Economic Nationalism: Fair or Foul?

By: Ian_Fletcher

Because we have a national government, because Americans care about what hap­pens to their economy, and because it is the national debate on the question that will bring changes or fail to, our trade problems will be fixed in Washington or not at all. As economist Herman Daly of the University of Maryland, best known for his work on ecological economics, puts it, “Free trade makes it very hard to deal with these root causes at a national level, which is the only level at which effective social controls over the economy exist.”

Unfortunately, critics of America’s trade mess are often confronted with the idea that caring about the well-being of other Americans more than foreigners is either a) irrational or b) downright evil.

It’s the latter category that concerns me here. For example, take this quote from economist Steven Landsburg of the University of Rochester:
I hold this truth to be self-evident: It is just plain ugly to care more about total strangers in Detroit than about total strangers in Juarez. Of course we care most about the people closest to us—our families more than our friends and our friends more than our acquaintances. But once you start talking about total strangers, they all ought to be on pretty much the same footing. (Forbes Magazine, “Xenophobia and Politics: Why Protectionism Is a Lot Like Racism”)

“Hold this truth to be self-evident” is a pretty cocky allusion, given that the Founding Fathers were protectionists.

As for “a lot like racism,” my assumption here is that he’s just trying to intimidate his opponents with bad words. The connection he seems to draw is that protectionism is somehow “like” racism because it involves discriminating between two different groups of people. But as the blue-plate special at the local diner is, er, “discrimination,” (of a kind we economists call price discrimination) I don’t think anyone has good reason to get offended here on civil-rights grounds.

In fact, there’s good reason to believe that protectionism, and economic nationalism more generally, cuts the other way. It is, in fact, one of the best policies we have left for uniting our increasingly diverse nation.

Why? Because it is something all Americans can agree on despite our differences of race, ethnicity, culture, lifestyle, religion and the other things that divide us.

We need something in common if we are to have the shared civic identity needed for democracy. A shared economy is a good start, though we will need policies which act on this fact (like protectionism) to get meaningful mileage out of it.

Not that economic nationalism doesn’t have obvious dangers. Of course it does. Like any kind of nationalism, it can go either way: it can either make people willing to sacrifice for their community, or it can make them act as predators towards other communities. Both phenomena have long historical records.

It follows that if we are to embrace economic nationalism, we need to answer the question of what must it look like, in order to be ethically legitimate? I would argue that the basic criteria for ethically legitimate economic nationalism are the following:

1) It must aim at the economic good of the nation as a whole, not just of special interests dressing themselves up as such. The latter is, of course, the classic danger of protectionism incompetently implemented, as when it protects industries based on who had the smarter lobbyist.

2) It must allow other nations the same right to fight for their own people’s economic interests as we claim for ours. Fair is fair, and we’re better off in a contented world, anyway.

3) It must be based on sound economics and policies that actually work, not misguided nostrums and empty populist gestures. I spent an entire chapter of my book debunking such ideas.

4) It must be open to interpretation according to either partisan leaning, that is, it must not be of itself a left-wing or right-wing position. If economic nationalism makes sense, it deserves to be part of the broad national consensus.

I am sick to death of the phony humanitarianism of economic globalists. They preen no end about how globalism serves the interests of all humanity, but in reality, this is just a convenient excuse for repudiating obligations to their fellow Americans while assuming—on paper—moral obligations to foreigners who have no power to make them live up to those obligations. Embracing our economic obligations to our own countrymen would be a far more meaningful step for anyone who really cares about other people.

Ian Fletcher is the author of the new book Free Trade Doesn’t Work: What Should Replace It and Why (USBIC, $24.95)  He is an Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council, a Washington think tank founded in 1933.  He was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at ian.fletcher@usbic.net.

© 2011 Copyright  Ian Fletcher - All Rights Reserved

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