Introduction
Economic nationalism is an ideology prioritizing national economic interests, using state intervention like tariffs, subsidies, and trade barriers to protect and grow domestic industries against foreign competition, often stemming from beliefs that global markets favor stronger nations and require state correction for national security and self-sufficiency. It contrasts with free-market liberalism, emphasizing protectionism, domestic control, and self-reliance, seen historically in commerce and resurgent today amidst globalization.
The Roots and Revival of Economic Nationalism
Modern economic nationalism is not a new phenomenon; it is an evolution of theories that challenged classical liberalism (Adam Smith) as early as the 18th century.
Mercantilism (16th–18th Century): The earliest form of economic nationalism, mercantilism viewed trade as a “zero-sum game.” Nations sought to maximize exports and minimize imports to accumulate gold and silver, believing that one nation’s gain was inevitably another’s loss.
Friedrich List and the “National System: In the 19th century, German economist Friedrich List argued that free trade was only beneficial for the strongest industrial power (then Britain). He advocated for infant industry protection,” suggesting that developing nations must use tariffs to protect their domestic industries until they are strong enough to compete globally.
The Interwar Period (1929–1939): Following the Great Depression, nations retreated into “beggar-thy-neighbor” policies, raising massive trade barriers like the U.S. Smoot-Hawley Tariff. This era is often cited as a warning of how aggressive economic nationalism can lead to global economic collapse and conflict.
Features of Economic Nationalism:
Protectionism: Imposing tariffs, quotas, and non-tariff barriers to shield domestic industries from foreign competition, such as U.S. steel tariffs.
State Intervention: Government actively directing the economy, controlling key sectors, and regulating markets to serve national goals.
Support for Domestic Industry: Providing financial aid, incentives, and promoting local businesses to enhance their competitiveness.
Self-Sufficiency (Autarky): Reducing dependence on foreign economies by developing strong internal capabilities and controlling essential resources.
Strategic Resource Control: Government taking ownership or control of vital industries and resources for national security.
Skepticism of Free Trade: Viewing international trade as a competition for relative gains, not mutual benefits, and opposing unrestricted globalization.
Import Substitution: Encouraging the production of goods domestically that were previously imported.
National Security Focus: Subordinating economic activity to national security and military strength, sometimes requiring colonies or dominance over trade routes.
Economic Nationalism and Global Supply Chains
Globalization has deeply integrated national economies through complex supply chains that span continents. Economic nationalism challenges this model by encouraging reshoring, nearshoring, or diversification away from foreign suppliers. The goal is to increase self-reliance, particularly in critical sectors such as energy, food, healthcare, and technology.
Recent global disruptions, including financial crises, pandemics, and geopolitical conflicts, have strengthened the case for greater economic resilience. Governments increasingly view dependence on foreign suppliers as a strategic risk. Economic nationalism, in this context, is framed not merely as protectionism but as a strategy for national security and economic stability. However, dismantling or restructuring global supply chains can increase costs, reduce efficiency, and provoke retaliatory measures from trading partners.
The Political Appeal of Economic Nationalism
Economic nationalism holds strong political appeal, particularly during periods of uncertainty. It offers a clear narrative: national decline is blamed on external forces, and restoration is promised through reclaiming control. This message resonates with voters who feel left behind by globalization and distrust elites who benefited from open markets.
Politicians often use economic nationalist rhetoric to justify interventionist policies and assert leadership on the global stage. By framing economic policy as a matter of national pride and survival, governments can mobilize public support more effectively than through abstract economic arguments. However, this politicization of economic policy can also oversimplify complex global challenges and foster antagonism between nations.
Tensions Between National Interests and Global Cooperation
One of the central dilemmas of economic nationalism is its relationship with global cooperation. Many economic challenges—climate change, financial stability, public health, and technological governance—require coordinated international responses. Excessive focus on national self-interest can undermine collective action and weaken global institutions designed to manage shared risks.
Trade wars and retaliatory tariffs illustrate how economic nationalism can escalate into economic conflict. While such measures may offer short-term protection for certain sectors, they often lead to higher prices for consumers, reduced export opportunities, and strained diplomatic relations. Over time, widespread economic nationalism risks fragmenting the global economy into competing blocs, reducing overall growth and stability.
Economic Nationalism in Developing and Developed Economies:
In Developing Economies
Goal: Achieve economic sovereignty, industrialization, and escape dependency.
Strategies:
Protecting infant industries from foreign competition to grow.
State-led development and public enterprises.
Mobilizing internal resources for growth.
Balancing global integration with national control.
In Developed Economies
Goal: Protect jobs, maintain industrial base, ensure security, and counter rivals.
Strategies:
America First policies, reshoring manufacturing.
Tariffs and trade restrictions to favor domestic producers.
Focus on national security in technology and supply chains.
Skepticism of multilateral trade agreements.
The Similarities & Differences
Shared Belief: Markets aren’t self-regulating and need state guidance for national benefit.
Contrast: Developed often react to globalization’s negative impacts; developing nations use it to build foundational strength.
Tools: Both use protectionism, but motivations differ (e.g., securing resources vs. preventing deindustrialization).
The Future of Economic Nationalism:
Resurgence Driven by Crises: Events like Brexit, U.S.-China trade friction, and the pandemic fueled nationalist sentiment, moving away from post-WWII liberal economics.
Strategic Competition: Major powers, particularly the U.S. and China, are using industrial policy (e.g., Made in China 2025,” U.S. chip initiatives) to build domestic capacity, leading to tech decoupling.
Fragmentation & Geopolitics: Expect more splintering into economic blocs, digital rule divergence, and challenges to dollar dominance, disrupting global supply chains.
Shift to Investment-Led Integration: While trade slows, investment flows are being redirected to build domestic resilience, forcing companies to “produce locally”.
National Security Focus: Economic goals are increasingly tied to national security, influencing policies on critical resources and technology.
For Businesses: Increased regulatory ambiguity, trade barriers, higher production costs, but also new opportunities for localized manufacturing.
For Consumers: Potential for higher prices due to reduced competition and tariffs.
For Global Cooperation: Strains international alliances as nations prioritize self-interest.
Conclusion
Economic nationalism in a globalized world reflects deep tensions between openness and control, efficiency and equity, global integration and national identity. While globalization has delivered significant benefits, its uneven effects have driven many societies to reassert national economic priorities. Economic nationalism offers a sense of protection and sovereignty, but it also carries risks of isolation, inefficiency, and conflict.