism model
China's economic system combines elements of market capitalism with strong state control and intervention
The Chinese government has actively promoted and protected strategic industries (telecommunications, renewable energy), often through state-owned enterprises or subsidies
China has also pursued policies to limit foreign influence and technology dependence (indigenous innovation, Made in China 2025)
Trump's "America First" agenda
Former US President Donald Trump embraced an economic nationalist agenda under the slogan "America First"
Trump imposed tariffs on imports from China, Europe, and other trading partners, arguing that they were necessary to protect American industries and workers
He also renegotiated trade agreements (NAFTA, US-Korea FTA) and took a more confrontational approach to trade relations with allies and rivals alike
Brexit and European economic integration
The UK's decision to leave the European Union () was driven in part by economic nationalist sentiments
Supporters of Brexit argued that leaving the EU would allow the UK to regain control over its trade policy, immigration, and economic regulation
The debate over Brexit highlighted tensions between national sovereignty and the benefits of economic integration within Europe
Critiques of economic nationalism
Potential for trade wars and retaliation
Economic nationalist policies, particularly protectionist measures like tariffs, can provoke retaliation from trading partners
This can lead to escalating trade wars, where countries impose tit-for-tat trade barriers on each other's goods
Trade wars can disrupt global supply chains, increase costs for businesses and consumers, and damage international relations
Reduced global economic efficiency
Critics argue that economic nationalism leads to a less efficient allocation of resources at the global level
By shielding domestic industries from competition, protectionist policies allow less efficient firms to survive and can reduce incentives for innovation and productivity growth
This can result in higher prices, lower quality goods, and slower economic growth overall
Negative impacts on consumers
Protectionist policies often lead to higher prices for consumers, as tariffs and other trade barriers increase the cost of imported goods
This can disproportionately affect lower-income households, who spend a larger share of their income on traded goods like food, clothing, and electronics
Economic nationalist policies may prioritize producer interests over consumer welfare, leading to a transfer of wealth from consumers to protected industries
Challenges in a globalized world economy
Economic nationalism faces significant challenges in an increasingly interconnected and interdependent global economy
Global supply chains, multinational corporations, and international financial flows make it difficult for countries to pursue purely national economic strategies
Attempts to "decouple" from the global economy can be costly and disruptive, as countries may face reduced access to markets, technology, and investment