The world we live in today has drastically transformed, deviating from the vision of global economic architects at the turn of the millennium. Back then, the removal of trade barriers was hailed as a gateway to shared prosperity and seamless globalization. However, the reality today is quite different.
We are witnessing a significant shift in economic governance, with new barriers rising, not in the form of concrete walls, but through tariffs, subsidies, and export bans. This grand narrative of globalization now feels like a relic of the past.
This is not a temporary blip but a tectonic shift powerful enough to influence the strategic directions of nations worldwide. What started as provocative tweets during Donald Trump's presidency has proven to be more than just a historical anomaly; it ignited a deeper, long-simmering transformation.
While Trump's "America First" rhetoric is a notable aspect, it would be a mistake to attribute this shift solely to him. Beneath this rhetoric lies a profound unease over China's rise and its perceived manipulation of the international economic system. Beijing has been accused of exploiting globalization's openness to accumulate wealth and industrial strength while shielding its domestic market through bureaucratic hurdles and opaque protectionism.
Economic nationalism has gone global, transcending ideologies and regions. In Japan, figures like Sanae Takaichi advocate for economic self-reliance in response to supply-chain vulnerabilities. The European Union embraces "strategic autonomy" to reduce dependence on China and hedge against political uncertainty in Washington. Even Indonesia has joined this trend, with policies promoting downstream processing of natural resources as a narrative of national sovereignty.
Efficiency, once globalization's supreme principle, is now subordinated to security and sovereignty. This shift presents an existential dilemma.
To truly understand economic nationalism, we must go beyond its narrow association with conventional protectionism. Marvin Suesse's "The Nationalist Dilemma" offers a humane perspective, arguing that economic nationalism is a rational response to perceived international inequities. When nations feel threatened by economic lag or foreign capital dominance, protectionism becomes an intuitive shield.
However, this shield hides a deep paradox. Suesse suggests that economic nationalists are caught between two conflicting aspirations: isolation to protect domestic industry and rapid development and expansion. Without access to foreign capital, technology, and international cooperation, industrial catch-up becomes nearly impossible for most, especially developing countries.
Indonesia, for instance, exemplifies this dilemma, desiring full sovereignty over resources while relying on external investment and technology transfer to make that sovereignty meaningful.
Jeremie Cohen-Setton, Madi Sarsenbayev, and Monica de Bolle, in "The New Economic Nationalism," offer a more technocratic yet skeptical view. They argue that the world is attempting to resurrect the state as the central economic actor, a move long considered taboo under liberal orthodoxy. For them, this "new economic nationalism" is a high-risk experiment, potentially leading to inefficiency, public debt, and corruption disguised as industrial policy.
Jamie Merchant, in "Endgame: Economic Nationalism and Global Decline," presents an even more radical interpretation from a Marxist perspective. He sees economic nationalism as a symptom of global capitalism's systemic decay, with globalization collapsing from within due to automation and the erosion of surplus value from human labor. In this view, economic nationalism is a desperate attempt by states to seize the remnants of prosperity as the global economy stagnates.
When these perspectives are applied to today's geoeconomic realities, a troubling pattern emerges, with profound implications for global stability. Kenneth A Reinert, in "The Lure of Economic Nationalism: Beyond Zero-Sum," warns of the psychological dangers of zero-sum thinking, where one country's gain is seen as another's loss. This mindset leads to existential threats and market access concerns, as seen in the US-China and Indonesia-advanced economies dynamics.
The global system is indeed under strain, with China embodying many of the fears described by Reinert. The US response, initiated under Trump and continued under Biden, reflects growing impatience, leading to tariffs, technology blockades, and sweeping subsidies. However, the unintended consequence has been the weakening of the multilateral system, leaving the global economy adrift without mutually accepted rules.
On the ground, economic nationalism is more than a political slogan. In Japan, the shift towards "economic security" has led firms to relocate production out of China, even at a higher cost. The European Union, once a champion of free trade, now arms itself with anti-coercion instruments to defend market sovereignty. These developments support Merchant's contention of a fragmented world, divided into rival economic blocs marked by mutual suspicion.
The situation is further complicated by moral justifications, with developing nations claiming protectionism as necessary to escape poverty and advanced economies defending it to preserve middle-class living standards. This collision of narratives provides fertile ground for populist and far-right movements, promising the illusion of absolute self-sufficiency as a path to power.
Economic nationalism must be understood comprehensively, acknowledging its role in national survival while recognizing its dangers. Suesse argues that it can be an instrument for marginalized nations to demand fairer participation in the international division of labor. For Indonesia, downstream industrialization policies may be the only way out of permanent dependence on low-value raw material exports.
However, the risks are real. Economic nationalism can intoxicate policymakers, leading to systemic global inflation and the suppression of innovation. Forcing domestic production at higher costs burdens citizens and sacrifices global efficiency for a potentially illusory sense of security. Moreover, techno-nationalism risks splintering the world into incompatible technological standards, slowing growth and undermining collective responses to global challenges.
The four perspectives offer a powerful synthesis, highlighting the severity of the systemic crisis and the world's decisive crossroads. The choices made now will shape the economic and political horizons for generations to come.
