At Dissent: A Cautious Case for Economic Nationalism

I have an article in the new issue of Dissent, arguing that “As long as democratic politics operates through nation-states, any left program will require some degree of delinking from the global economy.”

My piece is part of a special section on “Capitalism Today.” There will be an accompanying event at the New School on May 22, with Jamie Galbraith, Julia Ott, Mark Levinson and me.

I’ve made similar arguments to this article’s in a number of posts on this blog:

Capital Mobility as Trojan Horse
Only the Debt Is National
How to Think about the Balance of Payments
What Is Foreign Investment For?
Lessons from the Greek Crisis
Prices and the European Crisis, Continued

One thing that’s probably not as clear as it should be in the Dissent piece, is that the case for delinking is much stronger for most other countries than for the United States. For most countries, free trade and, even more, free capital mobility, drastically reduce the choices available to national governments. (This “disciplining” of the state by foreign investment is sometimes acknowledged as its real function.) For the US, I don’t think this is true – I don’t think the threat of capital flight meaningfully constrains policy here. And in particular I don’t think it makes sense to see a more positive trade balance as necessary or even particularly desirable to boost demand, for reasons laid out here and here.

 

2 thoughts on “At Dissent: A Cautious Case for Economic Nationalism”

  1. My first comment after a fast scanning of your article is:
    Shit no!

    First of all, “economic nationalism” is not the same of “de-linking”, it is in fact more likely to result in trade wars and imperialism;
    Second, “sovereignity” never existed for a lot of countries until well after the end of ww2, so the trilemma is a rater optimistic view of history;
    Third, as is obvious from the talks about brexit, the britons are on the way to make the UK a Tatcherite wet dream, and the only thing that is blocking them is the fact that they are still constrained by the EU (but after the almost certain hard brexit this too will cease and the british government will be free to squeeze the workers at will, using hate for the EU and economic nationalism as an excuse).

    Be careful what you wish for!

  2. I largely dissent with your dissent piece.

    Recently I read the famous book from 1902 “Imperialism: a study” by Hobson, and I was rather surprised because while some point of the book really are old (eugenetics, seriously?) many are really relevant today and many prefigure things that happened really many decades later: for example in the chapters about “ideological justifications of imperialism” Hobson discusses many theories that passed as scientific in his times and how these theories are actually caused by the economic roots of imperialism; many of those are clearly the ideological basis of fascism (so at this point I have no doubt that fascism was just a more extreme version of 19th century capitalism, and had nothing to do with socialism).

    In my opinion we are reliving a situation that is similar to Hobson’s one: not the interwar period, but the period before WW1, when the wage share was low and competition between nations was very strong as every nation needed to export its surplus.

    In this sense, finance and the increase in leverage is a very imperfect form of Varoufakis’ “surplus recycling mechanism”, as the increase in leverage recycles surplus into consumption, but the continuous increase in leverage (and capital gains in the financial markets) make the whole system more and more pro-cyclical, and there are perverse incentives as those countries that squeeze their workers more are the one that end up “winning” (as the debt ends up on somebody else’s shoulders).

    In Hobson’s times, as european countries could for a while release the tensions through continuous colonial expansion, a lot of dubious but at the time considered scientific theories arose that justified colonialism (and later became the basis for fascism). These theories were functional to:
    1) diminish internal social conflicts as the confict was redirected against other populations;
    2) justify a series of policies that actually squeezed the workers even more, such as protectionism.

    In our times, the “underconsumption level” is not as bad, as our society is not yet as unequal as that of the early 20th century; also straightforward imperialism is not tolerated anymore.
    However, other less extreme theories are surfacing, that still go on with the “blame the foreigner” idea, such as the idea that neoliberal policies are always forced from the outside, or that it is the immigrants who are stealing our jobs (while contemporaneously being unemployed and thus stealing our social security) and so on.
    These theories are functional to:
    1) diminish internal social conflicts by blaming someone else;
    2) justify a series of policies that will actually squeeze the workers even more, such as protectionism.

    In this situation, “nationalist capitalism” is not really the opposite of neoliberalism, in pratice it is a doubling down on neoliberalism!

    To put it in another way, if (as I believe) the problem in Greece is caused by the fact that Germans consume too few (due to German wages being too low), if the EU breaks up then Germans can devalue the Mark and (try to) become even more aggressive exporters, thus increasing “underconsumption” even more.
    The Greeks will have even less options that they have now.

    So in my opinion, in the case of the EU, the solution is exactly the opposite: going to a proper EU state, switching a large part of taxation from national governments to the EU. This would have two good effects:
    1) a certain degree of internal redistribution because of the unified taxation.
    2) now taxes in the EU are high but not very progressive, because national governments have incentive to not tax profits or businesses will just relocate inside the EU, so high VATs and low taxes on profits. If the EU starts to tax directly, this incentive toward the VAT ceases.

    Even the parts of the EU that are often seen as a neoliberal ploy are there mostly because national governments didn’t want to cede some prerogatives to the EU, so for example the idea of “the euro as a new gold standard” is really a case of the EU being too weak, not too strong.

    If tomorrow for some reason the USA broke apart in the various states, each with a different local currency, do you think USA workers would gain or would lose?

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