Technology & Trade
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Economic Nationalism

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By William Reinsch

On Oscar night 2017 I found myself recalling the same night in 1999, when Judi Dench won Best Supporting Actress for the eight minutes she spent playing Queen Elizabeth I in Shakespeare in Love. One of her memorable scenes was leaving the theater and heading for her carriage. Sir Walter Raleigh, seeing the mud puddle ahead of her, valiantly tries to catch up but flings his coat into the mud after she has stepped into it. “Too late,” she says imperiously as she gets into her carriage. The queen, apparently, stopped for no man.

“Too late” might also be said of Stephen Bannon’s speech to CPAC last week in which he forecast the “deconstruction of the administrative state” and argued for a policy of economic nationalism. (He said a lot of other things which deserve a response, but sticking to my brief, I will focus primarily on trade-related issues.)

First, deconstructing the administrative state is both unwise and politically unlikely. It is unlikely because it turns out that while people appear to dislike government when it is helping somebody else, particularly foreigners or immigrants, they rather like it when it is helping them. Witness the vigorous debate we are now having on repeal of the Affordable Care Act. It turns out people like their health insurance and don’t want to see it go away. You can expect similar debates over rollbacks of environmental and energy conservation regulations.

The latter represent efforts to provide public goods – things that benefit the population as a whole and not just one individual at a time. Roads, bridges, clean air and water, good schools, and a well-prepared military are all things people are willing to pay for and expect their government to provide even though they may not use every one of them every day. I cheerfully pay taxes to support public schools even though my kids graduated from them a long time ago because having a thoughtful, well-educated population is essential to preserving democracy. I like clean air and water, not just because I breathe and drink, but because I want my children and grandchildren (if there ever are any) to be able to do that too.

For the same reason, what the Obama administration did on climate change was particularly important – it was about future generations more than it was about us. Deconstruction in the name of freedom or small government is simply another way of saying future generations will have to make do with less, except for the rich, who will be able to pay for more. Lower taxes are always a seductive lure, but people are not dummies. They understand you get what you pay for, and they are willing to pay for more than what a minimal state will provide.

“Economic nationalism” is also a pernicious concept. It’s not alien – we practiced a form of it for our first 150 years – but as Queen Elizabeth said, it’s too late to go back to it. Rapid improvements in transportation and communication both tie the world together and enable transactions nobody even dreamed of 50 years ago, and we cannot uninvent that progress. More importantly, even if we could, we shouldn’t. The world’s religions teach us that the essence of a good life is reaching beyond ourselves and helping others. We don’t owe it to the world, we owe it to ourselves. Last week, I pointed out that by functioning as kind of a reserve market, we had enabled millions of people all over the world to climb out of poverty. Economic nationalism would let them sink back in in the name of taking care of ourselves first.   

It would also hurt ourselves in more practical terms. Our prosperity is no longer solely in our own hands. It is linked to everyone else’s. Remember that we are a mature economy, and 95% of the world’s customers are outside our borders. Growing means trading with them, and that means understanding they won’t always meet our terms – we will have to meet theirs or meet in the middle. The idea of insisting on having a trade surplus with everybody, which appears to be the administration’s policy, is not only silly, it’s counter-productive. We will not only impoverish ourselves, we will marginalize ourselves as a world power. You can see it starting to happen already. In two weeks the other TPP countries, along with others in Asia and Latin America, will meet in Chile to discuss how to move forward without TPP and, notably, without the United States.

When other countries decide they can collectively prosper without the United States or don’t need to consider our views when formulating a strategy, our ability to construct and sustain an economic world that follows our rules to our benefit will disappear. Our response to the foolish idea of economic nationalism should not only be “too late,” but “too stupid.” 

_____
William Reinsch is a Distinguished Fellow with the Stimson Center, where he works principally with the Center’s Trade21 initiative.

Photo credit: U.S. Government Work via Flickr

 

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