Nationalism Revived: Domestic Implications of Global Nationalism

​​Michael Hechter, PhDFoundation Professor
School of Politics & Global Studies
Arizona State University​Henry Thomson, PhDAssociate Professor
School of Politics & Global Studies
Arizona State University

​Winter 2023 Forum in Review​Introduction​Plato’s Allegory of the Cave​How to Leverage Social Media​AI for the Public Sector​State of the State Budgets​Budget Roundtable​Nationalism Revived

 A significant swing in the pendulum of international economic affairs was the subject of in-depth analysis from Arizona State University professors Henry Thomson, PhD, and Michael Hechter, PhD. They pointed out that the oscillation between nationalism and liberalism has characterized economic history since the dawn of the Industrial Revolution. Tracing the evolution of nationalism to its current iteration, they launched a discussion on its economic and cultural impact on U.S. states.

Neoliberalism in the 1990s

Economic neoliberalism was the dominant narrative of the 1990s, Dr. Thomson reminded the Forum. The neoliberal consensus arose in answer to the enduring stagflation of the 1980s that brought Keynesian economics into question, and the demise of the USSR that discredited Marxism as an economic model.

Economic logic is the dominant driver in neoliberalism, which prioritizes economic efficiency and growth over concerns of national identity. Neoliberalism was epitomized by the Washington Consensus, an agreement between the International Monetary Fund (IMF), World Bank, and U.S. Department of the Treasury on policy recommendations designed to remove barriers to trade and minimize the role of the government in the economy and society by lowering taxes and minimizing regulation.

Neoliberalism champions free market capitalism, free flows of international trade, currency flows, and immigration. It devolves responsibility for tariffs and currencies to global entities such as the IMF and World Trade Organization (WTO). A multinational technocracy would be in control of the world economy. The neoliberal belief was that as countries enjoyed more economic growth, this would lead to the growth of liberal democracy. In the 1990s, this looked to be happening as Eastern Europe and Latin America transitioned to more democratic governments and capitalist market economies. And Russia and China joined the World Trade Organization.

​The neoliberal belief was that embracing free market capitalism would lead to maximum individual freedom, the growth of liberal democracy, and a better standard of living for the whole population.

The Rise of Economic Nationalism

But neoliberalism did not fully meet its goal. “The rising tide did not lift all ships,” and liberal democracies did not spontaneously arise, Dr. Hechter reported. Not everyone benefitted equally from neoliberal economic policies, and this inequality fueled the movement toward economic nationalism. Globalization of free market commerce under neoliberal policies produced deindustrialization in the U.S. and the export of jobs offshore, facilitated by the decline of unions and class-based mobilization.

By 2020, the inequality of distribution of the benefits and wealth derived from neoliberal policies provided a platform for economic nationalists to leverage growing gap between the wealthy and the poor to gain support for their policies.

Economic nationalism promotes the interests of the “nation” over those of the individual. It emphasizes the role of the central government and shifts attention from policies that maximize economic growth (global free trade) to those that are meant to maximize national welfare. The rhetoric of nationalism promises to compensate those who were losers in the economy, such as those who lose jobs. It embraces government policies to protect national industry via tariffs and enacts legislation against immigrants, who are perceived as a threat to the national culture. Nationalists also advocate non-involvement in other countries.

​Economic nationalists promote interests of the nation over those of the individual, and define the “nation” as “those we consider to be part of our homeland and who share our culture.” They emphasize the role of the central government and shift attention from policies that maximize economic growth to those meant to maximize national welfare.

Who are the economic nationalists?

Dr. Thomson pointed out that the “economic nationalists” were once unknown outliers whose positions initially were roundly dismissed and discredited by neoliberal economists and politicians. In the U.S., Steve Bannon became the voice of economic nationalism when the former investment banker and owner of Breitbart News Network became Donald Trump’s campaign advisor and subsequently Special Advisor in the White House. In that role, he pushed for radical restrictions on trade and immigration policies, especially directed at China. In the UK, the economic nationalist view was espoused by Nigel Farage, also a former finance executive and Leader of UK Independence Party who led the campaign for Brexit in 2016.

The Future of Economic Nationalism

Economic nationalism will be with us for a long time due to three recent structural changes, according to Dr. Hechter: The rise of China, impacts of COVID-19, and the Ukraine War.

Free trade has benefited the most advanced economies in the international economy, such as the UK in the 19th century and the U.S. in the 20th century. Today, the rise of China as the world’s largest economy — with a growing military and its international presence through its Belt and Road Initiative, and substantial investments in Africa and Latin America — projects economic power that can feed nationalist protectionism.

Furthermore, declining or weak economies are attracted by policies designed to protect national industries from competition that they cannot win; for example, President Trump’s policies to protect the U.S. steel industry. Nationalism also helps protect supply chains that can be challenged by rival hegemons (like China and Russia), to the detriment of national security. For example, 80% of the rare earth metals essential for components in high-technology devices, and in clean energy and defense technologies, are mined in China. Nationalism supports policies to promote onshore or near-shore manufacturing of products that are essential for defense and for economic stability.

The COVID-19 pandemic enabled central governments to expand their powers. Intervention by the federal government to restrict travel and trade and to provide financial support such as with CARES Act and federal stimulus spending was widely accepted by the public. By protecting and supporting the public through the pandemic, the role of central government was fortified.

The Russia-Ukraine war also is fueling nationalist fervor as it impacts the global oil and food supplies. The war has led to a newly divided world oil market, where Russia trades with India and China, the U.S. trades with Europe, the Middle East trades with everyone, and Europe pursues energy independence through renewables. Furthermore, the ability of the war to disrupt the world food supply encourages greater reliance on domestic sources.

Implications of Economic Nationalism for U.S. States

All of these factors are interfering with the globalization of international trade, Dr. Thomson noted, and stand to produce a range of “winners and losers” among individual U.S. state economies, depending in part on a state’s economic drivers.

In the U.S., those companies with high-skilled workers, high-tech industries, software companies and financial services benefit most from globalization, but may become the losers in a protectionist, nationalist economy. The companies that benefit from global trade are the most efficient ones.

Restrictions on trade will benefit non-traded sectors; for example, services, healthcare and less skilled, less efficient and less competitive industries. Re-shoring, near-shoring or “friend-shoring” might lead to increased trade flows for states near the Canadian and Mexican borders.

Economic nationalists seek to limit immigration, and this may lead to higher labor costs with consequences for state tax revenues and expenditures.

Interventionist policies embraced by economic nationalists enable the federal government to invest in strategic industries or convince companies to invest in them. For example, President Biden endorsed the CHIPS Act to promote chip manufacturing in the U.S., and President Trump encouraged Taiwan Semiconductor Manufacturing Company Limited to move to Phoenix. Such federal actions increase the competition among states to benefit from increasingly generous federal industrial policy.

​Economic nationalists seek to limit immigration, and this may lead to higher labor costs with consequences for state tax revenues and expenditures.

The professors pointed out that economic nationalism is surging both on the right and the left. President Biden is an economic nationalist and is continuing tariffs imposed under President Trump. Dr. Hechter asked, “Is the left/right economic cleavage dead, and has it now become a cultural cleavage?”

​Two Economic Nationalists?

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Discussion

 
Tom Finneran (Moderator)
How has the diminished capacity of U.S. industries to manufacture medicines, steel, etc. and loss of these industries to China affected the rise of economic nationalism?

Dr. Hechter
Inequalities in the distributed benefits of neoliberalism have fueled the rise of economic nationalism. Places and people who did not benefit from global neoliberalism have seen job loss, decreased life expectancy, high suicide rates, and the opioid epidemic. Free trade policies are blamed.

Sen. Greg Reed (AL)
The U.S. faces a workforce deficit, with 2.9 million workers not participating in the workforce. The U.S. has the technology, but not the workers.  We need an immigration policy like Germany’s, that welcomed millions of Syrians into the country to fill open jobs.

Dr. Hechter
 It could be in the economic interests of the U.S. to reduce immigration restriction and allow workers to come in; however, in the nationalist view, immigrants threaten U.S. culture. The rise of “Christian nationalism” reflects this belief. The core of the U.S. national culture is believed to be based on white European settlers. Immigration opposes this national identity.

​It could be in the economic interests of the U.S. to reduce immigration restriction and allow workers to come in; however, in the nationalist view, immigrants threaten U.S. culture.

Sen. Greg Reed (AL)
To be in favor of immigration is a non-starter politically, but we have to be prepared for this discussion. A similar conversation needs to happen around energy: there will be opposition to renewable sources, until the lights go out. The pain is going to be harder than the philosophical difference.

Dr. Thomson
Economic nationalists focus more on cultural identity than economic outcomes, so they oppose immigration. They will be more responsive to cultural terms, enrichment.

Sen. Lee Schoenbeck (SD)
When restaurants and nursing homes close due to lack of workers, there is a problem. We need a system to vet immigrants. [South Dakota is] working to encourage Ukrainians to come to South Dakota, where we have 40,000 open jobs and only 600 people on unemployment. The skill set we need is callouses!

Sen. Page Cortez (LA)
Twenty years ago, liquid natural gas (LNG) was imported into the U.S. but we have lots of LNG in our state and now export it to the world. If we are blocked from exporting to certain countries, profits are cut.

There seem to be a disconnect between federal policy and economic reality. For example, North Carolina used to be the center for U.S. furniture manufacturing but now they only design furniture and it is manufactured outside the U.S. If a factory here wants to import Italian fabric for sewing and upholstering, there’s a tariff on it; but if you have China cut and sew fabric over there and ship it in, there’s no tariff. There’s a clash between the philosophical discussion and reality.

Dr. Hechter
In the climate of economic nationalism, cultural issues are more salient than pocketbook issues.

Sen. Paul Newton (NC)
President Biden is not consistently an economic nationalist. His stance is more nuanced. There are many political implications of decisions such as the CHIPS Act. The future is more eclectic than these labels indicate.

Dr. Thomson
Neither President Biden nor President Trump are true economic nationalists. Politicians are not ideologues, but they respond to political drivers. One thing we can observe from history is that this pendulum between liberalism and nationalism will continue to swing.

Presenter Biographies

Michael Hechter, PhD

Foundation Professor
School of Politics and Global Studies
Arizona State University

Michael Hechter is a Foundation Professor and an elected fellow of the American Academy of Arts and Sciences. Hechter has taught at the Universities of Washington, Arizona and Oxford. He has been a fellow at the Center for Advanced Studies in the Behavioral Sciences and the Russell Sage Foundation, and was a visiting professor at the Universities of Bergen and Llubljana. Hechter is the author of numerous books, including "Internal Colonialism: The Celtic Fringe in British National Development, 1536-1966" (1975; 1999); "Principles of Group Solidarity" (1987); "Containing Nationalism" (2000), and "Alien Rule" (2013). He is editor/co-editor of "The Microfoundations of Macrosociology" (1983); "Social Institutions: Their Emergence, Maintenance and Effects" (1990); "The Origin of Values" (1993); "Social Norms" (2001, 2005); and "Theories of Social Order" (2003). His articles have appeared in the American Journal of Sociology, Demography, Journal of Theoretical Politics, Rationality and Society, Sociological Theory, European Sociological Review, and many other journals. His writings have been translated into Italian, Japanese, Hungarian, Chinese, Arabic, French, Spanish, and Georgian.

Henry Thomson, PhD

Associate Professor
School of Politics and Global Studies
Arizona State University

Henry Thomson is an Associate Professor in the School of Politics and Global Studies at Arizona State University. He is a political economist with a research focus on authoritarian rule and transitions to democracy. He is currently completing a book on the secret police agencies of Communist Eastern and Central Europe from 1945-1989.

Before joining ASU, Thomson was a Postdoctoral Prize Research Fellow at Nuffield College, Oxford and completed his PhD in Political Science at the University of Minnesota. His doctoral dissertation won the 2015 Juan Linz Prize for the Best Dissertation in the Comparative Study of Democratization from the American Political Science Association. He has been a visiting scholar at the Mercatus Center at George Mason University, at Australian National University and at the German Institute for Global and Area Studies in Berlin.

Professor Thomson teaches classes on Democratization, Political Economy, International Political Economy and social science research design.

He is also a Faculty Honors Advisor in the School of Politics and Global Studies. More information on the writing an Honors thesis in SPGS, click here.

Thomson is the host of the Keeping It Civil podcast, which is a co-production of ASU and Arizona PBS. A former competitive fencer, Thomson is academic advisor and coach of the Arizona State University Fencing Club.

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