Although recently there has been a trend by some countries to try to go it alone, such as the United Kingdom leaving the European Union, there are other examples of economic nationalism-an ideology where governments assume that the role of government is to intervene in the economy, intervene in the global economy as the best way to protect a country’s economy and its people from the hardships that they may have suffered by operating in a free market economy, under the economic liberalism ideology. The “Make America Great” slogan and the decisions by the U.S. to withdraw support from international organizations and multilateral trade agreements the U.S .has championed since World War II is a good example of economic nationalism.
Economic nationalism is also referred to as “Mercantilism” and in a wider sense referred to in international relations theory as “Realism,” tends to be a zero-sum game. It is an approach where countries tend to be in conflict and develop policies that help them gain at the expense of another country or countries. In an increasingly interdependent world, political and economic cooperation between countries is a positive sum game because both sides win. The benefit may not be equal, but both sides benefit. On the other hand, economic nationalism undermines the cooperation established at Bretton Woods after World War II where institutions such as the IMF, WTO, and others established multilateral approaches to solve global problems to the benefit of the majority.
Although economic liberalism is a worldview that the U.S. has championed since World War II and although economic liberalism holds that global trade is a benefit for the economy and people of countries that participate, there have been winners and losers. While the role of government in economic nationalism is to intervene to help their economies, the role of government in economic liberalism is to define and enforce the rules that keep global trade as fair as possible and not intervene. In fact, in economic liberalism, the extent to which government can minimize interference, the assertion is that global trade will tend to benefit most those nations who participate and result in a positive sum, win-win scenario.
The rise in economic nationalism undermines the tradition of economic liberalism (globalism) and discourages economic and political cooperation between countries. When a country decides that they can improve the quality of life, increase jobs, and generally improve their economies by breaking away from bilateral or multilateral agreements, thereby undermining the institutions that have provided for agreements between countries that agreed to the rule of law, property rights, methods of exchange, tax collection, public goods provided to poorer countries, checks and balances on official corruption, there has been a benefit.
In short, the rise of nationalism threatens the rule-based trading system championed by the U.S. since World War II. Without these rules, without the World Trade Organization serving as a mediator and rules police, the trade would continue but the lack of norms and procedures would create more trade conflicts and would lead to more disputes. The fewer the rules, the more likely that military power would become more important in trade disputes, rather than working through institutions designed to reduce conflict. Transnational investment would be reduced.
Although not all countries benefit equally and economic liberalism has its winners and losers, it does provide the framework within which economic development is possible providing a way for savings to accumulate and investment to grow, thereby making the world, arguably, a better place, where investment helps economies grow.
Countries benefit with cooperation between countries to mutual benefit, becoming too nationalistic at the expense of its partners is counterproductive. It is an approach that creates conflict. Being more nationalistic tends to be a zero sum game in an increasingly interdependent world economy, where countries depend on other countries for their economic and political and national security wellbeing. When companies cooperate, they can become more competitive. When they are more competitive, they hire more workers, pay higher salaries, and otherwise contribute to economic growth. Economic nationalism is a bad policy.