April 26, 2017 / 3:26 PM / 4 months ago

Hadas: Nationalists are united by economic muddle

U.S. President Donald Trump speaks before signing an executive order directing federal agencies to recommend changes to a temporary visa program used to bring foreign workers to the United States to fill high-skilled jobs during a visit to the world headquarters of Snap-On Inc, a tool manufacturer, in Kenosha, Wisconsin, U.S., April 18, 2017.Kevin Lamarque

LONDON (Reuters Breakingviews) - The modern economy has discredited all the leading modern political ideologies. The new nationalists are the latest to discover this inconvenient truth.

The economic policy hole is largest for centre-left parties. Their traditional goals of a big welfare state and the conversion of the working class into a home-owning bourgeoisie have largely been achieved. So they stand for nothing much.

Their former voters, now mostly well-protected and prosperous, have moved on. Witness the dismal performance of the French Socialist Party in the first round of the country’s presidential election. That followed similar humiliations in the United States, the Netherlands, Spain and Italy, with one looming in the United Kingdom.

The far left is also on a road to economic nowhere. No elected leader really wants to repeat the Cuban-Venezuelan experiment of state expropriations and total government control. That is why the once-radical Syriza Party, which has run Greece since 2015, decided that appeasing creditors and trading partners is the least bad way to help the economy. And why Italy’s anti-establishment 5-Star Movement will almost certainly calm down if it ever gets into power.

Ardent nationalists face similar quandaries, although their ideology has never been primarily economic. Indeed, they have been all over the place. Benito Mussolini’s Italian fascism, for example, wandered from endorsing free markets to promoting corporatism – basically power-sharing between workers and investors – before ending up with almost total state control of much of the economy.

The current generation is at least as inconsistent. The National Front of Marine Le Pen, who faces neo-centrist Emmanuel Macron in the battle for the French presidency, proposes discriminating against foreign businesses and casting off Europe’s single currency. Almost no economists think this would be a good idea.

Conversely, enthusiasts for Britain leaving the European Union, including members of the current government, often claim the UK will benefit from the freedom to negotiate its own trade deals. Most trade experts doubt it will be better off.

Donald Trump liked Brexit, but he is on the protectionist side of economic nationalism – or at least he claimed to be on the election trail. In office, he has continued a few old trade disputes, but has backed away from many of his most aggressive campaign promises. The most likely explanation is that his advisers think the current trade arrangements are pretty good.

Trump seems equally confused about the right size and role of the government. His plans for dramatic tax cuts and his retreat on government-funded healthcare are hard to reconcile with his desire to support declining industries.

The U.S. president’s economic inconsistencies cannot be blamed solely on his confused thinking. When it comes to the optimal size of government, nationalists around the world range from libertarian to ultra-interventionist; from fiscally conservative to extreme Keynesian; and from friendly with big corporations to favouring the revival of small business.

There is one common nationalist economic theme: putting the country first. The leaders all have a gut feeling that global forces and foreign rivals have reduced economic sovereignty. They have weakened domestic industries, brought too many alien workers and left too many real citizens impotent and impoverished.

But the gut feeling is wrong. As the extreme left has discovered, in reality the modern economy works far too well to justify any revolutionary change. The mix of lower trade barriers and integrated global supply chains is more effective than any nationalist alternative.

Of course, the system is far from perfect. Some poor countries would benefit from more trade protection. Intellectual property rights are often unfairly lucrative. The unrestrained cross-border flow of financial capital sometimes wreaks havoc.

Overall, though, the global connections increase prosperity in poor and rich countries alike. They create goods and services more efficiently, match jobs to skills and capture the gains from advances in transport and communications technology.

Factoring in the social effects doesn’t change the judgment. The current system may destroy old jobs, be unfair to the poor, damage communities and undermine moral values. But a more nationalistic alternative would not necessarily serve the disadvantaged any better.

The best way to put one’s country first economically is to keep on the path of increased global cooperation and coordination. Nationalists may not be happy with that fact, but they won’t win elections by reducing standards of living, even if the more expensive and less sophisticated goods carry a “made at home” label.

In economics, nationalists have to choose between ideology and reality. They can embrace isolationism and accept remaining out of power – or quickly losing it. Or they can choose hypocrisy, propitiating their idol of economic sovereignty with fiery rhetoric while accepting international standards and supporting global commerce. Expect more of the latter.

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