“Economic nationalism” isn’t a phrase typically uttered at the Conservative Political Action Conference, but White House chief strategist Steve Bannon spoke it three times in a brief panel discussion there on Thursday.
The phrase is as ungraspable by itself as a bar of wet soap. In its most promising construction, it captures something important and right. But it is fraught with pitfalls and perils that need to be avoided. It reflects long-ignored philosophical and political truths, but can also give off a strong whiff of economic ignorance.
“We’re a nation with an economy,” Bannon said. “Not just an economy just in some global marketplace with open borders. We are a nation with a culture and a reason for being.”
This is a variation of a something Jeff Sessions, now Trump’s attorney general, used to say: “We’re a nation with an economy, not an economy with a nation. … We have a responsibility, a moral duty, to our citizens, to make their lives better and we’re not doing a very good job.”
The first truth of these statements is the moral one that the marketplace is a means, not an end in itself. Free commerce, business and the pursuit of profit all exist to serve higher human needs, material and social. It’s easy for business people and free-enterprise advocates to forget this, even easier for their many ideological foes to accuse them of having jettisoned the higher good for the bottom line.
Second is the notion that the federal government’s job is not to serve the global economy but to serve the national interest. The slogan, “America First,” offends many across the ideological spectrum. For some it is a throwback to an unpleasant form of nationalism that thrived in the 1930s and early 1940s. For others, mostly those on the left, it is damnable because they don’t really believe America can act morally if it is pursuing its national interest.
But as a principle for governing, “America First” is almost unassailable. By definition, the government of and by the people should be for the people as well. If a proposed policy helps poor people on the other side of the world but hurts the poor here at home, our government would be treacherous to pursue that policy.
Some of President Trump’s “economic nationalism” is sound policy. Bannon mentioned bilateral trade deals, negotiated fiercely in America’s interest, but benefitting both nations. Britain and then Japan would be two great opening acts in this regard.
The Trump administration has some good ideas for pursuing manufacturing jobs, especially by cutting red tape and reforming taxes.
One danger is that the administration will let nostalgia overcome reason. It needs to realize that nothing will bring back steel mills to the Ohio River Valley or the Mon Valley. Well-paid jobs in the future don’t have to be in factories. Broad reforms that reduce barriers will avoid this pitfall.
But plenty of other pitfalls lie ahead. Protecting American manufacturers from global competition, through tariffs, export subsidies or shoddy tax reform generally doesn’t serve America’s interest. If companies are forced or bribed to manufacture goods here at home, this will create far more jobs for robots than for blue-collar Pennsylvanians. Price hikes that tariffs would make inevitable would fall disproportionately on the poor, who spend a greater share of their income on consumer goods.
The second major pitfall of economic nationalism is the Fatal Conceit against which Friedrich Hayek warned. Economic nationalists are often central planners, and central planners always leave destruction in their wake.
Bannon, when he first used the phrase “economic nationalism” at CPAC Thursday, immediately invoked Commerce Secretary Wilbur Ross, who embodies many of the worst aspects of economic nationalism. Ross has argued that America should emulate China’s five-year plans, the industrial-policy tool originated by Chairman Mao Zedong.
“We ought, as a country, to decide which industries are we going to really promote,” says Ross, who enriched himself via protectionism, “the so-called industries of the future.”
Ross’s critique of Obamanomics was that Obama didn’t try hard enough to pick winners and losers: “The Obama administration talks a lot about green industries, wind power and solar,” Ross said. “Well, the truth is, China did a lot about it.”
President Trump will get the credit or blame for whatever happens to the economy, but the truth is that he and his administration cannot run it in the way that one can drive a car. There isn’t that much control. The market, which broadly defined simply means commercial freedom, is only a tool, but it’s the best tool ever found for maximizing societal wealth.
Trump and Bannon could serve as a useful corrective to those who think national interests are petty and who try to “think globally.” But the history of economic nationalism has shown us how easily it can go astray and hurt the people it aims to help.
