What is Meant by Economic Nationalism?

What is Meant by Economic Nationalism?
Economic nationalism, very simply stated, is the imposition of economy control to protect the nation. Buzzle will tell what is meant by economic nationalism.
WealthHow Staff
"Economic nationalism is on the rise in key members, notably in Indonesia. Other members have already displayed buyer's remorse over even the current modest level of commitments."
― Mr. Bilahari Kausikan, Policy Advisor and Ambassador, Ministry of Foreign Affairs, Singapore
Economic nationalism means to protect economy. In other words, it indicates the control of a nation's economy by implementing certain strategies. This kind of a situation occurs when there is an external threat to the nation's economy or there is a need to advocate national interests. The safeguarding strategies may involve the establishment of certain rigid methods or the imposition of certain restrictions, as per the government. In the following paragraphs, you will come across an in-depth definition of economic nationalism and the related concepts.
The Concept
  • The definition of economic nationalism states that it is a means to control the nation's economy. Advocates of this concept are completely antagonistic towards globalization.
  • The general belief is that globalization promotes excess international trade and investment policies, thus leading to diminished nationalism.
  • Economic nationalism advocates taking care of the nation's economy as a standalone entity, by applying policies that reduce international dependence.
  • Though the theory has supporters and may even work for a while, in the long run, it causes a tremendous strain on the economy due to the strategies used.
  • In the paragraphs ahead, you will learn some of these strategies that have been implemented for economic nationalism.
Policies Undertaken
Import Substitution
  • It is a policy that advocates using goods produced within the country rather than using foreign goods.
  • The idea is to reduce the dependence on foreign stuff and thereby international trade, and rely on the domestically manufactured goods.
  • This leads to increased domestic production and an increased economy for the country.
  • The concept also involves advocating increased taxation policies and subsidizing power and agro-based industries.
  • While the policy sustains the initial period, it cannot be used for a longer period of time.
  • Every country gains from trade, and if the import policies are stopped, it leads reduced efficiency and innovation.
Protectionism
  • It is almost similar to import substitution, except that here, both the import as well as export is restricted.
  • A number of policies are initiated by the government, which restrains the international trade.
  • One of the policies introduced is tariffs. Tariffs are basically taxes imposed on imported goods, i.e., if one imports stuff from a foreign land, a stipulated amount will have to be paid in order to allow entry for that product in the country.
  • Thus, importing a large number of goods will prove to be an expensive affair for importers, leading to a reduced number of traders wanting to import foreign goods. This leads to more opportunity for the local traders, giving rise to an increase in the economy.
  • Giving government subsidies is another policy. These subsidies are similar to small loans given to local firms to increase their annual output and stay in competition.
  • The area of export subsidies is also used to increase exports. Ironically, this policy is promoted in as a part of protectionism as the exporters get the benefit of tariffs.
  • Besides, import quotas, barriers, legislation, etc., are also implemented in order to support economic nationalism.
Planned Economy
  • Implementing a planned economy is one of the methodologies used by the government for economic nationalism.
  • A planned economy is one wherein all the major decisions regarding the investments and other details are planned by a common, central authority.
  • This authorized body/agency is the decision maker for all the policies and strategies used in order to improve productivity in the nation.
  • While a planned economy and a command economy are almost synonymous, the former allows the ownership of private enterprises unlike the latter, where public ownership is the sole formula. Thus, a command economy can be a planned economy, but a planned economy need not be a command economy.
  • In this system, most of the production, investment, trade, sale, profits, etc., are all taken care of by the government.
  • This kind of economy has its own advantages and disadvantages. However, there are very few planned economies in the world, as of today.
Mercantilism
  • This is again quite similar to protectionism, where exports are given importance and imports are to be reduced.
  • One of the strategies it thrives on is bullionism. This principle advocates that precious metals equal wealth, i.e., more the amount of gold and silver the nation has, the richer it is.
  • Mercantilism is an age-old system; however, it is still used in certain countries.
Important Examples
  • Malaysia had imposed the currency control system after the currency crisis in 1997.
  • The United States had imposed a tariff system in order to increase their steel production.
  • During the 2001 economic crisis, Argentina had imposed a tariff and devaluation policy.
  • There was a case in 2007, wherein Russia tried to safeguard its natural resources and other industries by restricting foreign companies.
  • The takeover of Autostrade, a famous Italian toll-road operator, by the Spanish company Abertis was blocked.
  • The sale of six huge U.S. Seaport management businesses to a UAE-based company in the year 2006 faced political opposition.
The Effects and Significance
  • Economic nationalism has been a topic of huge debate.
  • Many advocate that it is essential to increase internal economy; however, this has also negatively impacted the nation.
  • The significance of economic nationalism lasts only for a while; after that, the nation begins to require external resources and trade in order to survive.
  • Policies like protectionism severely cripple the global economy.
  • Globalization is beneficial in many ways - it has helped increase the trade, develop friendly relations, increase international investments, and develop healthy cross-continental political relationships.
  • Of course, it has had some negative effects too, but economic nationalism is not the answer to curb the ill effects of globalization.
  • As of today, the world in increasingly becoming a smaller place to live in, and national borders are being redefined. Globalization is, thus, the way to go.
  • In order to minimize the negative effects of globalization, different policies must be undertaken rather than playing on the positives of economic nationalism, which lasts for a shorter duration.
  • What's more, the two factors may co-exist in harmony if the right doctrines are applied.
Globalization has helped the world become smaller and much more progressive, even though it has caused some insecurities and potentially damaging effects as well. For that reason, economic nationalism is a powerful medium to help curb excess globalization. However, economic nationalism also leads to economic instability and politics, which may endanger the country. Therefore, while some of the policies may be adhered to, for a short duration, the concept should not be used beyond measure, for the fear of fragmenting the nation.