First published March 12
President Trump has declared that ‘trade wars are good’ and that ‘they’re easy to win’.
This, accompanied by his move to impose tariffs on imported steel and aluminium, is the first salvo in a trade war that could lead to a global recession, the loss of millions of jobs and an increased threat of political, economic and military conflict between the major powers.
Australia, as a most loyal ‘friend’ of the USA has been granted dispensation and exemption from such a trade war. This is hardly cause for celebration. Trade wars, economic nationalism and a retreat behind tariff barriers is only and can be only seen as a dangerous signal to the world and Australia remains a part of that world.
This world, for better or worse, is dominated by capitalism. Capitalism is a globalising economic order and has been globalising since capitalism first emerged. Clocks, in this sense, cannot be turned back.
Such globalised capitalist relations that increasingly by-pass national governments and institutions, necessarily become problematic for nation-states. Industries move to where profit can be maximised. Investments and capital quickly flow to these new more profitable manufacturing centres. There are winners and losers.
In reacting to the inevitable problems experienced by individual states, there has been what has been broadly described as a ‘return’ to economic nationalism. Economic nationalism is the antithesis of capitalist globalisation and yet it is growing in direct proportion to capitalist globalisation.
The sociologist, Sam Pryke, defines economic nationalism as an attempt to create, bolster and protect national economies in the context of world markets. It is an economic policy that places capitalist nation-states and global capital on a clear collision course.
There are indications that protectionist measures within national economies are being actively promoted. The World Trade Organisation in 2016 describe a “relapse in G20 economies’ efforts at containing protectionist pressures. Not only is the stockpile of trade-restrictive measures continuing to increase, but also more new trade restrictions were recorded”.
A decade earlier, former Chairman of the US Federal Reserve, Ben Bernanke cautioned against such an economic shift and the negative consequences it might have for the global economy.
There is a tendency, in times of economic difficulty, as we have witnessed since the GFC of 2008, to play more overtly upon nationalist sentiments. Its most blunt expression being in the slogans of let’s make America, or Russia, or China, or Australia – insert country of choice – great again. National leaders, and populists from either left or right, react by promoting a national appeal which quickly finds enemies. This is in no way a new phenomenon.
Martin Wolf of the Financial Times has written extensively of the attempt to reverse the trend toward globalisation that occurred at the end of the 19th century with economic nationalism leading to a stifling of free trade, militarisation, imperialism, and ultimately to war.
Wolf is by no means alone in expressing these fears.
Former US Treasury Secretary, Lawrence Summers, writing in 2016, spoke of an unease regarding perceptions that people have that ‘open’ economic policies in recent years are producing a political backlash. The managing director of the IMF, Christine Legarde, remarked that “I hope it is not a 1914 moment and I hope that we can be informed by history to actually address the negative impact of globalisation … because it has historically delivered massive benefits and it can continue to do so”.
She was referring specifically to Britain’s decision to leave the European Union, but equally significant in this context have been nationalist sentiments in relation to US-Russia relations, US-China relations and the rise of nationalist political groupings across the globe.
The global economy, since 2008 and the GFC, has struggled. The level of global trade has fallen and concerns have been expressed that global security, both political and economic, is under real threat. Peter Holmes, writing in the NATO Review repeats what he describes as an ‘adage’ that “if goods don’t cross frontiers, soldiers will”.
He sees a real possibility of a return to the conditions that dominated thinking in the 1930s and is concerned at a return to policies of protectionism. He lists a variety of ‘threats’ with China and Russia being prominent on his list. Holmes’ comments were made in 2009. Eight years on and things are no better. Trump’s effective declaration of trade war is an echo of the infamous Smoot-Hawley Tariff of 1930. While the Democrats tried to unpick this massive imposition of protectionist policies a few years later, it still played a significant role in the economic and eventual military conflicts that followed.
In refusing to learn from history, the world is being hurled into a regressive period of economic nationalism which pits country against country. It is a scenario that cannot hope to provide anything like a positive outcome for the majority of the world’s population.
While governments seem to be spiralling into resurgent economic nationalism and while tariffs and protectionist walls are being built, it is worth remembering that 1318 transnational corporations currently account for 60 per cent of global wealth. The most powerful 147 of these corporations control 40 per cent of the total global output and wealth. Fifty-one per cent of the biggest ‘economies’ in the world are individual corporations and 41 per cent of these are based in the United States.
The renewal of nationalism, politically and economically, has serious implications. We need, in such moments of heightened tension and concern, to keep in the forefront of our minds just why President Trump is choosing to travel this dangerous path.
It is not simply because his administration lacks balance or is irrational. The global economy is increasingly integrated. Nation-states play a less fundamental role than in the past. National economies are suffering and shrinking.
The welfare state is being unravelled. The global power of the US economy is being threatened. A contradiction is evident between a globalised capitalism and an increasingly constrained nation-state system of governance.
The call to nationalist sentiments and to a power that is no more, may have an immediate, if momentary, appeal, but it provides no answers for the people who inhabit those states and who suffer when economic crisis occurs. Other considerations and other options need to be considered. We simply cannot afford to build protectionist walls.
*William Briggs has lived and worked in Hobart for the better part of his life. He is a former teacher of English and History in a variety of Tasmanian high schools. For three years he worked as a foreign correspondent, based in Moscow. He has long had an interest in foreign relations and international affairs and recently completed a PhD from Deakin University with a major focus of interest in International Relations and Global Political Economy.