The Rise of Economic Nationalism

By Cable, Vincent | New Statesman (1996), October 20, 2008 | Go to article overview

The Rise of Economic Nationalism


Cable, Vincent, New Statesman (1996)


I seriously worry when thoughtful people portray the current lapse into large-scale state intervention as heralding the arrival of a progressive nirvana. Whatever George W Bush is doing nationalising mortgage lenders and insurance companies and bailing out banks he is not promoting socialism (though some of his fundamentalist Republican allies fear so). Whatever George Osborne means by "the end of laissez-faire" he is not discovering Keynes, let alone Marx. The idea that statism is inherently enlightened defies all our knowledge of its many malignant mutations. Prominent among them is nationalism.

Throughout recent history, chronic financial crisis has evolved into economic crisis, which has in turn led to popular demands for the state to intervene, often by adopting beggar-my-neighbour policies in relation to foreigners or discrimination against indigenous minorities.

One of the first recognisably modern financial crises was the South Sea Bubble in 1720. Many thousands of sane British citizens--including Sir Isaac Newton--invested their savings in a scam and were impoverished when it burst. There was much anger and parliament debated the proposition that the promoters should be sewn into a sack with poisonous snakes and thrown into the Thames. Then, as now, the contagion spread through Europe. The financial crisis led in turn to economic depression, which in England fuelled an already inflammatory dispute about the impact of imported Indian calico on the jobs of weavers in London. In the face of riots, parliament resolved to ban Indian textile imports. In a classic protectionist response, competition with low-wage Indian labour was deemed to be unfair and Indians were relegated to the role of supplying cotton to the British textile industry.

Two centuries later, history repeated itself on a global scale when the Great Crash of 1929 led to economic distress and unemployment. One of the consequences was a deteriorating political climate, which allowed the Smoot-Hawley Tariff Act to be passed by Congress, increasing protectionist trade barriers. The UK, France, Germany and Italy retaliated, Mussolini rising to the challenge of economic nationalism with particular relish. Although the impact of these measures on the Great Depression has been much debated, they certainly didn't help.

History never quite repeats itself and we still do not know what the full impact of the current crash will be. That, in turn, raises the question of where the inevitable anger will be directed. Despite the current UK national sport of "lack a banker" there is, as yet, no obvious mobilisation around a programme of income and wealth redistribution. Leading union leaders are looking perkier but they know the constituency for a round of industrial strife is small. To be sure, there are articles in the most improbable newspapers about "City greed" and the "evils of the bonus culture" but these are likely to be framed with accounts of immigrants living in luxurious council houses or Muslim preachers living an affluent life on the dole.

In fact, the ingredients are in place, in the UK and elsewhere, for a return to atavistic "politics of the soil": the politics of identity, and old-fashioned economic nationalism. I am sure the British Tories have already drawn up their Plan B for if Gordon Brown's confident response to the financial crisis disrupts the smooth cruise back to power. Immigrants are an obvious target for them (with attacks framed in scrupulously politically correct language). Liberal immigration is one deeply unpopular laissez-faire free-market policy for which the Labour government can unambiguously be blamed. Much more palatable than soaking the rich. No doubt the British National Party is girding itself for battle, too. …

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