Politics & Policy

An Economic Virus

Nationalism is spreading like the plague in economic circles.

State Department cookie-pushers, Davos dons, Wall Street Brahmins, think-tank worrywarts, and the Olympians of the European Union are all fretting about the troubling rise of “economic nationalism” in the West. And, although it pains me to say so, I think the pinstripe crowd is right.

#ad#To read the financial and European press, economic nationalism is the avian flu of public policy, spreading the bacillus of protectionism from one society to the next. Last week, European Commission President Jose Manuel Barroso denounced the rise in “nationalistic rhetoric” in Europe in response to the latest outbreak in France, where Prime Minister Dominique de Villepin blocked an Italian company from taking over a French energy company. De Villepin said he put the kibosh on the plan out of “economic patriotism.”

The European debate is much nastier than ours because Europe’s problems are so much worse. Europe has an asthmatic economy, a civilizational crisis brewing over Islam and immigration, an aging and shrinking population, and an anemic military establishment. And its reason for existence–the EU–is adrift without a constitution.

But even here in the U.S., the same argument has been raging for years. Companies that outsource jobs or move their headquarters abroad for tax purposes have for some time been called unpatriotic by many liberals and quite a few conservatives. Patrick Buchanan and Ralph Nader have both played the economic patriotism card to the hilt, but even mainstream politicians wax populist on trade. Sen. John Kerry demonized “Benedict Arnold” corporations in the 2004 presidential campaign.

This bipartisan anger is, paradoxically, the product of a larger bipartisan consensus on free trade. Hence, those who dissent from free-trade orthodoxy on the left and the right sound remarkably similar. But that consensus is unraveling as formerly unrelated issues–immigration, trade, outsourcing, globalization, national security, homeland security, the war on terrorism–melt together in the fire of populist anger.

The oddly bipartisan flavor of the outrage over the Dubai ports deal is the latest example of the trend. North Carolina Republican Rep. Sue Myrick wrote a one-sentence letter to President Bush outlining the view of many Republicans: “Not just no, but HELL NO.” Sen. Barbara Boxer is less pithy but even more extreme: “We have to have American companies running our own ports.”

The beauty of the American free-trade consensus over the last few decades is that it split two outlooks that tend to go together: nationalism and socialism. In terms of economic policy, nationalism is indistinguishable from socialism. When you nationalize an industry, you socialize it. And what is the difference between socialized medicine and nationalized health care?

Liberals are naturally sympathetic to socialistic arguments, conservatives to nationalistic ones. But to everyone’s benefit these two outlooks have been quarantined in different parties. Conservatives have been culturally nationalistic but economically liberal (in the classical sense). Liberals have been economically nationalistic–on health care, regulation, taxes, unions–but culturally liberal. Although it’s been quite painful for them, this cultural liberalism has kept the Democratic party in favor of free trade and immigration. Protectionism hurts foreigners and poor Americans, after all.

Indeed, to be fair, the Democratic party has been heroic in bucking its base–the economically nationalistic labor movement–on free trade. FDR, Truman, and Kennedy were all consummate economic nationalists. Free trade was tactically in their interests for a long time because it dovetailed with labor’s interest. When the United States stopped being the manufacturer to the world, the Democratic party struggled–not always successfully–to stay pro-trade on principle, even at the cost of votes. Meanwhile, the GOP has had the opposite challenge: to stay pro-free trade even as its ranks swell with working-class voters enamored with their paychecks, not Adam Smith.

Now, a win-at-all-costs Democratic party has realized that this is the perfect moment for it to re-brand all of its economic ideas in the language of patriotism. Many Republicans are determined to fight the Democrats for this turf. So they, too, are bending their economic policies to fit their cultural conservatism.

And if we let them follow this path, we’ll have the same problems as Europe in no time.

(c) 2006 Tribune Media Services

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