Economic nationalism

Economic nationalism
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Economic nationalism is a term used to describe policies which emphasize domestic control of the economy, labor and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital. It opposes globalization in many cases, or at least it questions the benefits of unrestricted free trade. Economic nationalism may include such doctrines as protectionism and import substitution.



Examples of this include Henry Clay's American System, French Dirigisme, Japan's use of MITI to "pick winners and losers", Malaysia's imposition of currency controls in the wake of the 1997 currency crisis, China's controlled exchange of the yuan, Argentina's economic policy of tariffs and devaluation in the wake of the 2001 financial crisis and the United States' use of tariffs to protect domestic steel production.

Instances became more visible from 2005 after several governments intervened to prevent takeovers of domestic firms by foreign companies. Some cases include:

The reason for a policy of economic protectionism in the cases above varied from bid to bid, In the case of Mittal's bid for Arcelor, the primary concerns involved job security for the Arcelor employees based in France and Luxembourg. The cases of French Suez and Spanish Endesa involved the desire for respective European governments to create a 'national champion' capable of competing at both a European and global level. Both the French and US government used national security as the reason for opposing takeovers of Danone, Unocal and the bid by DP World for 6 US ports. In none of the examples given above was the original bid deemed to be against the interests of competition. In many cases the shareholders supported the foreign bid. For instance in France after the bid for Suez by Enel was counteracted by the French public energy and gas company Gaz De France the shareholders of Suez complained and the unions of Gaz De France were in an uproar because of the privatization of their jobs.

Economic patriotism

Economic patriotism is the coordinated and promoted behaviour of consumers or companies (both private and public) that consists of favoring the goods or services produced in their country or in their group of countries. Economic patriotism can be practiced either through demand stimulation (encouraging consumers to purchase the goods and services of their own country) or through supply protection, the shielding of the domestic market from foreign competition through tariffs or quotas (protectionism). A recently emerging form of economic patriotism is financial protectionism, the hostility against acquisitions by foreign groups by companies considered of "strategic value"[7] for the economy of the country.


The objective is to support economic activity and promote social cohesion. The supporters of economic patriotism describe it as a kind of self-defence of local economic interests (national or European in case of the countries of the European Union). Some manifestations of economic patriotism are attempts to block foreign competition or acquisitions of domestic companies. An often cited example is France, where economic patriotism was the main rationale used in the Pepsico-Danone, Mittal-Arcelor, and GDF-Suez affairs.

In the United States, an example of economic patriotism would be the numerous bumper stickers: "Be American, Buy American".


Consumer preference for local goods gives local producers more market power and allows local producers to lift prices to extract greater profits. That occurs because firms that produce locally-produced goods can charge a premium for that good. Consumers who favor products by local producers may end up being exploited by profit-maximizing local producers. For example, protectionist policy in America that placed tariffs on foreign cars gave local producers Ford and GM market power that allowed them to raise prices of cars, which negatively affected American consumers who faced fewer choices and higher prices [2]. However, in most cases where no cartel is formed, the market forces will create competition for local products and cause prices to drop.[citation needed]

Because locally-produced goods can attract a premium if consumers show a preference towards it, a firm has an incentive to pass foreign goods off as local goods if foreign goods have cheaper costs of production than local goods. They are able to do this because the line between foreign-made and locally-made is blurry. This brings up the issue of the definition of local goods. For example, while a particular car may be assembled in America its engine may be made in another country such as China. Furthermore, while the engine may be made in China, the engine's components may be made in several other countries: the pistons may come from Germany and the spark plugs may come from Mexico. The components that make up the spark plugs and pistons may come from different countries and so on.

See also


Further reading

  • Baker, David (2006), "The political economy of fascism: Myth or reality, or myth and reality?", New Political Economy 11 (2): 227–250, doi:10.1080/13563460600655581  (a review of economic nationalism as manifested under the various forms of generic fascism)

External links

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