The Nationalist Dilemma: A Global History of Economic Nationalism, 1776-Present

By Marvin Suesse

Cambridge University Press/April 2023

Kevin Lynch and Paul Deegan

September 14, 2023

Nationalism is a coat of many colours, some of which are vibrant, others dark and unappealing. In his new book, The Nationalist Dilemma (Cambridge University Press, 2023), economic historian Marvin Suesse examines periods of intense nationalism in a variety of countries spanning the West, Asia and South America over the last two centuries to unearth commonalities of economic thinking and policies underlying nationalism.

Intrigued by Steve Bannon’s use of the term “economic nationalism” to describe the Trump economic agenda and the relative absence of the concept in mainstream economics and political science, Suesse delves into what nationalists of many stripes and in many lands have had to say about economics, with a particular focus on those who’ve led governments or directly influenced government policies.

From this analysis of various nationalist movements around the globe over the arc of two hundred years of history, Suesse concludes there are “fundamental commonalities in the way nationalists view the economy” and that these similarities are sufficiently strong to justify “a distinct nationalist approach to economic thought and policy.” Indeed, Suesse argues that the root of economic nationalism’s appeal is “its ability to capitalize upon economic inequality, both international and domestic.”

Nationalists, in Suesse’s paradigm, are largely driven by two basic motivators — an isolationist motive and an expansionist motive —and these motives are often in conflict. The isolationist motive is to keep foreign influence, goods, capital and people out and let the nation and its farmers and shopkeepers thrive alone — simply put, walls are good and globalization is bad. The expansionist motive, on the other hand, is to achieve a greater level of national economic development, particularly manufacturing, for reasons of national security, collective prosperity, and reputation. Achieving this requires some mixture of export-led growth, foreign capital and technology, global talent and national champions – here, walls have gates, globalization is to be managed in the nation’s interest and industrial policy is front and centre. Developing policies that reconcile these two motives is the core tension implicit in nationalist thinking on the economy — the nationalist’s dilemma.

There is no unifying economic theory, no Adam Smith intellectual colossus, underpinning this economic nationalism. Rather, it is more contextually based, rooted in perceived causes of inequalities, and promulgated by several nationalist political economists in the 19^th century who were both well connected with nationalist political leaders in both America and Europe, and very effective pamphleteers. They were exceedingly clever in their insight to reformulate elitist ideas to reflect the lives of the masses, and hence broaden the appeal of economic nationalism.

Their basic nationalist economic principle was that the nation, not the individual, is the over-arching frame of reference for economic action, and this led them to be early advocates for integrated national markets, national infrastructure (railways) and safeguards for domestic industries through industrial policies, including tariffs. They constantly sought out policies that could allow the tapping of foreign capital, technology and skills without losing domestic control and ownership. And, anti-immigration views were often incorporated into economic nationalist rhetoric and measures in times of significant economic downturns or social disruptions.

Most prominent among the early economic nationalists was Frederich List and his surprisingly well travelled tome, The National System of Political Economy. His writings influenced nationalists in Argentina, India, Russia, Turkey, France and Germany. Holding both German and American citizenship and possessing an extraordinary Rolodex, List was an example of the remarkable extent of the international migration of these ideas in the 19^th and early 20^th centuries.

What triggers the periodic bouts of economic nationalism that Suesse so eloquently dissects? He believes that it is largely inequality, broadly defined. “Expansionist economic nationalism is a product of international inequality,” according to Suesse, who argues that nationalists will call for various industrial policies to boost the economy when a large gap in income exists between their nation and others they compare with. This “catch-up” mentality, and a strongly perceived link to national security and its frequent slogan of “Wealth-Power”, was a key motivator as far back as Meiji Japan and China under the brief rule of Sun Yat-sen and later influenced the approach of Deng Xiaoping.

What triggers the periodic bouts of economic nationalism that Suesse so eloquently dissects? He believes that it is largely inequality, broadly defined.

Strongly held perceptions of domestic inequality, on the other hand, give rise in Suesse’s paradigm to isolationist economic nationalism. When internal social dislocations become viewed as a threat to the nation, they can be most easily blamed on unfair global forces of trade and capital plus the nefarious influence of global elites – the antecedents to today’s World Economic Forum- bashing. Isolationist economic policies tend to attack foreign ownership, trade and immigration, and focus on fixing domestic inequalities such as the restoration of traditional jobs and industries. Not surprisingly, isolationist nationalism also gains traction in the presence of interstate wars, global depressions and pandemics, as Suesse documents with vivid illustrations.

Some of the most compelling sections of the book trace the debates that shaped economic nationalism in various countries at key moments in their history. You have Thomas Jefferson and Alexander Hamilton tussling intellectually and politically about the shape of economic nationalism in the new United States, with Jefferson largely on the isolationist side and Hamilton an unrepentant expansionist who believed in a strong national economy where credit was the engine of growth, industrial policy was needed to build domestic industries to compete with Britain, and trade was to be managed not avoided to protect “infant industries”. In countries like Germany after the First World War, nationalism took a terribly dark turn, supported by its own suite of economic nationalism policies.

Turning to more recent experiences, Suesse reminds us that the originator of the “America First” label was Ben Franklin not Donald Trump, and that Pat Buchanan originated the slogan “Make America First Again” and railed against NAFTA and a loss of “American pre-eminence” decades before Trump. It is also fascinating to follow the extent to which Trump’s nationalist rhetoric appropriated the populist language of Nigel Farage and other Eurosceptics. Suesse argues that the so-called economic nationalism of Steve Bannon was largely based on “ethno-cultural” issues, including anti-elitism and opposition to immigration. Trump economic policy was more of an aggregation of often fringe economic ideas from both the right and the left of American politics but with a strong anti-trade and anti-China bias.

Having churned through many bouts of economic nationalism in many countries over many years, is Suesse optimistic that today’s cycle of pervasive economic nationalism will soon pass? Not really. In his view, inequalities remain a real and present danger within and among major countries.

Sadly, the list of nationalistic triggers is lengthy. China under President Xi is heavily invested in nationalism including what Suesse terms “techno-nationalism”. The bipartisan embrace of many elements of economic nationalism in the U.S., linked to concerns about security and China, seems likely to continue regardless of 2024 political outcomes while isolationist pressures would grow with a Trump return. The EU and member states will have to decide how to respond to the aggressive industrial policies of the US and China, setting off further ripples of economic nationalism.

Nationalism is taking root again in the Global South, where catch- up motivations are on the rise. Resource nationalism is likely to be stoked by the enhanced value of rare earth metals needed to propel the EV revolution. A preponderance of foreign investors is again spurring nativism, as China is now finding in Africa.  China is busily attempting to undermine the supremacy of the US dollar in global commerce with renminbi-based payment systems. And many nationalists continue to view international institutions as constraining their economic sovereignty, reflecting what they see as inequality in multilateral governance.

In short, Marvin Suesse ends his comprehensive and insightful global examination of the nationalist dilemma through history with the expressed fear that we are in for a long cycle of economic nationalism.

Hon. Kevin Lynch was Clerk of the Privy Council and vice chair of BMO Financial Group.

Paul Deegan was a public affairs executive at BMO and CN and served in the Clinton White House.