ECONOMIC NATIONALISM
Over the past century and a half, the ideologies of liberalism, nationalism, and Marxism have divided
humanity. This has been marked by a conflict among three moral and intellectual positions which have
revolved around the role and significance of the market in the organization of society and economic
affairs. In highly oversimplified terms, economic nationalism (or, as it was originally called,
mercantilism), which developed from the practice of statesmen in the early modern period, assumes and
advocates the primacy of politics over economics. It is essentially a doctrine of state building and asserts
that the market should be subordinate to the pursuit of state interests. (GILPIN, 1967)
Economic nationalism, like other theories, has undergone several metamorphoses over the past several
centuries. Its labels have also changed: mercantilism, statism, protectionism, the German Historical
School, and, recently, New Protectionism. Being the oldest and psychologically most deeply embedded of
the three IPE perspectives. It accounts for one of the basic compulsions of all people and nation-states: to
create and sustain wealth and power to preserve and protect the nation’s security and independence from
any number of real and imagined threats. Historically, classical mercantilism connoted efforts by states
to promote exports and limit imports, thereby generating trade surpluses that would strengthen the nation
while protecting certain groups within society. Today, neomercantilism accounts for a more complex
world marked by intensive interdependence where states use a wider variety of instruments—especially
economic ones—to protect their societies. (Baalam and Dillman, 2014)
To establish our understanding of this theoretical perspective, and its implication in the context of
political economy, we shall briefly trace the historical evolution of mercantilism. After which we shall
analyze the central features of it along with its impact on the political economy.
Historical Evolution of Economic Nationalism (Baalam and Dillman, 2014)
Mercantilism: The Foundations
Classical mercantilism emerged in early modern Europe, driven by the formation of centralized nation-
states. Monarchs like Henry VII and Elizabeth I implemented policies to control trade and bolster their
economies. Ha-Joon Chang highlights England's use of tariffs, subsidies, and industrial espionage to
dominate the wool industry, a hallmark of mercantilist strategies.
Economic historian Charles Tilly argues that war played a critical role in shaping mercantilist policies, as
monarchs sought to extract wealth for military expansion. This period also saw the rise of colonial
empires, where states like Britain and Spain exploited colonies for raw materials, cheap labor, and
exclusive markets. Scholars Kenneth Pomeranz and Steven Topik emphasize that colonial violence and
slavery were integral to mercantilism, providing the economic base for European powers.
Hamilton and List: Nationalist Alternatives to Liberalism
The late 18th and 19th centuries witnessed pivotal contributions to economic nationalism by Alexander
Hamilton and Friedrich List. In his Report on Manufactures, Hamilton rejected the laissez-faire model
advocated by economic liberals like Adam Smith, arguing instead for the protection of infant industries in
the United States. He championed state intervention through subsidies and tariffs, asserting that economic
independence was essential for national security.
Friedrich List expanded on Hamilton's ideas, emphasizing the developmental role of industrialization. In
The National System of Political Economy, List argued for temporary protectionist measures to allow
countries to "climb the ladder" of development, criticizing Britain's free-trade policies as hypocritical. His
advocacy for fostering diverse industrial bases and technological advancement remains a cornerstone of
modern economic nationalism.
Keynesian Revival and the Post-War Order
John Maynard Keynes provided a crucial revival of economic nationalism during the Great Depression.
Keynes argued that markets were prone to failure and required state intervention to stabilize economies
and address unemployment. His ideas influenced the creation of the Bretton Woods institutions—IMF,
World Bank, and GATT—which, while promoting economic liberalism, also embodied mercantilist
concerns of rebuilding national economies and containing communism.
Post-war economic policies reflected Keynesian principles, as governments actively intervened in their
economies. The United States, for example, leveraged its dominant position to craft a system that
balanced free trade with strategic state controls to ensure national security and global influence.
Neomercantilism in the Modern Era
The 20th century saw the resurgence of economic nationalism under neomercantilism. States adapted to
globalization by employing subtle protectionist measures, such as nontariff barriers, industrial subsidies,
and strategic resource policies. Japan's Ministry of International Trade and Industry (MITI) epitomized
this approach, using state-led strategies to foster industrial growth and secure global market dominance.
Joshua Kurlantzick and Ha-Joon Chang highlight how developing nations like South Korea and Brazil
adopted neo-mercantilist policies to promote industrialization and economic independence. Chang links
these measures to "patient capital," allowing nations to prioritize long-term growth over short-term
profitability.
Contemporary Perspectives and Challenges
Today, economic nationalism persists in a globalized world, as states navigate interdependence and
competition. China's strategic investments in Africa and Latin America, alongside its control of rare earth
minerals, reflect a continuation of mercantilist practices aimed at securing resources and technological
advantages. Similarly, the U.S. uses government procurement and subsidies to support domestic
industries like semiconductors and clean energy.
While economic liberals criticize such practices for distorting markets, mercantilists argue they are
necessary to safeguard national interests. Robert Wade's concept of the "developmental state" underscores
how strategic state intervention can drive industrial growth, a model emulated by the Asian Tigers and
other emerging economies.
The historical evolution has led to the shaping of features of economic nationalism.
Features of Economic Nationalism (GILPIN)
Revolving around state centrism with national units as the center of analysis, economic nationalism
moves around the idea that economic interests are subordinate to the national interest. Gilpin in his work
“The Political Economy of International “discerns two basic propositions of the perspective. The first is
"benign" mercantilism where safeguarding national economic interests is the minimum essential to the
security and survival of the state. On the other hand, there are those nationalists who regard the
international economy as an arena for imperialist expansion and national aggrandizement. This aggressive
form may be termed "malevolent" mercantilism. This perspective can be explained through the policies of
Nazi economic minister Hjalmar Schacht in the 1930s.
Jacob Viner, in his work “Theory of International Trade,” writes of the shared conviction of mercantilists
of all periods concerning the relationship between wealth and power. He mentions
“I believe that practically all mercantilists, whatever the period, country, or status of the particular
individual, would have subscribed to all of the following propositions: (I) wealth is an essential means to
power, whether for security or aggression; (2) power is essential or valuable as a means to the acquisition
or retention of wealth; (3) wealth and power are each proper ultimate ends of national policy; (4) there is
long-run harmony between these ends, although in particular circumstances it may be necessary for a time
to make economic sacrifices in the interest of military security and therefore also of long-run prosperity”
(Viner, 1958)
Economic nationalists regard the two goals of power and wealth as complementary. This view
distinguishes them from liberal writers who generally view the pursuit of power and wealth as a choice
between "guns and butter.”
Economic nationalists stress the role of economic factors in international political economy and view the
struggle among states – capitalist, socialist, or whatever economic resources as pervasive and indeed
inherent in the nature of the international system itself. The economic nationalist for the following reasons
has emphasized the need to industrialize their economies:
1. Industrialization has spillover effects (externalities) throughout the economy and leads to its
overall development.
2. These scholars have associated the possession of industry with economic self-sufficiency and
political autonomy.
3. Industry is prized because it is the basis of military power and central to national security in the
modern world.
Economic Nationalism views markets as a tool to concentrate wealth and to establish dependency or
power relations between the strong and the weak economies. In its benign or defensive form, it attempts
to protect the economy against untoward external economic and political forces. In its malevolent form,
economic nationalism is the conduct of economic warfare. Thus, in a system of competing states, the
economic nationalist considers relative gain to be more important than mutual gain promoting a zero-sum
game.
This helps us conclude that states, as viewed by economic nationalists continually try to change the rules
or regimes governing international economic relations to benefit themselves disproportionately with
respect to other economic powers.
Key Components of Economic Nationalism (SOL, can draw this in the form of G.O.)
a. Trade Protectionism: This involves the implementation of measures such as tariffs, quotas, and import
restrictions to shield domestic industries from foreign competition. Trade protectionism aims to safeguard
domestic jobs, industries, and markets from what is perceived as unfair competition or dumping practices
by foreign producers.
b. Industrial Policy: Economic nationalism often involves the formulation and implementation of
industrial policies aimed at fostering the growth and competitiveness of domestic industries. This may
include subsidies, tax incentives, and government procurement policies designed to support strategic
sectors deemed vital for national security or economic development.
c. Foreign Investment Regulation: Economic nationalists may advocate for greater control over foreign
investment in key industries and assets, including restrictions on foreign ownership, mergers, and
acquisitions. This is seen as a way to maintain domestic control over critical infrastructure and resources,
as well as to prevent foreign exploitation or dominance.
d. Currency Manipulation: Some economic nationalists may advocate for policies aimed at
manipulating the value of the national currency to gain a competitive advantage in international trade.
This may involve interventions in foreign exchange markets, capital controls, or other measures to
influence exchange rates and trade balances.
e. Buy Domestic Campaigns: Governments may encourage or mandate the purchase of domestically
produced goods and services through "buy domestic" campaigns or government procurement policies.
This is aimed at supporting domestic industries, stimulating economic growth, and reducing reliance on
imported goods.
f. Nationalization and State Ownership: In certain cases, economic nationalists may advocate for the
nationalization or state ownership of key industries or strategic assets. This is seen as a way to ensure
government control over critical sectors of the economy and to prevent foreign ownership or control.
g. Protection of Intellectual Property: Economic nationalists may prioritize the protection of intellectual
property rights as a means of safeguarding domestic innovation, technology, and creativity. This may
involve stricter enforcement of intellectual property laws and regulations, as well as measures to prevent
the unauthorized use or appropriation of domestic intellectual property by foreign entities.
h. Support for Domestic Labor: Economic nationalists often emphasize the importance of protecting
domestic workers' rights, wages, and working conditions. This may include measures such as labor
market regulations, minimum wage laws, and support for trade unions to ensure fair treatment and
opportunities for domestic workers in the face of global competition.
Critiques and Challenges (SOL)
While economic nationalism may offer short-term benefits such as protecting domestic industries and
preserving jobs, it also faces several critiques and challenges. Critics argue that protectionist measures can
lead to inefficiencies, reduced competitiveness, and retaliation from trading partners, ultimately harming
consumers and stifling innovation. Moreover, economic nationalism has been criticized for exacerbating
geopolitical tensions, undermining international cooperation, and hindering efforts to address global
challenges such as climate change and poverty.
Economic nationalism has been a prominent force in shaping global economic policies and strategies
throughout history. From its mercantilist origins to its contemporary manifestations, economic
nationalism reflects a desire to prioritize national interests in economic affairs. While it offers certain
benefits, it also faces significant challenges and critiques in an increasingly interconnected and
interdependent world. As we navigate the complexities of globalization and economic interdependence,
understanding the dynamics of economic nationalism remains essential in shaping future policies and
strategies.
