Economic Nationalism Is Not Compatible with Globalized Economic Interdependence

ECONOMICS, 19 Feb 2018

Kedar Neupane – TRANSCEND Media Service

16 Feb 2018 – Staggered economic growth in western hemisphere is not that gloomy for it is hovering around 2% in general. Higher growth in industrialized countries, if compared with emerging countries, is unlikely for it would have to compete with fast growing giant economies of the Orient. Growth compact in the Orient is robust than in the West.

Global economic ambivalent picture is not about hopelessness. There appeared unexpected socio-political fissures in the missing connect between liberalisation of globalized market economy and absence of people-oriented social-compact. Wealth has been created immensely but it lacked mechanism for equitable distribution. This is an area both policy makers and economic planners should seriously ponder instead of squarely blaming wealth creating mechanisms. Don’t dump wealth creations otherwise economy will go flat and stagnate or sink.

Industrialized world would grow but far less than it did in the past. These countries have achieved a higher level of economic development and, thus, narrower space for developing economies are also growing in tandem. There is a sort of growth competition. Developing countries will achieve much higher rate of growth with right strategies because opportunities exist in these countries.

Western world has been hit hard by unintended disruptions generated by spectacular pace of development in information technology, innovation automation, and concomitant social security conundrum, migration fiasco, and abilities to rapidly adapt to the challenges. This phenomenon is affecting on wider spectrum of polity – unprecedented in economic history. Uneven distribution of vastly created new wealth by few is partly attributed to the rapid rise of populism.

Growth, however, is catching up although at a slower pace. There is optimism in global recovery. IMF/WB agree. Economic liberalization is irreversible, and it is not dead because economies have become more inter-dependent than ever before in nations’ history. Rise of Marine Le Pen in France and, Brexit and Trumpism are the manifestations of economic anomalies due to unforeseen fallout of globalization which produced widespread sense of economic and social insecurity in the Western countries which were not growing economically to people’s expectation.

ASEAN region is growing with increased intra-region trade with capital and goods flowing across nations, and with free movement of entrepreneurs and people. American hemisphere is showing growth. Most African countries are growing too. Positive aspects are visible. Grass looks greener. Challenges, however, remain formidable for adapting to changes and sustaining the momentum.

China’s lower rate of growth should not be a worry for it is attributed to economic reorientation away from too much dependence on export-led growth strategies. Emphasis is on widening market through development investment in across region, domestic consumption, innovation, and automation and venturing news areas for expansion. Focus is on social compact for poverty reduction for economic sustainability; missed during the last decades of liberalization of market economy. China is growing between 6 and 7 percent annually for there is ample room for further growth.

China, however, is not the largest economic driver in the world, yet. The USA is, and it leads global economy. President Trump’s “America First, – but not alone”, is to be taken as reorientation strategy for alluring businesses for investment in the USA and to encourage capital inflow. President Trump well trumpeted this himself, as the CEO of Corporate America, during the World Economic Forum in Davos (Switzerland) in last January because he believes domestic growth unfairly suffered during the period of liberalization of American economy.

“America First” is economic misnomer for US economy is growing and stable, albeit there are complex social issues. Globalization created new wealth and, gap deepened further. This phenomenon culminated into rise of political populism in Europe and contributed to Trumpism in the USA. This has not, however, dampen business sentiments adversely for President Trump is seen as business-friendly. If positive perception remains intact economy will grow. This is positive for world economy too for US market is still one of the largest market for goods and services produced elsewhere.

Most economists should cherish economic prosperity that occurred in such a short span of time in economic development history under globalization of market economy. But, what is now needed is synergies in policy practices with built-in strong social compact; but not return to economic nationalism, or protectionism. Globalization trend is irreversible for information technology and innovation will contribute faster pace in development than ever before. With seamless connectivity, innovations are taking place everywhere hitherto unseen during the period of ideologically dominated political-economy restricting innovation, creativity and entrepreneurship drive, capital flow and technology collaboration.

Efficiency cannot be ascertained in closed environment. The supply-chain has done miracle for it has broken barriers by bringing out the best of comparative production advantages in global market. Western economies are interdependent, and comparative advantages cannot be expected to accrue without taking advantage of open market, free capital flow, advancing technology and sizeable consumer-base.

Economic policies under communism, socialism or narrowly defined ideologies failed to create wealth and did not achieve economic prosperity of the masses. In market economy, new wealth was created immensely but it lacked income distribution mechanism and produced aberrations in ‘laissez-faire’ economies. New challenges will be creations of right mechanism for investments on social security and economic development, and on welfare of people and community.

Globalization merely means collaboration and cooperation across wide spectrum of business opportunities, investment, innovation, creativity, and business synergies in economic sectors augmented by pragmatic policy strategies taking advantages of comparative production efficiency through economy of scale and open market. Wealth creation must accompany robust social-compact for well-being of people. People-oriented strategy should be integral part of the compact. It is the only way to limit wave of populism which is anti-democratic.

Consumers are dominant player in any economy where nation-state should limit itself as inspirational partner and as lead driver. Open market platform is where entrepreneurship, capital, labour, and goods would flow freely ‘sans- border’ until another system of economic collaboration, if at all, emerges in coming era. In short, gone are the days of economic sovereignty and protectionism if we are to make a country economically prosperous and lift population up on the economic ladder.

Emergence of Macron in France and continuation of Merkel in Germany at the helm of power is an indication of positive trend in political economy in Europe. Cautious but seemingly difficult Brexit negotiations, between London and Brussels, is another manifestation of changing air. Nonetheless, pragmatism will prevail on this endeavour for deadline for closing the deal is looming closer. Undoubtedly, regional trade and migration would remain complex issues to be resolved between them at a time when Brussels is in a hurry to induct additional Eastern European countries under its sphere of direct influence.

Emerging market is Africa. This where there will be fierce competition between the West and China, to a lesser extent India. ‘One Belt One Road’, (OBOR), is China’s ‘softly softly’ approach to diplomacy towards economic ascending for widening export market. It has already acquired considerable economic leverage largely due to the USA’s policy failures. Africa remains one of the largest market globally for Asia has come under significant economic influence from China for it is the top trading partner of ASEAN.

Somewhat unprepared India finds itself surrounded and outmanoeuvred by Xi Jing Ping’s unstoppable Silk Road myth popularized by One Belt One Road (OBOR) initiative backed up by trillions of dollars of state funding for the program. It is no accident or coincidence that India’s ‘look East’ policy for expanding strategic influence in East Asia converges with ASEAN’s desire for creating a security umbrella at time when USA was retreating from pivot in Asia. Given this, India’s induction in ASEAN gambit as strategic partner, beyond dialogue partner, not only reflects alliance’s pragmatism in creating conducive economic, political and security environment in the region aiming at rebalancing trilateral relationship between ASEAN and China and India but India’s strategic aspiration to gain a stronger foothold in East Asia.

India’s economic prowess is projected to surpass UK and France during 2018. This will confirm India’s place in global affairs as a major player. President Trump’s withdrawal from Trans Pacific Partnership (TPP) and desire to renegotiate or terminate NAFTA are the last straws that created sense of dismay and insecurity in the East Asia. China’s unstoppable maritime adventure in South-China Sea played a tectonic shift in ASEAN calculus in luring India into closer alliance. India is a rising economic and military power of this century. However, this strategic alliance is interesting for it is not going to produce rift in relationships with China, Russia and the USA for India needs broader goodwill and support for redefinition of economic restructuring for it has embarked on irreversible economic reform program that needs careful balancing acts with major economies.

Both India and China succeeded in changing past negative perceptions at the world stage. If Dr Manmohan Singh was the wise-man of G-20, when he was the Prime Minister of India, PM Modi became an instant rock-star of the West when he first attended the G-20 after his accession to power in New Delhi. India, albeit late, has aggressively moved towards changing past perception about its business-unfriendly image. Branding ‘Make in India’ campaign exudes positive lure by opening new economic sectors. Simultaneously India has succeeded in creating an atmosphere for large middle-class consumer base (purportedly half a billion people) and continues to open domestic market and, it is going global.

India is shedding off its political and economic nationalism zest that dominated the past decades but in recent years its political power centre has shifted economic gears. It has branded business friendly message creatively and spurred an aura of positive perception by not sending contradictory signals to business world. This is unlike in Nepal where negativism is overwhelming and all pervasive because political elites are battling for political survival and party interests. This perception does not allude to positive sentiments for creating business-friendly environment.

Perception matters. Nepal’s perception in business world is perhaps zero, to say the least. Economic scenarios have completely changed from the time older generation grew up, and most did not notice profound economic, political, and social changes that have occurred all around. Economist and planner failed to adapt to changes and stuck with tunnel vision, being unable to come ‘out of the box’, to adjustments in changing economic environment.

Nepal is neither unique, as widely purported by political opportunists, nor alone in global context just being sandwiched between the two big countries. It is the way people have been conditioned to think. There is no country in the world which is not unique on its own way and who would repeatedly claim so to stifle economic development. Singapore is unique because murky sea waters surround it, with no known internal resources. But, it has become a most advanced country just by exploiting its lack of resources into a gateway to shipping, maritime commercial base and modern financial centre of the world.

Switzerland, like Nepal, is sandwiched between big European powers. It is landlocked and has basically mountains and lakes, and with little known natural resources. It is unique for it is encircled all around by military and economic powers of the world and witnessed two great World Wars. Despite this, it has turned every corner of the nation into a paradise for business, culture, tourism, finance, and model for direct democracy, as well as precision industry, high-tech hot-spot destination, and international business and humanitarian player.

Gulf states in the Middle-East (with sand, oil, and gas only) successfully exploited ground resources and steered economic development. This was possible with massive injection of capital investment, technology, vibrant migrant population, and products are traded worldwide. In Asia, Japan, Singapore, and South Korea, without much natural resources, also achieved spectacular economic development by adopting right strategies with large scale capital investment and transfer of technology from the West. India, China, Vietnam, Malaysia, the Philippines, and Thailand are accelerating economic magnification with pragmatic economic strategies.

Why is Nepal unable to achieve respectable economic development despite claim on seating on a vast hydro-power energy-store in a world starved by clean energy? It is the sheer determination and will of the people with visionary leadership that make the changes and usually shape nations’ destiny. Perhaps, this is where people have missed something somewhere and population of Nepal is disillusioned by false political rhetoric.

Nation might have lost time in not making best use of its strategic position as strength, and by capitalizing uniqueness into a natural strength for economic development. This is a sad story of the century even though Nepal is well placed on the lap of economic giants of the Orient.

Talking of economic nationalism in an era of interdependent market economy environment is a mere illusion, if not anathema. Economic nationalism has long been dumped by all emerging nations including India and China. Nationalism is about protectionism and it means creating barriers; a failed system of the past that did not contribute to economic development. This is not an investment-friendly message. However, a self-reliant economy is fundamental to economic security of a nation, but it does not necessarily have to be with ‘nationalistic‘ myth for it gives wrong signal. This will not inspire entrepreneurial investment and capital creation. It is not consistent with democracy and dominant market economy of 21st Century.

Inordinate emphasis on economic nationalism cannot lift population out of poverty because economic development plan serves as leap-service strategy; for elites it is political survival and grip on power that matters. Economic liberalization of past decades recorded one billion people out of abject poverty globally. This is by no means a small feat. BRICS countries were on the forefront and reaped benefits through economic alliances and market reforms, and policy synergies followed globalized economic environment and achieved economic growth and social transformation; never seen in economic history of the world. Those who did not follow the mainstream trends, like Nepal, Zimbabwe, Cuba, Venezuela were left outside of the growth curve.

Nation’s economic prosperity is feasible if political economy is fully aligned with wealth creation and promoting economies and market reform. That is how western economies are functioning and continues to grow. It is not the same in South-Asia, particularly in Nepal, Zimbabwe, Cuba, and Venezuela, where focus is on defunct ideologies shrouded with misgivings, excessive nationalism, and fear-mongering.

We must look beyond creating economic borders for economic emancipation of people. SAARC is not an economic union for it is merely a tea-party club dominated by most corrupt nations in the global corruption perception index. Expecting something miracle out of this club is waste of resources and time. India, therefore, is rightly going beyond the realm of this club whereas others in the sub-region are stuck with old mind-set.

Evidence indicates economic and social transformation could not be accrued with economic nationalism myth. Economic exploitation of natural resources will be comparatively advantageous and productive with massive injection of capital inputs, efficient technology, dynamic entrepreneurship, and access to market for economic viability. Otherwise, it would be a short-lived strategy, doomed to collapse. Way forward is to embrace economic pragmatism based on market alliances, cross-border trade, and modern technology and with robust social compact, not mere political alliance, and rhetoric on regressive nationalism.

Economic nationalism was popular during ideologically-dominated two superpowers during the Cold War of the past century. Economic nationalism was the by-product of superpower political philosophies and rivalry. With the lifting of Iron Curtain and breakup of USSR, economic groupings like EC/EU, ASEAN, NAFTA flourished. China became global manufacturing hub and India dominated the Silicon Valley and new wealth was created, unprecedented in economic history. Countries like Cuba and Venezuela in Americas, Zimbabwe and Eritrea in Africa, Nepal, Mongolia, North Korea, and Myanmar in Asia remained trapped in inward-looking economic nationalism myth and population in these nations remained economically very poor.

In a multi-polar world of today business as usual based on failed premises is not the answer. Economic nationalism did not work in the past. How could we convince ourselves that it would be otherwise in future? We need rapid economic development for prosperity for all citizens. Democracy without economic prosperity of citizen is a mere delusion.


Kedar Neupane is a retired senior United Nations official and president of ‘We for Nepal’ association based in Geneva, Switzerland. He has worked in several countries in Africa, the Middle East, Asia and Europe in his 38 years of service with the UN system and was Senior Change Management Advisor to UN High Commissioner for Refugees. Email:

This article originally appeared on Transcend Media Service (TMS) on 19 Feb 2018.

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