Is economic nationalism even possible?
By Scott Sumner
A great deal of ink has been spilled about the causes and consequences of the recent rise in economic nationalism. Maybe it’s time to step back and ask whether economic nationalism is even possible in the modern world.
The Economist has an interesting article discussing the British struggle to negotiate a Brexit agreement with the EU:
Dominic Cummings, the former campaign director of Vote Leave, thinks that Brexit is being “irretrievably botched”. Ambrose Evans-Pritchard, a pro-Leave journalist, says that “the quixotic bid for British independence has failed”. On the Remain side, Jonathan Powell pronounces hard Brexit “dead”, killed by the conundrum of the Irish border. . . .
On June 6th Boris Johnson, the foreign secretary, delivered an agonised speech to a group of Conservative donors which was recorded and leaked. Mr Johnson argued that Britain runs the risk of ending up in “a sort of anteroom of the EU” and blamed this unhappy prospect on a combination of insufficient will on the part of the prime minister and strong resistance on the part of the establishment. He claimed that Britain needed a strong leader like Donald Trump—“he’d go in bloody hard”. He called the Treasury the “heart of Remain”. He lamented that Britain was so terrified of short-term disruptions that it would sacrifice long-term gains.
The more conservative Brexiteers advocated a hard break with the EU, which would allow the UK to chart its own course. In their vision, the UK would dump lots of burdensome EU regulations, strike free trade deals with many other countries, and become a sort of Singapore of Europe.
In retrospect, it’s easy to see why they are struggling to implement their vision. Consider the following:
1. While 52% of British voters supported Brexit, not all favored the more libertarian version envisioned by some Conservatives. Brexit also did well in many (northern) Labour areas, as the more socialist wing of the Labour Party has often seen the EU as being a bit too “neoliberal”, to willing to promote free markets and capital mobility.
2. The “establishment” in the UK opposed Brexit to a striking degree. It was opposed by both the Conservative and Labour parties, by big business, labor unions, academics, much of the press, and most people within the bureaucracy.
It’s fine to talk about the “will of the voters”, but precisely what version of Brexit did they support? If it’s the Singapore version, then why do British voters consistently support politicians who favor big government and lots of regulations? The fact is that people voted for Brexit for many different reasons, and under a representative democracy it’s up to the elected representatives to implement the actual policy.
Theresa May called an election soon after Brexit in the hope and expectation that it would strengthen her negotiating hand. But the British electorate delivered a stinging rebuke, as the Conservatives lost many seats, despite facing a Labour leader widely viewed as an extreme, eccentric, Marxist left-winger. The voters didn’t seem to want May to have a strong hand in negotiation, and their decision effectively gave those who favored a “soft Brexit” a veto over the final outcome.
So what does this mean for the US? Consider:
1. In 1979, the UK elected Margaret Thatcher, and in 1980 the US elected Ronald Reagan.
2. In June 2016, the British public shocked pollsters and the establishment by supporting Brexit. In November 2016, the US public shocked pollsters and the establishment by electing Donald Trump.
If the hard Brexit option fails to be enacted and the UK stays 90% in the EU while formally leaving it, would that be an indication of the likely outcome of Trump’s recent trade war? I think the answer is probably yes. The forces of globalization may be too strong for any politician or political movement to overturn. It seems likely that Trump will be forced to back off at some point, and globalization will proceed much as before.
It is possible that the US is able to achieve a few concessions on trade; perhaps our trading partners slightly reduce their trade barriers. But that’s not the sort of hard economic nationalism agenda advocated by Trump supporters like Steve Bannon. A move toward freer trade in China would result in a stronger dollar and even more manufactured imports pouring into America’s rustbelt. It would be a victory for globalization, not economic nationalism.
Think about Trump’s rhetoric. Does he advocate open borders? Obviously not. But he does pay lip service (sincere or not) to the abolition of all tariffs. That’s a tacit acknowledgement that free trade still has the upper hand in terms of intellectual respectability. Even economic nationalists must at least pretend to be globalists.