Economic Nationalism: What it Means

In the throes of the 2007-2008 economic collapse, I projected that the global economy would be irrevocably and qualitatively marred by the unfolding events. I foresaw a shift in the structure of international relations, a shift away from the so-called “globalization” interlude. Writing in November of 2008:

The economic crisis has reversed the post-Soviet process of international integration – so-called "globalization." As with the Great Depression, the economic crisis strikes different economies in different ways. Despite efforts to integrate the world economies, the international division of labor and the differing levels of development foreclose a unified solution to economic distress. The weak efforts at joint action, the conferences, the summits, etc. cannot succeed simply because every nation has different interests and problems, a condition that will only become more acute as the crisis mounts.

A crisis of the severity of 2007-2008 understandably challenges some earlier verities, but more importantly, it renders some economic roads now impassable. My view was that the era of completely open, free, and secure international exchange fueling dramatic growth in trade was not a new stage of capitalism-- as many wished to argue-- but a phase created by politically contingent factors and spurred by the intensified international competition of the last thirty years of the twentieth century. Moreover, that phase-- unhelpfully called “globalization”-- was both fortuitous and disastrous for the fate of capitalism. I elaborated on this further in April of 2009:

To simplify greatly, a healthy, expanding capitalist order tends to promote intervals of global cooperation – enforced by a hegemonic power – and trade expansion, while a wounded, shrinking capitalist order tends towards autarky and economic nationalism. The Great Depression was a clear example of heightened nationalism and economic self-absorption. Most commentators acknowledge this fact, but attribute it to the predilections of national leaders. It was said that Roosevelt “sabotaged” the London Economic Conference, for example. Earlier, he said: “Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound economy.” It is my contention, and I believe essential to a Marxist understanding, that Roosevelt’s reaction was an expression of the logic of capitalism under stress; the structural development that led to intense nationalism throughout Europe, especially in Germany and Italy, and ultimately to war.

The stress of the 2007-2008 economic collapse created “centrifugal forces,” forces pulling apart the institutions, the regulations, and the commitment to an open, unified, and universal global marketplace. In its place would come a growing national partisanship, a commitment to winning-against-adversaries, rather than partnership. This process of “de-globalizing,” of going it alone would gain against both the process and ideology of economic integration.

I believe these projections have been borne out. My February, 2017 article New Developments in Political Economy: The Demise of “Globalization”, makes the case that the trade internationalism of the post-Soviet era is in profound decline. Moreover, emergent and growing nationalism enjoys its vitality from the reaction to the failure of the global order. Events in the months since the article appear only to underscore that claim.

Rising Economic Nationalism

President Trump has substantially called the World Trade Organization (WTO) irrelevant to US trade policies. But skepticism about the WTO precedes his political rise as a nationalist. The once heralded WTO Doha (Doha Development Agenda) was mired in dispute and ineffectiveness from its inception in 2001 and especially after 2008. The annual number of WTO trade disputes has more than doubled since 2008 even though trade growth has been tepid (below global GDP growth for the last 3 years), a sure sign of growing protectionist sentiments. The recent December 10-13 meeting of the WTO was largely a failure. “The trade body’s 164 members didn’t reach full consensus on any of the major objectives it had set itself before the meeting,” in the words of Bloomberg’s Bryce Baschuk and Charlie Devereux, with the EU blaming failure on “destructive behavior by several large countries.”

But the European Union (EU) is itself enduring a burst of economic nationalism. While the popular press and liberal pundits stress the role of xenophobia in Brexit, the economic ills that fueled the growth of nationalism in the UK vote against EU membership are largely neglected. Also, the breadth of the rejection of open market policies throughout the EU are largely missed.

A recent The Wall Street Journal article (12-14-17) affirms my projections made in 2008 and 2009 for the EU:

The financial crisis that erupted in 2008 caused a drop in trade between EU countries, with little rebound since beyond precrisis levels. As Europe’s swoon dragged on, many politicians strove to prop up their economies with fixes that prioritized domestic markets over the EU. (The EU, a Disciple of Free Trade, is Erecting Barriers)

The WSJ author, Valentina Pop, choses the example of Emmanuel Macron, the new French President, to highlight the trend in the EU. Macron ran for office as a passionate advocate for Europeanism and free markets. Nonetheless, he nationalized a shipyard to block its purchase by an Italian firm, he supports limiting foreign employment, and he “gutted” dairy imports from EU countries. Further evidence for the retreat from border-free markets and the embrace of nationalism comes from the growth of trade barriers: legal actions against violators of the EU market openness more than tripled last year.

Earlier this year, the European commission moved legally against Romania and Hungary and, in June, against Poland over economic disputes.

Nothing shows the fraying of the one-global-market consensus and the turn to economic nationalism more than the dispute escalating between the US and Canada and waged though their corporate surrogates, Bombardier and Boeing. Boeing lodged a complaint against Canadian aircraft firm Bombardier with the US Commerce Department. With typical US arrogance, Commerce slapped a 300% tariff on Bombardier planes sold in the US.

Indignantly, the Canadian government cancelled its plan to purchase $5.2 billion of new Boeing fighters to supplement its existing Boeing fighter jets. Instead, it will accept bids in 2019 for a purchase of 88 new fighters, but with the pointed caveat that any bidder causing injury to Canada’s interests would be disadvantaged, a not very subtle slap at Boeing.

Further, as Canada grows increasingly unhappy with renegotiations over NAFTA, the government has turned to the People's Republic of China (PRC) to craft an alternative free-trade agreement (Canadian merchandise exports to the PRC have more than doubled since 2007). Clearly, one of history’s oldest and most intimate trading partnerships is under increasing stress from economic nationalism.

Elsewhere, I have demonstrated the qualitative changes in global energy markets, along with the dramatic intensification of competition and associated hostilities. The shifting energy alliances, the swings in market share, and the political instabilities that are commonplace have spurred the turn to economic nationalism.

What does it Mean?

The hasty conclusion that expansion of global markets along with universal homage to a new global community constituted an irreversible change in capitalist relations is now thoroughly discredited by the realities of imperialist aggression and economic crisis. In fact, the “globalization” moment coincided with the vast inclusion of new economies – the former socialist community – and the absolute hegemony of a capitalist power – the US. History has known other moments, but theorists – including many on the left – were too awed by capitalist triumphalism, drawn to knee jerk anti-Communism, and desirous of facile answers to recognize this continuity with the logic of state-monopoly capitalism. Well before World War I, a similar moment occurred with the massive expansion of markets under the global hegemony of the British Empire, a period followed by economic decline spurring extreme nationalism.

As I stress in the above passage, written in 2009, the normal course of global economic relations in the era of state monopoly capitalism is intense competition, pressure on profitability, accumulation crises, rising nationalism, and conflict. This is the norm in the age of imperialism. This is the logic of late capitalism.

Appearances may suggest to some a different narrative-- enduring prosperity in the mid-twentieth century, peace guaranteed by economic internationalism at the turn of the new century-- but the reality is different, far different. Reality is imposed by crisis. And the upheaval of 2007-2008 exposed the reality of fierce competition and national self-interest.

For some, the rise of nationalism is strictly a political phenomenon anchored in demagogy and ignorance; they see no linkage with the course of capitalism. But the economic base for this phenomenon cannot be denied. Liberal markets produced the crisis and the resulting human suffering sparked a political response.

And ruling classes, faced with pressure on profits from increasingly desperate and cut-throat competition in the unprecedented slow-growth recovery, are inexorably driven towards economic nationalism. While economic nationalism is a natural fit with the far right’s ultra-patriotism, it attracts centrist forces as well. Elements of the US trade union movement and Democratic industrial state politicians have warmed to economic nationalism since the days of bashing Japanese imports. Liberal Senators like Sherrod Brown have quietly worked with President Trump around overturning trade deals like NAFTA-- “strange bedfellows” in the words of The Wall Street Journal.

We do not have to press the parallel too hard to recognize that the economic nationalism of today threatens to spark disastrous wars, as did the rabid economic nationalism of the European powers in the prelude to World War I (and World War II). As in both eras, hostility and tensions are smoldering. And as in that era, war promises to follow, with devastation well beyond the comprehension of a complacent, self-absorbed population. The threat of general war, nuclear war, is possibly greater than any time in my lifetime, excepting the early Cold War years of General Curtis “Dr. Strangelove” LeMay and the US nuclear monopoly.

While extreme right nationalism is a serious political danger, the rise of economic nationalism, a growing policy consensus with capitalist rulers, threatens the very existence of millions, if not the planet.

Greg Godels

zzsblogml@gmail.com