Economic nationalism

Economic nationalism

Ask a question about 'Economic nationalism'
Start a new discussion about 'Economic nationalism'
Answer questions from other users
Full Discussion Forum
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 tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

s and other restrictions on the movement of labor, goods and capital. It opposes globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

 in many cases, or at least it questions the benefits of unrestricted free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...

. Economic nationalism may include such doctrines as protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...

 and import substitution
Import substitution
Import substitution industrialization or "Import-substituting Industrialization" is a trade and economic policy that advocates replacing imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of...



Examples of this include Henry Clay's American System
American School (economics)
The American School, also known as "National System", represents three different yet related constructs in politics, policy and philosophy. It was the American policy for the 1860s to the 1940s, waxing and waning in actual degrees and details of implementation...

, French Dirigisme
Dirigisme is an economy in which the government exerts strong directive influence. While the term has occasionally been applied to centrally planned economies, where the state effectively controls both production and allocation of resources , it originally had neither of these meanings when...

, Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

's use of MITI to "pick winners and losers", Malaysia's imposition of currency controls in the wake of the 1997 currency crisis, China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

's controlled exchange of the yuan
The Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...

, Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...

's economic policy of tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

s and devaluation
Devaluation is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged....

 in the wake of the 2001 financial crisis and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

' use of tariffs to protect domestic steel production.

Instances became more visible from 2005 after several governments intervened to prevent takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...

s of domestic firms by foreign companies. Some cases include:
  • Proposed takeover of Arcelor
    Arcelor S.A. was the world's largest steel producer in terms of turnover and the second largest in terms of steel output, with a turnover of €30.2 billion and shipments of 45 million metric tons of steel in 2004...

     (France and Luxembourg) by Mittal (India).
  • French governmental listing of Danone
    Groupe Danone
    Groupe Danone is a French food-products multinational corporation based in the 9th arrondissement of Paris. It claims world leadership in fresh dairy products, marketed under the corporate name, and also in bottled water...

     (France) as a 'strategic industry' to pre-empt a potential takeover bid by PepsiCo
    PepsiCo Inc. is an American multinational corporation headquartered in Purchase, New York, United States, with interests in the manufacturing, marketing and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company...

  • Blocked takeover of Autostrade, an Italian toll-road operator by the Spanish company Abertis
    Abertis Infraestructuras, S.A. is a Spanish corporation. The company runs 6,713 kilometres of motorways in Europe and operates more than a dozen airports in cities including London, Stockholm and Orlando...

  • Proposed takeover of Endesa
    Endesa (Spain)
    Endesa, S.A. is the largest electric utility company in Spain. The firm, a majority-owned subsidiary of the Italian utility company Enel, has 10 million customers in Spain, with domestic annual generation of over 97,600 GWh from nuclear, fossil-fueled, hydroelectric, and renewable resource power...

     (Spain) by E.ON
    E.ON AG, marketed with an interpunct as E•ON, is the holding company of the world's largest investor-owned energy service provider based in Düsseldorf, Germany. The name comes from the Greek word aeon which means eternity....

     (Germany), and the counter-bid by Gas Natural
    Gas Natural
    Gas Natural SDG, S.A., trading as Gas Natural Fenosa, is an energy company which operates primarily in Spain but also in such countries as Italy, Mexico, Colombia, Argentina, Puerto Rico and Morocco...

  • Proposed takeover of Suez (France) by Enel (Italy), and the counter-bid by Gaz de France
    Gaz de France
    Gaz de France was a French company which produced, transported and sold natural gas around the world, especially in France, its main market. The company was also particularly active in Belgium, the United Kingdom, Germany, and other European countries. Through its part-owned Belgian subsidiary SPE...

  • United States Congress
    United States Congress
    The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

    ional opposition to the takeover bid for Unocal
    Unocal Corporation
    Union Oil Company of California, dba Unocal is a defunct company that was a major petroleum explorer and marketer in the late 19th century, through the 20th century, and into the early 21st century. It was headquartered in El Segundo, California, United States.On August 10, 2005, Unocal merged...

     (USA) by CNOOC (PR China), and the subsequent takeover by Chevron
    Chevron Corporation
    Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining,...

  • Political opposition
    Dubai Ports World controversy
    The Dubai Ports World controversy began in February 2006 and rose to prominence as a national security debate in the United States. At issue was the sale of port management businesses in six major U.S...

     in 2006 to sell port management businesses in six major U.S. seaports to a company DP World
    Dubai Ports World
    DP World is a major operator of marine ports with 49 terminals in operation and a further 9 under development across 31 countries. In 2010, DP World handled nearly 50 million TEU across its portfolio from the Americas to Asia...

     based in the United Arab Emirates
  • Case of new draft legislation at the beginning of 2007 restricting foreign companies' access to Russia's natural-resource wealth and selected Russian industries
  • The New Zealand Government veto of the Canada Pension Plan Investment Board
    Canada Pension Plan
    The Canada Pension Plan is a contributory, earnings-related social insurance program. It forms one of the two major components of Canada's public retirement income system, the other component being Old Age Security...

    's bid for a majority stake in Auckland Airport in 2008.

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
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...

). A recently emerging form of economic patriotism is financial protectionism, the hostility against acquisitions by foreign groups by companies considered of "strategic value" for the economy of the country.


The objective is to support economic activity and promote social cohesion
Social cohesion
Social cohesion is a term used in social policy, sociology and political science to describe the bonds or "glue" that bring people together in society, particularly in the context of cultural diversity. Social cohesion is a multi-faceted notion covering many different kinds of social phenomena...

. 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
Competition is a contest between individuals, groups, animals, etc. for territory, a niche, or a location of resources. It arises whenever two and only two strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For...

 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 However, in most cases where no cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...

 is formed, the market forces will create competition for local products and cause prices to drop.

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

  • Business nationalism
    Business nationalism
    Business nationalism is a right-wing economic nationalist ideology held by a sector of the political right in the United States.Business nationalists are ultraconservative business and industrial leaders who favor a protectionist trade policy and an isolationist foreign policy...

  • Mercantilism
    Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...

  • Producerism
    Producerism, sometimes referred to as "producer radicalism," is a right-wing populist ideology which holds that the productive members of society are being exploited by parasitic elements at both the top and bottom of the social and economic structure....

  • The Wimbledon Effect
  • Foreign ownership of companies of Canada
    Foreign ownership of companies of Canada
    Foreign ownership of companies of Canada has long been a controversial political issue in Canada. Concerns regarding foreign ownership generally regard ownership of previously 'Canadian' assets by individuals or companies based in other countries....

Further reading

(a review of economic nationalism as manifested under the various forms of generic fascism)

External links