Reflections on post-US elections geopolitics: Part Three

Economic nationalism

Capitalism has been a progressive force in its times. But it has given rise to resistance at various levels. The first resistance came from its exploited classes – the industrial workers. When Capitalism was obliged by its own logic to colonise, it gave rise to national resistance. Hence we had the American war of independence in the 19^th century, and wars and struggles for national independence in the global south in the 20^th … and still continuing.

This struggle has both a political and an economic dimension. This segment deals with the economic.  In the previous segment, under the sub-heading “the National Question”, we dealt with its essentially political and ideological dimension.

Economic nationalism is part of the liberation struggle against imperialism. It is my contention that students of "economics" need a higher degree of awareness of history and a deeper understanding of the geopolitics of economic nationalism in order to make sense of the economic and political realities on the ground.  Given the overall title of this series, I would argue that Donald Trump is an economic nationalist.

Economic nationalism is a universal phenomenon

The imperial deception

We’ll start with the very continents that are today opposed – ideologically – to economic nationalism, namely the United States and the European Union.  However, what they preach is not what they do, or wish to do. They are as much economic nationalists as the very countries they criticise.

The evidence of this proposition is overwhelming – from agriculture to the environment to banking.  Let us take banking and finance. It is arguably the most “international” in character. In Europe the banks are facing a serious crisis as a result of tough competition from American banks. European investment banks are losing out market share to Americans. Germany's biggest bank, Deutsch Bank, has acknowledged that it must retreat from "global" ambitions, following €6 billion quarterly loss, resulting in 9000 jobs cuts (a quarter of workforce).

Top European bankers, which include the Chairman of Barclays, John McFarlane, have warned of the American threat to their future. France's Société Générale Chief Executive Frederic Qudea and president of European Banking Federation said that a handful of "robust” American banks "are gaining market share abroad while strengthening their positions at home". He said that the top five US banks had increased their share of the global capital market from 48 to 59 percent in past five years, while the top five EU banks have slipped from 35 to 31 percent. [1]

Other examples of economic nationalism

In April 2005, the US company Chevron and the China National Offshore Oil Corp (CNOOC) made competitive bids for Unocal, a Californian oil company.  The ferocious reaction of Congress against the Chinese bid surprised nobody, except those deluded by the ideology of free flow of capital across borders. Congress feared that the Chinese takeover would put to risk American energy sovereignty and compromise its “national security”. [2]

In July 2005, the French political elite mounted a massive campaign to prevent Danone, the country's leading food group, against takeover by an American “predator” - PepsiCo.  How could, they said, the US dare take over "our national champion". [3]

Of course, it is different story if a “third world” country dares to exercise economic nationalism. In April 2012, Argentina’s President Christina Kirchner asked Congress, in the interest of securing "hydrocarbon self-sufficiency", to nationalise oil and gas producer YPF, owned largely by the Spanish conglomerate Repsol YPF – a company that employs 24,000 workers globally and has revenue of

EUR 44.67 billion (2014). She also took action against other hedge funds. The Western reaction was strong: how dare a "communist third world banana republic” take matters in its hands like this?  Following smear campaigns, street wars between the embattled Kirchner and the “deep State” backed by the Empire, Kirchner lost her presidency. In February 2016, the new president, Mauricio Macri, offered to pay $6.5 billion to the group of six hedge fund holdouts. In addition to the 75% payment in principal and hefty interest accumulated over the years, thirteen years of hefty legal bills would also be picked up by Argentina. Estimates on the returns that the "super holdouts" will make on their investment in Argentina's bonds range from three to five times what they had paid for the bonds. [4]

Resource nationalism

All the three cases described above relate to resource nationalism. Global resources are unequally distributed, the bulk of them are in the Global South. Their ownership and control, however, remain largely in the hands of Western corporations which are jealously protecting their “historical rights” over these resources. [5]

This is a very sensitive area of the struggle between the Global North and the Global South.  Obviously, we cannot even begin to make a list of the many issues involved.  However, I would like to mention two issues that are often either left out of mainstream research or dealt with rather cursorily. 

One is the issue of the rights of indigenous peoples the world over. These can no longer be ignored. They are the battle-lines of the future. What we see in Bolivia, Ecuador, Venezuela...are the  beginnings of "Arab Spring"  in the area of natural resources, and will spread over the rest of the world - not least, Canada, Australia, New Zealand, and most of Asia and Africa. 

The second is the issue of women's rights to natural resources.  At the international level, the "national" rights to the resources are a burning issue. But at the national and local levels, it is the right of women to these resources that is critical, especially land. In fact, land and women's rights are two sides of the same coin. Metaphorically, land is women, and women are land. (I know this from my 15 years’ experience working amongst the rural people in southern Africa).

The ideological terrain

Here the battle lines go back to the “free trade” versus “protection” debate.  It is largely an academic, ideological, debate, for, as we have seen above, economic nationalism (including protectionism) is a universal phenomenon.  There is nothing called “free trade”. A bit of history will give a proper context to this debate.

The American 1775- 1783 war against England was about economic (as well as, of course, political) independence. Following independence, America went for a full-fledged program of economic nationalism.  Within 50 years, the US was well on its way to industrialisation. Friedrich List, a German political-economist, then living in the United States, decided he could suggest to his compatriots that they, too, should follow the lead of the US. In 1841 he wrote The National System of Political Economy.  It was the beginning of economic nationalism in Germany, followed by other countries in Europe and then Japan.

In 1884-5, the European nations met in Berlin and carved up Africa. The German Chancellor Bismarck presided over the division. The Europeans needed access to cheap raw materials which they could no longer get from America or the older colonies. This was the material reality. The erstwhile economic nationalists turned imperialist.  It is only one step from being a "nationalist" to being an "imperialist". Germany needed colonies for the sake of "national" interest.

None of the economic theories (classical, neoclassical, Listian, German historical school, Austrian school, among others) came to save Africa from savage colonisation.  Nor, for that matter, did the Hamilton School of American nationalists. At the time, the Americans were too preoccupied with their own imperialist project in South America declaring these as their “sphere of interest” under the Monroe Doctrine. New theories (ideologies) had to be invented to legitimise Africa's predation. Economic theories were now embellished by a missionary ideology - "the white man's burden" to "civilize" Africa.

Today, as we discussed above, it is “free trade globalisation”.  My book Trade is War gives a blow by blow account and analysis of this Empire-driven curious phenomenon of “free trade” that belies reality on the ground. [6]

What is the way forward?

The first thing we must realise is that this is an upstream struggle. The Empire is not about to disappear any time soon. For sure, it is weakening, and for all intents and purposes, it has become a “paper tiger”.  But it still has a lot of clout to do enormous damage to economic nationalists. To get some insight into this, look at what has been happening to Greece over the last two years. [7]

The following are some of the highlights of the way forward. I have Africa in mind, but they have relevance for the whole of the Global South.

1. We need to challenge economic orthodoxy, and work on development alternatives that take into account the fact that all countries – without exception – are economic nationalists, including those that swear by the ideology of “free market globalisation”. [8]
2. One of the most vital aspects on an alternative strategy is to protect local industries that add value to local resources, and put in place strong barriers against imports that kill local industries. I know this goes against the so-called “laws” of the World Trade Organisation (WTO). So be it. Let the WTO and the Empire impose sanctions on Africa. They cannot harm African economies more than they are already doing.  Decoupling from “free market globalisation” must be properly strategized and sequenced. The “value addition” must be done first at the local level, then at the national level, then regional and continental.
3. There should be no “open door” policy towards “free trade” and Foreign Direct Investments (FDIs) in general. These might be allowed as and when required by national consensus between the government, the local (not foreign) private sector, the workers, small farmers, and other organs of civil society. The FDIs must operate under certain nationally determined conditions (for example, limited access to domestic savings), and they must conform to certain performance requirements (for example, effective transfer of technology and managerial know-how).
4. Economic nationalism does not preclude regionalism – nations getting together to integrate regionally.  In fact, for Africa to get rid of the yoke of European and American imperialism it is imperative that they integrate at a continental level, though starting, at first, at regional level as prescribed by, for example, the Lagos Plan of Action that the African Union agreed to in April 1980 – a plan that was systematically subverted by the World Bank, acting for the Empire.

@Yash Tandon

End notes

[1] https://www.ft.com/content/b911380e-6e8a-11e5-8171-ba1968cf791a

[2] See: Genevieve Ding, “The CNOOC Bid for Unocal and US National Security: Was the Political Outcry in Congress Justified?”  https://sites.duke.edu/djepapers/files/2016/10/Ding.pdf

[3] https://www.theguardian.com/business/2005/jul/21/usnews.france

[4] See: Yuefen Li, “Implications of Argentina's Deal with ‘Super holdouts’” http://www.alainet.org/es/node/175835

[5] See: Ndletyana Mcebisi & David Maimele (eds.) 2014. Resurgent Resource Nationalism, Pretoria: MISTRA for an interesting study on this.

[6] However, those interested in an ideological challenge to my views may want to read Sam Pryke’s “Economic Nationalism: Theory, History and Prospects” in Global Policy, Vol. 3, Issue 2, September, 2012, where he makes the extraordinary claim that “the complexity of the global economy, makes it all but impossible to separate by nationality”. 

[7] For an eye-opening account of this, see: Daniel Munevar, “IMF explaining its own contribution in destroying South Europe”, where Munevar gives an account of the split within the political and technical divisions of the IMF that eventually ended with Germany using the IMF to protect the interests of German Banks. The IMF's Executive Board was kept in the dark, and told lies about what was taking place. The “Troika” (the IMF, the European Bank, and the European Commission) decided to give Greece more loans knowing fully well that the debt it was creating was unsustainable. This was mainly to protect German bonds that stood to lose €83 billion, and to give time to the Euro area to build firewall to prevent contagion. http://www.defenddemocracy.press/imf-explaining-its-own-contribution-in…

[8] See, for example, Reinert, Erik S. Jayati Ghosh & Rainer Kattel, eds. 2016 Elgar Handbook of Alternative Theories of Economic Development