The world is experiencing a rise in economic nationalism, with countries prioritizing their domestic agendas over free trade. Economic nationalism can be beneficial when pursued judiciously to build economic strength and reinforce national purpose. It frames the economy in terms of serving the nation and can be compatible with openness to international trade. East Asian developmental states have successfully combined economic integration with selective protection of key industries. While economic nationalism has its drawbacks, such as excessive state control and indiscriminate trade barriers, when done right, it can lead to inclusive domestic economies and cohesive societies. The risk lies in the US acting as a bully and imposing its policy preferences on others, which would harm the rest of the world and little good for itself.
Growing trade has contributed to rising inequality and the erosion of the middle class in advanced economies. Free trade was supported by nineteenth-century political reformers as a vehicle for defeating despotism, ending wars, and reducing inequalities. However, trade can promote peace, freedom, and economic opportunity, or foster conflict, repression, and inequality depending on whom it empowers. The post-World War II international trade system aimed to pursue world peace through free trade. However, trade can also be instrumentalized for authoritarian and militaristic ends. The lesson of history is that democratizing trade is necessary to ensure it serves the common good [26574a77].
The concept of national champions, companies that operate as global export powerhouses while serving the national interest of their home countries, is explored in this article by Robert Kuttner. The author delves into the history of industrial policies and economic nationalism in countries like Japan, Germany, Brazil, South Korea, and Taiwan. He also examines the role of national economic planning and the relationship between corporations and the national economy in the United States. The article discusses the Biden administration's embrace of deliberate industrial policies and raises the question of whether the national home base of corporations matters as long as they produce domestically. Examples from the automotive and semiconductor industries, as well as the role of tech platform monopolies, are explored. The author argues that while defending U.S.-based corporations is important for reasons such as trade, technology, and national security, it would be easier if these corporations were better domestic citizens [648ef077].
The potential risks of relying on private companies as national champions in industrial policy are discussed in an article by Robert Kuttner. The author highlights two examples: Boeing, which has faced financial troubles due to prioritizing financialization over engineering, and U.S. Steel, which is being sold to Japan's Nippon Steel. The article argues that these companies may not always act in the national interest, unlike their European counterparts. The government should step in and reorganize struggling companies like Boeing and ensure that sales like the one to Nippon Steel do not harm U.S. industrial security and jobs. The United Steelworkers union is also mentioned as a patriotic force that demands companies act in the national interest. The article concludes by emphasizing the need for corporate national champions to live up to their name.
Economists are beginning to understand the influence of nationalist ideas in shaping policy narratives. Nationalism can unite disparate groups and present a unifying story of progress and community. Protectionist groups often use nationalist narratives to gain support and legitimacy. Nationalist messaging leverages notions of identity and community, appealing in times of radical change. Propaganda and managing the media message have historically been crucial for nationalist causes. Economic nationalism is not all smoke and mirrors, as it taps into the desire for identity and community. Narratives are influential in helping economic nationalists gain and hold on to power. Policymakers may be as susceptible to fall for slanted narratives as ordinary citizens.
The Golden Age of Neoliberalism is over and an inward-looking, hard-edged nationalist-populist-isolationist orientation has taken its place. Both political parties in the US have tapped into the frustration and anger of voters who believe they are worse off economically. Trade agreements like NAFTA are often blamed for job losses, but studies have found that the majority of job losses are due to efficiency gains from technology and process improvement. Tariffs and protectionist measures are not the answer to improving trade balances. The US remains a manufacturing powerhouse, and the nation needs to prioritize education and workforce development. States can play a major role in trade and investment liberalization. Smart industrial policy and public-private competition can further the public interest without the need for protectionist measures. International trade has enjoyed consistent bipartisan support from a majority of Americans. The gains of free trade exceed the losses, and government support, enforcement of trade rules, and private sector initiative can produce the benefits that workers and communities seek [26574a77].
Protectionist parties have become increasingly prominent in European politics over the last two decades. According to data from the European Social Survey, the vote share of protectionist parties in national elections in EU countries increased from 26 per cent in 2002 to 40 per cent in 2018. Those with lower levels of education, the unemployed, and members of trade unions are the most likely to support protectionist parties. The Stolper-Samuelson model of international trade predicts that workers in advanced industrial economies with lower levels of education will suffer from open trade, while highly-educated voters are more likely to prefer free trade. Manufacturing imports from less developed countries dislocate the labor markets of advanced industrial economies, reducing the employment and wages of workers displaced in the import-competing sectors of the economy. Unemployed workers are more likely to vote for protectionist parties if they believe that restrictive trade policies would reverse the negative effects of job displacement. The vote for protectionist parties is lower when a country's public sector can reduce the adjustment costs associated with import competition. Protectionist parties are more likely to receive votes from workers who belong to trade unions. The authors used individual data, party data, and country data from the European Social Survey and the Manifesto Project to investigate the drivers of support for protectionist parties. [6b7681ce]